Shares in Halfords (HFD) were marked 0.6% higher to 408.2p as the car parts-to-bicycles retailer revved in with impressive full year results driven by market share gains in cycling and motoring services and returned to the dividend list.
Yet investors were unnerved by the news ‘acute’ supply chain challenges remain in cycling products following a pandemic-driven sales boom, the prospect of motoring price cuts crimping gross margins and an 'uncertain' outlook.
PENT-UP DEMAND
Pre-tax profits for the year to 2 April 2021 grew by £41.8 million to £64.5 million and Halfords is targeting pre-tax profits of ‘above £75 million’ this year.
Pent-up demand for bikes and continuing restrictions on foreign travel should support future sales and Halfords said positive momentum has carried forward into the first nine weeks of the current year.
‘Demand for our services remains strong in the new financial year, and our touring categories are currently performing particularly well given the trend towards staycations this summer,’ explained CEO Graham Stapleton.
‘In the longer-term, we remain confident in the future prospects for the UK’s motoring and cycling markets and our ability to compete strongly in both.’
UNCERTAIN OUTLOOK
However, Halfords warned external factors ‘add uncertainty to our outlook’. Management is ‘conscious of continued Covid-19 volatility’ and also warned supply challenges for cycling products remain ‘acute’ following last year’s 54% leap in like-for-like cycling sales and with bike manufacturers in Asia impacted by Covid lockdowns.
Having finished the financial year with net cash of £58.1 million, Halfords reinstated the shareholder reward, which it says will be progressive in future.
The retailer proposed a 5p final payout for 2021, a level which disappointed some investors, and said it will reinstate the ordinary dividend from full year 2022 at 9p, ‘intending this to be progressive’.
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