Halfords shares rev up as garage growth drives return to profit
Halfords shares have boomed after it smashed analyst expectations to turn a £44m profit, in a sign that the motoring and cycling retailer’s turnaround is beginning to gain pace.
The company notched a £43.6m pre-tax profit in the year to April, returning to the black after last year’s £30m loss, as revenue grew five per cent to £1.8bn. Its shares jumped 14 per cent on Thursday morning to 205p.
Analysts had tipped the firm to deliver £40.3m in profit before tax, and the company’s own estimates guided towards the “upper end” of a £41.2m ceiling.
The FTSE 250 firm has been pursuing growth in its motoring arm in recent months under new chief executive Henry Birch, as the division begins to outweigh its retail takings.
Birch’s strategy has leant on a rapid expansion of the firm’s network of garages as the company looks to its motoring services arm to drive its growth.
Halfords eyes Brits’ ageing cars
Revenue in Halfords’ autocentre operations jumped by six per cent on a like-for-like basis to £740m. The business said its repairs services are gaining pace, with the firm having previously eyed the UK’s ageing car stock as an opportunity for growth. The strength of this repairs work outweighed “ongoing weakness” in the tyres market, it said.
Duncan Ferris, an analyst at Freetrade, said the firm is “finding growth in keeping Britons’ ageing cars on the road,” 43 per cent of which are 10 or more years old.
Halfords said it has defied a “subdued consumer environment” to deliver a four per cent like-for-like jump in revenue, to £1bn, at its retail arm.
Bike sales are driving this growth, up 6.4 per cent, suggesting that this area of the business is regaining balance after the boom and bust caused by the pandemic-era spike in cycling demand.
The firm’s sales of bikes rose sharply during the pandemic, sending its share price soaring, but Halfords has since been unable to match these sales in the following years.
“There are still reasons to be cautious, though. In Halfords’ retail business, profits remain under pressure as inflation and reinvestment offset the impact of positive sales momentum,” Ferris said.
Share price shed 60 per cent
The company’s share price reached highs of 430p in June 2021 but has since shed nearly 60 per cent of its value in five years before Thursday’s update.
In April last year, the retailer announced the sudden departure of Graham Stapleton, who had led the firm for seven years.
Birch, the former boss of Very and William Hill, was appointed as his successor on the same day.
The new Halfords boss said: “These are early days in our growth strategy and there is much still to do as we seek to leverage Halfords’ clear strengths: leading market positions, an unmatched physical and digital presence in motoring and cycling, a trusted brand, and a unique services proposition.”
The firm announced on Thursday that former EY partner Jock Lennox will join its board as chair, replacing Keith Williams, whose departure was announced in November.
Halfords was founded as a wholesale ironmongery in 1892 before expanding its cycling and motoring retail. It has been listed on the London Stock Exchange since 2004.