How are these two consumer stocks going to perform during the winter season: Halfords Group and Wynnstay Group?

  • November 20, 2020 01:24 PM GMT
  • Kunal Sawhney
    CEO Kunal Sawhney
    2295 Posts

    Kunal Sawhney is founder & CEO at Kalkine and is a richly experienced and accomplished financial professional with a wealth of knowledge in the Australian Equities Market. Kunal obtained a Master of Business Administration degree from University of T...

How are these two consumer stocks going to perform during the winter season: Halfords Group and Wynnstay Group?

Summary

  • Halfords Group Plc has reported a 9.6% surge in revenues during H1 FY21.
  • Cycling revenue went up by 54.4% on LFL basis during H1 FY21.
  • Wynnstay Group Plc is expected to report an underlying pre-tax profit for FY20.
  • The Company has reported a 40% decline in wheat volumes.

Halfords Group Plc (LON: HFD) and Wynnstay Group Plc (LON: WYN) are consumer discretionary stocks. Shares of HFD were up by around 5.48%, and shares of WYN were down by about 0.94%, respectively, from their last closing price (as on 20 November 2020, before the market close at 08:20 AM GMT).

Why is the demand for cycling products of Halfords Group Plc soaring high?

Halfords Group Plc is the FTSE All-Share listed company, which is engaged in retailing of motoring and cycling products & services. The Company operates through key brands like Apollo, Carrera and Boardman. The reportable business segments are Retail and Car servicing.

H1 FY21 financial highlights (ended 02 October 2020) as reported on 18 November 2020

(Source: Company presentation)

  • The Company has demonstrated resilient financial performance in H1 FY21 with revenue growth of 9.6% to £638.9 million driven by the excellent financial performance of the Car Servicing business segment.
  • Underlying PBT (profit before tax) of the Company has witnessed 116.2% growth and reached 0 million during H1 FY21.
  • Operating costs remained 2.9% lower for H1 FY21 and stood at £7.8 million due to efficiency programs, business rates relief and furlough income.
  • Regarding the financial position, the Company is having robust liquidity reflected by net cash of £97.8 million as of 02 October 2020 due to lower levels of cycling stock and strong cash management. The Company made a capital investment of £11.2 million during H1 FY21 comprising £10.0 million in Retail and £1.2 million in Autocentres.
  • The Company has not announced any interim dividend for H1 FY21 ended on 02 October 2020.

 

Segmental Analysis

(Source: Company presentation)

  • Retail – The revenue growth of the retail segment remained at moderate levels of 4.8% driven by unprecedented demand observed for cycling products offsetting declining demand of motor products. Cycling revenue went up by 54.4% LFL, and motoring revenue declined by 23.7% during H1 FY21
  • Autocentres – The Company has reported revenue growth of 38.7% for Autocentres business segment in H1 FY21 mainly driven by exceptional demand of Halfords Mobile Expert vans and 78% year-on-year growth in Hybrid cars through the garages.
    •  

Share Price Performance Analysis of Halfords Group Plc

(Source: Refinitiv, chart created by Kalkine Group)

Shares of Halfords Group Plc were trading at GBX 261.00 and were up by close to 5.48% against the previous closing price (as on 20 November 2020, before the market close at 08:20 AM GMT). HFD's 52-week High and Low were GBX 284.00 and GBX 49.42, respectively. Halfords Group Plc had a market capitalization of around £481.86 million.

Business Outlook

The Company is quite hopeful regarding motoring products and services business as they have made a significant investment in recruitment and training. However, the Company is cautious of local and national lockdowns which will impact the motor business in H2 FY21 due to restrictions on the movement of vehicles. The cycling segment will continue to demonstrate satisfactory performance despite the normal seasonal decline in the initial phase of H2 FY21. The Company has not given profit guidance for FY21 due to heightened levels of uncertainties created by the seasonality factor and Covid-19 pandemic.

 

Does weak planting conditions during autumn 2019 affect Wynnstay Group Plc?

Wynnstay Group Plc is the FTSE AIM All-Share listed Company which is engaged in the provision of products and services to the agricultural industry. The Company operates through two business divisions: Agriculture and Specialist Agricultural Merchanting.

Recent Developments – The Company will announce its full-year result ending 31 October 2020 in January 2021.

FY20 Trading Update (for the financial year ended 31 October 2020) as reported on 18 November 2020

  • The Company has delivered a strong trading performance in September and October across both Agriculture and Specialist Agricultural Merchanting Divisions. The Company is expecting to report an underlying pre-tax profit for FY20.
  • The weak planting conditions during autumn 2019 have shown adverse results reflected by the low yield from the 2020 UK cereal harvest. Wheat volumes have demonstrated a significant decline of 40% year-on-year, affecting grain trading operations of the Company.
  • The Specialist Agricultural Merchanting division has generated strong sales driven by a stronger red meat sector.

Recent News

  • On 18 November 2020, the Company updated that Andrew Evans will step down from the Board position of Agricultural Director with effect from 1 December 2020. 
  • On 21 October 2020, the Company announced the appointment of Matthew Salter as Head of Professional Services.

H1 FY20 financial highlights (ended 30 April 2020) as reported on 24 June 2020

(Source: Company result)

  • The sales during H1 FY20 ended on 30 April 2020 went down by 12% to £229.29 million against £260.79 million in H1 FY19 due to commodity price deflation of around 60% year-on-year.
  • The Agriculture business segment has contributed £166.41 million, and the Specialist Agriculture Merchanting segment has made £62.83 million during H1 FY20. Both business segments have witnessed a decline during the period
  • Adjusted operating profit increased by 8% to £4.78 million in H1 FY20 from £4.43 million during H1 FY19. The Agriculture and Specialist Agricultural Merchanting business segments have demonstrated an increase in operating profit of 1% and 13.1%, respectively.
  • Regarding the financial position, the net debt of the Company was reduced by 83% to £2.54 million as of 30 April 2020 whereas it was £14.70 million as of 30 April 2019. The Company has a robust financial position well supported by committed banking facilities in the amount of £20 million.
  • The Board declared an interim dividend of 4.60 pence per share.

Share Price Performance Analysis of Wynnstay Group Plc

(Source: Refinitiv, chart created by Kalkine Group)

Shares of Wynnstay Group Plc were trading at GBX 341.77 and were down by around 0.94% against the previous closing price (as on 20 November 2020, before the market close at 08:20 AM GMT). WYN's 52-week High and Low were GBX 355.00 and GBX 185.00, respectively. Wynnstay Group Plc had a market capitalization of around £63.16 million.

Business Outlook

The Company is well-positioned to tackle challenges arising due to ongoing uncertainties and difficult business environment. The Board is hoping that the prospects for agriculture and farm business in the UK remain positive despite uncertainties around Brexit. The operations of the Company does not get much impacted by the recent introduction of new coronavirus-related restrictions in England as it is an essential supplier to the farming community. The Board has also reviewed the organizational structure and suggested several changes which are getting aligned with the future growth and investment plans.

 


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