Broker snap: Investec upbeat about turnaround plan at Halfords

23rd May 2013 10:48

Investec has recommended investors to 'buy' on share-price weakness at Halfords after the car- and bike-parts retailer announced a turnaround plan to boost growth in the future.Full-year results from Halfords contained few surprises, Investec said, due to the clear guidance given in the pre-close trading update last month. The profit before tax of £72m, while down 22% year-on-year, was at the top-end of the £68-72m guidance range.The turnaround plan, called 'Getting Into Gear 2016', will include re-positioning the retail business to focus on sales growth and sustainable profitability. The company will upgrade its stores, expand its car repair business Autocentres by 20 to 30 new centres a year and improve its online offering. Nevertheless, shares dropped sharply on Thursday after the company said it has slashed its final dividend by 35% to 9.1p per share, taking its full-year dividend to 17.1p, down 22.3% on the year. Halfords also said that profits in the fiscal year ending 2014 may reduce as it invests and doesn't expect group earnings to exceed current levels within the next two years.The stock was down 11.28% at 351.6p by 10:46."The statement is honest about current Retail performance, and the significant investments needed to fundamentally improve both service and store standards," said analyst Bethany Hocking."Clearly, significant near-term forecast downgrades are disappointing, but we view risk to our numbers as being to the upside, and feel that the changes being put in place should lead to medium-term industry outperformance."