Shares in car parts-to-bicycles seller Halfords (HFD) ticked up 1.5% to 341.5p after it agreed to buy Universal Tyre and Autocentres for £15 million in a deal that takes the retailer closer to its target of having over 550 UK garages.
Following on from the 2019 acquisitions of McConechy’s and Tyres on the Drive, Universal should accelerate the growth of Halfords’ motoring servicing business at a time when the nation’s motorists are gearing up to put their foot on the gas as the economy reopens.
Shares in high-flying Halfords’ surged earlier this month after the company upgraded full-year profit guidance with Britons’ continued love of cycling in lockdown leading to stronger than expected performance in the opening seven weeks of its first quarter.
Today, the focus is on the motoring side of the business with investors giving the thumbs-up to the acquisition of Kent-based Universal, a deal which builds Halfords’ coverage of the commercial truck and van market.
A well-established motoring services provider, Universal has 20 sites and 89 commercial vans operating in the South East and on the east coast. It specialises in tyre services, including the supply and fit of tyres for a wide range of vehicles, from cars to commercial and agricultural vehicles, as well as providing general car maintenance and repairs such as brakes, servicing and MOT.
Universal generated underlying earnings of more than £1.5 million as sales surpassed £31 million in 2020 and Halfords believes it can drive synergies from the acquisition. Following this transaction, Halfords now has 374 garages, 185 commercial vans and 136 Halfords Mobile Expert vans operating in its Autocentres business.
Around £9 million of the purchase price relates to the acquisition of Universal’s property and net cash position, with the remaining £6 million paying for the underlying trading business; Halfords plans to sell and lease back the property within the next few months.
SIGNIFICANT POTENTIAL
‘We have a clearly stated strategy of building a market-leading Motoring Services offer,’ said Halfords’ chief executive Graham Stapleton, ‘and the acquisition of Universal is another important step forward in helping us to achieve that goal.
‘We continue to see strong demand for our Autocentres, for our expanding fleet of Halfords Mobile Expert vans, and for our growing commercial business. Universal will help us to meet that demand whilst also expanding our geographic footprint in a market for which we see significant potential.’
Russ Mould, investment director at AJ Bell, pointed out that while Universal is a modest-sized acquisition, it is ‘nonetheless an important marker on the road to building a leading motoring services business.’
Mould added, ‘A current target to hit 550 centres, from 374 if you include those picked up in the Universal transaction, would still leave it short of Japanese-owned Kwik-Fit which has more than 600.
‘Often more closely associated with its cycling outlets, Halfords’ portfolio of car repair sites and vans which can offer a ‘mobile’ service to customers at home or at work is increasingly important. This work is typically higher margin and is growing more rapidly.
‘Now is a good time to be expanding in this area, with an opportunity to consolidate its position by snapping up smaller, weaker rivals to benefit from a likely increase in demand later this year.’
