Halfords Group Plc · LSE:HFD
Halfords — Investor Presentation (July 2015)
52 slides from Halfords's investor presentation, Jul 20, 2015
Slide 1: Driving Topline - July 2015
driving Stop line July 2015
Slide 2: Contents
Contents Introduction to Halfords Page 3 FY15 Highlights and Strategic Progress Page 8 Looking Ahead to FY16 Page 20 Appendix 1 - FY15 Financial Performance Page 27 Appendix – Additional Information Page 38 2
Slide 3: Introduction to Halfords
Introduction to Halfords 3
Slide 4: Halfords Group
Halfords Group The UK’s leading retailer of automotive, cycling and leisure products and a leading independent operator in garage servicing and auto repair FY15: £858m 463 main chain sales, £102m stores across RETAIL EBITDA the UK and ROI FY15 EBITDA £m c.8,000 5 Cycle colleagues Republic shops 8 AU
Slide 5: Halfords Retail
Halfords Retail 12% Cycling 34% Car Maintenance 22% Car Enhancement Travel Solutions 32% 85% of Group sales 468 stores in UK and ROI including 5 Cycle Republic c. 165,000 products available online c.90% of online transactions picked up in store 5
Slide 6: Halfords Retail Categories
Halfords Retail Categories CAR CAR TRAVEL CYCLING ENHANCEMENT SOLUTIONS below Retail average MAINTENANCE the highest-margin the lowest-margin the average-margin margin category category category Includes cycles, Includes 3Bs Includes sat nav Includes child- parts, accessories, (bulbs, blades & GPS,
Slide 7: Retail LFLs (%)
Retail LFLs (%) 9.9 8.8 7.9 7.5 6.6 6.8 5.9 5.7 4.6 3.5 0.4 0.3 (1.1) (2.1) (2.8) (2.3) (4.9) (4.8) (6.6) (6.8) (7.5) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 FY11 FY11 FY11 FY11 FY12 FY12 FY12 FY12 FY13 FY13 FY13 FY13 FY14 FY14 FY14 FY14 FY15 FY15 FY15 FY15 FY16 7
Slide 8: FY15 Highlights and Strategic Progress
FY15 Highlights and Strategic Progress 8
Slide 9: FY15 Financial Highlights
FY15 Financial Highlights Group Revenue exceeds £1bn, a year earlier than targeted Group EBITDA up 8.7% to £109.9m, with EBITDA margins also up Profit Before Tax up 11.4% to £81.1m Basic Earnings Per Share up 13.8% to 32.7p Net Debt at 3 April 2015 down at £61.8m with net debt:EBITDA at 0.6x Full ye
Slide 10: Retail Performance Highlights
Retail Performance Highlights Older children’s bike Premium bikes sales sales +40.5% #1 oil brand +24.9% Strengthened Online sales Newness and authority in core exceeded £100m innovation categories 10
Slide 11: Helping and Inspiring Customers with their Life on the Move
Getting Into Gear Helping and Inspiring Customers with their Life on the Move 11
Slide 12: Retail colleagues and contract hours
Retail colleagues1 Weekly Contract Hours2 9,200 25 22 8,100 17 7,700 FY13 FY14 FY15 FY13 FY14 FY15 % Full Time 3-month turnover3 36% 21% 30% 25% 12% 9% FY13 FY14 FY15 FY13 FY14 FY15 Notes: 1) As at the end of each year presented 2) The average contracted hours per week for store colleagues 3) The pr
Slide 13: Gears training and colleague engagement
Gears training1 Colleague Engagement2 Gear 1 96% 64% 81% Gear 2 46% April April Gear 3 over 300 2012 2015 Net Promoter Score3 72% 77% 55% FY13 FY14 FY15 Notes: 1) The Gear 1 and Gear 2 statistics represent the proportion of eligible colleagues that had qualified by the end of FY15 2) Halfords Retail
Slide 14: Store refreshes
a stores fit to shop Store owe le refreshes republic For us, learning to ride is right 2 5 yy Sam —we ca | up there with len 19 to wz ner" 6 clathine “f women’ s clothing 14
Slide 15: Strengthening our authority in Auto and Cycling
Strengthening our authority in Auto and Cycling… Expanding our community involvement… 9,000 cubs have learned about bike maintenance 12,000 children taught bike maintenance and safety at school 20,000 children and parents attended our free bike workshops Launched a new scheme to donate re-conditione
Slide 16: Online and systems developments
Tablets in store SAP upgrade Increased social media presence Website design refresh Continual online developments 16
Slide 17: Autocentres strategy
driving Autocentres strategy Stopline PEOPLE WHO LOVE WORKING ON CARS
Slide 18: Autocentres progress
Autocentres progress Online and technological enhancements Concept centre trial Early progress in Closer working with customer service Retail measures 18
Slide 19: Croydon Concept Centre
Croydon Concept Centre ie, Get ready for next advallare 19
Slide 20: Looking Ahead to FY16
driving topline dri a2 He} 33 o£ i < FY16 20
Slide 21: Retail trading initiatives
Retail trading initiatives New range launches Boardman accessories Cycle department refreshes Colleague training Cycle Republic: stores and online 21
Slide 22: Retail trading initiatives
Retail trading initiatives New products and extended range New and improved merchandising Festival pop-up shops Harness trend for Do It For Me Bundle promotions and package solutions 22
Slide 23: Retail strategic & operational focus
Retail strategic & operational focus c.11 additional Cycle Gear 2: 80% of colleagues c.75 store refreshes Gear 3: two in most stores Republic shops Warehouse & Annual colleague Online developments Distribution turnover 23
Slide 24: Autocentres
Autocentres 10-15 new centres Light touch refresh programme Productivity and utilisation Customer retention 24
Slide 25: FY16 Guidance
FY16 Guidance Cycle Republic sales growth c. 1% Retail Gross Margin A decline of 25-75bps Retail Operating Costs 4 - 5% Retail Capital Expenditure c. £45m Autocentres EBITDA Low double-digit % increase on FY15 Autocentres Capital Expenditure c. £8m Group depr’n & amort’n charge1 c. £30m Net Finance
Slide 26: FY16 Retail Opex Guidance
FY16 Retail Opex Guidance Store change initiatives c. 1-2% Cycle Republic operating costs Pay rise c. 1% Gears pay increments Volume-related cost growth offset c. 1% by targeted savings Depreciation c. 1% 26
Slide 27: Appendix 1: FY15 Financial Performance
Appendix 1 FY15 Financial Performance 27
Slide 28: Group Income Statement
Group Income Statement FY15 FY14 Change £m £m Revenue 1,004.9 939.7 +6.9% Gross Profit 535.1 504.2 +6.1% Operating Costs (450.5) (426.4) +5.7% EBIT 84.6 77.8 +8.7% EBIT Margin % 8.4% 8.3% +14bps EBITDA 109.9 101.1 +8.7% EBITDA Margin % 10.9% 10.8% +18bps Net Finance Costs (3.5) (5.0) -29.5% PROFIT B
Slide 29: FY15 Retail Revenues
FY15 Retail Revenues Total Retail LFL % Cycling +11.4 Car Maintenance +8.5 Car Enhancement -0.5 Travel Solutions +5.4 Total +7.0 Proportion of Proportion of Online Retail Total Retail Online Retail Growth Sales Sales % % % Home Delivery 8.9 1.1 -14.0% Click & Collect 91.1 11.1 +18.1% Total 100.0 12.
Slide 30: Retail Performance
Retail Performance FY15 FY14 Change £m £m Revenue 857.9 803.1 +6.8% Gross Profit 442.0 416.2 +6.2% Gross Margin 51.5% 51.8% -30bps Operating Costs (359.3) (341.0) +5.4% EBIT 82.7 75.2 +10.0% EBIT Margin 9.6% 9.4% +27bps EBITDA 102.4 93.6 +9.4% EBITDA Margin 11.9% 11.7% +28bps Notes: All numbers incl
Slide 31: Retail Operating Costs
Retail Operating Costs FY15 FY14 Change £m £m Store Staffing 99.7 92.4 +7.9% Store Occupancy 139.3 139.7 -0.3% Warehouse & Distribution 43.5 33.7 +29.1% Support Costs 76.8 75.2 +2.1% Total 359.3 341.0 +5.4% Depreciation / Amortisation 19.7 18.4 +7.1% Notes: All numbers include the acquired Boardman
Slide 32: Warehouse & Distribution product mix
W&D Product mix becoming bulkier… Cycling Workshop Cycle carriers Sat Nav +32% 2yr LFL +32% 2yr LFL +23% 2yr LFL -11% 2yr LFL Online sales Replenishment growing… frequency changing… Increased cube volume throughput Increased Order & Collect* volumes +39%** In two years, Retail LFL use of +14.5% with
Slide 33: Autocentres Performance
Autocentres Performance FY15 FY14 Change £m £m Revenue 147.0 136.6 +7.6% LFL% +5.3% -0.1% Gross Profit 93.1 88.0 +5.8% Gross Margin 63.3% 64.4% -109bps Operating Costs (89.3) (83.7) +6.7% EBIT 3.8 4.3 -11.6% EBIT Margin 2.6% 3.1% -56bps EBITDA 7.6 7.5 +1.3% EBITDA Margin 5.2% 5.5% -32bps Notes: All
Slide 34: Cashflow and Net Debt
Cashflow and Net Debt FY15 Cashflow £m 39.6 14.0 Debt facility amended 142.2 20.3 to £170m and extended 27.7 to November 2019 37.8 Operating Capex Boardman Tax & Returns to Other Reduction in cashflow acquisition interest shareholders net debt 139.2 Net debt £m 110.6 99.6 Net debt to EBITDA at 0.6x
Slide 35: Cashflow and Net Debt
Cashflow and Net Debt OPERATING FREE £m £m NET DEBT £m CASHFLOW CASHFLOW EBIT 87.6 Operating Cashflow 142.2 Opening Net Debt (99.6) Depreciation/ Amortisation/ 27.4 Capital Expenditure (39.6) Free Cashflow 66.4 Loss On Disposal Employee Share Scheme 1.4 Net Finance Costs (3.1) Dividends (28.4) Worki
Slide 36: Group Balance Sheet
Group Balance Sheet FY15 FY14 YOY Change £m £m £m Goodwill and Intangible Assets 356.8 342.2 +14.6 +4.3% Property, Plant & Equipment 103.8 95.2 +8.6 +9.0% Derivative Financial Instruments 3.8 (2.1) +5.9 +281.0% Net Working Capital 27.6 47.2 -19.6 -41.5% Net Debt (61.8) (99.6) +37.8 +38.0% Other Cred
Slide 37: Capital expenditure FY14-FY16
Capital expenditure FY14-FY16 FY14 FY152 FY16 Total actual actual estimate estimate £m £m £m £m Store Portfolio1 13.9 18.5 Infrastructure Systems 9.7 11.8 Other 0.8 0.4 Retail 24.4 30.7 c. 45.0 c. 100.0 Autocentres 6.0 6.8 c. 8.0 c. 20.0 TOTAL 30.4 37.5 c. 53.0 c. 120.0 Notes: 1) Before capital cont
Slide 38: Appendix 2: Additional Information
Appendix 2 Additional Information 38
Slide 39: 5 Year Group Performance
driving 5 Year Group Performance Stoplinie Revenue Underlying profit before tax Underlying basic earnings £m £m per share pence +6.9% +13.8% ( £939.7m £869.7m £871.3m 1 2011 2011 | 2012 | 2013 | 2014 | 2015 Underlying EBITDA EBITDA margin Dividend per ordinary share 2011 | 2012 | 2013 | 2014 £m % +8
Slide 40: Milestones
Milestones FY15 FY15 FY16 Target Achieved Target G2: 80% of 40-50% of colleagues 3-Gears colleagues through 46% G3: 2 colleagues in G2 most stores Reduce % Of Colleagues Leaving maintain FY15 <12.5% 9% Within 3 Months levels Colleague Engagement n/a n/a >85% >75% maintain FY15 Retail Net Promoter Sc
Slide 41: Management Incentives
Management Incentives Annual Bonus FY13-FY16 Performance Share Plan CEO – maximum award 150% base salary – 2/3 in cash with 1/3 deferred Maximum core award 150% base salary in shares for 3 years Finance Director – 100% base salary Performance multiplier of 1.5 x core award for Features – full bonus
Slide 42: LFL history by category
LFL history by category Cycling LFL 14.6% 41.6% Car Maintenance LFL 11.8% 11.0% 10.4% 21.3% 19.5% 14.7% 15.5% 7.1% 13.3% 11.3% 6.1% 5.8% 5.9% 7.6% 1.2% 2.0% 3.4% 2.7% -1.6% 1.0% 0.5% -9.6% -8.8% -0.5% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 FY13 FY14 FY15 FY16 F
Slide 43: Refreshed Stores
Refreshed Stores For us, learning to ride is right up there with le- 19 to wall
Slide 44: Our Major Cycle Brands
De) cyclists of every age aw halfords driving stopline 44
Slide 45: Cycling market data
Cycling market data 1400 Cycles market value 1,272 3,800 Cycles market volume 3,599 (in £'000) 3,600 ('000s of bikes) 1200 956 3,400 3,240 3,250 1000 3,200 800 674 3,000 600 2,800 2009-14 CAGR = 0% 2,600 400 2,400 200 2,200 0 2,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009 2010 201
Slide 46: Auto market data
Auto market data More cars… …starting to be driven more Licenced Cars (m) Total Car Miles (bn) 27.7 246.9 27.3 27.0 27.0 244.0 245.4 26.9 26.8 26.7 247.3 244.8 240.7 240.0 26.3 26.2 241.0 239.8 240.3 2005 2006 2007 2008 2009 2010 2011 2012 2013 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Avera
Slide 47: Group Components
Group Components Retail Autocentres Amortisation Group FY15 £m £m £m £m Revenue 857.9 147.0 - 1,004.9 Gross Profit 442.0 93.1 - 535.1 Operating Costs (359.3) (89.3) (1.9) (450.5) EBIT 82.7 3.8 (1.9) 84.6 EBITDA 102.4 7.6 - 109.9 Retail Autocentres Amortisation Group FY14 £m £m £m £m Revenue 803.1 13
Slide 48: Retail Portfolio – FY15 space
Retail Portfolio – FY15 space 1 Average Average Average Total Trading Average Ground Lease-able Space, Mezzanine Floor Space2 including Trading Trading (sq.ft) Mezzanine Space (sq.ft) Space (sq.ft) (sq.ft) 9,121 8,120 6,429 3,092 Notes: 1) Excluding Cycle Republic 2) Ground floor only, including bac
Slide 49: Retail Portfolio – Lease Expiries
Retail Portfolio – Lease Expiries Expiries FY14 6 FY15 12 FY16 18 FY17 15 FY18 16 Total Expiries 67 Average remaining leases (total portfolio): 6.7 years 49
Slide 50: Autocentres Portfolio
Autocentres Portfolio Centres Acquired 223 FY11 230 FY12 250 FY13 283 FY14 303 FY15 305 Average remaining leases: 6.9 years 50
Slide 51: Forward-Looking Statements
Forward-Looking Statements INCLUDED IN THIS PRESENTATION ARE FORWARD-LOOKING MANAGEMENT COMMENTS AND OTHER STATEMENTS THAT REFLECT MANAGEMENT’S CURRENT OUTLOOK FOR FUTURE PERIODS These expectations are based on currently available competitive, financial, and economic data along with our current oper
Slide 52: Contact and Newsflow
Contact and Newsflow For further information, please go to www.halfordscompany.com or contact Adam Phillips Head of Investor Relations [email protected] Landline: +44 (0)1527 513 113 Mobile: +44 (0)7703 890142 Next newsflow: 15 July 2015: Q1 trading update 52