Preliminary Results
Halfords Group PLC
09 June 2005
9 June 2005
Halfords Group Plc
Preliminary Results Announcement
Halfords Group plc, the UK's leading auto, leisure and cycling products
retailer, announces its Preliminary Results for the 52 weeks ended 1 April 2005.
Financial Highlights
• Turnover £628.4m up 8.6%
• Like-for-like sales, including contribution from new mezzanines, up 8.9%
• Gross profit percentage up from 53.5% to 53.7%
• Operating profit before goodwill amortisation and exceptional operating
items £92.2m up 16.4%
• Operating profit £78.3m up 19.5%
• Pre-tax profit before goodwill amortisation and exceptional items £77.5m
up 76.9%
• Pre-tax profit £64.1m up 130.6%
• Basic earnings per share before goodwill amortisation and exceptional
items 24.4p up 37.9%
• Basic earnings per share 18.5p up 122.9%
• Strong operating cash flow of £116.2m and year end net debt down 51.4%
to £169.7m
• Final dividend of 8.3p, making a total dividend for the year of 12p per
ordinary share
Business Highlights
• 398 stores including 18 new store openings and relocations
• 57 supermezzanine stores now trading
• New categories delivering good results
• 'We'll Fit It' programme approaching one million products fitted in the
year
Commenting on the results, Ian McLeod, Chief Executive, said:
'Following our Stock Exchange listing in June 2004, Halfords has reported a
successful year of sales and profit growth. Against strong comparative trading,
we are encouraged that Halfords continues to deliver positive like-for-like
sales after adjusting for Easter. The current trading performance gives us
confidence that the diligent application of our strategy will enable us to
deliver positive results going forward, despite a challenging retail
environment.'
Enquiries
Halfords Group plc (www.halfordscompany.co.uk)
on Thursday 9 June only 0207 190 1705
Ian McLeod, Chief Executive thereafter 01527 517601
Nick Carter, Finance Director
Gainsborough Communications 0207 190 1703
Andy Cornelius
Julian Walker
Halfords Group plc (www.halfordscompany.co.uk)
Halfords is the UK's leading auto, leisure and cycling products retailer with
398 stores and nearly 10,000 employees.
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 the latest 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, together with newer concepts such as Kidszone and Active
Leisure.
Halfords is a FTSE 250 company. It was established in 1892 and was successfully
floated on the London Stock Exchange in June 2004.
Chairman's Statement
This first set of full year results as a publicly listed company demonstrates
the strength and growth potential of our business, which has a unique position
as the UK's leading auto, leisure and cycling products retailer.
Halfords continued to improve performance and grow market share by building on
its unique advantages of greater scale than its competitors, a differentiated
customer service proposition through the 'We'll Fit It' initiative and from the
continued development programme of new and exciting products.
In the 52 weeks to 1 April 2005, and against a backdrop of a challenging retail
market, we achieved sales growth across all four of our key product categories
of car maintenance, car enhancement, cycling, and travel solutions, whilst
continuing to keep firm control of costs.
By the end of the financial year, the Group was operating from 398 stores across
the UK and the Republic of Ireland as we continued to roll out our store
development programme of introducing mezzanine floors, improving store layouts
and opening in new locations.
Our success would not have been possible without the huge contribution from our
9,940 employees, whose passion, knowledge and enthusiasm are crucial in giving
Halfords competitive advantage in the retail marketplace.
The Board would also like to place on record its appreciation for the valuable
contribution made by David Hamid, our former Chief Executive, who announced his
retirement from the Group in March this year because of ill health.
We were fortunate in being able to appoint Ian McLeod as Chief Executive. Ian
has outstanding credentials for the job. He has been with the Group since
September 2003 and as Chief Operating Officer played an important role in
running the business alongside David and the senior management team.
The Board is committed to the highest standards of corporate governance and
corporate social responsibility, as explained in more detail in the Annual
Report and Accounts.
The Board is recommending a final dividend of 8.3p per share in addition to the
3.7p per share interim dividend already paid, bringing the total dividend for
the year to 12.0p per share.
Although the UK retail climate has become more subdued, we have a strong and
differentiated business with a proven strategy for growth, which provides a
solid platform from which to build and gives us confidence about the Halfords'
growth prospects for the future.
Rob Templeman
Chairman
8 June 2005
Chief Executive's Report
Halfords has a very strong brand name, synonymous with quality, reliability and
trust and has delivered 17 consecutive years of sales growth.
The financial year ended 1 April 2005 has been notable for continuing the pace
of change in the business and the substantial improvement in store performance
and company profitability.
Sales increased by 8.6% to £628.4m compared with the previous year, while
pre-tax profits have risen by 130.6% to £64.1m over the same period.
We aggressively pursued the store opening, refurbishment and product development
programmes outlined to investors at the time of the Company's successful listing
on the London Stock Exchange in June 2004.
Halfords has a unique retailing proposition. We are about 12 times the size of
our nearest competitor and are market leaders in all of our key product
categories. We are a store of first choice for cycling and automotive
requirements and have successfully widened our product offer into new areas
including camping equipment and a broader range of leisure products.
A key competitive advantage is the Halfords 'We'll Fit It' programme; we have
fitted in the course of the year close to one million products, ranging from car
parts, to child seats, CD players, DVD's and the latest satellite navigation
equipment. The Company's staff are passionate about our products and are trusted
by our customers.
'We'll Check It' and 'We'll Repair It' underpin our Bikehut sub-brand, which
sells more than one in every four cycles in the UK.
Our key objectives following last year's listing are to maintain and develop
Halfords' core strengths by:
• Expanding the store portfolio
• Broadening the product offer
• Improving the supply chain and active trading
• Marketing the Halfords' service proposition
The financial results for the year clearly demonstrate that these actions are
being translated into improved profitability and shareholder value.
Expanding the store portfolio
Supermezzanine Format
The roll out of 'supermezzanine' stores continued with the number of
supermezzanines increasing from 11 at the beginning of the financial year to 57
stores by the end of March 2005. Typically a supermezzanine store will add a
further 40% of selling space to a standard superstore.
These stores allow us to design an in-store environment, which includes much
better sight lines and clearer product segmentation creating an automotive
ground floor and a leisure mezzanine. It also creates space for product range
enhancement and for new product categories such as Active Leisure and Kidszone.
Supermezzanine conversions have generated significant uplifts in like-for-like
sales and 35 further conversions are planned for the current financial year.
This will add over 100,000 square feet of retailing space without increasing our
rent levels and will enable Halfords to broaden its product offer to the
consumer.
New Stores
Halfords trades from 398 stores in the UK and the Republic of Ireland. During
the year Halfords opened 18 new stores and closed seven. In addition,
supermezzanine conversions were added to a total of 38 stores.
We have also developed a smaller store footprint and been encouraged by the
results generated by this type of store format.
The decision to expand beyond the UK into the Republic of Ireland is also
proving to be successful. Halfords now trades from three stores in the Republic
of Ireland and eight in Northern Ireland and is continuing to seek further
sites, following the encouraging results from these developments.
Over the next 12 months we plan to open 16 new stores including four site
relocations.
Our property team is actively continuing to progress our expansion plans through
seeking suitable new locations for both our supermezzanine and small store
formats.
Broadening the product offer
During the year Halfords has succeeded in growing like-for-like sales in all
four key categories of Car Maintenance, Car Enhancement, Cycling and Travel
Solutions.
Car Maintenance
Halfords is the largest supplier of car parts in the UK, in a market worth
almost £1 billion annually despite longer service intervals and increased
complexity of vehicle engines.
We have increased sales and grown market share through a combination of good
availability on specialist car parts (either held at branch or through special
order) and by driving up average transaction value on consumable servicing
products. We offer special deals on added value products, as well as offering a
comprehensive 'We'll Fit It' service on items such as wiper blades and bulbs.
We have made good progress through our business-to-business initiatives. We have
reached agreement to supply a range of Halfords branded merchandise to over 300
BP forecourt sites. Products are purchased, merchandised and managed by BP, with
range recommendations provided by the Halfords category team.
We have also introduced a Halfords trade card into virtually all stores to
encourage more committed home car mechanics and smaller garage proprietors to
purchase an increasing amount of their parts requirements from our stores. Early
results from both initiatives are encouraging.
Car Enhancement
The £850m car enhancement market is growing at more than 7% a year and as market
leader Halfords has seen significant growth in its sales and market share.
The largest growth area has been in in-car entertainment and technology.
Eighteen months ago, satellite navigation units were a difficult aftermarket
installation with few units available below £1,000. In recent months, as
technology has advanced, we have reduced the entry price point to as little as
£300 and demand has grown substantially. We have a wide range of products and
have invested heavily in training our store teams to advise the customer of the
products' capability and fit products into customers' cars. We are now satellite
navigation specialists and are successfully marketing this together with our
expertise in fitting in-car DVD and safety camera detectors.
The Halfords' 'We'll Fit It' programme provides sustainable competitive
advantage across our product categories and combined with our strong sales
performance, gives us real confidence for the future.
We continue to enjoy a healthy business selling and fitting CD players to cars
already on the road. About 50% of the cars on the UK roads are over six years
old, which presents us with a continued growth opportunity. Younger drivers, in
particular, create a strong market for trading up to an audio unit, which is MP3
compatible.
Ripspeed
Ripspeed is an exclusive brand to Halfords and is firmly established as one of
the country's leading brands in the growing market of car enhancement and
modification. Whilst all of our stores have Ripspeed branded merchandise, we
have seen strong sales growth from the introduction of a dedicated Ripspeed
sub-shop into our supermezzanine stores.
As we introduce more supermezzanine formats into our stores we are able to
allocate extra space to create more dedicated Ripspeed sub-shops and to widen
the product offer through the introduction of new and exciting ranges such as
the latest alloy wheels and LED lights.
We continue to develop and raise awareness of the Ripspeed brand by sponsoring
events targeting car enthusiasts and marketing the brand through specialist
publications that appeal to the target consumer for this large and growing
market.
Bikehut
Halfords, with its successful Bikehut brand, continues to consolidate and grow
its position as the market leader within the UK cycling market.
Our exclusive Apollo brand is firmly established as the number two cycle brand
within the UK and with the recent launch of our new Apollo range we are
confident that we can further improve its sales performance and market share.
We are also successfully growing our sales in the premium and specialist sectors
of the cycle market. As well as offering recognised premium brand products such
as Kona, GT and Saracen, we have also been able to establish our Carrera brand
as a credible alternative within this market, particularly within the emerging
Town and Trail category. Our specialist buying team have secured a cycle range
with the right quality and design at highly competitive prices through sourcing
product directly from Far East suppliers.
Bikehut is one of the main areas of the store where we experience strong sales
uplifts following store conversion to supermezzanine format.
We have improved the in-store marketing of Bikehut as our cycling sub-brand in
mezzanine stores in order to broaden general appeal and add credibility with
enthusiasts. Employees who work in Bikehut are frequently enthusiasts themselves
which further helps in building customer confidence.
Our Bikehut colleagues' expertise enables us to also provide additional fitting,
maintenance and repair services to our customers, which differentiate us from
other mainstream multiples.
Bikehut also sponsors teams of employee and professional cyclists to heighten
brand awareness and encourage independent product reviews or recommendations.
Specialist press is also used to advertise Bikehut and Carrera branded
merchandise to leverage credibility amongst enthusiasts.
The Bikehut brand has been extended to include own label cycle accessories to
complement the highly successful Carrera and Apollo cycle brands.
Travel Solutions
This market is worth around £700m a year nationally and Halfords is market
leader in this highly fragmented sector which includes travel equipment and
travel accessory products such as roof boxes, roof bars and cycle carriers. We
have updated certain key product areas and this, together with a strong
promotion programme brought about good year-on-year growth with Halfords
continuing to grow market share.
New Category Development
Active Leisure has been rolled out across all stores nationally, providing
camping solutions to satisfy all needs, including developing a multi-purchase
offer for families embarking on their first camping trip. Our new combined tent
and sleeping equipment packs at very competitive prices have proved extremely
popular.
A range of Halfords branded tents and sleeping bags has also been introduced for
the 2005 season.
Kidszone has been developed for supermezzanine stores and includes a broader
range of child safety seats, an extended range of wheeled products (both pedal
driven and electric) and a range of larger outdoor activity products. Sales of
child seats, underpinned by an aggressive marketing and pricing campaign
(including fitting advice in store), have increased significantly. The widening
of the product offer, particularly wheeled toys over the Christmas period, was
also very successful and will provide a good base to build on next year.
Improving the supply chain and active trading
A number of stores benefited from a low cost store renewal programme ahead of
last year's listing, providing better linear merchandising and improved sales
intensity.
As well as delivering range extension benefits, these store layout changes have
also freed space at the front of the store, which allows us to accommodate bulk
displays of product, creating greater impact. The benefits are an increase in
incremental sales from impulse purchases, the development of a 'test bed' for
the trial of new product ideas and giving consumers more reasons to shop at our
stores.
The organisation has responded extremely well to the active trading philosophy
and we are reaping the benefits from it.
The roll-out of the Active Leisure range and the speed of development of the
special purchase programme are good examples of the successful change in
approach, with a focused trial period and scale roll-out following rapidly.
The development of Halfords Asia has proved invaluable in supporting the special
purchase programme, facilitating bulk purchase of product at source,
specifically for promotion activity within the recently created bulk display
space created in-store. There has also been a sustained effort to increase the
number of product ranges we source directly from the Far East. This strategy has
proved highly successful through the creation of a dedicated Far East sourcing
team based in Hong Kong. The growth of directly sourced products enables us to
reduce cost and utilise the benefit to either grow margin or reduce prices to
grow market share. The penetration of product sourced directly from the Far East
has grown significantly in the last year and is targeted to rise further.
Marketing the Halfords service proposition
Halfords has traditionally had a reputation for providing good service through
knowledgeable employees. This, together with our enhanced product fitting
capability, gives us a strong and unique competitive advantage.
The Halfords' 'We'll Fit It' programme is now an integral element of all our
marketing communications and central to the service message inherent within our
latest TV advertising campaign.
We have underpinned the marketing communication message with a series of
in-store training programmes to ensure that the service communicated can be
comprehensively provided.
At a local level, colleagues are trained to deliver fitting services on
servicing consumables such as wiper blades and car bulbs. They are also trained
to build bikes and perform safety checks prior to customers receiving their bike
and also service them with a free six week post purchase check.
Halfords always endeavours to employ colleagues in areas where they have a
natural affinity or preference. Cycling and car enthusiasts will be available in
most stores to advise customers. Halfords has been awarded official status as an
Approved Assessment Centre for the Institute of the Motor Industry and over 500
colleagues have been trained and accredited to deliver hardwire electronic
equipment installation, extending our fitting capabilities from in-car audio, to
include satellite navigation, safety camera detectors and in-car DVD.
Frequently the individual who sells an electronic device will be the same
individual who fits it in the customer's car. This provides additional customer
reassurance and is a strong competitive advantage. None of our competitors
provide such a comprehensive service nationally.
During the year, we also relaunched our Child Seat Fitting service.
Approximately 1,000 employees have been trained and certified in child seat
fitting during the year, which combined with strong deals has supported a
substantial growth in sales volume.
80% of child seats in cars are fitted incorrectly so the advice that Halfords
provides in child seat fitting is significant in providing reassurance to
parents and guardians.
Outlook
Following what we regard as a very successful first year since our Stock
Exchange Listing, Halfords has reported its seventeenth year of consistent sales
growth. This strong track record demonstrates Halfords' ability to defend itself
against cyclical economic change.
During the last 12 months we have worked hard to further consolidate our leading
market position within our core categories, extend sales potential through
leveraging our brand equity into new markets and accelerate Halfords' new store
and portfolio improvement programmes.
We are encouraged by these results and are confident that the continued diligent
application of our strategy provides the opportunity to deliver further positive
results in the future.
Ian McLeod
Chief Executive
8 June 2005
Finance Director's Report
The 52 week period ended 1 April 2005 saw a successful maiden year as a public
company. A good sales and profit performance with continued strong cash
generation enabled the company to deliver the plan outlined at the time of the
Initial Public Offering ('IPO').
Operating result
Group sales increased 8.6% to £628.4m, 10.5% adjusting for the 53rd week in the
previous year. Like-for-like sales growth including the contribution from new
mezzanines was 8.9%. The Group experienced growth in each of the four categories
in which it operates.
At the gross profit level there has been an improvement from 53.5% to 53.7% and
reflects good margin management. The growth in the number of 'special purchase'
offers and ranged products sourced directly from the Far East provides the Group
with a degree of price flexibility as it can either improve margin or pass on
the benefit to customers through price reductions.
As noted in the Interim Report the continued growth of the Car Enhancement
category has had a small dilutive impact upon the margin percentage, which
arises from the relatively lower margin experienced in this heavily branded
category.
The Group's operating profit before goodwill amortisation and exceptional
operating items increased by £13.0m to £92.2m, with the corresponding operating
margin improving to 14.7% from 13.7%. Total operating expenses, excluding
goodwill amortisation and exceptional items, as a percentage of sales fell to
39.1% from 39.8%.
Operating exceptional items in the 52 weeks to 1 April 2005, relate to a
non-cash charge of £4.2m in respect of employee share options that were
exercised at the time of the Group's IPO and income of £4.0m in respect of a
premium received in relation to the sub-lease of garage premises by the Group to
the Automobile Association Limited. Further details are included in note 2 to
the preliminary results.
Net interest payable
Net interest payable before exceptional items was £14.7m compared with £35.4m
last year. A net exceptional interest credit of £0.5m was taken to the profit
and loss account and the details of these transactions are noted below.
Halfords Group floated on 8 June 2004 and the Company used the net proceeds of
the Global Offer together with borrowings under new banking facilities to repay
its indebtedness under its existing senior credit agreement, deep discount
bonds, shareholder loan notes and to pay fees and expenses associated with the
new bank facilities. As a consequence, an exceptional charge of £1.7m (53 weeks
to 2 April 2004: £6.3m) was made in respect of accelerated amortisation of the
issue costs associated with these borrowings.
On repayment of the Group's borrowings at the time of the IPO, the Group hedged
its new borrowing facilities using new interest rate swaps and received £2.2m of
exceptional income on the termination of its former interest rate swaps.
Profit on ordinary activities before taxation
Profit on ordinary activities before taxation was £64.1m compared with £27.8m in
the prior year, an increase of 130.6%.
Taxation
The taxation charge on profit before exceptional items for the financial year
was £24.8m (2004: £15.0m) resulting in a full year effective tax rate of 32.0%
(2004: 34.2%) applied to profit before taxation excluding exceptional items and
goodwill amortisation.
The tax charge exceeds the charge based on the statutory rate of UK corporation
tax rate of 30% principally due to the non-deductibility of depreciation charged
on capital expenditure in respect of mezzanine floors and other store
infrastructure.
Cash flow and net debt
The Group continues to be a strong generator of cash and during the year
generated an operating cash inflow of £116.2m. Included within the working
capital movement of £1.6m there is an £8.2m benefit arising from the timing of
the Group's VAT payment.
Underlying net debt at 1 April 2005 was £169.7m, a reduction of £179.8m on the
prior year comparative of £349.5m, which also reflects the debt repayment and
restructuring following the IPO.
Capital expenditure
As outlined at the time of the IPO, the Group is planning an investment
programme that will amount to approximately £80m over a three year period. The
majority will be spent on improving the store environment via the supermezzanine
programme and new stores. Capital investment in the period totalled £27.7m, an
increase of £7.5m on last year. This included spend of £7.1m on new store and
relocation investment, and £11.1m on the store conversion programme. Other
capital expenditure included the investment in head office IT systems, which is
now close to completion.
Operating leases
All the Group's stores are held under operating leases, the majority of which
are on standard lease terms, typically with a 15 year term at inception. The
Group has an annual commitment under non-cancellable operating leases of £66.6m.
Earnings per share
Earnings per share before exceptional items and goodwill amortisation at 24.4p
(2004: 17.7p) is an encouraging maiden performance and reflects the increase in
operating profit combined with a lower interest charge. Basic earnings per share
was 18.5p (2004: 8.3p).
Dividend
The Board is recommending a final dividend of 8.3p per share in addition to the
3.7p per share interim dividend already paid, bringing the total dividend for
the year to 12.0p per share.
Subject to shareholder approval at the Annual General Meeting on 13 July 2005,
the final dividend will be paid on 1 August 2005 to shareholders on the register
at the close of business on 17 June 2005. Shares will be quoted ex-dividend from
15 June 2005.
International Financial Reporting Standards ('IFRS')
As required by European Union legislation, the Group will first publish a report
under IFRS for the 26 weeks ending 30 September 2005 and financial statements
for the 52 weeks ending 31 March 2006. It is estimated that the adoption of IFRS
will have a small adverse impact on the reported operating profit before
exceptional operating items and goodwill amortisation, estimated to be £2m for
the 52 weeks ended 1 April 2005. The IFRS adjustments will have no impact on the
Company's trading or its cash flow.
Cautionary statement
This announcement contains forward looking statements that are subject to risk
factors associated with, amongst other things, the economic and business
circumstances occurring from time to time in the countries and sectors in which
the Group operates. It is believed that the expectations reflected in these
statements are reasonable but they maybe affected by a wide range of variables,
which could cause actual results to differ materially from those currently
anticipated.
Nick Carter
Finance Director
8 June 2005
Group Profit and Loss Account
For the period 52 weeks 53 weeks
to to
1 April 2005 2 April 2004
Notes £m £m
------------------------------- ------ ---------- ---------
Turnover 628.4 578.6
Cost of sales (290.7) (269.0)
------------------------------- ------ ---------- ---------
Gross profit 337.7 309.6
Net operating expenses (259.4) (244.1)
------------------------------- ------ ---------- ---------
Operating profit before goodwill
amortisation 92.2 79.2
and exceptional operating items
Goodwill amortisation (13.7) (13.7)
Exceptional operating items 2 (0.2) -
------------------------------- ------ ---------- ---------
Operating profit 78.3 65.5
Profit on disposal of fixed assets - 6.4
------------------------------- ------ ---------- ---------
Net interest payable, before net
exceptional (14.7) (35.4)
interest income/(charges)
Net exceptional interest income/(charges) 0.5 (8.7)
------------------------------- ------ ---------- ---------
Net interest payable 3 (14.2) (44.1)
------------------------------- ------ ---------- ---------
Profit on ordinary activities before 64.1 27.8
taxation
Taxation on profit on ordinary activities 4 (24.2) (14.3)
------------------------------- ------ ---------- ---------
Profit on ordinary activities after 39.9 13.5
taxation
Equity dividends 5 (27.4) -
------------------------------- ------ ---------- ---------
Retained profit for the financial period 12.5 13.5
------------------------------- ------ ---------- ---------
Earnings per 1p share
Basic 6 18.5p 8.3p
Diluted 6 18.5p 8.0p
Earnings per 1p share before goodwill
amortisation and exceptional items
Basic 6 24.4p 17.7p
Diluted 6 24.4p 16.9p
------------------------------- ------ ---------- ---------
i) All results relate to continuing operations of the Group.
ii) There is no material difference between the results as stated above and
their historical cost equivalents.
iii) The Group has no recognised gains and losses other than the profits
above and therefore no separate Statement of Total Recognised Gains and
Losses has been presented
Reconciliation of Movements in Group Shareholders' Funds
For the period 52 weeks 53 weeks
to to
1 April 2005 2 April 2004
£m £m
----------------------------------- --------- ---------
Profit on ordinary activities after taxation 39.9 13.5
Dividends (27.4) -
----------------------------------- --------- ---------
12.5 13.5
Movements arising from the exercise of share
options (see note 2) 4.2 -
Proceeds from the issue of ordinary shares 140.0 -
Finance costs of share issue written off to
share premium (4.9) -
----------------------------------- --------- ---------
Net increase in equity shareholders' funds 151.8 13.5
Opening shareholders' funds 4.5 (9.0)
----------------------------------- --------- ---------
Closing shareholders' funds 156.3 4.5
----------------------------------- --------- ---------
Group Balance Sheet
As at 1 April 2005 2 April
2004
£m £m
---------------------------- -------- ---------
Fixed assets
Intangible assets 239.4 253.1
Tangible assets 91.8 82.5
---------------------------- -------- ---------
331.2 335.6
Current assets
Stocks 112.2 107.1
Debtors 23.6 23.5
Cash at bank and in hand 1.1 25.6
---------------------------- -------- ---------
136.9 156.2
Creditors: amounts falling due within
one year (183.1) (293.8)
---------------------------- -------- ---------
Net current liabilities (46.2) (137.6)
---------------------------- -------- ---------
Total assets less current liabilities 285.0 198.0
Creditors: amounts falling due after
more than one year (123.9) (190.2)
Provisions for liabilities and charges (4.8) (3.3)
---------------------------- -------- ---------
Net assets 156.3 4.5
---------------------------- -------- ---------
Capital and reserves
Called up share capital 2.3 -
Share premium account 132.9 0.1
Profit and loss account 21.1 4.4
---------------------------- -------- ---------
Equity shareholders' funds 156.3 4.5
---------------------------- -------- ---------
Group Cash Flow Statement
52 weeks 53 weeks
to to
1 April 2005 2 April 2004
Notes £m £m
---------------------------------- ------ --------- --------
Net cash inflow from operating activities 7 116.2 114.8
Returns on investments and servicing of
finance
Interest received 0.4 2.8
Interest paid (13.9) (26.8)
Exceptional interest received 2.2 -
Issue costs incurred in connection with
the raising of new bank loans (3.1) (2.5)
---------------------------------- ------ --------- --------
Net cash outflow from returns on
investments (14.4) (26.5)
and servicing of finance
Taxation (20.1) (8.1)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (27.6) (19.3)
Sale of tangible fixed assets - 6.9
---------------------------------- ------ --------- --------
Net cash outflow for capital expenditure
and financial investment (27.6) (12.4)
Equity dividends paid (8.5) -
---------------------------------- ------ --------- --------
Net cash inflow before use of liquid
resources and financing 45.6 67.8
Management of liquid resources
Reduction in short term deposits with banks - 20.0
Financing
Issue of ordinary share capital 140.0 -
Costs in respect of share issue (4.9) -
Capital element of finance lease (0.2) 0.8
obligations
Repayment of borrowings (370.5) (146.9)
New borrowings 156.0 65.0
---------------------------------- ------ --------- --------
Net cash outflow from financing (79.6) (81.1)
---------------------------------- ------ --------- --------
(Decrease)/increase in net cash (34.0) 6.7
---------------------------------- ------ --------- --------
Reconciliation of net cash flow to
movement in net debt
Net debt at the beginning of the period (349.5) (395.9)
(Decrease)/increase in net cash (34.0) 6.7
Movement in deposits - (20.0)
Movement in borrowings 217.8 83.6
Other non cash changes (4.0) (23.9)
---------------------------------- ------ --------- --------
Net debt at end of the period 8 (169.7) (349.5)
---------------------------------- ------ --------- --------
Notes to the preliminary results
1. Accounting policies
These results have been prepared using the accounting policies as set out in
Halfords Group Limited's Annual Report for the 53 weeks ended 2 April 2004 with
the exception of the adoption of UITF 17 (revised 2003) 'Employee Share
Schemes'. The impact on the results arising from this adoption is shown in note
2. In addition, UITF 38 'Accounting for ESOP Trusts' has also been adopted
during the period with no material impact on the results of the Group.
2. Exceptional items
Exceptional operating items in the 52 weeks to 1 April 2005, relate to a
non-cash charge of £4.2m in respect of employee share options that were
exercised at the time of the Group's IPO and income of £4.0m in respect of a
premium received in relation to the sub-let of garage premises by the Group to
the Automobile Association Limited ('AA').
Certain senior employees held options to subscribe for shares in the Company
under a share option scheme, approved by shareholders on 19 November 2003. The
share options were exercisable only in the event of a Takeover, Sale or
Admission of the Company to a Relevant EEA market. Under the scheme, share
options were granted to senior employees on 12 December 2003 and 20 May 2004.
The shares required to meet the Company's obligations under the scheme were held
in trust. On 8 June 2004, senior employees exercised their rights over 2,527,307
shares.
In accordance with UITF 17 (revised 2003) 'Employee share schemes', the Group
has charged £4.2m to the profit and loss account, being the difference between
the fair value of the shares at the date of their grant and the amounts paid by
the employees to exercise the share options. A corresponding credit has been
taken to the Group's profit and loss reserves.
In August 2001, Halfords Limited sold its garaging servicing business to the AA.
Under the terms of the sale 124 garage premises were sublet to GB Gas Holdings
Limited by way of an underlease agreement from Halfords Limited.
On 16 November 2004, the Group entered into an agreement with GB Gas Holdings
Limited and the AA. Under the agreement the Group received a £4.0m premium in
consideration for providing consent to the assignment of the above underlease
from GB Gas Holdings Limited to the AA and the subsequent subletting by the AA
of 49 premises to Nationwide Autocentres Limited.
The Group's tax charge for the period to 1 April 2005 includes a £0.8m credit in
respect of the above exceptional items.
3.Net interest payable
For the period 52 weeks 53 weeks
to to
1 April 2005 2 April 2004
£m £m
------------------------------------ ---------- ---------
Interest receivable and similar income:
Bank and similar interest (0.4) (2.7)
------------------------------------ ---------- ---------
Interest payable and similar charges:
Bank overdraft interest 0.1 0.4
Bank and other loans 12.3 23.5
Premium on deep discount bond 1.5 12.1
Interest on fixed rate subordinated unsecured
loan notes - 0.1
Amortisation of issue costs on loans and deep
discount bonds 0.8 1.3
Commitment and guarantee fees 0.4 0.7
------------------------------------ ---------- ---------
15.1 38.1
Exceptional amortisation of issue costs on loans
and deep discount bonds 1.7 8.7
Exceptional gain on close out of interest rate
swap (2.2) -
------------------------------------ ---------- ---------
14.6 46.8
------------------------------------ ---------- ---------
Net interest payable 14.2 44.1
------------------------------------ ---------- ---------
On flotation (8 June 2004), the Group redeemed and replaced all of its existing
borrowings. As a consequence, a charge of £1.7m (53 weeks to 2 April 2004:
£6.3m) was made in respect of accelerated amortisation of the issue costs
associated with these borrowings.
On repayment of the Group's existing borrowings, the Group hedged its new
borrowing facilities using new interest rate swaps and received £2.2m of
exceptional income on the termination of its existing interest rate swaps.
During the 53 week period to 2 April 2004 the Group repaid all of the borrowings
under its mezzanine facility and repaid £68.2m of its deep discount bonds. As a
result £2.4m of unamortised issue costs associated with these borrowings was
written off.
4. Taxation on profit on ordinary activities
For the period 52 weeks 53 weeks
to to
1 April 2005 2 April 2004
£m £m
------------------------------------ ---------- ---------
Current taxation
UK corporation tax charge for the period 23.6 15.2
Adjustment in respect of prior periods (0.3) 0.1
------------------------------------ ---------- ---------
Total current tax 23.3 15.3
Deferred taxation
Origination and reversal of timing differences 0.9 (1.0)
------------------------------------ ---------- ---------
Taxation on profit on ordinary activities 24.2 14.3
------------------------------------ ---------- ---------
The current tax charge is reconciled with the standard rate of UK corporation
tax as follows:
For the period 52 weeks 53 weeks
to to
1 April 2005 2 April 2004
£m £m
------------------------------------ ---------- ---------
Profit on ordinary activities before taxation 64.1 27.8
------------------------------------ ---------- ---------
UK corporation tax at standard rate of 30.0% 19.2 8.3
Factors affecting the charge for the period:
Disallowable goodwill amortisation 4.1 4.1
Capital allowances for the period less than
depreciation 1.0 0.7
Timing difference on premium received on
property transaction - 1.1
Deduction for employee share options (0.7) -
Other timing differences (0.5) 0.3
Other disallowable expenses 0.5 0.7
Adjustment in respect of prior periods (0.3) 0.1
------------------------------------ ---------- ---------
Total current tax charge for the period 23.3 15.3
------------------------------------ ---------- ---------
The Group's tax charge for the period includes a credit of £0.6m (53 weeks to 2
April 2004: £0.7m) in respect of operating exceptional items and exceptional
interest income/(charges).
5.Dividends
For the period 52 weeks 53 weeks
to to
1 April 2005 2 April 2004
£m £m
------------------------------------ ---------- ---------
Equity - Ordinary 1p shares
Interim - paid 3.7p 8.5 -
Final - proposed 8.3p 18.9 -
------------------------------------ ---------- ---------
27.4 -
------------------------------------ ---------- ---------
6. Earnings per share
Basic earnings per share are 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
an Employee Benefit Trust and has been adjusted for the issue of shares during
the year. In accordance with FRS 14, the weighted average number of shares for
the 53 weeks to 2 April 2004 has been adjusted to reflect the bonus issues made
at the time of the IPO.
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 52 weeks to 1 April 2005. In the period to 2 April 2004 the dilutive
potential ordinary shares were in respect of warrants issued on 30 August 2002
that were exercised on 8 June 2004.
For the period 52 weeks 53 weeks
to to
1 April 2005 2 April 2004
£m £m
------------------------------------ ---------- ---------
Weighted average number of shares in issue 215.6 162.9
Weighted average number of dilutive shares
options/warrants 0.1 6.6
------------------------------------ ---------- ---------
Total number of shares for calculating diluted
earnings per share 215.7 169.5
------------------------------------ ---------- ---------
The alternative measure of earnings per share is provided because it reflects
the Halfords Group's underlying trading performance by excluding the effect of
exceptional items and amortisation of goodwill.
For the period 52 weeks 53 weeks
to to
1 April 2005 2 April 2004
£m £m
------------------------------------ ---------- ---------
Basic earnings 39.9 13.5
Exceptional items net of tax:
Operating profit (0.6) -
Profit on disposal of fixed assets - (4.5)
Interest (0.3) 6.1
Amortisation of goodwill 13.7 13.7
------------------------------------ ---------- ---------
Underlying earnings before exceptional items and
amortisation of goodwill 52.7 28.8
------------------------------------ ---------- ---------
Diluted earnings 39.9 13.5
------------------------------------ ---------- ---------
Underlying diluted earnings before exceptional
items and amortisation of goodwill 52.7 28.8
------------------------------------ ---------- ---------
Earnings per share is calculated as follows:
For the period 52 weeks 53 weeks
to to
1 April 2005 2 April 2004
pence pence
------------------------------------ ---------- ---------
Basic earnings per ordinary share 18.5p 8.3p
Diluted basic earnings per ordinary share 18.5p 8.0p
Basic earnings per ordinary share before
goodwill amortisation and exceptional items 24.4p 17.7p
Diluted basic earnings per ordinary share before
goodwill amortisation and exceptional items 24.4p 16.9p
------------------------------------ ---------- ---------
7. Reconciliation of operating profit to net cash inflow from operating
activities
For the period 52 weeks 53 weeks
to to
1 April 2005 2 April 2004
£m £m
------------------------------------ ---------- ---------
Operating profit 78.3 65.5
Depreciation charge (including loss on disposal
of assets) 18.4 16.0
Goodwill amortisation 13.7 13.7
Non-cash movement arising from the exercise of
employee share options (see note 2) 4.2 -
Increase in stocks (5.1) (16.8)
Increase in debtors (0.1) (0.3)
Increase in creditors 6.2 36.5
Increase in provisions 0.6 0.2
------------------------------------ ---------- ---------
Net cash inflow from operating activities 116.2 114.8
------------------------------------ ---------- ---------
8. Analysis of movements in the Group's net debt in the period
At Cash flow Other non cash At
changes
2 April 2004 1 April 2005
£m £m £m £m
-------------------- --------- --------- ---------- -----------
Cash in hand and at 25.6 (24.5) - 1.1
bank
Bank overdraft (7.1) (9.5) - (16.6)
-------------------- --------- --------- ---------- -----------
18.5 (34.0) - (15.5)
Debt due within one year (182.2) 185.5 (38.6) (35.3)
Debt due after one year (185.0) 32.1 34.6 (118.3)
Finance leases due
within one year (0.2) 0.2 (0.2) (0.2)
Finance lease due after
one year (0.6) - 0.2 (0.4)
-------------------- --------- --------- ---------- -----------
Total net debt (349.5) 183.8 (4.0) (169.7)
-------------------- --------- --------- ---------- -----------
The total debt cash outflow consists of £214.5m net repayment of borrowings,
£3.1m issue costs of new loans and £0.2m repayment of finance lease obligations.
Non-cash changes relate to interest charges of £2.5m for the amortisation of
capitalised issue costs and £1.5m in respect of interest rolled into the
principal of the deep discount bonds.
9. Other information
These results for the 52 weeks ended 1 April 2005 together with the
corresponding amounts for the 53 weeks ended 2 April 2004 are extracts from the
Group Annual Report and Accounts and do not constitute statutory accounts within
the meaning of section 240 of the Companies Act 1985 (as amended).
The Group Annual Report and Accounts, on which the auditors have issued a report
that does not contain a statement under section 237(2) or (3) of the Companies
Act 1985, will be posted to shareholders by 13 June 2005 and will be delivered
to the Registrar of Companies in due course. Copies will be available from The
Company Secretary, Halfords Group plc, Icknield Street Drive, Washford West,
Redditch, Worcs, B98 0DE.
The annual general meeting will be held at The Stratford Moat House, Bridgefoot,
Stratford-upon-Avon, Warwickshire, CV37 6YR at 11:30 am on Wednesday, 13 July
2005.
This information is provided by RNS
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