Halfords Group PLC: Current trading and COVID-19 update (1006019)

 
 Halfords Group PLC (HFD) 
Halfords Group PLC: Current trading and COVID-19 update 
 
25-March-2020 / 07:00 GMT/BST 
Dissemination of a Regulatory Announcement, transmitted by EQS Group. 
The issuer is solely responsible for the content of this announcement. 
 
                                                               25 March 2020 
 
                             Halfords Group plc 
 
                        ("Halfords" or "The Group") 
 
                    Current trading and COVID-19 update 
 
Halfords is providing an update today on the impact of the COVID-19 pandemic 
on its business, along with the measures it is taking to actively manage the 
  risks to its customers and colleagues. Each day we are learning more about 
the effects of the pandemic as well as evolving government interventions. We 
    are modelling a range of scenarios to understand the potential impact on 
  sales, profit and cashflow and to support decisions on mitigating actions. 
       Whilst we are confident that the post-pandemic future of the business 
 remains strong, trading in the near term is likely to be severely impacted. 
 
                                     Supporting our customers and colleagues 
 
       The health and safety of our customers and colleagues remains our top 
  priority and we are committed to supporting them and our wider communities 
       at such a difficult time. As the UK's largest independent provider of 
 motoring and cycling services, we have an essential role to play in keeping 
    the UK moving. Each month, we carry out more than a quarter of a million 
    motoring jobs in our retail stores, over 100,000 jobs in our garages and 
approximately 12,500 motoring jobs at people's homes or workplaces using our 
  fleet of mobile vans. Every month we see over 50,000 vehicles with serious 
         safety defects and a further 100,000 vehicles with issues requiring 
   attention. Many key workers rely on us to keep their motor fleet running, 
 including the Ministry of Defence, the British Transport Police and several 
  large UK utility companies. Alongside this, we carry out over 200,000 bike 
     builds, services and repairs every month and over 40% of the Government 
backed Cycle2Work scheme in the UK is delivered through our Retail business. 
 Halfords is uniquely positioned to keep the UK's cars and bikes on the road 
    and safe to drive or ride, providing vital support to emergency workers, 
 fleet operations, key workers and the general population as they travel for 
              essential supplies and, where required, attend places of work. 
 
  We are committed to playing our part, but only if we can ensure the health 
  and safety of our colleagues and customers, and we are able to comply with 
  government policy. We have been designated by the Government as a provider 
   of essential services and so we have the legal flexibility to remain open 
 across the entire business. As it currently stands, our Autocentres garages 
  and Mobile vans are open and, within Retail, we are working through a plan 
 to provide partial store coverage from later this week. We will continue to 
  take orders online on both Halfords.com and Tredz.co.uk, offering either a 
      home delivery service or Click and Collect once branches are reopened. 
 
                                                             Current trading 
 
Recent trading has been in line with expectations, and, in fact, very strong 
     in the last couple of weeks, but delivery of the FY20 profit outturn is 
dependent on sales performance in the final two weeks of the financial year. 
Post the Government's latest announcement on measures to protect the public, 
    we are working through our operational plans. We are seeking to strike a 
 balance between providing essential motoring and cycling services to the UK 
      public alongside guaranteeing the personal safety of our customers and 
 colleagues. Given the latest Government guidance we believe there is a high 
 likelihood that sales will drop sharply and, if so, that the shortfall will 
    have an impact on profitability, such that FY20 underlying profit before 
    tax, on a 52-week and pre-IFRS16 basis, could be at the lower end of, or 
                      slightly below, the current guidance range of GBP50-55m. 
 
          At this early stage in the pandemic, it is not possible to provide 
   meaningful guidance on earnings in FY21. Our focus now is on taking every 
      step necessary to secure future value for colleagues and shareholders. 
 
                                                                   Financing 
 
     The Group has access to substantial liquidity through a GBP180m revolving 
credit facility (RCF) and a GBP20m overdraft facility, provided by a syndicate 
of major banks, expiring in September 2022. We have drawn down on the RCF in 
full and now have approximately GBP118m of cash on deposit. Total liquidity is 
   therefore GBP138m, including the overdraft facility. The Group continues to 
 expect that it will satisfy its covenant requirements at the FY20 year-end. 
    We are in active dialogue with our existing lending syndicate to provide 
           additional flexibility to support Halfords through this period of 
                                                                uncertainty. 
 
                                              Outlook and mitigating actions 
 
  Despite an improvement in recent sales performance, we expect that volumes 
  could now see a material reduction. We have modelled a range of disruption 
 scenarios, with our median scenario assuming significant sales declines for 
     the three-month period from April to June, followed by weakness for the 
  remaining nine months. Over the course of the full year, this would result 
    in a sales decline of 25% (c. GBP300m) with the most material impact being 
                        seen in the first quarter of the new financial year. 
 
 In response, the Board is taking a series of immediate measures to preserve 
                                        cash, including, but not limited to: 
 
· Suspension of the dividend, resulting in a cash saving of approximately 
GBP24m in FY21. 
 
· As announced by the UK Government, business rate relief for the whole of 
FY21. This currently applies to the retail estate only, saving 
approximately GBP26m per year. 
 
· Negotiations with landlords regarding rent relief, including an 
immediate switch to monthly payments from quarterly. 
 
· Where stores and garages are closed, we will access Government support 
on salary payments. 
 
· Reduced purchases of goods not for resale (GNFR), including lower 
marketing spend. 
 
· Postponing capital commitments: Our capital spend for FY21 will be well 
below current guidance of GBP40-60m. We are currently planning for capital 
spend in FY21 to be in the range of GBP10-15m, but this will remain under 
review as the situation evolves. 
 
· Optimising working capital, including changes to the timing and amount 
of stock purchases. 
 
· Deferral of VAT payments to March 2021. 
 
Based on the median sales scenario, and the measures we have outlined above, 
    we are confident that we can operate within our existing debt facilities 
                                                            throughout FY21. 
 
 Given the rapidly changing situation, there is no certainty on the severity 
or duration of the impact on the business and so we are not providing formal 
  profit guidance for FY21 at this time. The Group will continue to consider 
                                    its funding options on an ongoing basis. 
 
  Halfords is a resilient business with a healthy balance sheet, substantial 
        liquidity and strong cash flow. The Group has a core role to play in 
    providing essential motoring and cycling services to the nation, at this 
    critical time but also more generally. We have an experienced management 
     team and the capability to adapt and respond quickly to changing market 
conditions. The Board remains confident in the strategy over the longer term 
          and believes the Group will be well positioned to benefit from the 
                                                     normalisation in trade. 
 
                                 We will update the market as events evolve. 
 
Graham Stapleton, CEO said: 
 
"In such difficult times the health and safety of our colleagues and 
customers remains our top priority and we continue to take all appropriate 
action in line with government advice. Halfords has an essential role to 
play in keeping the country moving, providing vital support to emergency 
workers, fleet operations, key workers and the general population as they 
travel for essential supplies and, where required, attend places of work. 
 
While significant uncertainty exists on the impact of COVID-19, we are 
taking immediate and significant measures to contain our costs and protect 
our financial position. We have a strong balance sheet, with significant 
liquidity headroom and low levels of financial debt. 
 
This is an unprecedented challenge for all of us, but I am confident that 
the actions we are taking to successfully navigate the current situation 
will put the business in a position of strength, enabling us, over the 
medium term, to refocus on our strategic transformation. 
 
Finally, I would like to thank all our fantastic colleagues and customers 
for their incredible support during this challenging period." 
 
Enquiries 
 
Investors & Analysts (Halfords) 
 
Loraine Woodhouse, Chief Financial Officer 
 
Neil Ferris, Corporate Finance Director [phone] 
 
Media (Powerscourt) [phone] 
 
Rob Greening [e-mail] 
 
Lisa Kavanagh 
 
                                                            Notes to Editors 
 
www.halfords.com www.halfordscompany.com [1] www.halfordsautocentres.com [2] 
 
     www.cyclerepublic.com [3] www.boardmanbikes.com [4] www.tredz.co.uk [5] 
 
  Halfords is the UK's leading provider of motoring and cycling services and 

     products. Customers shop at 446 Halfords stores, 26 Performance Cycling 
  stores (trading as Cycle Republic, Tredz, Boardman and Giant), 369 garages 
 (trading as Halfords Autocentres) and have access to 75 mobile service vans 
             (trading as Halfords Mobile Expert). Customers can also shop at 
  halfords.com, cyclerepublic.com and tredz.co.uk for pick up at their local 
 store or direct home delivery, as well as booking garage services online at 
                                                    halfordsautocentres.com. 
 
                                                        Cautionary Statement 
 
 This report contains certain forward-looking statements with respect to the 
financial condition, results of operations, and businesses of Halfords Group 
           plc. These statements and forecasts involve risk, uncertainty and 
assumptions because they relate to events and depend upon circumstances that 
    will occur in the future. There are a number of factors that could cause 
 actual results or developments to differ materially from those expressed or 
          implied by these forward-looking statements. These forward-looking 
    statements are made only as at the date of this announcement. Nothing in 
       this announcement should be construed as a profit forecast. Except as 
         required by law, Halfords Group plc has no obligation to update the 
          forward-looking statements or to correct any inaccuracies therein. 
 
ISIN:           GB00B012TP20 
Category Code:  UPD 
TIDM:           HFD 
LEI Code:       54930086FKBWWJIOBI79 
OAM Categories: 3.1. Additional regulated information required to be 
                disclosed under the laws of a Member State 
Sequence No.:   54402 
EQS News ID:    1006019 
 
End of Announcement EQS News Service 
 
 
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(END) Dow Jones Newswires

March 25, 2020 03:00 ET (07:00 GMT)