Halfords Group plc (HFD) Earnings Call Transcript & Summary

Welcome to the Halfords Group Results for the 53 weeks ending the 3rd of April 2026. I'm Henry Birch, the Chief Executive of Halfords, and joining me today is Jo Hartley, our Chief Financial Officer. In terms of today's presentation, I wanted to start with some initial reflections on the year. We'll then take you through progress on our strategy. Jo will take you through the detail of our financial results I'll then give you an overview of current trading and our outlook and we'll close today's session with the opportunity for Q&A. So starting with some reflections on FY '26. I'm really pleased to be announcing a very strong set of results. We've delivered strong like-for-like sales growth at 4.8%. We've grown our gross margin rate to its highest level in a decade at 52.8%. Our underlying PBT performance is at the top end of consensus forecast and we've delivered another impressive cash flow performance with strong free cash flow, net cash on our balance sheet and an increase in our dividend. We've also seen the momentum of FY '26, carry over into the current year with strong trading in April, May and June, resulting in us guiding to the top end of analyst consensus for FY '27. If we look at the wider context, FY '26 was a year to focus the business and reset our agenda the years ahead. Made a number of key hires into our leadership team, I joined the business about 14 months ago. Adam Pay joined as Managing Director of garages. Jess Frame, joined as our Managing Director of Retail and more recently, Sarah Hayward joined as our CIO. In November, we laid out a strategic work with 3 sequential phases of optimize, evolve and scale. And while it's early days, we have made great progress in the optimized phase of our plan so far with a laser focus on execution, cutting out noise and demonstrating tangible progress. And this progress has played a part in delivering the strong financial performance we're reporting today. We feel passionately that as a specialist retailer and services provider it is the advice and service advantage, which our colleagues bring, which gives us a competitive advantage that others can't match. It was important to me that this was reflected in our purpose and I wanted to show a short film that we made to launch this new purpose to our colleagues. [Presentation]

So as I said, that purpose we keep the nation moving with trusted experts who love to help really encapsulates Halfords, but also articulates our competitive advantage as a specialist retailer and services provider. So now turning to strategic progress we've made as we started to deliver the optimized phase of our Fit for the Future plan, and I'm very pleased with what we've achieved so far. To my mind, the potential for Halfords has never been in doubt. But we've not always fulfilled that potential. Driving some of our strategic focus has been an element of self-reflection and candor as to what we've failed to do in the past, what we've dubbed home trues. We laid these out in November of last year, and I won't dwell on them now, but they have both guided our strategy and sharpened the outcomes we're looking to achieve. We're also clear on the need for discipline as to how we deploy capital and have articulated our clear guardrails for the business. I'm pleased that we've made good progress with these outcomes, driving sales margin, profit and our returns on capital whilst remaining firmly within our guardrails. And we have every intention and confidence that we will continue to drive that performance and that discipline. We've been clear that our optimized program touches every part of the business, and we revisit here some of our priority work streams. All of these are underway, but as you would expect, they are at different stages of maturity. Today, we'll focus predominantly on the improvements we've made in garages both through Fusion and in the rest of the estate, which have improved utilization and consequently operating margin in the Autocentre segment. In retail, we spent the last few months focusing on laying the foundations for our new category management approach and are deploying a test-and-learn approach across a select few categories ahead of a scaled rollout later in FY '27. As such, our interim presentation in November will focus more on the retail aspects of our optimized plan. And across the group, we're investing in digital and AI in our brand and our loyalty proposition. So starting with retail and category management. Category management is by no means a new concept in retail, but it's worth pausing and explaining exactly what it entails and why as an approach, it is relevant for Halfords. In recent history, Halfords has been set up more with a buyer-led model. Under our new approach, a category manager has end-to-end responsibility for their category, sitting over range selection, pricing, promotions, supplier relationships, channel strategy and sales and margin performance. It demands a focus on customer and competitor insight and it's an approach I saw real yield real benefits at my previous business. Our emphasis in the last few months has been on making sure we have the right structure and capability to deliver this new model. And I'm confident that we now have the right team in place. We've also relaunched 4 important categories: workshop, car cleaning, flagship cycling and cycling parts and accessories or PACS, and are trialing a range of in-store and digital innovations designed to improve customer journeys for these products. Taking workshop as an example, workshop is a category which incorporates tools, cabinets, workstations and the like and serves both trade customers and auto enthusiasts. We see an opportunity both in better targeting of trade customers and developing our product range, particularly at the advanced and professional end of things. And we also believe we can drive sales by better articulating future benefits and improving how we lay out and sell product, both in-store and online. We are early in our category management journey and given the extent of change required from range review all the way through to product arriving on the shelves, implementing our new approach in a single category can take around 9 months. We look forward to providing a more detailed update in November and expect to see the benefits materializing in the second half of the year. But I wanted to take the opportunity to talk a bit more about cycling, which is something we haven't done for a while. But Cycling was a particular bright spot for the group in terms of sales growth in FY '26 with the market showing good signs of recovery and the Halfords and Treads proposition driving share growth against that backdrop. As we talked about before, we are the clear market leader in Cycling. More than half of all bikes sold in the U.K. come from Halfords, we operate the nation's biggest network of cycling showrooms, and we also operate the largest cycle to work scheme nationally. Our growth in Motoring means that cycling now generates a smaller proportion of group sales, around 20%, but it remains core to our business and an important source for growth in the years ahead. Under the leadership of a new cycling door, we are bringing Halfords and Treads businesses closer together, starting with offering Click & Collect for Tread's performance cycling products through a small number of Halfords stores. We're also trialing a new flagship cycling concept in 19 stores, incorporating locally curated ranges, improved layouts and labeling and enhanced technical training for colleagues. It's worth reiterating that we don't just sell bikes, we design and build them. Consequently, Halfords Cycling very high own brand penetration through the likes of Apollo and Carrera and Boardman. Just a few weeks ago, we sold our millionth career of engines, making it the U.K.'s best-selling bike of all time. And our Boardman range continues to win accolades and awards for delivering premium bites at more affordable prices. Looking ahead to FY '27, we're particularly excited by the arrival of our new e-bike ranges, which I saw earlier this week. I have to say they are amazing and a massive step up from the previous range in terms of performance and styling but at a similar price point to the old range. We see significant potential in growing e-bikes where our share currently indexes versus the wider bike share that we have. And we also look forward to working more closely with the bicycle allocation on their e-bike positive quality and safety accreditation across our whole range. So now turning to Garage. On the garages side of our business, Fusion has been a well-documented success driving both profit growth and improved customer and colleague experience. We have a well-rehearsed formula that's delivered consistent returns. And when we complete the program at the end of this year, we expect we've converted 138 garages to our Fusion concept. But our garage improvement program doesn't stop with Fusion and there are opportunities to drive performance across the rest of our garage estate. Fusion is giving us a huge amount of experience and data to inform how we can put capital to work effectively and efficiently in our physical estate. We're confident that in future years, we can take the strongest elements of the Fusion program and roll them out a much lower cost across the rest of our estate, while still driving good returns and remaining within our capital guardrails. In addition, investment in new equipment and technology and in sales and leadership helped underpin sustained and attractive growth in our garage business. We're already starting to see some of this through the operational improvements we've been making drive improved utilization across all 500 of our garages over the last year. Utilization is ultimately about matching demand with labor and hours worked, and we've been laser-focused in regularly reviewing productivity on the individual garage level to redeploy technicians to the locations where they can best support growth in sales. The chart here shows year-on-year progress for both Q1 and Q4 looking at the cost of labor as a percentage of sales, the number of hours worked and overall sales. In Q1, we obviously faced the immediate impact of national insurance and minimum wage hikes. But by Q4, even with these cost increases, we had reduced year-on-year, the cost of labor as a percentage of sales, a key utilization metric. Our consumer garages grew like-for-like sales by more than 8% in FY '26, supported by an increase in additional work identified and higher income per tire due in part to our new Hunter wheel alignment technology. While the tire market continued to decline in FY '26, it showed some signs of stabilization towards the end of the year, and the investments we're making in garage leadership and more modern equipment are allowing us to outperform the wider market. And at the same time, as driving increased sales and profitability we're also seeing really positive feedback from our customers. Our lifetime Google score has increased from 3.9% to a very credible 4.5 with our weekly averages surpassing this level. I appreciate that some of this can seem quite abstract. I wanted to share a short video featuring Adam and some of his team lifting the lid on all the great work going on across our garage network.

So welcome to our Halfords Network and our garages. Today, I'm going to be giving you a little to take year around, getting you to meet a few colleagues, but more so shine in the light on some of the improvements that we've made in the last few months through the Garage network. As you'd imagine, Halfords, it all starts with the customer. We know our customers are looking for ultra-convenience, they're looking for a seamless, transparent experience, and they want it all wrapped in genuine value, which means for us, we've got to work really hard to keep changing and innovate in products and services along with improving all of the customer touch points. We want to be the trusted experts who love to help. That means being available, reliable and in the right place at the right time where the customers need and that's why we continue to build out a network of garages that are always on and always available. And in order to do that consistently at scale, we've had to think about how we run our garages and run them differently. We're focused on driving performance through efficiency gains that are supported by tools, technology and people. And even in these early stages, we're starting to see some solid results. So the question is, how have we done this? Well, let me take you around and show you what's changed on the ground. So better tools mean better conversations with our customers. [indiscernible] wheel liner equipment. We know from studies that there's over 60% of vehicles on the road right now that require a wheel line. So when we use this equipment, we know we're not just changing tires. We're sending customers away in safer, more efficient vehicles. So using 100 equipment enables it to be pinpoint accurate and gives us super quick turnaround times. It also generates a visual report that makes it easier for us to show customers what needs to be done. So at the same time, our new tablets enable us to smooth process capture images of vehicle that we can share with the customer to help them make the right decision, no jargon just simply building trust [indiscernible]

I feel like the changes have made a massive impact for us here at for they really help with the workflow and improve both the colleague and the customer experience and we're getting really good results with no equipment so far. It's easier for the technicians to do a great job. So of course, having state-of-the-art equipment really matters, but only if the colleague is fully trained to deliver the very best service.

[indiscernible] at Halfords. I joined Halfords because I want a high level of brand and the high level of training. I've been at Halfords for 1.5 years. Over the time of being at Halfords, I've led to do higher skilled jobs. I can see my future with Halfords is finishing Level 2 apprenticeship, then get a MLT license, and then we'll come in a center manager. As you can see, we're growing our own talent with broader skills, including diagnostics and EV3 technicians, Halfords really feels like a place where you can build your career. So our focus will be on attracting, retaining and developing the very best team having colleagues with the right attitude and skills is mission-critical. So alongside this, we've simplified our garages of resource and run removing complexity and increasing efficiency. Our fusion program has allowed us to test, learn and refine and now we'll be taking the strongest elements across the remainder of the network. And this gives [indiscernible] So the next phase is about focus, bringing the best of what we've learned so all of our garages. That's the right operating model, the right skills and great people. And this is how you build a Garage business that delivers today and is fit for the future.

Finally, I wanted to turn to our optimized program related to group-wide initiatives. Last year, I highlighted that I see digital both as an area where we need to improve our offer, but also one which offers significant growth potential. To enable both these aspects, we've been making some foundational improvements and changes. Much of this relates to site performance and architecture. Those changes resulted in a faster site with customer journeys with less friction and better conversion. And pleasingly, sales growth for our digital channel were ahead of the wider group. But there's more to do, and the year ahead, we'll see greater focus on how we trade online and how we manage our channel strategy for each category. And alongside the focus on digital, we're acutely aware that customers are changing the way they discuss, search and buy products and services using AI. And we're already seeing that where customers do come to us through a rather than standard search, we get much higher rates to convert. We're excited about how AI can help significantly grow our top line, improve customer experience and journeys and allow us to work more effectively and efficiently. That has meant vesting and making changes to optimize our offer for AI across all parts of the business, building new capability and partnering with third parties. And in that regard, we were pleased to be one of the first retailers to participate in early-stage ChatGPT advertising trials. Finally, in FY '26, we started a trial to invest more in our brand marketing. Research shows us that whilst our brand awareness is around 80%, far fewer customers are aware of exactly what we offer, which impacts consideration. In the second half of FY '26, we ran localized trials, increasing our above-the-line marketing. This yielded positive results improving customers and brand perception and consideration and has given us the data to invest more with a good degree of confidence in the returns. We have this budgeted and in play for FY '27. Another important tool we have at our disposal is Halfords Motoring Club, which now has around 6.5 million members in total. 2,000 of whom are subscription paying premium members. Club members are typically more engaged customers who spend more with us more consistently. So as you can see, as well as making improvements in each of our business divisions, we're building strength and value in the overall Halfords proposition. Our garages business is much stronger alongside our retail business and vice versa. And there is more here we can and will do to drive that value. But I now wanted to hand over to Jo to talk through the detail of our financial performance.

Thank you, Henry. Before I get into the detail of our financial performance for FY '26, a few words on the basis of preparation as detailed on this slide. Firstly, a reminder that FY '26 was a 53-week year. The numbers that follow are all on a 52-week basis to a comparability. Secondly, we've made a change to the treatment of amortization of intangible assets arising on historical acquisitions. These are now taken below the line as a non-underlying item. This change of accounting treatment allowed us to reduce and simplify the profit metrics we report. We've restated our prior year comparatives. Accordingly, and as a result, underlying PBT increases by GBP 3.9 million in FY '26 and GBP 5.2 million in FY '25. There are no changes to our statutory profit measures and a full reconciliation of our P&L before and after the change is included as an annex to this presentation. With the accounting matters covered I'll now take you through our FY '26 financial performance. And as you can see on this slide, we delivered a very strong set of results. Like-for-like sales grew 4.8%, reflecting building momentum across both retail and garages and continued progress from our optimize initiatives. Gross margin increased by 210 basis points to 52.8%, the highest level we've delivered in more than a decade. Underlying PBT increased 4.1% to GBP 45.4 million or GBP 41.5 million before our accounting policy change. This was ahead of market expectations despite significant inflationary headwinds. Return on capital grew by 160 basis points year-on-year to 14.2%, which is above our cost of capital demonstrating that our investments are delivering stronger returns. And we continue to generate cash and maintain balance sheet strength, ending the year with a net cash position. Free cash flow of GBP 25.3 million was very strong, slightly lower than the previous year, only as a result of the payment in the year of the reinstated FY '25 colleague bonus and receipt of a tax refund in the prior year. Finally, in light of our strong performance and confidence looking forward, we recommend an increase in the full year dividend to 9p per share. Overall, these results give us confidence that the optimized phase of our strategy is beginning to deliver as intended. Turning now to a brief overview of profit performance, which I'll cover in more detail later in the presentation. Revenue increased 2.9% to GBP 1.76 billion, with stronger like-for-like growth of 4.8%, reflecting the impact of previously announced garage closures. Gross margin increased materially to 52.8% for reasons I'll describe shortly. And together, these things were enough to offset a 7.6% increase in operating costs. Cost growth in the year primarily reflected material inflationary pressures from National Insurance and national living wage changes effective at the start of the year. Furthermore, in light of strong trading performance, we chose to make targeted investment in technology, capability and brand, which were partly mitigated by strong operating cost control. And as a result of all these dynamics, underlying PBT increased 4.1% to GBP 45.4 million. It's worth noting that without the change in accounting policy, underlying PBT would have increased 8.1% to GBP 41.5 million, slightly above the consensus range of GBP 40.3 million to GBP 41.4 million. Below the line, nonunderlying items fell significantly year-on-year with the FY '26 charge, mostly comprising costs relating to the warehouse management system implementation in the first half of the year alongside the amortization now treated as nonunderlying. The significant charges last year were predominantly noncash impairments of historical goodwill. Statutory PBT for the 52-week period was GBP 39 million, up GBP 69 million year-on-year. This slide bridges underlying PBT between FY '25 and FY '26 and illustrates how we manage substantial inflationary pressures while still growing profitability. In addition to the labor cost increases already described, we saw inflation across property, technology and operating costs as third parties sought to pass on labor inflation through managed service contracts. In total, we saw more than GBP 40 million of inflation in the year. Against that backdrop, we delivered a strong trading performance with robust sales growth and further gross margin expansion in part due to better buying, but also supported by tailwinds from FX. Costs continue to be well managed with Garage productivity improvements and our goods not for resale cost reduction program, delivering significant savings. And garage initiatives, including Fusion and the Garage closure program, also materially improved profit year-on-year all of which meant that we were able to continue investing in priority areas as already noted, helping to drive momentum into FY '27. I Henry will cover the outlook in more detail later in the presentation, but it's worth noting that as we look forward, we anticipate materially lower inflationary headwinds. Wage growth has eased, business rates are falling. And while we're seeing some inflation in fuel costs because of the recent conflict in the Middle East, our energy costs are fully hedged at broadly similar rates to FY '26. As we've seen, gross margin expansion was key to offsetting material inflation during the period. This chart describes the key drivers of the 210 basis points improvement in FY '26. The largest contributor continued to be better buying, where our scale sourcing capability and supplier relationships delivered further gains in both retail and garages, more effective pricing and promotional activity also drove significant margin accretion with a more data-driven approach protecting margin, while ensuring we remain competitive for customers. And finally, we benefited from a more favorable U.S. dollar rate on the GBP 220 million of dollar-denominated product we buy each year with the hedge rate coming through cost of goods sold at 129 versus 1.24 in FY '25. Over the last 2 years, we've grown gross margin by 460 basis points and reached the highest level seen in a decade, predominantly driven by our better buying program and price and promotion optimization. Looking forward, we don't expect further margin expansion to continue at the rate we've seen over the last couple of years, albeit we continue to project FX tailwinds in the year ahead based our hedging program. Turning now to the Retail segment. Here, we saw a strong performance in FY '26 with like-for-like sales growth of 4.1%. And Cycling was particularly encouraging with like-for-like growth of 6.4%, supported by market recovery, volume share gains and strong performance in premium and e-bike categories. Motoring also saw a like-for-like growth of 2.9% despite range simplification in some lower-margin areas, which reduced trading volumes. Our full year performance was particularly pleasing given H1 like-for-like growth of 1.1%, reflecting strong trading momentum through the second half, which has continued in the early part of this year. Gross margin increased 160 basis points to 50.9% driven by the factors described on the previous slide, and operating cost increase as expected reflecting labor inflation alongside targeted investment in digital capability and brand. As a result, underlying operating profit was modestly lower year-on-year at GBP 37.5 million. We have seen a strong trading performance in our retail business since the start of the financial year and are confident that the investments we have made alongside the rollout of our category management approach will bring further momentum to our retail business in FY '27 and beyond. Meanwhile, the auto sensors business delivered another very strong year. Revenue, excluding Avala increased 2.2% to GBP 723 million. In FY '26, we closed 43 underperforming garages, which suppressed sales growth but added GBP 1 million to underlying profit. On a like-for-like basis, sales grew 5.8%, supported by robust consumer demand for services, maintenance and repair work alongside stronger attachment rates for additional services such as wheel balancing and alignment on tire sales. These factors, together with our better buying program, also contributed to a 250 basis points improvement in gross margin to 55.6%. Labor cost inflation impacted our garages as well as our retail business but was partially offset by pricing and initiatives to drive improved utilization across our network, as Henry has already described. and other Garage optimization initiatives, including Fusion and garage closures, further supported the very strong performance with underlying operating profit, excluding Avalor, increasing by more than 20% to GBP 22.3 million. This represented a 50 basis points increase in operating margin to 3.1%. This early proof point gives confidence that our optimized strategy will drive significant margin expansion in this segment in the years ahead. And finally, a word on Avalor. During FY '26, we continued to progress the development of the software for Bridgeton in the U.S. and my car in Australia ahead of full rollout. Losses widened year-on-year as anticipated, following the loss of revenue from ATD, which went into Chapter 11 in the second half of FY '25. Balance sheet discipline and cash generation remains central to our strategy. At the year-end, the group held net cash of GBP 19.1 million on a 53-week basis. Inventory increased modestly year-on-year, reflecting as plan and stock build ahead of the summer cycling season. CapEx for the 53-week period was GBP 58.1 million within our annual cash investment envelope of GBP 55 million to GBP 65 million. Importantly, we generated a free cash inflow of GBP 33.3 million or GBP 25.3 million on a 52-week basis, while also funding investment in infusion, technology and capability building. Including lease liabilities, year-end net debt fell to GBP 28.7 million, meaning lease adjusted leverage is 1.2x. We continue to maintain a flexible portfolio with average retail lease lengths of just over 2 years and average garage lease length of around 4 years. And during the year, we also extended our GBP 180 million revolving credit facility through to April 2029 further strengthening our financial flexibility. Overall, we remain focused on maintaining a prudent balance sheet while continuing to invest selectively where we see attractive returns. Our capital allocation priorities remain unchanged from November and continue to provide a clear framework for disciplined decision-making. First, we will maintain a prudent balance sheet operating well within our leverage guardrail of less than 0.8x EBITDA, excluding lease debt. Second, we will continue to invest in growth opportunities where we see strong returns and strategic value. Third, we remain committed to a sustainable dividend policy targeting cover of between 1.5 and 2.5x underlying profit after tax. Fourth, while M&A remains part of the longer-term scale phase of our strategy, our near-term priority remains disciplined execution and organic value creation. And should surplus cash accumulate, we will then consider special dividends and buybacks. Finally, the Board has recommended a final dividend of 6p per share, taking the full year dividend to 9, up from 8.8p in 2025. This second year of dividend growth reflects improved profitability and the strength of our balance sheet as well as confidence in our outlook. To conclude, this slide brings together the progress we've made against the Fit for the Future strategy we outlined in November. During FY '26, we delivered growth in like-for-like sales, progression in underlying profit and a meaningful improvement in our return on capital, which moved further above our cost of capital. At the same time, we've remained disciplined within the financial guardrails we set out, including our investment range, leverage target and dividend framework. Seven months in, the optimized phase is beginning to show tangible financial benefits while the investments we're making today are laying the foundations for the evolve and scale phases of the strategy. Overall, we're encouraged by the progress made in FY '26 and remain confident in the long-term opportunity ahead. I'll now hand over to Henry to cover our FY '27 plans and outlook.

Thanks, Jo. So as Jo has detailed, we are really pleased with our FY '26 performance and the momentum that it has given us into FY '27. And excitingly, we have plenty in the pipeline to drive further optimization benefits. In retail, we will continue to roll out our category management approach across the next wave of categories including bulbs, blades, travel, touring and car accessories. We'll continue our test-and-learn trials and decide which elements to roll across our store estate and we'll introduce more comprehensive product training for frontline colleagues to better serve our customers, reinforcing our position as the trusted experts who love to help. In garages, we will complete the final 35 fusions. We will continue to invest in modern equipment and technology. We'll invest in training and capability will improve customer journeys for servicing and will remain focused on driving operational improvements and utilization. And at a group level, we're continuing to invest in our brand and digital capability not least to ensure we're set up for success as customer behaviors adapt and change with the growth of AI, but also in FY '27, we'll begin to scope the key initiatives for the evolve phase of our plan. Turning now to the last 3 months of trading and the outlook for the year ahead. I'm very pleased to say that trading in April, May and June has continued to be strong across both retail and garages. While we have not seen any significant impact from the conflict in the Middle East, second order effects on consumer behavior could yet materialize later in the year. But based on our experience in recent months, and plans to further optimize the business in the year ahead, we expect a strong first half performance in FY '27 and as such, expect full year underlying PBT to be around the top of the consensus range. To conclude, I wanted to remind you exactly why we, as a management team, are such strong believers in the Halfords business and so confident in its future. We have a strong universally recognized brand. We operate with unrivaled scale in attractive markets. We have an operating platform spanning physical stores, garages, depots and vans, combined with a growing digital offer. In fact, 85% of the population live within 15 minutes of Halfords. We have 12,500 specialist colleagues offering unmatched advice and service. And with our 20 million customers and 6.5 million motor and club members we have a valuable data asset with significant and as yet largely untapped potential. We have a clear strategy, which we are executing with focus and discipline. This is driving share gains in our key markets. We're experiencing a tailwind from FX, while the inflationary headwinds hindering our progress in recent years are easing and we're driving improved profitability and higher returns as a result. Over the medium term, as part of the evolved stage of our strategy, we see attractive investment opportunities to drive structural profitability gains. These opportunities are at the planning stage, but will be executed with the same level of focus on returns and within the guardrails we've outlined. We expect to give more details on these at our interims in November. But overall, we feel we are in great shape. And although there is much to do, there is even more to gain. Before finishing, I wanted to acknowledge the huge contribution of Keith Williams, our Chair to our business. Keith has been the Chair of Halfords for 8 years and has navigated Halfords through significant periods of change. And I'd like to thank him wholeheartedly on behalf of all colleagues at Halfords for stewardship and its commitment to our business. We announced earlier in the year that Keith will be stepping down this summer, and I'm delighted to welcome Jock Lennox as our new Chair. Jock will assume his role at our AGM in September and joins us with significant experience across a number of businesses and industries. We're excited to have appointed somebody of Jock's caliber and look forward to working with him. Thank you for listening today, and we'll now happily take any questions that people may have.

Very much. Now we've been watching the Half year results presentation that was given this morning at 9:30. And now we are joined live by both Henry and Joe, who are able to answer your questions live. [Operator Instructions] So if we go to our first question, you're guiding to the top end of FY '27 PBT consensus range. What gives you that confidence so early in the year given it's only June?

Thank you very much for the question, and good afternoon, everyone. So the question as to why we're guiding already to the top end of guidance is because we have had a very strong quarter so far. And what's really encouraging is actually we've seen that strength across the business. And it does give us the confidence to guide to that top of range. We're also cognizant that if you look at the last few years, there have been unexpected changes and volatility. We factored that in as well in terms of making that forecast. But fundamentally, yes, we do have the confidence at this stage of the year to upgrade our profit guidance by what is effectively about 7% when you look at the -- that upgrade in terms of the range.

And how much of the success of the strategy is in your control versus at the mercy of external events?

So look, fundamentally, our belief is that the performance is a result of what we would kind of term self-help. So the things that we have done to drive performance in the business. But undoubtedly, there are also some positive more kind of structural forces that have helped us and hopefully will continue to help us not least the cycling market has come back over the course of the last 12, 18 months. And again, that is in force at the moment. The tire market, we said earlier on today that we saw improved signs in Q4 of last year. So that tire market as well, having had a long period of decline seems to be at least stabilizing. And we benefited from foreign exchange rates as well. So predominantly, we see it as self-help for things that we're doing to the business, but as well in addition we have some tailwinds, which I suppose you would turn more kind of structural.

And moving on to the next question around auto centers. Let's say, look, auto sensors look like it's doing the heavy lifting now with profit up over 20%. How much more upside is left in the Fusion garage rollout once it's fully skilled? And how busy are your garages? Is there room to do more?

Jo, do you want to take?

So we were really pleased with the performance of our Autocentre business in the first -- during the year, as you've noted, it was up 20%, and we expanded the operating margin there by 50 basis points was a key contributor to that success. We ended the year with 103 fusion sites converted and we have 35 more to do during FY '27, which we expect to continue to drive momentum in the operating profit performance of that segment.

Now do you have the right shape to your physical store estate?

Yes is the short answer. So we have got 370 retail stores. We've got just under 500 garages, and we've got 800 mobile vans. And one of the things that we feel is really powerful about Halfords is that actually, we've got that combination of a physical estate through which 85% of the population are within 15 minutes of the Halfords combined with a really strong digital offer. And we think that is the right shape. Over the course of the last probably decade, we've closed about 100 retail stores. But we do have the flexibility there as well. So if you look at our retail estate, the average lease length is about 2.3 years. So there's quite a lot of flexibility where we want to change that. But the reality is that all of our stores are profitable. They all play an important part in Halfords today, and we don't really fundamentally see any need to change that going forward.

Now moving on to Cycling. What's the long-term future of cycling within the business? Is Halfords ever going to be seen as credible in the higher end of the market? Or is that not the target customer? And how much of a threat is the unregulated e-bike and conventional market?

Brilliant. So quite a lot to cover there. But perhaps if I just start with cycling overall. So a lot of people when they think about Halfords, they think cycling, Actually, cycling is only 20% of our business today. It's 80% motoring, 20% cycling. Having said that, it's a really important part of our business. And we're very excited about where we think we can take it. And I think, as I said before, it's fair to say that post COVID, the whole cycling market struggled. Over the last 18 months, we've seen that come back. So we are really excited about where we can go. The point around the premium end of the market and Halfords has typically been seen to kind of operate that kind of middle market. We own a business called TED, which is focused on the premium side of things. And that does about GBP 60 million or GBP 70 million of revenue. It's a really important player digital only with 2 stores actually in Wales. But Treads will bring those brands, those premium brands that we don't sell in Halfords. One -- so the things that we're looking to do is bring Halfords and treads closer together, being able to do click and collect for Tread's product in our Halfords stores and over the course of time, potentially bringing some of the trends product into Halfords. So we always think that there will be room for independent bike retailers. We're absolutely supportive of having a broad and competitive market, but we do think that Halfords can start to play in more of that premium market that treads currently occupies. On the e-bike side, we're actually enormously excited about where we can go with e-bikes. Last week, Jo and myself and our exec team saw our new range of e-bikes, and they are absolutely fantastic. So hitting the stores and hitting online in the next few weeks, brilliant product with much better performance, much better styling, but at similar prices to our existing e-bike range but a real jump up in terms of quality and performance. And I think extremely go down extremely well with cyclists, with consumers. Clearly, amongst the general public in the media, there is kind of concern with e-bikes. And I think a lot of that comes from what we see on the streets in terms of unregulated sped up e-bikes quite often being driven by delivery riders. And I think quite often, those bikes that have been souped up, that's been done illegally. We -- there is a clear space in terms of e-bikes for a quality, trusted brand, quality trusted retailer like Halfords, to really make an impression in that e-bike space. And we're working very closely with the bicycle association in terms of their e-bike positive program, which is all about that, making sure that people buy safe, trusted quality e-bikes, and that's what you get if you come to Halfords.

Halfords motoring club premium is now at 470,000 members and GBP 22 million in subscriptions. Is there a ceiling to how big this can get? Or still plenty of room to grow?

Short answer to that is there's plenty of room to grow. So if you think about Halfords Motor and Club, we've got 5 million members and 420,000 premium members who are paying that annual subscription effectively for a free MOT, but then a host of other benefits, delivering, as you say, GBP 22 million of annual subscription revenue. Now if you think about Halfords overall, we have about 20 million customers. We have the details of about 1/3 of the vehicle details of about 1/3 of the U.K.'s car park. So there's massive headroom room to go from that 420,000 or even GBP 6.5 million up to GBP 20 million with the customers who we see today. And clearly, we've got an ambition to grow that GBP 20 million even more. So no, there is a huge amount of headroom for Halfords Motor & Club.

With the balance sheet in good shape now, would you ever consider M&A again? Or is the focus purely organic for the foreseeable future?

Jo, why don't you grab that?

So as we laid out at our Strategy Day in November, we see our strategy unfolding in 3 phases. At the moment, we're in the optimized phase of our strategy. Once we've earned the right, we'll then move to the evolve phase, which you'll see us investing in some capital programs with significant returns before then coming on to the scale phase of our strategy, which is sort of 36 months plus on. At that time, there may well be space for M&A, particularly likely in the garage space where we do see the opportunity to expand our network and grow market share. But as I said, that's very much sort of 3 years on from now. For now, we're very focused on the optimized phase of our plan.

And just a reminder, if you'd like to ask any questions, please do type them in the Q&A box. Are you looking at evolving your dividend policy in the coming years?

As we said earlier, our dividend -- our capital allocation priorities remain unchanged from those laid out back in November. Our first priority is maintaining a strong balance sheet. And then second to that, we will invest in projects which have -- which will deliver good returns and have strategic value for the group. The dividend comes next. And in that regard, our policy remains unchanged in that we plan to pay a dividend that's covered 1.5x to 2.5x by profit after tax.

Next question is, sorry, one moment. What are you most excited about in the year ahead and the long term?

So I think there is a load of things to be excited about Halfords future. As I said before, one thing that I'm really enthused and excited about is the fact that we're seeing strong performance at the moment in Halfords across the board. So in every part of our business, motoring, cycling, consumer, B2B, garages stores, it is all performing well and heading in the right direction. So secondly, I think we've got some really exciting and clear plans. And we've got a brilliant, I think, management team to be able to deliver that. So very enthused, very excited about what we can achieve at Halfords.

Well, that is all we've got time for with regards to the Q&A today. Henry, maybe I could hand back to you for any closing remarks just now.

Thank you very much. I just want to thank everyone for attending and asking the questions today. And obviously, for being Halfords shareholders, those of you listening, thank you for your support and look forward to engaging with you in the future.