Interim Results
Halfords Group PLC
23 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 trading
performance during the first 26 weeks of this financial year. The Group has
maintained its momentum within Car Enhancement and Car Maintenance, and we have
also delivered a strong performance within the Leisure categories of Cycling and
Travel Solutions. Growing sales in all key categories has therefore provided us
with further confidence in our trading prospects for the second half.'
Enquiries:
Halfords Group plc
Tony Newbould, Investor Relations 01527 513113
07753 809522
Gainsborough Communications
Andy Cornelius 0207 190 1703
Julian Walker 0207 190 1705
Notes to Editors
Halfords Group plc
Halfords is the UK's leading auto, leisure and cycling products retailer, with
420 stores and 10,000 employees. The company was established in 1892 and floated
on the London Stock Exchange in June 2004. The Group sells 11,000 different
product lines, ranging from car parts and cycles through to the latest in-car
technology, alloy wheels, child seats, roof boxes and outdoor leisure and
camping equipment. Halfords' own brands include Ripspeed, for car enhancement,
and Bikehut, for cycles and cycling accessories, including the Apollo and
Carrera brands. Stores offer a 'We'll fit it' service for car parts, child
seats, satellite navigation and in-car entertainment systems and a 'We'll repair
it' service for cycles.
In addition to the corporate website, www.halfordscompany.com, Halfords operates
an online retail website, which can be found at www.halfords.com.
Cautionary Statement
This report contains certain forward-looking statements with respect to the
financial condition, results of operations, and businesses of Halfords Group
plc. These statements and forecasts involve risk, uncertainty and assumptions
because they relate to events and depend upon circumstances that will occur in
the future. There are a number of factors which could cause actual results or
developments to differ materially from those expressed or implied by these
forward-looking statements. These forward-looking statements are made only as at
the date of this announcement. Nothing in this announcement should be construed
as a profit forecast. Except as required by law, Halfords Group plc has no
obligation to update the forward-looking statements or to correct any
inaccuracies therein.
Overview
There has been a strong first half sales performance that has seen like-for-like
growth in all of the key categories. Gross profit dilution has shown a
substantial improvement since the end of the financial year, which, with the
continued focus on cost control, has delivered a 7.9% increase in profit before
taxation 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 bps
Operating 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 share
before 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 a
five-year term loan of £180m and a revolving facility of £120m. As a
consequence, a charge of £1.5m was made in respect of the accelerated
amortisation of the issue costs associated with the original borrowings.
(b) On 29 September 2006 the Group closed out its existing interest rate
swap at a cost of £1.1m. On the same date, the interest on the £180m term loan
was fixed for a three-month period. The Group has entered into a new interest
rate swap for £70m commencing on 29 December 2006 for the length of the new
facility.
Financial Review
Income Statement
Sales for 26 weeks to 29 September 2006 were £369.2m (2005: 337.7m) an increase
of 9.3% on the comparable period last year, representing like-for-like sales of
6.5%. As noted in last year's interim report, there was no Easter period in the
26 weeks ended 30 September 2005 and with a typical Easter worth 1.5% of sales
in 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 sales
and compares to last year's restated figure of 51.4%. As noted below the
comparative gross profit figures have been restated by £0.1m to reflect an
appropriate absorption of rebate income into inventories that was previously
recognised in the Income Statement. The company has previously commented upon
the impact that the change in sales mix, towards lower margin in-car technology
products, has had upon gross profit per cent. However, it is pleasing to note
that the 40 basis point dilution in gross profit per cent represents a
significant improvement on both the 140 basis point and 260 basis point dilution
reported at the interim and preliminary results last year. This dilution
improvement reflects the company's active margin management, the flow through of
Far East sourcing benefits and improved sales performance in higher margin
categories.
Operating expenses as a per cent of sales at 37.9% is at the same level as the
comparable period last year. An improvement in the selling and distribution
costs ratio, in part driven by the slowing down of rental inflation, has been
offset by the increase in administrative expenses. Included within this period's
administrative expenses there are a number of one-off project related expenses
of £0.5m, which include the three store Czech Republic pilot, with the first
store scheduled to open in Summer 2007, legal costs associated with the group's
capital restructuring and the relocation of the Halfords Asia office.
Landlord contributions during the period totalled £1.2m, compared to £3.5m last
year. In line with the guidance previously given, the Company remains on track
to 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 included
exceptional finance costs totalling £2.6m in respect of the write-off of
previously capitalised loan fees of £1.5m, arising from the repayment of the
company's term debt and the close-out of an interest rate swap of £1.1m, as part
of 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, the
Board took the decision to undertake a debt re-financing exercise, which was
completed on 14 July 2006. The debt facility now comprises a £180m five-year
term non-amortising loan with a £120m revolving credit facility.
Total net debt at 29 September 2006 was £181.2m (31 March 2006: £173.7m) and
includes £12.5m (31 March 2006: £12.6m) in respect of the Head Office finance
lease.
The company continues to generate strong net cash flows from operations, which
were £60.7m at 29 September 2006 (2005: £61.0m) and included a small working
capital 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 resulting
in an improvement in stock turn. Stock turn in the 26 week period improved to
2.6 times, compared to last year's 2.4 times. Since the beginning of the
financial year stock levels have increased by £10.5m, reflecting the stock build
of in-car technology products such as satellite navigation devices and DVD
units.
Capital expenditure during the first half totalled £10.8m (2005: £13.9m) and the
company is forecast to spend approximately £25.0m for the full year (52 weeks to
31 March 2006: £27.8m). The major spends during this period have been the
opening of new stores, £5.2m (2005: £5.6m), and £1.9m (2005: Nil) in respect of
the 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 have
increased the interim dividend by 8.8% to 4.35 pence per share (2005: 4.0 pence
per share). The dividend will be paid on 8 January 2007 to shareholders on the
register on 1 December 2006.
At the Preliminary results presentation on 8 June 2006, Halfords announced a
share buy-back programme that would purchase, for cancellation, up to £50m of
share capital. In the period from the 8 June 2006 to 29 September 2006 Halfords
has purchased 5.2m of its own shares at a consideration of £16.0m, an average of
308.0 pence per share.
Operating Review
Halfords has delivered encouraging results, which reflects a continuing focus on
providing a strong, well promoted, in-store offer supported by trained and
highly 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 the
last two years means we are now trading in a modern environment with well
merchandised product and knowledgeable staff.
The trading teams in head office have been focused on providing compelling
offers through new and exciting ranges at better margins, helped by Far East
sourcing opportunities, which has seen the teams optimise our position in new
markets and take advantage of legislative changes that impact upon existing
markets.
The wettest May for 23 years generated a good start to the financial year for
the car maintenance category, with strong demand for windscreen products and
light bulbs. Halfords service proposition continues to have a positive impact on
car battery sales, as customers welcome the option of Halfords staff removing
and disposing of old batteries.
The satellite navigation market remains strong, with Halfords underpinning its
leading retailer status through its broad range of brands and product
demonstration. MP3 connectivity products, in conjunction with the 'We'll fit it'
proposition, have helped to grow sales in technology products. Within the
performance styling category Halfords has launched a national mobile fitting
offer for alloy wheel and tyre packages. There has been a successful roll out
into 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 has
resulted in Halfords being able to provide a competitive entry-level range of
products sourced from the Far East. Therefore the combination of warm weather in
June and July with a strong camping offer based upon own label and value for
money generated good sales, especially in tents.
The introduction of child seat safety legislation on 18 September 2006 has seen
increased demand for child seats and booster seats. Halfords advised customers
of the change in legislation through in-store point of sale materials and built
a large stock position well in advance of the new law, which provided better
stock availability than the competition when the law changed. The interest in
child safety generated an increase in footfall of both female shoppers and
consumers that had not shopped at Halfords before, leading to an increased
awareness of our stores.
The first half-year was a good period for the cycling category with strong
growth in the own brand Apollo and Carrera ranges. In addition, hybrid,
commuting and folding bikes have performed particularly well. With more than
four million cycle accessories sold under the Bikehut brand, in the first 26
weeks, this area continues to demonstrate growth potential and provides
encouragement for our trial of standalone Bikehut stores.
Store Portfolio
During the 26 weeks to 29 September 2006 the company opened 13 new stores and
closed one, resulting in 420 stores trading at the half-year end. We aim to open
more smaller format 'neighbourhood' stores, with seven of these stores opened in
the first half. Of the remaining new stores five were opened with mezzanine
floors, of which four were the supermezzanine format. Space from new stores
contributed 2.8% (2005: 2.1%) to the first half sales growth.
At 29 September 2006 Halfords traded from 3.5 million square feet representing
an additional 100,000 square feet since the beginning of the financial year.
With the supermezzanine conversion programme virtually complete, the company's
focus has shifted to opening new stores and identifying potential sites
The company remains on track to have its first two standalone Bikehut stores
trading by Christmas, the first of which was opened in Brighton on 9 November
2006.
International Expansion
The roll out programme in the Republic of Ireland continues, with two of the new
supermezzanine format stores noted above having opened during the period, taking
the total number of stores in Ireland to ten.
Progress continues to be made in developing three sites in the Czech Republic
with the first store scheduled to open in Summer 2007. In addition we have
recruited a 'country' team that will be responsible for managing the trial on
the ground.
Second Half Outlook and Current Trading
With like-for-like sales up 6.5% we are pleased with Halfords trading
performance during the first 26 weeks of this financial year. The Group has
maintained its momentum within Car Enhancement and Car Maintenance, and we have
also delivered a strong performance within the Leisure categories of Cycling and
Travel Solutions. Growing sales in all key categories has therefore provided the
Group with further confidence in its trading prospects for the second half. In
the six weeks since 29 September 2006 Halfords has traded in line with internal
expectations.
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)
------------------ ----- ----------- ----------- ---------
Profit
attributable
to equity
shareholders 28.6 27.5 53.6
------------------ ----- ----------- ----------- ---------
Earnings per share
Basic 6 12.7p 12.1p 23.6p
Diluted 6 12.7p 12.1p 23.6p
------------------ ----- ----------- ----------- ---------
A final dividend of 8.75 pence per share for the 52 weeks to 31 March 2006 (8.3
pence 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 in
respect of the 26 weeks to 29 September 2006 (4.0 pence per share for the 26
weeks 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 assets
Goodwill 253.1 253.1 253.1
Other intangible assets 5.0 6.0 5.7
Property, plant and equipment 105.2 101.3 104.1
----------------------------- ----------- ----------- ---------
363.3 360.4 362.9
Current assets
Inventories 137.7 145.0 127.2
Trade and other receivables 32.8 29.5 29.4
Derivative financial
instruments - 1.4 1.2
Cash and cash equivalents 45.2 4.9 1.5
----------------------------- ----------- ----------- ---------
215.7 180.8 159.3
----------------------------- ----------- ----------- ---------
Total assets 579.0 541.2 522.2
Liabilities
Current liabilities
Borrowings (34.7) (45.1) (63.5)
Derivative financial
instruments (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 liabilities
Borrowings (191.7) (130.5) (111.7)
Derivative financial
instruments - - (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' equity
Ordinary shares 2.2 2.3 2.3
Share premium account 133.2 133.1 133.2
Capital 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 2005
Restated (see note 1) 2.3 132.9 - (2.9) 40.5 172.8
Profit for the period - - - - 27.5 27.5
Shares issued - 0.2 - - - 0.2
Cash flow hedges
(net of tax):
Fair value gains in the
period - - - 0.7 - 0.7
Employee share options - - - - 0.6 0.6
Dividends - - - - (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 53.6
Shares issued - 0.3 - - - 0.3
Cash flow hedges
(net of tax):
Fair value gains in the
period - - - 3.2 - 3.2
Transfers to inventory - - - (0.8) - (0.8)
Transfers to net profit - - - (0.3) - (0.3)
Employee share options - - - - 1.3 1.3
Deferred tax on employee
share options - - - - 0.4 0.4
Dividends - - - - (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 28.6
Purchase of own shares (0.1) - 0.1 - (16.0) (16.0)
Shares issued - - - - - -
Cash flow hedges (net
of tax):
Fair value losses in the
period - - - (2.9) - (2.9)
Transfers to inventory - - - 1.2 - 1.2
Transfers to net profit - - - 0.5 - 0.5
Employee share options - - - - 0.7 0.7
Deferred tax on employee
share options - - - - 0.1 0.1
Dividends - - - - (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 activities
Cash generated from operations 7 60.7 61.0 100.9
Finance income received 0.6 - 0.4
Finance costs paid (5.5) (5.4) (11.0)
Exceptional swap close out costs (1.1) - -
Gain/(costs) of forward foreign
exchange 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 activities
Purchase of intangible assets (0.3) - (1.4)
Purchase of property, plant and
equipment (11.7) (12.9) (26.1)
------------------------------------- ----- ---------- ---------- ----------
Net cash used in investing activities (12.0) (12.9) (27.5)
------------------------------------- ----- ---------- ---------- ----------
Cash flows from financing activities
Net proceeds from issue of ordinary
shares - 0.2 0.3
Purchase 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 financing
activities (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 the
beginning of the period 8 (18.4) (15.5) (15.5)
------------------------------------- ----- ---------- ---------- ----------
Cash and bank overdrafts at the
end 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 interim
consolidated financial statements of Halfords Group plc for the 26 weeks to 29
September 2006. It has been prepared in accordance with the accounting policies
set out in the 2006 Annual Reports and Accounts, which are published on the
Halfords Group website (www.halfordscompany.com) and are expected to be followed
in the full financial statements for the 52 weeks to 30 March 2007. In addition
to these policies, exceptional items have been separately disclosed within this
report 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 and
Accounts, the consolidated financial statements include the results of Halfords
Holdings (2006) Limited. Halfords Holdings (2006) Limited is an intermediate
holding company that was established on 7 June 2006 as part of the Group's
re-financing exercise.
The accounting policies set out in the 2006 Annual Report and Accounts have been
consistently applied to the periods presented. Therefore an adjustment has been
made to the 30 September 2005 comparative financial information to reflect an
appropriate absorption of rebate income into inventories that was previously
recognised in the income statement. The impact of this change has been to
decrease profit before tax by £0.1m and to decrease inventories by £4.0m in the
comparative half-year period. This change was reflected in the full year
comparative period.
These interim consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards ('IFRS') and IFRIC
interpretations as endorsed by the European Union and comply with the
requirements of the Listing Rules issued by the Financial Services Authority.
The interim consolidated financial statements have been prepared under the
historical cost convention as modified by the revaluation of certain financial
instruments. The Group has chosen not to adopt IAS 34 'Interim financial
statements' in preparing the interim consolidated financial statements.
The interim financial report and accounts for the 26 weeks to 29 September 2006
and for the comparative 26 weeks to 30 September 2005 are unaudited and do not
constitute statutory accounts within the meaning of section 240 of the Companies
Act 1985. The comparative figures for the 52 weeks ended 31 March 2006 are
derived from the statutory accounts filed with the Registrar of Companies. The
audit report on the 2006 Annual Reports and Accounts was unqualified and did not
contain 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 main
geographical segment, which is the United Kingdom. The business segment
reporting format reflects the Group's management and internal reporting
structure.
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 £m
Finance costs:
Bank borrowings (4.9) (4.6) (9.7)
Amortisation of issue costs on
loans (0.3) (0.4) (0.7)
Commitment and guarantee fees (0.1) (0.2) (0.3)
Cost of forward foreign exchange
contracts - - (0.9)
Interest payable on finance leases (0.4) (0.4) (0.9)
---------------------------------- -------- -------- -------
Finance costs before exceptional
finance costs (5.7) (5.6) (12.5)
Exceptional finance costs:
Accelerated amortisation of
issue 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 - 0.4
Gain 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 a
five-year term loan of £180m and a revolving credit facility of £120m. As a
consequence, a charge of £1.5m was made in respect of the accelerated
amortisation of the issue costs associated with the original borrowings.
(ii). On 29 September 2006 the Group closed out its existing interest rate
swap at a cost of £1.1m. On the same date, the interest on the £180m term loan
was fixed for a three-month period. The Group has entered into a new interest
rate swap for £70m commencing on 29 December 2006 for the length of the new
facility.
4. Taxation
The taxation charge in the 26 weeks to 29 September 2006 is based on an
estimated effective tax rate of 30.1% (2005: 31.8%) on profit before tax for the
52 weeks to 30 March 2007.
The underlying tax charge on trading is 31.4%, principally due to the
non-deductibility of depreciation charged on capital expenditure in respect of
mezzanine floors and other store infrastructure. The lower tax rate of 30.1% in
this financial period is due to the progression of the agreement of prior year
tax computations and the structure put in place, as part of the debt re-finance
on 14 July 2006.
5. Dividends
During the period the Group paid a final dividend of 8.75 pence per share (8.3
pence per share for the 52 weeks to 1 April 2005) in respect of the 52 weeks to
31 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 the
26 weeks to 29 September 2006 (4.0 pence per share for the 26 weeks to 30
September 2005), which equates to £9.7m (2005: £9.1m) and will be paid on 8
January 2007 to those shareholders on the share register at the close of
business on 1 December 2006.
6. Earnings Per Share
Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares in issue
during the period. The weighted average number of shares excludes shares held by
the Employee Benefit Trust and has been adjusted for the issue/repurchase of
shares during the period.
For diluted earnings per share the weighted average number of ordinary shares in
issue is adjusted to assume conversion of all dilutive potential ordinary
shares. These represent share options granted to employees where the exercise
price is less than the average market price of the Company's ordinary shares
during 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 226.2 227.9 228.0
Less: shares held by Employee
Benefit Trust (0.9) (0.4) (0.9)
---------------------------------- -------- -------- -------
Weighted average number of shares
for calculating basic earnings
per share 225.3 227.5 227.1
Weighted average number of
dilutive shares options 0.1 0.2 0.2
---------------------------------- -------- -------- -------
Total number of shares for
calculating diluted earnings per
share 225.4 227.7 227.3
---------------------------------- -------- -------- -------
The alternative measure of earnings per share is provided because it reflects
the 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 £m
Basic earnings attributable to
equity shareholders 28.6 27.5 53.6
Exceptional 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 23.6p
Diluted earnings per ordinary
share 12.7p 12.1p 23.6p
---------------------------------- -------- -------- -------
Basic earnings per ordinary share
before exceptional items 13.5p 12.1p 23.6p
Diluted earnings per ordinary
share before exceptional
items 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 89.1
Depreciation - property, plant and
equipment 9.4 9.8 19.6
Amortisation - intangible assets 0.9 0.9 1.9
Loss on sale of property, plant and
equipment 0.1 - 0.5
Share option scheme charges 0.7 0.6 1.3
Increase in inventories (10.5) (36.7) (18.9)
Increase in debtors (3.4) (5.9) (5.8)
Increase in creditors 14.7 46.6 13.6
Increase/(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 - 45.2
Bank 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 excluding
finance leases (160.7) (5.8) (1.8) (168.3)
Finance leases due within one
year (0.3) 0.1 (0.1) (0.3)
Finance leases due after one
year (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 the
amortisation of capitalised debt issue costs.
9. Interim Report
Copies of the interim report are available from the registered office of
Halfords Group plc, Icknield Street Drive, Washford West, Redditch
Worcestershire, B98 0DE.
Introduction
We have been instructed by the company to review the financial information for
the 26 weeks ended 29 September 2006, which comprises a consolidated income
statement, consolidated balance sheet, consolidated statement of changes in
shareholder equity, consolidated cash flow statement and related notes. We have
read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The Listing Rules
of the Financial Services Authority require that the accounting policies and
presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where any changes, and
the reasons for them, are disclosed.
This interim report has been prepared in accordance with the basis set out in
Note 1.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of management and applying analytical
procedures to the financial information and underlying financial data and, based
thereon, assessing whether the disclosed accounting policies have been applied.
A review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than an
audit and therefore provides a lower level of assurance. Accordingly we do not
express an audit opinion on the financial information. This report, including
the conclusion, has been prepared for and only for the company for the purpose
of the Listing Rules of the Financial Services Authority and for no other
purpose. We do not, in producing this report, accept or assume responsibility
for any other purpose or to any other person to whom this report is shown or
into whose hands it may come save where expressly agreed by our prior consent in
writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the 26 weeks ended
29 September 2006.
PricewaterhouseCoopers LLP
Chartered Accountants
Birmingham
23 November 2006
Notes:
(a) The maintenance and integrity of the Halfords Group plc web site is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the interim report
since it was initially presented on the web site.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.
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