- Pre-tax profits fell 6 per cent to £67.1million in the year to the end of March
- Retailer sees £25million in additional costs because of the pound’s devaluation
- It expects 2019 profits to be ‘broadly in line’ with this year
Halfords shares fell more than 11 per cent today after the company said higher costs linked to a weaker pound had dented margins and it warned profits were unlikely to grow this year.
The group, which sells bikes and car parts, said pre-tax profits fell 6 per cent to £67.1million in the year to the end of March after incurring £25million in additional costs because of the pound’s devaluation against the US dollar.
Most bikes Halfords sells are made overseas, which means that the slide in the pound since the Brexit vote has made it more expensive to import these bikes, forcing it to increase the price of some of its products.
The pound’s fall since the Brexit vote has made it more expensive for Halfords to import bikes
But Halfords said it no longer expects to see price rises in cycling this year and is relying on an improved exchange rate to offset currency headwinds.
These benefits will not be seen until 2020, however, and as a result it expects 2019 profits to be ‘broadly in line’ with this year.
Investors did not react well, with shares in Halfords falling as much as 14 per cent at the open. They were 11.6 per cent lower at 342.80p in mid-morning trading.
Full-year like-for-like revenues rose 2 per cent, with its cycling division outperforming the motor department, as sales jumped by 2.9 per cent and 1.9 per cent respectively. Online sales jumped by 11.8 per cent.
The full year dividend rose 3 per cent to 18.03p per share.
Halfords chief executive Graham Stapleton, who took overfrom Jill McDonald in January, said: ‘We are pleased with the full-year 2018 performance in a challenging retail environment, with profits in line with expectations.’
Nicholas Hyett, analyst at Hargreaves Lansdown, said investors had high expectations for today’s update as shares hit a 17-month high yesterday.
‘Halfords stated that next-year’s profits will be largely unchanged from this year’s, and this prompted traders to exit their long positions,’ he added.
Neil Wilson, analyst at Markets.com, also said that ‘profits ‘broadly in line’ with 2018 was not particularly positive and the market probably also wanted to see some more detail from Graham Stapleton after 4 months in charge.
‘The reasonable 2018 results belong to Jill McDonald and investors want to see what the new man in charge is about. There is also some concern that the weaker pound will continue to hit earnings, whilst it will also struggle to improve margins from cycling,’ he added.