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Halfords profits hit by higher costs but full year guidance unchanged

"Despite the challenging UK consumer environment, we delivered a robust sales and cash flow performance in the first half, with costs and profit broadly in line with our expectations,” said chief executive Graham Stapleton
Halfords raised its interim dividend by 3.0% to 6.18p

Bicycle and car maintenance retailer Halfords Group plc (LON:HFD) said it continues to expect broadly flat full-year profits after a 17.1% drop in the first half.

Higher operating costs and a tough retail market dragged underlying pre-tax profit down to £30.5mln in the six months to September 28 from £36.8mln a year ago.

However, revenue rose 1.9% to £599.9mln, supported by robust sales of electric bikes, dashboard cameras and motoring services.

Halfords is trying to boost its performance by investing in improving its stores, services and digital operations as high street retailers grapple with weaker consumer confidence and competition from online rivals.

READ: Halfords surges as it maintains full-year guidance

The group raised its estimated capital expenditure from £40mln to between £40mln and £60mln per year over the “medium term” as it ramps up investment.

Halfords said it still expects full-year profit before tax to be “broadly unchanged” from the previous year, as the second half will gain from an improved sales mix, a £3mln foreign exchange benefit and lower retail operating costs. The guidance is subject to its trading performance over the key Christmas period and average winter weather.

"Despite the challenging UK consumer environment, we delivered a robust sales and cash flow performance in the first half, with costs and profit broadly in line with our expectations,” said chief executive Graham Stapleton.

“We are making good early progress as we implement our new strategy, and we are encouraged by the initial signs."

Halfords raised its interim dividend by 3.0% to 6.18p each as free cash flow rose 10% to £34.2mln and net debt fell by £7.6mln to £77.2mln. 

Shares fell 3.1% to 300.2p in morning trading. 

Sophie Lund-Yates, equity analyst, at Hargreaves Lansdown said: "Profit before tax might look like Halfords has a flat tyre but half year numbers are actually pretty stable. The group’s spending a lot on restructuring, but the bottom line is still in good health - in fact, net debt fell slightly year-on-year to about £77mln.

"Investors hold their breath when looking at retailer results these days, but all the signs are that Halfords will deliver on its transformation plans."

She added: "All in, Halfords looks well oiled. Time will tell if its evolutionary efforts will fully pay off, but it looks like it’s on the right road for now.”

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