This will be my last Chairman's statement as I will be standing down at the conclusion of the Annual General Meeting having been privileged to serve Halfords for nine wonderful years.
Halfords is a much-changed business from that at the start of the decade, as is the retail landscape. The digital revolution, which now encompasses every aspect of our lives, has transformed the way we do business and we at Halfords have embraced that change. However, we have not lost sight of Halfords' key differentiator: our people.
I am so proud of the progress we have made to lift our service ethic, customer centricity and services focus. To this end, and on behalf of my Board colleagues, I would like to thank each and every colleague throughout the Group for making this a reality.
This year we have seen a change in executive leadership, with our CEO Jill McDonald leaving the business in September 2017 and Jonny Mason taking over as interim CEO prior to the arrival in January 2018 of Graham Stapleton, our new CEO. Graham is an outstanding business leader with credentials spanning across the retail, digital and services spaces. He is an ideal fit for Halfords and I am confident that he will successfully lead Halfords through its next phase of growth.
I would like to thank Jill for her significant contribution to Halfords, some of which I have summarised below. Jonny Mason will also be leaving us in a few months and I would also like to thank him for the positive impact he has made over the last three years. We wish both Jill and Jonny all the best for the future.
Against the background of a challenging retail environment , we have achieved good sales growth, introduced new in-store services and continued to improve our product ranges, colleague training and service delivery. We also grew service-related retail sales by 14%.
Underlying Profit Before Tax was down some £4m but this was in the context of an additional c.£25m year-on-year cost of imported goods as a result of the weaker pound against the US dollar. Our actions to mitigate the impact of this headwind, both this and last year, have worked well and, at current exchange rates, there is virtually no further foreign exchange headwind to come.
Whilst earnings in the year were naturally adversely impacted by currency and other cost headwinds, particularly from increased labour costs, the underlying business performance was positive and cash flow was robust.
Accordingly, the Board has recommended a final dividend of 12.03 pence per share, payable on 31 August 2018, which would result in a dividend per share for the year of 18.03p, up 3.0% year-on-year and consistent with our policy of paying an increasing ordinary dividend. Gearing remains within our debt target.
Summary of strategic progress over recent years
In the report that follows, we have set out our progress against the objectives and milestones in our Moving up a Gear strategy that was set out in November 2015.
The strategy was investment led with a focus on continued colleague development, infrastructure to drive the business forward digitally and to better understand and serve our customers.
Some of the highlights, which illustrate the positive impact of investments we have made, are:
- 59% of Retail transactions can now be matched to customers (up from 3% in 2015);
- Service-related Retail sales up 46%;
- Group online sales up 55%;
- over 70% of Retail colleagues trained to "Gear 2" level, up from 46% three years ago;
- Colleague turnover much improved from three years ago; and
- 9th in the Sunday Times Best Big Companies To Work For (from 18th in 2015).
The business cannot stand still and the time for refreshing our strategy is upon us. The timing of Graham joining as CEO is thus opportune and he and his team are currently working with the Board to develop the next phase of strategic development to set Halfords on a path to profitable growth.
The intention is to set this out to shareholders in September.
The year ahead
With changes to the executive management team and the Board, Halfords is entering a new phase. We have a talented group of engaged colleagues who remain focused on growing the business and driving sustainable long-term growth. I am confident that Halfords will continue to prosper in the coming years under the capable leadership of Graham and his wider team.
Lastly, I welcome to Halfords my successor, Keith Williams, who brings a wealth of experience. I trust that Keith will enjoy working, as much as I have, with such a talented and engaged Board and such wonderful colleagues throughout the Group.
22 May 2018