Halfords' shares have surged by a significant 14 per cent to 205p on Thursday morning, following the company's announcement of a pre-tax profit of £43.6m for the financial year ending April, exceeding market predictions and marking a notable turnaround in profitability. This represents a reversal from the £30m loss reported last year, with overall revenue increasing by five per cent to £1.8bn.
As part of its strategic shift towards bolstering motoring services, Halfords has rapidly expanded its network of garages and autocentres, driving a six per cent like-for-like increase in revenue from these operations to £740m. This expansion is capitalising on the UK's ageing vehicle fleet, with an estimated 43 per cent of cars being 10 years old or more, presenting a significant opportunity for growth in repair services.
The company's retail division has also demonstrated resilience, achieving a four per cent like-for-like revenue increase to £1bn. Bike sales have driven this growth, rising by 6.4 per cent, after experiencing volatile demand patterns during the pandemic and subsequent decline in sales. In contrast, the tyre market remains challenging for Halfords.
Duncan Ferris, an analyst at Freetrade, cautioned that profit margins within the retail business are under pressure due to inflation and reinvestment costs, which are currently offset by increased sales. The company's share price had previously reached 430p in June 2021 but has declined significantly over the past five years.
Henry Birch, Halfords' CEO since April last year, commented on the results, stating that these are "early days" in their growth strategy and that much work remains to leverage the company's market position, extensive presence in motoring and cycling, trusted brand, and unique service offering. The leadership transition saw Graham Stapleton depart as CEO after seven years, with Birch succeeding him.
The company has also announced a number of appointments, including the appointment of a new chief operating officer. Despite the strong showing, some analysts remain cautious about Halfords' prospects, highlighting ongoing challenges in the tyre market and pressure on profit margins.