Halfords repays £10.7m in furlough funds after sales jump

UK motoring and bike retailer Halfords has returned £10.7m of furlough money to the government after a better than expected sales performance powered by the pandemic cycling boom and growth in its garage business.

Shares in the company were up 12 per cent by midday on Monday after it forecast that underlying pre-tax profit in the year to April 2 would be £90m-£100m — almost double the £56m for the previous financial year.

Halfords has now repaid all of its furlough funds, although a decision about whether to repay business rates relief of about £36m remains under review.

The retailer has not paid out any dividends throughout the pandemic and is yet to announce whether it will do so when full-year results are released in June, but analysts suggest the company’s cash position might imply a payout is on the way.

“The net cash position is something of interest as we look to full-year results,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown. “Quite what the group plans to do with that stash is unknown, but an attractive dividend can’t be ruled out.”

In the seven weeks to February 19, Halfords’ cycling division — one of the biggest beneficiaries of gym closures and government guidance to avoid public transport during the pandemic — reported a 43 per cent rise in like-for-like sales.

Problems with the supply chain for bikes have eased, the company said on Monday, but continued to limit sales growth, as manufacturers worldwide struggled to keep up with the surge in demand. 

Jonathan Pritchard, retail analyst at Peel Hunt, said the sales growth despite “questionable” supplies was “a nod to how strong the underlying market is [for bikes]”. He added that “there is no doubt that Halfords is winning market share as well”.

Overall sales rose 6.2 per cent between January 2 and February 19 as Halfords’ retail operation grew 5.1 per cent, while sales for its car servicing arm Autocentres were up 13.3 per cent. 

Adam Tomlinson, research analyst at Liberum Capital, said sales across the board were “ahead of . . . expectations” but singled out Autocentres, which operates 367 garages and 121 mobile vans nationwide, as particularly promising.

Halfords has followed other companies that have repaid government support, returning more than a fifth of the £46.7m it received from the furlough scheme and business rates holiday combined. 

The outsourcer Serco, which runs the government’s test and trace scheme, returned £8m in furlough payments towards the end of last year, along with law firms Norton Rose Fulbright and Osborne Clarke, which repaid cash, citing a busier than expected pandemic. 

By August last year, Halfords had stopped using the furlough scheme, but at the height of the first lockdown it had about 4,000 staff members — roughly 40 per cent of the workforce — on furlough. 

The group plans to have closed 80 sites, 10 per cent of its total, by April this year as part of cost-saving measures.

Halfords’ share price is up sharply from 53p when the UK locked down on March 23 last year to 318p on Monday.