Halfords' 23% Profit Hit


LONDON -- Halfords (ISE: HFD.L) announced a slump in pre-tax profit in today's preliminary half-year report, crashing 23.4% to 41.9 million pounds compared with 54.7 million pounds at the halfway stage last year. As a result, the share price has slumped by 4.1% to 330.8 pence near the end of trading.

Retail was the division most affected, with operating profit before nonrecurring items plunging 23.6% to 42 million pounds against 55 million pounds at HY12, while total group revenue fell 1.9% to 393 million pounds in contrast to the halfway figure last year of 400.6 million pounds.

However, its auto centers division saw a 10% boost in operating profit to 3.3 million pounds and a 17.2% increase in revenue from 53.4 million pounds last year to 62.6 million pounds.

Back in October, despite announcing first-half results ahead of expectations, management spoke words of caution for its second-half sales. That has come to fruition, with basic earnings per share slipping 16.8% to 16.4 pence. This morning, chairman Dennis Millard said:

Our second-half Retail planning assumptions remain unchanged and cautious given the prevailing pressures on the consumer as we approach the important winter and Christmas trading periods. We continue to plan for a full-year Group Profit before tax and non-recurring items of between 66 million pounds and 70 million pounds. We have a strong platform for sustainable growth; the management team retains its focus on active trading, cash generation, prudent cost management and the delivery of strategic objectives.

Indeed, all was not doom and gloom, as net debt was reduced by 23% to 107.9 million pounds, while free cash flow was up 47% to 59.5 million pounds with a "continued focus on investment priorities and cash management." Importantly for investors, though, the interim dividend of 8 pence per share was maintained and is due to be paid out on Jan. 25, shortly after its Q3 interim statement on Jan. 15.

On these figures, Halfords remains a high-yielder at more than 6%, and with the busy Christmas shopping period ahead, the company has the potential to easily recover from this minor slip. Halfords is one for this Fool's watch list, at least.

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