Automotive, bicycle and leisure product retailer Halfords is facing a £7.5 million charge following the collapse of home & DIY specialist Focus DIY, the company announced today.
The non-recurring expense, to be accounted for in Halfords financial year ending April 2011, stems from a lease guarantee made by Halfords when it was part of the same group as Payless DIY, which is now part of Focus.
Focus’s administrator Ernst & Young announced last month that it had failed to find an overall buyer for the failed retailer, and the subsequent winding down of the company has triggered the Halfords charge.
A statement from Halfords said: “This non-recurring expense relates to the creation of a provision for the potential liabilities arising from guarantees provided by Halfords prior to July 1989.
“An estimate of the potential liability relating to these guarantees was previously disclosed as a contingent liability.
“The guarantees were provided to landlords of properties leased by Payless DIY when both Halfords and Payless DIY were under the ownership of the Ward White Group.
“It is anticipated that the cash outflow relating to the guarantees will be incurred over the next three years. The group is taking mitigating actions to reduce these liabilities.”
The charge comes at a time when Halfords is trying to reverse falling like-for-like sales by implementing a new strategy that focuses on providing “excellent value”, expert advice and practical guidance.
It has also expanded it Autocentres division this year with the acquisition of 240 sites from Nationwide Autocentres, and this remains a key growth area for the business in the year ahead.