Halfords Group plc (HDK.MU) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the Halfords Group preliminary results for 53 weeks, ending the 3rd of April 2020. I'm Graham Stapleton, CEO at Halfords and I am joined this morning by Loraine Woodhouse, our CFO. We're very sorry not to be with you in person today, but hopefully, this is a one-off, and we'll be back together in the same room at the Half 1 results. In terms of the structure for this morning, Loraine will start by taking you through our financial performance for the year. I will then provide you with an update on how we have progressed against the strategy over the last 12 months. I will then talk you through our focus for the year ahead, particularly in light of the pretty extraordinary environment in which we're all living at the moment and the challenges and opportunities that presents. Finally, Loraine will conclude with our outlook and the various trading scenarios that we've developed to model a range of potential outcomes. You'll then have the opportunity to ask questions at the end. But before I hand over to Loraine, I just wanted to put on record right at the start, my sincere gratitude to the extraordinary hard work, loyalty and dedication that the Halfords team around the U.K. and Ireland have shown and is continuing to show during this exceptionally challenging period. It has been humbling to see our colleagues' commitment, and I count myself extremely fortunate to work alongside them all. I will now hand over to Loraine to talk you through our full year performance.

Thank you, Graham. Good morning, everybody. Thank you for joining us. I'm going to start today on Slide 4 with a review of our FY '20 financial performance. Last financial year feels like a very long time ago now. I'll try not to spend too long looking back because I know you'll be keen to move to the year ahead. But I do want to take the opportunity to talk through the highlights of our financial performance. Later in the presentation, I will cover current trading and the outlook. Just a couple of housekeeping points before I start. This financial year was a 53-week year for us. At the same time, we've adopted IFRS 16 in our accounts this year for the first time. To try to give you the most comparative analysis, unless I state otherwise, I have focused on the 52-week pre-IFRS 16 numbers. Our 52-week trading period ended on the 27th of March, the week the entire country went into lockdown. Prior to the pandemic hitting, the trading year had already been quite turbulent with subdued consumer confidence on the back of the ongoing Brexit narrative and the associated political change. Despite this, we delivered a good set of results overall. Our revenue grew by 0.3% despite the difficult macro environment. We reported group profit before tax of GBP 55.9 million, which if we exclude the dilutive impact of our acquisitions and with COVID at the year-end in line with last year. We saw our gross profit margin increase as our operating costs excluding acquisitions declined year-on-year. Our acquisitions have performed well, and the integration is going very smoothly. Finally, in the 53 weeks, we generated GBP 54.6 million of free cash, around GBP 12 million more than the previous year with net debt dropping to just over GBP 73 million. Moving to Slide 5. Our reported underlying profit before tax on a comparative basis dropped by 5% to GBP 55.9 million. In our 53-week numbers, profit dropped to GBP 52.6 million, which is unusual as the 53rd week is usually profit enhancing. This reflects the fact that in our 52nd and 53rd weeks of trading, we were at the very start of lockdown with a large number of stores and garages shut. Consistent with our announcement back in March, we recorded non-underlying costs of GBP 32.1 million. This primarily reflects the one-off costs associated with the closure of Cycle Republic and the Boardman Performance Centre. We completed the closure of both operations in early June. Given the number of moving parts in our numbers last year, in Slide 6, I thought it would be helpful to provide a simple bridge of our year-on-year profit. I'll start with a picture before acquisitions and before the impact of COVID in the last 2 weeks of the year. In our underlying business, you can see that a very strong performance in Autocentres, alongside lower financing costs from reduced net debt offset a weaker set of results in Retail. We then saw 2 profit dilutive impacts in-year. The first was an in-year loss from McConechy's and Tyres on the Drive, albeit this was a better performance than we had anticipated. The second, of course, was the impact of COVID. The first couple of weeks of lockdown were the most disruptive we faced with many of our stores and garages shut. We estimate that this cost us around GBP 7 million of lost profit in weeks 52 and 53. Finally, on this slide, you can see the impact of IFRS 16, which reduces profits by a further GBP 1.1 million, and also the non-underlying costs of GBP 32 million that I mentioned earlier. Moving to Slide 7 to look at our Retail business in more detail, we saw divergent performances in our Cycling and Motoring segments. Cycling had a good year, growing 2.3% after a much stronger second half. Adults and kids bikes were in growth during the year, with particularly strong demand for e-bikes, growing 45% in-year and accounting for nearly 20% of adult bike sales. Our own brand and exclusive ranges of e-bikes, mechanical bikes and scooters offer great choice and value, and we continually bring new and innovative products to market. As you know, we had a more difficult year in Motoring, albeit our second half performance has been improving until COVID struck, with year-to-date week 51 like-for-like down 4.4%. The more discretionary categories were impacted over the course of the year by low consumer confidence. And of course, mild winter weather affected our performance overall. Nonetheless, we gained market share and we saw good performances in the more resilient and less discretionary categories such as bulbs, blades and batteries, child safety and car security. Although the sales line was weaker, on Slide 8, you can see further growth in Retail gross margin. Identifying efficiencies in the supply chain and being more targeted in our promotions improved margin by 20 basis points. Trading margin was good. We were ahead by 57 basis points after all costs of freight, FX and IFRS 15. Offsetting this, we invested in interest recredit to support hard-pressed consumers. Our new credit offer attracted a significant number of new customers, albeit the interest-free element does have a cost to overall margin. The commission line on this chart also represent Cycle to Work commissions, an important element of our B2B business. The final factor in determining margin is the impact of a lower Motoring mix, which reduced margin by 11 basis points during the period. Reducing operating costs, particularly in our Retail business, has been a focus throughout the year. As you can see on Slide 9, through a series of cost initiatives, we've been able to drive reductions in underlying Retail costs of over 3%. We are focused on cost across the whole business, but the most significant of our savings have been rental rate savings of GBP 4 million, with rent renewals settling, on average, 15% lower; efficiencies in our store processes, offsetting national minimum wage increases; savings in distribution costs, where we moved from 3 to 2 store deliveries per week; reduced electricity costs as we implemented LED bulbs across the estate; and finally, implementing better procurement practices, such as the use of e-auctions on commodity products. Although it was a difficult year, we did continue to invest in supporting our strategic areas of growth with around GBP 3 million invested in digital, in technology more broadly, in building our B2B business and in the second phase of our store space relay. Moving now to our Autocentres business. We were really pleased with the results last year, particularly given that we purchased and integrated 2 businesses during the year. Overall sales growth, including the benefit of the acquisitions, was nearly 19%, with like-for-like growth of 1.4%. Again, COVID had a material impact at the very end of the year with like-for-like to week 51 of 2.2%. Margin was diluted in-year, but this is entirely reflective of the impact of the 2 acquisitions with businesses currently weighted more towards tires than our existing garage business. The opportunity over time is to transition both acquisitions to delivering higher-margin service categories. The important point to highlight for Autocentres is in the chart on the right-hand side. The underlying garage and mobile business, excluding the acquisitions, grew profitability by GBP 2.4 million or over 40%, bringing the operating margin to 4.7%. This is a great result on the back of several successive years of growth and reflects the improvement in the operating model on the back of significant technology investments. Moving to Slide 11. Cash flow was strong last year, with free cash flow of GBP 54.6 million, ahead of the previous year by GBP 12 million, despite us investing more capital year-on-year. Working capital drove the positive movement with a cash inflow of GBP 49 million, but it's worth pointing out that GBP 25 million of this was a movement in accruals as a result of the Cycle Republic closure. As you know, internally, we focus on average working capital as the timing of year-end payments can materially impact presented cash flows, whereas average improvements are harder to manipulate. Through a continual focus on stock balances, our average stock balance throughout the year, stripping out the impact of acquisitions, was GBP 11 million lower than the previous year. Over the last 2 years, we've reduced average stock levels by GBP 18 million. Equally, through working with suppliers to better align our terms with our stock turn, we've also moved creditor days by 3 days on average. Both initiatives have underpinned our positive cash flow this year. Slide 12 covers net debt and the dividend. Our strong cash performance reduced net debt, which stood GBP 8.6 million lower at GBP 73 million at the year-end. Pre-IFRS 16, our net debt is less than 0.8x EBITDA. I should touch briefly on the dividend before I close. As you will be aware, we have suspended the dividend until we have greater clarity over the broader impact of COVID. And therefore, our full year dividend is equivalent to the interim dividend declared at 6.18p. That's all I have to say on last year, we believe it was a good performance in a tough trading year with some particularly strong results in gross margin improvement, cost reduction and cash management. Thank you. I will now hand over to Graham to provide a strategic update.

Thanks, Loraine. So as Loraine said, we believe we were able to deliver some strong results in what was a particularly challenging year. Despite everything that's happened in the wider world since our interim results in November, I want to make it clear today that we are making no changes to our underlying strategy and our long-term aim remains very much the same as we outlined at the Capital Markets Day in 2018 set out here on Slide 14; that is to inspire and support a lifetime of Motoring and Cycling. However, we are, of course, alive to the uncertainty of the current trading environment and indeed, the possibility of a severe recession as a result of COVID-19. So I will take you through the ways in which we are reprioritizing some of the activities within our strategy in order to respond to emerging customer trends and effectively navigate through the crisis. First, though, I want to remind you of the 3 key strategic goals that we have set out to help us deliver against our plan, which, again, are entirely unchanged. Firstly, we will inspire our customers through a differentiated, super specialty shopping experience. Secondly, we will support our customers through an integrated, unique and more convenient services offer. And thirdly, we will build relationships with customers aimed at enabling them to get the most from a lifetime of Motoring and Cycling. These goals will be underpinned by a relentless focus on improving cost and efficiency within the business and an investment in our colleagues in order to ensure we continue to offer our customers industry-leading levels of service, expertise and know-how. You will recall that at our interim results back in November, I spoke about our intention to accelerate certain aspects of our strategy, which should be seen as a shift in emphasis rather than a change in direction. Put simply, the shift can best be summarized as a commitment to evolve into a consumer and B2B services focused business with a greater emphasis on Motoring, generating higher and more sustainable financial returns. Slide 17 shows you the basis on which that accelerated strategy has been formed. It divides our business into its key component parts: Retail Motoring and Cycling, products and services, Autocentres and B2B. On the bottom axis, we show our return on invested capital and on the side axis, we have the market opportunity or our growth opportunity. The size of the bubble reflects the relative size of the component parts of our business today. For Cycling, clearly, the picture has changed quite a bit since you last saw this graphic. We have seen a very welcome consumer shift towards cycling with a surge in demand for bikes and services during the lockdown in the U.K. The extent to which that demand can be sustained remains to be seen. The key message here is that the analysis tells us a lot about where we have value-creating opportunities with the only real difference being the significant demand in growth for cycling. This doesn't change our approach. It simply means we have to increase the pace at which we optimize the returns on Cycling products and services. So with that context in mind, the next few slides highlight the significant progress that we've made during FY '20 within those 3 strategic pillars of Inspire, Support and Lifetime. Slide 18 looks at the Inspire pillar, in other words, giving our customers a differentiated and super specialty shopping experience whenever they come to Halfords either online or in store. Our new group web platform launched as planned in Q4. This has transformed the digital customer experience by bringing all of our products and services together in 1 website for the very first time. The timing of the launch was clearly very opportune, given the subsequent COVID-19 crisis, where we have seen a record digital performance with both growth and participation metrics ahead of industry benchmarks. We've also optimized Cycling space in all our Retail stores, improving the customer experience and the financial returns in the category. In November, we talked about conducting a strategic review of our Cycling business. This is now complete, and we've executed the recommendations to consolidate Cycle Republic and Tredz and better leverage our Halfords Retail Cycling business. Finally, sales of our own brand and exclusive products were ahead of proprietary brands, and we launched more unique and innovative products. This included the Carrera all-weather bike with heated handle bars, which you can see here on the right of the slide. Slide 19 looks at the Support pillar, in other words, giving our customers a better integrated and more convenient services offer. Firstly, we accelerated the growth in our Autocentres business by acquiring McConechy's Tyre Services. This is one of the U.K.'s leading garage chains with 57 sites and 100 vans. It has established strong coverage for us in Scotland and the north of England, taking Halfords to within a 15-minute drive of all households. Similarly, we continue to develop our Halfords Mobile Expert proposition, delivering best-in-class customer service as reflected by strong Trustpilot scores. The acquisition of Tyres on the Drive increased our mobile hub footprint from 1 to 7, and our fleet of vans from 3 to 75. Customers now have a wider choice of where they have products like batteries fitted, be it at their home or place of work and at a time convenient to them. This provides a strong platform for future Mobile services growth. We also completed the upgrade of PACE, the digital operating platform that we use in all Autocentres garages. PACE puts a tablet in the hands of every technician, providing customers with the assurance of quality and enabling our garages to optimize resource allocation and labor efficiency. Since its implementation, we have seen improved sales and margin, record productivity and better customer Net Promoter Scores. Finally, we rolled out new services in Retail, including weCheck free and premium motoring services as well as a new suite of cycle care offers, driving both footfall and attached product sales. Prior to lockdown, we conducted approximately 24,000 weCheck services each week in our Retail stores. Turning now to Slide 20, and looking now at the Lifetime pillar, in other words, how we build stronger relationships with more customers over their lifetimes. This is the least developed of our 3 pillars, having so far prioritized Inspire and Support. There is more to do, but nevertheless, we are pleased with the progress that we made during the year. We launched an improved financial services offer across the group, providing a new range of payment options, which gave us double-digit sales growth year-on-year and access to new customer demographic. The customer-led application process allows shoppers to access the service from their own smartphone, in-store and online without the need to use our till points. Our group CRM offer, program rather is now more relevant to more customers with engagement rate growing above industry levels. The average open and click-through rates have grown year-on-year, and our unsubscribe rate has fallen to our lowest ever level at less than 1%. Group cross-shop has also improved year-on-year through a combination of targeted promotional campaigns and improved awareness of our broad proposition, strengthened greatly by our new group website. As I've said before, those 3 pillars are underpinned by improving cost and efficiency within the business and investment in our colleagues as set out on Slide 21. As Loraine described earlier, we delivered significant cost savings during the year through supply chain efficiencies, Retail productivity programs, property savings and improved procurement practices. Across the group, these savings came to GBP 14.6 million, demonstrating our ability to optimize the cost base. We agreed a strategic buying alliance with Mobivia, a leading player in the European motoring products and services market. The relationship, although in its early stages, is progressing well. We also made a start on improving returns in mainstream and performance cycling. We rationalized and consolidated some bike components to make it more cost-effective and efficient to make bikes, lead times have reduced with an increased focus on near-source European suppliers and several significant range of [ views ] were completed in cycle accessories, reducing range spread, improving product quality and increasing gross margins. And finally here, we also managed to reduce overall group working capital by GBP 11 million on average through FY '20. Lastly, in the FY '20 strategic highlights, we continue to invest in our colleagues in order to ensure that they can offer our customers industry-leading levels of service, expertise and know-how as set out on Slide 22. Our efforts in this area were rewarded by our inclusion in The Sunday Times Top 25 Employee list for the seventh year running, which is a fantastic achievement and a great endorsement. We continue to invest significantly in upskilling colleagues across all areas of the group. This is especially relevant within EV and hybrid services, where we've trained nearly 800 technicians to service electric vehicles, e-bikes and e-scooters across the group. This builds on our unique position of being the only provider of electric bike and vehicle servicing. Finally, we have significantly increased the pace for our cross-group strategic change during FY '20 through our transformation plan. We have upskilled our senior leadership team and enhanced our change management capabilities across the business. So all in all, we made significant progress against our strategic objectives in FY '20. We have exited 2 businesses, we have acquired 2 businesses, we launched a new group web platform and we transformed our Mobile services proposition, and at the same time we have delivered significant cost and efficiency improvements across the entire business. This has given us strong foundations to support our response to COVID-19, and we believe has positioned us well for the rest of FY '21 and the longer term. If we compare our progress against some of our key strategic metrics, it's easy to see just how much we've delivered this year. Our focus on group services, and more specifically, our Autocentres business has driven growth of 9% in group service-related sales and an increase in our customer Net Promoter Score of 3.5 points. Our investment in B2B channels has increased B2B sales as a percentage of the group to 15%. And our digital channel has seen 17% growth in online sales. And finally, our continued progress on cost and efficiency has helped us to achieve procurement efficiency savings of nearly GBP 15 million, and an GBP 11 million reduction in average working capital levels. I'm going to turn now to look at our focus for the year ahead and consider the ways in which COVID-19 presents us with both opportunities and inevitably challenges. On Slide 25, we've set out our experiences and some of the trends we've noted through the COVID pandemic. To give you some context, you'll all be aware Halfords has been classified as an essential retailer by the U.K. government, and as such, has continued to trade during the lockdown. For the majority of the first quarter, we operated from a reduced retail estate on a dark store basis, serving customers at the store entrance to ensure both colleague and customer safety. Through June, we moved to a light store operation with stores open to a limited amount of customers at any one time. As of the 3rd of July, 359 stores are trading under the light format, 800 under the dark store format and 77 remain closed. Autocentres operated from the majority of the garage estate across Q1 and was fully reopened by the 3rd of July. As has been well documented, there has been a big surge in Cycling as a result of people avoiding public transport, enjoying the more favorable recent weather conditions and seeking new health and leisure activities. We've seen this right across the board from high-end electric bikes to kids bikes and accessories. As a result, our Cycling business has performed very strongly throughout the period, up 57% in the 13 weeks to the 3rd of July. Our digital sales have also been very strong, up 200% year-on-year in Q1, highlighting the value of the investment in our new web platform, which dealt well with the unprecedented shift to online ordering during the COVID-19 lockdown. In addition, Click & Collect remain popular and accounted for 51% of retail sales during Q1. Perhaps unsurprisingly, Halfords Mobile Expert has also seen a record number of jobs per day with more customers opting to have their car serviced from the safety of their homes. All 75 of our vans have been well used throughout Q1 with record average jobs per day at peak times. And finally, there were significantly high levels of phone, e-mail and social media customer contact into the business as a result of store closures and channel shift. This reflects the change in customer shopping habits and a huge increase in our digital channel. In managing this, the lessons we've learned will lead to fundamental changes to the way in which we think about contact in the future. As a more general point, I'd echo the broad theme that I've heard from other businesses about their experience of trading throughout this period, which is that you learn even more about a company's operating model when it's put under a significant amount of change and stress. This has both confirmed some of the opportunities we already knew and highlighted some others. So in terms of the opportunities and challenges, we've summarized what we think are the key ones here on Slide 26. In terms of the opportunities, as we're already seeing, there will be an increase in Motoring and Cycling journeys for a variety of reasons. These include customers opting to avoid public transport and a likely rise in staycations as people choose to holiday in the U.K. rather than going abroad. A recessionary environment is also likely to create an aging U.K. car park. Clearly, this would be positive for our Motoring services business, which focuses on the servicing of cars over 3 years old. An increased focus on climate change, supported by government investment and incentives should drive higher demand in bikes and electric modes of transport. Online Click & Collect and home-work delivery growth is likely to be more marked as a consequence of the crisis, and that will lead to opportunities to reshape our existing store and garage portfolio and reduce our cost base. And overall, the challenging market conditions are likely to see further consolidation of our competitor set. More broadly, the fact that we have been able to keep operating during the lockdown has increased awareness of our services offering, particularly where other retailers have remained closed. However, there are also some challenges that the crisis has surfaced. The acceleration in the shift to online and home delivery channels will present operational stretch as we are required to adapt even more rapidly to this trend than we were before. We'll need to work hard to make sure that our offer is fully optimized and fit for purpose. And in the short term, at least, the new way of working means a more expensive operating model for us as we count the cost of increased labor, PPE requirements and social distancing measures. The rapid shift in the shape of the demand may well put some pressure on our supply chain and cause disruption, as indeed it has done already, albeit I'm very pleased with the way in which we managed our way through it. Finally, a recessionary environment could, of course, dampen consumer confidence, particularly for discretionary expenditure. So where does this rapidly changing landscape and the need to respond quickly to emerging consumer trends leave our strategic priorities for FY '21? While looking at Slide 27, in simple terms, it means 2 things: Our first and biggest priority will be an increased focus on our cost and efficiency programs to create an even leaner and more effective business as we move into FY '22. Secondly, a greater emphasis on the Support pillar of our strategy, which focuses on transforming and optimizing our services business, a large proportion of which is nondiscretionary spend and potentially less impacted by lower customer confidence. This doesn't mean we will not concentrate on moving forward with our Inspire and Lifetime pillars, but there will be less relative investment and time spent in developing these 2 areas in this financial year. So looking at the FY '21 plan, therefore, in Inspire, we will materially up-weight our web platform and digital customer experience in order to create an even more differentiated and specialist proposition here. We are likely to invest similar amounts in optimizing our new web platform to the sums we invested in launching it last year to a multimillion-pound investment still. In Support, we will continue to expand our Motoring services offer, where we intend to build aggressively on our mobile proposition with the aim to increase our fleet to 120 vans by the end of this financial year. And in Lifetime, our aspiration is to double the number of customers shopping across the group, fully utilizing the new group web platform and our Single Customer View and CRM systems. Customers who shop across our group are, by far, the most valuable customers to Halfords. However, as I said at the start, the biggest area of focus in FY '21 will be cost and efficiency. Here, we will continue to grow the profitability and returns of our core categories, particularly in Cycling and accelerate the reduction of our operating cost across the group. We made good progress in FY '20 in several areas, and we will accelerate this further in FY '21. I will talk more about property costs in a moment, but it is important to note that we will take action on all areas of cost where we have the opportunity to do so. For example, we will conduct a major review of our supply chain costs with a particular emphasis on simplifying and centralizing the operation. And finally, we believe it is critical that we do our best to keep colleagues engaged and motivated through this very challenging year, and we will, therefore, continue our investment accordingly here. The next 3 slides, from 28 to 30, hopefully, demonstrate in real terms and using specific examples, how we are prioritizing the strategy in this year, and in particular, what we are doing in our areas of support and cost and efficiency, which are our biggest focus areas. Starting on Slide 28 with support, we will continue to transform and build a market-leading Motoring services offer. For instance, we aim to significantly improve awareness of our unique retail store, garage and mobile services offering through leveraging our new website and introducing group-wide marketing campaigns. We're also significantly expanding our mobile services business by 60% this year as we build out this important strategic platform, and we will continue to assess the opportunity to acquire further garages. We will further develop our digital operating platform, PACE, in Autocentres with a view to this becoming the basis for a group-wide services platform next year. And we're rolling out a new and innovative weCheck app to ensure that Motoring services are even easier and more convenient for customers to access. The app will also enable us to capture data, which will highlight customer trends and help inform future services growth. Turning now to our focus on cost and efficiency on Slide 29. And here, I want to give you 2 specific examples as this is our most significant area of focus for the year ahead. As we said last November, a key priority for our market-leading Cycling business is to improve its returns and this has become even more a focus in light of the volume growth that we've seen recently. We've made some good progress already in this area, and our focus for FY '21 will be on investment in the infrastructure of Tredz to further strengthen its position as one of the leading performance Cycling brands in the U.K. We've also recently appointed a new MD for that business to help drive the transformation, significantly improving the digital customer shopping experience, removing any existing pain points in the customer journey. This will include market-leading functionality like the introduction of preorder, improving the effectiveness of our Cycling promotions and optimizing and simplifying our ranges, and solutions selling both in-store and online to ensure customers have all they need to enjoy their new bike or scooter. For example, the bike will be offered with a range of accessories, services and finance going forward. Combined, these initiatives will improve the overall customer experience and net profitability as well as lower our working capital requirements. We are targeting a 300-basis points improvement in Cycling gross margin in FY '21. This gives you a sense of the scale of our ambition here. Finally, moving to Slide 30. As we said before, there is huge potential for us to unlock more value within our property estate. For the purposes of this year, that means closing uneconomic locations and negotiating significantly better terms on our existing estate. However, it is important to recognize that this is a multiyear journey. We currently have very few unprofitable sites, therefore, the changes we will make in FY '21 solely reflect the channel shift we've seen recently towards online. Even before the emergence of COVID-19, we have been making progress on optimizing our Retail store estate and investing in the growth of our online business. In FY '20, we closed 8 stores and garages. And so far, in FY '21, we have exited a further 27, including 22 former Cycle Republic stores. COVID-19 has accelerated the shift to online shopping, and we think this will continue in the long term. As a result, we will require less physical locations. And so in FY '21, we will close up to 10% of the group's physical estate. This includes those locations we have already exited. In addition to closures, we will be targeting better value at more flexible terms for the remainder of the estate through commercial negotiations with landlords. We negotiated average rent reductions of 15% in FY '20 and we expect to achieve more than this in FY '21, given the current market dynamics. By accelerating the property strategy through FY '21, focusing on the size and cost of our existing estate, we will build a stronger platform to continue the journey into next year. FY '22 will see investment in our new destination and hybrid formats, which we believe will unlock further value in our property assets. So to summarize then, our biggest priority in FY '21 is a major focus on cost and efficiency, where we are aiming to create an even leaner and more profitable business this year. This puts us in an even better position to deliver our longer-term strategy as we move into the next financial year. We will also continue to invest in the customer strategy, particularly the Support pillar where we will build a unique and market-leading position for Motoring services. But the investment doesn't stop there. We will still be making progress in both Inspire by further transforming our digital proposition and in Lifetime through a major shift in the number of customers shopping across the group. I will now hand you back over to Loraine to the outlook and summary section, after which we'll take your questions.

Thank you, Graham. I would now like to touch briefly on the outlook for this year. Turning first to current trading on Slide 33. The pandemic has created unprecedented uncertainty for everyone with the Retail sector particularly hard hit. We have seen very volatile trading over the last few months, and we expect that to continue. As Graham said, we were classified as an essential retailer by the government. And as such, we have continued to trade throughout this period, albeit with a materially adapted customer offer. The operational complexity at this time and the cost of adapting the operation has been very significant. Our group sales for the 13 weeks, the 3rd of July were minus 6.5% on a like-for-like basis, with the performance improving markedly over time. As you would expect, our Cycling business has performed extremely well, up 57% year-on-year, boosted by good weather, families cycling together throughout lockdown and a desire to avoid public transport throughout the worst of the pandemic. We believe these trends could continue as cycling becomes more of an essential way of commuting for some people. Motoring revenue was down 45%, reflecting the material drop in car journeys across the U.K. However, we've seen much improved trends in recent weeks as lock down have eased, and we've also seen categories like batteries start to perform very well. Autocentres revenue was 19% lower than last year on a like-for-like basis. But again, this has also materially improved in recent weeks as motoring journeys have increased. As mentioned in our RNS, our liquidity is good. As at the end of last week, we had total available liquidity of GBP 235 million, including GBP 25 million of CLBILS funding recently secured. Within these numbers, we have deferred VAT payments of GBP 13 million, and our rents are currently paid monthly, but otherwise, the cash is reflective of the real underlying position. Moving now to the outlook. You'll notice that we are in probably the most challenging retail environment we've ever seen, and we simply have no means by which we can predict the future with any degree of certainty at all. Despite a better-than-anticipated trading performance in Q1, the current uncertainty means that we have withdrawn formal guidance for FY '21. We simply can't forecast with accuracy, particularly as we've yet to experience any impact of an impending recession. Instead, on Slide 34, we've provided trading scenarios to model a range of potential outcomes, including the estimated impact on profit and cash. In each scenario, we forecast a significant reduction in variable and discretionary costs such that the profit differential between the scenarios is driven largely by the sales outturn. The government support for business rates and furlough is also built into each scenario, as are the incremental costs of trading in a COVID-19 world, which we estimate to be around GBP 20 million. It's worth saying that in addition to the cost reductions assumed here, as Graham said, we're also working on a more strategic reduction of our fixed cost base to lay a stronger foundation for next financial year. In building these scenarios, we've considered likely trends in our key categories. We do believe that Cycling demand will remain strong throughout the year, particularly within commuter bikes. And also that Cycling service and repair will be important. For Motoring, we expect demand to improve during the year as car journeys pick up and as the workplaces in schools reopen. It does seem likely, however, that our mix will remain biased towards Cycling. And whilst that tailwind is welcome, Cycling is a lower margin, more capital-intensive segment than Motoring, and as such, the incremental benefit to the group will be lower. The mix effect is reflected in these profit scenarios. I do want to emphasize that these are scenarios, not forecasts. They simply aim to give some insight into group profitability under different sales outcomes. Our job is to remain agile and to respond to switches in demand in the best way possible. It's important to say under each of these scenarios, the group retains adequate liquidity and is compliance with its covenants. Slide 35, you'll be pleased to hear is the last slide. I wanted to summarize this morning's messages with 3 simple points. We had a good year last year, financially, operationally and strategically. We're very clear, as Graham described, on our strategic priorities for FY '21, and our strategy remains sound. And finally, whilst we are in a very uncertain world right now, Halfords is a strong and resilient business, and we are confident that we can navigate through the current crisis and emerge even more strongly on the other side. Thank you very much. Graham and I are now happy to take your questions.

[Operator Instructions] We have a question from Jonathan Pritchard of Peel Hunt.

Three, if I may. Excuse me. First, on rent, you suggested that you might get better reductions going forward. Is that just a function of coming to the end of -- coming to lease renewals and doing better? Or is there a bit of relocation of stores, perhaps, in that mix? Interested in your comments on e-scooters, particularly in the light of some press comments suggesting -- Graham, you'd said that they were flying off the shelves. And then the sort of latest batch of stocks you have in cycling. I've heard sort of 25,000 a week or 100,000 mentioned. Is it a batch that then sort of dries up and you're back to the normal sort of buying routine? Or do you have a constant flow of supply for the foreseeable?

Thanks for the question, Jonathan. Loraine, do you want to pick up rents first? And I'll pick up scooters and stock.

Yes, sure. Jonathan, the reductions that we think we'll see are largely just on the back of normal lease renewals. So we're not planning significant relocations. There may be some, of course, if we get opportunities. But this is mostly about the normal cycle of renewals. We've only done a handful of renewals in this year and FY '21 so far. But what we are seeing thus far is the landlords are keen to secure businesses like Halfords, and they're therefore willing to move on rent a little bit further even than they were last year. So we're hopeful that we should be able to achieve something better than 15% just based on our normal cycle of coming to the end of a lease.

And then picking up e-scooters. Certainly, a big growth in both e-bikes and e-scooters. And arguably, with more customers potentially avoiding public transport and wanting to look at other means of transport, I think that will carry on growing, particularly if the government continues to invest in infrastructure. We've seen in Q1, if you look at electric bikes and electric scooters together, combined, we've seen growth of nearly 230% in volume in Q1, so well above the average cycling growth. And we think that will -- is likely to continue as we go through the second half, so we're really pleased with where things are. Obviously, you've all heard probably about the electric scooter rental trial. We welcome that, too. We're not involved directly, albeit we'll obviously be able to service e-scooters that need servicing. And we're hoping that if that trial is successful that, that will then be rolled out into some form of legislation, which legalizes scooters for use on public roads in a similar way to that, that we've seen other countries around the world do successfully. In terms of bike stock, we -- the lead times on bike stock are quite long because the majority of stock comes from Asia, and it comes by sea. Air freight costs is very prohibitive for getting bike over from the Far East. So what we will see is a gradually improving position, I think, on stock because obviously we've been able to look at recent demand levels and build that into our supply requirements, and that will -- therefore will get better as we go into late summer and early autumn. The biggest pain for stock we've actually gone through, so our sort of poorest availability, was 2 or 3 weeks ago when obviously we weren't able to get enough stock in to meet the huge spike in demand that we'd seen more recently. So I'm expecting actually, relative to sales, our availability to improve, not get worse over the coming months.

We have a question from Matthew McEachran of Nplus1 Singer.

Three, if I may, and actually largely follow-ups and same subject matter as Jonathan's. Can we just stick with the supply chain for a second and just elaborate a little bit more, if you can, on the shorter end of the supply chain? And is that stock that's coming in recently, is that in certain parts of the range, i.e., you might have improving availability but only in certain categories of bikes? So that's the first area. And have you been tempted? Or is it totally prohibitive to express freight some of that stock over from your supply base?

Yes. So just pick up those 2 things. So in terms of what stock have we got coming in, what we have deliberately done is to focus on the best-selling products first, so we bought a narrower range but in greater depth to ensure that we've got availability of the most popular lines. Obviously, that minimizes our risk as well. So if demand does start to fall off, we don't think it will, but if it did, those are the product lines that we would be able to stock throughout the year and then eventually sell. So it's -- we -- the best sellers are what you'll see coming into stock. And what you're seeing now, we're e-mailing customers when they're back in stock now. In terms of express, what we have done successfully is we've managed to get some nearshore sourcing set up during the pandemic with some European suppliers. We'd already started to work with some European partners prior to the crisis, and we've sort of accelerated our work with them, which has meant that we've been able to get some stock in much more quickly than we would normally do from Asia, particularly in the sort of good part of the range, so the under GBP 250 price point, which was great. We've had some success, and we carry on working with those supply partners now. In terms of express freight Asia, there is -- outside of getting fee freight routes as fast as we can, so we can potentially sometimes get that down a week or so, there is no other option because airfreight is ridiculously expensive on a per-unit basis. It would just make the bikes far too expensive. And it's not just us, say, Matt. I think if you spoke to Evans and others, they would also be saying air freight is just not an option at the moment.

Yes. That's an interesting one in terms of the European supply line you've opened up, and that may become a more permanent piece in terms of more shorter lead times. And the cost differential on a like-for-like basis, what sort of differences are we talking about?

They're quite similar for this type of bike. So we're focused very much, as I said, on the sort of good entry-level part of the range, where if you're focus in that space, you can still buy very competitively in Europe. It gets more difficult to do the more premium the bike is and special it is. So yes, that's where you need the scale advantages of an Asian supply partner.

Okay. That just on the store closure plans then. I kind of infer that you've got about 62 -- beyond Cycle Republic, you've got about 62 that you're earmarking for closure in the current financial year. Could you just maybe give us a split between Autocentres and retail? Because I think the Autocentre at average kind of cost is generally much lower than a lot of the retail locations.

I mean, I think first thing to say, it's definitely an ARPU number, up to 10%. It would be around that sort of number if you were looking at the full 10%. And the reason to some extent it's an up-to is that it will depend on the negotiations we have with landlords. If we can get better, long -- mid- to long-term terms, so it's not just the immediate rents, but the break clauses, et cetera, we may decide not to close that many units this year. It is group, as you say. It is stores and garages. We're looking at it on a location by location basis. So we're not certain just yet exactly which stores or garages and where. We're working through that literally as we speak. And of course, there is a reason for that is there are some very new information that we're using to make those decisions, not just channel shift itself, but we've obviously had a large number of units closed for a period of time, which has enabled us to see where the likely potential transfer of business goes. So it is relatively new data. It comes with a bit of a health warning because, obviously, the traffic on the road is very different during this period. But it does give us a sense of shape and theme there, which we're feeding all of that into the mix, along with the landlord negotiations to come to the right conclusion there.

Yes. Well, yes, it looks like the boot is definitely on the other foot these days, so I'm sure you make some good progress. And then the final question was in relation to the Autocentre side. You thankfully gave some detail on the underlying margin performance of the organic business, stripping out McConechy's, nearly a 5% underlying margin. Could you give us a little bit of a flavor as to what the scope is for the underlying business under the plan that you're implementing? And then will McConechy's -- this year is somewhat distorted, but was the intention pre-COVID for McConechy's to be a profitable, positive margin contribution in the FY '21 year?

So to tackle that one first, Matthew. So the short answer was yes, pre-COVID plan was exactly that. That does rely on some capital investment into McConechy's because we have to put in certain kits to allow us to be able to carry out some of the more margin-enhancing services that our Halfords Autocentres tend to provide, so I would imagine that will be a little bit delayed potentially throughout the year. But pre-COVID, the plan was definitely that McConechy's would tip into profitability. And there isn't anything outside of COVID that changes our view. This is simply circumstance of the period of time that we're in. And then on the underlying margin, we've never given a target margin for the Autocentres business, but we do know that others in the sector have been able to achieve 5.5% to 6%. So I would hope there's a little bit more scope in the underlying margin number. But again, this year, of course, that's going to be very, very challenging because of the time we're in, but we're making good progress there. And I think there is still more opportunity yet, particularly as Phase 2 has only just gone in. That is the thing that gives me some confidence that there is more to go around labor productivity, particularly in making sure that we've got -- we're able to monitor productivity much more precisely in every Autocentre and address areas where we're seeing low productivity. And we can even then pinpoint local marketing opportunities to push volume into those areas where we're seeing lower productivity. So I think data will give us a lot in Autocentres, and there's a bit more opportunity yet. But we're really pleased with what they managed to achieve during the year because it would have been quite easy to lose focus given the amount of change in the business.

Yes. I mean just build on that. I think we're really pleased with the Autocentres business. I mean remembering that, that underlying growth of 40% is on the back of several years of growing net profitability in Autocentres each year. And we've invested a lot in the customer proposition and operational best practices, so we've got a really good finance solution now that we launched at the back end of last financial year for customers to help them with the expensive build shop with repairs. We've got pace as we just talked about Phase 2, a digital operating platform, which we're also going to develop into a customer-facing digital sales tool as well this year. And so if anything, if you add that to what we talked about on Halfords Mobile Expert, where we've got a model there, we think, can now scale profitably, we've got a lot of reasons to believe that it won't stop at just under 5%. It should be a high-returning business than that.

We have a question from Adam Tomlinson from Liberum.

A few questions for me, please. First, the first question just around repeat customer business. So obviously, there have been some helpful trends in terms of cycling recently. Anything you're doing and any opportunities you're seeing here to try and drive that, stickiness of customer, get them to transact again in the future? Just any comments around that would be very helpful. Second question, in terms of the store estate. I think previously, you've done a couple of co-location trials. Just wondering, should we still be thinking about that as a strategy going forward? Does it sort of slow down with COVID-19? And any findings you were getting from those initial trials there? And then just 2 quick ones, please. In terms of online, clearly, a big boost from the sales transfer, but I think your website launched before the COVID-19 outbreak. So just any stats, color you can give in terms of the performance and the pickup before we have the COVID-19 outbreak? And finally, just a question on B2B, please. I think from my perspective, it's often an area that's overlooked. So clearly, some good growth there. So just where you sit at the moment and the opportunities you see forward, perhaps how much of business overall mix that could become as well, please?

Yes. Okay. Thanks for those questions. Probably, Loraine and I will share the answers to those. If I start with repeat customers, as I think I mentioned in my update earlier, the lifetime pillar has probably had the least focus over the last 12 months as we put more, much more time and energy into the support and inspire pillars within the strategy. It doesn't mean it hasn't moved forward, and that's the pillar where customer retention is a particular focus, but we put less investment there. What we -- we're not going to do nothing, though, in this current financial year. What we're looking to focus on very much there is what we call cross-group shopping. So this is ensuring as many customers as possible shop across the group. And therefore, we obviously encourage them to purchase more than once doing that, but also we have a better chance of retaining their information, getting them to be more sticky customers, as you rightly said in your question. We've got a much better opportunity of doing that now. We have the web platform out because the web platform for the first time shows a customer the entire proposition across every channel, and where our focus will be this year is very much on Motoring services. So making sure, for example, if some -- if a customer is shopping for a retail motoring product on our website, as they go through the customer journey, they will get offered the option for an MOT or a service, for example, in our garage business or, potentially, a battery fitted if they need it with our mobile services division. So we are looking at how we change the customer journeys to ensure the customer every point gets an option to shop across all of our Motoring services business. So that, that's the focus this year, and we set a big target. I mean doubling the number of customers not a small target, it's a big one, and we are going to be putting investment behind that. Do you want to pick up the store state piece, Loraine?

Yes. So we haven't -- we've talked historically, Adam about the sort of hybrid approach that we are definitely planning to trial. So this is bringing together the offerings of retail and auto center. So we were ready to go with our plans. We've got those designed, and we were hoping to be trialing those in the second half of this year, but we pushed that back a little bit. It remains really -- a really key part of our strategy, and we certainly hope to do that in the early part of next year. But the combination of COVID hitting, us planning to keep CapEx tight, resource constraints, et cetera, we're moving that back a little bit. I think it's also important to say that we've learned some really interesting things throughout this period on how customers behave and how they like to shop. And that is quite different across the categories so we will take some of that learning and build that back into our designs for the hybrid because I think that's quite important. In many ways, we've seen the lockdown period has allowed us to see some of that behavior in a very accelerated way that we might have spent a long-time trialing. So I think that's quite important. In terms of online, you asked a question of online. So our website -- our new website launched in February. It feels a very long time ago now. So even prior to COVID, it was trading well. What we saw, as you would expect on launch, was a good performance, but lots of little customer journey, niggles and tweaks that we had to dial out. So we probably spent the second half of February and the first bit of March making sure that everything was operating as it should. And fortunately, we just finished that work as COVID hit. So the website then, I mean, the traffic was, obviously, many, many, many times over, and we were really pleased with what we were able to deliver, 200% on the new web platform is really significant. So all of that worked incredibly well. But even prior to COVID, we were very confident we see a good uplift from the web because it was performing really well, and we could see where customers were spending their time, what they were buying. And we got a lot more data about how our customers were shopping from this new website than we did from the previous website. So that, I think, throughout the course of this year will allow us to continue to enhance our digital offer, and I'm really confident that we've got quite a way to go yet with the website. I'll hand back to Graham to talk to you about B2B.

Yes. For B2B, really, I mean, it was one of the first things we started to move on in 2018 after the Capital Markets Day piece, and it's just growing from strength to strength. We put in a new website in. We put in a new sales team. We've got a head of that area as well for B2B, and we saw growth in B2B across every part. So from fleet sales to houses for business, gift cards through the cycle to work, which we talked about a bit earlier. So all in all, our B2B business grew 25% year-on-year last year, and it represented about 15% of our group revenue. So it's becoming a significant part of what we do. And what we're developing strategically, things like our Motoring Services business, gives us a really good platform for future growth there. The bigger, for example, are mobile van fleet becomes, 120 vans now, because that is now national in scale, obviously, that could support any fleet services growth because we're able to visit our fleet's cars at their place of work, not just rely on them coming into a garage. So we're really pleased with the growth. We're seeing that growth continue into this financial year.

We have a question from Lucy Sharma of Liberum.

Two questions, actually. First of all, the cycling gross margin gains that you're trying to sign, I suppose, this coming year of 300 basis points, I was wondering if you'd give a little bit more clarity on where that is now at that level or the differential that it has with the Motoring products. And is that 300 basis points going to get you to a level that you're happy with? Or is there more to go for from there?

Lucy, so the 300 basis points, yes, would get us to a level that we're comfortable with. There are lot of different aspects that we're looking at on gross margin to all the way from supply to -- sorry, I can't hear -- is that your background?

Sorry, yes, I'll put back in the office. Sorry, it's in the background. I'll put -- I have to go on mute for a little while.

Yes. Thanks.

Thank you. So there are lots of things that we're planning to work through to secure the 300 basis points all the way through from supply chain efficiencies to understanding more about our promotional activity, where it's more effective and selling bundles and services associated with the bike. So we're confident that we've got a number of things underway that will deliver 300 basis points. And we would -- that would get us to a point where we would be comfortable with the return on invested capital for cycling of the category. We don't give the differential between cycling and motoring. I think that would allow you to work back through and actually calculate the margins for the 2 sectors, which would be pretty commercially sensitive, obviously. But if you look at any pure-play cycling retailer, you can get a sense of margin level for a scaled operator. So I think is an important category for us this year. It is incredibly important, obviously, given the tailwinds, but it's also important that we are smart about how we engage in that category and make sure that we optimize the returns from it. The exit of Cycle Republic has helped that. We've seen good transfer through to Halfords mainstream and to Tredz, so we've been able to do that pretty much without too many hiccups. We've moved the stock around, and we've managed to make sure that customers are aware of where they can buy the product. So there's a lot of work underway. We're making good progress already, and you can see some of that progress coming through in working capital as well, but there's definitely more to go for.

Yes. I mean, just building on what Loraine said there. Yes, we're comfortable with the 300 basis points, but we wouldn't say we would be happy with that. We will -- we would want more than that. And I think the good thing that we're building from is over the last year or 2, we have continued to focus on increasing the proportion of the cycling range that is unique and exclusive to us. And with 85% of the bikes now only available at Halfords, it does give us more leeway on pricing as we develop out the range. So I think that, coupled with services, we haven't mentioned services, obviously, we're seeing huge growth in repairs and servicing on bikes. We are the only nationwide business that has got service stations in every town, city in the U.K. Nobody else has got that. The government scheme that, hopefully, will be announced very shortly, that helps customers with their cost of repair, which is a GBP 50 voucher. We stand as the market leader in this space to benefit from that. Obviously, that also helps our services strategy overall. So we're feeling pretty positive about the journey that we set off in November to get better returns from cycling, and I think there's more to go for.

And the second question, if I may, is the -- very helpfully, given that GBP 20 million of COVID-related costs that are coming through, just wondering whether or not you can maybe provide a little bit more help on getting that to sort of scenario analysis. I know it's a scenario analysis and not guidance, but that scenario analysis you've given, I suppose, that sort of profit bridge going from sort of the 56 -- just shy of GBP 56 million of PBT produced last year. Are there -- could you give us some idea of where the other sort of costs are coming through, but also the fact that you're talking about operating cost opportunities during this year? Does that mean that, that scenario analysis number could be beaten?

Sorry, Lucy, you were breaking up a bit there, so I'll sort of try and answer what I think you were asking and just hope I put it right. So we've given some scenarios. Obviously, I do want to stress they're not guidance. They're to try to help sort of steer you in the event of different sales numbers effectively. The circa GBP 19 million, GBP 20 million of cost of COVID we've built into every scenario, we think they are inevitable. They're a combination of labor, PPEs, additional home delivery costs, those sorts of things, quite significant, obviously. We've had a few questions this morning on the drop-through, i.e., the sales are probably best -- a little bit better than the market was expecting, but that's not necessarily feeding through all the way to profit. And that reflects the mix effects that we have built into these scenarios where we do believe that in any scenario, probably the cycling sales are likely to be stronger than motoring. And therefore, that has an effect, not only on margin actually, but also on cost to serve. So simply the cost of getting the tube through the supply network and also the cost of building the bikes, et cetera. So I'm not going to cost all of these, but basically, what we've got running through those scenarios are the mix effect of margin; the impact of lost sales; the additional cost of COVID; normal cost inflation coming through; government support from rates primarily, a little bit of furlough in there as well; and then our own savings stroke turnaround costs of the Performance Cycling business. So there's quite a lot going on between the top line and the bottom line, but I think there's no escaping the cost of trading in this environment, and what we don't want to do is give a significantly poorer customer experience. It's challenging enough anyway, I think, for any retailer trying to operate in this environment and keep customers happy because of the way in which they have to shop. But there are some costs that we have put in, believing that, that will make the customer experience a little bit better. I hope that answers the question. I could only hear sort of every other word.

I apologize, but yes it does.

We have a question from Kate Calvert of Investec.

A couple of questions for me. First one is just to do with price inflation. Was there any price inflation slightly last year? And what have we seen in terms of price inflation for the moment? In terms of my second question, in statement, it -- mentioned that on the, I think, 3rd of July, you still have 77 stores closed. Is this tranche of stores where you're expecting to get most of your closures from? And are there any sort of common characteristics with group of stores? And the third question is on the cycling gross margin of plus 300 basis points. Is that at constant currency?

So do you want to sort of...

Yes. So let me do the last one first, Kate. So yes. So the cycling that we quote -- the cycling margin we quote in the trading statement is effectively trading margins. So it is before the impact of FX, before the impact of freight and before the impact of IFRS 15. So we should have been a bit clearer about that. But yes, you're right, effectively at constant currency.

Picking up the other 2 questions. The 77 stores that are closed at the moment, they don't -- they're not necessarily reflective of stores that we are looking to close in the longer term. They're closed for a variety of reasons. Some of which, for example, are social distancing restrictions in those stores. They're just smaller and more difficult to open. Where -- with the changes on the 4th of July to social distancing of 1 meter-plus, we are now able to look at opening some of those stores, at least. And we believe by the end of week 15, we will probably have opened pretty much all of those 77. So that's the end of next week. So it's not a -- it doesn't give you a sense of those stores are the ones we're going to close in any way, shape or form. In terms of price inflation last year, there was some -- a little bit of inflation on cycling, less on motoring when we look at the market. And the -- in terms of inflation so far this year, again, pretty subdued in motoring. There has been a little inflation in cycling, as you would expect, because of the demand and supply challenges that we've got in that space.

We have a question from Tony Shiret from Whitman Howard.

Sorry, as time is moving on, just one thing. Maybe you could talk to us a bit about how you're buying for the seasonal sort of peaks for the rest of the year. And what sort of thought process, but also what sort of flexibility you're building in because of the unpredictability?

Tony. Shall I take that? So we've built in quite an agile system, I think, over the past 3 months because we have to. As Graham said, what we've been trying to focus on are the best-selling products. So if I think about the seasonal period, the seasonal period, there are obviously motoring category elements that are strong in season. But obviously, things like kids' bikes and teenage bikes are really important Christmas. We've been focused on trying to build ranges for the seasonal period that consists of best-selling bikes. So we bought more narrowly but deeply. We've been -- we've laid down our purchase orders all the way through the Christmas period based on our latest views. But what we're able to do, and I think what you'll see effectively in the statement because of the liquidity we've built up, because even though we've laid down purchase orders, we have been effectively able to move back those purchase orders if demand has changed. So we've instigated a daily cash committee. The cash committee signs off everything out of the business. So every day, the purchase orders come through. And what we're able to do is agree the point at which we lay down a purchase order, the point at which we release an existing purchase order and then the point at which we ship. So we've managed to be as flexible as we can in pushing back. Obviously, what's harder is bringing those purchase orders forward. That's much more challenging. So I would say we've laid down purchase orders in as confident a way as we can at this stage of the year, but we've certainly got flexibility to push back so that we don't end up with a horrible working capital outflow. Obviously, if demand is way in excess of what we believe, then that's a little bit more challenging.

The only other build I would add to that is that we are being a bit more cautious on the discretionary purchase part of the range. Because of the potential recession in the second half, discretionary products, we are being a bit more cautious about. With the nondiscretionary stuff like bulbs, blades, batteries, we're buying more confidently. So we have to take some view that there's going to be a more challenging customer environment in that second half. And that, coupled with what Loraine has said, that's how we're looking at it.

Okay. So it sounds like on the seasonal stuff, you have effectively pushed back the effective point of ordering. Is that fair to say? And how much, if you were to characterize that in sort of weeks? Any sort of sense of that?

Sorry, Tony. I was struggling to hear that.

I'm sorry. Yes. I just -- it sounds like you've pushed back the effective point of ordering of seasonal products, and I was asking if you could give us some sort of sense as to how much by in terms of weeks of ordering.

So we've placed purchase orders for the season. We were probably a little bit later than we would ordinarily be, but all of the purchase orders are laid down for the seasonal product. It's simply that whereas ordinarily, we might place those purchase orders, and then it would just flow into the normal delivery and shipping process. What we're doing at the moment is revisiting literally every week the point at which we wish to ship. So we're much more agile about the shipping time line effectively, but the purchase orders are laid down and probably have been for several weeks now.

We currently have no further questions. [Operator Instructions] We have a question from Matthew McEachran again of Nplus1 Singer.

Graham, just a quick follow-up from me just in relation to your commentary around bike servicing. My guess is that local demand for bike servicing is going to be heavily on the up, and I'm just wondering whether or not you've got any plans within your overall bike servicing strategy to try and capture that local requirement as opposed to customers needing to hold bikes often vehicles out to retail parts.

Well, in terms of mobile servicing -- is that what you're suggesting? Just checking.

Yes, mobile and your initiative. Yes.

Yes. I mean we haven't got any plans at this stage to a mobile cycling service. In terms -- I mean, obviously, we've got 450-ish, 446 stores with all of which have bike servicing hubs in them. So pretty much every town and city has got access to cycling services from us. What we have done is introduced the 32-point free bike check, which we announced a few weeks ago, which means that unlike a lot of other competitors, including local shops, you can come to a Halfords store, get a free 32-point check on the bike. And then after that check, decide what you need to have done on the bike, and that then we are hoping will link through into the government voucher scheme of GBP 50 voucher. So we've tried to do something different to others, and we put that sort of above the line as well, and it's been in the press and the media. And then what we've also done is obviously resourced up for what we -- what's already an increase in business and then a potential increase when the voucher scheme is launched. So that's obviously meant more trained colleagues available for siting repairs and servicing. So that's what we've done today, but no plans at this stage for mobile cycling. We've just got so much demand for a more profitable Motoring services business. We need to optimize that first, really. Did I answer your question, Matthew?

Yes, sorry. I got cut off a bit, sorry. That's perfect.

No problem.

We currently have no further questions.

Okay. All right. Thanks very much, everybody, for joining the call this morning. Hopefully see you in person next time around. Thanks a lot.