Halfords beats H1 expectations despite autocentres handbrake

7th Nov 2013 07:53

- H1 sales ahead of expectation- Q2 growth slows from fast Q1- Autocentres decline in Q2Halfords beat analyst expectations for the first half, despite a marked second-quarter deceleration in car servicing centre revenue. Total group revenues for the 26 weeks to September 27th increased 7.7% £490.6m, with like-for-likes up 6.2%, slowing from the impressive 8.8% total growth and 7.5% like-for-likes enjoyed in the first quarter. "These are early days in our three-year transformation plan," said Chief Executive Matt Davies. "But it is encouraging to see the Retail business deliver a strong first-half performance."He also said the performance in Autocentres was weighed on by both "operational and market challenges" and a new divisional CEO is being sought as the company seeks to implement its investment plan to grow this business.A net 13 Autocentres were opened in the period, taking the total number of locations to 296, but the business endured a decline in daily rental car servicing as older cars were churned for newer models. Cycling and car maintenance led a strong half for the retail business, though in cycling retail Davies admitted Halfords was helped by the better weather.Cycle repair revenues grew by a very encouraging 27.7%, a key area of growth potential, with a partnership with the national Sky Rides helping its profile. Gross retail margin slipped as expected by 124 basis point to 51.2%, dragging group margins 94 points to 53.1%, due to a 5.5% increase in total operating costs from higher store staff investment and incentives, as well as higher volumes of lower-margin products, the launch of an extended range of cycling accessories, and a more-aggressive clearance approach. Broker N+1 Singer said it was "a very commendable performance" given that the comparatives toughened considerably in the second quarter and drives an acceleration in two-year like-for-likes to 11.2% in the second quarter from 1.3% in the first."It is still too early to assess many of Matt Davies's new initiatives but we have been encouraged by recent store visits and it is clear staff morale and engagement has improved," said analyst Mark Photiades. "We understand the three trial stores are performing well, and management now expect to have at least 25 stores fully refitted with the new format by the end of the year, compared from 10-15 previously guided."Shares in Halfords were up 10.1% to 461.57p at 08:31 on Thursday.