Halfords acquires Lodge Tyre

Halfords Group plc has made a further tyre sector acquisition with its purchase of LTC Trading Holdings Limited and subsidiary Lodge Tyre Company for £37.2 million. The addition of Lodge Tyre’s 50 garages and 248 mobile vans takes the Halfords garage services business to 656 garages, 253 consumer vans, 440 commercial vans and nine warehouses.

In a statement published by the London Stock Exchange today, Halfords Group shares that its directors consider the acquisition “both strategically and financially compelling” as it delivers on Halfords’ objective of “further evolving into a business more heavily weighted towards motoring services.” They view this business as one that provides “more resilient, needs-based revenue streams.”

“The acquisition of Lodge Tyre is yet another example of Halfords’ strategic aim of becoming a motoring services-focused business, and will mean that motoring accounts for over three quarters of our total revenue,” states Graham Stapleton, chief executive officer of Halfords. “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.

Following the acquisition, on an annualised basis, revenue derived from services will account for circa 48 per cent of Halfords Group revenue, up from 26 per cent in FY20. The company is already positioned as the UK’s market leading motoring service provider to consumers, and on completion will also be the UK’s largest B2B commercial tyre provider by revenue and national coverage.

Details of the acquisition

Halfords has signed a share purchase agreement to purchase the entire issued share capital of Lodge Tyre on a cash free, debt free basis, for total consideration of £37.2 million, subject to an adjustment for normalised working capital. £33.2 million of the consideration will be paid in cash on completion, with the remaining £4 million paid in FY25 subject to successfully achieving set profit performance criteria.

A further investment of up to around £6 million of capex will be made in the three years post the acquisition to integrate and optimise the business.

According to Lodge Tyre’s last audited financial statements, in the year ending 31 March 2021 the company possessed gross assets of £27.4 million, delivered turnover of £68.2 million, EBITDA of £4.7 million and profit before tax of £2.9 million on a pre-IFRS 16 basis.

Targeted synergy benefits are expected to deliver incremental EBITDA of £3.8 million per annum by year 5. The Consideration reflects a 4x multiple of year 5 EBITDA (post synergies).

Lodge Tyres’ existing shareholders Andrew Martin Christmas, Martyn Joseph Lodge and Simon Peter Christmas will remain in the business on employment contracts as members of the Lodge senior management team.

About Lodge Tyre

With a history dating back to 1935, Stafford-headquartered Lodge Tyre provides on-demand and emergency coverage across the Midlands, East Anglia, North Wales and the North-West. The company employs more than 400 people and operates a warehouse in Birmingham in addition to the aforementioned 50 garages and 248 mobile tyre fitting vans.

Halfords sees these locations as “highly complementary” to its existing McConechy’s Tyres and Universal Tyres commercial tyre businesses, which are respectively located in Scotland and Northern England. The addition of the Lodge Tyres sites thus provides “much greater nationwide coverage of Halfords’ commercial fleet service business.”

Over 90 per cent of Lodge Tyre’s sales are to B2B customers operating commercial vehicles.