Halfords Share News (HFD)

(Sharecast News) - Halfords, the cycle and car parts retailer, has warned that trading will be "severely impacted" by the coronavirus outbreak, with full-year profits likely to come in below forecasts and the dividend suspended.
Shares in the group jumped, however, as investors welcomed confirmation that Halfords had been designated as a provider of essential services and would seek to keep some outlets open.

The company said recent trading had been in line with expectations and "very strong" in particular in the last two weeks.

But looking ahead, it conceded trading in the near-term was likely to be "severely impacted".

It warned: "Given the latest government guidance, we believe there is a high likelihood that sale will drop sharply and, if so, that the shortfall will have an impact on profitability, such that the full-year 2020 underlying profit before tax on a 52-week and pre-IFRS16 basis, could be at the lower end or slightly below the current guidance range of ?50m to ?55m."

The retailer, which has around 800 shops and garages, has been able to keep some outlets open as a designated provider of essential services; it also has contracts with the Ministry of Defence, British Transport Police and several large utilities. Its Autocentre garages remain open, and it is looking at providing partial store coverage in its shops from later this week. It will also continue to take online orders.

But the company conceded that sales volumes could still see a "material reduction". Under its median scenario - which assumes significant sales declines in the second quarter and weakness in the third and fourth quarters - full-year sales would fall 25%, or around ?300m.

It is therefore suspending the dividend, negotiating with landlords over rent payments, lowering marketing spend and taking advantage of various government schemes intended to support business during the crisis, including deferring VAT payments.

Graham Stapleton, chief executive, said: "Halfords has an essential role to play in keeping the country moving, providing vital support to emergency workers, fleet operations, key workers and the general population as they travel for essential suppliers and, where required, attend places of work.

"While significant uncertainty exists on the impact of Covid-19, we are taking immediate and significant measures to contain our costs and protect our financial position. We have a strong balance sheet with significant liquidity headroom and low levels of financial debt.

"This is an unprecedented challenge for all of us."

By 10345 GMT, shares in Halfords had soared 34% to 80.65p. Unlike Halfords, most non-food retailers have been forced to shut entire estates, with revenue streams grinding to a halt as a result.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "The latest restrictions from the government mean sales volumes are likely to drop, and the full impact on sales, profits and cash flow will simply depend how long the disruption lasts and how speedily the economy recovers.

"The group is responsible for maintaining some very important fleets, including the Ministry of Defence. That means we can expect a certain stream of revenue to keep flowing through the difficulties, and gives the group an edge over peers who've been forced to shut down completely."