HALFORDS suspended its dividend yesterday after forecasting a 25 per cent drop in sales amid the coronavirus outbreak.

The retailer anticipates a sharp drop in sales, of around £300m, following the government's tightening of restrictions. However shares soared 56 per cent in morning trading before closing up 25.6 per cent to 75.6p.

The group said the shortfall will likely have an impact on profitability, such that underlying profit before tax for 2020 could be at the lower end of, or slightly below, the current guidance range of £50m to £55m.

Halfords joins a long list of firms cancelling dividends in a bid to shore up cash. The company's board said the dividend freeze will result in a cash saving of approximately £24m.

The retailer is also taking full advantage of chancellor Rishi Sunak's stimulus package, including the business rate relief for the full year. Where stores and garages are closed, Halfords will access government support on salary payments.

The group has access to a £180m revolving credit facility (RCF) and a £20m overdraft facility, expiring in September 2022. It has drawn down the RCF and now has approximately £118m of cash on deposit, with total liquidity of £138m while operating within its existing debt facilities.

(c) 2020 City A.M., source Newspaper