Lower profits at Halfords but future looks stronger

The company is expected to reassure investors that it is on the road to recovery on Thursday, even as it unveils a sharp slide in profits.

The group has had a tough year as high petrol prices and mild weather saw motorists use their cars less and so require fewer car maintenance products.

But the chain, which operates 467 stores, has been lifted by stronger cycle sales fuelled by recent interest in Britain’s Olympic cycling team. The group previously vowed to cash in on the growing trend and also said it would invest more in its servicing operations, so the City will be looking for further details on how this might be achieved.

Halfords is forecast to report pre-tax profits of between £90 million and £93m in the year to March, around 28 per cent lower than the previous year, but the City will be looking for signs of a pick-up in current trading.

David Jeary, an analyst at Investec, said: “We believe the combination of increased investment in the current financial year and a strengthened senior operational management team should deliver increased profits from next financial year.”

Water giant Severn Trent will provide further insight into the impact of the recent drought when it presents annual results on Wednesday.

The group, which serves more than a million customers, was hit by a hosepipe ban earlier this year. While the drought status was recently lifted by the Environment Agency, the group is likely to have taken a hit on consumption since April, the start of its financial year.

The company is expected to report a 7 per cent decline in underlying pre-tax profits to £269m as customers used less water last summer and spending on infrastructure increased, offsetting a 4.7 per cent rise in prices.

James Brand, research analyst at Deutsche Bank, said Severn Trent could be the “most exposed” of the water companies to the impact of this year’s drought.

He said: “In the case of a drought it is possible that additional costs associated with water supply may be incurred and potentially, under a situation where severe restrictions are introduced, for an impact on volumes, although we think it is too early to get concerned about such a scenario for the listed water companies.”

Severn Trent missed its leakage targets in the previous year, but that was due to harsh weather over the winter, which was not repeated in the reporting period.

A strong season for US house builders is likely to boost trade at plumbing and heating merchant Wolseley, which is giving a quarterly update tomorrow.

The group reported a 28 per cent jump in half-year profits but this was driven by the US, which contributed 42 per cent of revenues, where surveys have shown improved confidence among housebuilders, as well as lower unemployment and better home sales.

The UK is set to contribute even less to its overall performance after Wolseley sold Bathstore, its only consumer-facing brand in the UK.

The UK saw a 3 per cent drop in like-for-like revenues in the first half of the year, while the US reported a 9 per cent surge.