Halfords Group Aktie

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.

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 Joe 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. Joe 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 in which we refocused the business and reset our agenda for the years ahead. We've 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 Haywood joined as our CIO.

In November, we laid out a strategic framework 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've 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 truths.

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're 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 Autocentres 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 interims 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 feature 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 Tredz 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 cycles 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 of profitable growth in the years ahead.

Under the leadership of a new cycling director, we are bringing Halfords and Tredz businesses closer together, starting with offering click and collect for Tredz' 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 has very high own brand penetration through the likes of Apollo and Carrera and Boardman. Just a few weeks ago, we sold our millionth Carrera Vengeance, 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 bikes 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. And 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 under indexes versus the wider bike share that we have. And we also look forward to working more closely with the Bicycle Association on their E-bike Positive quality and safety accreditation across our whole range.

So now turning to Garages. 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 to have 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 at 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 skills and leadership help 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 to 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, so 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 tour, taking you around, getting you to meet a few colleagues, but more so shining a light on some of the improvements that we've made in the last few months through the garage network.

As you would imagine at 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 innovating products and services along with improving all of the customer touch points.

We want to be the trusted experts who love to help. And that help means being available, reliable and in the right place at the right time where the customers need us. 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 have had to think about how we run our garages and run them differently. We are focused on driving performance through efficiency gains supported by tools, technology and people.

And even in these early states, we are starting to see some solid results. So the question is how we've 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. Take the Hunter wheel aligner equipment, we know from studies that there's over 60% of vehicles on the road right now that require wheel alignment. So when we use this equipment we know we are not just changing tires, we are sending customers away in safer, more efficient vehicles. So using a Hunter 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 and capture images of vehicle that we can share with the customer to help them make the right decision. No jargon, just simply building trust in our expertise.

As a center manager, I feel like the changes have made a massive impact for us here at Halfords that really help with the workflow and improve both the colleague and the customer experience, and we are getting really good results with the new equipment so far. It's easy 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.

Hi, I am Owen. I am an apprentice at Halfords. I joined Halfords because I wanted the high level of brand and the high level of training. I have been at Halfords for 1.5 years. Over the time I have been at Halfords, I have learned to do higher-skilled jobs. I can see my future with Halfords as finishing my level 2 apprenticeship and then getting my MOT license and then becoming a center manager.

As you can see, we are growing our own talent with broader skills, including diagnostics and EV trained 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 simplified how our garages are resourced and run removing complexity and increasing efficiency.

So our Fusion program has allowed us to test, learn and refine, and now, we will be taking the strongest elements across the remainder of the network, and this gives us confidence shaping what comes next. So the next phase is about focus, bringing the best of what we have learned to 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.

Brilliant. 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 have 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 discover, search and buy products and services using AI. And we're already seeing that where customers do come to us through AI rather than standard search, we get much higher rates of conversion. 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 investing 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 customer numbers 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 the Halfords Motoring Club, which now has around 6.5 million members in total, 420,000 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 Joe 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 aid 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 has 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 optimized 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 investments 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, non-underlying 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 non-underlying. 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. 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 $1.29 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 on 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%. 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 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 costs increased 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 new 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 Autocentres business delivered another very strong year. Revenue, excluding Avayler, 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 Avayler, 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 Avayler. During FY '26, we continued to progress development of the software for Bridgestone in the U.S. and mycar 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 a planned 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 Fusion, technology and capability building. Including lease liabilities, year-end net debt fell to GBP 228.7 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 lengths 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 1.5x 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 9p, 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. 7 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, Joe. So as Joe 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. We'll improve customer journeys for servicing, and we'll 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 Motoring 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 my colleagues at Halfords for his stewardship and his 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.

Ben Hunt from Panmure Liberum. I'm just sort of intrigued about the stance seems to have changed -- or not necessarily changed, but the Fusion momentum seems to have been very strong. It looks like there hasn't really been any diminish in the returns that you've been making there. But going forward, you're talking more about taking the learnings and applying it to the rest of the estate. What sort of maybe perhaps put a break and maybe you didn't want to extend the Fusion rollout? Or has there been any -- do you think you can just do this more efficiently without having to do as much CapEx or rebranding? Just some of the findings there. And what are the sort of paybacks we should sort of look at where you do, do changes to some of the existing estate?

Thanks, Ben. So to be really clear, Fusion was never about rolling out that concept to all of our garages, not least because the concept of Fusion had a couple of kind of qualifying criteria. One was that typically, we were looking at a Fusion model where we had close proximity of a retail store, the idea being that actually you kind of manage the 2 together. But secondly, Fusions, by their nature, typically demand a larger garage. So when we made the National acquisition, a lot of those garages were candidates for Fusion conversion. You've got a small garage, it doesn't necessarily make sense to have that kind of Fusion blueprint. Again, one of the things with Fusion is putting in more ramps, so you can have more throughput. If you got a small garage, we may not be able to do that. So it's not a case of us saying that actually Fusion has kind of run out of gas. It was only ever going to affect a certain number of garages.

We originally said 150 a few years ago, we said 138, and that's just us really being really clear about getting the returns. The point beyond that, though, is that actually having done this for 2.5 years, 3 years, we've got a lot of learning and a lot of data about what works. We've now got the remaining, about to do the math, 350 garages that we feel that we can actually put capital to work in effectively. Now that may be new equipment, it may be new capability in terms of colleagues or management or it may be the refurbish refurbishment, putting in more ramps. It may be the customer area. But we're probably unlikely to kind of come up with a new branding of kind of Fusion Mark 2. But over the course of the next 12 months, we're focused on delivering that Fusion, but we will come back to investors to this forum and talk about exactly what we're going to do in terms of continuing to refurb our garage estate because what we have proved is we can put capital to work and get returns. And that's really, really important and really encouraging.

And I guess just related to that, how should we think about sort of the pruning of the -- I suppose, both the garage and the retail estates locking. I think you said you've got 90% of leases coming up for renewal and retail over the next 5 years or so. But the age old question about sort of the estate, and how you're thinking about?

Yes. So I mean, taking Retail, first of all, all of our stores are profitable. If you look actually over the last decade, we've probably closed, what, 100 stores. We've closed 2 or 3 over the last 18 months, but all of them are profitable. Average lease length for retail, 2.3 years, and I think it's, what, 80% or 90% within 5 years, they've got. So we've got the flexibility there. But I actually think we've got the right level of stores. And one of the things that actually, I think, strategically and operationally is a real competitive advantage for us actually is we want a retail estate. We want a physical estate. We want people to be able to bring their cars, come to our car parks, have services delivered in the retail car park. And don't forget, 80% of the services we provide as Halfords actually take place in the retail car park. So that is an important asset for us. So I don't really see that changing much at all.

On the Garages side, you're right, we closed a bunch of garages last year. Now don't forget, we made that National acquisition. In some cases, we ended up with 2 or 3 garages in very close proximity, and it just doesn't make sense necessarily to have them next door to each other. So we did an element of pruning. As Joe said before, it gave us GBP 1 million of benefit, but did take down -- has obviously taken down our sales a bit. But if you strip that away like-for-like, still up at 5.8%.

So I think on both sides, we're comfortable with the size of our estate. My feeling is that over the medium term and longer term, we'll be growing our garage estate because actually, there are limitations in the amount of volume we can process with that estate. On the retail side, I don't see it changing significantly.

Jonathan Pritchard at Peel Hunt. Two, if I may. Just back on the current trading like-for-like, could you just perhaps not looking for numbers, but just outline some categories that have been particularly strong, anything that might have lagged? And just sort of anecdotal stuff really just to help us get another level of granularity on that. And then on the gross margin, interested in your comments. Obviously, you've done a great job in growing that gross margin, but suggesting now that it's pretty much high enough, but there are some reasons to believe it could go higher. You've got more own label, more services, more SMR, et cetera. So am I reading this wrong that you might be reinvesting that? Am I reading it wrong that perhaps those aren't necessarily forces for higher gross margins? Or is there an opportunity here to, as I say, reinvest into the brand, into service, into price?

I won't hold the mic fully. So Joe, why don't you take that latter question? And if I talk to category management. And Jonathan, I'm sure you have, but I encourage you to chat to Jess, who's sitting in front of you, who is the leading expert on category management. But the short answer is -- actually is that we're excited across the board in terms of what we can do with pushing that category management lens on our business. As I said, we've done 4 so far. We've got more that we're going to be rolling out this year.

To be honest, there's probably not one that I would pick out. They've all -- they're all driving strong returns. I think cycling, we are quite excited about pushing cycling, that combination of Tredz with Halfords we haven't done historically. This concept of flagship cycling stores, where there's more product, there's more kind of local curation, that is reaping real benefits. And I think maybe over the last few years, we've kind of pushed cycling down a bit. It is only 20% of our business, but it's what we're known for. And actually, there's real excitement in the business in terms of not just kind of cycling coming back, but actually how we can take it to the next level.

And the e-bike stuff, I mean, hopefully, it came across, but all of our exec team saw it this week, and we were literally blown away, I am going to be going out and buying at least 2 of our e-bikes. We get staff discount. But even without that, I would go out and buy our e-bikes. And this isn't just a kind of promotional piece. If you -- I would, a, buy an e-bike, but if you are going to buy one, go to Halfords and check out what we've got because I can guarantee you won't get a better bike of that quality at that price.

So, Joe.

Gross margin, and thank you, Jonathan, yes, so it has been a brilliant couple of years on gross margin. We hit 52.8% this year, highest level in a decade, and 460 basis points of gross margin improvement over the last 2 years. You're right to say there are some reasons it could get better. FX will continue to be a tailwind for us. There is opportunity to expand our own label penetration, which is margin accretive for us. And historically, we have seen a mix into SMR that's helped.

As we look forward, though, I don't think we will see gains at the sort of 200-plus basis points that we've seen in the past. And that's largely because our 3-year Better Buying program has really come to an end. And also, one of the strengths we're seeing in early trading this year is actually in the tires business, and that is a slightly lower margin. So we may actually, as cycling and tires start to recover, see a bit of a downward mix impact for that reason. I'm not saying margin will go backwards as a result, but it will slightly temper some of those other impacts that you've rightly called out.

It's Mark Photiades from Canaccord. A couple of questions from me, please. Just on Avayler, I appreciate obviously some customer changes in the year, but is there any update on the sort of time line to breakeven for that business?

Secondly, just on -- in terms of the margins on e-bikes versus traditional bikes, any differential?

And then finally, you mentioned in the statement you're launching a new range of servicing options on the mobile expert side of things. Can you just give us a sense of what some of those new servicing options are?

Yes. So on Avayler, there isn't a significant update from when we spoke last. This year, FY '27, our major client is Bridgestone in the U.S. And in the course of calendar year 2027, we expect them to roll out -- start rolling out the Avayler product throughout their garage network. And that will be at the point at which the financial dynamics of Avayler changes significantly. So we are in this kind of period as many software businesses are where you're developing the product, early stage in terms of the sales pipeline, but we're not far away from the point at which there should be that kind of change. So no, I'm afraid there's not a huge update. It's kind of business as usual. We're talking to other potential clients. The Bridgestone relationship continues to be strong, but it's more kind of watch this space.

On the e-bikes, I'm going to defer to Joe, and she may defer to Jess on the margins, but I expect they're not significantly different.

No. And I mean, the great thing is that our e-bike range that Henry has described is largely own label within Halfords. And as a result, we're able to create a brilliant product at a fantastic price point, but also at a strong margin for ourselves. So there's not a material difference between the e-bike and traditional bike margins. As Henry says, they're amazing products. So hopefully, we can show you some of them soon.

And on the Halfords Mobile Expert piece, that actually started life as really a tire product, and we once upon a time, bought a company called Tyres On The Drive, which kind of hinted at what it did. That business has predominantly been changing tires at people's houses. Absolutely brilliant proposition. Again, if you want tires changing on your car rather than having to take in the garage, we'll come to you and do it, very cost-effective and efficient way of doing things.

One of the things we recognized, though, was actually why couldn't we do servicing as well, actually get the technician to come to your house and do a service on your drive outside your house. So that's something that we started offering. We're actually going to be rolling out more vans that are servicing only. So again, we think that's something that will go down well with customers because it's the ultimate convenience actually. So expect more in that regard, but early trials are positive in that regard.

It's Manjari Dhar, RBC. I just had 2 questions, if I may. I just wondered about the B2B side of the Garage business. How is brand awareness there? How is the Yodel contract doing? And is there -- are there opportunities or plans to sort of extend that to more partners?

And then, Joe, I just wondered on working capital for this year. I just wonder if you could give us color on the moving parts. Do the range relaunches in retail have an impact on how we should be thinking about that?

So look, B2B is a really important part of our business. If you look at our overall sales, it's about 30% of our sales come from B2B. And they're really important from -- for us in terms of their reliable revenue. So whatever the weather, whatever the economy is doing, actually, those B2B revenues are kind of consistent and solid. And the good news is that they're growing, particularly on the fleet side of things. So we've had some good wins actually this year.

Sainsbury's has become a client. But one of our garage competitors, ATS, who are owned by Michelin, have basically dropped out of the market. And where we've seen a real benefit there is picking up some of their clients. So yes, B2B, absolutely core part of our business, and we see it as a part that we can grow. And to the point you make, Manjari, about actually having the Halfords brand behind it, I think, is really powerful and something we'll look to accentuate increasingly.

And then from a working capital point of view, actually in the year just gone, notwithstanding the fact that we grew our stock to support higher cycling sales in the spring/summer season, we kept our working capital reasonably neutral. And actually, looking forward, we would intend to do the same, if not improve working capital. Again, stock may continue to increase slightly as our sales growth progresses, particularly in cycling, but we will -- we see levers to offset that. So no material movement.

David Hughes from Shore Capital. A couple of questions from me. Firstly, in terms of the margin bridge or profit bridge, particularly on the Autocentres side of things, obviously, you had a big boost from the kind of improvement to the gross margin within that, which you're not expecting to carry on going forward. But the flip side, you had very high inflation, which I think you're also not expecting to be so high. So I was just wondering in terms of where you think you can get to in garage margin, how do you see the further labor optimization versus the inflation picture looking going forward?

And then secondly, just on the category management side of things again, on the 4 categories that you've seen so far -- you've done so far, have you got any early indications in terms of are you seeing a notable difference in sales performance for those categories at the end of the year and seeing that kind of the benefit of that work?

Yes.

So look, we've always said that we believe we can get our Autocentres business to a margin of sort of 5% to 6%. And at the moment, we're at 3.1%, having grown 50 bps in the year. So first step on that journey. As we look forward, we expect the further margin expansion to largely come through utilization and productivity gains as well as a growing top line. And I think the work that Adam and the team have done this year has made an incredible difference in that. And I think the most compelling stat is that reduction in labor costs that we saw year-on-year in the fourth quarter despite the material increases in wage rates from National Insurance and National Living Wages. So as we look forward, we expect to see more of that and higher sales driving gross margin expansion -- sorry, operating profit expansion as we look forward.

And look, on the category management side, I'm not sure I can add too much more detail. We are really encouraged by what we're seeing so far, albeit it is early days. And as I said, it typically takes about 9 months in terms of cycling through, making changes and kind of optimizing each category. So hence, we kind of gave a taste of it. We'll come back in, in November and give a lot more detail. But my guess is even in November, we'll probably say wait until the end of the year to see a kind of full cycle of results. But talk to Jess, but I think that will probably be the thing that she's most excited about at the moment in the retail business and showing tangible progress and kind of results that we can really see and track.

I'll give you a tiny snippet workshop, which we talked about earlier was one of the best-performing categories from a like-for-like sales growth perspective last year and ahead of the wider retail business. So I'm not going to give you numbers, but it was -- you can really see the benefit coming through, and we'll talk a bit more about it at the interims.

Kate Calvert from Investec. Just another question on the Retail side. So as you move more towards this sort of category management, is there any investment you need in sort of fixtures and fittings or the general fabric of the store, et cetera, going forward? Or is that later on?

Not specifically, but it is something we're conscious of that actually we need to continue to update and modernize our store estate in terms of it looking inviting to customers. I mean, we do change the ranges physically. So what we did with layout of our car cleaning products this year, there's a little bit of tweaking, but it's not a kind of significant expense. And we will shift categories around in terms of reducing the ranges or expanding them. But that per se doesn't present a significant capital expenditure. It's probably more on the overall fabric of stores that we're looking at that.

And also, I would say that whatever we do, we will stick within the guardrails that we've laid out, GBP 55 million to GBP 65 million, as we look forward.

And just as we move from Optimise to Evolve, what sort of big picture CapEx can we see there in the next stage of that development?

Yes. I mean, the answer is, what, Joe -- is that we're really clear that we've set out a CapEx envelope that we are looking to stick within. And yes, we just want to make sure that we drive that focus and that discipline and be very clear on the returns that we're getting from any CapEx that we put to work.

Arthur Peel of Berenberg. Just on the digital offering, where do you see the opportunity there? And what could that grow to perhaps on like a 5-year view?

Yes. So look, we -- as I said before, we're really excited about what we can do on digital. I think historically, we've maybe been a little bit underpowered in terms of our offer and the kind of focus on digital. It's a really important part of how we run our retail business altogether. And the fact that 80% of digital orders are actually picked up in store, click and collect, shows actually quite how closely those 2 kind of channels work hand-in-hand.

Having said that, I think there are customers who will just shop with us digitally. And therefore, we need to make sure that we are competing with digital-only retailers. So our first kind of focus has really been on more kind of foundational improvements in terms of making sure that the -- in terms of website performance and speed, navigation. But on the -- we're putting more focus on the trading side, and the category management piece actually goes across both physical stores and the digital piece as well. So that category management discipline in terms of running the kind of channel strategy should yield benefits. So what we've said is that we expect our digital sales to be ahead of our overall retail sales, and we've delivered that over the course of the last year. But clearly, our kind of intention is to grow that more.

And obviously, the fantastic thing about digital is that the kind of the demand and supply is potentially infinite, so we can really scale up our business that way. So it will continue to be important for us.

Okay. There are no other questions. I just want to thank everyone for coming today, and wish you all the best for today and beyond. Thank you.

Welcome to the Halfords Group Interim Results for the 26 weeks ending the 26th of September 2025. I'm Henry Birch, the Chief Executive of Halfords, and joining me today is Jo Hartley, our Chief Financial Officer.

I'm very pleased to report a strong set of results for the first half of FY '26. Against the backdrop of considerable cost inflation and consumer uncertainty, we've delivered like-for-like sales growth of 4.1%. Underlying PBT of GBP 21.2 million, up slightly versus the prior year and a strengthening balance sheet with net cash of GBP 8.5 million since the year-end to GBP 18.6 million. We have also made good progress on our strategic priorities and in a separate presentation, we will be sharing more detailed thoughts on the strategic direction for the group and how we plan to deliver sustainable growth.

At that presentation, there will be an opportunity to ask questions, both on our interim results and on our strategic direction. In terms of this presentation, Jo will now take us through a review of HY '26 financial performance, and I will then briefly cover the strategic and operational progress we've made in the first part of the year and our outlook for FY '26.

For now though, I will hand over to Jo.

Thank you, Henry, and good morning, everyone. And I'm pleased to be reporting another strong set of results for half 1. Despite the very significant inflation arising from minimum weight and National Insurance changes that were effective from the start of the year, we have delivered half 1 performance ahead of our own expectations.

Our performance has been supported by some recovery in the Cycling market and a tailwind from better FX rates, but we have also executed with discipline, delivering against our ambitious cost-saving targets, winning in our markets, continuing to successfully roll out our Fusion programme and fully recovering our Coventry warehouse operations following the implementation of a new warehouse management system. We have also continued to manage working capital and cash carefully to further strengthen our balance sheet. Our strong first half performance gives us confidence that we can deliver for the full year.

So let's start with the highlights of our financial performance. Like-for-like sales grew by 4.1%. Pleasingly, once again, we saw growth across both Retail and Autocentres. Cycling was a standout in half 1 performance, delivering 9% like-for-like sales growth. Group gross margin grew 200 basis points building on 160 basis points of growth seen in the first half of FY '25 to bring margins to 51.4%, the highest level in 3 years.

Operating costs as a percentage of revenue grew as anticipated, reflecting cost inflation and selective investments in leadership, fusion rollout and our digital platform planned at the start of the year. All of which meant that underlying PBT of GBP 21.2 million was up GBP 0.2 million or 1% year-on-year, slightly ahead of our expectations, driven by pleasing sales performance.

And as already noted, our cash and working capital performance was again strong, resulting in GBP 18.6 million net cash on the balance sheet at the end of the reporting period, up GBP 17.3 million versus this time last year and up GBP 8.5 million versus the year-end position.

This next slide bridges the underlying profit movement between half 1 last year and half 1 this year. The first bar on the bridge shows the very material impact of cost inflation. This was predominantly driven by the changes to National Insurance and the minimum wage and the knock-on impact to labor costs across the wider workforce and our managed services such as maintenance, cleaning and technology.

We also saw inflation in property costs and from the new packaging tax, meaning that in total, cost inflation was a very sizable headwind. As the bridge goes on to show, this was more than offset by our trading performance. Including successful pricing pass-through, particularly in services, the continued success of our Better Buying programme, a continued focus on reducing operating costs and benefits from Fusion and the small number of garage closures we announced back in June. We also benefited from an FX tailwind as improved hedge rates on U.S. dollar purchases came through cost of goods sold.

The final point to pull out on this bridge is that our successful trading and cost control enabled us to continue to invest in priority areas, including Fusion, leadership and our digital platform. Given the significant gross margin progression, I thought it would be useful to pull out the key drivers.

As you can see, the majority of our gross margin growth came from better buying, contributing 100 basis points of margin accretion with notable gains from the successful retendering of our own label products and strengthen partnerships with our branded suppliers, who recognize the unique value of our physical estate and skilled colleagues in showcasing product and delivering solutions for customers in a way that no other business can. This chart also shows our continued success in optimizing pricing, particularly in services, where a significant proportion of the sales price reflects labor costs.

And finally, FX, as already noted, was a tailwind for us in the period. We purchased around $200 million of U.S. dollar-denominated products each year and the hedged FX rate coming through in cost of goods sold improved from $1.24 in half year '25 to $1.28 in half year '26. Overall, a very strong margin performance in half 1, which we expect to sustain in half 2.

This next slide serves to bring together the key metrics we have discussed in a summary table, which I won't dwell on. The only point we have not yet discussed is nonunderlying items. In half 1, our non-underlying charge was GBP 4 million, of which GBP 3.1 million related to nonrecurring costs associated with the implementation of a new warehouse management system in our Coventry distribution center. As we described in June, we saw issues with system stability and productivity immediately following the implementation.

We, therefore, invested in additional resources to preserve stock availability in our Retail business. I'm pleased to report these issues are now resolved, and the nonrecurring cost was at the lower end of the range we indicated at the prelims. Warehouse productivity, store stock levels and customer home delivery propositions are now back to normal as are our warehousing and distribution costs. We do not expect any further non-underlying costs associated with challenges relating to the warehouse management system implementation in half 2.

Moving now to our Retail business, which saw a strong first half of the year with like-for-like sales growth of 4%, being the strongest performance we've reported since FY '21. Here, cycling sales were particularly strong at 9% like-for-like with our premium cycling fascia Tredz delivering double-digit like-for-likes. In a stronger market, supported by a warmer summer, we won share in all segments of our cycling proposition through range extensions across our Boardman and Voodoo brands and in premium e-bikes supported by pricing discipline and service and advice from our expert cycling colleagues. Henry will cover more detail on this shortly.

Motoring like sales were more muted, but pleasingly in growth at 1.1%. Sales volumes were slightly suppressed by some deliberate range review actions to improve margins and profitability. Margin growth was strong with 150 basis points of improvement year-on-year. This was driven by better buying and the FX tailwinds already described coming through and more than offsetting the negative impact of mix into cycling sales year-on-year. Sales growth and margin accretion helped mitigate against the inflationary headwinds and investments already described to result in underlying EBIT, down slightly year-on-year to GBP 20.6 million.

Moving now to the Autocentres segment, which, as a reminder, includes consumer garages and fans, our commercial fleet service business, which supports larger lorries and other commercial vehicles and Avayler, our Software as a Service business. As usual, Avayler is shown separately and all the numbers which follow are for Autocentres excluding Avayler.

The Autocentres segment saw like-for-like growth of 4.3% with total growth a little lower at 3.4% as a result of the small number of garage closures announced at the prelims. Within this, the consumer garage and mobile business saw considerably stronger revenue growth of around 8% reflecting continued share gains in what is a highly fragmented and growing service, maintenance and repair market, while the tyres market continues to be weak.

Sales growth in Autocentres was also supported by pass-through of labor cost inflation in an offering which is heavily weighted towards services. Revenue growth in our commercial fleet business was lower as we reprioritized our resources to focus on higher-margin services and more profitable tyre options with a corresponding gross margin benefit. Margin growth was particularly strong with 270 basis points of margin accretion year-on-year.

As elsewhere in the group, Better Buying and our pricing strategy were key contributors supported by improvements in the tyre margin as a result of focus on sales of high-margin add-ons such as tyre alignments and warranties and the sales mix into SMR. This margin accretion helped to offset the inflationary dynamics already discussed alongside further operating cost efficiencies, as well as the benefits from Fusion and the site closures already mentioned. This resulted in operating profit growth of nearly 8% year-on-year.

Finally, on this slide, in Avayler, we saw losses widen as anticipated, given the loss of revenue from ATD, a U.S. client, which entered Chapter 11 last year.

Moving now to our balance sheet, where we've seen another strong period of cash generation closing the half year with net cash of GBP 18.6 million, up GBP 17.3 million versus half 1 last year. A key contributor to the strong cash performance was working capital management, noting that the figure on the chart is net of the payment of the reintroduced FY '25 colleague bonus detailed in June.

Inventory management was particularly strong with stock down nearly GBP 9 million versus the same period last year, with reductions across both Retail and Autocentres. This strong working capital management means that net cash has grown by GBP 8.5 million versus the year-end despite GBP 8 million cash CapEx on fusion, GBP 9 million of colleague bonus payout and a GBP 30 million dividend payment, reflecting the strong cash generation of the business. From a lease debt perspective, we've continued to retain significant flexibility in our property portfolio with average retail lease lengths now at 2.6 years and average garage lease lengths now up 4.9 years.

Net debt, including lease debt, was GBP 232.7 million at the balance sheet date, down GBP 43.8 million versus half 1 last year, driven by the higher cash balance already described and a reduction in lease debt. As such, leverage including IFRS 16 lease debt is 1.3x EBITDA on a 12-month basis.

As a final point, we successfully executed a 1-year extension option within our RCF in August this year, such that debt facilities now mature in April 2029. So to summarize, we are pleased with the performance in the first half of the year. We have delivered sales growth, gross margin expansion and profit ahead of our expectations successfully implementing cost savings to mitigate considerable inflationary pressures. And we've strengthened our balance sheet closing with a higher net cash position than we had either this time last year or at the end of FY '25. Our first half results and our balance sheet strength enable us to move forward with confidence.

Finally, I'm pleased to report that the Board has declared an interim dividend of 3p per share, in line with the interim dividend paid last year.

I will now pass you back to Henry, who will cover some of the strategic and operational highlights from half 1 and our outlook for the balance of the year.

Thank you, Jo. As Jo mentioned, H1 saw a really strong performance in cycling, which grew 9% like-for-like after a multiyear period of weaker demand post-pandemic. And I wanted to talk a little bit more about our leading position in that market.

Our national network of stores make us unique. Acting as cycling showrooms while also offering specialist service and advice to our customers. We are a clear category leader. And as just one example, we sell 2/3 of all children's bikes in the U.K. In the core Halfords business, we sell bikes under award-winning brands. We developed ourselves, such as Carrera, the leading mainstream cycling brand in the U.K. by value and Apollo, the largest brand by volume, and Boardman offering outstanding quality at an unrivaled price point for enthusiasts in the nerve.

Our proprietary brands enable us to offer leading design and quality at brilliant value prices to customers, while also delivering strong margins through our strategic partnerships with suppliers and our global sourcing office in Asia. And through Tredz, we also operate in the premium branded bike market online.

Following a spike in demand during COVID, weakness ever since has driven significant market consolidation with numerous independent retailers and some smaller chains and wholesalers disappearing from the market. While this period was challenging for Halfords too, we've grown both market share and margin, while continuing to invest in our product ranges. And we are cautiously optimistic about the future planning our intake accordingly with inventory levels expected to increase in the second half of the year ahead of next summer's peak season.

I'm very pleased to say that we have made good progress in our two ongoing strategic priorities, namely Fusion and Halfords Motoring Club. With respect to Fusion, we now have 79 garages converted to the Fusion model. As a brief reminder, a Fusion conversion will typically double garage profitability within 2 years and the average amount of CapEx spent on each of these conversions is approximately GBP 200,000.

By the end of the year, we are on track to have converted more than 100 garages with the remainder of the 150 planned in total to follow in FY '27. Fusion provides a more modern, customer-friendly garage environment, incorporating dedicated front-of-house customer service advisers, and it works hand-in-hand with our Retail business, driving customers from local stores into our less well-known garage services offering.

Meanwhile, Halfords Motoring Club has continued to prove popular with customers. Our membership has now reached around 6 million members, who are able to access attractive discounts and benefits, while providing us with valuable data and marketing permissions. Perhaps more excitingly, with more than 400,000 premium members who effectively pay an annual subscription for their MOT and in doing so, gain access to a range of enhanced benefits across retail stores and autocentres. Club remains an important part of our business, delivering higher rates of cross-shop, customer engagement and average spend. There is much more we can and will do with Club, and it is a key part of our plan for the future.

As mentioned previously, later today, we will be detailing our strategic plans for Halfords, and I will say more about our direction in these and other key areas. So moving now to our outlook for the balance of the year. As already described, we saw strong trading in H1, helping us to deliver results that exceeded our expectations in the 6 months to September. While our performance was helped by a more supportive market backdrop, specifically in cycling, where the warm weather may have pulled some sales forward from later in the year, there is also plenty of self-help at play in delivering an excellent first half performance across the Group.

We are building our stock position ahead of next summer's peak period through the second half, but we look ahead to the remainder of the year with confidence. We move forward with a talented new leadership team in place, including our latest appointment of Sarah Haywood as our new Chief Information Officer, a clear plan more on which in our separate strategy update presentation later and a very strong balance sheet. These factors enable us to invest in our brand and digital experience at the same time as delivering underlying PBT for the full year in line with consensus.

So I wanted to close this morning by saying a huge thank you to the more than 12,000 Halfords colleagues who've made these excellent results possible as well as to our outgoing Chair, Keith Williams, who will be departing before our next AGM, having served 9 years on the Halfords Board. I know I speak for many in the organization when I say that his experience and wisdom have been invaluable through that period.

[Operator Instructions] Our first question is, Henry, can we start by asking you to say a few words about what attracted you to Halfords?

Thank you, Ivy. And before I answer that question, I should just add that the strategy presentation that I referred to just now is actually available on our website at halfordscompany.com and you can view it there. So in terms of what attracted me to Halfords in the first place, was a combination of the assets that it has and the market positions that it occupies in terms of having a trusted and well-recognized brand, in terms of having what I see as a unique set of assets.

So 370 retail stores, nearly 600 garages, mobile vans, a strong digital presence, the fact that we operate in predominantly needs-based markets, the fact that our Retail business, in particular, has a high element of advice or services attached to our sales, the fact that we've got 12,000 expert colleagues who are trained and committed, and the markets, as I said, that we operate in actually are large. They are typically fragmented and over the medium term and long term, I think will continue to be growth market.

So I think a combination of the markets we occupy and those structural trends in those markets together with the assets and people that we have what attracted me to Halfords in the first place.

Thank you, Henry. Next, we have, it sounds like you had a great performance in cycling in the first half of the year. How sustainable is that recovery? And are you expecting it to continue into next year?

Yes. So great question. And we reported, as you'll know, for the first half, 9% growth in our cycling business. Now I should just qualify that cycling is about 20% of our overall business. So people know how Halfords quite often because of our cycling heritage, but it's about 20% of our overall business. Now nevertheless, we were delighted with that 9% growth in cycling.

In terms of what we can expect going forwards, again, I won't be telling people anything new here, but COVID saw a big spike in terms of cycling, a lot of sales. And then post COVID, we've had various kind of after shocks from that spike in sales. I think we're now back to a more normal level, and I think things are kind of equalizing.

Having said that, we're still probably about 1/3 below pre-COVID level. So we were delighted with that 9% growth, and we continue to see strength in our cycling business, but bearing in mind, as we go forwards, we'll be lapping more challenging comparables in terms of -- 9% growth this year will make growth next year more challenging. But we have every confidence in our cycling business, I should add.

Are you happy with the budget and the fact that it did not impact the cycle to work scheme?

Yes. And yes, I think above all else, we're probably relieved to be the other side of the budget, like everyone else in the U.K. I think the speculation and anticipation for many months ahead of it was unhelpful, particularly in terms of consumer spending and consumer confidence. And that was seen, particularly in October in terms of aggregated Retail sales, which were, I think, at best, flat, if not down a bit.

I think now with the other side of the budget, I think we can focus on -- or the whole country can focus on the task in hand. And for us, that's about growing our business. The budget, I think when you look at it, probably didn't penalize those people on basic rate taxpayers, people who are basic rate taxpayers. And I think that is good news for us because the majority of our customers are those basic rate taxpayers.

In terms of cycle to work, I mean, there was speculation that it might get impacted by the budget. That obviously didn't materialize and I have no idea as to whether it was properly under consideration. But we had some confidence in as much as the treasury themselves through HMRC, which is a part of the treasury had done a review of cycle to work and concluded that it was actually achieving its aims and not least that 67% of people who benefited from cycle to work were, in fact, basic rate taxpayers.

So the kind of -- the challenge that cycle to work was somehow a benefit just directed at higher rate taxpayers. I think the treasury's own analysis showed that, that wasn't the case. So we're pleased that it hasn't been impacted, and I think rightly so.

Our next question is what are the main sources of the margin expansion you have reported? And what's the biggest lever in delivering improved profitability?

So at this point, I'm going to take a break, and I'm going to ask Jo, our CFO, to answer that question.

Thank you. We're really pleased with the 200 basis points of margin expansion that we delivered in the first half of the year. And probably the biggest contributor to that was our Better Buying programme, which saw a significant reduction in the cost of goods that we sold through retendering some of our own label product ranges and also through partnering closely with some of our strategic suppliers. One of the other strengths we have is the amount of our product that's own label, which enables us to negotiate really the best prices on those products and indeed to grow our margin.

You've taken out an awful lot of costs over the last few years. How much further can you go?

Do you want to take that one, Jo, as well? Go.

Yes. No, we're really pleased with the cost savings that we've managed to deliver over the last 3 years, over GBP 90 million of cost savings, which has been necessary to offset GBP 98 million of inflation that we've seen in the last 3 years. The big cost savings have been those better buying savings that I just described, as well as a number of initiatives that have driven operating cost efficiency. I think it's fair to say that the lower hanging fruit has been taken, but we do see opportunities going forward to drive out more structural cost savings.

And earlier today, we talked about our strategy in 3 phases; an optimized phase followed by an involved phase where we described opportunities to invest to drive incremental returns through optimizing our supply chain and also driving a reduction in our central costs through the implementation of a new enterprise resource planning system that will simplify and streamline our operations. So still more opportunity, but more structural cost savings as we look forward.

Our next question is, what exactly does your Fusion programme entail?

So I'll take that one. So Fusion has been an enormously successful program in our garages business. And to date, we have implemented 79 Fusion garages with the ambition of doing 150 Fusion garages. Now Fusion is a garage concept, which really looks to leverage Halfords footprint across a town or a city, so using the retail store, as well as the garage. And the idea is that we get more customers crossing the threshold of our stores than we do of our garages. But the vast majority of those customers are car owners.

So Fusion looks to drive the customers from retail into garages. Now within garages, we've made a few changes. We have updated and upgraded the customer service areas, so making them looking modern and professional. And then we've also invested in more customer-facing colleagues, such that actually a customer walking in has somebody who is dedicated to customer service rather than dual-hatting of being a technician and a customer services manager.

That has meant, though, overall, and this is the key thing that when we have implemented a Fusion garage, it typically cost us about GBP 200,000 in CapEx, but we will double the profitability of a Fusion site and get that return within 2 years. So it's a really compelling model for customers, and it's a really compelling model for us at Halfords.

We're now going to switch on to the strategy more after the first few being about the interims. So can you briefly summarize the strategy update that you gave earlier?

Sure. So we talked earlier today about our strategy being based around 3 phases of Optimize, Evolve and Scale. And those are 3 phases that are sequential as one comes off the other, albeit there's some overlap between them. And principally Optimize is focusing on what we do today but executing better.

Now that may sound fairly simplistic, but we have a business that is brimming with potential today and we are not yet firing on all cylinders. So if we look at our garages business, that is about ensuring that we increase our utilization ratios within garages. So in terms of making sure that all of the hours that our colleagues are working in garages are being used for revenue-generating work.

In Retail, it's about ensuring that we drive better category management, that we have a focus on services and advice-led selling and that we improve our digital, our e-commerce capability. So those are just some examples. But in essence, it's making sure that we prioritize and focus on the areas where we feel that there is real short-term potential to drive both top line and bottom line growth.

The Evolve piece, which is more about laying the foundation for the future, we've been very clear that we'll move into that evolve phase and start to invest more in the business only when we have earned the right now. What we mean by earned the right is show progress in terms of that optimized state. So show improved financial performance, improved returns on capital.

And then secondly, when we're talking about investing that we can show a clear line between investment and return. So that is -- the Evolve stage is about laying the foundations, particularly in terms of data, particularly in terms of technology. Jo mentioned before, supply chain, we see an opportunity there to structurally improve our cost base.

And then the third stage is Scale, which is really saying that once we have optimized and evolved our business that there is the opportunity to increase our speed of growth and ultimately scale up. Now on the garages side, that will inevitably mean more garages because clearly, there's a limit in any one garage, how much work you can put through that. And on the retail side, it is more likely to be growth through our digital channels, so through e-commerce, but we also see the ability to actually expand what we do today.

We've got a highly successful Halfords Motoring Club, which is a loyalty programme. And over the course of time, we believe there is a really interesting model to be a one-stop shop for all things motoring and cycling. So today, we offer retail, we offer services in terms of service, maintenance, repair, tyres. Over the course of time, we see no reason why we can't offer and potentially in partnership things like breakdown, insurance, car financing, parking even, but to have a single destination where customers can come and by paying a monthly or annual fee, they sort out all of their life in terms of motor and cycling. So that is a longer-term vision, but very much part of our kind of scale ambitions.

And for anyone who would like to look into the strategy update in more detail, there is now a recording available on halfordscompany.com.

Our next question is, you've highlighted the importance of garages and services, what's the customer feedback been like so far? And what makes this such an attractive growth area for you?

So the customer feedback has been great. And actually, if you look at Google reviews, in particular, and Jo will remind me, but I think we've gone from a 4.2 to 4.6 Google rating across our garages. We've seen a big increase in the volume of reviews. So we feel that we're delivering for customers, but it's not just us. We're seeing that back in evidence on kind of Google reviews. And I think particularly, our Fusion model, we get rave reviews from our customers because of that kind of enhanced customer service environment.

Was there an additional part of that question, Ivy? Sorry, apologies. Are we seeing the...

So the next to be mentioned was, what's the customer feedback been like so far? And what makes this such an attractive growth area for you?

Okay. So I think the answer is probably what I was talking about before, is the Fusion model is really something that's driving that. But beyond that, clearly, we have other garages, and we're really focused on driving a better customer environment and more efficient garages.

Next, we have, can you talk a bit more about what you see as opportunities from AI? And how quickly do you think you can see the benefits of what you do here?

Yes. So look, when -- and we've done a lot of thinking, a lot of talking to people about AI, and I think there are 2 things that are clear to me. The companies that are going to reap the most benefit from AI are those who have large amounts of usable data on one hand. And then secondly, large amounts of processes and particularly kind of repeatable processes that can be automated or tackled with AI.

And I think Halfords has plenty of both of those. We have about 20 million customers coming through our doors every year. We have 6 million people in our Halfords Motoring Club. And crucially, in Halfords Motoring Club, it's not just the data we get from them, it's enhanced data in terms of all of their transactions, but we also have marketing permission, so we can really use that data. There's a lot more we can do, I think, on the data side, but we're starting from a really strong position.

And then in terms of processes, there's a lot that we can do in terms of back office, in particular. But I think the other point to make on AI, and I made this earlier in the presentation was that we don't see the core of what Halfords does in danger of being made redundant or obsolete or in some way kind of disintermediated by artificial intelligence. So what I mean by that is, actually, there will always need to be garage technicians, people will always want to walk into a Halfords and get specific advice about their issue and their particular car and want to get that from a Halfords colleague.

But I mentioned this before, Microsoft did a piece of work and published a study in October this year, which listed the 40 jobs most likely to be made obsolete by AI and the 40 jobs least likely. And on the least likely list was tyre and auto technicians. So I think there is some comfort there that Halfords will be around for many years to come.

Our next question is, the share price doesn't seem to reflect the value creation opportunity that you have described this morning. What do you think the market is most skeptical about? And how do you plan to address that?

So look, I always hesitate to get drawn into share price discussions. And obviously, as a Chief Executive, I'm perennially thinking that our company is undervalued and our share price doesn't reflect the full potential of the company. I think what you've got going on at the moment is many different moving parts in the economy in the retail sector and frankly, in terms of our Halfords investor base, we're very lucky in that we've got a great shareholder register with long-term supportive shareholders. And sometimes on any day to day, you can have different levels of liquidity, you can have strange movements up and down. But fundamentally, we're more delivered or I'm more focused on delivering long-term value for Halfords than looking at kind of short-term share price.

What do you see as the biggest competitive advantage today? And what's the biggest threat?

So I would say our biggest competitive advantage is the fact that over half of what we do is service related. So now clearly, if you go to a garage, you will get a service in terms of if your car is being serviced or repaired or having an MOT. But actually on the Retail side of things, we have a large number of the Retail sales that we carry out actually have a service or advice attached to them.

And by that, I mean, someone may come in to buy a roof box or a wiper blade and as well as actually buying that, they're getting it fitted on their car, which in the case of a wiper blade, not sure I could do that. I have fitted a roof box. It took me about 5 hours. And had I know I could have gone to Halfords and got it done quickly and cheaply. I would have been down there in a flash. But my point is, a lot of what we sell as a service or advice attached to it.

And again, most people who walk into our stores are looking either for a service or advice; which car cleaning products should I use for my car, I've got a diesel car, which oil goes in it, et cetera, et cetera. Now that is something which, if you are Amazon or one of the supermarkets, you don't provide that service or that advice. So I think that is something which is genuinely a lasting competitive advantage that I think is a real strength.

Our next question is, can you talk us through your plans for the dividend going forward?

So we declared today an interim dividend of 3p per share, in line with the interim dividend that we paid this time last year. Our dividend policy is to pay a dividend of 1.5 to 2.5x. That is 1.5 to 2.5x covered by underlying profit after tax. We said today that we expect profits to progress each year through the different phases of our plan. And as such, assuming we deliver that, we would expect the dividend to move accordingly.

That brings us to our final question for today. If there's anything we didn't have a chance to address, please feel free to e-mail the team, and they'll be happy to follow up after the session.

Looking ahead to the second half of the year and beyond, how are you feeling about the company's prospects going forward?

So we are confident in our progress, confident in the future ahead. And you would have seen in our interims presentation and our statement today that we are comfortable with our forecast for the remainder of our financial year, so our second half of the year. Clearly, there is -- there will always remain a bit of kind of uncertainty in terms of economic outlook in terms of consumer environment. But I come back to what I said before, that actually a lot of what we sell and what we perform is needs-based. If somebody's car won't start, if they need a new wiper blade, they don't have a choice as to whether they want to buy that or not. They have to. It is needs-based.

So I think we are slightly different as a retailer and as a services-based provider. And therefore, I think we have the ability to navigate any kind of economic backdrop. But fundamentally, we have confidence in Halfords and we look forward to delivering for all our shareholders moving forward.

Thank you. And as that was our final question for today. I'll now hand back to the management team for any closing remarks.

Brilliant. Thank you, Ivy. Just to say thank you, everyone, for participating and listening and asking questions today. As I said, more information can be found on the company and the presentation that I referenced, the webcast can be found there at halfordscompany.com. But thank you for listening, and have a great rest of the day.

Thank you to the management team for joining us today. That concludes the Halfords investor presentation. Please take a moment to complete a short survey following this event. The recording of this presentation will be made available and Engage investor. I hope you enjoyed today's webinar.

Good morning, everyone, and welcome to our strategy update for the Halfords Group. You'll be aware that today, we have also announced a strong set of interim results for the 26 weeks to the 26th of September. And these, together with the webcast are available on our corporate website. I'm very pleased to be setting out my vision for Halfords over the next 5 years and believe that we are at an exciting and compelling moment in time from an investor point of view.

I joined Halfords because I believed in its potential. 7 months on, I'm even more convinced in its potential and believe we have a pathway to growing our business and creating value and benefit for all our shareholders, our customers, colleagues and most relevant to this forum, our shareholders.

At the heart of my conviction is the unique set of assets and capabilities that Halfords possesses and the dynamics of the markets in which we operate. We have leading positions in fragmented and evolving markets. We have an unmatched and scaled combination of stores, garages, mobile vans and digital capability across Motoring products and services and Cycling. We have a trusted, universally recognized brand and over 12,000 expert trained colleagues. We have structural resilience with a focus on needs-based products and services, and 1/3 of our revenue comes from B2B.

We have a debt-free balance sheet together with strong cash flow generation. And in combining assets and capabilities under one roof, the Halfords Group as a whole is much more valuable and has more potential than the sum of its parts. Today, I want to drill down into some of those capabilities and assets. I want to deliver some home truths about our past and where we are today. And most importantly, I want to elaborate on why I am so confident in our future and detail our plans to deliver for all our stakeholders. Jo will talk to how we're going to measure progress and ensure financial discipline, and I will introduce our team and wrap up proceedings.

I mentioned scale and breadth of our assets. As a retailer, we have 370 stores across the United Kingdom and the Republic of Ireland, combined with a strong digital platform together generating about GBP 1 billion in annual Retail sales. We have 500 consumer garages delivering service, maintenance and repair together with tires. We have our Halfords Mobile Expert service with 250 vans, and we have our Commercial Fleet Services business with 550 vans serving business customers up and down the country. And we have Avayler, our Software-as-a-Service business, providing garage management software to third parties. Our more than 12,000 colleagues are solutions experts, trained and knowledgeable, and we continue to invest in young people, bringing 150 new apprentices through our doors last year.

Amongst many other impressive statistics, that scale means that we serve over 20 million customers a year. It means we sell over half of all bikes in the U.K. and handle a significant share of the U.K.'s car keys. Scale in our business drives competitive advantage and is extremely difficult to replicate. But the power of Halfords is in its combination of assets and capabilities and the additional value that it drives. At the most obvious level, we have a single Halfords brand across all our businesses and services. That drives brand authority, relevance and resonance across all things, Motoring and Cycling, and gives us the potential for service and product extensions.

The Halfords brand is served by a single consumer website where customers can buy products or book garage services. We have a combined loyalty program, allowing customers to move seamlessly between our different services, driving higher engagement and subscription revenue. We deploy central specialist functions across our businesses, driving cost and capability advantages. We have buying power, with many of the same suppliers across our divisions. And our B2B efforts, a key and growing part of our business, deliver benefits for corporate clients across the group, whether that is Commercial Fleet Services, Trade Card or Cycle2Work. The power in Halfords is the power of the group and the assets we bring together under one roof.

From a customer point of view, we aim to deliver 3 guiding benefits: convenience, value and expertise. The convenience of digital and nationwide coverage with 85% of the population not further than 15 minutes from Halfords. Value, enabled through our scale, supplier relationships and our own brand products and expertise through our dedicated 12,000 colleagues. Our customers are diverse in their makeup, but broadly fall into 2 categories: those we classify as do-it-for-mes and those we classify as do-it-yourselves. Do-it-for-mes are much greater in number and, as their name suggests, are looking for advice or a service.

And candidly, Halfords is often the only place they can get that advice or service, whether it's having a wiper blade or roof box fitted or getting advice on which oil to buy. The do-it-for-me population is large, and we have a significant opportunity in greater penetration of this market. DIY customers are typically high-value, high-frequency customers who recognize the depth and breadth of our range and our product and service expertise.

Our B2B customers share many of the same priorities: convenience, value and expertise, but place an even greater emphasis on reliability and turnaround speed. Through our national footprint and fleet service capability, we offer a comprehensive single provider solution that keeps businesses moving throughout our nation. Over the last 5 years, we have built a much bigger B2B business across different sectors. This includes our Commercial Fleet Services business, combining what were Lodge, McConechy's and Universal, where we are typically serving HGVs and light commercial vehicles.

B2B is also an important demand driver for our consumer garages where we serve fleet cars and light commercial vehicles with a growing proportion of them being electric vehicles. And on the Retail side, our Cycle2Work scheme helps drive bicycle sales with Trade Card also contributing B2B revenue. B2B gives us a reliable source of demand, can drive a higher utilization of our asset base and is more insulated from the volatility of consumer confidence and spending.

If we look at the markets in which we operate, Halfords is in a strong position. Our largest market is Garages or Motoring Services, a market which is around GBP 17 billion in size. In this space, small local independents still represent the biggest share, leaving room for Halfords as a scaled professional operator, with the capability and credibility to meet the growing complexity of modern Motoring. Many of these independent garages are owner-operated and may face issues not just with generational succession, but with the scale of investment in equipment and skills needed to meet the changing dynamics of Motoring.

So whilst it is early days, we expect competitor garage supply to diminish over time. We've spoken previously about a weak tire market that has struggled for the past 2 years. But the important thing here is that irrespective of growth or decline in the market, with the brand and scale that we have, we should be able to grow and take share in tires.

The Motoring products market is worth around GBP 4 billion. We see significant potential in developing our digital offer, but believe our unique strength is in the combination of digital and physical stores. This is illustrated by the fact that 80% of our digital orders are click and collect. Our combination of products with an attached service is not something that Amazon or any other online retailer can easily provide.

The Cycling market remains a core part of our proposition and strategically important, both as a significant business in its own right, but also as a gateway to Halfords, from the first bikes that introduce families to our brand to the enthusiasts who invest in the latest innovations through our specialist brand Tredz. This year, we have seen good growth in Cycling, and the market overall seems to be in improving health. Across the group, we represent more than half of the Cycling market in volume terms, including all parts and accessories as well as bikes themselves.

Taken all together, the markets we operate in are large, robust and dynamic, providing a strong foundation for Halfords' long-term growth and future strategy.

I mentioned that our markets are dynamic, and there are some clear trends that Halfords must navigate. Firstly, and most obviously, is the move to electric, and that's both cars and bikes. Electric vehicles currently constitute about 5% of the U.K. car parc of 35 million cars. Despite successive government inconsistency, we know 2 things with absolute certainty. First, that, that EV number will grow. And second, internal combustion engine cars will be on our roads for many, many years to come. Whatever the growth or scenario, we are well prepared. We have almost 700 EV trained technicians, and the majority of our garages work on EV cars. We're ahead of the curve, investing early and building capability to serve EV customers at scale as the demand arrives.

And although there are differences between EVs and internal combustion engine cars, they all need tires, and they all need to be serviced, maintained and repaired. It's worth saying that the same goes for any other car powered by a different technology or fuel. At the end of the day, we are fuel and technology agnostic and are confident that we can navigate any shifts or trends.

At the other end of the spectrum, another structural trend to touch on is the aging car parc in the U.K. Despite the rise of EVs and new technology, the average vehicle in the U.K. is now close to 10 years old, shifting demand away from dealer-based early life servicing towards independent aftermarket providers, a space where Halfords is exceptionally strong. Over the last decade, the U.K. has seen the rise of the convenience economy, and this has been reflected in the Motoring products and services market. More than ever, consumers want convenience. They want someone to do it for them, removing hassle and fitting around their busy lives. Today's customers are also more demanding and digitally engaged. With our nationwide reach, integrated service model and advanced digital capability, Halfords is uniquely placed to deliver on this shift towards convenience and service, both in our garages and our stores.

Halfords has a long and illustrious history. But similar to most consumer businesses, it has had a fairly volatile decade post Brexit and lastly COVID. In that time, it has had to navigate some choppy waters, but it has made 3 important strategic shifts, which I've mentioned but want to reiterate. First is a shift to a greater proportion of services, with service-related revenue now representing over half the total. Service revenue is typically higher margin and more resilient being more needs based. Secondly, we've grown our B2B business with around 1/3 of revenue now generated by B2B sources. B2B revenue is generally less impacted by economic swings and consumer confidence and is therefore, more consistent and reliable. And thirdly, we executed a material cost reduction program to mitigate the inflationary pressures over the last 3 years. These shifts are the right ones to have made and set us up well for future success.

Halfords is a fantastic company, brimming with potential, but arguably over -- our performance over the last 3 years has not matched that potential. And I think an element of candor and self-reflection is needed to ensure that as we map out the years ahead, we take the necessary learnings forward with us.

First, as I have said, we have rightly evolved into a services-led business. But with that change, we have failed to deliver the uplift in margin we should expect from services being a higher proportion of revenue. That must and will change. And in particular, we will be targeting margin expansion in our Garages business.

Over the last few years, we have made a number of acquisitions. These acquisitions have given us additional scale and capability, but our integration has not been good enough, and we have not driven expected returns. There is more to do here, but I am clear that in the immediate term, any further acquisitions would be a distraction from the task in hand.

Halfords is a diversified business with breadth and inherent complexity, but we've often found ourselves spread too thinly chasing too many priorities. That will change, with a simplification of action and a focus on the things that matter and the things that will drive value in our business.

Halfords has an enviably rich and powerful data set, which we use effectively for CRM and segmentation, but we are yet to use this data for real-time decisioning, personalization or predictive analytics, and we need to develop our data platform further. Doing so effectively will increase customer lifetime value and drive profit growth.

And I talked about the power of the Halfords Group, how the combination of our assets yields considerable benefit, but we have not sufficiently joined these assets from a customer point of view. The customer journey between our group assets is not smooth enough, and it is not evident enough to customers what exactly we offer. We need to better join our assets together and better promote what we offer. If we do this well, there is much to gain.

And overall, I believe we need to drive better and more visible returns on the capital we deploy. This is very much front of mind and something we will ensure we get the required focus. So there are both lessons to be learned and challenges to meet, but fundamentally, we have a unique and fantastic business. And while I've been candid about where we need to improve, it's equally important to recognize the many strengths already in place. So hopefully, I've given a clear articulation of where I see our strengths and also some of the home truths that we need to face into.

I've also covered some of the dynamics and trends of the markets we play in, but I now want to talk about where we believe we can take our business and the future ahead. When I decided to join Halfords, it was because I could see a business with deep foundations, a strong sense of purpose and a differentiated platform most companies would envy. Now having spent time across the organization, I'm even more convinced. The fundamentals are intact, the potential is significant and the challenges we face are executional, not structural. And it's not just me who believes this. Let's hear from 2 of our newest team members of our executive team.

I joined Halfords because I believe it has the potential to redefine the specialty Retail business model for the future. I've had the privilege of advising many retailers in the U.K. and Europe and all of them were navigating the shift online, fiercely competitive marketplaces, how to create value-add experiences in stores, how to make cross-channel convenience come to life and also how to personalize their proposition for customers.

I fundamentally believe that the retailers who thrive over the next decade will be those who successfully fuse products and services to create solutions for customers. And what excites me about Halfords is that we have the required assets and capabilities to drive that new model now. We have the asset to create an ecosystem around customers for all of their car and bike needs. We have the skills and operating model to deliver services in retail and our mobile vans and garages network for more complex jobs. We've got the colleague expertise and culture to offer trusted, helpful in-person advice.

We've got the supply chain that can support click and collect within an hour on many of our lines, and the relevance of our store estate is underpinned by the fact that over 80% of our online sales are picked up in store. And finally, our data gives us deep understanding of our customers, their vehicles and bikes, their service history and a predictive view on where they'll need us next. There is still so much more we can do with our data to unlock value for customers and realize that potential.

So I'm energized by the significant opportunity I see in Halfords, and I'm looking forward to realizing many of those over the coming few years.

I joined Halfords because I believe in the power of its brand and its unrivaled scale and coverage in the U.K. Halfords really is unique. In fact, there's no one else in the U.K. that can offer customers the same level of convenience and expertise at such scale, all wrapped up in such a trusted brand across stores, garages and mobile. It's a fabulous combination.

And what I'm doing now at Halfords feels really familiar. I've done this before, transforming the mycar offer in Australia, and I see so much of the same potential in Halfords, and I can really see where the opportunities lie. Fusion is really exciting. I'm keen to unlock its full potential by creating an exceptional customer experience and driving profitability. I also see huge opportunity by simplifying operations and creating a culture of operational excellence, which will, in turn, drive profit from improved utilization across the existing garage estate. And I'm absolutely clear that our colleagues are indeed our greatest asset. And with focus on developing their skills and expertise and retaining that talent, we can create fantastic career opportunities and really deliver exceptional customer service.

I'm incredibly proud to be part of the Halfords team and excited for the future.

Brilliant. So that's Jess, our Retail Managing Director; and Adam, our Garages Managing Director. What I've seen since joining confirms that we don't need to reinvent Halfords though. We need to execute with focus. The opportunity isn't in radical change. It's in doing the important things consistently well and sequencing them properly. Our strategy ahead is simple, disciplined and built around 3 clear phases: optimize, evolve and scale. I'll go into the detail of these phases shortly, but at a summary level, optimize means maximizing what we already have and what we already do. It's about getting more value faster and more consistently from the assets already in place. This is the near-term value creation phase, and the work is already underway.

The evolve phase means having a business that is future-proof, lean, effective and efficient. It means strengthening our foundations to deliver sustainable growth and continuing to invest in key areas such as technology, data and our physical estate. And then as our core strengthens and our foundations evolve, we can have the confidence to grow in scale, taking advantage of our operating leverage. And the nature of how we scale will vary across our business divisions, as I will discuss.

These 3 phases are time bound with some overlap between them, as you can see on this slide. But the important thing to note is that our optimization is already underway and realizing short-term benefits, contributing to the strong H1 results we announced earlier this morning. And likewise, we see an opportunity for scaling and building real value within a relatively short time frame.

So let's have a look at these phases in a bit more detail. The optimize phase is a crucial first step in our strategy designed to establish early momentum and unlock the latent value within our core business. We have 3 focus areas to optimize our Retail business, better category management, services expansion and e-commerce.

Firstly, category management. We believe that improved category management has the potential to significantly drive our sales and margin. Candidly, it's not something we currently do well at Halfords. In summary terms, it means taking each major product category and applying a forensic lens to optimize our product assortment, our pricing and promotions to drive relevance for customers and unlock growth. It requires a very keen eye on customer and competitor dynamics and for us, building on our strong own-brand products to create even more differentiation that is unique to Halfords.

It's worth mentioning here that we have an amazing track record in own-brand products that is sometimes overlooked or forgotten. In Cycling, we have developed Carrera, the leading mainstream Cycling brand in the U.K. by value and Apollo, the largest brand by volume. Improving our category management will take a little time as we cycle through our categories, but we have started over the last month with Cycling parts and accessories and a few selected areas of Motoring. We expect to start to see results from this initiative as soon as early FY '27, but we have confidence in the scale of impact we can create when we focus on the right need states for customers. Through work in our impulse category, we've already driven over 70% year-on-year growth through much stronger impulse and gifting lines.

Our second opportunity is to improve and better promote our services proposition, which sits at the heart of what makes Halfords unique. For millions of customers, we are not just a retailer. We are a trusted expert that solves their problems in one visit. We're therefore, really focusing on optimizing our service offering across both Motoring and Cycling, ensuring we have the right offer, pricing and operating model in place. And we're driving awareness of the full breadth of our services to attract more customers, which you'll start to see in our marketing and media in the coming months.

The opportunity is clear. Services are one of our most defensible advantages. They also offer higher-margin revenue and are less price sensitive. They cannot be replicated credibly by online pure players or mass or discount retailers, and they deepen our relationships with customers who increasingly value the convenience and reassurance we bring them.

Thirdly, as I mentioned, digital already represents around 25% of our total Retail sales, and around 80% of those orders are collected in store. That shows the strength of our integrated model and the importance of our digital channel in generating customer footfall. But it also highlights a simple truth: with the scale of our online reach and the breadth of our retail and services proposition, we should be capturing more of that demand more consistently. In short, we have an opportunity to grow our online share.

Having come from a pure-play online retailer, I know that applying the right focus and resources will yield results. And moving forward, I expect our digital sales growth to outstrip our core physical Retail sales growth. Progress here is about improving core website functionality and performance, and it's also about improving customer journeys and processes. Alongside this, we're sharpening our offer, expanding our online ranges, improving availability, tightening product descriptions and applying a more scientific approach to pricing and presentation. These are the basics of good digital retailing and with our scale, they will have a meaningful impact.

If we turn now to our Garages division, there is much we can do to optimize our business over the short term. As I've already explained, Motoring Services is a large fragmented market and our biggest opportunity over the next few years.

I'll start with the program you'll know most about, our Fusion rollout. By the end of this financial year, we will have more than 100 Fusion garages in operation, with up to another 50 or so to roll out in FY '27. We have a tried and tested formula that customers love and typically drives a doubling of profitability within 2 years. Over the last 5 years, we have materially changed the shape of our Garages business. Today, we have scale and effective national coverage, but we now need to drive operating standards and improve garage utilization rates to drive margin accretion and profitability.

The same principles apply in our mobile van business and our Commercial Fleet Services. Fundamentally, this is about operational excellence and a ruthless focus on efficiency and process improvement. We have a range of activities underpinning this that are all in flight. We're implementing a zonal operating model, which allows us to redeploy labor to high-demand garages rather than recruit new technicians, effectively balancing supply and demand. As well as improving total utilization, we're now focused on ensuring we have the right skills mix in each site, with our master technicians focusing on the complex work, and service and diagnostic technicians picking up the rest. By getting the right people on the right job, we will deliver a better service and reduce the cost per job. We're also bringing in new equipment to reduce job times. For example, we're rolling out new equipment for wheel alignment, which halves the time taken to complete the work.

These are just a few examples of the work already in train in our garage business that I'm confident will create a more profitable garage and mobile business and deliver an even better customer experience.

I mentioned that the power in Halfords is the power of the group and the fact that our assets are stronger together than alone, and there is much we can do to optimize that group dynamic. Uniting the Group is the Halfords brand, trusted and well recognized. But for understandable reasons over the last few years, we have not sufficiently invested in our brand. That has meant that we've lost ground in terms of consideration and some of our performance marketing channels such as Google and PPC have lacked cut through.

We've been running localized trials in certain geographic areas, and we have a high degree of confidence that an investment in advertising will strengthen the foundations of the Halfords brand and yield a rapid payback. This is not about a big bet marketing campaign. This is iterative, spending little, proving return and driving overall business performance. We'll measure our success and returns here in customer numbers and in our brand health metrics and transaction volumes.

Halfords Motoring Club has been a standout achievement over the last few years. From a standing start, we've built a loyalty base of 6 million customers, with over 400,000 of those taking up a paid subscription in premium membership. They generate about GBP 20 million of annual recurring revenue for an MOT subscription, which also offers a host of other benefits while providing us with valuable vehicle data. Over the medium term, we have plans to transform club and make it the central destination for our customers to manage all their motoring and cycling needs. But in the short term, we'll continue to prioritize premium and ensure that our promotional mechanics are driving incremental margin through our standard membership. We'll measure success here in the numbers and contribution of premium membership.

So there is a lot to get our teeth into in optimizing our business. What I've mentioned today are some of the key parts of our optimize phase, but it is not exhaustive, and there are other aspects of what we need to tackle. None of this, though, is revolutionary or rocket science, and that is good news. It's all clearly within our grasp, and we are on with it with clear plans and associated resources.

But we also need to think about how we drive value over the medium and longer term, how we strengthen and evolve our business. Some of this will require investment, but we are very clear on 2 things. First, we need to earn the right to invest further. That means that we need to show progress in optimizing the business, and we need to show improved financial performance. And second, if we do invest, we have to show a very clear line between investment and returns. So there is a phasing here, optimize first and earn the right to invest and evolve.

The evolve phase, though, is not just about investment. It's about self-help and business improvement. There are 2 clear areas or pillars that will help drive value. First is having a lean and effective business being fit for the future. Second is evolving our tech and data capability, and I'll take each of these in turn.

As a business, we've managed our costs over the last few years, but there is an element of painting the Forth Road Bridge here. As soon as you finish running a cost program, you need to go again. And frankly, that should be part of any well-run business. But I believe there are bigger opportunities to structurally reduce our costs and realize ongoing annual savings as well as having a more effective business.

Having driven a GBP 20 million annualized supply chain benefit in my previous business, I believe we have a compelling opportunity to improve our supply chain logistics, take out cost and improve productivity. We will need to work through cost and benefit details, but we believe there will be a clear business case and compelling returns here.

And likewise, we see an opportunity to reengineer our back office, build better business intelligence and reduce costs by upgrading our enterprise resource planning, or ERP system. These programs of work once ground businesses to a halt in their scope and enormity, but this will likely be an upgrade, not a replacement, and we will take a phased and iterative approach rather than in one big bang. This will also be an important enabler of our future scale phase, which I'll come on and talk about in a minute.

Finally, we believe that there is an opportunity to improve effectiveness and reduce cost by looking at our organizational structure and how we work with outsourcers. It's worth saying that in all of these areas, we are highly functional today, so there are choices that we can make. But to be crystal clear, we will only proceed with a clear and quantified line between spend and return. However, with a debt-free balance sheet, we should have the confidence to pursue projects with clear returns that give us an uplift in our long-term profitability.

Technology and data have the potential to fuel significant growth in our business. In the medium term, there are tech projects that we have already clearly identified that will drive value. Amongst these, we plan to fully roll out Avayler, our proprietary garages management software, to all parts of our Garages business. This will further drive utilization, improve margins and provide a better customer experience. And in time, in Retail, we want to upgrade our current point-of-sale system, iServe, improving speed to serve and freeing up colleagues to spend more time helping and advising customers.

I mentioned earlier as part of our home truth that we had not yet made full use of our data potential and that we had work to do. Today, we use data effectively to reward loyalty and drive CRM. And this activity drives both spend and customer engagement, but we have the potential to do much more with significant benefit by further developing our data platform. Through our evolve stage, we'll build the capability for real-time decisioning and much greater personalization. We see an opportunity for predictive analytics for customers and their cars, allowing us to anticipate issues before they arise, provide proactive maintenance and deliver a rapid, seamless service. This will differentiate our customer experience, drive sales and reduce our cost to serve.

We will also improve how we use data to inform business reporting and decision-making, enabling faster evidence-based decisions across the business. In particular, we see the potential to improve marketing effectiveness, pricing and use of promo.

We have a lot of data. 20 million customers engage with us every year. We have 12 million vehicle registration numbers with owner data. And in Halfords Motoring Club, we're building an even richer data set with marketing permissions. Utilizing that data for our own purposes and in partnership with others, such as through a retail media network or through introducing other services will be a key area of focus for us.

The next 5 years will likely see the widespread adoption of AI in businesses, and those who have workable data are likely to be the ones who benefit the most. Whilst we don't have a crystal ball, we see AI as being much more of an opportunity than a threat. We see significant opportunity in automating processes, improving back-office efficiency and in improving insight, and we're on with it. We started at a small scale to experiment and change things using both internal and external resource. But this is test and learn rather than anything transformational at this point, but we are enthused and excited about the potential, and we'll continue to look at ways in which we can harness AI.

But at the other end of the spectrum, we do not believe our business or the services we provide risk being made redundant or being disintermediated. Much of the physical work in a garage is difficult to automate and likewise, AI or automation would struggle with many of the services we perform in our retail stores. Indeed, it's not just our opinion, in October of this year, Microsoft published a list of the top 40 jobs likely to be replaced by AI and the top 40 with most resilience. These included tire and garage technicians. Our services and products are unlikely to be made redundant, but AI should help us be much more efficient and free up our colleagues to spend more time supporting customers and so generating revenue.

The third and final phase of our strategy is about the scaling of the business. Clearly, we're trying to scale our business organically every day of the week. But our strong belief is that as we optimize and evolve and invest in our business, we'll be in a position to scale at much greater pace.

From a Garages' perspective, this will mean opening more garages, but only once our estate is at optimum utilization. More garages can be achieved through organic openings, but more likely, we will scale through acquisition. The dynamics here play in our favor, and we expect there to continue to be a number of opportunities on the market that will allow us to scale rapidly.

For Retail, scaling is likely to come via our digital channel, where we see significant opportunity to grow our existing business, but also expand our markets and range in a low-risk CapEx-light fashion. We also believe we can ultimately broaden our offer in partnership to become the digital go-to destination for all things, Motoring and Cycling, a digital one-stop shop, a single point where you can access products and services for all things, Motoring and Cycling, under one brand, one account with a singular website or access.

Today, we offer products, and we offer servicing, maintenance, repair and MOTs. In partnership, we see the potential to offer breakdown, insurance, financing, parking and many other benefits. From a customer point of view, the hassle of car ownership is removed. You have one entity to deal with and one monthly or annual fee that covers all your motoring needs.

This is not an unachievable pipe dream. We've built the core component parts and have a working model in our Halfords Motoring Club Premium tier. But there is much more we can do and need to do before we really push and scale this. But ultimately, we believe we are by far and away the best positioned company to achieve this, and we see real value and potential here.

So I've outlined the 3 phases of execution that we will implement and what those will mean in practice, but I now wanted to hand over to Jo to talk about how we will measure success and the financial performance and returns we can expect and the disciplines we will look to adhere to.

Thank you, Henry, and good morning, everyone. Last time we talked about strategy was at our CMD in April 2023. We shared in detail our future targets and the building blocks that would get us there. The reality since then is that while we've worked hard to deliver the cost savings and market share growth we targeted, we struggled to meaningfully grow profits against the challenging consumer and inflationary backdrop.

Our markets have been slower to recover to pre-COVID levels than anticipated, and the GBP 90 million of cost savings delivered in the last 3 years to March '25 have not quite mitigated over GBP 98 million of cost inflation during the same period. We have, however, manage cash and working capital well and strengthened our balance sheet throughout this period.

Notwithstanding the challenges of the last few years, I'm pleased to say I'm more optimistic about our future. While I'm not going to share a detailed forecast today, I will lay out how we will measure success, the trajectory we anticipate and how we will allocate capital and manage our balance sheet going forward.

As we move through the next few years, we will consistently come back to the same measures to indicate progress. Financially, we expect to deliver like-for-like sales growth, with faster growth through our digital channels, operating margin expansion, underlying PBT progression and a return on capital that grows to exceed the cost of capital. Clearly, as we look forward, we cannot predict the external forces that may impact us, specifically, how consumer spending patterns may change, what successive governments and budgets may bring, or how geopolitics will evolve, and the impact this may have on our cost base. But we do know our business, the strength of our brand, the attractive markets we operate in and the unmatched scale we have through our unique combination of digital and physical assets.

We have a hugely differentiated service-led customer proposition, delivered through 12,000 skilled colleagues and led by a new and experienced management team. We also know we're starting from a relatively low profit base and the opportunity from data and technology is significant. And importantly, we have a strong balance sheet and a cash-generative business which gives us not only resilience, but the ability to invest in projects that will drive growth in underlying profit and returns for shareholders. As such, we do believe that with discipline we can deliver against these measures sustainably and over time.

That said, each phase of the plan will have slightly different dynamics. Throughout the plan, we anticipate CapEx to maintain and drive optimization improvements within our existing business, continuing at broadly similar levels to those seen historically, with investment between GBP 55 million and GBP 65 million per annum. In the evolve phase, we see opportunity to deliver returns from additional investments to drive efficiency and cost savings in our supply chain and in our central overhead, including through upgrading our ERP. In this phase, we will make incremental investment where we see attractive and incremental returns. And we won't move beyond the previously mentioned GBP 55 million to GBP 65 million per annum investment range until we earn the right to do so by showing good momentum in our underlying business. We'll come back to you with more detail on these programs and their costs and benefits once we're confident in the business case returns and ready to get started.

Finally, and to be clear, only once our model is optimized and our investments are paying off, will we enter the scale phase, using our balance sheet to enable investment in acquisitions, expansion and further growth. We will operate with discipline throughout all phases of the plan, delivering progress on the KPIs I've described and always operating within our previously guided net debt-to-EBITDA range of 0 to 0.8x, excluding leases.

One of our strengths today is undoubtedly our strong balance sheet. We have GBP 180 million debt facility committed to April '29, our balance sheet is currently in a net cash position of GBP 18.6 million as reported this morning. And our lease lengths and therefore, liabilities are low. Leverage, including lease debt is 1.3x. We, therefore, have resilience in uncertain times and the financial firepower to invest where there's opportunity to deliver compelling returns.

As we have updated the strategy, we've revisited our capital allocation priorities, and there is very little change. Maintaining a strong balance sheet remains our core guardrail and #1 priority as we look forward. We will continue to operate such that leverage, excluding lease, that does not exceed 0.8x underlying EBITDA at any stage through the plan. Secondly, we continue to see opportunity to invest to maintain and grow our business, as Henry has described.

The dividend becomes our third priority, now ahead of M&A. This switch reflects our focus on growing the core business and returning to shareholders through an intention that the dividend progresses as underlying profit progresses. As such, our dividend policy remains unchanged in that we will pay a dividend that's covered 1.5x to 2.5x by underlying profit after tax. M&A, therefore, becomes our fourth priority, most likely once we get to the scale phase of our plan. And thereafter, we would return surplus cash to shareholders.

To conclude, the plan Henry has described is clear and compelling. There's a refreshed leadership team in place with clear priorities and a focus on execution and as a team, we're all excited about this next chapter. I believe the potential in this business is enormous, and there are clear opportunities to drive shareholder value in the years to come. We will report consistently on the measures I've laid out today in future announcements, and we'll lay out our quantified investment plans and anticipated returns when we've earned the right to move into the next phase. The results going forward should speak for themselves.

I'll hand you back now to Henry.

Fantastic. Thank you, Jo. So what I hope I have shown is that we have a clear, achievable and compelling plan for Halfords over the next 5 years. It may not be as shiny or gimmicky as the Tesla Cybertruck or Robotaxi launch, but we're okay with that. We're not pulling rabbits out of hats here, and we do not need to. Success and growth will be achieved by a clear focus and execution of a plan.

But it does ask the question, "Who is executing that plan, and why will things be different moving forward?" Well, I'm very excited to be working alongside a very talented team of people, some of whom are new to Halfords, and all of them bring relevant experience and a track record of success as well as genuine leadership and drive.

Earlier this year, we hired Adam Pay as the Managing Director of our Garages business. Adam spent 10 years of his career at Kwik Fit and most recently was the Managing Director of mycar, Australia's largest garages business. Over the course of 10 years there, he transformed the business from loss-making to market leader. Adam brings energy, leadership and hands-on experience, and he's the only person I know who can change a fan belt and read a balance sheet and at the same time.

Jess Frame joined us 4 months ago as Managing Director of our Retail business. Jess was previously the Managing Partner of BCG's London office, advising many of the U.K.'s largest retailers. And she's done stints at Tesco and as Chief Executive of a PE-backed veterinary business. Jess has landed with pace and drive and has high ambitions for our Retail business.

And most recently, Sarah Haywood joined us as our Chief Information Officer. Sarah had previously been the global CIO for the Carlsberg Group and brings a wealth of experience. Sarah's leadership will be key in navigating a changing tech world and guiding us through change.

Our 3 newest executives join an existing team with huge experience and capability alongside Jo, our CFO; Paul O'Hara, our Chief People Officer; Karen Bellairs, our Chief Customer Officer; and Chris McShane, our B2B and Avayler MD, all of whom make up our team. And with the exception of Karen, all are here today, and Jess and Adam will join our Q&A in a minute.

And culturally and stylistically, we intend for things to be different. In addition to driving more of a performance culture, we're pushing a simplification of activity, focusing on the core levers that matter, that create customer benefit or drive performance. Halfords is a broad and complex business.

But over the years, I think we've made it unnecessarily complicated and have added too many new initiatives and projects. These have stretched us, spread us too thinly and distracted us from the basics of the business. We're looking to bring simplicity, focus and clear prioritization to what we do. Part of that is governance and cadence. Part of it is having the right people and leadership, and it's about creating the right culture. The good news here is that we are pushing against an open door when it comes to our people and the change, agenda we want to implement.

As Jo outlined, we also want to make sure that we are disciplined and rigorous in spending capital and driving returns, and if we're not getting the returns, to be transparent and explain why. I also want to shift our narrative from sharing plans that then struggle to materialize to reporting on what we have actually done and achieved and the associated financial outcome.

So I wanted to draw matters to a conclusion and summarize some of the key points that you've heard today. I believe we have a unique and valuable business, capable of sustained top and bottom line growth. No one else has our asset base, and we are operating in markets that play to our strengths. Although there are explainable reasons, I recognize our more recent financial performance has been underwhelming compared to our potential.

I also recognize that the Halfords machine is not yet humming. We have a fantastic group of assets, but both in isolation and as a combination, they are some way away from their potential. But we do not need a strategic pivot. We need delivery of the basics. There is nothing broken, but we need to apply focus, simplicity and disciplined operational execution.

In the short term, this focus will deliver progression in our profit performance across all our divisions. As we drive improved performance, we earn the right to further invest and evolve our business, building additional foundations for growth. We see a significant opportunity to better utilize the data at our disposal and harness technology. And as we optimize and evolve, we will significantly increase our ability to scale.

It is a phased approach, but one that delivers returns along the way and will drive value. We're purposely not giving detailed forecast today, but we will consistently track and report on key performance indicators that will measure our progress. But we are clear. Our first job is to build confidence in our investor base that we can consistently deliver results and drive required returns on capital. We have clear plans to do this. We have a great senior team, and we have over 12,000 colleagues who are committed and passionate about the business. I'm excited for what together we can achieve.

So that concludes today's presentation. And I'd like to invite Jo, Adam and Jess to join us for Q&A. And I think in terms of asking questions, if you can identify who you are and what organization you're from.

Kate?

I'm Kate Calvert from Investec. Three questions from me. On the fiscal estate, does Halfords have too many retail stores? And what is the ideal sort of number of Autocentres over the longer term? In terms of my second question, I know you're not giving your forecast, but could you talk a little bit about the margin recovery opportunity? You did talk about expansion of margins within Autocentres, but you didn't mention Retail. So is the sort of 7% historic Autocentres profit margin that's being talked about, is that still valid? And what are your thoughts on Retail? And I think my third question is, when I go into a retail store in 3 to 5 years' time, how different is it going to look versus today? What sort of new product categories might there be or service proposition?

Okay. Brilliant. So just the one question, Kate.

Yes.

Brilliant. Okay. So we -- if I tackle the first bit around size of estate and then maybe get some commentary from Adam and Jess on that, too. Jo, you talked to the margin point on -- I can't read that. The margin point...

Margin recovery.

Margin recovery. And then what was the last bit?

Retail store, how will they look.

What they will look? I'll let Jess take that. So I think, look, in terms of the Retail estate, important thing to note today is that they are all profitable and they're all on short leases. And broadly, we're comfortable with that. I think moving forward, there may be some change to that, but nothing radical. And I think on the Garages estate, post-acquisition, we've done a little bit of trimming in terms of ensuring that we've got the right garages in the right local markets. But again, we don't see significant change there. In any given year, there may be a few closures and a few openings. Indeed, we opened a new store this year in Reading. But fundamentally, those won't change significantly.

I think over the longer term, and I think we've made kind of mention of like 800 garages. My view actually is that there shouldn't necessarily be an upper limit because actually, the Garages market is typically very local. So actually, one of the attractive things about Garages is that, frankly, we can continue to scale up and up and up, but it does require opening more units, whereas clearly, with digital retail, you don't need to do that. But yes, broadly speaking, I don't think there'll be a significant change.

Jo, do you want to do the margin point and then maybe Adam and Jess can talk about...

Yes, absolutely. So in terms of the margin opportunity in Autocentres, I think the numbers we previously had out there were 5% to 6%, Kate. And I think we do continue to believe that's an achievable target for our Autocentre business. The opportunity lies in driving utilization and reducing effectively the cost to serve as well as adding more high-margin add-on services, particularly within our tire business. And we've had a very successful first half of the year in terms of increasing income per tire and growing our wheel balance and alignment services using some of the equipment that Henry described earlier. So I do believe we can get to those targets in time.

Adam, I don't know if you've got anything to add on that.

No. Spot on, Jo. I think they're realistic numbers. I think the work that we're doing to simplify processes, improve equipment, speed things up in Garages will help us get there in the short to medium term.

Do you want to take Retail?

Jess, do you want to tackle the Retail bit?

I think your question on have we got too many shops is sort of the same in terms of what you're going to see. So just sort of reinforce Henry's point. So Halfords has had real discipline over the size of its estate over the last few years. So we've actually exited 100 shops since 2018. So what you see today is a tight footprint, which, as Henry said, positively contributes across the estate.

And as Henry mentioned in his presentation, our network, our footprint is what gives us this convenience offer and the route of the omnichannel proposition. We must remember that Halfords, as we move more and more into services, our stores don't play a traditional role as they do for many retailers. This is where our service events are taking place in the car parc essentially. So it's a really important role. It's a huge part of the omnichannel proposition.

And at the same time, there are clearly opportunities to drive sales densities out of our stores. So it's not necessarily about fewer, but it's certainly about making that space work much harder.

In terms of how different we look today, I don't want to presuppose the answer of sort of 4 months in. I can say that my current point of view is that format innovation is not going to be where we see a lot of value in the short to medium term. There's a huge amount we can do. You alluded to it, Kate, with our categories driving more sales densities, really focusing our core range to create space for newness and innovation and frankly more reasons for customers to come and shop with us. I won't predict ahead what those categ going to look like. We will absolutely stay core to the motoring and cycling needs that we surround our customer with, but there is plenty of opportunity that we see to do that.

Jonathan Pritchard at Peel Hunt. You said the brand is extremely well known, recognition of the brand is high. What are the bits that people don't get? What don't they associate Halfords with that they should? And how are you going to change that? And then, just as it's a one rule, but I'll add another one, just a one word answer. A cycle membership club, feasible in the short term or more medium or long term?

Yes. So I think -- on the brand and what people don't necessarily get, I think there are 2 things. One, I think, our Garages offering, I'm not sure everyone fully understands that. And then I think the other piece is the services element, the convenience of actually going to a retail store and being able to have a wiper blade fitted or get advice or do more of this kind of do-it-for-me. So we talked about broadly our kind of DIY customers who I think are fully knowledgeable about what Halfords offers, but I think they can also go to a Halfords and kind of serve themselves. The do-it-for-me customers, I think, just don't understand the full range of our proposition, either in terms of into Garages or the fact that actually they can bring any motoring or cycling problem to us, and we will fix it. So I think it's those kind of core things.

Cycling Club, I would say, is not a priority for us right now. And I think kind of going back to -- it would be very easy for me to say, yes, a great idea. We're trying to drive this prioritization and simplification of focus. So it is not a high priority right now.

Ben, sorry, did you...

Just a couple of questions. Firstly, just on the emphasis on online seems to be coming more through Retail. How does that sort of square with the whole sort of cross-selling more into the Garages? And are there any margin implications? And I guess you've answered Kate's question on the size of the Retail, but any sort of thoughts how you're going to sort of square that?

Secondly, just on Motoring Club, it seems to have accelerated really strongly. What's been necessarily driving that? Has that actually been incremental customers who are new to Halfords who are coming in or -- anything really you can add to that? And I guess the third question is on the evolve side. It looks like there's sort of quite a lot of work to be done in the supply chain and how you are going to maintain your CapEx and the guide rails. It feels like there's quite a lot to spend there. But really, any thoughts there would be great.

So would you mind repeating the first question?

Sorry, Ben.

First question is just on, there seems to be an emphasis on online within the Retail and how that squares with the need to cross-sell services into Garages?

Yes. So look, I think overall, we have a -- we've got one website, which our customers go to, whether they want to buy a roof box or screen wash or put their car in for an MOT. So there is a big focus for us in terms of making sure that those kind of digital customer journeys are improved. So when we talk about digital, it's both the kind of experience, which hits all part of our business.

For Retail, we then have kind of e-commerce where we're selling those products. For Garages, people will find and pay for services, but they will also then book to have that service in a garage. So for Garages, it tends to be more about the journey to the physical unit, whereas in e-commerce, people can buy from us without actually setting foot in one of our physical outlets. But absolutely, digital is important for Garages as well, but there is that distinction in terms of products and services.

The Halfords Motoring Club, we haven't done anything particularly to drive that. It is something that we do push in our stores and in our garages. So I think it's just a reflection of successful execution of that. But yes, it is growing. And yes, it is important for us. And the...

The third question was on the CapEx, to evolve the supply chain. The CapEx guidance that I gave of GBP 55 million to GBP 65 million is really the CapEx that we need to maintain and optimize our core business. What we said was we would only move beyond that GBP 55 million to GBP 65 million investment envelope once we've earned the right to do so by showing momentum in our underlying business. And then we would come back with the investment opportunities and clear line of sight to the returns that they would generate.

So I think we would expect to invest beyond that to optimize the supply chain, but only when there's clear line of sight to returns, and whether that's a CapEx or OpEx investment, remains to be seen.

Manjari.

It's Manjari Dhar, RBC. I just had 2 sort of broader ones and maybe one quick one. Just on the sort of garage optimization work, I was just wondering how much of that is -- needs to be done on sort of the existing Halfords garages, and how much is it needs to be done on the garages you've acquired over the last few years? Just trying to get a sense of sort of where that integration stands now.

And then secondly, I think you mentioned it very briefly about in the sort of evolve stage about retail media and other opportunities. I was just wondering if you could give some more color on what that could look like, what that means for the proposition? And then just finally, Jo, I think in the prerecorded presentation, you gave the H1 FX hedge rates. I just wonder if you could give some -- give the H2 rates as well.

Okay. Adam, do you want to talk to the -- in terms of where we need the optimization, is it existing Halfords or acquisition areas? I mean the answer is both, but you'll give more color.

It is both, and there are a lot more together than they were previously now. So we're not talking about them internally any differently. The opportunity to work through improving processes, providing equipment, providing tooling and training that we need to smooth through at the front end is exactly the same, whether it's a Halfords, also center or one of the acquisitions. It's working really well for us now. And I think the fact that we've got so much unity across those brands now is really helping.

And I think it's worth noting that National was predominantly a tire brand. One of the things that we've done is moved more service maintenance repair into that, which has driven higher-margin revenue. So that's been a kind of clear and obvious thing to do.

On the retail media network, we do actually have a -- we do actually use retail media today, but it is predominantly with existing suppliers. So if you think on the kind of battery side, we work with Yuasa, you'll find online and with our customers, we are promoting Yuasa and various other existing suppliers. There is an opportunity to go beyond our supplier base. So I'm kind of making it up, but a Nissan or a Toyota, if they want to access 20 million U.K. customers, car buying U.K. customers, then obviously, Halfords would be a kind of important partner. We don't currently do that at the moment.

So I think there is a much bigger opportunity. We do make money today from a kind of limited, what you call, a retail media network, but there is a potential above that.

Is there anything, Jess, sorry, that you want to talk about?

No, no. Obviously, I think the third party in offsite is actually really exciting and much bigger, but that won't be until sort of medium, longer term.

Your last question on FX, Manjari. So yes, in half 1 this year, we saw a hedge rate in cost of goods sold coming through at $1.28 versus $1.24 in the prior year, which was obviously helpful and supportive of our margin progression during the first half.

In the second half of the year, we expect broadly similar. It all depends on the stock turn really that comes through. We bought all of our currency requirements for the purchases we'll make in FY '26 at around $1.29, and we bought about 60% of what we need for our purchases next year at about $1.32. So we should continue to expect to see a bit of a tailwind from FX as we look forward.

Russell.

Russell Pointon from Edison. Two questions. Going back to your criticisms at the start, Henry. First one was on the category management. You said you haven't done a good job of that. How quickly will you actually get through reviewing all the categories? Will it be done pretty quickly over 12 months? And the second one was, you also criticized the lack of synergies between the businesses, so do you need to incentivize staff in a slightly different way to push that through?

Yes. I wouldn't necessarily classify them as criticisms, more maybe observations. But maybe if Jess can talk to category management and the speed there. I think on the synergy point, we do -- I mean, Fusion, actually, our garage model, is a really good example of actually how assets work within Halfords, in Garages, in Retail, in as much as the model is driving Retail customers into our Garages. So we are doing that to good effect.

I think my point is there is more that we can do. I'm not sure it's necessarily about incentives, but that is one way that we could do it. I think it's more around actually removing any kind of points of friction and making sure that our colleagues kind of understand how we drive value in the business. So I think it's more about operational management and communication.

Jess, do you want to talk to the category management?

Yes, sure. Very happy to. I mean the short version is this will be pulsing. It will go through waves through all of the categories. This is an 18- to 24-month job. This is a massive, massive rebuild of all those ranges, starting with what does the customer need, how do we provide that. And within that, undoubtedly, there'll be a real opportunity for own-brand development. So Halfords has got incredible heritage in own brand, which is both higher quality and much, much better margin.

So when we think about category management, it's not just a quick range review that really, really is challenging, bottom up, all of those ranges. So we're very excited. We've already started the first 2, but this is real sort of heavy lifting that will go on over the next 2 years essentially.

Carl Smith from Zeus. Two questions, please. First is on Fusion town. So previously, earlier this year, you talked about sort of doubling of profitability at the sites you invested in. Now you're sort of over halfway through your 150. Are those return rates sort of still applying now that you're getting a bit further along? And sort of expanding on that, do you think you'll go beyond 150 sites in the into the evolve phase even if the return rates become a bit lower for the incremental ones beyond 150?

And then the next question is about the Motoring Club. How do you sort of intend to get more people on to premium? Is it more incentives? Is it more marketing or lower pricing? Or what's going to get more people to shift to premium?

So on the return rates for Fusion, the short answer is no, we haven't seen any deterioration. And clearly, we've kind of gone back and checked that prior to coming out today. So no, we're in good shape there. In terms of whether we can go beyond the 150, I mean, Adam is maybe best placed to talk to that. But I think there is then the question of what do we do beyond? We've got 600-odd garages. But Adam, do you see an opportunity for Fusion be extended or kind of Fusion light or...

Well, it's interesting. I mean if I think about the reason -- part of the reason that I joined the Halfords Group was the Fusion concept. I was really excited by that, and I continue to be excited. The fact that we can largely double profit in 2 years is absolutely fabulous. I mean we're going to have 100 by the end of this year, somewhere near, another 50. It'll get us to the 150.

I think for me, the customer experience and the colleague experience is something that really stands out. So I think the broader question is not Fusion past 150; it's kind of what elements can we take forward into the rest of the estate moving forward. And I think there's some real benefits and some great learnings. So yes, it's very positive.

And on Halfords Motoring Club, look, I think we -- to my mind, we've made a brilliant start. And you may query me saying start when we've already got 6 million customers. But I think there is a piece of work that we need to do in terms of saying actually how do we drive premium more, what are the mechanics to drive membership, to drive value from that. So I think this is a kind of ongoing project that we are going to kind of drill down into, but it is an absolutely brilliant kind of asset and base to start from.

So just one more question. First was club and less on strategy. But I'm wondering if we could just dwell a little bit on the [ sick job being ] tires. You mentioned that you think you can reenergize that. What's been going on there? And where do you see that turning around?

So look, I think, without question, tires, over the last couple of years, have been struggling in the U.K. in terms of growth. I think we've seen some improvement in that. I think as a company and talking to investors, I want to kind of change the narrative from talking about the tire market to talking about our performance because I fundamentally think that actually even in a static or declining market, we've got the potential to take share. And I think actually some of the stuff that we're doing, and I'm going to ask Adam to talk about, wheel balancing and alignment and actually how you can sell a tire and make money not just on the tire, but the services around it and the margin that, that drives is something which actually we're starting to do, to kind of good effect.

So I think my kind of headline is I don't want to be talking about the kind of tire market endlessly. I want to talk about our overall Garages performance and within that, that actually we're running a kind of healthy and growing tire business. It may not be immediately, but we're getting there.

Adam, do you want to talk about your specialist subject maybe?

Yes, I'll come dip off to one side and fit a fan belt in a second, too. Yes. I mean the opportunity for tires that I've seen since I've landed is significant for Halfords. The market has been tricky. There's no doubt about that. I don't want to go into all of the technical detail that sits behind that. But we are only 9% of that market, and it's a very, very attractive segment. And there's a lot that we can do internally to smooth the path for tires.

So there's work underway around training for our colleagues. That's technical and soft skills. There's also different ranges being put into Garages right now. We've got different equipment that speeds up that process. So I think over the next short to medium term, we're going to start to see an uplift in our tire performance despite whether the market is in decline or in growth, I think we can certainly take market share and grow.

It's Mark Photiades from Canaccord. Just on Cycling, you talked about pushing into premium and parts and accessories. Could you maybe just give us a sense of what those 2 categories represent in terms of the GBP 1 billion market? And the group has moved into that area before, particularly premium. It didn't necessarily go to plan. I just wonder what gives you confidence that you can make inroads this time around?

Jo, do you want to talk to that?

Yes, I'll talk to that, and Jess may have some points to add on it. But if we sort of start at your last point, we were in premium cycling several years ago, and we owned -- we sort of had -- we came out of specific premium cycling shops actually some time ago. Our move back into premium cycling is not, to be clear, opening a load of premium cycling shops that are separate from our own Halfords business today.

What we have seen though over the last 6 months is really good growth in those premium price bikes, in e-bikes and also in those slightly higher price point bikes. And it's really noticeable that Tredz, our performance Cycling business, which to be clear, just has 3 shops and a big online business, had the strongest growth in the group in the first half of the year with double-digit like-for-like sales growth. So that market is definitely coming back, and it's really where enthusiasts want to play -- are playing.

We've got quite a lot of innovation that's been happening in that space, and I'll let Jess talk a little bit more about that in a second. But we're confident that there's a good growth opportunity for us there as we look forward.

Yes. Just to build on what Jo said, I think it's really important that there's nuance in terms of what is premium cycling and what is not. And the reality is there's an entire spectrum where we see a lot more people trading up than we used to do. And so actually, with our Tredz business and Halfords' core, it's a really, really exciting opportunity for us to actually serve across the set of need states. And we've identified some areas that aren't currently served across those 2 areas. There's some really interesting white space opportunity.

And back to the point on own brands, we've developed and have just started to launch now. You'll see them drop into shops over the next 3, 4 months, a really, really impressive range of more premium e-bikes that we're very, very proud of, that we've developed with integrated technology and so forth, which again, so that sort of Halfords' product capability and own brand actually allows us to take features that are typically premium-only and bring that more into the mass market and make it more accessible for customers. So I think we have a really exciting role to play on that one.

I think we're nearly -- Rupert, you had a question? We're nearly up on time.

I was just going to ask a question on Cycling, too.

Okay.

And you've largely covered it. Sorry. The 9% like-for-likes, I just wonder whether that was aided by price promotion? In a challenged consumer environment, that feels like a good number. And a bit of color on what was behind it, please?

I mean Jess can talk to it in a bit more detail. We didn't do anything massively promotionally. I think you'll remember, earlier in the summer, we had warm weather that came in the kind of spring, which I think probably helped some of that performance, maybe pulled forward some of the Cycling sales from later in the year. But no, there wasn't anything we did promotionally.

We did outperform the market quite significantly, but that wasn't through Tredz, and essentially, we've got a great range. Tredz is the #2 online player in premium cycling, right? So across that when the market wants to buy, Halfords is the place to come.

And particularly strong in Kids and Electric in the first half of the year from a Cycling perspective.

All right. First and last. I was just going to come back on the garage utilization. What are the sort of main levers short term to improve utilization? Is it all about systems and processes? Or is there a skill issue and equipment issue in some of these centers?

No. It's a really good question. So the processes are the underlying piece. But what you've got then is making sure that we've got the right headcount and skills mix, to your point, in each and every one of our garages that meets the market needs and gives us the opportunity to grow. There's also an opportunity for us to really accelerate our apprentice programs to get more colleagues into Garages and make sure that we've got more people on the ground in the right place at the right time, but also protecting the future health of the workforce for us, too.

Brilliant. Thank you very much, everyone, for attending today. Thank you for those joining online. This concludes our presentation. Thank you.

Okay. Good morning, everyone, and welcome to the Halfords Group results for the 52 weeks ending the 28th of March 2025. And I'm Henry Birch, the Chief Executive of Halfords, and joining me today is Joe Hartley, our Chief Financial Officer.

In terms of the agenda for today's presentation, I wanted to start with some initial reflections on my first 10 weeks. Joe is then going to cover our financial results. I'll talk to some of our strategic highlights of FY '25 and then give you an overview of current trading and outlook. And we'll close today's session with the opportunity for Q&A.

So as the new Chief Executive, I wanted to start just very briefly with a bit about my background. My last role was as Chief Executive of The Very Group, the privately held multi-category retailer. And prior to Very, I ran Rank plc, the FTSE 250 Gaming & Leisure Group. And before Rank, I was the Chief Executive of William Hill Online.

So I'd like to think I have a strong retail and digital experience, but also have run a multisite business of similar scale to Halfords. And in all of those businesses, I've led a transformation agenda driven by tech and data and clearly focused on better serving customers.

I've been in role now for about 10 weeks, and I'm hugely enthused by what I've seen, both in terms of what we do today and more importantly, where I think we can take our business in the future. Much of my initial time has been spent out and about in our operations, visiting our stores and garages, our commercial fleet services and mobile vans and in our distribution centers. And it's clear to me that we have a unique and compelling offer for customers alongside unmatched scale and breadth and capability across the group from retail to mobile, B2B to our SaaS business, Avayler.

It's fair to say that the last 3 or so years have been pretty tough for the majority of consumer-facing companies in the U.K., and Halfords has been no exception. The forces and events are well documented, and I'm not going to go into them now. I come from a retail environment where many companies are continuing to struggle to differentiate themselves, selling very similar product to one another with very limited provision of services and grappling for the same discretionary spend, but Halfords is different.

Over half of all customer transactions are service-based with the majority of service events taking place in our retail store car parks, in fact, 80% of them. We are unique in this space, providing on-demand fitting of bulbs, wiper blades, batteries and various other products. Customers can drive into our car park, access expert advice to help pick the right product for their vehicle, have it fitted, then drive away. That's the ultimate convenience and a brilliant solution for customers. This is combined with a strong digital capability supporting those operations and as a transactional channel with more than 3/4 of digital transactions being Click & Collect, which brings those customers into our stores.

And delivering all of this, we have over 12,000 passionate and knowledgeable colleagues. Having spent time in our stores and garages, it's very clear to me that they're not just knowledgeable colleagues, they're specialists. The majority of the people who walk through our doors are looking for advice or a service, and that puts us in a really strong position to build trust and a relationship with those customers. And from those interactions, we're capturing a huge amount of data about those customers, their vehicles, their transactions and their needs.

I'm delighted with the progress of Halfords Motoring Club, but to my mind, we're just scratching the surface as to how we use that data to better serve customers, to grow the business and to operate more efficiently. Joe and I will talk a lot today about the success of Fusion and the growth in our Garages business, which I think is really exciting. But our Retail business also grew last year, and I believe there is opportunity for us to grow it further. We remain clear category leaders in retail. And for the majority of our customers, the store experience is their introduction to Halfords.

So all in all, I believe we have really strong foundations to grow our business, and I'm genuinely excited about where we can take it. And those foundations are strengthened by our FY '25 results, and I wanted to thank my predecessor, Graham, for handing over a business in good shape and acknowledge that these positive results are ones achieved under his watch.

Against the challenging backdrop of inflation, we managed to grow like-for-like sales 2.5%, beat expectations on PBT and announced a 10% increase in the dividend to 8.8p. So a really strong set of results.

And I'm now going to ask Joe to go into some more of the detail.

Thank you, Henry, and good morning, everyone. I'd like to start today by saying how pleased I am with the performance we've delivered in FY '25, navigating a challenging consumer and inflationary backdrop to deliver ahead of target across the P&L and balance sheet.

We achieved this with clear focus, prioritizing optimizing pricing, delivering our better buying program and continuing our relentless efforts to drive out cost and improve efficiency in all areas of the business. At the same time, we managed inventory and cash carefully while investing selectively in high-returning strategic initiatives, including our very successful Fusion program, as Henry will detail later. And the result of this focused approach was a strong set of numbers.

Before I go into more detail, the usual reminder that all results are post IFRS 16 and also the comparisons to the prior year are on a total operations basis. You'll recall that we closed and discontinued our loss-making consumer tire warehousing and distribution businesses last year, outsourcing these operations to Bond. Overall, this drove significant P&L benefit, but moved some costs into the continuing garage business. As such, a comparison to total operations last year better reflects comparative performance.

So to start with the highlights. Like-for-like sales grew 2.5%, led by Autocentres, but pleasingly, with sales growth across both segments despite the continued consumer challenges. Group gross margin grew 250 basis points, exceeding our initial expectations and with half 2 accelerating beyond the 190 bps increase we described in half 1.

The combination of gross margin expansion and sales growth led to a very strong underlying performance for the group, triggering the reinstatement of a performance-related bonus for colleagues that had not been paid in the previous 2 years. This caused costs to increase as a percentage of sales year-on-year.

Underlying PBT was up 6.4% at GBP 38.4 million, slightly above consensus on the top of our guided range. Free cash flow at GBP 43 million was particularly strong, up nearly GBP 14 million year-on-year, reflective of an excellent underlying performance and continued good working capital management.

It's worth noting that the incentives charged to the P&L in FY '25 will be cash paid in FY '26. And as a result, we closed the year with GBP 10.1 million of net cash on our balance sheet, notwithstanding higher CapEx than in previous years to fund the successful Fusion program. Overall, it was a very pleasing performance.

This next slide shows the drivers of that profit growth, bridging between the underlying PBT reported in FY '24 on a total operations basis and the underlying PBT we're reporting today. As you can see, once again, we faced very material inflation that alone would have eliminated most of the profit made in the previous year. However, this was more than offset by successful price and promotion optimization alongside GBP 35 million of cost savings. I'll share more detail on the makeup of inflation and cost savings shortly.

As I indicated this time last year, we also made selected investments during the year, reinstating performance-related bonuses at a cost of around GBP 11 million and also investing in leadership capability, apprenticeships and our Fusion program.

So let's look now at the makeup of inflation and offsetting savings in a bit more detail. As you saw on the previous slide, we faced GBP 33 million of inflationary headwinds in FY '25. The biggest of those was GBP 21 million of wage inflation, driven by the 10% increase in the minimum wage effective April '24, and the knock-on impacts on the wider workforce as we sought to maintain a skills differential. We also saw GBP 3 million of inflation in freight costs driven by Red Sea disruption, slightly below the GBP 4 million to GBP 7 million range we expected at the start of the year.

Business rates increased by GBP 3 million. And across all other cost lines, we saw a further GBP 6 million of inflationary pressure. Offsetting this, we found cost savings of GBP 35 million, around GBP 5 million more than our initial target. GBP 21 million came from our Better Buying program, more than GBP 4 million was realized from the tire warehousing and distribution outsourcing to Bond, GBP 2 million was saved in interest costs due to excellent cash management and falling interest rates and GBP 8 million came from a host of other initiatives across the group, including our goods not for resale program, operational efficiency and productivity improvements.

As we just saw, the bulk of cost savings came from Better Buying this year and are reflected in an excellent gross margin performance. Overall, we delivered 250 basis points of gross margin accretion, reaching 50.7%, which is the highest margin delivered in the last 3 years. This chart shows the drivers of the margin improvement, bridging the margin year-on-year. You can see here how Better Buying contributed 140 bps of the growth as we successfully tendered own label product categories in the retail business and continue to robustly negotiate with our commercial partners across all areas of the group.

The second significant contributor to our performance was price optimization, delivering 90 basis points of the improvement. We've made several strategic changes to pricing over the last year, particularly in services, where customers can tangibly see how the labor cost that's involved and dynamic pricing enables customers to make their own choices between price and convenience.

The margin rate also benefited from further mix into strategically important servicing, maintenance and repair, supported by Fusion and our investment into garage leadership, which has resulted in more additional work being identified when vehicles are in our garages. FX was a tailwind this year, given we purchased around $200 million of dollar-denominated product and the average FX rate in cost of goods sold improved from 122 in FY '24 to 124.

We expect FX to deliver further benefit as a result of our hedging strategy. FY '25 requirements were bought at nearly 126 and 92% of our FY '26 purchasing requirement has already been bought at 129. Overall, we saw strong margin momentum in half 2 with gains accelerating, all of which should give confidence in our ability to mitigate the further headwinds we're facing in the year ahead.

The dynamics we've just discussed come together in this summary slide. Good revenue growth, gross margin expansion and cost control were partly offset by an increase in operating expenses. Overall, this delivered growth in underlying PBT that we're reporting today despite market and inflationary pressures. That said, headwinds continue in FY '26, not least from a further increase in the minimum wage and changes to employees' national insurance contributions, which impacts us from the start of the new financial year.

While we've identified the actions required to mitigate yet another year of significant inflation, these factors, together with a change in the risk-free rate, which has impacted our discount rate, have contributed to the noncash exceptional charges, resulting in a statutory loss before tax for the year.

Slide 12 breaks down the non-underlying charges with the 2 biggest components being closure costs and impairment of noncurrent assets. The most material item is a GBP 49.1 million noncash impairment charge, mostly impacting our Retail segment and largely relating to goodwill.

A major driver of this is an upward move in U.K. gilt yields over the last 12 months, which has impacted the discount rate used in our impairment testing calculations. This higher rate has, of course, then been applied to a revised set of forecasts, which incorporate the additional costs introduced by the government's autumn budget.

We've also assumed further minimum wage growth throughout the forecast period and taken a prudent view on FX rates. I would stress this impairment is a noncash charge and reflects the mechanics of an NPV calculation according to the method prescribed by accounting standards.

In addition, GBP 14.9 million of closure costs are predominantly noncash charges relating to garage closures. In reviewing our portfolio in light of the autumn budget and our plans to roll out Fusion, a number of sites were identified for closure with the majority of affected colleagues to be redeployed to nearby garages with the potential to offer a better customer and colleague experience.

These closures are expected to be immediately earnings accretive with an upfront cash cost of just over GBP 1 million. In total, cash nonunderlying costs for FY '25 amounted to GBP 5.7 million, with the remainder being noncash accounting charges.

Moving now to briefly touch on segmental performance. In retail, like-for-like sales growth was 2.1%, with growth in both Motoring and Cycling supported by a stronger second half performance. This is the first time we've reported positive like-for-like sales growth in Cycling since FY '21, a good sign in a market that remains significantly depressed versus pre-COVID levels.

The strong underlying performance at the profit level was driven primarily by margin expansion, up 200 basis points, largely as a result of our Better Buying program. This performance triggered bonus reinstatement for colleagues without which retail segment EBIT would have grown year-on-year. Including this impact, EBIT declined slightly to GBP 39 million. But the standout performance in FY '25 was in the Autocentres part of our business.

Excluding Avayler, underlying EBIT grew 21.2% year-on-year. The like-for-like sales growth of 3.7% was very pleasing, especially versus strong prior year comparatives. FY '24 like-for-like was 10.7%. So on a 2-year basis, this part of the business has grown sales by 14.4%. We saw very different dynamics in TAS and SMR during the year with double-digit sales growth in SMR, but a much more muted tire performance, and I'll describe these dynamics in a bit more detail later.

The really significant 320 basis points of margin expansion reflected the themes already discussed at a group level. Smarter pricing, better buying and mix into higher-margin SMR work were the key drivers. Costs were well managed, productivity improved, and we saw the benefit of switching our tire warehousing and distribution operations to Bond.

And all of this was delivered partly due to the investments we made in the Fusion program and in developing the capability of our garage leadership. Overall, we were delighted by the performance of the segment in FY '25 and continue to see significant potential for the growth and profitability of this part of our business.

Before moving on, I'll touch on Avayler, our software business. Here, we continue to make progress, winning new clients such as MyCar in Australia and also moving to the next stage of our flagship contract with Bridgestone. Losses expanded slightly to GBP 2.7 million as we continue to invest in development for future growth.

Unfortunately, ATD, a key U.S. client, went into Chapter 11 proceedings during the year. The impact of the loss of this account will be more significant in FY '26. As a result of this and our continued investment, we expect Avayler's losses to widen in the year ahead. The Avayler team continued to prioritize the successful delivery of our major contracts, including that with Bridgestone.

Before moving on, I thought it might be useful to look a little more closely at our 2 consumer garage end markets, which saw divergent performance in the year. As I've already described, growth was very strong in strategically important servicing, maintenance and repair, while the consumer tires market continued to struggle with customers still choosing to defer tire purchases wherever possible, and this slide brings those dynamics to life.

On the left-hand side, you can see how the volume of SMR jobs that we have performed in our garage business has steadily increased since the acquisition of National at the end of 2021. As a reminder, SMR is a highly fragmented market with significant opportunities for disruption, particularly with our Fusion model.

Year-on-year, the mix of SMR work within our consumer garages grew by 3 percentage points. Our strong performance in this growing market has helped to offset the ongoing challenges in the tire market, which based on GfK data remains around 14% below pre-COVID levels in FY '25.

On the right-hand side is the chart we shared at the interims, depicting the percentage of tire jobs that come into our garages where tread depth is below 2 millimeters, very close to the legal limit. Six months ago, we spoke about tentative signs of recovery with this percentage starting to fall from its peak in FY '24.

However, we've seen this reverse in the second half, indicating that customers are continuing to delay and defer tire replacement. We're seeing almost 1 in 5 of the vehicles coming into our garages with at least 1 tire that's illegal or close to being illegal, showing the scale of this issue and the genuine safety risk that it poses. This market has continued to be challenging in the early part of our new financial year.

Moving now to our balance sheet, which has further strengthened this year. We closed the year in a net cash position of GBP 10.1 million, up GBP 18.2 million year-on-year as a result of strong cash and working capital management and despite spending around GBP 9 million more cash CapEx than we did in FY '24 as we invested in the Fusion program.

Inventory across both retail and Autocentres fell year-on-year, and we closed with GBP 225 million of stock, GBP 12.3 million less than this time last year. Total stock levels are now at the lowest level since FY '22 despite the acquisition of Lodge that has happened since then.

Free cash flow of GBP 43 million was up GBP 14 million year-on-year, reflecting working capital discipline and a very strong underlying performance, which triggered colleague incentives that will be paid out in FY '26. This impact, together with the higher CapEx spend of GBP 60 million to GBP 70 million as the Fusion program accelerates means that lower free cash flow is anticipated in the year ahead.

As a final point, we've maintained significant flexibility in our property portfolio with the average remaining lease length below 3 years in retail and around 5 years in Autocentres. Our balance sheet, therefore, remains strong with leverage, including lease debt at 1.4x, slightly below our target range. And maintaining a strong balance sheet is at the heart of our capital allocation priorities, which remain unchanged. Reflective of our balance sheet strength and within our dividend policy, we are pleased to be proposing an increase in the final dividend to 5.8p, bringing the full year dividend to 8.8p, growth of 10% on FY '24.

So to summarize, FY '25 has been a good year in the context of a challenging external backdrop. We have delivered against the 3 priorities we set out at this time last year. We've continued to optimize our unique platform, growing group profits. We've mitigated over GBP 30 million of inflation through our ongoing cost and efficiency program. And we've selectively prioritized investments, which we know from experience can deliver substantial returns, most notably Fusion.

And returning to where I started, this focus has delivered financial outcomes, which have surpassed our expectations. We've grown underlying PBT, largely by delivering a significant increase in our gross margin to levels not seen in the last 3 years. We've continued to deliver on cost, exceeding the initial target, and we've maintained a very strong balance sheet, which is net cash despite increasing investment in high-returning strategic programs such as Fusion.

FY '26 will bring its own opportunities and challenges, but the actions we've taken and continue to take set us up well for another year of progress.

I'll now hand over to Henry, who will cover current trading and our plans for the year ahead.

Thank you, Joe. So I now wanted to talk about 2 key areas of strategic progress, specifically our Fusion Garages and Halfords Motoring Club before turning to current trading and outlook.

Starting with Fusion, with 50 garages now live, I thought it might be helpful to set out a reminder of how Fusion works and how it's delivering significant growth for our Garages business. Very simply, Fusion sits at the center of our garages proposition, feeding demand directly into our garages and offering customers a truly differentiated experience.

The easiest way to describe this is to look at Halfords as an ecosystem. As well as generating the majority of sales, our retail stores are an important acquisition channel. When we perform a weCheck or weFit service in our retail car parks, any work identified and referred to our garages is effectively captured demand, essentially taking a customer out of the market before they search on Google or go to a competitor.

Whilst out visiting our retail stores, I've actually seen this in action, and it's a really compelling customer proposition. Our market-leading Halfords Motoring Club builds on that. It enables us to harness the data we collect to retain and convert customers effectively. Couple that with the unrivaled scale of our garage and mobile van network and together, the ecosystem means that unlike a traditional garage business, we're able to generate demand from our group assets, capturing demand on a total town basis.

So that's how Fusion works within the Halfords ecosystem. What do we actually mean when we say a Fusion garage? What's different? Well, as I've seen for myself, it isn't just a rebranding exercise. It's an increase in capacity, more ramps and improved equipment, increasing the return from our fixed cost by optimizing the space. Alongside that, we implement a full operating model change with specialist customer service and quality control roles within the garage, as you can see on this slide.

Fundamentally, this is a people-led change underpinned by increased capacity and all presented to the customer with a new look and feel and updated Halfords branding. A year into rollout, the great news is that the results continue to be compelling. We're seeing excellent returns from the 50 sites delivered to date with no change in performance in the latest cohort of garages converted compared to the first wave.

As a reminder, this means garage level contribution is on track to double on average at maturity, delivering an average payback of just 2 years. We continue to see scope for around 150 Fusion garages in total by FY '27. Fusion is a fantastic program, delivering on every level for customers, colleagues and shareholders, and I'm looking forward to seeing this generate substantial growth for our Garage business over the course of this year.

Moving on now to the progress we've made with our Halfords Motoring Club, which continues to generate significant value for the business. This year saw the club exceed 5 million members who, on average, shop twice as often and are more likely to access products and services across both our retail and garage offer. In fact, members now account for more than half of all MOTs booked in our garages.

As a reminder, the club consists of 2 tiers of membership, free and premium, both delivering benefits to the group. Free membership provides an important route towards higher-value premium membership with half going on to convert, helping to reduce the cost of customer acquisition for our garages.

And our 370,000 premium members bring in GBP 18 million in annualized subscription revenue, and they spend more, in fact, 3x the amount of a nonmember annually. But the club is not just generating value for the business, customers are enjoying the benefits, and we're seeing a market-leading retention rate in our paid membership of around 70%. So a strong year for the club. And as I said earlier, in my view, there is still significant opportunity for growth. It gives us unparalleled access to customer and automotive data, and there is much more we can do here to use that data to better serve customers, to grow the business and to operate more efficiently.

On the people side, I'm really pleased that we've recently announced the appointment of 2 new managing directors for our retail and Garages divisions. First, Adam Pay will lead our Garages division, taking over from Karen Bellairs from the 1st of July. Adam brings extensive industry experience, most recently as Managing Director of MyCar in Australia. Adam inherits a fantastic platform in our Garages business, and I'd like to thank Karen, our Chief Customer Officer, for the role she's played here.

And later in July, Jess Frame will join us as Managing Director of Retail. Jess is currently a partner at the Boston Consulting Group, BCG, where she served as the managing partner of the London office as well as previously having operating roles in various retail businesses. I expect both Adam and Jess to have a significant positive impact on their businesses and both inherit experienced and capable teams beneath them.

Moving on now to FY '26 and our current trading and outlook. So overall, I'm pleased to report that trading has been in line with our expectation in the first 3 periods of FY '26. In retail, cycling and touring have been particularly strong. And in our garages business, both consumer and fleet components continue to grow with particular strength in service, maintenance and repair, helping to offset a tire market that remains sluggish.

Earlier this year, we deployed a new warehouse management system in our Coventry distribution center, which led to issues with stability and output. We're on track to return to full productivity before the end of H1, but in the short term, we're deploying additional resources to maintain stock availability in our stores. This has led to additional nonrecurring costs of low to mid-single-digit millions being incurred in the first half of the year.

Similar to FY '25, we're facing a number of cost increases, mainly related to the autumn budget, which come into effect from the very start of the new financial year. But just like last year, we have a clear plan to mitigate them through pricing and cost savings. The combination of these factors, together with our investment plans mean that our profit in FY '26 will be weighted to the second half of the year.

And in terms of that investment, we have clear plans for the year ahead. Many of our investments will build on the good work of FY '25 and progress the optimization of the valuable and differentiated assets we have at our disposal. So we'll continue to expand our successful Fusion program with over 100 Fusion garages planned to be operational by the end of the year.

We'll drive growth in our retail business through better category management, range development and price optimization. We'll deliver more customer benefits through our Motoring Club and we'll continue to invest in talent and leadership.

We'll lay the foundations to transform our technology and data capability. And alongside all of that, we'll continue to build a more efficient and effective business. I'm really pleased with the results we're announcing today. They give us a strong base from which to build, and we're starting to generate good momentum.

Looking forward, there is a lot of work to do, but there is a huge amount of opportunity for this business firmly within our grasp. I look forward to providing a detailed update on our strategy and plans later in the year. But for now, this concludes today's presentation, and Joe and I will now be happy to take any questions you may have.

It's Jonathan Pritchard at Peel Hunt here. Firstly, what's the difference between -- is it Washford Coventry and Washford -- because you had a sort of systems overhaul at the former and it's not been as smooth as the latter. So what are the differences between those 2? And why has that happened?

And then secondly, you've talked an awful lot about data. Is there a sort of quality overhaul needed here? Is it usable? Is it in the right sort of shape and packaging you would like that data to be coming in? Or is there a job of work to sort of work on data management before you can actually move forward with it?

Sure. Okay. So on the distribution center side of things, we've got 3 distribution centers, Washford or Redditch, which is where we also have our corporate HQ. We've got Coventry and we've got Crick. Last year, we migrated the warehouse management system in Washford and Washford deals almost exclusively with bikes, so kind of big, fairly simple packages. Coventry is where we have the most complexity in terms of product. And that is where we've had the challenges with the warehouse management system.

So in Washford, we had no issues. We migrated successfully. In Coventry, we've had issues. But as I say, we feel that those are kind of well under control, albeit we've incurred those additional costs. And Crick, we'll be looking to do in the course of FY '27, and I would sincerely hope that we won't have issues there because we would have resolved any outstanding issues from Coventry.

In terms of the data, yes, I think there is more work that we can do and some of that is getting data into the right format. We actually do use data extremely effectively today, which I think is kind of evidenced by our Halfords Motoring Club. We're actually using that effectively. And as a company kind of new in, one of the things I'm kind of acutely aware of is we've got a lot more data at our fingertips than your average retailer or consumer-facing company because we've got that customer information, that transactional information, but we've also got vehicle data as well.

So actually, it's that combination where I think there is a lot more that we can do. But yes, there is more work that we can do in terms of systems and in terms of data availability and quality. But it's not significantly different from other companies that I've been in.

Ben Hunt from Panmure Liberum. Obviously, the cost headwinds this year continue to exist. It seems a bit of an unfair question, but can you keep going with the momentum you've had from the previous year in terms of the price optimization and maybe just flesh out where you see those cost savings coming from and how you're going to get them?

Well, I mean, Ben, I think the good news from my perspective coming into Halfords is that we've got that track record of actually being able to push cost savings. And last year, we had GBP 33 million of inflationary costs to deal with. We delivered GBP 35 million of cost savings.

This year, as we said last year, GBP 23 million from the autumn budget that we've got to mitigate. And it is a continuation of what we did before. I'm confident we've got the plans in place, both in terms of the kind of Better Buying, the suppliers and supply chain management, pricing optimization and then what I'd kind of classify as kind of good old-fashioned cost control to the extent that we're not -- we don't have any kind of program of redundancies or job losses.

So I've got a pretty good degree of confidence that we'll deliver on those. And we've got plans in place that are underway. I think it does go slightly to that H1, H2 weighting, though, because the costs hit us from day 1 and clearly, a mitigation program will go throughout the year.

But Joe, I don't know if you wanted to add anything to that?

I think that covers it.

Just on Avayler, are you able to tell us how much ATD contributed to -- I'm just aware that momentum seems to have slowed a little bit there in terms of winning new clients in the second half. And obviously you've mentioned losses expected to widen. So any sort of color around that?

Yes. So look, we haven't given a revenue split historically. So I can't really go into specifics around the impact of the loss of ATD, apart from, say, it was a fairly significant client for us. There's no slowing though of pace with Avayler. Our absolute focus is on delivering the Bridgestone contract, which we previously described as probably the biggest contract that we could gain in the U.S. for the Avayler business, and we're progressing really well with that. Losses will widen a bit in the year ahead as we continue to invest and as a result of the loss of the ATD contract. But the absolute focus is on delivering the expansion that will come from Bridgestone.

Kate Calvert from Investec. I'm just following up on Ben's question on Avayler. Should we expect a rollout to start with Bridgestone this year or next year, do you think?

So we have a contractual agreement with Bridgestone that looks at a rollout, which the majority of that rollout will be next year. We're currently live in one site, and we're currently in discussion with them as to whether we roll out more in the course of this year or whether it will be weighted into next year. But definitely, the intention is that we together roll out from 1 to 10 to 50 and then do the whole lot in the course of time.

And 2 other questions. The first one on the Motoring hub, sorry, not the motoring hub, the Motoring Club. What should we expect in terms of developments in the current year from a consumer perspective? And the second question is just on the retail estate. You've got a very short average lease length now. Is there any sort of lumpiness in the lease renewals over the next year or 2? Are there any opportunities to get lease costs down?

Why don't you take the leases and I'll take the...

I'll take leases, yes. So as you know, Kate, we have got a really flexible lease portfolio. And I think we've got sort of 40 or 50 lease events coming up in the year ahead. We look at every one on its merits as it comes up for renewal. And as you know, over the last 3 years, we've taken the opportunity to take around 100 sites out of the retail lease portfolio. I don't think we'll see another major reduction, but we will continue to see, I think, a few closures as we have done in the year that's just gone in each year as we go forward.

And on the Motoring Club, I think the majority of our focus is going to be on converting free members to premium members this year. I think longer term, there is the ability to really expand the offer of Halfords Motoring Club in terms of driving different types of subscriptions potentially and working with third-party partners as well. But as I say, I think the majority of our focus this year is going to be on driving premium membership.

Andy Edmond, Equity Development. A couple of questions for Joe. I'll come back to you, Henry, don't worry. Inventory and supply chain and sort of linking the 2 together, the world remains a very volatile place. So is it unreasonable to expect further cuts in inventory because you might be holding back a little more stock than usual or the new usual.

And linked to that, looking at the cost on freight costs that you referred to in the prior year, have you learned? Have you got new partners? Have you taken remedial action that might mitigate, let's say, an extension of what's going on in the Middle East again at the moment?

So just firstly on stock, look, I think we've done a really good job in getting our stock levels down over the last 3 years. And I'm pretty happy with where stock is actually across the group. We're back at stock levels that we haven't seen since FY '22 across the group. And I don't think we need or will be going any further in terms of reducing stock.

As we look forward, we're in a really good shape actually. In terms of freight costs, the freight headwind that we described was really driven by the disruption that the entire market saw in the Red Sea as a result of the issues in the Red Sea last year. And we've always worked really hard with our freight forwarders to negotiate rates that have consistently been below spot rates in the market.

It's been actually one of our real successes, and we managed to mitigate the potential cost headwind that we saw at the start of the year, which was GBP 4 million to GBP 7 million back to around GBP 3 million. So I think we're in pretty good shape from a freight perspective. It's hard to know what will happen to freight costs in the year ahead with everything that's going on around the world at the moment. But we remain in a good and really competitive place from a buying perspective, and we haven't seen the need to change our forwarding partners.

And Henry, very unfair question after 10 weeks, but you obviously will have done a lot of due diligence prior to joining the group and your introduction in your video this morning have been very positive. What is the single thing that you've found that's come as a surprise that [ aside ] that depressed you, you were hopefully excited the most?

It is -- the surprises have definitely been positive. I think it probably comes back to actually -- well, I think 2 elements. One is the fact that most of our customers come to us for advice or a service, which I think really differentiates us. And then secondly, I think, is the level of data that we have and are collecting and potentially are not using to its full potential.

Charlie Perkins from RBC. Just 2 questions, if I may. So firstly, I'm just wondering sort of roughly how many of the ex-National garages have been transferred to Fusion? And do you guys see sort of significant upside for the ones yet to come? And then can you just give a little bit more color on the additional investments that you plan on making to the customer experience that I think you guys mentioned in the statement this morning?

Yes. So the national, Joe will know the figure because...

Yes. So we've done about 50 Fusion garages so far and around about 1/2 to 2/3 of those have been ex-National garages that have converted. So that leaves a significant proportion of the ex-National portfolio that haven't yet been transformed, and we see more of those becoming Fusion garages as we go forward.

I think on the National garages have tended to be larger than the Halfords Autocentres, so we can get more ramps in there. Therefore, they are better candidates for conversion to fusions. And on the digital customer experience, we're looking at developing our search capability, accessibility in terms of people with disabilities.

And then thirdly, in terms of we're putting in place a headless front end, which means that we can integrate with a much larger number of third parties, tools, content feeds, that type of stuff gives us additional flexibility, which overall will improve the customer experience.

Sorry, can I just ask a question on the cycling market as to where are volumes now you think versus pre-COVID levels? And you're getting more positive on it. So are you calling the recovery in the cycling market? And can you talk about how much stock you still think there is out there in the wider market that might need clearing?

I think I probably say it's a bit early to call a widespread recovery in the cycling market, Kate, much as we'd love that to be the case. The early part of the year has been really strong though, March and April was strong from a market perspective, and we traded well within the market there. And while we don't like to talk too much about the weather, the warm weather will certainly have helped with that. And it is tentatively looking more positive, as you say.

In terms of excess stock that's out there in the market, I think most of that is probably worked through now. It's hard to be absolutely sure, but it feels that way.

And I mean it's worth pointing out, we grew -- cycling grew by 1.7% last year, which is not huge, and we're still below pre-COVID levels. But I think as Joe says, there are definitely some positive signs coming through.

Yes. The market still was around 33% below pre-COVID levels by the end of the year, maybe getting a little bit better.

So if there are no more questions in the room, we just want to check and see if there are questions from callers outside of the room.

[Operator Instructions] We have no questions coming through the audio, handing it back to the room for further questions.

Okay. Assuming there are no further questions, that concludes today's presentation. Thank you very much for attending, and we look forward to seeing you later on in the year for our interim results. Thank you.