And B&Q owner Kingfisher predicts decent full-year results.
Halfords Group (LSE: HFD) has been popular with Britain's motorists and cyclists for decades now, and has built itself into an £800m company, turning over a similar value in annual business. With modest debt, it hasn't suffered from the credit crunch, and has operated through the economic downturn as if it never happened.
All that has helped put Halfords in a position to take advantage of current bargains and snap up Nationwide Autocentres, for £73.2m in cash.
The auto servicing and repair market in the UK is worth £9bn annually, and the deal lands Halfords with 224 UK service centres, to be rebranded as Halfords Autocentres, at a cost of around £325,000 apiece. A further 200 outlets are in the pipeline too, expected to create over 1,000 new jobs.
A nice bargain
As well as the business, Halfords are also buying experience, as Nationwide's management team will stay with the group. Nationwide has grown its EBITDA by 70% over the past four years, and Halfords expects that to double again, to around £20m, in the next three. All told, that sounds like a pretty astute shopping trip by Halfords to me.
I was impressed when I looked at Halfords' third quarter results last month, and rated the shares good value. As often happens when I voice a positive opinion, the price immediately started a slow slide, but at the time of writing it had rebounded by 10% after the acquisition was announced.
Along with the announcement, Halfords also assured us that the final quarter is looking good, and full-year figures, expected on 15 April, should be in line with current expectations.
But even at the new price, the shares are still only on a prospective P/E for the full year of 11.3, with a dividend yield of 4.2%, moving to 10.6 and 4.5% for the year ending April 2011 -- and we should expect those forecasts to be uprated now, to account for the Nationwide acquisition. I still think the shares are cheap.
Kingfisher
Meanwhile, Kingfisher (LSE: KGF), which prides itself with being Europe's largest DIY chain, and the third largest in the world, released a fourth-quarter trading update on Thursday, indicating that results for the full year to 31 January 2010 are likely to be ahead of expectations.
Best known in the UK for its B&Q stores and its Screwfix online business, Kingfisher saw sales fall a little in the final quarter due to the bad weather -- though like-for-like B&Q sales were actually slightly up before the freeze hit. Sales in Poland, where Kingfisher is also the market-leader, were also hit by exceptionally harsh weather.
With cost-saving measures brought in during the year bearing fruit, profit for the quarter is likely to have held up, and pre-tax profit for the full year is expected to be substantially better than last year.
Consensus forecasts are currently for a pre-tax profit of around £540m, which marks a very strong reversal of the two-year slump the company has just been through -- last year's figure was just £327m. Further growth, to around the £625m level, is expected in 2011.
Future growth
The company is expecting good things for the future too, as chief executive Ian Cheshire told us: "After what has been a busy and productive year I am pleased that we now have a stronger balance sheet, a very experienced leadership team and a clear set of well-established 'Delivering Value' initiatives to drive higher cash returns and future growth."
The shares put on a couple of percent on the news, and currently stand on a P/E for the full year of around 13.5. The dividend yield is likely to be around 2.6%, representing a return to rising dividends, after a slump of 50% over the past two years.
That's not bad for a multi-national FTSE-100 company, but it does make Halfords look like even more of a bargain to me.
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