Why Halfords Group plc Skyrocketed Today

Profit increase beat market expectations as Halfords (LON: HFD) enjoyed a swell of demand for cycles.

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The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Halfords (LSE: HFD) is powering along in its turnaround under chief executive Matt Davies. The firm was buoyed this morning by a 19.4% upswing in like-for-like cycle sales, which

Full-year profit before tax arrived at £72.8m, which was slightly ahead of analyst forecasts, and 1.1% up on a year earlier.

Turnaround gathers pace

HalfordsWhen Mr Davies joined Halfords 18 months ago this “great British brand”, in his own words, was in desperate need of a shot in the arm. To March 2013 profits had diminished to £71m from £118m two years earlier.

Nine (nine!) profit warnings were issued between 2010 to 2012 as retailers struggled in the aftermath of the financial crisis.

Davies increased investment to £30.4m in the year to March 2014, including an overhaul of 23 stores, a website refresh and equipment upgrades at the firm’s autocentres.

£100m will be invested in the three year period to the end of 2016, with an aim of generating £1bn in annual sales.

Share performance

Halfords shares surged over 10% to 489p in early trade this morning, up 85% since Davies began his tenure in October 2012, and just 3% below the firm’s 52 week high of 499p.

The board is recommending a final dividend of 9.1p taking the full year dividend to 14.3p per share (yield 2.9%). Subject to approval, the final dividend will be paid on 1 August 2014 to all shareholders on the register before the close of business on 4 July.

The board intends to grow dividends broadly in line with earnings per share while maintaining 2x cover.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Mark does not own shares in Halfords.

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