Halfords sees more growth as year profit rises

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The Independent Online

British car maintenance and bicycle retailer Halfords Group Plc said it was on track for further growth as it posted an expected 2.4 per cent rise in full-year profit.

"The management are confident that we're well-positioned to deliver earnings growth again this year," Chief Executive David Wild told reporters today.

But he said he was managing the business conservatively, given the continued fragility of the UK economy and consumer confidence.

Wild said the first quarter of 2010 looked like being particularly tough as Value Added Tax (VAT) was expected to rise and unemployment was likely to peak.

Shares in Halfords have increased in value by 23 per cent over the last year, outperforming the general retailers index .FTASX5370 by 33 per cent.

The stock was down 1 pence at 345.5 pence at 0818 GMT, valuing the business at about £719 million.

"Halfords' full-year results contained no nasty surprises but also no real excitement," said analysts at Numis in a research note.

The group, which runs about 460 stores, said profit before tax and one-off items was £92.4 million in the 52 weeks to March 27. That was in line with company guidance of £92-92.5 million.

Halfords said it increased market share despite a 0.3 per cent fall in revenue to £795 million. Its gross margin was up 160 basis points.

Many British retailers have struggled over the past year as shoppers curb spending amid rising unemployment, sliding house prices and fears of a long and deep recession.

Halfords has fared better than most, thanks to its exposure to less discretionary areas of spending, such as car maintenance, as well as the growing popularity of cycling.

The group reduced its year-end net debt by 9.7 per cent to £164 million and raised its total dividend payment by 5.3 per cent to 15.9 pence, payable from earnings per share up 8.5 per cent to 31.8 pence.

"Reinforced by management actions to improve margins and control costs the delivery of year on year earnings growth, in the present economic turbulence, emphasises the resilient quality and adaptability of the business," said Wild.

He said that over the next two years Halfords would deliver further annual cost savings of £4 million by moving from three old distribution centres to one remodelled centre and one new centre at a cost of £16 million.

The CEO said he saw "significant" opportunities for future growth within the British business and expansion opportunities in Central Europe.

The group plans to open 15-25 new stores are in the current year.