Halfords interim profits fall; Budget changes to add £23m in costs
By Michele Maatouk
Date: Tuesday 26 Nov 2024
(Sharecast News) - Retailer Halfords said on Tuesday that changes to National Insurance contributions and minimum wage announced in last month's Budget will increase its costs by around £23m, as it reported a dip in interim revenue and profit.
In the 26 weeks to 27 September, reported pre-tax profit was down 23.3% to £17.8m, while underlying pre-tax profit dipped 1.4% to £21m.
Revenue nudged down 1% to £864.8m, with revenue from Autocentres 2.3% lower at £348.7m, while Retail saw a 0.1% decline to £516.1m.
The retailer said that as a business employing more than 12,000 people, the measures announced in the Budget add around £23m of direct labour costs, of which around £9m was already included in FY26 planning assumptions and fully mitigated.
Halfords called on the government to make changes to the Apprenticeship Levy to help mitigate the impact of the new measures.
Chief executive Graham Stapleton said: "The cost implications from the recent UK Budget are particularly acute for a specialist retailer that provides expert advice and assistance to customers, face to face. While we will work hard to mitigate these costs, we urge the government to consider alternative ways of supporting businesses like ours, including the acceleration of Apprenticeship Levy reform, which would help us to upskill existing colleagues and offset some of the new headwinds.
"Looking ahead, while the short-term outlook remains challenging, we will continue to build on our unique omnichannel platform and focus on what we can control to deliver on our strategy this year and beyond."
At 1000 GMT, the shares were up 13% at 146.14p.
Dan Coatsworth, investment analyst at AJ Bell, said: "Halfords' results show a business stuck in the slow lane. Make no mistake, the jump in its share price does not reflect a business in perfect health. This is simply a relief rally that full-year earnings guidance hasn't changed.
"Halfords has been the bearer of bad news for a while and the consensus forecast for its 2025 earnings have been cut by 51% since January 2024. Those are savage downgrades, illustrating a business in a pickle.
"It is at the mercy of consumer spending and shoppers have been watching every penny. Sales of 'nice to have' items like bikes have been patchy while motorists have been opting for cheaper options on essentials to keep a car running.
"An additional £23 million in costs as a result of the Budget presents yet another headwind for Halfords and it will have to push up prices, find more cost savings in the business or cut jobs to mitigate this factor, or simply stomach lower profit margins.
"Motorists should brace themselves for servicing and repair prices to go up, but Halfords might find the consumer turns their back completely if prices go up too much on non-essentials. It means management must look in every nook and cranny for ways to save money.
"To its credit, gross margins have improved in the first half and there have been improvements to cash generation. The fact it has maintained the dividend, and not cut it, also shows that management aren't panicking about the impact of the Budget on the business and its customers."
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