Halfords to become the UK’s largest commercial tyre seller after agreeing new £37.2m deal

Halfords is set to become the UK’s biggest commercial tyre provider after agreeing to acquire another motoring services business. 

The cycling and automotive products retailer has said it will pay £33.2million in cash for Lodge Tyre, followed by another £4million in the 2025 financial year, depending on whether specific profit levels are achieved.

Headquartered in Stafford, Lodge operates 50 garages and hundreds of mobile vans across the North of England, West Midlands and East Anglia, mainly serving B2B customers with commercial vehicles.

Repair Giant: Halfords told investors that the latest takeover ‘further consolidates’ its position as the UK’s largest automotive maintenance and repair company 

It is the fifth motoring assistance firm in the past three years to be acquired by Halfords, following Tyres on the Drive and McConechy’s in 2019, Universal early last year, and Iverson and Axle Group in the past 12 months.

Halfords told investors that the latest takeover ‘further consolidates’ its position as the UK’s largest automotive maintenance and repair company.

In addition, the Redditch-based group said it would help expand its presence across areas of the UK where its presence is smaller and boost its chances of winning major national contracts.

When the deal is finalised, Halfords expects motoring will provide more than three-quarters of its annual revenues, while services will provide just under half of all sales compared to just 26 per cent in 2020.

In recent times the company has been gradually shifting its focus away from cycling and towards automotive services, which it believes will be more financially sustainable and lucrative. 

Graham Stapleton, the chief executive of Halfords, said: ‘The current trading environment reinforces the rationale for building ever-more resilient, needs-based revenue streams, which is exactly what the motoring category offers.

‘Within that, the nature of the commercial tyre market means that it is non-discretionary and therefore extremely well insulated against macroeconomic uncertainty.’

In a trading update published last month, the firm revealed total sales rose by 9.2 per cent in the last quarter, thanks to extremely strong growth in its Autocentres car servicing and repair business.

This offset declining trade in revenues from cycling as consumers cut back on spending amid inflationary pressures.

Halfords benefited heavily during the early stages of the Covid-19 pandemic from a surge in bike sales as Britons sought to avoid public transport, and fewer cars were travelling on the roads.

Growing concerns about global warming provided a further uplift, as did the boom in domestic holidays and rising popularity of electric bikes and scooters.   

Loosening pandemic restrictions eventually led to a slowdown in orders, but the group has also been affected by supply chain pressures, such as rising freight and raw material costs, as well as staff absences and recruitment issues.

Derren Nathan, Hargreaves Lansdown’s head of equity research, said: ‘The B2B automotive services sector has an extra level of resilience as fleet managers have no choice but to replace worn or damaged tyres. They’re not going to leave their employees on the roadside.’

Halfords Group shares were up 3.2 per cent to £1.48 during the mid-morning on Wednesday, although their value has fallen by over half so far this year.

This post first appeared on Dailymail.co.uk