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Cycling not only cheap and healthy, but also good for your porfolio


I'VE always believed that the most brilliant bit of pseudo-science in all of literature was the bicycle theory of Myles na gCopaleen – or more precisely Flann O'Brien – in his priceless novel, 'The Third Policeman'.

Our bookish readers will remember that Flann promoted the idea that those who rode their iron bicycles over the rocky Irish roads get their personalities mixed up with the personalities of their bikes as a result of the "interchange of atoms".

The author went on to suggest that "you would be surprised at the number of people in these parts who are nearly half-people and half-bicycles". When I see cyclists flying through red traffic lights or up one-way streets, I'm convinced that the Mylesian theory carries some considerable weight.

However, there is one prominent business enterprise in this country which would be most keen to see a lot more "interchange of atoms". That's the British-owned Halfords group that has become a major feature of the Irish retail environment in the past few years and the 'go to' place for car parts, sat navs and bikes.

Halfords is a specialist in car parts, car accessories, audio equipment and bicycles. It has two divisions, Halfords Retail and Halfords Autocentres.

Retail sells up to 16,000 different products in car parts and car technology and employs 10,000 people trading from 467 stores (24 in Ireland) and online.

A strategic move by the company was the buying of National Auto Centres in 2010 and marketing them as Halfords Autocentres. Today the company has 260 car service centres and 1,700 employees.

All this has grown from a single bicycle shop in Halford Street in Leicester a century ago. The company had many owners ranging from Ward White, Boots, Burmah Oil and CVC Capital, prior to its floatation in 2004. At one time the group had Denis Thatcher as non-executive director. The company has an important collaboration agreement with Auto Bracs Seven, a Japanese-based car accessory retailer, which owns 5pc of the company shares.

The company has three strategic marketing pillars, 'Friend of the Motorist', 'the Best Cycle Shop in town' and the 'Starting Point for Great Getaways'.

Halfords claims it is uniquely placed to be the 'Friend of the Motorist' by providing end-to-end solutions for car aftercare needs. Its store fitting services focus on the 'three b's'. This is the fitting of bulbs, batteries and blades (windscreen wipers).

The final element of its 'Friends of the Motorist' strategy is its autocentres. Results to date have been encouraging with strong sales growth, and the company plans an additional 20 centres this year.

The second marketing pillar is the 'Best Cycle Shop in Town'. Today, it has the largest sales of bicycles in the UK and Ireland, yet have only an 11pc market share of the £1bn (€1.17bn) market. Halfords also sees growth opportunities for parts, accessories and clothing sales.

The last pillar is the 'Starting Point for Great Getaways'. These are products motorists need for getting to the country, or out of the country, like tyre pumps, warning triangles, high visibility jackets and roof racks. It also has a wide range of camping and outdoor equipment.

Halfords' income in 2012 was £860m and its profits before tax were £92m, down 26pc.

Retail accounts for 82pc of group turnover with car entertainment and leisure accounting for 60pc of retail sales. Group revenue declined by 0.8pc, retail dropping 2.3pc but offset by a 13pc growth in autocentres revenue. The reasons given for the drop in retail sales are the uncertain employment landscape and lack of consumer confidence.

The value of the company is £630m having a P/E of 10. The latest share price was 333p, although it has sunk as low as 186p over the past year. The dividend was unchanged at 22p.

Halfords' business model is a simple one and given its shares have performed well recently, it is obvious some investors like a simple business that can be easily understood. Given all this, I have a feeling the company could do better if it can promote the Mylesian theory of atom transference.

Dr John Lynch is a former hon chairman of CIE. Nothing published in this section should be taken as a recommendation, either implicit or explicit, to buy or sell any of the shares mentioned.

Irish Independent