Halfords the largest commercial fleet tyre servicing operation in the UK

Earlier this year we found that Halfords Autocentres is neck-and-neck with Kwik-Fit for the title of largest car tyre retailer in the UK, with 650 centres a piece. However, what that figure doesn’t tell you is just how influential the company’s commercial vehicle tyre business has become. Tyres & Accessories recently met up with Halfords Commercial Fleet Services director, Greg Ward in order to find out.

Before getting into the details of how Halfords Commercial Fleet Services works, it is worth setting it all in context. For us at Tyres & Accessories, the suggestion that Halfords would enter the commercial vehicle tyre business first arose around the time of Halfords’s acquisition of McConechy’s in November 2019. That transaction brought with it 60 sites across Scotland and the North of England. Back then, the addition of 60 McConechy’s sites into the Halfords Autocentres fold grabbed our attention because it made the car tyre retail business the second-largest in the UK and was therefore a statement of intent towards Halfords Autocentres’ current goal of 800 branches up and down the country.

However, the McConechy’s acquisition brought with it 100 strategically placed 24-7 commercial vehicle servicing vans. In response, many initially thought Halfords – as a consumer motoring retail specialist – would sell off the commercial vehicle business and focus on the car tyre business closest to its retail roots. However, the subsequent acquisition of Universal Tyres in March 2021 not only took Halfords’s commercial vehicle coverage to 185 vans with the addition of 89 Universal vans based in positions across the South East and East of England, it also meant Halfords had bought two-thirds of the ULM fleet venture that Universal, Lodge Tyres and McConechy’s established together in the years before.

It was, therefore, no surprise to hear in October 2022 that Halfords had also bought Lodge, making Halfords the largest commercial tyre network in the UK.

At that point, official statements suggested that the Halfords commercial tyre network was comprised of “over 90 commercial tyre depots and over 400 mobile commercial vans”. However, the Halfords 2023 annual report (which was published on 2 August 2023) doesn’t specify the number of commercial depots. Instead, it puts the total number of garages (mainly car-focused sites) at 643 and reports a total of “479 commercial vans”.

“Universal, McConechy’s and now Lodge Tyre, operate within the commercial B2B sector and as such…[offer]…strong margin per worked hour, and more resilient revenues.” – Halfords Group 2023 annual report

For years we have been reporting about the growing proportion of overall Halfords revenue that its Autocentres business generations. To be specific, Autocentres accounted for 14 per cent of group turnover in 2018. That proportion had more than doubled to 39 per cent by the time the full-year 2023 data was published. That equates to a consumer tyre market share of roughly 10 per cent, which is worth around £2.2 billion, according to executives.

However, it is far harder to say exactly what proportion commercial fleet services contribute to the Halfords business. What we do know is that Halfords counts its truck tyre business under the B2B heading. Considering that B2B is made up of fleet services, the Avayler SaaS operation and a few far smaller items, it is likely that B2B is being driven by tyre sales generated by the former ULM commercial fleet services operation. B2B revenue contributed 10 per cent of overall group turnover in 2018. Five years later, B2B is bringing 24 per cent – a figure that equates to £384 million.

With that context in mind, it is no surprise to learn that Halfords is a leading customer to basically every premium player in the UK truck tyre market. Speaking to Greg Ward reveals that Halfords commercial fleet services operates a service-centric strategy that brings with it a significant degree of flexibility on the product side of things. For Ward that is, perhaps, the opposite way of working when he was responsible for Bridgestone North Region commercial vehicle sales prior to joining Halfords roughly 18 months ago.

Asked why he made the decision to move to Halfords, Ward explained that he was pleased with his achievements at Bridgestone, which include the establishment of three or four teams and taking Bridgestone tyres to market-leading positions in off-road tyre sales as well as truck tyre sales at different points during his tenure. In his view, Bridgestone still has ambition and vision, but the blank canvas associated with the Halfords proposition evidently proved too attractive.

During the short time it has existed, Halfords commercial fleet services has fused its commercial tyre service operations – which centre on the assets brought in via the ULM acquisitions – into a national fleet tyre servicing spine. As we saw earlier, that means the best part of 100 physical locations and “479 commercial vans”. And that makes Halfords the biggest servicing network and the biggest single truck tyre customer out there.

Halfords commercial fleet services is now the biggest truck tyre retailer in the UK, however, corporate graphics suggest the retention of some of the particular long-standing identities that make up that proposition (Image: Halfords)

In other words, the establishment of a truck–tyre-focused business was not an afterthought, it was part of the plan. A quick look at Halfords’s financials explains more of the reason why.

Compared with full-year 2020 figures, Halfords’s Autocentre revenue saw both strong like-for-like growth of 31.6 per cent. The like-for-like calculation balances out the effect of acquisitions which would otherwise have put total revenue growth at +220.1 per cent compared to 2020 and +61.2 per cent compared with 2022.

Autocentres is currently running at a gross margin of 50.4 per cent, which – believe it or not – is actually a decrease on the previous year “driven by the dilutive effect of…acquisitions”.

This is explicitly put down to the fact that “Universal, McConechy’s and now Lodge Tyre, operate within the commercial B2B sector and as such has a different operating model of lower gross margin but strong margin per worked hour, and more resilient revenues.”

Moving forward, Halfords is working to deliver stronger margins via economies of scale and deployment of digital technology. In other words, while margins of over 50 per cent would make a tyre manufacturer sing, Halfords sees that figure as a work in progress. In other words, very strong margins were a primary attraction when it came to building a market-leading fleet tyre business.

Halfords’s association of the former ULM operation with “more resilient revenues” is the second reason. While Halfords is both big and financially strong, it is also consumer-driven. That makes sales dependent on consumers’ whims on the one hand and weather-affected on the other. Add in the current cost-of-living pressures the nation is facing and the more stable and predictable fleet tyre business clearly has its positives.

The preservation of identities

In order to leverage the clear benefits of the commercial fleet businesses it has acquired, integration has to be successful and sound business can’t be disrupted too much. That is especially true when you consider that Lodge, McConechy’s and Universal have something like 280 years of history between them (80, 100 and 100 years respectively). Halfords smoothing the transition by softening its initial post-acquisition position so that identities will be persevered to some degree rather than simply folded into Halfords. In short, that means Halfords commercial fleet services will be the umbrella under which the other brands are gathered. In addition, something like has taken place with McConechy’s is more likely with the other businesses. In Scotland McConechy’s is known as “McConechy’s a Halfords company” and the McConechy’s branding has been subtly changed from blue and yellow to Halfords’s grey and orange tones.

In other words, the establishment of market-leading fleet business has long been part of the Halfords growth plan. And with the former ULM entities very much on-board, Halfords has staked its colours to the mast. Integration is ongoing, but – by all accounts – is going well.