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Edited Transcript of HFD.L earnings conference call or presentation 21-May-19 9:00am GMT

Full Year 2019 Halfords Group PLC Earnings Presentation

London Jun 12, 2019 (Thomson StreetEvents) -- Edited Transcript of Halfords Group PLC earnings conference call or presentation Tuesday, May 21, 2019 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Graham Stapleton

Halfords Group plc - CEO & Executive Director

* Loraine Woodhouse

Halfords Group plc - CFO & Director

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Conference Call Participants

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* Adam Stuart Tomlinson

Liberum Capital Limited, Research Division - Analyst

* John Stevenson

Peel Hunt LLP, Research Division - Analyst

* Jonathan Pritchard

Peel Hunt LLP, Research Division - Retail Analyst

* Kate Calvert

Investec Bank plc, Research Division - Retail Analyst

* Matthew Neil McEachran

Nplus1 Singer Capital Markets Limited, Research Division - Senior Research Analyst of Retail

* Tony Shiret

Whitman Howard Limited, Research Division - UK General Retail Analyst

* Wayne Mervyn Brown

Liberum Capital Limited, Research Division - Research Analyst

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Presentation

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Graham Stapleton, Halfords Group plc - CEO & Executive Director [1]

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Good morning, everyone. Welcome to the Halfords Group Preliminary Results Presentation for FY '19. Today, I'm joined by Loraine Woodhouse, our Chief Financial Officer.

And let's begin by having a quick look at the agenda. I'm going to start by taking you through an overview of the FY '19 performance and share some of the operational highlights from the year. I will then give a brief update on our FY '20 outlook. I'll then pass over to Loraine, who will take you through the financial results for FY '19 and provide more detail on the outlook for FY '20. I will then summarize and open the floor up to questions.

Let's start then by looking at the financial performance for FY '19. Despite a challenging consumer environment, group revenue was up 1.1% on a like-for-like basis with Retail plus 0.8% and Autocentres plus 2.6%, a pretty good performance in the current retail climate. After a disappointing Q3, the group returned to positive like-for-like sales growth in Q4. This was principally driven by strong performance in both Cycling and Autocentres. Motoring continued to suffer as a result of an extremely mild winter and tough comparators.

Gross margin has been under significant pressure for several years. So it was a positive step forward to see group gross margin at 70 basis points ahead of last year. Operating costs were also well controlled in the second half and came in below guidance. Over the full year, cost grew 4.3%.

Underlying profit before tax, whilst disappointing, was in line with the guidance given in January. The decline was driven by lower Motoring sales mix year-on-year predominantly due to mild weather, weakened consumer confidence in the run-up to Christmas, retail cost inflation and investment in strategic projects. Loraine will take you through this in a bit more detail later on.

Cash generation continued to be strong. Free cash flow was up year-on-year, and despite unseasonable weather and Brexit-related challenges, the group reduced stock holding by GBP 12 million in the year through effective inventory management. Net debt reduced by GBP 6 million year-on-year to 0.8x underlying EBITDA, which is in line with last year. Given the cash-generative nature of the business, the Board has proposed a final dividend increase of 3%. And if approved, we'll take the full year dividend to 18.57p.

Moving on to operational highlights. The group continues to make positive progress against the strategy set out at the Capital Markets Day in September. We have continued to strengthen our market leadership position in bikes with the sales of electric bikes up 47% on the year. We have also introduced more premium bike brands like Brompton and further improved our exclusive own-brand proposition.

Autocentres significantly improved profitability by 34% in the year. An improved customer experience, coupled with good revenue growth, better buying and tight cost control, led Autocentres to a second consecutive year of profit growth.

Service-related sales continued to grow as a proportion of overall revenue with group service-related sales now accounting for 24% of total sales. On-demand services trials in Autocentres' garages provided promising results, and we continue to increase the number of Halfords Mobile Expert vans, extending the trial to 3 cities.

The strengthening of our financial services proposition saw sales through this offer to customers grow by 30% year-on-year. A combination of increased focus on business sales, the launch of the new website and continued growth in Cycle to Work saw our B2B sales performance in strong double-digit growth year-on-year, too.

Group online sales were up 9.5% in the period, and Click & Collect continues to remain strong with 83% of halfords.com orders being collected in-store, highlighting the service-led nature of our business but also the importance of our physical state.

Our colleagues remain our most valuable asset, and we continue to invest in training to support them and, in turn, our customers as we move towards a service-led strategy. We remain in the coveted Sunday Times' Top 20 list of Best Big Companies To Work For.

Before handing over to Loraine, I'd like to provide an overview of our FY '20 outlook. We continue to anticipate FY '20 profit before tax to be broadly in line with FY '19. Our view assumes average weather conditions across the year and the consumer and economic outlook in line with that experienced during the second half of FY '19. Customer confidence remains fragile, and consequently, we will continue to place greater emphasis on cost control and efficiency.

The recent move towards a more holistic group operation has helped us identify even more opportunity here, and the delivery of the associated initiatives will be key to underpinning profit growth in FY '21 and beyond. We though firmly believe that the customer strategy presented at the CMD last year is the right direction for Halfords. The execution of this will take longer than we expected as we adapt the plan to the current economic environment. Capital investment this year will, therefore, be likely to be around circa GBP 35 million, which is slightly below the GBP 40 million to GBP 60 million guidance for FY '20. Any revenue investment in the strategy will be self-funded via rigorous cost efficiency plans. Free cash flow will be in line with our medium-term financial targets and underpinned by working capital efficiencies.

I will now hand over to Loraine to take you through the FY '19 financial performance and FY '20 outlook in a bit more detail.

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Loraine Woodhouse, Halfords Group plc - CFO & Director [2]

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Thank you, Graham. Good morning, everybody. There are a number of familiar faces in the room. But for those of you I've not managed to meet over the last 6 months, I'm Loraine Woodhouse, the Halfords CFO. Graham has already talked about our overall financial position. So I won't repeat that. Instead, I'll look at the results in a little bit more detail.

If we start with Retail, we saw like-for-like growth of just over 1%, which, in the current Retail environment, was an achievement. Profit, however, as we know, was more challenging with our underlying EBITDA down 19% of GBP 58.8 million. Our Retail performance this year was impacted by a number of factors. Our Motoring mix was lower on the back of a very mild winter. And Motoring, as you know, is lower margin -- is higher margin, I'm sorry. We experienced the impacts of weaker consumer confidence especially in the run-up to Christmas, and you can see both of these factors at play in the like-for-like chart on the right-hand side during Q3 and Q4. Ongoing retail cost inflation impacted the cost base. And at the same time, we continue to invest in the delivery of our strategy, particularly in building capability and in the promotion of our services offering.

Moving to gross margin. Given the challenging background, we were pleased to see Retail margin grow by 60 basis points. On the back of weakness in sterling, gross margin has been declining for a number of years, as you can see from this chart. So it was really encouraging to see the step forward this year. The improvement reflected a number of factors, including a positive FX tailwind, as flagged at the interims, with our average U.S. dollar rate this year at $1.32 versus $1.29 last year. We also saw ongoing improvements in our levels of stock loss, and we continue to focus on buying efficiencies. Offsetting these improvements, of course, was the impact of softer Motoring sales particularly within the second half of the year where the mix impact resulted in a 30 bps decline in margin.

Our overall cost growth this year as a group was 4.3%, but Retail cost growth across the full year was 5%. At the interims, we talked through the drivers of our first half cost growth. And in the corner of this chart, you can see the slide from our interims. I won't repeat the factors in detail, but we did incur some costs in the first half that were one-off in nature and also some additional costs that were associated with the weaker first half cycling market. We also faced, like all retailers, ongoing cost inflation in a number of areas, and we did continue to invest in strategic initiatives particularly in building capability for the longer term. In the second half, as we guided at the interims, you can see that our cost growth was significantly lower as we focused on managing cost in light of lower sales.

Moving to Autocentres. Autocentres is a positive story and took a further step forward in profitability this year, growing EBIT by 34%. The ongoing profit recovery was across all aspects of the business and all aspects of the P&L. Revenues were up by 2.6% on a like-for-like basis with a broad-based sales growth across servicing, tires and MOT. Improved buying margins particularly on tires led to a 50 basis point improvement in gross margin. And an effective program of cost efficiency capped cost growth at just 1.7% despite the sales growth. Within the Autocentre business, we expect to see ongoing improvements from the investments that we've made over the last 12 months.

To summarize, the group delivered like-for-like sales growth of 1.1%, and it was good to see gross margin improving by 70 bps. Underlying PBT of GBP 58.8 million, as Graham said, was disappointing, down GBP 12.8 million year-on-year albeit it was in line with the guidance that we gave back in January.

Before I come on to talk about cash and debt, I will just briefly touch upon exceptional items. Exceptional items this year totaled GBP 7.8 million versus GBP 4.3 million last year. The most significant element of that is a GBP 5.3 million asset write-off primarily relating to the strategic decision to replatform the Retail and Autocentres website into one Halfords website, strategically important for us, a further GBP 1.5 million related to redundancy cost as we restructured a number of areas across the business.

Moving to cash. Cash was a positive story with free cash flow of GBP 42.7 million ahead of last year. It's worth spending a little bit of time just explaining the key drivers of that cash movement. EBITDA, post our exceptional items, dropped by GBP 14 million, but compensating for that, our stock holding levels year-on-year reduced by GBP 12 million with a particular focus on Cycling stock levels. The lowest stock came despite a small stock build for Brexit of around GBP 4 million. Unsurprisingly, in a year where we were developing our strategy, we spent less on capital in year particularly on stores wanting to make sure we formulated our plans before we started to invest. Within other on this chart, we saw an adverse creditor movement, reflecting lower stock levels towards the end of the year. We do expect some of that creditor movement to reverse as the stock intake should be more balanced throughout FY '20. The positive cash reduced our group net debt by GBP 6 million with our net debt to EBITDA ratio remaining at 0.8, as Graham said. On this chart, you can see the positive trend in net debt reduction over time.

Finally, coming back to the guidance for full year '20. As we stated back in January, we expect our FY '20 underlying profit to be broadly in line with FY '19. We do expect underlying sales growth to be fairly muted given the current economic backdrop, but we do also expect to see some growth from some of the early initiatives within our strategy. We expect cost growth in FY '20 to be lower than the year just closed albeit we will experience retail inflation. We will also see some increasing incentive cost year-on-year, and we have an increase in employment costs relating to a recent change in case law.

We will continue to make strategic investments, but this will be self-funded by cost efficiency plans in goods not for resale and goods for resale. And again, those plans are already in place. It is worth saying at this point that any guidance we do give around profit does reflect a consumer and economic outlook broadly similar to that, that we saw in the second half of last year and it also assumes that we experience average weather.

Capital investment will be around GBP 35 million, which is lower than the GBP 40 million to GBP 60 million guidance as we balance the need to invest with the need to recognize the fact that we are operating in a different economic and financial environment. We remain confident in our ability to generate consistent levels of free cash flow, and that will be underpinned by working capital efficiencies that, again, we already have underway. On that point, we will inevitably see greater emphasis on reducing our cost base and maximizing our group efficiencies, both of which will be necessary to underpin profit growth in FY '21.

Thank you. Graham?

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Graham Stapleton, Halfords Group plc - CEO & Executive Director [3]

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Thanks, Loraine. I'll just let these people sit. It's all right. You've just arrived for the summary. Perfect timing.

In summary then, FY '19 trading was challenging for the Halfords Group. However, despite a tough retail backdrop, the group delivered revenue and gross margin growth in the year. While some of our cycling competitors struggled, Halfords delivered a full year like-for-like growth of plus 2.6%. We are now well placed to take further market share in Cycling. Motoring performance was hampered in the year by unseasonable weather with our winter-related sales in significant decline as a consequence. In Autocentres, we continue to make significant progress, delivering a second consecutive year of very good profit growth.

We remain a cash-generative business with a strong balance sheet. Free cash flow was up in the year, supporting the growing dividend. Net debt at 0.8x EBITDA remains below the 1.0x target. Underlying profit before tax, whilst disappointing, was in line with the guidance given in January.

Finally, our focus is now firmly on the delivery of FY '20. The strategy set out at the CMD continues to be the right direction for Halfords. However, as I mentioned earlier, the execution will take longer than we expected as we adapt the plan to the current economic environment. We will continue to execute and prioritize our group cost and efficiency plans together with the delivery of some key elements of our customer strategy.

Before I finish, a quick update on current trading performance. The 7 weeks ending 17th of May 2019, which includes Easter, remain in line with our expectations.

Thank you for listening, and I look forward to speaking to you all again at our 20-week trading update on the 4th of September. Loraine and I will now be happy to take your questions.

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Questions and Answers

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Jonathan Pritchard, Peel Hunt LLP, Research Division - Retail Analyst [1]

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Jonathan Pritchard from Peel Hunt. Sort of 2.5, if I may. On current trading, it's a late Easter, it's a very warm Easter. Obviously, Cycling does have a very strong link to the weather. It sounds like you didn't see much of a pull forward of trade. Is that a shade disappointing that we've only aligned given the beneficial weather conditions?

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Graham Stapleton, Halfords Group plc - CEO & Executive Director [2]

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I mean it's early 7 weeks in. So it's difficult to see the whole season. We've got another May bank holiday at the back end of this period. We're happy at this stage that we're in line with expectations in a tough and challenging retail market.

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Jonathan Pritchard, Peel Hunt LLP, Research Division - Retail Analyst [3]

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Okay. Then on the CapEx, the reduction of that, can you tell us a bit about the potential for sort of store of the future model and the rollout of that? Because I'm also thinking that you're talking an awful a lot of about reducing cost and efficiencies, et cetera, but not really about driving the top line and less CapEx would suggest -- rather suggest that you've given absolutely strong work, but you're perhaps looking other ways to drive the recovery as opposed to sales. So can you just sort of square that circle for me in terms of less CapEx but clearly, you've got over 400 stores that need more than a lick of paint. So I'd just -- as I say, square that circle for me.

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Graham Stapleton, Halfords Group plc - CEO & Executive Director [4]

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Yes. Sure, Jonathan. So the first thing to say is that we've had to adapt our plan to the current economic environment. It's important to do so and look at that prudently. We are going to be spending more capital in this financial year than we did in last financial year. So we are still investing. And not just capital, we will also make revenue investment in the strategy as well albeit funded through the cost and efficiency program that we have.

We will be investing very heavily this year in digital, and we think that's the right place to be. It's a digital-first plan with the replatforming of the website. We talked about the exceptional cost earlier on that go with that. And we will also be investing in developing our services business to make the most of the "do it for me" trend that we see customers moving towards. So there will be investment and some of that will impact our store portfolio but we are -- what you will see less of is a major refurbishment program until we are confident we've got the right model there to move forward.

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Jonathan Pritchard, Peel Hunt LLP, Research Division - Retail Analyst [5]

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And that's sort of an ongoing piece of work to crack that, is it?

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Graham Stapleton, Halfords Group plc - CEO & Executive Director [6]

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Yes. And it's -- the important thing to say there is we do not believe this is a format change. It's a customer experience change that we're trying to create. In the past, it's been very format-driven. It's a customer -- an omnichannel customer experience we need to create in a physical store, and that's going to take longer and you have to have a digital platform first to do that.

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Adam Stuart Tomlinson, Liberum Capital Limited, Research Division - Analyst [7]

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Adam Tomlinson from Liberum. A quick question on -- just on the Autocentre side of the business. So another second consecutive year of growth there. Do you think the initiatives that you've put in place there have actually started to impact this year? Or is it more a case of the momentum that perhaps was in the business before you joined -- so just in terms of the balance of growth going forward, how much we can expect those initiatives you've put in to start impacting? And then also on the -- I guess the inventory size, good discipline there, inventory levels down. Can you talk a little bit about the categories you've been through? What left there is to do and the -- I guess the further opportunities on that, so in terms of the working capital management?

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Graham Stapleton, Halfords Group plc - CEO & Executive Director [8]

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Shall I pick up Autocentres and you do inventory?

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Loraine Woodhouse, Halfords Group plc - CFO & Director [9]

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Yes. Sure.

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Graham Stapleton, Halfords Group plc - CEO & Executive Director [10]

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Yes. So in terms of Autocentres, we've done a lot of work -- the team have done some fantastic work in getting the operating model, particularly in the back office part of the business, into a more effective and efficient position. And we are now starting to see the benefits of that work coming through now, and that work is not finished. There's more opportunity there. So I think you will see continued improvement, as Loraine indicated in her part of the presentation, in the Autocentres business. We have also improved the customer experience. Our NPS scores are growing in Autocentres, and customers are telling us that they like the experience in Autocentres more than they've ever done. So I think a combination of a much more efficient business coupled with better customer experience gives us real hope that we've got not just the momentum of the past but something to take going forward.

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Loraine Woodhouse, Halfords Group plc - CFO & Director [11]

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Shall I pick up inventory? So we made good progress on stock, principally in Cycling. It wouldn't be fair to call it tactical changes throughout FY '19, but we have basically put in a lot more rigor around the commercial, open-to-buy processes. And through a combination of that and some range rationalization, we made a good step forward. But there's more to go after, again, particularly in Cycling. And 2 initiatives this year will really help that.

One is a store relay for Cycling in probably about 200 of our stores, relevant to Jonathan's question, I think, as well in the sense that we are changing the way in which our cycling shops look within at least 50% of our stores to help that be a better shopping experience for the consumer and make the e-bike range much more prominent. And as part of that, we're definitely making sure we've got the right ranges for the right stores, and that will more strategically take out some stock. And then alongside that, we're quite a long way through a forecasting and replenishment system implementation. We're quite spreadsheet-led at the moment in that space, and an F&R system will really help us target where our stock should be in the supply chain. So a combination of those 2 things should give us more to go after in FY '20.

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Wayne Mervyn Brown, Liberum Capital Limited, Research Division - Research Analyst [12]

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Wayne Brown, Liberum. I missed the entire presentation. So if I -- in my questions, you did cover, my apologies. Just 2 from me. On rent rolls, clearly, a theme that we heard from a number of companies across the sector is reductions in rent when break clauses, rent renewals come up. So if you could just give us a reminder as to what the profile of your estate looks like from upcoming rent reviews? And what those rent reviews are leading to from a cost reduction perspective?

And then secondly, on your last point that you just made on the new system for stock that is well advanced, this may be a question you may not want to actually give a number towards, but do you think -- by the sounds of it, it sounds like there's probably sales which have been left on the table through merchandising on paper as opposed to necessarily moving the stock where it needs to be. Can you give us a flavor of what that feels like of how many -- of how much sales in Cycling has now been optimized?

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Loraine Woodhouse, Halfords Group plc - CFO & Director [13]

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Okay. Shall I take those?

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Graham Stapleton, Halfords Group plc - CEO & Executive Director [14]

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Take this one, yes.

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Loraine Woodhouse, Halfords Group plc - CFO & Director [15]

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So if I do the sales first, I think we're more likely to have been overstocked personally. So we monitor our availability of key lines very closely. We very rarely dip below 98% availability of all of our key lines across the estate. So the challenge for us is probably being more around overloaded stock rooms than it has about stock not getting to the right place. What F&R all will allow us to do is make sure we've got enough stock but not too much stock, which will be positive.

On the rent, you're right. So we've got a big estate obviously. Over the next 4 years, we've got 175 either break clauses or points of review in the rents. So we've got a lot of opportunity to go back to landlords and renegotiate rents, which we've seen some success in over the last year. I would say on average, we've probably seen -- if you add up the rent free plus the rent review, probably around double-digit savings but not everywhere. So it's very inconsistent. We've seen up to a 50% reduction and we've seen up to a 20% increase. So the swings were enormous. But on average, we're seeing savings as you would expect, and we're confident we will be negotiating hard for those 175 leases.

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Kate Calvert, Investec Bank plc, Research Division - Retail Analyst [16]

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Kate Calvert from Investec. Just on your bike like-for-like growth of 2.6% last year, can you give us an idea of how much was volume and how much was price-driven?

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Graham Stapleton, Halfords Group plc - CEO & Executive Director [17]

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Yes. So the volume was fairly flat in our business. And therefore, most of that growth was priced and that was predominantly through the growth we saw in areas like electric, which have a higher average ticket price. So that was our business.

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Kate Calvert, Investec Bank plc, Research Division - Retail Analyst [18]

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And relative to the rest of the market, I mean do you still believe the market is down in volume terms versus pre-Brexit?

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Graham Stapleton, Halfords Group plc - CEO & Executive Director [19]

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It's a good question. I mean all we can go on is what we have in terms of market intelligence. We'd obviously have seen the challenges that Evans have had, the recent CBA with Cycle Surgery. We look at the important data, which is less reliable these days as bikes come in componentry. If you look at all of those trends, you would think that we have outperformed the market the way -- by some way.

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Matthew Neil McEachran, Nplus1 Singer Capital Markets Limited, Research Division - Senior Research Analyst of Retail [20]

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Matthew McEachran from Nplus1 Singer. A couple of questions but probably all pointing towards the same direction. So the guidance you've given for the year talks about average weather, which I think would signal that -- I hope that Motoring does better than it has done in the year just ended. And that's the highest margin part of the business with the highest attachment rates obviously in We Fit. You seem to have started the year relatively well in Cycling, as per the original question, and Autocentres has got a bit of momentum in it as a result of the initiatives there. So there's clearly something which we haven't really discussed in a lot detail yet today, just -- which is the drag. We've got a bit of cost inflation, but it feels like something you're very nervous about the cycling market as you go into mainstream summer season. Is that the piece that we haven't yet talked about? Or what is the bit that we haven't yet talked about?

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Graham Stapleton, Halfords Group plc - CEO & Executive Director [21]

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I mean the weather has an impact on sales. We are planning and forecasting for average weather because that's all we can do at this stage. We've had a good start to the year. And as much as we're in line with where we forecast to be, with the extremes that we saw last year in the weather, the hottest summer for 100 years, the mildest winter for 30, 2 days of frost, the Beast from the East and one of the hottest Easters we've just had for, I don't know, 40 or 50 years, all you can do is plan for an average position. And if we have average weather, we will deliver the guidance that we're suggesting. That's why we're very confident about that.

If we see -- if we do see a more challenged cycling market, it's likely to be as a consequence of the weather being cooler and wetter, and that favors the Motoring business. It's one of the big positives about the Halfords model is that we're able to hedge the weather to some extent with the mix of products that we've got. Obviously, when they are very extreme differences in weather, it's more difficult to hedge, but usually, we can do that pretty well.

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Loraine Woodhouse, Halfords Group plc - CFO & Director [22]

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The thing, Matthew, I would add, is last year was very much a game of two halves. So we had quite a strong first half last year. And if you look at the consumer confidence tracking throughout the year, there was a big dip in September, and we really felt that in the run-up to Christmas. So in giving this guidance, we're assuming that, that challenging consumer, which for us was experienced very much in the second half of the year, continues throughout FY '20. Now of course, that's contingent on many factors, none of which sadly are within our gift to control. But that's really driving the heart of our guidance. The weather, if it genuinely is average, should help us a bit. But the consumer that really dipped in the second half, if we see that and experience that throughout FY '20, that will be the offsetting factor.

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Matthew Neil McEachran, Nplus1 Singer Capital Markets Limited, Research Division - Senior Research Analyst of Retail [23]

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Yes. Okay. Second question was just a little bit around the write-off on the platform, one of the exceptional charges. Is that the primary reason for depreciation in Autocentres being well down in the second half or is there anything else? I mean should we expect the level of depreciation to have been rebased as a consequence of that write-off?

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Loraine Woodhouse, Halfords Group plc - CFO & Director [24]

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I don't think you should expect to see a significant shift in depreciation. The bulk of that write-off would have been Retail assets rather than Autocentre assets. We're simply taking the write-off on both websites because we're obviously pulling the whole thing together, but the underlying depreciation is just slightly down on Autocentres.

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Matthew Neil McEachran, Nplus1 Singer Capital Markets Limited, Research Division - Senior Research Analyst of Retail [25]

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Yes. I mean in the second half, it was well down year-on-year. So...

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Loraine Woodhouse, Halfords Group plc - CFO & Director [26]

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Yes. So -- which will reflect the websites, but it will normalize a little bit.

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John Stevenson, Peel Hunt LLP, Research Division - Analyst [27]

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John Stevenson of Peel Hunt. A couple of questions as well, please. Just starting on the consumer side of Autocentres, just interested in spending trends. So are people coming down -- calling down the extra work when they come in terms of sort of the yellow and red light type stuff? Are they reacting to CRM as the same they would? Are they delaying services? What are you sort of seeing in terms of trends in terms of how people are spending? Are they being more cautious? Or actually are you seeing people act the same as they have done in the past?

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Graham Stapleton, Halfords Group plc - CEO & Executive Director [28]

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I think -- it's a good question. In the market overall, there's definitely some things around customers being more cautious and waiting longer to replace tires and other parts in the car because of all of the other circumstances we've talked about today. There's no doubt that's the case. And they are being more value-conscious. But actually, what that means is we're in a good place because in the Autocentre, in garage world, we are very competitively priced against the main dealers, a main dealership servicing. So we've seen as one of the high quality but value players. So we're not seeing -- as you can see by the like-for-like growth, we're not necessarily seeing some of that impact that perhaps more premium players are in the market at the moment. And we've got more customers coming to us and are happier.

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John Stevenson, Peel Hunt LLP, Research Division - Analyst [29]

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And second question is on cash in terms of sort of strategy, I guess. Yes, earnings are down. It's a tight market. You've rephased your CapEx. You've increased the dividend. Just interested in the sort of messaging why you cut back on CapEx but increased the divi?

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Loraine Woodhouse, Halfords Group plc - CFO & Director [30]

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We were confident in the cash flow. So we generated a little bit more cash this year than we did last year through working capital efficiencies. We think we've got line of sight for -- to continue to drive working capital opportunities. That gave us the confidence to increase the dividend, in line with our policy.

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John Stevenson, Peel Hunt LLP, Research Division - Analyst [31]

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I mean on that basis, though, would that not be better spent on sort of pushing forward most of the initiatives?

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Loraine Woodhouse, Halfords Group plc - CFO & Director [32]

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I think it's always a balance, isn't it? We have opportunities this year to invest in the business, which we believe we can fund. We've stated we were looking to spend around GBP 35 million, which is an increase on the previous year. We're confident that, that will allow us to do the things that are important for FY '20 with some revenue investment alongside that. Clearly, if we felt there was a point at which we were starving the business of capital, we would make a different choice, but we're not at that point and we were comfortable with the dividend that we've proposed.

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Tony Shiret, Whitman Howard Limited, Research Division - UK General Retail Analyst [33]

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Tony Shiret from Whitman Howard. You were asked about market share in Cycling. I just wondered if you could make some comments about the extent to which you know your market share in the Motoring side of the business, the various categories. I expect that to be quite difficult, but if you could try anyway. And the second thing, when you talked about sales growth coming from some of your early-stage sort of strategic initiatives, I just wondered if you could just give us -- make that a bit more precise. What particularly do you think is going to grow?

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Graham Stapleton, Halfords Group plc - CEO & Executive Director [34]

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So let's start with Motoring. A bit like Cycling, we haven't got a total Motoring share picture. We do have some market share data on select product areas within Motoring, so areas like technology, pressure washers, the big branded buys that other retailers also sell a lot of. In those categories, we've seen good share growth in this year. So we're pleased with the growth that we've got. We have made some investment in price in some of those big branded categories as well to ensure we remain competitive in the market. So that would be -- that's what we have in Motoring. I don't know if there's anything else she want to add or anything.

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Loraine Woodhouse, Halfords Group plc - CFO & Director [35]

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No, I don't think so. So our Motoring market share, Tony, are very different depending on the different categories. So as you would expect, in the technology areas, we've got really, really very high share. So -- therefore, our performance tends to reflect what's happening to the market. And then in other areas, like Autocentres, we've got a tiny share of the market and plenty of opportunity. So it's very, very different depending on the different categories.

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Graham Stapleton, Halfords Group plc - CEO & Executive Director [36]

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In terms of strategy, moving on to the second question, when we were here this time last year, we talked about a few areas that we would invest in early, and they were B2B, financial services and customer data. And we've done all of that.

So the B2B business last year performed very well. We delivered 20% growth in B2B sales. So it's now 12% of our total business from 10%. We -- on our financial services business, as I think we've mentioned in the presentation, all the sales that we deliver through that customer offer grew by 30% year-on-year. So I've seen very good traction there and we'll be investing more in that space in the coming year. And in terms of customer, we launched a free MOT campaign that we mentioned at the interims. We're very pleased with the take-up of that campaign. 50% of the 152,000 MOTs have been delivered now, 70% of them are brand-new to the Autocentre business.

In terms of the value that creates, financially going forward, obviously, we'll need to wait a year or 2 to see that come through because this was about acquisition of customers, not making profit immediately. So there are some very good signs in terms of the strategic investments that we'll be making over the last 12 months.

More questions? None? Okay. Thank you very much indeed.

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Loraine Woodhouse, Halfords Group plc - CFO & Director [37]

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Thank you very much.

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Graham Stapleton, Halfords Group plc - CEO & Executive Director [38]

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Thank you.