Halfords to update shareholders on trading amid takeover speculation

It comes as shares have ticked around a fifth higher over the past month amid reports the business is being targeted by potential suitors.

The Sunday Telegraph reported that Halfords rebuffed a £1.4bn merger approach from van rental specialist Redde Northgate.

Halfords’ board reportedly ended the talks after they felt the business was undervalued by the suitor.

Nevertheless, the interest will have drawn attention from investors, who will be looking for signs of a positive long-term trajectory for the business and an indication of how it may return value to shareholders.

On Wednesday, the group is expected to reveal an increase in revenues, with the firm’s motoring operation offsetting a slower cycling market.

The company has already highlighted positive trading over the first 20 weeks of the current financial year, which will cover most of the latest half-year period, despite facing pressure from poor weather conditions for parts of the spring and summer.

It saw group revenues rise by 14.1 per cent, driven by a 34.6 per cent jump in trade from its autocentres business, which benefited from continued expansion across the UK.

Nevertheless, the firm indicated that profits would be lower for the half-year despite strong sales.

Analysts at Investec forecast that the firm will report a pre-tax profit of £20.9m for the period, down 28 per cent on the same period a year earlier due to a particular impact from a one-off tax credit.

It indicated that profits are more likely to be weighted towards the second half of the year due to ongoing cost-saving efforts and a boost it expects from its autocentre business.

The brokerage said it expects Halfords to tell shareholders it is on track to secure around £30m of cost efficiencies to bolster its finances.

Analysts have also said investors will be looking for signs it will match annual profit targets as consumer budgets come under strain.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “Halfords’ full-year underlying pre-tax profit guidance was set at £48m-58m and investors will be looking for a clearer target in next week’s half-year results.

“A further slowdown in the more discretionary pockets of Halford’s business, like cycling and car cleaning, could put the brakes on reaching profit targets.”

Cycling revenues have been one area to come under pressure recently, with the firm revealing a sales dip in its previous update.

However, Halfords could seek to take advantage of uncertainty in the category, and has been linked with a takeover move for online rival Wiggle, which tumbled into administration last month.