REG - Halfords Group PLC - Final Results - Part 2
10/06/2010
- Part 2: For the preceeding part double click [ID:nRSJ3620Na]
(0.2) (0.2)
Derivative financial instruments (0.8) (0.3)
Trade and other payables (131.5) (87.8)
Current tax liabilities (17.5) (12.2)
Provisions (20.4) (14.3)
Total current liabilities (170.4) (114.8)
Net current assets 50.4 99.3
Non-current liabilities
Borrowings (191.8) (191.5)
Derivative financial instruments - (0.4)
Accruals and deferred income - lease incentives (28.0) (28.3)
Provisions (3.3) (4.4)
Deferred tax liabilities (0.5) -
Total non-current liabilities (223.6) (224.6)
Total liabilities (394.0) (339.4)
Net assets 278.5 244.4
Shareholders' equity
Share capital 2.1 2.1
Share premium 146.5 145.6
Other reserves 2.5 13.6
Retained earnings 127.4 83.1
Total equity attributable to equity holders of the Company 278.5 244.4
278.5
244.4
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Attributable to the equity holders of the Company
Other reserves
Share Capital
Sharecapital premiumaccount Translation reserve Redemption reserve Hedgingreserve Retainedearnings TotalEquity
£m £m £m £m £m £m £m
Balance at 28 March 2008 2.1 145.6 - 0.2 2.8 71.0 221.7
Total comprehensive income for the period
Profit for the period - - - - - 55.8 55.8
Other comprehensive income
Cash flow hedges:
Fair value gains in the period - - - - 22.8 - 22.8
Transfers to inventory - - - - (11.8) - (11.8)
Transfers to net profit:
Cost of sales - - - - (5.0) - (5.0)
Finance costs - - - - 4.6 - 4.6
Total other comprehensive income for the period net of tax - - - - 10.6 - 10.6
Total comprehensive income for the period - - - - 10.6 55.8 66.4
Transactions with owners, recorded directly in equity
Purchase of own shares - share buy-back - - - - - (13.1) (13.1)
Share-based payment transactions - - - - - 1.7 1.7
Dividends to equity holders - - - - - (32.3) (32.3)
Total transactions with owners - - - - - (43.7) (43.7)
Balance at 3 April 2009 2.1 145.6 - 0.2 13.4 83.1 244.4
Total comprehensive income for the period
Profit for the period - - - - - 77.0 77.0
Other comprehensive income
Foreign currency translationdifferences for foreign operations - - 0.4 - - - 0.4
Cash flow hedges:
Fair value gains in the period - - - - (5.1) - (5.1)
Transfers to inventory - - - - (7.3) - (7.3)
Transfers to net profit:
Cost of sales - - - - 1.5 - 1.5
Income tax on other comprehensive income - - - - (0.6) - (0.6)
Total other comprehensive income for the period net of tax - - 0.4 - (11.5) - (11.1)
Total comprehensive income for the period - - 0.4 - (11.5) 77.0 65.9
Transactions with owners, recorded directly in equity
Share options exercised - 0.9 - - - - 0.9
Share-based payment transactions - - - - - 2.5 2.5
Income tax on share-based payment transactions - - - - - 0.1 0.1
Dividends to equity holders - - - - - (35.3) (35.3)
Total transactions with owners - 0.9 - - - (32.7) (31.8)
Balance at 2 April 2010 2.1 146.5 0.4 0.2 1.9 127.4 278.5
127.4
278.5
CONSOLIDATED STATEMENT OF CASH FLOWS
52 weeks to 53 weeks to
2 April 3 April
2010 2009
Notes £m £m
Cash flows from operating activities
Profit after tax for the period before non-recurring items 83.0 68.1
Non-recurring items 4 (6.0) (12.3)
Profit after tax for the period 77.0 55.8
Depreciation - property, plant and equipment 21.9 22.4
Impairment charge 5.0 -
Amortisation - intangible assets 2.2 2.7
Foreign exchange loss 0.6 -
Net finance costs 2.6 14.2
Loss on sale of property, plant and equipment 0.7 0.3
Equity-settled share based payment transactions 2.5 1.7
Fair value gain on derivative financial instruments 0.1 (2.3)
Income tax expense 32.7 21.7
Decrease in inventories 9.8 4.6
Decrease in trade and other receivables 0.5 3.8
Increase/(decrease) in trade and other payables 22.8 (27.4)
Increase in provisions 2.6 16.7
Finance income received 2.0 2.5
Finance costs paid before non-recurring swap close out costs (4.5) (12.8)
Swap close out costs - (4.6)
Income tax paid (30.4) (25.5)
Net cash from operating activities 148.1 73.8
Cash flows from investing activities
Acquisition of subsidiary undertaking, net of cash acquired 10 (72.3) -
Purchase of intangible assets (3.5) (5.4)
Purchase of property, plant and equipment (15.6) (17.3)
(91.4) (22.7)
Cash flows from financing activities
Net proceeds from issue of ordinary shares 0.9 -
Purchase of own shares - (13.1)
Payment of finance lease liabilities (0.2) (0.2)
Dividends paid (35.3) (32.3)
Net cash used in financing activities (34.6) (45.6)
Net increase in cash and bank overdrafts 22.1 5.5
Cash and cash equivalents at the beginning of the period 9 15.5 10.0
Effect of exchange rate fluctuations (1.1) -
Cash and cash equivalents at the end of the period 36.5 15.5
NOTES TO THE PRELIMINARY RESULTS
1. Basis of preparation
The summary financial statements of Halfords Group plc and its subsidiary undertakings (together "the Group") are prepared
on a going concern basis and under the historical cost convention, except where International Financial Reporting Standards
require an alternative treatment. The principal variations relate to financial instruments (IAS 39 "Financial instruments:
recognition and measurement") and share based payments (IFRS 2 "Share-based payment").
The Group has a syndicated five-year term facility totaling £300m that provides the Group with committed bank facilities
until July 2011. The Board is currently reviewing, with the Group's Brokers, the optimal capital structure for the enlarged
Group that will provide the necessary flexible funding to deliver its strategic agenda. The Board envisages that renewed
debt facilities will be agreed and in place in the second half of the financial year ended 1 April 2011.
The accounts of the Group are prepared for the period up to the Friday closest to 31 March each year. Consequently, the
summary financial statements for the current period cover the 52 weeks to 2 April 2010, whilst the comparative period
covered the 53 weeks to 3 April 2009.
The preparation of summary financial statements in conformity with Generally Accepted Accounting Principles requires the
use of accounting estimates and management to exercise its judgement in the process of applying the Group's accounting
policies. These judgements and estimates are based on historical experience and management's best knowledge of the
amounts, events or actions under review and the actual results may ultimately differ from these estimates. Areas involving
a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated
financial statements, are, where necessary, disclosed separately.
2. Operating expenses
For the period 52 weeks to 53 weeks to
2 April 2010 3 April 2009
£m £m
Selling and distribution costs before non-recurring items 280.2 271.3
Non-recurring selling and distribution costs 6.8 10.3
287.0 281.6
Administrative expenses before non-recurring items 52.8 46.1
Non-recurring administrative expenses 0.6 2.0
53.4 48.1
340.4 329.7
3. Operating profit
For the period 52 weeks to 53 weeks to
2 April 2010 3 April 2009
£m £m
Operating profit is arrived at after charging/(crediting) the following expenses/(incomes) as categorised by nature:
Operating lease rentals:
- plant and machinery 1.8 1.3
- property rents 82.9 82.1
- rentals receivable under operating leases (7.1) (7.6)
Landlord surrender payments (1.1) (2.7)
Loss on disposal of property, plant and equipment 0.7 0.3
Amortisation of intangible assets 2.2 2.7
Depreciation of:
- owned property, plant and equipment 21.4 21.8
- assets held under finance leases 0.5 0.6
Impairment of property, plant and equipment 5.0 -
Trade receivables impairment 0.2 0.1
Staff costs 126.5 128.9
Cost of inventories consumed in cost of sales 369.0 379.2
4. Non-recurring items
For the period 52 weeks to 53 weeks to
2 April 2010 3 April 2009
£m £m
Non-recurring operating expenses:
Head Office rationalisation (a) - 2.0
Store rationalisation (a) - 0.8
Exit of standalone cycle store pilot (b) - 1.2
Distribution and warehousing reorganisation (c) - 8.3
Central Europe closure (d) 7.4 -
Non-recurring operating expenses 7.4 12.3
Non-recurring finance costs:
Swap close out costs (e) - 4.6
- 4.6
Non-recurring items before tax 7.4 16.9
Tax on non-recurring items (f) (1.4) (4.6)
Non-recurring items after tax 6.0 12.3
(a) Cost of staffing reductions in Head Office and stores, to access efficiencies arising from the Group's investment in
core enterprise systems over the past four years.
(b) Exit costs associated with the cessation of the Group's standalone cycle concept, including the closure of stores
where necessary.
(c) Costs associated with the re-configuration and consolidation of the Group's distribution infrastructure.
(d) Exit costs associated with the closure of all seven stores in Central Europe. Results for Central Europe for the
period are as follows:
52 weeks to 53 weeks to
2 April 2010 3 April 2009
£m £m
Revenue 5.9 4.4
Operating loss before non-recurring items (2.5) (3.2)
(e) On 1 April 2009, the Group closed out its existing interest rate hedging instruments, which were contracted until
2011, at a cost of £4.6m.
(f) This represents the tax credit on these non-recurring costs; this credit is lower than the UK corporation tax standard
rate of 28% due to the non-deductibility of certain legal expenses and depreciation associated with store infrastructure.
Non-recurring operating expenses of £7.4m (2009: £12.3m) consisted of £0.4m (2009: £6.0m) redundancy costs, £5.3m (2009:
£0.8m) in respect of property, plant and equipment and inventory, £2.4m (2009: £2.3m) onerous lease costs and £0.5m (2009:
£3.2m) of other costs offset by £1.2m foreign currency translation gains.
5. Finance income and costs
Recognised in profit or loss for the period 52 weeks to 53 weeks to
2 April 2010 3 April 2009
£m £m
Finance costs:
Bank borrowings (2.7) (9.4)
Amortisation of issue costs on loans (0.5) (0.2)
Commitment and guarantee fees (0.2) (0.2)
Costs of forward foreign exchange contracts (0.1) (1.2)
Interest payable on finance leases (0.8) (0.9)
Interest payable on rent reviews (0.3) -
Finance costs before non-recurring finance costs (4.6) (11.9)
Non-recurring finance costs:
Swap close out costs1 - (4.6)
Finance costs (4.6) (16.5)
Finance income: Bank and similar interest 2.0 2.3
Net finance costs (2.6) (14.2)
1On 1 April 2009, the Group closed out its existing interest rate hedging instruments, which were contracted until 2011, at
a cost of £4.6m.
6. Taxation
For the period 52 weeks to 53 weeks to
2 April 2010 3 April 2009
£m £m
Current taxation
UK corporation tax charge for the period 35.5 27.6
Adjustment in respect of prior periods (1.1) (2.2)
34.4 25.4
Deferred taxation
Origination and reversal of timing differences (2.5) (4.2)
Adjustment in respect of prior periods 0.8 0.5
(1.7) (3.7)
Total tax charge for the period 32.7 21.7
The tax charge is reconciled with the standard rate of UK corporation tax as follows:
For the period 52 weeks to 53 weeks to
2 April 2010 3 April 2009
£m £m
Profit before tax 109.7 77.5
UK corporation tax at standard rate of 28% (2009: 28%) 30.7 21.7
Factors affecting the charge for the period:
Depreciation on expenditure not eligible for tax relief 1.8 0.9
Employee share options (0.2) 0.2
Other disallowable expenses 0.7 0.6
Adjustment in respect of prior periods (0.3) (1.7)
Total tax charge for the period 32.7 21.7
In this financial period, the UK corporation tax standard rate was 28%.
The underlying tax rate on trading was 29.4% (2009: 29.7%), principally due to the non-deductibility of depreciation
charged on capital expenditure in respect of mezzanine floors and other store infrastructure. This level of tax
non-deductibility is anticipated for the foreseeable future.
The higher tax rate of 29.8% compared to the prior year (2009: 28.0%) is mainly due to the release of tax provisions in the
prior year following the favourable settlement of tax computations, in particular relating to capital allowance claims.
The tax charge of £32.7m (2009: £21.7m) includes a £1.4m (2009: £4.6m) credit in respect of the tax on non-recurring costs,
as detailed in note 4.
Income tax of £0.6m on other comprehensive income relates to the fair value of forward currency contracts outstanding at
the year end. No other items within other comprehensive income have an income tax impact.
7. Dividends
For the period 52 weeks to 53 weeks to
2 April 2010 3 April 2009
£m £m
Equity - ordinary shares
Final for the 53 weeks to 3 April 2009 -paid 10.90pper share (2009: 10.35p) 22.8 21.8
Interim for the 52 weeks to 2 April 2010 - paid 6.0pper share(2009: 5.0p) 12.5 10.5
35.3 32.3
In addition, the directors are proposing a final dividend in respect of the financial period ended 2 April 2010 of 14.0p
per share (2009: 10.90p per share), which will absorb an estimated £29.3m (2009: £22.8m) of shareholders' funds. It will be
paid on 6 August 2010 to shareholders who are on the register of members on 2 July 2010.
8. Earnings per share
Basic earnings per share are calculated by dividing the profit attributable to ordinary shareholders by the weighted
average number of ordinary shares in issue during the period. The weighted average number of shares excludes shares held
by an Employee Benefit Trust and has been adjusted for the issue/purchase of shares during the period.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of
all dilutive potential ordinary shares. These represent share options granted to employees where the exercise price is
less than the average market price of the Company's ordinary shares during the 52 weeks to 2 April 2010.
For the period 52 weeks to 53 weeks to
2 April 2010 3 April 2009
Number of shares Number of shares
m m
Weighted average number of shares in issue 210.2 210.6
Less: shares held by the Employee Benefit Trust (1.1) (1.1)
Weighted average number of shares for calculating basic earnings per share 209.1 209.5
Weighted average number of dilutive shares 1.5 0.3
Total number of shares for calculating diluted earnings per share 210.6 209.8
For the period 52 weeks to 53 weeks to
2 April 2010 3 April 2009
£m £m
Basic earnings attributable to equity shareholders 77.0 55.8
Non-recurring items (see note 5):
Operating expenses 7.4 12.3
Finance costs - 4.6
Tax on non-recurring items (1.4) (4.6)
Underlying earnings before non-recurring items 83.0 68.1
Earnings per share is calculated as follows:
For the period 52 weeks to 53 weeks to
2 April 2010 3 April 2009
Basic earnings per ordinary share 36.8p 26.6p
Diluted earnings per ordinary share 36.6p 26.6p
Basic earnings per ordinary share before non-recurring items 39.7p 32.5p
Diluted earnings per ordinary share before non-recurring items 39.4p 32.5p
The alternative measure of earnings per share is provided because it reflects the Group's underlying performance by
excluding the effect of non-recurring items.
9. Analysis of movements in the Group's net debt in the period
At 3 April 2009 Cash flow Other non-cash changes At 2 April 2010
£m £m £m £m
Cash and cash equivalents at bank and in hand 15.5 22.1 (1.1) 36.5
Debt due after one year (179.5) - (0.5) (180.0)
Total net debt excluding finance leases (164.0) 22.1 (1.6) (143.5)
Finance leases due within one year (0.2) 0.2 (0.2) (0.2)
Finance lease due after one year (12.0) - 0.2 (11.8)
Total finance leases (12.2) 0.2 - (12.0)
Total net debt (176.2) 22.3 (1.6) (155.5)
Non-cash changes include finance costs of £0.5m in relation to the amortisation of capitalised debt issue costs, £1.1m
effect of exchange rate fluctuations and changes in classification between amounts due within and after one year.
10. Acquisition of subsidiary undertaking
On 17 February 2010 the Group acquired 100 per cent of the issued share capital of Nationwide Autocentres Holdings Limited
and subsidiary undertakings ("Nationwide Autocentres") for cash consideration of £74.9m (including transaction costs of
£2.6m). Nationwide Autocentres is group of companies involved in car servicing and repair. This transaction has been
accounted for by the purchase method of accounting.
Consideration transferred
£m
Cash 69.7
Deferred consideration 0.9
Contingent consideration 1.7
72.3
Contingent consideration
The cash consideration payable for the acquisition was reduced by £1.7m to reflect additional cash consideration payable to
certain shareholders remaining as Directors, contingent on their remaining as employees of the Group as of the first and
second anniversary of the acquisition or, in the event of any of them having terminated their employment, said employment
having been terminated in circumstances of being a 'good leaver'. The additional cash consideration is payable at a rate
of £1m on 17 February 2011 and £0.7m on 17 February 2012.
The deferred consideration has been settled since the year end.
Identifiable assets acquired and liabilities assumed:
Book value£m Fair value adjustments£m Final fair value£m
Property, plant and equipment 5.4 (0.2) 5.2
Intangible assets - 18.2 18.2
Inventories 1.2 - 1.2
Trade and other receivables 5.7 - 5.7
Trade and other payables (16.6) (0.4) (17.0)
Provisions (0.9) (1.5) (2.4)
Current tax liabilities (0.9) (0.4) (1.3)
Deferred tax liabilities 0.3 (4.7) (4.4)
(5.8) 11.0 5.2
Goodwill
Goodwill was recognised as a result of the acquisition as follows:
£m
Total consideration transferred 72.3
Associated costs 2.6
Less fair value of identifiable assets (5.2)
Goodwill 69.7
The goodwill arising on the acquisition of the Nationwide Autocentres is attributable to a) future income to be generated
from new retail, fleet customer contracts and related relationships, b) the Nationwide workforce, c) the value of
immaterial other intangible assets and d) operating synergies.
Nationwide Autocentres contributed £13.5m revenue and £0.3m to the Group's profit before tax for the period between the
date of acquisition and the balance sheet date.
If the acquisition of Nationwide Autocentres had been completed on the first day of the financial year, group revenues for
the period would have been £97.3m higher and group profit attributable to equity holders of the parent would have been
£4.9m higher (pre amortisation of Intangible assets arising on consolidation).
11. Other information
The financial information set out above does not constitute the Company's statutory accounts for the 52 weeks ended 2 April
2010 or the 53 weeks ended 3 April 2009 but is derived from those accounts. Statutory accounts for 2009 have been delivered
to the registrar of companies, and those for 2010 will be delivered in due course. The auditors have reported on those
accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 237 (2) or
(3) of the Companies Act 1985 in respect of the accounts for 2009 nor a statement under section 498 (2) or (3) of the
Companies Act 2006 in respect of the accounts for 2010.
Halfords will be holding its Annual General Meeting at the Alveston Manor, Clopton Bridge, Stratford upon Avon,
Warwickshire CV37 7HP on Tuesday, 27 July 2010. The meeting will include a first quarter trading update from the Company
that will cover the 13 weeks from 3 April 2010 to 2 July 2010.
This information is provided by RNS
The company news service from the London Stock Exchange