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1. Company Snapshot

1.a. Company Description

Halfords Group plc, through its subsidiaries, provides motoring and cycling products and services in the United Kingdom and the Republic of Ireland.Its Retail segment is involved in the retail of automotive, cars, leisure, cycling products, scooters, and parts, as well as clothing and accessories through its stores.The company's Car Servicing segment provides car servicing and repair services from Autocentres and mobile vans.


As of June 23, 2021, it operated 404 Halfords stores, 3 Performance Cycling stores, 374 garages, and 143 mobile service vans, as well as 192 commercial vans.The company also sells its products to customers through halfords.com and tredz.co.uk for pick up at their local stores or direct home delivery, as well as provides garage-booking services online at halfords.com.Halfords Group plc was founded in 1892 and is based in Redditch, the United Kingdom.

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1.b. Last Insights on HFD

Halfords Group's recent performance has been driven by robust trading updates, with the company hailing rising sales in the previous year. The appointment of a new CEO, amidst a challenging retail market, suggests a proactive approach to navigating the company's growth trajectory. Additionally, Halfords has been able to mitigate the impact of rising costs and taxes, with a focus on cost management. The company's ability to adapt to changing market conditions and maintain sales momentum is a positive driver of its recent performance.

1.c. Company Highlights

2. Halfords' 5-Year Strategy Update: A Path to Growth and Profitability

Halfords reported a strong set of interim results for the 26 weeks to September 26, with revenues and earnings per share (EPS) coming in at expectations. The company's EPS was 0.06435, beating analyst estimates of 0.043. Revenue growth was driven by a strong performance in the Cycling division, with 9% like-for-like sales growth, and a solid showing in the Motoring Club, with 6 million customers and 400,000 premium members. The company's gross margin was under pressure, but it expects to see margin expansion in the future as it implements its 5-year strategy.

Publication Date: Dec -04

📋 Highlights
  • 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.

3. NewsRoom

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Halfords sales and profits tick higher as cycling demand jumps

Nov -27

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At UK£1.42, Is It Time To Put Halfords Group plc (LON:HFD) On Your Watch List?

Oct -10

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A Look At The Intrinsic Value Of Halfords Group plc (LON:HFD)

Jul -31

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Halfords Group's (LON:HFD) Dividend Will Be Increased To £0.058

Jul -03

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Halfords Group Full Year 2025 Earnings: EPS Misses Expectations

Jun -27

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Halfords profits beat expectations after cost savings and price rises

Jun -25

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Is There Now An Opportunity In Halfords Group plc (LON:HFD)?

May -03

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Halfords appoints new boss as ‘very challenging’ retail market unlikely to ease

Apr -15

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.95%)

6. Segments

Retail

Expected Growth: 1.8%

Halfords Group plc's Retail segment growth of 1.8% is driven by increasing demand for cycling products, particularly electric bikes, and a strong online presence. Additionally, the company's focus on services such as MOTs, repairs, and fitting has contributed to growth. Furthermore, Halfords' efforts to enhance the in-store experience and invest in digital capabilities have also supported sales growth.

Car Servicing

Expected Growth: 2.2%

Halfords Group plc's 2.2% growth in Car Servicing is driven by increasing demand for MOTs and routine maintenance, fueled by an aging UK car parc and stricter emissions regulations. Additionally, the company's investment in digital platforms and expanded service offerings, such as tyre fitting and brake repairs, have enhanced customer convenience and loyalty.

7. Detailed Products

Car Servicing

Halfords offers a range of car servicing options, including MOTs, car repairs, and maintenance checks.

Car Parts and Accessories

Halfords sells a wide range of car parts and accessories, including batteries, brakes, and suspension components.

Cycling Products

Halfords offers a variety of cycling products, including bikes, accessories, and safety gear.

Sat Nav and In-Car Technology

Halfords sells a range of sat nav systems, dash cams, and other in-car technology products.

Child and Baby Travel

Halfords offers a range of child and baby travel products, including car seats, strollers, and travel accessories.

Leisure and Touring

Halfords sells a range of leisure and touring products, including roof boxes, bike carriers, and camping gear.

Motoring Services

Halfords offers a range of motoring services, including MOTs, car repairs, and maintenance checks.

8. Halfords Group plc's Porter Forces

Forces Ranking

Threat Of Substitutes

Halfords Group plc faces moderate threat from substitutes, as customers have limited alternatives for its products and services. However, the rise of online retailers and DIY stores may pose a threat to its market share.

Bargaining Power Of Customers

Halfords Group plc has a large customer base, which reduces the bargaining power of individual customers. Additionally, the company's strong brand presence and wide range of products reduce the likelihood of customers switching to competitors.

Bargaining Power Of Suppliers

Halfords Group plc has a diverse supplier base, which reduces the bargaining power of individual suppliers. However, the company's dependence on a few large suppliers for certain products may give them some bargaining power.

Threat Of New Entrants

The threat of new entrants is low for Halfords Group plc, as the company has a strong brand presence and a large market share. Additionally, the high capital requirements and regulatory barriers to entry make it difficult for new entrants to enter the market.

Intensity Of Rivalry

The intensity of rivalry is high in the automotive and cycling markets, with many established players competing for market share. Halfords Group plc faces intense competition from online retailers, DIY stores, and specialist cycling retailers.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 17.73%
Debt Cost 3.96%
Equity Weight 82.27%
Equity Cost 11.84%
WACC 10.45%
Leverage 21.55%

11. Quality Control: Halfords Group plc passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Halfords

A-Score: 5.1/10

Value: 9.1

Growth: 3.1

Quality: 3.1

Yield: 7.5

Momentum: 4.0

Volatility: 3.7

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Quality: 1.6

Yield: 6.2

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Moonpig

A-Score: 4.5/10

Value: 6.5

Growth: 4.6

Quality: 5.9

Yield: 1.2

Momentum: 5.0

Volatility: 3.7

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Fenix Outdoor

A-Score: 3.6/10

Value: 5.2

Growth: 4.0

Quality: 3.8

Yield: 3.1

Momentum: 0.5

Volatility: 5.0

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Momentum Group

A-Score: 3.6/10

Value: 1.6

Growth: 6.4

Quality: 6.0

Yield: 0.6

Momentum: 2.0

Volatility: 4.7

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IVS Group

A-Score: 3.0/10

Value: 3.1

Growth: 2.9

Quality: 2.5

Yield: 1.2

Momentum: 5.0

Volatility: 3.3

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

1.48$

Current Price

1.48$

Potential

-0.00%

Expected Cash-Flows