Halfords Reports Mixed Results: Underlying Profit Up, But Posts Loss Due to Impairment
Why we think this is neutral
While Halfords has shown some resilience with a 6.4% increase in underlying profit before tax and improved gross margins, there are significant headwinds to consider. The reported loss of £30.0m due to non-cash goodwill impairment is concerning, as is the cautious outlook on consumer spending. The company faces challenges from economic uncertainty and has had to close underperforming sites. However, the improved cash position and modest sales growth demonstrate some stability. The mixed nature of these results, balancing positive operational improvements against macroeconomic challenges and accounting losses, leads to a neutral overall sentiment.
Key Points
- Underlying profit before tax up 6.4% to £38.4m
- Reported loss of £30.0m due to non-cash goodwill impairment
- Group like-for-like sales up 2.5% YoY
- Gross margin improved by 250 bps to 50.7%
- Net cash position of £10.1m, improved from net debt last year
- Free cash flow increased to £43.0m from £29.4m
- Cautious outlook due to economic uncertainties and consumer spending concerns
- Closure of underperforming sites and challenges with warehouse management system implementation
Summary
Halfords Group plc reported mixed financial results for FY25. While underlying profit before tax increased by 6.4% to £38.4m, the company posted a reported loss of £30.0m primarily due to a non-cash goodwill impairment. Group like-for-like sales grew by 2.5%, with Autocentres up 3.7% and Retail up 2.1%. The company significantly improved its gross margin by 250 bps to 50.7% and ended the year with a net cash position of £10.1m, up from a net debt position last year. Free cash flow improved to £43.0m from £29.4m. However, Halfords faces ongoing economic uncertainties and has had to close some underperforming sites. The company remains cautiously optimistic but acknowledges the challenging market conditions and their impact on consumer spending.