- Assets and Reach 370 stores, 500 garages, 250 mobile vans, and a GBP 1 billion annual retail sales platform serving 20 million customers yearly.
- EV Preparedness 700 EV-trained technicians and nationwide reach to capitalize on UK's aging car parc and EV transition trends.
- Motoring Club Growth 6 million members (400,000 premium), generating GBP 20 million in annual recurring revenue with 70% year-on-year growth in impulse categories.
- Capital Allocation GBP 55-65 million annual capital expenditure for optimization, alongside a GBP 18.6 million net cash position and a 1.5x–2.5x dividend payout ratio.
Operational Highlights
The company's operational performance was marked by a number of highlights, including the growth of its Motoring Club, the expansion of its services proposition, and the rollout of its Fusion garage model, which has doubled profitability at 150 sites. The company's CEO, Henry Birch, noted that the "do-it-for-me" customers are not fully aware of the range of services offered by Halfords, and the company aims to drive a more service-based business model. The company's e-commerce platform serves both retail and garage customers, and digital customer journeys are a key focus.
Strategy Update
Halfords' 5-year strategy is built around three phases: optimize, evolve, and scale. The optimize phase focuses on maximizing the value of existing assets and operations, with a near-term focus on value creation. The company aims to improve category management, expand its services proposition, and grow online share. The evolve phase aims to create a future-proof, lean, and efficient business, with a focus on structurally reducing costs and investing in technology and data. The scale phase will involve growing the business organically and through acquisition.
Valuation
Halfords' valuation metrics suggest that the stock is attractively priced, with a P/E Ratio of -9.42, a P/B Ratio of 0.63, and a Dividend Yield of 6.16%. The company's EV/EBITDA ratio is 7.57, and its ROIC is 6.43%. These metrics suggest that the stock is undervalued, and that the company's efforts to drive growth and profitability may lead to a re-rating of the stock.
Outlook
Halfords expects to deliver like-for-like sales growth, operating margin expansion, underlying PBT progression, and a return on capital that grows to exceed the cost of capital. The company has a strong balance sheet, with a net cash position of £18.6 million and a debt facility committed to April 2029. Analysts estimate next year's revenue growth at 2.3%, and the company's guidance on capital expenditure is £55-65 million per annum. With a focus on execution, operational excellence, and customer experience, Halfords aims to realize its potential and deliver value to shareholders, customers, and colleagues.