Halfords Group H2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
June 25, 2026

Key Takeaways

  • Positive Sentiment: Halfords reported a strong FY 2026 with like-for-like sales up 4.8%, gross margin at a 10-year high of 52.8%, and underlying PBT at the top end of expectations. Management also highlighted solid cash generation, a net cash balance sheet, and a higher full-year dividend.
  • Positive Sentiment: The company said its “Optimize” strategy is gaining traction, with tangible benefits coming from garage improvements, better buying, and tighter operating discipline. Executives said this is already supporting sales, profit, and returns on capital while staying within capital guardrails.
  • Positive Sentiment: The garage business was a standout, with like-for-like sales up 5.8% and underlying operating profit rising more than 20%. Halfords said Fusion conversions, improved utilization, and new equipment are helping margins, and it still sees a path to a 5%-6% operating margin over time.
  • Positive Sentiment: Retail and cycling also showed encouraging momentum, especially in premium bikes and e-bikes, as the market recovered and Halfords gained share. The company is rolling out category management and new flagship cycling concepts, with benefits expected to build through FY 2027.
  • Neutral Sentiment: For FY 2027, management guided to underlying PBT around the top of consensus after strong trading continued in April through June. They also noted gross margin gains may moderate from recent exceptional levels, even though FX remains a tailwind and inflation is easing.
AI Generated. May Contain Errors.
Earnings Conference Call
Halfords Group H2 2026
00:00 / 00:00

Transcript Sections

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Henry Birch
Henry Birch
CEO at Halfords Group

Good morning, everyone, and welcome to the Halfords Group results for the 53 weeks ending the 3rd of April 2026. I'm Henry Birch, the Chief Executive of Halfords, and joining me today is Jo Hartley, our Chief Financial Officer. In terms of today's presentation, I wanted to start with some initial reflections on the year. We'll then take you through progress on our strategy. Jo will take you through the detail of our financial results. I'll then give you an overview of current trading and our outlook, and we'll close today's session with the opportunity for Q&A. Starting with some reflections on FY 2026, I'm really pleased to be announcing a very strong set of results. We've delivered strong like-for-like sales growth at 4.8%. We've grown our gross margin rate to its highest level in a decade at 52.8%.

Henry Birch
Henry Birch
CEO at Halfords Group

Our underlying PBT performance is at the top end of consensus forecasts, and we've delivered another impressive cash flow performance with strong free cash flow, net cash on our balance sheet, and an increase in our dividend. We've also seen the momentum of FY 2026 carry over into the current year with strong trading in April, May, and June, resulting in us guiding to the top end of analyst consensus for FY 2027. If we look at the wider context, FY 2026 was a year in which we refocused the business and reset our agenda for the years ahead. We've made a number of key hires into our leadership team. I joined the business about 14 months ago. Adam Pay joined as Managing Director of Garages. Jess Frame joined as our Managing Director of Retail, and more recently, Sarah Haywood joined as our CIO.

Henry Birch
Henry Birch
CEO at Halfords Group

In November, we laid out a strategic framework with three sequential phases of optimize, evolve, and scale. While it's early days, we have made great progress in the optimize phase of our plan so far, with a laser focus on execution, cutting out noise, and demonstrating tangible progress. This progress has played a part in delivering the strong financial performance we're reporting today. We feel passionately that as a specialist retailer and services provider, it is the advice and service advantage which our colleagues bring, which gives us a competitive advantage that others can't match. It was important to me that this was reflected in our purpose, and I wanted to show a short film that we made to launch this new purpose to our colleagues.

Video Narrator

We're Halfords. We've always been there, keeping you going. The same Halfords that helped your grandfather with his flat tire. The same Halfords ensured you made it to the seaside every year. We are the hands that tighten the bolts, the voices that reassure, the helpers who never stand still. From your first bike to your new bike, your first car to your new EV. We're the first to help you start and the first you turn to when things stall. We're there when it matters most. We don't just fix cars and bikes. We keep school runs running, commutes on course, weekends winning. We keep the nation moving. Every light that shines, every wheel that turns, every engine that starts, we're there. Hands-on experts who love to help. Because helping isn't an add-on, it's who we are. It's the extra mile, the friendly chat, the job done right.

Video Narrator

It's fixing the little things that make the big things possible. From workshop to high street, van to bike, north to south, we are the quiet engine of everyday life, and we are the hard work behind every easy journey. We serve with heart, solve with skill. Britain moves because we've been here since 1892, and we'll keep doing it mile after mile, year after year because that's who we are. Halfords. We keep the nation moving with trusted experts who love to help.

Henry Birch
Henry Birch
CEO at Halfords Group

As I said, that purpose, we keep the nation moving with trusted experts who love to help, really encapsulates Halfords but also articulates our competitive advantage as a specialist retailer and services provider. Now turning to strategic progress we've made as we've started to deliver the optimize phase of our Fit for the Future plan, and I'm very pleased with what we've achieved so far. To my mind, the potential for Halfords has never been in doubt, but we've not always fulfilled that potential. Driving some of our strategic focus has been an element of self-reflection and candor as to what we've failed to do in the past, what we've dubbed home truths.

Henry Birch
Henry Birch
CEO at Halfords Group

We laid these out in November of last year, I won't dwell on them now, but they have both guided our strategy and sharpened the outcomes we're looking to achieve. We're also clear on the need for discipline as to how we deploy capital and have articulated our clear guardrails for the business. I'm pleased that we've made good progress with these outcomes, driving sales, margin, profit, and our returns on capital whilst remaining firmly within our guardrails. We have every intention and confidence that we will continue to drive that performance and that discipline. We've been clear that our Optimize program touches every part of the business, and we revisit here some of our priority work streams. All of these are underway, but as you would expect, they're at different stages of maturity.

Henry Birch
Henry Birch
CEO at Halfords Group

Today, we'll focus predominantly on the improvements we've made in garages, both through Fusion and in the rest of the estate, which have improved utilization and consequently operating margin in the Autocentres segment. In retail, we spent the last few months focusing on laying the foundations for our new category management approach and are deploying a test-and-learn approach across a select few categories ahead of a scaled rollout later in FY 2027. As such, our interims presentation in November will focus more on the retail aspects of our Optimize plan. Across the group, we're investing in digital and AI in our brand and our loyalty proposition. Starting with retail and category management. Category management is by no means a new concept in retail, but it's worth pausing and explaining exactly what it entails and why, as an approach, it is relevant for Halfords.

Henry Birch
Henry Birch
CEO at Halfords Group

In recent history, Halfords has been set up more with a buyer-led model. Under our new approach, a category manager has end-to-end responsibility for their category, sitting over range selection, pricing, promotions, supplier relationships, channel strategy, and sales and margin performance. It demands a focus on customer and competitor insight, and it's an approach I saw yield real benefits at my previous business. Our emphasis in the last few months has been on making sure we have the right structure and capability to deliver this new model, and I'm confident that we now have the right team in place. We've also relaunched four important categories, workshop, car cleaning, flagship cycling, and cycling parts and accessories, or PACS, and are trialing a range of in-store and digital innovations designed to improve customer journeys for these products.

Henry Birch
Henry Birch
CEO at Halfords Group

Taking workshop as an example, workshop is a category which incorporates tools, cabinets, workstations, and the like and serves both trade customers and auto enthusiasts. We see an opportunity both in better targeting of trade customers and developing our product range, particularly at the advanced and professional end of things. We also believe we can drive sales by better articulating feature benefits and improving how we lay out and sell product both in-store and online. We are early in our category management journey and given the extent of change required from range review all the way through to product arriving on the shelves, implementing our new approach in a single category can take around nine months. We look forward to providing a more detailed update in November and expect to see the benefits materializing in the second half of the year.

Henry Birch
Henry Birch
CEO at Halfords Group

I wanted to take the opportunity to talk a bit more about cycling, which is something we haven't done for a while. Cycling was a particular bright spot for the group in terms of sales growth in FY 2026, with the market showing good signs of recovery and the Halfords and Tredz proposition driving share growth against that backdrop. As we've talked about before, we are the clear market leader in cycling. More than half of all bikes sold in the U.K. come from Halfords. We operate the nation's biggest network of cycling showrooms, and we also operate the largest Cycle2Work scheme nationally. Our growth in motoring means that cycling now generates a smaller proportion of group sales, around 20%, but it remains core to our business and an important source of profitable growth in the years ahead.

Henry Birch
Henry Birch
CEO at Halfords Group

Under the leadership of a new cycling director, we are bringing Halfords and Tredz businesses closer together, starting with offering click and collect for Tredz performance cycling products through a small number of Halfords stores. We're also trialing a new flagship cycling concept in 19 stores, incorporating locally curated ranges, improved layouts and labeling, and enhanced technical training for colleagues. It's worth reiterating that we don't just sell bikes, we design and build them. Consequently, Halfords cycling has very high own brand penetration through the likes of Apollo and Carrera and Boardman. Just a few weeks ago, we sold our millionth Carrera Vengeance, making it the U.K.'s best-selling bike of all time. Our Boardman range continues to win accolades and awards for delivering premium bikes at more affordable prices.

Henry Birch
Henry Birch
CEO at Halfords Group

Looking ahead to FY 2027, we're particularly excited by the arrival of our new e-bike ranges, which I saw earlier this week. I have to say they are amazing and a massive step up from the previous range in terms of performance and styling, but at a similar price point to the old range. We see significant potential in growing e-bikes where our share currently under indexes versus the wider bike share that we have. We also look forward to working more closely with the Bicycle Association on their e-bike positive quality and safety accreditation across our whole range. Now turning to garages. On the garages side of our business, Fusion has been a well-documented success, driving both profit growth and improved customer and colleague experience.

Henry Birch
Henry Birch
CEO at Halfords Group

We have a well-rehearsed formula that's delivered consistent returns, and when we complete the program at the end of this year, we expect to have converted 138 garages to our Fusion concept. Our garage improvement program doesn't stop with Fusion, and there are opportunities to drive performance across the rest of our garage estate. Fusion is giving us a huge amount of experience and data to inform how we can put capital to work effectively and efficiently in our physical estate. We're confident that in future years we can take the strongest elements of the Fusion program and roll them out at much lower cost across the rest of our estate, while still driving good returns and remaining within our capital guardrails. In addition, investment in new equipment and technology and in skills and leadership help underpin sustained and attractive growth in our garage business.

Henry Birch
Henry Birch
CEO at Halfords Group

We're already starting to see some of this through the operational improvements we've been making to drive improved utilization across all 500 of our garages over the last year. Utilization is ultimately about matching demand with labor and hours worked, and we've been laser-focused in regularly reviewing productivity on the individual garage level to redeploy technicians to the locations where they can best support growth in sales. The chart here shows year-on-year progress for both Q1 and Q4, looking at the cost of labor as a percentage of sales, the number of hours worked, and overall sales. In Q1, we obviously faced the immediate impact of national insurance and minimum wage hikes. By Q4, even with these cost increases, we had reduced year-on-year the cost of labor as a percentage of sales, a key utilization metric.

Henry Birch
Henry Birch
CEO at Halfords Group

Our consumer garages grew like-for-like sales by more than 8% in FY 2026, supported by an increase in additional work identified and higher income per tire, due in part to our new Hunter wheel alignment technology. While the tire market continued to decline in FY 2026, it showed some signs of stabilization towards the end of the year, and the investments we're making in garage leadership and more modern equipment are allowing us to outperform the wider market. At the same time as driving increased sales and profitability, we're also seeing really positive feedback from our customers. Our lifetime Google score has increased from 3.9 to a very credible 4.5, with our weekly averages surpassing this level.

Henry Birch
Henry Birch
CEO at Halfords Group

I appreciate that some of this can seem quite abstract. I wanted to share a short video featuring Adam and some of his team lifting the lid on all the great work going on across our garage network.

Adam Pay
Adam Pay
Managing Director of Garages at Halfords Group

Welcome to our Halfords network and our garages. Today, I'm going to be giving you a little tour, taking you around, getting you to meet a few colleagues, but more so shining a light on some of the improvements that we've made in the last few months through the garage network. As you'd imagine, at Halfords, it all starts with the customer. We know our customers are looking for ultra convenience, they're looking for a seamless, transparent experience, and they want it all wrapped in genuine value. Which means for us, we've got to work really hard to keep changing and innovate in product and services, along with improving all of the customer touch points. We want to be the trusted experts who love to help. That help means being available, reliable, and in the right place at the right time where the customers need us.

Adam Pay
Adam Pay
Managing Director of Garages at Halfords Group

That's why we continue to build out a network of garages that are always on and always available. In order to do that consistently at scale, we've had to think about how we run our garages and run them differently. We're focused on driving performance through efficiency gains that are supported by tools, technology, and people. Even in these early stages, we're starting to see some solid results. The question is: how have we done this? Well, let me take you around and show you what's changed on the ground. Better tools mean better conversations with our customers. Take the Hunter wheel aligner equipment. We know from studies that there's over 60% of vehicles on the road right now that require a wheel alignment.

Adam Pay
Adam Pay
Managing Director of Garages at Halfords Group

When we use this equipment, we know we're not just changing tires, we're sending customers away in safer, more efficient vehicles. Using the Hunter equipment enables it to be pinpoint accurate and gives us super quick turnaround times. It also generates a visual report that makes it easier for us to show customers what needs to be done. At the same time, our new tablets enable us to smooth process and capture images of vehicle that we can share with the customer to help them make the right decision. No jargon, just simply building trust in our expertise.

Company Representative at Halfords Group

As a center manager, I feel like the changes have made a massive impact for us here at Halfords. They've really helped with the workflow and improved both the colleague and the customer experience, and we're getting really good results with the new equipment so far. It's easier for the technicians to do a great job.

Adam Pay
Adam Pay
Managing Director of Garages at Halfords Group

Of course, having state-of-the-art equipment really matters, but only if the colleague is fully trained to deliver the very best service.

Company Representative at Halfords Group

Hi, I'm Owen. I'm an apprentice at Halfords. I joined Halfords because I wanted the high level of brand and the high level of training. I've been at Halfords for one and a half years. Over the time I've been at Halfords, I've learned to do higher skilled jobs. I can see my future with Halfords as finishing my level two apprenticeship, then getting my MOT license, and then becoming a center manager.

Adam Pay
Adam Pay
Managing Director of Garages at Halfords Group

As you can see, we're growing our own talent with broader skills, including diagnostics and EV-trained technicians. Halfords really feels like a place where you can build your career.

Adam Pay
Adam Pay
Managing Director of Garages at Halfords Group

Our focus will be on attracting, retaining, and developing the very best team. Having colleagues with the right attitude and skills is mission critical. Alongside this, we've simplified how our garages are resourced and run, removing complexity and increasing efficiency. Our Fusion program has allowed us to test, learn, and refine, and now we'll be taking the strongest elements across the remainder of the network. This gives us confidence shaping what comes next. The next phase is about focus, bringing the best of what we've learned to all of our garages. That's the right operating model, the right skills, and great people. This is how you build a garage business that delivers today and is Fit for the Future.

Henry Birch
Henry Birch
CEO at Halfords Group

Brilliant. Finally, I wanted to turn to our optimized program related to group-wide initiatives.

Henry Birch
Henry Birch
CEO at Halfords Group

Last year, I highlighted that I see digital both as an area where we need to improve our offer, but also one which offers significant growth potential. To enable both these aspects, we've been making some foundational improvements and changes. Much of this relates to site performance and architecture. Those changes have resulted in a faster site with customer journeys, with less friction, and better conversion. Pleasingly, sales growth via our digital channel were ahead of the wider group. There's more to do, and the year ahead will see greater focus on how we trade online and how we manage our channel strategy for each category. Alongside the focus on digital, we're acutely aware that customers are changing the way they discover, search, and buy products and services using AI.

Henry Birch
Henry Birch
CEO at Halfords Group

We're already seeing that where customers do come to us through AI rather than standard search, we get much higher rates of conversion. We're excited about how AI can help significantly grow our top line, improve customer experience and journeys, and allow us to work more effectively and efficiently. That has meant investing and making changes to optimize our offer for AI across all parts of the business, building new capability, and partnering with third parties. In that regard, we were pleased to be one of the first retailers to participate in early-stage ChatGPT advertising trials. Finally, in FY 2026, we started a trial to invest more in our brand marketing. Research shows us that whilst our brand awareness is around 80%, far fewer customers are aware of exactly what we offer, which impacts consideration.

Henry Birch
Henry Birch
CEO at Halfords Group

In the second half of FY 2026, we ran localized trials increasing our above-the-line marketing. This yielded positive results, improving customer numbers and brand perception and consideration, and has given us the data to invest more with a good degree of confidence in the returns. We have this budgeted and in play for FY 2027. Another important tool we have at our disposal is the Halfords Motoring Club, which now has around 6.5 million members in total, 420,000 of whom are subscription-paying premium members. Club members are typically more engaged customers who spend more with us more consistently. As you can see, as well as making improvements in each of our business divisions, we're building strength and value in the overall Halfords proposition. Our garages business is much stronger alongside our retail business, and vice versa.

Henry Birch
Henry Birch
CEO at Halfords Group

There is more here we can and will do to drive that value. I now wanted to hand over to Jo to talk through the detail of our financial performance.

Jo Hartley
Jo Hartley
CFO at Halfords Group

Thank you, Henry. Before I get into the detail of our financial performance for FY 2026, a few words on the basis of preparation as detailed on this slide. Firstly, a reminder that FY 2026 was a 53-week year. The numbers that follow are all on a 52-week basis to aid comparability. Secondly, we've made a change to the treatment of amortization of intangible assets arising on historical acquisitions. These are now taken below the line as a non-underlying item. This change of accounting treatment has allowed us to reduce and simplify the profit metrics we report. We've restated our prior comparatives accordingly, and as a result, underlying PBT increases by GBP 3.9 million in FY 2026 and GBP 5.2 million in FY 2025. There are no changes to our statutory profit measures, and a full reconciliation of our P&L before and after the change is included as an annex to this presentation.

Jo Hartley
Jo Hartley
CFO at Halfords Group

With the accounting matters covered, I'll now take you through our FY 2026 financial performance. As you can see on this slide, we delivered a very strong set of results. Like-for-like sales grew 4.8%, reflecting building momentum across both retail and garages, and continued progress from our optimize initiatives. Gross margin increased by 210 basis points to 52.8%, the highest level we've delivered in more than a decade. Underlying PBT increased 4.1% to GBP 45.4 million, or GBP 41.5 million before our accounting policy change. This was ahead of market expectations despite significant inflationary headwinds. Return on capital grew by 160 basis points year-on-year to 14.2%, which is above our cost of capital, demonstrating that our investments are delivering stronger returns. We continued to generate cash and maintain balance sheet strength, ending the year with a net cash position.

Jo Hartley
Jo Hartley
CFO at Halfords Group

Free cash flow of GBP 25.3 million was very strong, slightly lower than the previous year only as a result of the payment in the year of the reinstated FY 2025 colleague bonus and receipt of a tax refund in the prior year. Finally, in light of our strong performance and confidence looking forward, we recommend an increase in the full-year dividend to GBP 0.09 per share. Overall, these results give us confidence that the optimized phase of our strategy is beginning to deliver as intended. Turning now to a brief overview of profit performance, which I'll cover in more detail later in the presentation. Revenue increased 2.9% to GBP 1.76 billion, with stronger like-for-like growth of 4.8%, reflecting the impact of previously announced garage closures. Gross margin increased materially to 52.8% for reasons I'll describe shortly. Together these things were enough to offset a 7.6% increase in operating costs.

Jo Hartley
Jo Hartley
CFO at Halfords Group

Cost growth in the year primarily reflected material inflationary pressures from national insurance and national living wage changes effective at the start of the year. Furthermore, in light of strong trading performance, we chose to make targeted investments in technology, capability, and brand, which were partly mitigated by strong operating cost control. As a result of all these dynamics, underlying PBT increased 4.1% to GBP 45.4 million. It is worth noting that without the change in accounting policy, underlying PBT would have increased 8.1% to GBP 41.5 million, slightly above the consensus range of GBP 40.3 million-GBP 41.4 million. Below the line, non-underlying items fell significantly year-on-year, with the FY 2026 charge mostly comprising costs relating to the Warehouse Management System implementation in the first half of the year, alongside the amortization now treated as non-underlying. The significant charges last year were predominantly non-cash impairments of historical goodwill.

Jo Hartley
Jo Hartley
CFO at Halfords Group

Statutory PBT for the 52-week period was GBP 39 million, up GBP 69 million year-on-year. This slide bridges underlying PBT between FY 2025 and FY 2026 and illustrates how we managed substantial inflationary pressures while still growing profitability. In addition to the labor cost increases already described, we saw inflation across property, technology, and operating costs as third parties sought to pass on labor inflation through managed service contracts. In total, we saw more than GBP 40 million of inflation in the year. Against that backdrop, we delivered a strong trading performance with robust sales growth and further gross margin expansion, in part due to better buying, but also supported by tailwinds from FX. Costs continued to be well managed with garage productivity improvements and our goods not for resale cost reduction program delivering significant savings. Garage initiatives, including Fusion and the garage closure program, also materially improved profit year-on-year.

Jo Hartley
Jo Hartley
CFO at Halfords Group

All of which meant that we were able to continue investing in priority areas as already noted, helping to drive momentum into FY 2027. Henry will cover the outlook in more detail later in the presentation, but it is worth noting that as we look forward, we anticipate materially lower inflationary headwinds. Wage growth has eased, business rates are falling, and while we are seeing some inflation in fuel costs because of the recent conflict in the Middle East, our energy costs are fully hedged at broadly similar rates to FY 2026. As we have seen, gross margin expansion was key to offsetting material inflation during the period. This chart describes the key drivers of the 210 basis points improvement in FY 2026. The largest contributor continued to be Better Buying, where our scale, sourcing capability, and supplier relationships delivered further gains in both retail and garages.

Jo Hartley
Jo Hartley
CFO at Halfords Group

More effective pricing and promotional activity also drove significant margin accretion with a more data-driven approach, protecting margin while ensuring we remain competitive for customers. Finally, we benefited from a more favorable U.S. dollar rate on the $220 million of dollar-denominated product we buy each year, with the hedge rate coming through cost of goods sold at 129 versus 124 in FY 2025. Over the last two years, we have grown gross margin by 460 basis points and reached the highest level seen in a decade, predominantly driven by our Better Buying program and price and promotion optimization. Looking forward, we do not expect further margin expansion to continue at the rate we have seen over the last couple of years, albeit we continue to project FX tailwinds in the year ahead based on our hedging program. Turning now to the retail segment.

Jo Hartley
Jo Hartley
CFO at Halfords Group

Here we saw a strong performance in FY 2026 with like-for-like sales growth of 4.1%. Cycling was particularly encouraging with like-for-like growth of 6.4%, supported by market recovery, volume share gains, and strong performance in premium and e-bike categories. Motoring also saw like-for-like growth of 2.9%, despite range simplification in some lower margin areas, which reduced trading volumes. Our full year performance was particularly pleasing given H1 like-for-like growth of 1.1%, reflecting strong trading momentum through the second half, which has continued in the early part of this year. Gross margin increased 160 basis points to 50.9%, driven by the factors described on the previous slide, and operating costs increased as expected, reflecting labor inflation alongside targeted investment in digital capability and brand. As a result, underlying operating profit was modestly lower year-on-year at GBP 37.5 million.

Jo Hartley
Jo Hartley
CFO at Halfords Group

We have seen a strong trading performance in our retail business since the start of the new financial year and are confident that the investments we have made alongside the rollout of our category management approach will bring further momentum to our retail business in FY 2027 and beyond. Meanwhile, the Autocentres business delivered another very strong year. Revenue, excluding Avayler, increased 2.2% to GBP 723 million. In FY 2026, we closed 43 underperforming garages, which suppressed sales growth but added GBP 1 million to underlying profit. On a like-for-like basis, sales grew 5.8%, supported by robust consumer demand for services, maintenance, and repair work, alongside stronger attachment rates for additional services such as wheel balancing and alignment on tire sales. These factors, together with our Better Buying program, also contributed to a 250 basis points improvement in gross margin to 55.6%.

Jo Hartley
Jo Hartley
CFO at Halfords Group

Labor cost inflation impacted our garages as well as our retail business but was partially offset by pricing and initiatives to drive improved utilization across our network, as Henry has already described. Other garage optimization initiatives, including Fusion and garage closures, further supported the very strong performance with underlying operating profit, excluding Avayler, increasing by more than 20% to GBP 22.3 million. This represented a 50 basis points increase in operating margin to 3.1%. This early proof point gives confidence that our optimized strategy will drive significant margin expansion in this segment in the years ahead. Finally, a word on Avayler. During FY 2026, we continued to progress development of the software for Bridgestone in the U.S. and MyCar in Australia ahead of full rollout. Losses widened year on year as anticipated following the loss of revenue from ATD, which went into Chapter 11 in the second half of FY 2025.

Jo Hartley
Jo Hartley
CFO at Halfords Group

Balance sheet discipline and cash generation remain central to our strategy. At the year end, the group held net cash of GBP 19.1 million on a 53-week basis. Inventory increased modestly year on year, reflecting a planned stock build ahead of the summer cycling season. CapEx for the 53-week period was GBP 58.1 million within our annual cash investment envelope of GBP 55 million-GBP 65 million. Importantly, we generated a free cash inflow of GBP 33.3 million or GBP 25.3 million on a 52-week basis, while also funding investment in Fusion, technology, and capability building. Including lease liabilities, year end net debt fell to GBP 228.7 million, meaning lease adjusted leverage is 1.2x. We continue to maintain a flexible portfolio with average retail lease lengths of just over two years and average garage lease lengths of around four years.

Jo Hartley
Jo Hartley
CFO at Halfords Group

During the year, we also extended our GBP 180 million revolving credit facility through to April 2029, further strengthening our financial flexibility. Overall, we remain focused on maintaining a prudent balance sheet while continuing to invest selectively where we see attractive returns. Our capital allocation priorities remain unchanged from November and continue to provide a clear framework for disciplined decision-making. First, we will maintain a prudent balance sheet operating well within our leverage guardrail of less than 0.8x EBITDA, excluding lease debt. Second, we will continue to invest in growth opportunities where we see strong returns and strategic value. Third, we remain committed to a sustainable dividend policy, targeting cover of between 1.5x and 2.5x underlying profit after tax. Fourth, while M&A remains part of the longer-term scale phase of our strategy, our near-term priority remains disciplined execution and organic value creation.

Jo Hartley
Jo Hartley
CFO at Halfords Group

Should surplus cash accumulate, we will then consider special dividends and buybacks. Finally, the Board's recommended a final dividend of GBP 0.06 per share, taking the full-year dividend to GBP 0.09, up from GBP 0.088 in 2025. This second year of dividend growth reflects improved profitability and the strength of our balance sheet, as well as confidence in our outlook. To conclude, this slide brings together the progress we've made against the Fit for the Future strategy we outlined in November. During FY 2026, we delivered growth in like-for-like sales, progression in underlying profit, and a meaningful improvement in our return on capital, which moved further above our cost of capital. At the same time, we've remained disciplined within the financial guardrails we set out, including our investment range, leverage target, and dividend framework.

Jo Hartley
Jo Hartley
CFO at Halfords Group

Seven months in, the optimize phase is beginning to show tangible financial benefits, while the investments we're making today are laying the foundations for the evolve and scale phases of the strategy. Overall, we're encouraged by the progress made in FY 2026 and remain confident in the long-term opportunity ahead. I'll now hand over to Henry to cover our FY 2027 plans and outlook.

Henry Birch
Henry Birch
CEO at Halfords Group

Thanks, Jo. As Jo has detailed, we are really pleased with our FY 2026 performance and the momentum that it has given us into FY 2027. Excitingly, we have plenty in the pipeline to drive further optimization benefits. In retail, we will continue to roll out our category management approach across the next wave of categories, including bulbs, blades, travel, touring, and car accessories. We'll continue our test-and-learn trials and decide which elements to roll across our store estate. We'll introduce more comprehensive product training for frontline colleagues to better serve our customers, reinforcing our position as the trusted experts who love to help. In garages, we will complete the final 35 Fusions. We will continue to invest in modern equipment and technology. We'll invest in training and capability. We'll improve customer journeys for servicing, and we'll remain focused on driving operational improvements and utilization.

Henry Birch
Henry Birch
CEO at Halfords Group

At a group level, we're continuing to invest in our brand and digital capability, not least to ensure we're set up for success as customer behaviors adapt and change with the growth of AI. Also in FY 2027, we'll begin to scope the key initiatives for the evolve phase of our plan. Turning now to the last three months of trading and the outlook for the year ahead, I'm very pleased to say that trading in April, May, and June has continued to be strong across both retail and garages. While we have not seen any significant impact from the conflict in the Middle East, second-order effects on consumer behavior could yet materialize later in the year.

Henry Birch
Henry Birch
CEO at Halfords Group

Based on our experience in recent months and plans to further optimize the business in the year ahead, we expect a strong first half performance in FY 2027, and as such, expect full-year underlying PBT to be around the top of the consensus range. To conclude, I wanted to remind you exactly why we, as a management team, are such strong believers in the Halfords business and so confident in its future. We have a strong, universally recognized brand. We operate with unrivaled scale in attractive markets. We have an operating platform spanning physical stores, garages, depots, and vans, combined with a growing digital offer. In fact, 85% of the population live within 15 minutes of a Halfords. We have 12,500 specialist colleagues offering unmatched advice and service.

Henry Birch
Henry Birch
CEO at Halfords Group

With our 20 million customers and 6.5 million Halfords Motoring Club members, we have a valuable data asset with significant and as yet largely untapped potential. We have a clear strategy which we are executing with focus and discipline. This is driving share gains in our key markets. We're experiencing a tailwind from FX, while the inflationary headwinds hindering our progress in recent years are easing. We're driving improved profitability and higher returns as a result. Over the medium term, as part of the evolve stage of our strategy, we see attractive investment opportunities to drive structural profitability gains. These opportunities are at the planning stage, but will be executed with the same level of focus on returns and within the guardrails we've outlined. We expect to give more details on these at our interims in November.

Henry Birch
Henry Birch
CEO at Halfords Group

Overall, we feel we are in great shape, and although there is much to do, there is even more to gain. Before finishing, I wanted to acknowledge the huge contribution of Keith Williams, our Chair, to our business. Keith has been the Chair of Halfords for eight years and has navigated Halfords through significant periods of change. I'd like to thank him wholeheartedly on behalf of all my colleagues at Halfords for his stewardship and his commitment to our business. We announced earlier in the year that Keith would be stepping down this summer, and I'm delighted to welcome Jock Lennox as our new Chair. Jock will assume his role at our AGM in September and joins us with significant experience across a number of businesses and industries. We're excited to have appointed somebody of Jock's caliber and look forward to working with him.

Henry Birch
Henry Birch
CEO at Halfords Group

Thank you for listening today. Will now happily take any questions that people may have.

Ben Hunt
Analyst at Panmure Liberum

Uh. Morning. Ben Hunt from Panmure Liberum. I'm just sort of intrigued about The stance seems to have changed. Well, not necessarily changed, but the Fusion momentum seems to have been very strong. It looks like there hasn't really been any diminishing returns that you've been making there. Going forward, you're talking more about taking the learnings and applying it to the rest of estate. What's sort of maybe perhaps put a brake and maybe you didn't want to extend the Fusion rollout? Has there been any? Do you think you can just do this more efficiently without having to do as much CapEx or rebranding? Just some of the findings there and what are the sort of paybacks we should sort of look at where you do changes to some of the existing estate?

Henry Birch
Henry Birch
CEO at Halfords Group

Thanks, Ben. So, to be really clear, Fusion was never about rolling out that concept to all of our garages, not least because the concept of Fusion had a couple of kind of qualifying criteria. One was that typically we were looking at a Fusion model where we had close proximity of a retail store. The idea being that actually you kind of manage the two together. Secondly, Fusions, by their nature, typically demand a larger garage. When we made the national acquisition, a lot of those garages were candidates for Fusion conversion. If you've got a small garage, it doesn't necessarily make sense to have that kind of Fusion blueprint. Again, one of the things with Fusion is putting in more ramps so you can have more throughput. If you've got a small garage, we may not be able to do that.

Henry Birch
Henry Birch
CEO at Halfords Group

It's not a case of us saying that actually, Fusion has kind of run out of gas. It was only ever going to affect a certain number of garages. We originally said 150. A few years ago, we said 138, and that's just us really being really clear about getting the returns. The point beyond that, though, is that actually, having done this for two and a half years, three years, we've got a lot of learning and a lot of data about what works. We've now got the remaining, about, do the math, 350 garages that we feel that we can actually put capital to work in effectively. Now, that may be new equipment, it may be new capability in terms of colleagues or management, or it may be the refurbishment, putting in more ramps. It may be the customer area.

Henry Birch
Henry Birch
CEO at Halfords Group

We're probably unlikely to kind of come up with a new branding of kind of Fusion Mark 2. Over the course of the next 12 months, we're focused on delivering that Fusion. We will come back to investors to this forum and talk about exactly what we're going to do in terms of continuing to refurb our garage estate. Because what we have proved is we can put capital to work and get returns, and that's really important and really encouraging.

Ben Hunt
Analyst at Panmure Liberum

I guess just related to that, how should we think about the sort of the pruning of both the garage and the retail estates? Just clocking, I think you said you've got 90% of leases coming up from new and retail over the next five years or so. The age-old question about sort of the estate and how you're thinking about it.

Henry Birch
Henry Birch
CEO at Halfords Group

I mean, taking retail, first of all of our stores are profitable. If you look actually over the last decade, we've probably closed, what, 100 stores? We've closed two or three over the last 18 months, but all of them are profitable. Average lease length for retail, two point three years, and I think it's, what, 80% or 90% are within five years they've got. We've got the flexibility there, but I actually think we've got the right level of stores. One of the things that actually I think strategically and operationally is a real competitive advantage for us actually is we want a retail estate. We want a physical estate. We want people to be able to bring their cars, come to our car parks, have services delivered in the retail car park.

Henry Birch
Henry Birch
CEO at Halfords Group

Don't forget, 80% of the services we provide as Halfords actually take place in the retail car park. That is an important asset for us. I don't really see that changing much at all. On the garages side, you're right, we closed a bunch of garages last year. Now, don't forget, we made that national acquisition. In some cases, we ended up with two or three garages in very close proximity, but it just doesn't make sense necessarily to have them next door to each other. We did an element of pruning, as Jo said before, gave us GBP 1 million of benefit, but has obviously taken down our sales a bit. If you strip that away like-for-like, still up at 5.8%. I think on both sides, we're comfortable with the size of our estate.

Henry Birch
Henry Birch
CEO at Halfords Group

My feeling is that over the medium term and longer term, we'll be growing our garages estate because actually there are limitations in the amount of volume we can process with that estate. On the retail side, I don't see it changing significantly.

Jonathan Pritchard
Jonathan Pritchard
Analyst at Peel Hunt

Good morning, Jonathan Pritchard at Peel Hunt. Two if I may. Just back on the current trading like-for-like, could you just perhaps, not looking for numbers, but just outline some categories that have been particularly strong, anything that might have lagged, and just sort of anecdotal stuff really just to help us get another level of granularity on that. On the gross margin, interested in your comments. Obviously, you've done a great job in growing that gross margin, but suggesting now that it's pretty much high enough. There are some reasons to believe it could go higher. You've got more own label, more services, more SMR, et cetera. So, am I reading this wrong that you might be reinvesting that? Am I reading it wrong that perhaps those aren't necessarily forces for higher gross margins? Or is there an opportunity here to, as I say, reinvest into the brand, into service, into price?

Henry Birch
Henry Birch
CEO at Halfords Group

I won't hog the mic fully. So, Jo, why don't you take that latter question, if I talk to category management. Jonathan, I'm sure you have, but I encourage you to chat to Jess, who's sitting in front of you, who is the leading expert on category management. The short answer actually is that we're excited across the board in terms of what we can do with pushing that category management lens on our business. As I said, we've done four so far. We've got more that we're going to be rolling out this year. To be honest, there's probably not one that I would pick out. They're all driving strong returns. I think cycling we are quite excited about pushing cycling, that combination of Tredz with Halfords we haven't done historically.

Henry Birch
Henry Birch
CEO at Halfords Group

This concept of flagship cycling stores where there's more product, there's more kind of local curation, that is reaping real benefits. I think maybe over the last few years, we've kind of pushed cycling down a bit. It is only 20% of our business, but it's what we're known for. Actually, there's real excitement in the business in terms of not just kind of cycling coming back, but actually how we can take it to the next level. The e-bike stuff, hopefully it came across, but all of our exec team saw it this week, and we were literally blown away. I am going to be going out and buying at least two of our e-bikes. We get a staff discount. Even without that, I would go out and buy our e-bikes. This isn't just a kind of promotional piece.

Henry Birch
Henry Birch
CEO at Halfords Group

I would, A, buy an e-bike, but if you are going to buy one, go to Halfords and check out what we've got because I can guarantee you won't get a better bike of that quality at that price. So, Jo.

Jo Hartley
Jo Hartley
CFO at Halfords Group

Gross margin. Thank you, Jonathan. Yeah, it has been a brilliant couple of years on gross margin. We hit 52.8% this year, highest level in a decade, 460 basis points of gross margin improvement over the last two years. You're right to say there are some reasons it could get better. FX will continue to be a tailwind for us. There is opportunity to expand our own label penetration, which is margin accretive for us. Historically, we have seen a mix into SMR that's helped. As we look forward, though, I don't think we will see gains at the sort of 200+ basis points that we've seen in the past, that's largely because our three-year Better Buying program has really come to an end.

Jo Hartley
Jo Hartley
CFO at Halfords Group

Also, one of the strengths we're seeing in early trading this year is actually in the tires business, that is a slightly lower margin. We may actually, as cycling and tires start to recover, see a bit of a downward mix impact for that reason. I'm not saying margin will go backwards as a result, but it'll slightly temper some of those other impacts that you've rightly called out.

Jonathan Pritchard
Jonathan Pritchard
Analyst at Peel Hunt

Understood. Thank you.

Mark Photiades
Mark Photiades
Analyst at Canaccord

Hi there, it's Mark Photiades from Canaccord. A couple of questions from me, please. Just on Avayler, appreciate obviously some customer changes in the year, but is there any update on the sort of timeline to break even for that business? Secondly, in terms of the margins on e-bikes versus traditional bikes, any differential? Finally, you mentioned in the statement you're launching a new range of servicing options on the mobile expert side of things. Can you just give us a sense of what some of those new servicing options are?

Henry Birch
Henry Birch
CEO at Halfords Group

Yeah. On Avayler, there isn't a significant update from when we spoke last. This year, FY 2027, our major client is Bridgestone in the U.S., in the course of calendar year 2027, we expect them to start rolling out the Avayler product throughout their garage network. That will be at the point at which the financial dynamics of Avayler changes significantly. We are in this period, as many software businesses are, where you're developing the product early stage in terms of the sales pipeline, but we're not far away from the point at which there should be that kind of change. No, I'm afraid there's not a huge update. It's kind of business as usual. We're talking to other potential clients. The Bridgestone relationship continues to be strong, but it's more kind of watch this space.

Henry Birch
Henry Birch
CEO at Halfords Group

On the e-bikes, I'm going to defer to Jo. She may defer to Jess on the margins, but I expect they're not significantly different.

Jo Hartley
Jo Hartley
CFO at Halfords Group

No, the great thing is that our e-bike range that Henry's described is largely own label within Halfords, and as a result, we're able to create a brilliant product at a fantastic price point, but also at a strong margin for ourselves. There's not a material difference between the e-bike and traditional bike margins. As Henry says, they're amazing products, hopefully we can show you some of them soon.

Henry Birch
Henry Birch
CEO at Halfords Group

On the Halfords Mobile Expert piece, that actually started life as really a tire product, and we once upon a time bought a company called Tyres On The Drive, which kind of hinted at what it did. That business has predominantly been changing tires at people's houses. Absolutely brilliant proposition. Again, if you want tires changed on your car rather than having to take it to the garage, we'll come to you and do it. Very cost effective and efficient way of doing things. One of the things we recognized, though, was actually why couldn't we do servicing as well, actually get the technician to come to your house and do a service on your drive outside your house. That's something that we started offering. We're actually going to be rolling out more vans that are servicing only.

Henry Birch
Henry Birch
CEO at Halfords Group

Again, we think that's something that will go down well with customers because it's the ultimate convenience, actually. Expect more in that regard, but early trials are positive in that regard.

Manjari Dhar
Manjari Dhar
Analyst at RBC

Thank you. It's Manjari Dhar, RBC. I just had two questions, if I may. I just wondered about the B2B side of the garage business. How is brand awareness there? How's the Yodel contract doing? Are there opportunities or plans to sort of extend that to more partners? And then, Jo, I just wondered on working capital for this year. I just wondered if you could give us color on the moving parts. Do the range relaunches in retail have an impact on how we should be thinking about that?

Henry Birch
Henry Birch
CEO at Halfords Group

Yeah.

Manjari Dhar
Manjari Dhar
Analyst at RBC

Thank you.

Henry Birch
Henry Birch
CEO at Halfords Group

Look, B2B is a really important part of our business. If you look at our overall sales, it is about 30% of our sales come from B2B, and they are really important for us in terms of their reliable revenue. Whatever the weather, whatever the economy is doing, actually, those B2B revenues are kind of consistent and solid. The good news is that they are growing, particularly on the fleet side of things. We have had some good wins actually this year. Sainsbury's has become a client. One of our garage competitors, ATS, who are owned by Michelin, have basically dropped out of the market. Where we have seen a real benefit there is picking up some of their clients. Yeah, B2B, absolutely core part of our business and we see it as a part that we can grow.

Henry Birch
Henry Birch
CEO at Halfords Group

To the point you make, Manjari, about actually having the Halfords brand behind it, I think is really powerful and something we will look to accentuate increasingly.

Jo Hartley
Jo Hartley
CFO at Halfords Group

From a working capital point of view, actually, in the last year, just gone, notwithstanding the fact that we grew our stock to support higher cycling sales in the spring, summer season, we kept our working capital reasonably neutral and actually looking forward, we would intend to do the same, if not improve working capital. Again, stock may continue to increase slightly as our sales growth progresses, particularly in cycling. We see levers to offset that, so no material movement.

David Hughes
David Hughes
Analyst at Shore Capital

Hi, David Hughes from Shore Capital. A couple of questions from me. Firstly, in terms of the margin bridge or profit bridge, particularly on the Autocentres side of things, obviously you had a big boost from the kind of improvement to the gross margin within that, which you're not expecting to carry on going forward. The flip side, you had very high inflation, which I think you're also not expecting to be so high. I was just wondering, in terms of where you think you can get to in garage margin, how do you see the further labor optimization versus the inflation picture looking going forward?

David Hughes
David Hughes
Analyst at Shore Capital

Secondly, just on the category management side of things, again, on the four categories that you've done so far, have you got any early indications in terms of are you seeing a notable difference in sales performance for those categories at the end of the year and seeing the benefit of that work?

Henry Birch
Henry Birch
CEO at Halfords Group

Yeah.

Jo Hartley
Jo Hartley
CFO at Halfords Group

Can I go to margin?

Henry Birch
Henry Birch
CEO at Halfords Group

Yeah.

Jo Hartley
Jo Hartley
CFO at Halfords Group

Look, we've always said that we believe we can get our Autocentres business to a margin of sort of 5%-6%, and at the moment we're at 3.1%, having grown 50 basis points in the year. First step on that journey. As we look forward, we expect the further margin expansion to largely come through utilization and productivity gains, as well as a growing top line. Look, I think the work that Adam and the team have done this year has made an incredible difference in that, and I think the most compelling stat is that reduction in labor costs that we saw year-on-year in the fourth quarter, despite the material increases in wage rates from national insurance and national living wages.

Jo Hartley
Jo Hartley
CFO at Halfords Group

As we look forward, we expect to see more of that and higher sales driving operating profit expansion as we look forward.

Henry Birch
Henry Birch
CEO at Halfords Group

Look, on the category management side, I'm not sure I can add too much more detail. We are really encouraged by what we're seeing so far, albeit it is early days. As I said, it typically takes about nine months in terms of cycling through, making changes, and kind of optimizing each category. Hence, we kind of gave a taster of it. We'll come back in November and give a lot more detail. My guess is, even in November we'll probably say, "Wait until the end of the year to see a kind of full cycle of results." Talk to Jess, but I think that would probably be the thing that she's most excited about at the moment in the retail business, in showing tangible progress and kind of results that we can really see and track.

Jo Hartley
Jo Hartley
CFO at Halfords Group

I'll give you a tiny snippet. Workshop, which we talked about earlier, was one of the best performing categories from a like-for-like sales growth perspective last year and ahead of the wider retail business. I'm not going to give you numbers, but you can really see the benefit coming through, and we'll talk a bit more about it at the interim.

David Hughes
David Hughes
Analyst at Shore Capital

That's great. I'll take what I can get. Thank you very much.

Kate Calvert
Kate Calvert
Analyst at Investec

Kate Calvert from Investec. Just another question on the retail side. As you move more towards this sort of category management, is there any investment you need in sort of fixtures and fittings or the general fabric of the store, et cetera, going forward? Or is that later on?

Henry Birch
Henry Birch
CEO at Halfords Group

Not specifically, but it is something we are conscious of, that actually we need to continue to update and modernize our store estate in terms of it looking inviting to customers. We do change the ranges physically. What we did with layout of our car cleaning products this year, there is a little bit of tweaking, but it is not a kind of significant expense. We will shift categories around in terms of reducing the ranges or expanding them. That per se doesn't present a significant capital expenditure. It is probably more on the overall fabric of stores that we are looking at that.

Kate Calvert
Kate Calvert
Analyst at Investec

Okay, thanks.

Jo Hartley
Jo Hartley
CFO at Halfords Group

I would also say that whatever we do, we will stick within the guardrails that we have laid out, GBP 55 million-GBP 65 million.

Henry Birch
Henry Birch
CEO at Halfords Group

Yeah.

Jo Hartley
Jo Hartley
CFO at Halfords Group

As we look forward.

Analyst at Equity Development

Tam from Equity Development. Just as we move from optimize to involve, what sort of big picture CapEx can we see there in the next stage of that development?

Jo Hartley
Jo Hartley
CFO at Halfords Group

Do you want me to?

Henry Birch
Henry Birch
CEO at Halfords Group

Yeah. The answer is what Jo is, that we're really clear that we've set out a CapEx envelope that we are looking to stick within. Yeah, we just want to make sure that we drive that focus and that discipline and be very clear on the returns that we're getting from any CapEx that we put to work.

Arthur Peel
Arthur Peel
Analyst at Berenberg

Arthur Peel, Berenberg. Just on the digital offering, where do you see the opportunity there? What could that grow to, perhaps on like a five-year view?

Henry Birch
Henry Birch
CEO at Halfords Group

Yeah. Look, as I said before, we're really excited about what we can do on digital. I think historically, we've maybe been a little bit underpowered in terms of our offer and the kind of focus on digital. It's a really important part of how we run our retail business altogether, and the fact that 80% of digital orders are actually picked up in store, click and collect, shows actually quite how closely those two kind of channels work hand in hand. Having said that, I think there are customers who will just shop with us digitally and therefore we need to make sure that we are competing with digital-only retailers. Our first kind of focus has really been on more kind of foundational improvements in terms of making sure that the intent of website performance and speed, navigation.

Henry Birch
Henry Birch
CEO at Halfords Group

We're putting more focus on the trading side and the category management piece actually goes across both physical stores and the digital piece as well. That category management discipline in terms of running the kind of channel strategy should yield benefit. What we've said is that we expect our digital sales to be ahead of our overall retail sales, and we've delivered that over the course of the last year. Clearly our kind of intention is to grow that more. Obviously the fantastic thing about digital is the demand and supply is potentially infinite, so we can really scale up our business that way. It will continue to be important for us. Okay. If there are no other questions, I just want to thank everyone for coming today and wish you all the best for today and beyond. Thank you.

Executives
    • Adam Pay
      Adam Pay
      Managing Director of Garages
    • Henry Birch
      Henry Birch
      CEO
    • Jo Hartley
      Jo Hartley
      CFO
    • Company Representative
Analysts
    • Arthur Peel
      Analyst at Berenberg
    • Ben Hunt
      Analyst at Panmure Liberum
    • David Hughes
      Analyst at Shore Capital
    • Jonathan Pritchard
      Analyst at Peel Hunt
    • Kate Calvert
      Analyst at Investec
    • Manjari Dhar
      Analyst at RBC
    • Mark Photiades
      Analyst at Canaccord
    • Analyst at Equity Development
    • Video Narrator
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