Halfords shares sink on lowered profit guidance for FY 2023

Halfords shares sank 16.2% to 165.5p in early morning trading on Thursday, after the company warned of lowered profits in FY 2023 in its financial results.

Halfords reported a FY 2022 revenue growth in FY 2022 of 6% to £1.4 billion compared to £1.2 billion in FY 2021.

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The company highlighted a 3.7% drop in its retail revenue to £1.001 billion against £1.039 billion year-on-year, however its autocentres revenue climbed 45.7% to £368 million compared to £252 million.

The firm said its motoring business had experienced positive growth while its cycling sector had declined as a result of strong comparators and supply chain disruption.

It credited its autocentre success to improved efficiency as it utilised its Avayler software, along with strong demand for its Halfords Mobile Expert vans proposition with a 44% growth compared to FY 2021 as its fleet grew to 253 vans, 14 hubs and over 230 technicians.

The company also saw an increase in electric vehicle servicing, with the number climbing 140% since the previous year.

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“We are continuing to play a key role in helping consumers to choose electric forms of transport and are constantly investing in the training and upskilling of our technicians in this critically important area,” said Halma CEO Graham Stapleton.

“Sales of e-bikes, e-scooters and accessories were up 74% on two years ago, and servicing for electric cars in our garages was up 140% year-on-year.”

“We have also rolled-out free electric bike trials to encourage customers to make the switch and are the first mainstream retailer to offer an end-to-end EV charging solution for the home.”

Halma mentioned a gross margin rise of 10% to £721.7 million from £656.3 million the last year.

The group confirmed an underlying EBITDA decrease of 11.1% to £207.1 million compared to £233 million, alongside an underlying pre-tax profit slide of 9.7% to £89.8 million against £99.5 million the year before.

Halma announced a total pre-tax profit surge of 49.8% to £96.6 million compared to £64.5 million in the previous year.

Lowered Profit Guidance for FY 2023

The group commented that its guidance for FY 2023 included the consideration of challenges such as lowered demand for big-ticket items on the back of a higher cost of living, alongside cost inflation in its supply chain impacting its financial performance.

Halma said it expected a FY 2023 lowered pre-tax profit between £65 million to £75 million, however it caveated its outlook by stating that the current macroeconomic environment made any estimations uncertain in the near-term.

“All eyes today will be fixed on the outlook statements, where management point to lower demand and significant cost inflation as the reason profits are expected to fall 23% next year, and markets have reacted badly,” said Hargreaves Lansdown equity analyst Matt Britzman.

“With a cost-of-living crisis hitting consumer wallets, demand for higher ticket items is heading for trouble and we’re seeing a continued unwind of some of the lockdown tailwinds, such as the cycling boom that helped performance last year.”

The firm also said it would spend FY 2023 investing in its customer proposition and carefully maintaining its cost base. The company stated it currently believed itself to be in a good position to deliver relatively strong growth in the coming year.

“While rising inflation and declining consumer confidence will naturally present short-term challenges for any customer-facing business like ours, we remain confident in Halfords’ long-term growth prospects due to our service-led strategy and the enduring strength of our brand, people, products and services,” said Stapleton.

The company noted an underlying basic EPS drop of 14.9% to 35.5p against 41.7p and a proposed final dividend of 6p per share for the financial year.

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