Halfords interim results for FY17 have revealed a total group revenue increase of 2.2%, something largely lead by the performance of its cycling businesses.
Having acquired Welsh bike companies Wheelies and Tredz in May, Halfords has continued to enjoy strong performance across the two businesses, which have increased revenues by 25% year-on-year.
Sales across the cycling portfolio rose 15.4% on a like-for-like basis, pushing the division’s revenues up 4.6%.
Online proved a strong performer during the period, with group sales up 30% like-for-like.
Jill McDonald, Chief Executive, commented: “The first half sales performance was strong, improving through the period, with growth across all areas of our business. Our service-led offer is a key point of difference for Halfords and continued investment in this area has led to good progress in service-related sales. I’m pleased with the momentum that is building as we implement our strategy. There is demonstrable progress across the plan, with more to come in the year ahead, and the benefits for colleagues and customers are starting to come through. The depreciation of Sterling brings cost headwinds. However, we have developed a number of initiatives to mitigate the profit impact and remain confident in the underlying performance of the Group.”
Halfords now operates 460 branches, as well as 12 bike-specific Cycle Republic branches. Customers can also shop at three Tredz stores and a Giant store in South Wales.
On the results David Cheetham, a market analyst at London broker XTB.com told CyclingIndustry.News:
“A 2.2% increase in like for like sales for the first fiscal half of the year will be seen as a positive development for Halford’s shareholders, but the fall in sterling continues to weigh on profitability.
“The average hedged US dollar rate has fallen from $1.56 to $1.46 which will translate to a circa 100 basis point improvement for the gross margin, however with the market currently trading sub $1.25 it’s not hard to see that this hedge has proved an expensive mistake in light of the rapid depreciation in the pound following the EU referendum.
“Largely due to this the basic earnings per share after tax, before non-recurring items has fallen by 13.5%.
“Despite this fall in the bottom line the decision to raise dividends by 3% to 5.83p will likely please investors who will hope that CEO Jill Mcdonald’s “moving u a gear” strategy is starting to bear fruit with a 4.6% increase in cycling sales over the past year boosted by the success of team GB in the summer Olympics and and a prolonged season due to warm weather at the start of Autumn.
“Whilst the share price remains 20% below the level it traded at a year ago there’s been a jump of more than 6% in the past month and shareholders may think on balance that the positives outweigh the negatives in this latest trading update and look forward to higher prices in the not too distant future.”