Halfords Shares Surge as Motor Repair Business Drives Return to Profit

Shares in Halfords experienced a notable jump of 16 percent on Thursday following the company's announcement of a return to profit, driven by robust growth in its motor repair business. The automotive retailer reported a full-year underlying profit before tax of £45.4 million, surpassing analyst expectations of £40.3 million and marking a significant turnaround from the £30 million loss recorded in the previous year.

Total revenue for the year grew by five percent to £1.8 billion, with the company actively strengthening its garage and motoring operations. Revenue within Halfords' autocentre operations increased by six percent on a like-for-like basis, reaching £740 million. The company highlighted that its repair services are gaining traction, attributing this growth to Britain's aging car stock, which presents a continued opportunity for expansion.

The strong performance of the motoring repairs segment helped to offset ongoing weakness observed in the broader tyres market. Overall group sales saw a 4.8 percent increase, with retail sales up 4.1 percent and autocentre sales up 5.8 percent. The consumer garages business, encompassing services such as car repairs and MOTs, benefited from the establishment of numerous 'fusion garages' that combine retail and repair facilities. Halfords has already opened over 100 of these integrated sites and plans to launch an additional 35 this year.

Modernization and Future Outlook

Halfords is embarking on a modernization initiative for its garage network. This plan includes equipping most sites with specialized electric vehicle servicing equipment and providing staff with tablets to enhance vehicle inspection processes. The company anticipates that earnings for the 2027 fiscal year will range between £45.7 million and £52.3 million, exceeding current analyst projections.

In recognition of its improved profitability and within its dividend policy, the board of directors has recommended a final dividend of 6p. This increases the total dividend for the 2026 fiscal year by 0.2p to 9p.

The company has stated it has not observed any direct impact on customer behavior from the conflict in the Middle East. However, it cautioned that any effects on consumer sentiment and spending power might become apparent in the latter half of the current fiscal year. To manage rising employer costs and taxes, Halfords has implemented strategies such as redeploying staff hours from lower to higher utilization garages and reducing its dependence on agency labor.

Henry Birch, Halfords' chief executive, expressed optimism about the company's trajectory, stating, "With good sales growth, higher margins and an increased dividend, we are delivering improved shareholder returns alongside a more compelling customer proposition." He emphasized that the company is in the early stages of its growth strategy and aims to leverage its established market positions, its extensive physical and digital presence in motoring and cycling, its trusted brand, and its unique service offerings.

Victoria Scholar, head of investment at Interactive Investor, commented on the results, noting that "Amid a challenging consumer backdrop, consumer demand remains robust for its motoring and cycling services and products." She added that the strong set of results, evidenced by the double-digit percentage jump in share price, combined with better-than-expected earnings, impressive profit guidance, a dividend increase, and positive commentary on the turnaround strategy, are all encouraging signs for investors.