Job Number 15 July 2021 7:09 pm Proof NumberHalfords Group plc Annual Report and Accounts for the period ended 2 April 2021Halfords Group plcAnnual Report and Accounts for the period ended 2 April 2021Stock code: HFDTo Inspire and Support a Lifetime of motoring and cycling30441-Halfords-Annual-Report-2021-Strategic.indd 330441-Halfords-Annual-Report-2021-Strategic.indd 315/07/2021 19:12:3615/07/2021 19:12:36 Halfords is the UK’s leading
provider of motoring and cycling
products and services.
Our purpose is to Inspire and Support a
Lifetime of motoring and cycling. Our vision
is to be the super-specialists in motoring
and cycling, trusted by the nation.
Evolving into a consumer and B2B services-led
business, positioned for long-term success.
Our unique market position means we can offer
customers products and services for all their motoring
and cycling needs under the Halfords brand. We have
proven that our strategic direction is right and with our
highly skilled colleagues and strong culture, we are
well-positioned to deliver for all our stakeholders.
We offer a unique proposition
We are the market-leader in motoring and cycling
products and services, providing our customers
with the convenience of over 900 fixed and mobile
locations and with unparalleled specialist expertise.
We have a proven strategy
Our strategy is more relevant than ever. We have
made progress against our strategic priorities with
strong momentum continuing in a challenging
operating environment.
We have a strong culture
Our colleagues live our values and demonstrate
a ‘can do’ attitude, making them the foundation
of our long-term sustainable success.
Read more on pages
08 and 09.
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Overview
What’s in this Report
Overview
A Year of Focus and Momentum
Group Highlights
Our Purpose, Values, Strategy and
Culture
Group at a Glance
Chair’s Statement
Our Response to COVID-19
Investment Case
Strategic Report
Chief Executive Officer’s Statement
Our Marketplace
Our Engagement with Stakeholders
Section 172(1) Statement
How We Create Value
Our Strategy
Our ESG Strategy
Our Key Performance Indicators
Chief Financial Officer’s Review
Our Principal Risks and Uncertainties
Viability Statement
Our Governance
Board of Directors
Directors’ Report
Corporate Governance Report
Nomination Committee Report
ESG Committee Report
Audit Committee Report
Remuneration Committee Report
– Directors’ Remuneration Policy
Summary Report
– Directors’ Remuneration Report
Directors’ Responsibilities
Financial Statements
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
Financial Position
Consolidated Statement of Changes in
Shareholders’ Equity
Consolidated Statement of
Cash Flows
Note to Consolidated Statement
of Cash Flows
Accounting Policies
Notes to the Financial Statements
Company Balance Sheet
Company Statement of Changes in
Shareholders’ Equity
Accounting Policies
Notes to the Financial Statements
Shareholder Information
Five Year Record
Glossary of Alternative Performance
Measures
Company Information
01
04
06
08
10
12
14
18
22
28
30
32
34
42
54
58
66
73
76
78
84
110
114
116
122
124
125
136
144
150
151
152
153
154
155
156
168
190
191
192
193
200
201
202
halfords.annualreport2021.com
01
Keeping the UK moving
during the pandemic
Our status as an essential retailer was a clear endorsement of the wider role Halfords
plays in keeping the UK moving, by continuing to offer products and services to those who
needed them. Our Retail stores, despite initially being closed, delivered free checks and
discounts to over 480,000 key workers and were a vital way for customers to get access
to bikes and cycling services during a period of unprecedented demand. Growth in our
Mobile Expert vans proposition meant we were also able to provide services in a safe,
contact-free and convenient way.
Read about our response to the COVID-19
pandemic on pages 12 and 13.
Our Integrated Report
This is our seventh integrated report and is designed to provide a concise overview of how
we generate value for all stakeholders. By following an integrated reporting model, we aim
to show how our competitive advantage is sustainable in the short, medium, and long term.
Whilst this report focuses on value generation for our shareholders, it also demonstrates
how we interact with all stakeholders.
Online Annual Report
Read our Annual Report online, including a link to the full
Remuneration Policy: halfords.annualreport2021.com
Corporate Website
Catch up with our latest news and learn more about Halfords
on our corporate website: www.halfordscompany.com
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Job Number 15 July 2021 7:09 pm Proof NumberWe offer a unique propositionDelivering value in the short term:• Halfords continues to play an essential role in keeping the UK moving during the pandemic.• Providing market-leading service specialism – the only business in the UK able to offer Motoring Services in a retail store, a garage, at home or at work, providing our customers with unparalleled choice and convenience.• Cycling growth remains strong, demand for mobile services is high.Ensuring success in the long term:• Our market-leading proposition will continue to differentiate Halfords in the UK retail and motoring services sectors. Much of our Services proposition is unique, including, for example, on-demand fitting.• We will continue to invest in our Services proposition by scaling the number of customer touchpoints and broadening our services offering. We have a proven strategyDelivering value in the short term:• The accelerated shift to online was enabled by our investments in a new Group web platform and our best-in-class digital operating model in Autocentres.• We capitalised on the cycling tailwind by leveraging our relationships with suppliers to meet unprecedented demand and significantly improving the profitability of the category.• We have made good progress against our strategic priorities, with strong momentum continuing in a challenging operating environment.Ensuring success in the long term:• Our strategy will see us develop into areas with good long-term growth prospects such as motoring services, B2B and electric mobility. • The UK’s motoring service market is highly-fragmented with no clear market leader, and one in which we have some unique advantages. • The integration of our physical and digital assets, such as stores, garages, vans and home delivery, will provide even more convenience for customers.We have a strong cultureDelivering value in the short term:• Our colleagues are at the heart of our business and have passion, dedication and a ‘can do’ attitude, making them the foundation of our long-term sustainable success.• We have prioritised colleague safety, supporting them throughout the pandemic in return for their unwavering loyalty and dedication to our customers. Our strong performance can be attributed to the strength and skillset of our colleagues. Ensuring success in the long term:• We motivate and incentivise our colleagues to ‘inspire’ and ‘support’ our customers with their motoring and cycling needs and deliver best-in-class training via our in-house training programmes such as ‘Gears’ and E-training. • We continue to invest in our colleagues’ wellbeing and ensure they are fully engaged to drive our long-term sustainable growth ambitions.We are the only business in the UK able to offer Motoring Services in a retail store, a garage, at home or at work, providing our customers with unparalleled choice and convenience.Growth of Group online sales+110%Group Service-Related Sales growth of +23%Autocentres Net Promoter Score improved by+3.8 pointsOffering free checks and discounts to 480,000NHS workers, teachers and Armed Forces staffWe are evolving into a consumer and B2B services-led business, positioned for long-term success.Our strategy remains unchanged, with motoring and cycling products remaining at the core of our proposition. However, in recognising the market opportunity and our unique advantages, we will continue to evolve into a consumer and B2B services-focused business, with a greater emphasis on motoring, generating higher and more sustainable financial returns.The last year has proven that this is the correct strategic direction for our business, and we continue to invest in the right areas to meet the expectations of our key stakeholders. Alongside this, we recognise the importance of sustainability and we are therefore committed to minimising our impact on the environment, creating a diverse and inclusive workplace, and ensuring that we give back to the communities in which we operate.Positioned for long-term success 02Halfords Group plc Annual Report and Accounts for the period ended 2 April 202130441-Halfords-Annual-Report-2021-Strategic.indd 230441-Halfords-Annual-Report-2021-Strategic.indd 215/07/2021 19:12:4115/07/2021 19:12:41 Job Number 15 July 2021 7:09 pm Proof NumberWe offer a unique propositionDelivering value in the short term:• Halfords continues to play an essential role in keeping the UK moving during the pandemic.• Providing market-leading service specialism – the only business in the UK able to offer Motoring Services in a retail store, a garage, at home or at work, providing our customers with unparalleled choice and convenience.• Cycling growth remains strong, demand for mobile services is high.Ensuring success in the long term:• Our market-leading proposition will continue to differentiate Halfords in the UK retail and motoring services sectors. Much of our Services proposition is unique, including, for example, on-demand fitting.• We will continue to invest in our Services proposition by scaling the number of customer touchpoints and broadening our services offering. We have a proven strategyDelivering value in the short term:• The accelerated shift to online was enabled by our investments in a new Group web platform and our best-in-class digital operating model in Autocentres.• We capitalised on the cycling tailwind by leveraging our relationships with suppliers to meet unprecedented demand and significantly improving the profitability of the category.• We have made good progress against our strategic priorities, with strong momentum continuing in a challenging operating environment.Ensuring success in the long term:• Our strategy will see us develop into areas with good long-term growth prospects such as motoring services, B2B and electric mobility. • The UK’s motoring service market is highly-fragmented with no clear market leader, and one in which we have some unique advantages. • The integration of our physical and digital assets, such as stores, garages, vans and home delivery, will provide even more convenience for customers.We have a strong cultureDelivering value in the short term:• Our colleagues are at the heart of our business and have passion, dedication and a ‘can do’ attitude, making them the foundation of our long-term sustainable success.• We have prioritised colleague safety, supporting them throughout the pandemic in return for their unwavering loyalty and dedication to our customers. Our strong performance can be attributed to the strength and skillset of our colleagues. Ensuring success in the long term:• We motivate and incentivise our colleagues to ‘inspire’ and ‘support’ our customers with their motoring and cycling needs and deliver best-in-class training via our in-house training programmes such as ‘Gears’ and E-training. • We continue to invest in our colleagues’ wellbeing and ensure they are fully engaged to drive our long-term sustainable growth ambitions.We are the only business in the UK able to offer Motoring Services in a retail store, a garage, at home or at work, providing our customers with unparalleled choice and convenience.Growth of Group online sales+110%Group Service-Related Sales growth of +23%Autocentres Net Promoter Score improved by+3.8 pointsOffering free checks and discounts to 480,000NHS workers, teachers and Armed Forces staffOverview03 halfords.annualreport2021.com30441-Halfords-Annual-Report-2021-Strategic.indd 330441-Halfords-Annual-Report-2021-Strategic.indd 315/07/2021 19:12:4515/07/2021 19:12:45 Group Highlights
Strategic Highlights
Halfords Mobile Expert Growth
A notable highlight this year was the demand for our
Halfords Mobile Expert proposition, which remained high
throughout the period, with record job numbers and sales
over the summer as the benefits of convenience and
safety resonated with customers. We continued to invest
in our Mobile Expert proposition, increasing the scale and
geographic reach of this service, and ended the year with
143 vans in our fleet.
Biggest Ever Year of Group Services
It was a record year for our Group Services proposition,
and against the backdrop of -25% fewer journeys, it is
testament to our focus on this market. We launched several
initiatives to boost customer awareness, including our
‘Road Ready’ campaign, our Group marketing campaign
and our free 32-point bike check. We made booking our
services easier than ever by enabling customers to book
on our single Group website and we are the first national
service provider to allow customers to book timed cycle
service appointments or collections online. With heightened
demand, we continued to increase our scale and capacity,
making it easier and more convenient for customers to
receive their services.
Acquisition of The Universal Tyre Company
In March, we announced the acquisition of The Universal
Tyre Company. Operating from 20 sites and 89 commercial
vans in the South East of the UK, Universal specialises in
tyre services, including the supply and fit of tyres for a wide
range of vehicles, from cars to commercial and agricultural
vehicles, as well as providing general car maintenance and
repairs such as brakes, servicing and MOT. This acquisition
takes us closer to our medium-term goal of having 550
garages and delivering our consumer services proposition
from over 1,000 locations.
Refreshing ESG Strategy
Sustainability continues to be high on our agenda and
during the year we conducted a refresh of our ESG strategy,
recognising the need to fully integrate our commitments
and actions with the corporate strategy. We aligned on four
key areas of priority - Electrification, Net Zero Commitment,
Diversity & Inclusion, and Product, Packaging and Waste
Management – and developed a roadmap for delivering
against these priorities in the short, medium, and long term.
We have also set science-based targets and have engaged
with the Science Based Target Initiative (“SBTi”), working
towards formal accreditation.
Operational Highlights
Our Response to a Challenging Year
COVID-19 was demonstrably the most significant challenge
faced by any retailer over the last year, but we have also
faced Brexit, container shortages, port congestion and
more recently, the blockage of the Suez Canal. Despite all
of these external challenges, our operational agility has
meant that our business has been able to perform well, keep
our colleagues safe and offer products and services to our
customers in order to help keep the UK moving.
Strong Growth in Tredz
Tredz, our Performance Cycling business, saw strong growth
during the year, driven by the cycling market boom as the
UK public took to bikes during lockdown, and capitalising on
customer transfer from our closed Cycle Republic business.
We identified very early in the pandemic the unprecedented
levels of demand for cycling, enabling us to use our scale
and relationships to secure stock from new and existing
suppliers.
Investing in Colleagues
Over the last year, our colleagues have shown their dedication to
our business, going the extra mile to provide our customers with
the products and services they needed to keep the UK moving.
We have invested significantly to ensure the health, safety and
wellbeing of our colleagues and continue to prioritise colleague
training – recognising the value of multi-skilled colleagues and
providing more cross-Group career opportunities. This year, we
also implemented a new operating model in our Retail stores,
designed to significantly increase our scale and capability in
motoring and cycling services.
Review of our Physical Estate
Our focus on cost and efficiency has led us to conduct a full
review of our physical estate, resulting in the closure of 80
stores and garages, which includes the exit of 22 Cycle Republic
stores announced at the end of FY20. We are confident we will
retain a large share of the customer base through trade transfer
to neighbouring stores based on trials, experience through the
pandemic and analysis of catchment areas.
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Overview
Total Group sales which
are service-related
29%
Total Group sales from
online channels
44%
Halfords.com online orders
click and collected in-store
80%
Total Group sales from
B2B channels
18%
Financial Highlights
Revenue (£m)1
+13.1%
m
0
.
5
9
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1
£
,
.
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5
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£
.
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4
2
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,
1
£
.
m
3
2
9
2
,
1
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Underlying profit
before tax (£m)1,2
+72.3%
.
m
3
6
9
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m
4
.
5
7
£
.
m
6
1
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7
1
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1
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2
1
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7
1
8
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2
Profit before tax (£m)1,2
+184.1%
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4
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1
7
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7
6
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0
.
1
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Underlying basic
earnings per share (p)1,2
+67.5%
p
7
.
0
4
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3
.
0
3
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6
.
9
2
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.
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Dividend per
ordinary share (p)
-19.0%
p
6
.
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1
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0
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.
7
1
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Basic earnings
per share (p)1,2
+139.8%
p
7
.
8
2
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7
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2
.
1
2
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1
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1
0
2
1
2
Read more in the Chief Financial
Officer’s Review on pages 58 to 64.
1. FY20 numbers are calculated on a 52-week basis.
2. These numbers are calculated on a pre-IFRS 16 basis.
halfords.annualreport2021.com
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Our Purpose,
Values,
Strategy
and Culture
The successful
implementation
of our strategy
is critical to the
delivery of the
Group’s purpose
and is underpinned
by the values and
behaviours that
shape our culture
and the way that
we conduct our
business.
Our Purpose
Our Vision
Our Strategy
Our Values
Our Culture
Why we
exist
To Inspire and Support a
Lifetime of motoring and
cycling culture
Being a purpose-driven
organisation, the Board recognises
the importance of its role in
ensuring the culture of the
organisation is aligned to its
purpose, business strategy and
ambition to become a market-
leading products and services
business. Colleagues from across
the Group believe in our Purpose
and strive to deliver it every day
they come to work.
Our aspirational
goal
The super-specialist in
motoring and cycling,
trusted by the nation.
Our Mission
Our achievable
goals
✔ Make motoring
easier, safer and more
enjoyable for everyone
✔ Get more people
cycling, more frequently
Read more in our
sustainability section
on pages 42 to 53.
How we achieve
our Purpose and
Mission
1 Inspire
Inspire our customers with a
differentiated and super-
specialist offer.
2 Support
Support our customers
through an integrated,
unique and more convenient
services offer.
3 Lifetime
Enable a lifetime of motoring
and cycling.
Fundamental
beliefs that
underpin
everything we do
one
wow our
be better
pride in
halfords
customers
every
expertise
family
day
We are reliant on the culture of our
business and the engagement of our
colleagues to achieve our ambition.
During FY21, we ran listening
groups to inform a new set of Group
values, relevant for the current
strategy. These new values are the
fundamental beliefs that underpin
everything we do and have been
incorporated into Group training,
review and reward mechanisms.
Ethical
foundation
enabling better
decisions
every day
Monitoring Culture
The Board plays an active role
in monitoring the culture of the
business through its regular
facilitation of listening groups and
site visits. The Board reviews the
results of the annual colleague
engagement survey and sets
engagement targets for Executive
Directors and Executive Committee
members. The outputs of listening
groups and associated action plans
are reviewed by the Board and
key actions are incorporated into
functional engagement plans.
Read more about how the
Board monitors our culture
on pages 94 to 97.
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Overview
Our Purpose
Our Vision
Our Strategy
Our Values
Our Culture
Why we
exist
To Inspire and Support a
Lifetime of motoring and
cycling culture
Being a purpose-driven
organisation, the Board recognises
the importance of its role in
ensuring the culture of the
organisation is aligned to its
purpose, business strategy and
ambition to become a market-
leading products and services
business. Colleagues from across
the Group believe in our Purpose
and strive to deliver it every day
they come to work.
Our aspirational
goal
The super-specialist in
motoring and cycling,
trusted by the nation.
Our Mission
Our achievable
goals
✔ Make motoring
easier, safer and more
enjoyable for everyone
✔ Get more people
cycling, more frequently
Read more in our
sustainability section
on pages 42 to 53.
How we achieve
our Purpose and
Mission
1 Inspire
Inspire our customers with a
differentiated and super-
specialist offer.
2 Support
Support our customers
through an integrated,
unique and more convenient
services offer.
3 Lifetime
Enable a lifetime of motoring
and cycling.
Fundamental
beliefs that
underpin
everything we do
one
halfords
family
wow our
customers
be better
every
day
pride in
expertise
We are reliant on the culture of our
business and the engagement of our
colleagues to achieve our ambition.
During FY21, we ran listening
groups to inform a new set of Group
values, relevant for the current
strategy. These new values are the
fundamental beliefs that underpin
everything we do and have been
incorporated into Group training,
review and reward mechanisms.
Ethical
foundation
enabling better
decisions
every day
Monitoring Culture
The Board plays an active role
in monitoring the culture of the
business through its regular
facilitation of listening groups and
site visits. The Board reviews the
results of the annual colleague
engagement survey and sets
engagement targets for Executive
Directors and Executive Committee
members. The outputs of listening
groups and associated action plans
are reviewed by the Board and
key actions are incorporated into
functional engagement plans.
Read more about how the
Board monitors our culture
on pages 94 to 97.
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07
Group at a Glance
We are a market-
leading business,
with unique and
differentiated
products and
services.
garages or stores, having a fitting done
on their driveway via our Halfords Mobile
Expert vans, or a phone call or web chat
with our contact centre. Longer term, we
are planning a new and exciting way to
showcase our market-leading proposition
with a re-designed physical estate,
enabling customers to experience our
products and services in a more inspiring,
more integrated, and more convenient way.
Our unique mix of stores,
garages, mobile vans and
home delivery means we can
offer customers unparalleled
convenience in the motoring and
cycling markets.
The last year has highlighted how important
it is for customers to get access to the
products and services in the way that
is most convenient for them, and our
proposition must match this. We recognise
that most customer journeys begin online
and our Group website gives customers
access to a range of options, from delivery-
to-home or to-store, booking a service in
Our Unique Combination of Assets Create a Market-Leading Customer Proposition
Recognising that convenience is important to our customers, our combination of assets means customers can access our wide range of
products and services in a way that suits their needs, be that in a store, garage, at home via a mobile van or online via our integrated web
platform. Our B2B platform means business customers can also take advantage of our unique combination of assets.
Stores
404 Halfords Retail and 3
Performance Cycling stores offering
a wide range of motoring and
cycling products and on-demand
services.
Garages
374 garages offering MOT, service,
maintenance and repair services.
Mobile Vans
143 ‘Halfords Mobile Expert’ vans
and 185 Commercial vans, bringing
services direct to customers.
Customer Contact Centre
Offering expert advice, knowledge
and help from a centralised, virtual
location.
Click & Collect
Enabling customers to pick up
products at their local store.
Integrated Web Platform
Bringing together all Halfords
products and services under one
website.
B2B
Offering products and services,
across both motoring and cycling,
to businesses around the UK and
ROI, including our market-leading
Cycle2Work scheme.
Read more about how we operate on pages 32 and 33.
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Overview
Services
Products
Last year, we set out our ambition to evolve into a
consumer and B2B services-focused business, meaning
that even more of our revenue would come from Services.
In the medium term, over half of our business will be in
Services, which are essential in their nature, meaning
we are a more resilient business with higher customer
retention, a lower risk profile and generating a stronger
and more sustainable return on capital. Our status as an
essential retailer and services provider throughout the
COVID-19 pandemic, and our ability to provide services
to those in need, highlights how this shift in emphasis
benefits both the Group and our customers.
Selling products remains at the heart of our proposition
and we are always looking to bring new, exciting and
innovative products to market to maintain pace with
customer expectations and emerging market trends. From
the latest E-bike and E-scooter to a child car seat to a
motorcycle battery, we work hard to ensure that we can
offer a wide range of products and services as part of our
customers’ motoring and cycling journeys.
Our Offering
Our Offering
Retail Cycling
Services
Autocentres/
Mobile Expert
Retail Motoring
Services
Mainstream
Cycling
Products
Performance
Cycling
Motoring
Products
g
C y clin
am C y cli n
tre
s
n
i
a
M
3 3 %
g
Perf.
Cycling 6%
GROUP
GROUP
REVENUE
REVENUE
S
e
r
v
i
c
e
s
2
9
%
M
otoring 32%
M o t o rin g
Cycling Services: 15%
Autocentres
Mobile Expert: 69%
Retail Motoring
Services: 16%
Services
Products
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Our colleagues at Halfords
provided over 480,000
services to key workers and
over a million services during
full lockdowns to those
needing our support.
Chair’s
Statement
Keith Williams
We recognise the remarkable efforts of our
colleagues during the challenges of COVID-19
and look forward to an exciting year ahead.
As I prepared last year’s statement, the impacts of
COVID-19 were still emerging, but it was already
clear it would have a material effect on every
aspect of our lives.
One year on, this statement coincides with UK
restrictions lifting and our lives beginning to return
to normal, albeit with a degree of uncertainty about
the future.
Although I am keen to look to the future, we should
remember the many admirable efforts across the
UK over the last year.
The pandemic
We are proud to be key workers during the
pandemic. Our colleagues at Halfords provided
over 480,000 services to key workers during
the year and over a million services during full
lockdowns to those needing our support. We
managed to keep most of our stores, garages
and vans open, providing a safe environment for
our staff and for customers to enable them to buy
essential items to carry them through lockdown.
Last year, I referenced our colleagues as being the
lifeblood of our business.
The response of every colleague throughout the
business has been truly remarkable. In FY21 we
launched a series of initiatives to help support
them including Front Line bonus schemes,
hardship funds, free flu vaccinations and support
lines. I hope in some way, we have eased the
distress of the last 12 months on some of our
colleagues.
In order to safeguard the business, we took fast
and decisive action to safeguard the immediate
future, followed by an ongoing and agile response
to the volatile and transforming environment we
faced.
At times, traffic levels were more than 90% below
pre-pandemic levels, impacting the motoring
side of our business as the public stayed in and
worked from the safety of their home, MOTs were
not required for a period in our Autocentres and
cycling needed to adapt to increased demand
while many of our suppliers themselves were in
lockdown.
Free Cash
Flow
£145.3m
Net Cash
£58.1m
Read our Corporate
Governance Report
on pages 86 to 108.
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Overview
Proposed final
Dividend for
FY21
5.0p
per share
Proposed
Dividend in
FY22
9.0p
per share
We had to take a series of very difficult decisions
during the first few months: pausing dividend
payments, furloughing 50% of colleagues, and
running a reduced investment plan that ultimately
limited our ability to transform the business.
That said, I am pleased that despite some major
investments being curtailed, the Group still made
meaningful progress towards creating a more
efficient and profitable business for the future.
I am particularly pleased with the resulting Group’s
performance during FY21 as the UK faced an
almost continuous rhythm of restrictions and
lockdowns. Group Profit Before Tax was £96.3m
(£99.5m post-IFRS 16), over £40m ahead of last
year, and we generated a Free Cash Flow of
£145.3m, finishing with net cash of £58.1m.
Looking at the Year Ahead
Hoping for the best but preparing for the worst, we
will continue to hold a strong balance sheet given
the uncertainties ahead. But we are well placed to
continue our plans to move the business forward.
I believe our existing strategy, that will see
Halfords evolve into both a consumer and B2B
services-focused business, generating higher and
more sustainable financial returns, is still the right
one, and we will continue our plans to accelerate
the growth of our motoring services business. This
requires greater capital expenditure, which we
expect to be with the range of £50m–£60m.
We have many exciting plans that were
momentarily paused, but I now look forward to
seeing them emerge in FY22 and the positive
effects they will have on the Group.
Dividend
Given the strength of our performance in the
closing stages of FY21, the Board has proposed a
final dividend of 5p per share. We also propose a
dividend in FY22 of 9p per share with an intention
for this to be progressive.
Should surplus cash remain in the business that
we feel we cannot deploy with good rates of
return, we will return this to shareholders in the
most appropriate way.
Board of Directors
We have seen three changes to our Board this
year. In September, we welcomed Tom Singer
to the Board. I know Tom will bring invaluable
experience to the Board and will contribute
greatly to the ongoing success of Halfords. Also,
in September David Adams stepped down as
Senior Independent Director, and Helen Jones
took on this role. In December, David Adams left
Halfords, following which Tom Singer became
Chair of the Audit Committee. We have benefitted
greatly from David’s considerable efforts since he
joined the Board, initially as a Director and more
recently in his additional roles as Chair of the Audit
Committee and as Senior Independent Director.
We are grateful to David for the work he has done
in these roles.
Keith Williams
Chair
16 June 2021
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Our Response to COVID-19
Playing an essential
role in keeping the
UK moving during
the pandemic
Our response in numbers
£2.3m
awarded to customer-facing
colleagues working through
the initial lockdown, as part of
a Frontline Colleague Support
Scheme.
£1.5m
investment to create the
Halfords Here to Help fund,
supporting colleagues and
their families who have been
financially impacted by the
pandemic.
480,000
free checks and discounts to key
workers including NHS workers,
teachers and Armed Forces
personnel during the year.
The pandemic has highlighted the important role we play in society in helping the UK
population to get from A to B in a safe, economical, convenient and environmentally-
friendly way. Our market-leading Cycling and Motoring businesses afforded us the
critical role to keep the UK moving during the pandemic, from free checks for key
workers, to maintaining vehicles in our Autocentres, and to our mobile vans bringing
services to people’s doorsteps.
Taking care of our colleagues
The safety of our colleagues was our immediate priority throughout the beginning
of the pandemic and has remained a top priority ever since. From acquiring
sufficient PPE, to supporting our colleagues financially through our ‘Here to Help’
and ‘Frontline Colleague Support’ funds, to creating a Wellbeing Hub where
colleagues can go to get support and advice, we have worked hard to ensure all
colleagues are able to cope during these difficult times.
Supporting our
customers
Our role in keeping the UK moving
was essential for many key workers
– maintaining bikes and vehicles to
ensure they were able to perform
their jobs throughout the pandemic.
We created safe environments so
that we could remain open to those
in need and provided free checks
and discounts to key workers
throughout lockdown.
Working with suppliers to
manage our supply chain
We worked closely with our
suppliers on end-to-end supply
chain challenges driven by global
supply and demand volatility to
ensure we could minimise disruption
to our business. We reacted quickly
to minimise delays, extending our
planning and ordering horizons,
redesigning product ranges to
overcome shortfalls, and using our
strong relationships to ensure both
we and our suppliers were in the
best place possible.
Ensuring the long-term
success of our company:
Financial Resources
We acted quickly and decisively at
the start of the pandemic to preserve
cash, in what was an incredibly
uncertain environment. We increased
the robustness of our processes
and controls, implementing weekly
scenario analysis and forecasting,
and a daily Cash Committee to
approve spending commitments.
Later in the year, we refinanced our
existing debt facilities with a new
three-year commitment, expiring in
2023.
Ensuring the long-term
success of our company:
Risk Management
As an essential retailer, being able
to continue to provide services to
customers throughout the pandemic
was a key focus. Protecting our
customers and colleagues is
important to us, therefore we were
guided by a risk-led approach during
this period. The Board and Executive
Team follow a Risk Management
framework that ensures the
evaluation of emerging risk and the
Group’s principal risks as well as
operational considerations.
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2
4
6
5
Overview
1
3
Helping to make a
difference to our
communities
1
Chris from Bolton
At the Manchester Road Autocentre,
Chris was happy to help when he
received a request to provide some PPE
for local care workers. He supplied them
with a roll of seat covers so that they
could continue to visit their patients
while remaining safe.
2
3
4
5
6
Paul from Washington
A nurse with a flat tyre called the
Washington Autocentre for help. Paul
invited her to bring her car down
immediately so they could do a complete
tyre check. The check revealed that the
punctured tyre needed replacing, while two
others were low on pressure. The relieved
nurse chose to get all four tyres replaced
so that she’d be safe on the road.
David from Hermiston Gait
At the Hermiston Gait store in
Edinburgh, David and the team
supported an order for a children’s
autism charity. The team turned the
order of 50 bikes with accessories
around in just under a week, alongside
delivering record bike volumes.
Mark from Coatbridge
The Autocentre got an urgent call from
a company who needed to deliver
medications to pharmacies for patients,
but 13 tyres on their vans had been
slashed and the vehicles stranded. Mark
drove straight to the site in Edinburgh
and changed all 13 tyres so that the vans
could make their essential deliveries.
Kieran from Aberdeen
After a 12-hour shift, a nurse in Aberdeen
found her car wouldn’t start. Panicking,
she called the Aberdeen Autocentre to
see if they could help. Kieran had just
finished his shift but didn’t hesitate to go
to her aid, travelling 15 miles to fit a new
battery. The nurse was extremely grateful
that she was able to get home for some
well-deserved rest.
Kieran from Gateshead
McConechy’s in Gateshead received
a visit from a police rapid response
vehicle, which urgently needed four new
tyres. Kieran took the vehicle in straight
away and managed to get it back out on
the road in a record 35 minutes!
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Investment Case
Five Reasons to Invest
Market-leading business
Value-creating
opportunities
We are the UK’s largest retailer of motoring and cycling
products and services, allowing us to drive benefits in
procurement, innovation and customer offering. In car
servicing, the market is highly fragmented with no clear
leader – with 2% share we have significant opportunity for
growth.
Our strategy will see us develop into areas with good long-
term growth prospects such as motoring services, B2B and
electric mobility.
Building a services-focused
business
Strong balance sheet
and cash generative
In the medium term, over half of our business will be in
Services – which are essential in their nature – meaning we
are a more resilient business with higher customer retention,
a lower risk profile and stronger and more sustainable
returns on capital.
The Group has always maintained a strong balance sheet
and benefits from a cash generative business model, with
good Free Cash Flow enabling investment in our plan.
Dividend returns
Until the COVID-19 pandemic we have consistently paid a dividend, supported by strong levels of Free Cash Flow.
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Overview
Our Strengths
Unique and differentiated
products and services
Omnichannel customer
proposition
We offer a wide range of unique and differentiated products,
with exclusive ranges and customer-led innovative products.
Much of our Services proposition is also unique, including,
for example, on-demand fitting.
Our business has a strong omnichannel customer
proposition with high levels of Click & Collect driving footfall
into stores, giving us a unique advantage over online
competitors.
Convenient services
proposition delivered
in over 900 locations
We are the only business in the UK able to offer Motoring
Services in a retail store, a garage, at home or at work,
providing customers with unparalleled choice and
convenience.
Expertly trained
colleagues
Consistently great customer service is key to our success
and we achieve this through our expertly-trained colleagues.
All colleagues benefit from high levels of training via our
Gears programme and more tailored training programmes
via our central training hub. Cross-Group career
opportunities give colleagues further ways to boost their
knowledge and expertise.
Super-specialist expertise
that cannot be replicated
As a super-specialist, we have unmatched product and
services expertise across both motoring and cycling,
creating a significant barrier to entry for our generalist
competitors, both on and offline.
Strong sustainability
credentials
Our sustainability strategy aligns well with our Commercial
strategy, particularly our ambitions to lead the way in Electric
mobility as well as our ongoing commitment to supporting
higher cycling uptake in the UK .
Unique, technology-driven
proposition in our physical
estate
We utilise market-leading and unique proprietary technology
in our stores, garages and mobile vans, enabling our
colleagues to deliver a best-in-class proposition.
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Job Number 15 July 2021 7:09 pm Proof NumberChief Executive Officer’s Statement18Our Marketplace22Our Engagement with Stakeholders28Section 172(1) Statement30How We Create Value32Our Strategy34Our ESG Strategy42Our Key Performance Indicators54Chief Financial Officer’s Review58Our Principal Risks and Uncertainties66Viability Statement73ContentsStrategic Report30441-Halfords-Annual-Report-2021-Strategic.indd 1630441-Halfords-Annual-Report-2021-Strategic.indd 1615/07/2021 19:13:0215/07/2021 19:13:02 Job Number 15 July 2021 7:09 pm Proof Number30441-Halfords-Annual-Report-2021-Strategic.indd 1730441-Halfords-Annual-Report-2021-Strategic.indd 1715/07/2021 19:13:0415/07/2021 19:13:04 We are delighted to have delivered
a year of very strong financial and
operational progress, especially
in light of the extraordinary
challenges presented by the
pandemic. As ever, I would like to
thank our outstanding colleagues
across the business for their
hard work, professionalism, and
dedication.
Chief
Executive
Officer’s
Statement
Graham Stapleton
Introduction
This year has undoubtedly been one of the most
challenging that Halfords has faced in its 130-
year history. I reflect on the year with immense
pride in the commitment and determination of our
colleagues to support our customers, suppliers
and communities, whom we served throughout
the pandemic to keep the UK moving in a time of
great difficulty. Despite the challenging operating
environment, I am very proud of the resilient and
strong performance we delivered in FY21. We have
shown agility in adapting our operating models
on multiple occasions during the year, whilst at
the same time continuing to build the strategic
foundations on which we will transform our
business in FY22. The Group is in good shape
to invest in its strategy and position the business
for long-term success.
Operational review
I am very pleased with our performance in FY21,
shown not only in the financial results but also in
the operational agility demonstrated throughout
the business to overcome the many challenges
presented last year. COVID-19 was clearly the
most significant challenge faced by any retailer, but
we have also faced Brexit, container shortages,
port congestion and, more recently, the blockage
of the Suez Canal. Our performance not only
showcases the resilience of our core business
and the relevance of our strategy, but also the
importance of our progress in creating a more
efficient and profitable business to provide strong
foundations for future growth.
Retail revenue of £1,039.8m was +9.4% above last
year and +14.6% on a LFL basis. We saw a volatile
and unpredictable year of trading, with large
swings in LFL performances from week to week,
and across our categories. Overall, we saw strong
demand for our Cycling products, +54.1% above
last year, with our performance cycling business
Tredz performing even better at +66.3%. Motoring
was -12.1% LFL, better than traffic levels but
inevitably impacted by the lockdowns.
Autocentre revenue was £252.5m, growing
31.6% year-on-year and +9.7% on a LFL basis.
The overall growth in Autocentres benefited from
the annualisation of our FY20 acquisitions and
the continued expansion of our Halfords Mobile
Expert business, launching new vans and hubs to
serve this growing and in-demand service.
Underlying
Profit Before
Tax
£96.3m1
Autocentres
Revenue
Growth
+31.6%
Read our Corporate
Governance Report
on pages 86 to 108.
1. Number presented is pre-
IFRS 16. Underlying Profit
Before Tax, post-IFRS 16
is £99.5m.
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We are delighted to have delivered
a year of very strong financial and
operational progress, especially
in light of the extraordinary
challenges presented by the
pandemic. As ever, I would like to
thank our outstanding colleagues
across the business for their
hard work, professionalism, and
dedication.
Strategic Report
Group Services
Revenue
£370.0m
Growth in
B2B revenue
40%
Enhancing our Group web platform and
digital customer experience, to create
an even more differentiated and specialist
proposition
• Launched over 160 new customer
enhancements to our group website, including
‘email me when in stock’, guided selling, local
store stock availability, and personalisation.
• Transferred inbound phone and digital
customer-contact from all 404 retail stores
to a centralised, specialist team. With the
pandemic driving contact volumes to at least
four times higher than normal, caused by
accelerated online adoption and a buoyant
cycling market, this initiative enabled a
significant improvement in call answer rates, to
over 95%, improved service speed and query
resolution, and the liberation of store-based
colleagues to focus on those customers in
front of them.
• With an ongoing focus on improving the
customer experience, Retail NPS improved by
+1.8 YoY and Autocentres NPS by +3.8 YoY, a
proud achievement in such a challenging year.
It has been a particularly strong year for our
areas of strategic focus – Group Services, B2B
and Online - demonstrating the resilience and
relevance of our strategy in the face of a tough
operating environment. Group Services revenue
grew +23% on last year and accounted for 29% of
the Group; B2B sales were up +40% on the prior
year and accounted for 18% of Group revenue;
and finally, online revenue was up +110% on last
year and accounted for 44% of the Group.
Progress on strategy in FY21
‘To Inspire and Support a Lifetime
of motoring and cycling.’
At our preliminary results in July 2020, reflecting
the unprecedented impact and extreme
uncertainty of the COVID-19 pandemic, we
highlighted that we would moderate our near-
term plan. We adjusted our short-term focus to
cost efficiency and cash preservation, ensuring
our colleagues are safeguarded and engaged in
the success of the business and, of particular
importance, adapting quickly to new customer
trends. Our aim was to strengthen the core of our
business during FY21, in the hope that we could
return to more transformative investment in FY22
as the pandemic situation stabilised. Our progress
on the key building blocks was as follows:
Continue to transform and build
a unique and market-leading
Motoring Services offer
•
Increased the scale of our Halfords Mobile
Expert offer to 143 vans, 14 hubs and over 250
technicians to serve a wider geographic reach.
• Acquired Universal Tyres, adding 20 garages to
our fixed estate, as well as 89 vans, enabling
us to expand our coverage of the commercial
market in FY22.
• Continued to invest in our technology:
− PACE into McConechy’s
− Tyres on The Drive (“ToTD”) integrated into
our Group website
− WeCheck app launched in Retail stores
• Launched our first Group motoring services
campaign, contributing to increased
awareness and a +28% uplift in consideration
scores for our Services offer.
•
Implemented a new labour operating model
in our Retail stores, designed to significantly
increase our scale and capability in motoring
and cycling services. We completed
consultations with over 5,500 colleagues, with
88% ultimately retained in the business.
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Chief Executive Officer’s Statement
A focus on cost and efficiency,
creating a leaner and more
profitable business
• Cycling profitability improvements of
+680bps, far exceeding the targeted
+300bps.
• Sustainable working capital
improvement of £20m
•
In line with our plans announced in
November 2019, we closed 80 low-
returning stores and garages where
we were confident of trade transfer to
neighbouring locations. This includes
the exit of 22 Cycle Republic stores,
announced in FY20.
• Negotiated 19 lease renewals in Retail,
achieving an average rent reduction
of -30%.
• Secured GNFR annualised cost savings
of £7m.
Invest in our Colleagues’ welfare,
engagement and development
• Colleague safety and wellbeing was our
number one priority throughout FY21:
− We invested £11m in PPE and
COVID-19 protocols across the
Group.
− We invested a further £4m in
direct financial support, including
a Frontline Colleague Support
Scheme and the Halfords Here
to Help fund.
− We launched a Wellbeing hub to
support colleagues on a range of
issues affecting their mental and
physical health.
• We commenced our Services skills
intervention, significantly increasing our
colleagues’ ability to provide a broad
range of motoring and cycling services
to customers and providing them with
development opportunities to help
further their careers.
FY22 strategy focus
The last 12 months have proven the
resilience of our business and the ongoing
relevance of our strategy to focus on the
growth of motoring services and B2B.
Although we expect the volatile and
uncertain trading patterns to continue, the
period of optimisation we have undertaken
has strengthened the core business and
it is now well-placed to withstand future
challenges. Although we will continue
to optimise the business, we will now
accelerate the process of transformation
that was paused during the pandemic.
By the end of FY22 we expect to see a
different business beginning to emerge,
with our areas of focus next year as follows:
Inspire
• Project Fusion remains an exciting
opportunity and we will trial between
two and three towns in FY22. We think
of Fusion as ‘a customer experience
seamlessly, consistently, & conveniently
executed across all of our assets in a
town’. It will encompass a destination
retail store, an updated Autocentre
garage, and a Halfords Mobile
Expert offer, all operating together in
conjunction with centralised customer
support channels and an online and
home delivery proposition across a
major town or city. Focused primarily
on improving the customer experience
and understanding the potential of
combining all Halfords services in the
most compelling way, the trial will also
test whether a reinvigorated in-store &
garage design, focused more heavily
on the delivery of services, can further
stimulate sales across the Group.
• We will continue to invest heavily in
our digital proposition, whether online
through the Group web platform, or
enabling the wider transformation
agenda.
• Through Project ‘Peloton 2’, we will
significantly improve our PACs (“parts,
accessories and clothing”) offering
in Cycling, through better ranging,
improved merchandising, and most
importantly enabling our colleagues
to provide customers with complete
solutions to their needs.
Support
• We will increase our Halfords Mobile
Expert van network to at least 200,
bringing this popular service to more
parts of the UK and giving us over 80%
national coverage.
• We will increase the number of
Autocentres garages, bringing us closer
to our medium-term goal of 550 in the
UK and ROI.
• We will continue to expand our
B2B channel, in particular building
on the commercial business we
established through our acquisitions of
McConechy’s and Universal Tyres.
• We will lead the transition to an
electric future by investing in training,
technology and introducing new
products and services, positioning
Halfords as the leading voice
of E-mobility. This will include a
commitment to train over 2,000 Retail
and Autocentres colleagues in Electric
servicing in FY22.
Lifetime
• We will launch a unique and market-
leading motoring services club,
rewarding loyal customers with
preferential terms and offers.
• The additional value of customers
that shop across our Group remains
an exciting and valuable opportunity.
Although the pandemic caused normal
shopping behaviours to be interrupted,
we will continue to focus on this and
our digital customer experience.
• Our focus on ESG matters will
accelerate, centred on four priority
areas in which Halfords can make a
real difference: Electrification, our Net
Zero commitment, Diversity & Inclusion,
and Product, Packaging and Waste
Management.
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Strategic Report
Outlook
In the longer term, we are confident in
the outlook for the motoring and cycling
markets and our ability to compete strongly
in both. We have demonstrated the
resilience and growth opportunity in our
Services and B2B businesses by gaining
market share through increasing scale
and convenience alongside enhancing
the overall customer experience. We
also believe that the increased adoption
of Cycling will continue, supported by
Government investment and a societal need
to tackle climate change. As a business,
we will continue to drive our markets
by launching more new and exclusive
products, becoming the market leader
in electric mobility as the UK switches
to a sustainable future, and continuing
to engage our customers by creating a
seamless digital and physical experience.
Building on the strong foundations we have
created in FY21, Halfords is well-positioned
to accelerate its transformation journey.
Graham Stapleton
Chief Executive Officer
16 June 2021
Underpinned by:
• Cost and efficiency will remain a focus
and although we do not foresee any
further large-scale property closures in
the near-term, we will retain flexibility in
our estate and seek to negotiate further
rental savings.
• Our frontline colleagues will benefit from
the biggest investment in skills to-date,
further enhancing our super-specialist
expertise. By the close of H2 we will
have completed our skills intervention,
resulting in our skills base increasing
from 16,000 to over 40,000, with every
colleague trained in all core services.
• We will transition to a new Group
operating and reward model, better
aligned to our Group strategy and our
One Halfords Family values.
In addition to these strategic priorities,
we will continue to optimise the business
to further strengthen our foundations.
As mentioned in our Outlook statement
above, one key initiative in FY22 will
be an investment in core pricing in our
motoring products business. The dramatic
acceleration in online shopping and a
more challenging economic picture have
brought value into sharp focus and so
we believe this is the right time to make
this investment, providing customers
with greater value and providing a strong
foundation for our services business.
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Job Number 15 July 2021 7:09 pm Proof NumberOur Marketplace Our Motoring and Cycling products segments remain core but we have a greater market opportunity in growing our existing services business. We will evolve into a consumer and B2B services-focused business, with a greater emphasis on motoring.Market OpportunityCOVID-19 affected our markets in the short term however the resilient services markets remain the best growth opportunity for our business, particularly motoring services which are delivered through Retail stores, Autocentres or via our Mobile Expert vans. The past year has shown that, whatever the circumstances, these services are an essential part of life in the UK and our status as an essential provider highlights our role in keeping the UK moving. Even during the pandemic, the opportunity for us to take further share in this market remains significant, with no clear market-leader and no single equivalent competitor.The cycling market saw strong growth over the last 12 months and also gave us the opportunity to take share. Cycling services has seen a boost as customers dusted-off their old bikes rather than buying new ones when stock was limited and buying big-ticket items was financially more challenging. We are leading the market in electric mobility and are excited about the future of E-bikes and E-scooters which, when coupled with the booming mechanical bike market, shows how exciting the cycling market is for us. Along with the increased market opportunity, we have had significant success improving the returns of our cycling business, by rationalising our ranges, negotiating better buying terms and promoting more effectively. Despite growth prospects being relatively lower in Motoring Products, this segment still contributes a high return and represents a significant part of the Halfords Group. We are excited about the new market opportunities, particularly those surrounding the UK shift to electric vehicles, and look forward to invigorating the markets in which we operate. ServicesProductsFY21 has seen progress in improving cycling profitability and financial returns:Market Growth OpportunityB2BRetail Cycling ServicesRetail Motoring ServicesPerformance Cycling ProductsMotoring ProductsReturn on Invested Capital (“ROIC”)FY20FY20AutocentresMainstream Cycling ProductsFY20Halfords Group plc Annual Report and Accounts for the period ended 2 April 20212230441-Halfords-Annual-Report-2021-Strategic.indd 2230441-Halfords-Annual-Report-2021-Strategic.indd 2215/07/2021 19:13:0915/07/2021 19:13:09 Strategic Report
Retail Macro-Customer Trends
DIY to DIFM
Whilst the shift from ‘Do It Yourself’
to ‘Do It For Me’ is continuing to
progress over time, with more people
spending time at home and less able
to go out, over the last year we have
seen an increase in people searching
for DIY solutions and ‘having a go’ at
home. As the shift to electric mobility
accelerates and technology continues to
advance; however, DIY solutions will be
increasingly difficult to manage at home
and DIFM will become the norm.
Omnichannel Shopping
Modern consumers expect a seamless
shopping experience across all channels
and touchpoints. Our mission is to
provide a best-in-class digital-led
customer journey, that leverages all
our digital and physical assets. Our
locations are an important differentiator
from online competitors, providing a
convenient Click & Collect proposition
and the delivery of services and
expertise by our colleagues in stores
and garages.
Sustainability
The requirement for sustainable practices
is now impacting all businesses in the
UK, with COVID-19 bringing this to
the forefront of consumers’ thoughts.
Consumers are increasingly expecting
proactive policies on climate change,
clean air, reduction of plastic waste and
ethical recycling, and wanting to shop
with a clean conscience. The impact
that we are having on the world and the
footprint we are leaving behind is starting
to shape the markets of the future.
Link to Strategy 2
Link to Strategy 1 2
Link to Strategy 3
Moving from Owning
to Using
Economic, political and health crises
have reduced consumer willingness to
purchase ‘big ticket’ items. Particularly
apparent among younger people, there
is an increasing trend towards short and
long-term renting rather than owning,
evidenced by the increase in PCP
schemes, car sharing initiatives and bike
rental.
Link to Strategy 1
Less Brand Loyalty
Online searching and comparison is
challenging traditional notions of brand
loyalty. Alternative products offering
better value or convenience can be
identified within seconds, making brand
loyalty harder to earn and maintain
without possessing a compelling unique
selling point.
Link to Strategy 3
New Post-COVID-19 Trends
Healthy Living and Exercise
Maintaining a healthy lifestyle – both
physically and mentally – has been
brought to the forefront of consumers’
minds over the last year with self-care,
healthy eating and exercise being key
ways in which people have coped
during the pandemic. Outdoor exercise
such as walking and cycling has been
encouraged by the Government and
health experts alike. We expect this
trend to continue as we move out of the
pandemic and into the new norm.
Link to Strategy 1
Experiential Shopping
The popularity of experiential shopping
is continuing to increase. Retailers
and retail parks are building non-
core concessions and entertainment
concepts, turning one-off ‘impulse’ visits
into ‘destination’ shopping experiences.
Link to Strategy 1
Convenience
Consumers’ lifestyles are getting busier,
free time is becoming more valuable, and
consumers expect retailers and service-
providers to fit around their routines with
on-demand services and friction-free
interactions as standard. Convenience to
them is not just about speed but about
making their lives easier, even if this comes
at an increased price. Our customers want
their car or bike fixed as quickly as possible,
at a time and place that suits them.
Link to Strategy 2
Personalisation
Personalisation is an important way
of standing out from the vast array
of competitors. Enabling customers
to feel valued through personalised
communications or products is a good
way to build strong relationships and
drive loyalty.
Link to Strategy 1
Human Encounters
Customers are becoming more
familiar with digital customer service
interactions but want them to feel like
in-person interactions. While customers
understand many experiences will be
digital, the in-person service with a smile
will be essential to help brands stand
out and be memorable.
Link to Strategy 1
Key
1 Inspire
2 Support
3 Lifetime
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Our Marketplace
Key:
Motoring products
Motoring services
Autocentres
Motoring Market
Halfords Group addresses two distinct areas of the UK’s highly-fragmented motoring market: Car Parts, Accessories, Consumables and
Technology, and Car Servicing and Aftercare. From the perspective of the former, there is no single equivalent competitor selling all of our
product ranges in physical locations, with many specialists and generalists now online only. In respect of the latter, there are over 30,000
garages in the UK, an estimated two-thirds of which are small independents.
Car Parts, Accessories,
Consumables and Technology
>£3.5bn 20–25%
Market size
Our share
Forecasted
Market Growth
Our Approach
Our strong heritage and brand mean that Halfords is a
destination for consumers who want inspiration and support
with their vehicles. We continue to make progress in our
markets through investment in our stores and colleagues to
help deliver innovative products and services to our customers
when and where they want them. Whilst some of the
traditional motoring product markets are in decline, there is
opportunity for innovative, unique and differentiated products
to be brought to market. Halfords is also seeing an increase
in service-related sales as more people are preferring to have
an expert fit or install products as opposed to performing it
themselves.
Car Servicing
and Aftercare
>£9bn
Market size
2%
Our share
Forecasted
Market Growth
Our Approach
The automotive servicing market is large and highly fragmented
with no clear leader, and with only 2% share, there is significant
opportunity for Halfords to grow. Increasing car complexity,
accelerated by the transition to electric, is expected to drive
growth in this market. Our goal is, by 2025, to operate from
over 1,000 service locations in the UK and ROI, whether a Retail
store, a garage or a mobile van. This will enable us to deliver
customers the services they want at a location convenient to
them. We will continue to invest in equipment and colleague
training in order to remain at the forefront of technological
changes. This will give us a competitive advantage in this
fragmented market dominated by independent operators.
Specifically, we have made significant progress in providing
industry-accredited training to Autocentres colleagues in the
servicing and maintenance of hybrid and electric vehicles, with
most of our centres now capable of servicing these vehicles.
Competitor Landscape
• Limited number of specialists but a highly diverse and
Competitor Landscape
• Technological advancements limit scope for effective
competitive set of retailers (e.g. Amazon) selling generalist
product ranges.
• Limited bricks and mortar competition.
• Wholesalers and generalists moving into specialist retail
markets with strong omnichannel offer.
• Supermarkets and garage forecourts continue to sell a
limited range of high-volume, high-margin products.
Independent garages offering car parts and associated fitting.
•
How We Differentiate Ourselves
Our heritage of over 125 years has established Halfords as a
household name, with 90% of the UK population living within
20 minutes of a Halfords store. We have many outstanding
strengths that differentiate us, notably our exclusive product
ranges and our colleague expertise. Significantly, we have an
established and growing ability to provide services on demand
in-store.
delivery by small independent garages.
• Car dealerships expanding into used car servicing.
• Some evidence of sales aggregation (e.g. My Car Needs
A…) and mobile services entrants.
How We Differentiate Ourselves
Halfords has a unique ability to offer automotive services from
a variety of locations – our Retail stores, garages and mobile
vans. In our accelerated strategy, we announced an ambition
to increase our services footprint to over 1,000 locations in
the medium term, including 550 garages, 200 vans and our
existing Retail stores. Via our Autocentres, Halfords Group
offers great value and convenience for UK consumers of
car servicing, repairs and MOT compliance. The strength of
our brand and the scale of our store, garage and mobile van
estate enables us to invest in the most up-to-date equipment
and technology with the majority of centres now equipped to
deal with electric and hybrid vehicle servicing. Our Halfords
Mobile Expert vans deliver elements of car fitting and
servicing, such as battery replacement, tyres and diagnostic
checks, direct to the customer at their home or workplace.
In addition, we pride ourselves on our B2B proposition in
this market, having developed a strong Fleet business over
a number of years and recent acquisitions mean we have an
ever-growing presence in the commercial tyre market.
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Market Trends Affecting the Motoring Market
COVID-19
Time horizon:
Increasing Complexity
Time horizon:
Short term
Medium term
Medium term
The number of cars on the road dropped to record levels
as the first lockdown began with large swathes of the
nation ordered to stay at home, impacting demand for
motoring products and services. Conversely, the restriction
of international travel has led to significant demand for
Staycation products and services, such as roof racks, boxes
and camping equipment.
Comparing a vehicle from even the turn of the century to
now would show just how quickly technology has evolved
in the automotive world. In the next 10 years, we see this
trend accelerating to a point where maintaining vehicles
is something that only those with access to specialist
knowledge and equipment are able to do. Adding to this,
the generation of DIY’ers is in decline and therefore the
motoring market will shift even further away from selling car
parts to selling services and solutions.
Electric Vehicles
Time horizon:
Autonomous Vehicles
Time horizon:
Short term
Medium term
Long term
The shift to electric has accelerated in the last 12 months
and we believe this will continue at pace, driven by
Government policy, investment in charging infrastructure,
and vehicle manufacturers’ pledges to reduce their indirect
emissions. Manufacturers have been investing in this
technology for several years and will continue to do so as
countries around the globe shift away from fossil fuels to a
cleaner method of transport. New products and services
will come to the aftermarket following the rise in Electric
Vehicles (“EVs”) on the roads.
Thinking further ahead, vehicles are likely to become
autonomous with many trials already taking place
around the globe. Companies such as Tesla are investing
significant sums into autonomous vehicles and believe
this to be the future of transportation. When technology
advances sufficiently, and trials make it feasible to change
Government legislation, these vehicles will change the
motoring market and who the customer is, with subscription
schemes replacing ownership as vehicles become too
expensive for individual ownership.
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Our Marketplace
Key:
Cycling products
Performance cycling
Retail cycling services
Cycling Market
The cycling market is highly fragmented, with an estimated 2,500 bike shops in the UK, the majority of which are independently owned.
Halfords Group is the market leader, with strong brand awareness in bicycles, parts, accessories and clothing.
Mainstream
Cycling
>£2bn
22-27%
Market size
Our share
Forcasted
Market Growth
Our Approach
As the market-leading retailer in mainstream cycling, we are
well positioned to serve the needs of the consumer. We do
this by continuing to monitor market trends to keep up with
customer demand, whilst also providing great value and
convenience to customers. As an example, Halfords was the
first major stockist of E-scooters and is leading the market
with product range and nationwide service capabilities, this
year having expanded our ranges to include own-brand
E-scooters.
Competitor Landscape
• Predominantly generalist competitors with own-label bikes
(e.g. Decathlon, Argos).
• Online penetration in mainstream bikes boosted
significantly by COVID-19.
• Physical service locations are important.
• Cycle-to-Work continues to be an important driver.
• Major sports retailers have diversified into cycling in recent
years (e.g. JD Sports, Go Outdoors).
How We Differentiate Ourselves
Halfords Group boasts the biggest and most popular cycle
brands in the UK – Carrera and Apollo. In total, approximately
80% of our bikes are own-brand, covering both children
and adults at a wide range of price points. Our stores are
conveniently located, and our online platform provides support
and information to help customers choose the products and
services they want. Our bike build proposition is leading the
market with free 6-week checks and bike care plans to make
sure our customers continue to stay safe whilst enjoying the
great outdoors. Many customers take advantage of our Click &
Collect offer, placing orders online via our website and picking
up from a designated store at a time which is convenient to
them. This also drives positive store footfall. Additionally, we
are the market leader in the UK’s Cycle-to-Work scheme,
supporting sales and introducing new customers to our brand.
Performance
Cycling
£1.1bn 6-7%
Market size
Our share
Forcasted
Market Growth
Our Approach
From our top-end Boardman bikes to brands such as
Specialized and Giant, we offer customers higher specification
products via Halfords Retail and Tredz brands. Demand has
been exceptionally high in the last year, boosted by COVID-19
impacts, and we worked hard to serve our customers with
the products and services they needed. Tredz complements
Halfords Retail well, giving access to a wider customer base
and bringing even more brands into the Group proposition,
with our passionate colleagues, across both retail brands,
offering expert knowledge and advice to customers.
We are one of the UK’s leading retailers in the E-bike market
and our colleagues, both in-store and our customer support
functions, are highly trained to help customers with advice,
support and in-store servicing. Cycle-to-Work schemes
continue to be important and Halfords, as the market leader,
can help consumers get to work in a healthy and sustainable
way, whether that’s on a mechanical bike, E-bike or E-scooter
– with the Tredz brand position complementing the strong
own-brand offering within Halfords Retail.
Competitor Landscape
• Predominantly branded bikes.
• Traditional specialists and independents struggling but
supported more recently with the increase in cycling
awareness and participation.
• Big brands selling directly to customers.
• Online pure-play continuing to grow.
• Physical service locations are important.
• Cycle-to-Work is an important driver.
How We Differentiate Ourselves
Through Tredz, Halfords has a strong and increasing foothold
in the performance cycling market. Offering products and
services appealing to performance cyclists has contributed
to growth in the overall number of customers and provided
many with bikes and exercise equipment during the COVID-19
pandemic. Cycle-to-Work vouchers can also be redeemed
through Tredz, which contributes significantly to the ongoing
success of that partnership through offering a wide range
of recognised cycling brands. Tredz has a strong online
presence which differentiates it from the independent cycle
shop community and helps the brand to stay relevant and
competitive in a challenging market environment.
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Market Trends Affecting the Cycling Market
COVID-19
Time horizon:
E-mobility
Time horizon:
Short term
Medium term
Short term
Medium term
The cycling market boom over the last 12 months has been
driven primarily by COVID-19 and the increase in people
taking up cycling as a way of exercise, days out with the
family or as an alternative means of commuting. As we look
to the future and move out of the pandemic, we anticipate a
proportion of those who have taken up cycling will continue,
leading to sustained demand for replacement bikes,
accessories and servicing.
Electric mobility was an area of the cycling market already
seeing significant growth before the pandemic. Over the last
year, E-bikes have continued to be in demand, either as a
new and exciting way of travelling, an alternative to public
transport or car, or a way for those who are unable to cycle a
mechanical bike to access the benefits of cycling. We firmly
believe that E-scooters will revolutionise urban mobility and
we continue to lobby the Government to change the laws
around this mode of transport.
Sustainability
Time horizon:
Government Investment
Time horizon:
Medium term
Long term
Long term
From second-hand bikes and bikes made using recycled
parts, to ‘Green’ living and clean air zones, we know the
importance of cycling to people who are conscious about
their environmental impact. As even greater focus is
placed on reducing our environmental footprint, we expect
consumers to look to cycling and eco-friendly solutions even
more.
The Government’s £2bn Cycling and Walking Plan for
England announced in the summer of 2020 is a bold vision
that, if implemented, will have a material impact on the
cycling market. Examples of initiatives include investment
in infrastructure to improve safety and the convenience
of cycling, the Cycle-to-Work scheme expanding to
accommodate E-bikes, and the creation of clean air zones in
many cities across the UK. Over time, this investment will be
critical in creating sustainable growth in the cycling market.
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Our Engagement with Stakeholders
Effective utilisation of our resources and relationships are an
integral part of our plan to drive long-term sustainable growth.
The views of all of our stakeholders are considered by the Board and
Executive team on a regular basis.
Stakeholders that Benefit from the Value We Create
Colleagues
Suppliers
Communities
Investors
Customers
Why is it Important to Engage
Our colleagues are fundamental to
the achievement of our customer
experience ambitions and are
the cornerstone of our services
proposition.
How We Engage
Across the Company
•
‘3-Gears’ training programme
•
‘Aspire’ store management
development courses
• Listening: surveys and colleague
groups
• Promotion of the Group values
• Recognition and reward
Stakeholder Key Interests
• Support and development
• Career opportunities
• Fair remuneration
Why is it Important to Engage
Engaging with our supply chain
effectively ensures the security of
supply and speed to market. Our
brand relies heavily on the high
standards of our carefully selected
suppliers in order for us to deliver
market-leading products and
services.
How We Engage
Across the Company
• Far East trading office
developing mutually beneficial
relationships
• Logistics, efficiencies and
environmental management
• Supplier conferences
Stakeholder Key Interests
• A trusted distributor in the UK
and ROI
Why is it Important to Engage
Ensures continued viability of the
business in the long term and it
is the right thing to do. We aim
to contribute positively to the
communities in which we operate.
How We Engage
Across the Company
• Charity & Community initiatives
• Media channels
• Recycling initiatives
• Net Zero commitment
Stakeholder Key Interests
• Environmentally friendly
practices
• Charitable giving
Link to Our Risks
• Stakeholder Support
• Brand Appeal and Market Share
• An appropriate sustainability
• Fair payment terms and pricing
• Cyber Security
strategy
Link to Our Risks
• Stakeholder Support
• Regulatory & Compliance
• Service Quality
• Colleague engagement / Culture
• Skills shortage
Link to Our Risks
• Stakeholder Support
• Sustainable Business Model
• Critical physical infrastructure
failure (including supply chain
disruption)
Why is it Important to Engage
Why is it Important to Engage
As a publicly listed company, we
Understanding our customers’ needs
need to provide fair, balanced and
and behaviours allows us to deliver
understandable information to instil
relevant products and services,
trust and confidence and allow
retain customers and attract new
informed investment decisions to be
ones. It also identifies opportunities
made.
How We Engage
Across the Company
• Annual Report
for business growth.
How We Engage
Across the Company
• Satisfaction surveys
• RNS announcements
• Rewards
• Annual General Meeting
• Commercial website
•
Investor presentations
• Social media engagement
• Corporate website
• One-on-one meetings
Stakeholder Key Interests
• Create value and deliver long-
term sustainable growth
• Appropriate sustainability
practices
Link to Our Risks
• Stakeholder Support
• Brand Appeal and Market Share
• Sustainable Business Model
• Regulatory & Compliance
Stakeholder Key Interests
• A great product or service, for a
fair price
Link to Our Risks
• Stakeholder Support
• Value Proposition
• Brand Appeal and Market Share
• Service Quality
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Strategic Report
Read more about our Risks and
Uncertainties on pages 66 to 72.
Stakeholders that Benefit from the Value We Create
Stakeholders That
Influence What We Do
Colleagues
Suppliers
Communities
Investors
Customers
Government
Why is it Important to Engage
Why is it Important to Engage
Why is it Important to Engage
Our colleagues are fundamental to
Engaging with our supply chain
Ensures continued viability of the
the achievement of our customer
effectively ensures the security of
business in the long term and it
supply and speed to market. Our
is the right thing to do. We aim
brand relies heavily on the high
to contribute positively to the
standards of our carefully selected
communities in which we operate.
experience ambitions and are
the cornerstone of our services
proposition.
How We Engage
Across the Company
•
•
‘3-Gears’ training programme
‘Aspire’ store management
development courses
• Listening: surveys and colleague
groups
• Promotion of the Group values
• Recognition and reward
Stakeholder Key Interests
• Support and development
• Career opportunities
• Fair remuneration
strategy
Link to Our Risks
• Stakeholder Support
• Regulatory & Compliance
• Service Quality
• Colleague engagement / Culture
• Skills shortage
suppliers in order for us to deliver
market-leading products and
services.
How We Engage
Across the Company
• Far East trading office
developing mutually beneficial
relationships
• Logistics, efficiencies and
environmental management
• Supplier conferences
Stakeholder Key Interests
• A trusted distributor in the UK
and ROI
Link to Our Risks
• Stakeholder Support
• Sustainable Business Model
• Critical physical infrastructure
failure (including supply chain
disruption)
• An appropriate sustainability
• Fair payment terms and pricing
• Cyber Security
How We Engage
Across the Company
• Charity & Community initiatives
• Media channels
• Recycling initiatives
• Net Zero commitment
Stakeholder Key Interests
• Environmentally friendly
practices
• Charitable giving
Link to Our Risks
• Stakeholder Support
• Brand Appeal and Market Share
Why is it Important to Engage
As a publicly listed company, we
need to provide fair, balanced and
understandable information to instil
trust and confidence and allow
informed investment decisions to be
made.
Why is it Important to Engage
Understanding our customers’ needs
and behaviours allows us to deliver
relevant products and services,
retain customers and attract new
ones. It also identifies opportunities
for business growth.
How We Engage
Across the Company
• Annual Report
How We Engage
Across the Company
• Satisfaction surveys
• RNS announcements
• Rewards
• Annual General Meeting
• Commercial website
•
Investor presentations
• Social media engagement
• Corporate website
• One-on-one meetings
Stakeholder Key Interests
• Create value and deliver long-
term sustainable growth
• Appropriate sustainability
practices
Link to Our Risks
• Stakeholder Support
• Brand Appeal and Market Share
• Sustainable Business Model
• Regulatory & Compliance
Stakeholder Key Interests
• A great product or service, for a
fair price
Link to Our Risks
• Stakeholder Support
• Value Proposition
• Brand Appeal and Market Share
• Service Quality
Why is it Important to Engage
Policies and regulatory changes
may provide opportunities and
pose risk to our operations.
Working closely with the
Government ensures that our
products and services evolve
appropriately.
Link to Our Risks:
• Regulatory & Compliance
Media
Why is it Important to Engage
Ensures transparency and
accuracy of information on the
business. As a business-to-
consumer company, we need
strong multi-channel exposure to
connect with customers and our
wider stakeholder audience.
Link to Our Risks
• Stakeholder Support
• Brand Appeal and Market
Share
• Regulatory & Compliance
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Our Engagement with Stakeholders
Section 172(1) Statement
Engaging with stakeholders delivers better outcomes for
our business, fundamental to our long-term success
Board Information
Keeping the Board Informed
• Leadership and management
receive training on Directors’ duties
to ensure awareness of the Board’s
responsibilities.
• Board minutes include an
explanation of s.172 factors and
relevant information relating to
them.
• Our Board continually engages
with stakeholders.
Our Approach
As is referenced in the Corporate Governance Report on page 96, this section describes
how the Directors have had regard to the matters set out in section 172(1)(a) to (f)
Companies Act 2016 (the “Act”), in exercising their duty to promote the success of the
Company for the benefit of its members as a whole.
In July 2019, the UK Corporate Governance Code, reinforced the importance of section 172 of
the Act, which requires the Directors to have regard (amongst other matters) to the interests of
wider stakeholders, as well as:
Likely consequences of decisions in the long term
The interests of the Company’s workforce
The need to foster relationships with suppliers, customers and others
Read more on pages 84
to 108.
Impact of operations on the community
High standards of business conduct
The need to act fairly between members of the Company
Strategic Considerations
s.172 and the Company’s
Strategy
• s.172 factors considered in the
Board’s discussions on strategy.
• Chair ensures decision making
is sufficiently informed by s.172
factors.
Read more on pages 84
to 108.
Board Decision Making
Outcomes of Considering s172
• Outcomes of decisions assessed
and further engagement and
dialogue.
• Actions taken as a result of Board
engagement.
• Actions align with our culture.
Read more on pages 84
to 108.
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Strategic Report
Net Zero
Commitment
Description
The fight against climate change
requires all businesses to play their
part in reducing GHG emissions. Our
commitment to Net Zero is a key
priority of our ESG agenda.
s172 Consideration
Environmental responsibility
During the period, we set a 1.5°C
aligned science-based target by
2030, and an aim to achieve net
zero emissions across our entire
value chain by 2050. In the shorter
term, this will include initiatives
such as LED lighting installation and
renewable energy sourcing.
Shareholders
Our long-term success is reliant on
building a sustainable business.
In addition, many of the initiatives
needed to reduce our GHG
emissions also provide good returns,
such as LED installation.
Colleagues
Our colleagues are increasingly
conscious of climate change and
the environmental impact of our
business. A robust commitment to
net-zero is an important element in
driving colleague engagement.
Dividend
Policy
Description
The Board carefully considered the
impact of the dividend policy on all
key stakeholders.
s172 Consideration
Shareholders
Having cancelled the dividend at
the start of the pandemic as a cash
preservation measure, we knew that
an eventual reinstatement would be
important to investors. The Board
feels that the proposed dividend
policy offered an attractive return to
shareholders whilst allowing sufficient
funds to reinvest in the business for
its long-term success.
Debtholders
Maintaining a strong balance sheet is
a key element of our capital structure
considerations and the dividend level
was therefore determined with this in
mind.
Customers
The Board considers it critical that
we continue to invest in the customer
experience, positioning the business
for long-term success. The proposed
dividend policy allows sufficient
investment in the business to do this.
Colleagues
Many of our colleagues are
shareholders, either directly through
our share plans, or indirectly through
their pensions or other investments.
COVID-19
Pandemic
Description
The impacts of the COVID-19
pandemic have been fast-moving
and uncertain, but the Board
consider that the decisions made
were in the best long-term interests
of all stakeholders.
s172 Consideration
Colleagues
Our frontline colleagues in stores,
garages and vans supported our
customers throughout the pandemic,
as we remained open as an essential
business. The provision of PPE and
the robust implementation of policies
and procedures helped colleagues to
feel safe in their working environment.
In addition, we launched over £4m of
initiatives to support our colleagues,
including a £2.3m Frontline Colleague
Support Fund and a £1.5m Here to
Help Fund for colleagues and their
families to use if they are struggling
financially due to COVID-19.
Customers
As an essential retailer we have
remained open throughout the
pandemic, supporting our customers
to help keep the UK moving. Like
our colleagues, it has been important
to keep our customers safe through
strong COVID-19 protocols.
Shareholders and debtholders
In a fast-paced and uncertain
environment, we took immediate
action to preserve cash to protect
the long-term interests of both our
shareholders and debtholders.
This included reductions in
expenses, working capital and
capital expenditure, as well as the
suspension of the dividend.
Government and UK taxpayer
Once the future trading environment
became clearer, we took the decision
to repay all funds we had received
through government furlough
schemes.
Link to Section 172
Considerations
Link to Section 172
Considerations
Link to Section 172
Considerations
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How We
Create Value
Our inputs
enable
us to . . .
Offer a
unique
proposition . . .
Colleagues
Training and accreditation,
such as our 3-Gears training
programme in Retail or
our electric/hybrid vehicle
maintenance training in
Autocentres, ensures that
consistent product knowledge
and services capability reaches
our customers across all
locations.
Partners
Halfords is proud to work with
suppliers, distributors and other
industry partners to drive our
business forward, supporting the
sale of our products and services
and enabling us to work with
communities across the UK.
Brand
Halfords is the nation’s trusted
retailer for motorists and cyclists
and a leading provider of
motoring services. We have a
range of exclusive and highly-
regarded brands including Apollo,
Carrera and Boardman in Cycling,
as well as our Halfords Advanced
ranges in Motoring.
Infrastructure/Assets
Our physical estate of Retail
stores, Autocentres garages and
Mobile Expert vans, combined
with a best-in-class web platform
and an efficient distribution
network, provide customers with
a convenient omnichannel offer.
Financial
With a strong balance sheet and
strong cash generation, we have
continued to invest in appropriate
systems, capabilities and people
to help support and grow our
business for the long term.
Products
Products are at the core of our business and have been for over 125 years,
defining us as the UK’s leading provider of motoring and cycling products.
Whether in one of our physical locations or online, customers are able to find
any part or product they want for their motoring or cycling needs from E-bikes
to socket sets, power washers to bicycle helmets. Our colleagues are the true
experts and can suggest suitable products for each customer situation.
Motoring
Products
Mainstream
Cycling
Products
Performance
Cycling
Services
Our services proposition complements our strong product business; helping to
keep the UK moving whilst delivering unrivalled customer service.
Operating from over 900 locations, Halfords has the national scale to offer
services for our customers’ cars or bicycles in a way and at a location which is
convenient to them. Whether a customer wants their bike serviced, a new wiper
blade fitted, a new set of tyres fitted or a full car service we are able to help them
find the ideal solution to fit their busy lifestyle.
Autocentres
Mobile Expert
Retail Motoring
Services
Retail Cycling
Services
Our Unique Strengths
Unique and
differentiated
products and services
Omnichannel
customer
proposition
Convenient services
proposition delivered
in over 900 locations
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Expertly trained
Super-specialist
Strong
colleagues
expertise that
sustainability
credentials
cannot be
replicated
Unique,
technology-driven
proposition in our
physical estate
Strategic Report
Focused on
value-creating
opportunities . . .
Delivering long-
term value for all
stakeholders
Evolving into a consumer and B2B services-
focused business, with a greater emphasis on
motoring, generating higher and more sustainable
financial returns.
What This Means for Halfords
in the Medium Term
Selling products and related solutions for our customers’ motoring and cycling
needs remains core to our offering. However, in recognising the market
opportunity and our unique advantages, we will evolve into a services-led
business, with a greater emphasis on motoring. Our integrated services offering
will provide customers with unparalleled convenience, giving them access to the
services they need, when and where they want them.
Integrated service
proposition across stores,
garages and mobile.
Lead and differentiate
our markets and with
innovation.
Link to Strategy:
Link to Strategy:
2
1
Increase awareness of
Halfords services by
leveraging our brand.
Focused and targeted
approach to loyalty at a
Group value.
Link to Strategy:
Link to Strategy:
2
3
Our strategic priorities:
1 Inspire
2 Support
3 Lifestyle
Our Unique Strengths
Unique and
differentiated
products and services
Omnichannel
customer
proposition
Convenient services
proposition delivered
in over 900 locations
Expertly trained
colleagues
Super-specialist
expertise that
cannot be
replicated
Strong
sustainability
credentials
Unique,
technology-driven
proposition in our
physical estate
Customers
Access to a market-leading
shopping experience, both online
and in stores, helping meet all of
their motoring and cycling needs
in a way convenient to them, with
access to technical and expert
advice through our colleagues.
Colleagues
Developing, rewarding and
retaining our colleagues so that
they are engaged to drive our
growth ambitions.
Financial
Generating returns for our
shareholders through effective
management of our financial
resources.
Read the Chief Financial
Officer’s Report on pages
58 to 64.
Community
Building relationships with
suppliers, customers and the
communities around us.
Read more in the Charity
and Communities section
on pages 52 and 53.
Environmental
Ensuring the resources our
business utilise have a positive
impact on the environment, both
today and in the future.
Read more in the ESG
Strategy on pages 42 to 53.
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Our
Strategy
The strategy we set out
in 2018 remains just as
relevant today – the last
12 months have proven
this – delivering for all
of our stakeholders, and
building relationships
and trust with our
customers.
Graham Stapleton
Chief Executive Officer
Our Purpose
To Inspire and Support a Lifetime of
motoring and cycling.
Our medium-term goal
To evolve into a customer
and B2B services-
focused business.
Our Strategy
We set out a clear vision and purpose in September 2018, which remains unchanged. Our
strategy is as relevant now as it was then, arguably more so given shifting markets and
changes to consumer behaviour. We have achieved significant progress in recent years and
will continue to invest in the execution of the strategy, for the benefit of all stakeholders.
1 Inspire our customers with a differentiated and
super-specialist offer.
2 Support our customers through an integrated, unique
and more convenient services offer.
3 Enable a Lifetime of motoring and cycling.
Underpinned by
Focus on Cost
and Efficiency
Investment in
our Colleagues
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Strategic Report
1 Inspire
Inspire our customers with a differentiated and
super-specialist offer.
• Transition from a general-specialist to a super-specialist.
• Lead and differentiate our markets with customer-led innovation.
• Redefine and further differentiate our own label ranges.
• New customer experience in stores and garages, linking online and offline journeys.
2 Support
Support our customers through an integrated, unique
and more convenient services offer.
• Offer convenience through an integrated and expanded ‘on-demand’ service proposition across
stores, garages and mobile.
• Enhance the customer journey from booking through to service delivery.
• Enhance our unique position in E-bike servicing in retail stores and hybrid and electric vehicle
servicing in our garages with the most fully trained technicians outside the dealer network.
• Increase awareness of Halfords services by leveraging the Halfords brand.
3 Lifetime
Enable a Lifetime of motoring and cycling.
• A more focused and targeted approach to loyalty at a Group level in order to optimise the
lifetime value of our customers.
• Accelerating the development of our Customer Relationship Management (“CRM”) programme,
offering compelling reasons for our customers to return and shop across the Group.
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Job Number 15 July 2021 7:09 pm Proof NumberCarrera impel is-1This year, we launched our own-brand E-scooter – the Carrera impel is-1 – bringing together the strength and reputation of the Carrera brand and the exciting growth in the E-scooter market. The impel offers customers the same high-quality performance technology commonly found on performance E-scooters but at a much lower price point. Developing our own product has meant we have been able to talk to our customers, understand the pain points with branded E-scooters, and design a product which our customers love and that our electric service technicians know inside and out.The impel has received great reviews from customers and critics, and has been in high demand with consumers as pressure mounts for the legalisation of E-scooters as we transition out of COVID-19 lockdowns and prepare for an exciting future of electric mobility within the UK. Our Strategy Inspire our customers with a differentiated and super-specialist offer.ObjectivesSpecialismWe will become a super-specialist by: • Increasing our online ranges of motoring and cycling products.• Investing in training with even greater focus on specialism.• Reducing our non-core products.InnovationWe will lead and differentiate our markets with customer-led innovation by: • Utilising customer insight to develop products we know they want and need.• Working with suppliers to jointly create, and bring to market, innovative products which are exclusive to Halfords.Customer ExperienceWe will improve our customer shopping journey online and in-store by: • Continuing to optimise the Group’s web platform and the full omnichannel journey.• Focusing on personalisation by leveraging our Group-wide Single Customer View.• Improving the in-store experience by providing a more experiential, inspirational and service-led environment.Case StudyProgress Made• Launched over 160 new customer enhancements to our group website, including ‘email me when in stock’, guided selling, local store stock availability, and personalisation.• Expanded our E-scooter range; introducing our first own-brand E-scooter and a greater number of products at a broader range of price points.• Transferred inbound phone and digital customer-contact from all 404 retail stores to a centralised, specialist team.Priorities for the Year• Project ‘Fusion’ remains an exciting opportunity and we will trial 2-3 towns in FY22. Fusion is ‘a customer experience seamlessly, consistently, and conveniently executed across all of our assets in a town’.• We will continue to invest heavily in our digital proposition, whether online through the Group web platform, or enabling the wider transformation agenda.• Through Project ‘Peloton 2’, we will significantly improve our PACs (“parts, accessories and clothing”) offering in Cycling, through better ranging, improved merchandising, and most importantly enabling our colleagues to provide customers with complete solutions to their needs. 36Halfords Group plc Annual Report and Accounts for the period ended 2 April 202130441-Halfords-Annual-Report-2021-Strategic.indd 3630441-Halfords-Annual-Report-2021-Strategic.indd 3615/07/2021 19:13:2515/07/2021 19:13:25 Job Number 15 July 2021 7:09 pm Proof NumberStrategic Report37 halfords.annualreport2021.com30441-Halfords-Annual-Report-2021-Strategic.indd 3730441-Halfords-Annual-Report-2021-Strategic.indd 3715/07/2021 19:13:3415/07/2021 19:13:34 Job Number 15 July 2021 7:09 pm Proof NumberThe Universal Tyre CompanyIn March, we announced the acquisition of The Universal Tyre Company. Operating from 20 sites and 89 commercial vans in the South East of the UK, Universal specialises in tyre services, including the supply and fit of tyres for a wide range of vehicles, from cars to commercial and agricultural vehicles, as well as providing general car maintenance and repairs such as brakes, servicing and MOT.This acquisition takes us closer to our stated ambition of having over 550 garages in the UK and builds our coverage of the Commercial Truck and Van market. Following on from our acquisitions of McConechy’s and Tyres on the Drive in 2019, this is another exciting step in the growth of Halfords’ motoring servicing business as we continue to inspire and support a lifetime of motoring and cycling, and establish ourselves as a leading motoring service provider in the UK.Our Strategy Support our customers through an integrated,unique and more convenient services offer.ObjectivesIntegratedWe will have a unified services identity across the Group through: • One seamless website, combining Halfords Retail, Halfords Autocentres and Halfords Mobile Expert.• Easy referral from Retail WeCheck findings to Autocentres booking.• Integrating the Services booking experience to include nearest available location and timeslot.Unique• Offering customers access to our products and services via a unique combination of Retail stores, garages and mobile vans complemented by a strong online proposition.Convenient• Combining our physical estate with a consistent mobile services offer and increased availability.• Full roll out and expansion of Halfords Mobile Expert to give most of the UK population access to our mobile services.• Future roll out of garages to reduce average drive time from 30 minutes to 20 minutes.Case StudyProgress Made• Added 61 new Mobile Expert vans, bringing the total to 143 to serve the exceptional demand for this service. • Acquired The Universal Tyre Company, adding 20 garages to our fixed estate as well as 89 vans, enabling us to expand our coverage of the commercial market in FY22.• Launched our first Group motoring services campaign.• Rebranded 52 of our McConechy’s garages to Halfords Autocentres.• Launched new services including mobile towbar fitting and mobile tyre fitting in our Retail stores.Priorities for the Year• Increase our Mobile Expert van fleet to at least 200, bringing this popular service to more parts of the UK and giving us over 80% national coverage.• Increase the number of Autocentres, bringing us closer to our medium-term goal of 550 in the UK and ROI.• Continue to expand our B2B channel, in particular, building on the commercial business we established through our acquisitions of McConechy’s and Universal Tyres.• Lead the transition to an electric future by investing in training, technology and introducing new products and services, positioning Halfords as the leading voice of E-mobility. 38Halfords Group plc Annual Report and Accounts for the period ended 2 April 202130441-Halfords-Annual-Report-2021-Strategic.indd 3830441-Halfords-Annual-Report-2021-Strategic.indd 3815/07/2021 19:13:3515/07/2021 19:13:35 Strategic Report
Case Study
Halfords Mobile Expert
Expansion
Convenience is of vital importance to our customers and, over
the last year, our ability to bring services directly to customers
has been in high demand. Our Mobile Expert proposition offers
customers the ability to have services performed on their
driveway by our expert technicians, from having products fitted
to top-ups and even car diagnostic checks.
Over the last year, the business saw a record number of
jobs and sales with the benefits of convenience and safety
resonating well with customers.
We have continued the expansion of the proposition, investing
in the scale and geographic reach of the service, growing the
number of hubs from 8 to 14 to serve the ever-growing demand
and ending the year with 143 vans, bringing us closer to our
medium-term target of 200 vans.
Case Study
WeCheck App
This year, we launched our innovative WeCheck application,
specifically created in-house to enhance the customer journey,
improve colleague productivity and strengthen the relationship
between Halfords and its customers. The app is used by
colleagues when they are carrying out a check on a vehicle and
enables them to clearly record and share what tasks have been
carried out with the recommended actions for customers to
keep their vehicle safe.
Since launching the app, our data capture rate has increased
significantly with over 80% of customers providing an email
address and registration number when the app is used.
We have received great feedback from our customers who
love the ‘simple to understand’ feedback, demystifying what
could previously have been a very complicated report from a
colleague.
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Our Strategy
Enable a lifetime of
motoring and cycling.
Objectives
Case Study
Loyalty and Retention
We will more actively drive
customer loyalty and retention by:
• Supercharging our CRM
programme, providing
compelling reasons for
customers to return to our
brand.
• Building cross-Group loyalty
programmes to optimise
lifetime value and advocacy.
Customer First
We have started to drive
meaningful action from our insight,
which has been used to:
• Define future range decisions.
• Change the labour operating
model to better reflect
customer needs.
• Obtain a greater understanding
of customer pain points and
moments that matter.
• Provide a Group-wide Financial
Services offer.
ESG
We have started to make progress
with our ESG strategy, focusing on
our key priority areas:
• Electrification
• Net Zero Commitment
• Diversity & Inclusion
• Product, Packaging and Waste
Management
Improving the
Customer Experience
This year, we have transformed
our Customer Experience strategy,
investing in initiatives to improve
the customer shopping journey and
convenience we offer our customers.
For instance, an end-to-end review of
the bike purchase journey – customers
can now see bike stock availability in
their local store, book a bike collection
slot and will receive personalised
communications after their purchase to
help them get the most of their bikes.
To manage customer contact, we
have centralised our customer contact
centre.
Our Net Promoter Scores have reached
record levels as a consequence of the
improvements we have made to the
customer experience and we know
that our customers are more engaged
– with better opt-in rates – meaning we
can talk to more customers than ever
before.
Progress Made
• Record NPS scores with Retail exit rate
Priorities for the Year
• Launch a unique and market-leading
of 65.3, and Autocentres 76.1.
motoring services club.
• Development of our single Group web
platform and other initiatives driving
higher cross-shop volumes.
• Further develop cross-shop
opportunities across the Group.
• Continued investment in our digital
• Refresh of our ESG strategy and
commitment to science-based targets.
capabilities, enhancing the customer
experience online.
• Accelerating progress on our ESG
programme.
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Strategic Report
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Our ESG Strategy
Overview
We are committed to an ESG agenda
which aims to exceed our stakeholders’
expectations. Building on our strategy
announced last year, we are now starting
to make meaningful progress. The
COVID-19 pandemic and broader social
factors have accelerated expectations for
progress, including more robust regulatory
requirements, a fairer society, and a greater
urgency to tackle climate change. We will
continue to review and refresh our ESG
strategy in line with this fast-changing
environment and ensure we have a
sustainable business that delivers for all
stakeholders.
In our FY20 Annual Report, we set out
our ESG strategy and demonstrated its
alignment to the Group’s purpose: ‘To
Inspire and Support a Lifetime of motoring
and cycling’. In a fast-moving landscape,
we have since refreshed our strategy,
including a clear prioritisation on the
topics most important to us and our broad
stakeholder base, and a clear roadmap for
building the capabilities and governance
processes to drive further progress against
the strategy.
Key:
1 Inspire
2 Support
3 Lifetime
Our Priorities
Electrification
Net Zero
Commitment
“ The leading name in electric
services giving everybody
the confidence to switch and
continually enjoy the benefits
of electric mobility.”
“ Achieve Net Zero
value chain emissions
by 2050 and interim
reductions aligned to
science-based principles.”
Link to Strategy
1 2
Link to UN SDG
Link to Strategy
3
Link to UN SDG
Description
• Lead the market in Electric
Servicing as the UK shifts
towards more sustainable
mobility options, specifically
Electric Vehicles (“EVs”), E-Bikes
and E-Scooters.
•
Investing in education and
community engagement
programmes to help and support
consumers to make climate-
smart choices.
Description
• Commit to a 1.5ºC science-
based target across our own
operations by 2030, reducing our
emissions by at least 42% in this
time period (vs. FY20 baseline).
• Engage with 67% of our suppliers
by emissions, covering purchased
goods and services and capital
goods, with the objective of them
having science-based targets by
the start of 2026.
• Providing industry-leading
• Our ultimate aim is to achieve net
training to our colleagues to
better support customers as they
make the switch to electric.
• Broadening our ranges of electric
services and solutions e.g.
E-bikes/E-scooters making the
transition to electric travel easier.
• Lobbying campaigns designed
to accelerate the transition to
electric vehicles.
Priorities for the next
12 months:
• Further develop the means we
communicate with our customers
to better engage with, support
and educate them on the
benefits of electric mobility.
• Broaden the range of electric
products and services we offer.
• Accelerate investment in
colleague training for electric
servicing.
• Continue lobbying campaigns
for the legalisation of private
E-scooters in public areas.
zero emissions across our value
chain by 2050. We recognise
we cannot do this alone, so will
collaborate and partner with our
suppliers, vendors and customers
to work towards a net zero future.
Priorities for the next
12 months:
• Make the switch to 100%
renewable energy suppliers.
• Complete roll out of LED lighting
and Building Management
Systems across our estate,
looking to identify and act upon
new energy efficiency measures.
• Engage with suppliers to gather
more data on their emissions,
educate them on the importance
of reducing emissions and
support them in setting their own
science-based targets.
• Develop a set of sustainable
procurement criteria for all
tenders and decisions.
• Preparation for reporting against
the TCFD framework.
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Diversity &
Inclusion
“ Make Halfords a truly
inclusive place to work
and representative of the
customers and communities
we serve.”
Product, Packaging &
Waste Management
“ Minimise our environmental
impact and increase our
transparency whilst continuing
to pursue sustainability
opportunities within our
product portfolio.”
Link to Strategy
2 3
Link to UN SDG
Link to Strategy
1 3
Link to UN SDG
Description
Description
• Create an inclusive workplace
•
Increase repair services
in which all colleagues are able
to be themselves at work, feel
valued for their contribution and
are supported to perform their
best.
• Provide equal opportunities for
all colleagues.
• Remove the gender/ethnic/
diversity pay gap.
across products and mitigate
environmental impact of returns.
•
Increase the recyclability of retail
packaging and reduce transit
packaging.
• Extend waste management to
accommodate new streams
including rubber-based products
and flexible plastics.
• Create accessible opportunities
Priorities for the next 12
and training to improve female
representation across our Group,
particularly in our garages.
Priorities for the next
12 months:
months:
• Reduce commercial and
industrial packaging with
increased transparency.
•
Increase known recyclability of
• Further reduce our gender pay
retail packaging, including the
gap.
• Collect baseline data on a
number of categories, including
introduction of on-pack recycling
labelling to drive customer
awareness of recycling options.
gender, age and ethnicity.
• Establish the UK’s industry-
• Proactive engagement
with colleagues to increase
knowledge of D&I in the
leading tyre, tubes and car mat
recycling processes.
• Extend repair capabilities of
workplace, such as webinars,
faulty returns to E-bikes and
events and videos from business
E-scooters.
leaders.
• Launch Business Resource
Groups (“BRGs”) to provide
peer-to-peer support for
LGBTQ+, disability, race and
ethnicity and women.
• Develop a UK-wide capacity
to safely manage end-of-life
E-mobility batteries to combat
the growing waste stream.
• Trial reselling of reconditioned
products for discounted prices,
• Establish a D&I awareness and
specifically piloting selling
compliance programme for all
colleagues across the Group.
second-hand bikes to explore the
opportunity within this market.
Strategic Report
Electrification
Net Zero
Commitment
“ The leading name in electric
services giving everybody
the confidence to switch and
continually enjoy the benefits
of electric mobility.”
“ Achieve Net Zero
value chain emissions
by 2050 and interim
reductions aligned to
science-based principles.”
Link to Strategy
1 2
Link to UN SDG
Link to Strategy
3
Link to UN SDG
Description
Description
• Lead the market in Electric
• Commit to a 1.5ºC science-
Servicing as the UK shifts
towards more sustainable
mobility options, specifically
based target across our own
operations by 2030, reducing our
emissions by at least 42% in this
Electric Vehicles (“EVs”), E-Bikes
time period (vs. FY20 baseline).
and E-Scooters.
•
Investing in education and
community engagement
• Engage with 67% of our suppliers
by emissions, covering purchased
goods and services and capital
programmes to help and support
goods, with the objective of them
consumers to make climate-
having science-based targets by
smart choices.
the start of 2026.
• Providing industry-leading
• Our ultimate aim is to achieve net
training to our colleagues to
zero emissions across our value
better support customers as they
chain by 2050. We recognise
make the switch to electric.
• Broadening our ranges of electric
services and solutions e.g.
E-bikes/E-scooters making the
transition to electric travel easier.
• Lobbying campaigns designed
to accelerate the transition to
electric vehicles.
Priorities for the next
12 months:
• Further develop the means we
communicate with our customers
to better engage with, support
and educate them on the
benefits of electric mobility.
• Broaden the range of electric
products and services we offer.
• Accelerate investment in
colleague training for electric
servicing.
• Continue lobbying campaigns
for the legalisation of private
E-scooters in public areas.
we cannot do this alone, so will
collaborate and partner with our
suppliers, vendors and customers
to work towards a net zero future.
Priorities for the next
12 months:
• Make the switch to 100%
renewable energy suppliers.
• Complete roll out of LED lighting
and Building Management
Systems across our estate,
looking to identify and act upon
new energy efficiency measures.
• Engage with suppliers to gather
more data on their emissions,
educate them on the importance
of reducing emissions and
support them in setting their own
science-based targets.
• Develop a set of sustainable
procurement criteria for all
tenders and decisions.
• Preparation for reporting against
the TCFD framework.
Diversity &
Inclusion
“ Make Halfords a truly
inclusive place to work
and representative of the
customers and communities
we serve.”
Product, Packaging &
Waste Management
“ Minimise our environmental
impact and increase our
transparency whilst continuing
to pursue sustainability
opportunities within our
product portfolio.”
Link to Strategy
2 3
Link to UN SDG
Link to Strategy
1 3
Link to UN SDG
Description
• Create an inclusive workplace
in which all colleagues are able
to be themselves at work, feel
valued for their contribution and
are supported to perform their
best.
• Provide equal opportunities for
all colleagues.
• Remove the gender/ethnic/
diversity pay gap.
• Create accessible opportunities
and training to improve female
representation across our Group,
particularly in our garages.
Priorities for the next
12 months:
• Further reduce our gender pay
gap.
• Collect baseline data on a
number of categories, including
gender, age and ethnicity.
• Proactive engagement
with colleagues to increase
knowledge of D&I in the
workplace, such as webinars,
events and videos from business
leaders.
• Launch Business Resource
Groups (“BRGs”) to provide
peer-to-peer support for
LGBTQ+, disability, race and
ethnicity and women.
• Establish a D&I awareness and
compliance programme for all
colleagues across the Group.
Description
•
Increase repair services
across products and mitigate
environmental impact of returns.
•
Increase the recyclability of retail
packaging and reduce transit
packaging.
• Extend waste management to
accommodate new streams
including rubber-based products
and flexible plastics.
Priorities for the next 12
months:
• Reduce commercial and
industrial packaging with
increased transparency.
•
Increase known recyclability of
retail packaging, including the
introduction of on-pack recycling
labelling to drive customer
awareness of recycling options.
• Establish the UK’s industry-
leading tyre, tubes and car mat
recycling processes.
• Extend repair capabilities of
faulty returns to E-bikes and
E-scooters.
• Develop a UK-wide capacity
to safely manage end-of-life
E-mobility batteries to combat
the growing waste stream.
• Trial reselling of reconditioned
products for discounted prices,
specifically piloting selling
second-hand bikes to explore the
opportunity within this market.
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Job Number 15 July 2021 7:09 pm Proof NumberThe Electric HubThis year, we launched a brand new Electric Hub on our website designed by in-house experts to educate customers and provide support and advice for those looking to make the switch to electric.Covering EVs, E-bikes and E-scooters, consumers can navigate around the site educating themselves on topics such as the advantages of electric mobility, maintenance tips, and the environmental benefits, as well as getting answers to common misconceptions about electric mobility such as charging or reliability. We have also created bespoke calculators to show customers the associated costs of switching to electric; for instance, comparing the cost of an electric vehicle vs. a traditional combustion engine, over the life of the car, dispelling the myth that electric is always more expensive. We also provide customers with advice and help on purchasing electric bikes and scooters, such as through our Cycle2Work scheme or with finance options to spread the cost of their purchase.We are uniquely positioned in the UK to help support customers on their electric journey and we are continually investing in our colleagues and capabilities to drive awareness of the benefits of electric mobility and to make electric travel accessible to everyone. ESG Progress in FY21ElectrificationWe are the aftermarket leaders in electric and hybrid vehicle servicing and have the most colleagues trained nationally to service Electric Vehicles (“EVs”). Colleague training remains a top priority and we are investing heavily in electric services training to support customers who have made the switch. We ended the year with 359 colleagues trained to service EVs in our garages, with 317 colleagues accredited to IMI Hybrid Electric Vehicle Level 2 and 42 colleagues accredited to Level 3. In addition, we finished the year with 383 technicians in Retail stores capable of servicing E-bikes and E-scooters, up 10% on the year before. COVID-19 meant training plans were scaled back in FY21, but we plan to significantly increase the number of E-trained colleagues in FY22.E-scooter legislationWe continue to lobby the Government to legalise the use of E-scooters on public roads, engaging with the Department for Transport through their consultation process, and in the last year we have held E-scooter events to raise awareness of the benefits of E-scooters. We believe strongly that E-scooters should play an important role in the future of sustainable urban transport and as a leading electric retailer and services provider we will lend our voice to this campaign.Case StudyOverviewFor Halfords, Electrification means leading the way as the UK shifts towards electric modes of transport and supporting our customers as they make the switch. Halfords is uniquely positioned in the UK to offer electric services and solutions for both 2- and 4-wheeled modes of transport and we are proud to support our customers with everything they need as the UK transitions towards electric mobility. Our ambition is to be the leading name in electric services, giving everybody the confidence to switch and continue to enjoy the benefits of electric mobility. We are in a privileged position to champion the needs of consumers and we intend to use our voice to develop the UK’s electric mobility industry.Progress in FY21Knowledge is a key barrier for customers in their journey to electric and recognising that most customer journeys begin online, we launched an ‘Electric Hub’ on our website that provides advice and support on the benefits of electric vehicles, electric bikes and electric scooters. In addition, consumers can utilise our bespoke calculator to understand the costs of switching to electric and the impact it will have on the planet. We are incredibly proud of our role in helping customers make the switch to electric and we will continue to support them through this transition.In FY21, customer demand for electric products and services continued to grow strongly and we sold a record number of E-bikes, E-scooters and electric service plans this year. To ensure that electric mobility remains widely accessible, we continued to expand our range of electric solutions, such as E-scooter care plans and electric bikes and scooters at a broader range of prices, including our first own-brand Carrera E-scooter. In addition, through our Cycle2Work proposition and the recent Government changes to increase the maximum purchase price on the scheme, we are making electric mobility more accessible to our customers than ever before.44Halfords Group plc Annual Report and Accounts for the period ended 2 April 202130441-Halfords-Annual-Report-2021-Strategic.indd 4430441-Halfords-Annual-Report-2021-Strategic.indd 4415/07/2021 19:13:4315/07/2021 19:13:43 Strategic Report
Net Zero Commitment
Overview
Addressing climate change through
the reduction of greenhouse gas
(“GHG”) emissions is now a key
priority for most companies and
Halfords is no exception. As one
of the UK’s largest employers it is
critically important that we make
a strong commitment to tackle
climate change and put this at the
top of our ESG agenda.
Progress in FY21
Last year, we set out our plan to be carbon
neutral by 2050. Over the last 12 months,
we have gone a step further, agreeing a
set of science-based targets for emissions
reduction, and have engaged with the
Science Based Target Initiative (“SBTi”),
working towards formal accreditation. A
target is ‘science-based’ if it aligns with the
goals of the Paris Agreement to keep global
warming below 2oC and sets out a clearly-
defined pathway for companies to reduce
emissions.
Our targets are as follows:
• Halfords commits to achieve a 1.5ºC
aligned science-based target across our
own operations by 2030, reducing our
greenhouse gas emissions by at least
42% in this decade (vs. FY20 baseline).
• We will also engage with 67% of our
suppliers by emissions, covering
purchased goods and services and
capital goods, with the aim of them
having science-based targets by the
start of 2026.
• Achieve Net Zero value chain emissions
by 2050.
The engagement with our supply chain
will see us work with our priority suppliers
to help them decarbonise their own
operations. In support of this, we will
encourage suppliers to measure and report
their GHG emissions and have their own
reduction plan in place, preferably setting
science-aligned and Net Zero targets.
We continued to implement solutions to
reduce our emissions, such as a further
roll-out of LED lighting and Building
Management Solutions (“BMS”) in our retail
stores, an assessment of our company car
fleet to incorporate lower carbon vehicles,
and an assessment of renewable energy
options, after which we agreed a deal with
a renewable energy company which will
come into effect during FY22. We will continue to invest in initiatives to reduce our carbon
footprint further, whether that’s through improving efficiency e.g. LED lighting or heat pump
technology, or through switching to greener forms of energy e.g. biomass options for
vehicles.
We want to lead by example in electric mobility and so, as the operator of over 300 Mobile
Expert and Commercial vans, we will continue to explore the options for making the switch
to electric vans as soon as we can. The key challenges are weight and range, and as it
stands today, we don’t yet believe the technology exists for the journeys our vans make.
We will continue to work with manufacturers and collaborate with other fleet operators to
switch to electric once it is feasible to do so.
Scope 1 and 2 emissions data
Halfords Retail directly purchased electricity
Autocentres directly purchased electricity
Total Electricity consumption
Halfords Retail combustion of gas
Autocentres combustion of gas
Total Gas consumption
Vehicles on Company business
Overall totals
Company’s chosen intensity measurement:
tCO2e per £1m Group revenue
SECR Report – 2020/2021
Scope
1
2
1
Gas
Electricity
Transport
Total
Scope Breakdown (tCO2e)
Scope 1
Scope 2
Electricity
Brand
Halfords Retail
Halfords Autocentres
Grand total
Gas
Brand
Halfords Retail
Halfords Autocentres
Grand total
Transport
Brand
Halfords Retail
Halfords Autocentres
Mobile vans
Grand total
2020 tCO2e
2021 tCO2e
10,576
2,897
13,473
7,438
4,311
11,749
2,5471
27,090
7,967
2,159
10,126
6,470
3,637
10,107
2,988
23,221
23.45
17.97
2021 (tCO2e)
% of total
10,107
10,126
2,988
23,221
43.52%
43.61%
12.87%
100%
13,095
10,126
tCO2e
7,967
2,159
10,126
tCO2e
6,470
3,637
10,107
tCO2e
362
460
2,166
2,988
Total kWh
34,173,135
9,261,221
43,434,355
Total kWh
35,185,311
19,780,143
54,965,455
Miles
1,311,954
1,668,482
7,990,000
10,970,436
1. Restating 2020 to include all Group vehicles, including mobile vans.
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ESG Progress in FY21
Net Zero Commitment
The overall reduction in Scope 1 and 2
emissions is partly driven by store closures
related to COVID-19, but also our own
efficiencies within our emissions-reduction
programme, e.g. the roll-out of LED lighting
and BMS within our Retail estate.
Scope 3 emissions
Our Scope 3 emissions data is based on
an Input/Output model and is therefore an
estimate, calculated by applying supplier
spend data to industry-accepted carbon
benchmarks for each supplier. We will start
working with our suppliers and vendors to
gather accurate Scope 3 data, building a
robust baseline from which to set targets and
measure our progress. As is common with
most retailers and distributors in the UK, the
majority of our overall emissions are Scope
3, reflecting the impact of manufacturing
products in a global supply chain. It is
therefore imperative that we engage with
our suppliers to reduce their own emissions,
thus putting us on pathway to achieving Net
Zero by 2050.
Case Study
LED Lighting and
BMS Roll-Out
Over the past 12 months, we have
continued our investment in energy-
saving measures across our estate,
particularly the roll out of LED lights
and Building Management Systems
(“BMS”) in our retail stores. BMS
provides automation of controls in
stores for heating, lighting and small
power sources, ultimately helping us
control energy usage.
By the end of FY21, we had BMS
and LED lights installed in 224 sites
accounting for well over 50% of our
retail estate. This roll-out significantly
improves our energy efficiency,
reducing our Scope 2 emissions, and
will form a core part of our plans to
meet our science-based targets.
We will invest further in FY22, rolling
out to an additional 124 retail sites.
Looking further ahead, we will continue
to search for innovative opportunities
to reduce the energy requirements of
our stores, garages, distribution centres
and hubs.
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Strategic Report
Diversity & Inclusion
Overview
Halfords Group is committed to
providing equal opportunities to
colleagues and candidates. This
applies to recruitment, training,
career development and promotion,
regardless of physical ability,
gender, sexual orientation or gender
reassignment, pregnancy and
maternity, race, religious beliefs,
age, nationality or ethnic origin.
We are proud to promote diversity
in the motoring and cycling
industries (e.g. representation
on D&I working groups within
the IMI) and work hard to ensure
every colleague feels they can be
themselves at work and perform
to their best. We also recognise
there is always more we can do
and we are excited to build on our
foundations.
Progress in FY21
Today, we have a good understanding of our
gender diversity within the Group. We routinely
collect gender data and have been publishing
our gender pay gap data for a number
of years, which we are proud to say has
improved even further this year. The Gender
Pay Gap Report highlighted that across the
Halfords Group of companies, our mean
and median hourly pay gap is less than the
national average, with women’s mean hourly
rate 1.15% higher than men’s and women’s
median hourly rate 3.98% lower than men’s.
Our focus remains on two areas: improving
gender diversity across the Group, and
building awareness amongst our colleagues
of career progression opportunities, such as
promoting female technicians in garages.
We have a number of initiatives in place
to support this, including partnering with
schools and colleges to engage with potential
candidates, delivering virtual ‘Values’ sessions
to colleagues right across the Group, and
promoting our Group career path.
Our annual colleague engagement survey is
a key point in the year for us to gather overall
sentiment across the Group, with some
highlights of the year being:
• 80% of colleagues feel Halfords treats
them and their colleagues fairly.
• 85% of colleagues feel they can be
themselves at work.
• Engagement is consistent across
gender, with female indexing slightly
higher.
• Colleagues identifying as Asian are
10ppts more engaged.
Whilst we have not historically collected
ethnicity data, our field-based colleagues
live in their local communities and we
therefore have a diverse mix of ethnic
backgrounds across the UK. We do,
however, recognise the need for a more
thorough understanding of diversity across
a number of categories, and so we have
started to develop methods through
which we can collect and record this data,
which will eventually form the basis of our
Inclusion programme. Data from our initial
findings are shown below:
Gender
Ethnicity
White /
Caucasian /
White
Other
Prefer not
to Say
Black/
Black
African/
Black
Caribbean/
Black Other
Male
Female
Other
75%
83%
20%
13%
75%
20%
1%
0%
1%
4%
3%
4%
86%
88%
83%
2%
1%
3%
Role
Leadership
Group
Management
Non-
Management
Middle
Eastern
Mixed
Ethnic
Heritage
Other
Prefer not
to say
0%
0%
0%
1%
1%
2%
1%
2%
1%
7%
5%
6%
Asian
3%
3%
5%
The data presented is based on the 94% of colleagues that completed the most recent colleague survey.
The Board is committed to improving ethnic diversity at Board level and, during the year, we will begin the process of ensuring that the
composition of the Board is compliant with the Parker review into corporate governance. Importantly, the Board is committed to providing
an inclusive workplace so that all colleagues feel that they can be themselves at work and perform to their best.
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ESG Progress in FY21
Diversity & Inclusion
Case Study
Halfords BTCC
Apprentice 2020
Jackie Hardy, an apprentice mechanic at the Halfords
Autocentre in Borehamwood, was named Halfords BTCC
Apprentice 2020, fending off tough competition from eight
of her colleagues. The Level 3 apprentice has since been
travelling with the touring car team to BTCC race weekends
where she plays an integral part of the effort to win races.
To secure the victory, Jackie did a practical timed assessment
on a Volkswagen van to find hidden faults and successfully
convinced a panel that she has the right attitude and character
to become part of the BTCC team.
After it was announced that she won in an otherwise all-male
field, Jackie offered the following comment on the victory and
her expectations of joining BTCC on the road:
“To be fair I didn’t expect it. I was nervous during the
competition but I’m over the moon now, really happy. Now I’m
looking forward to joining the BTCC team, which will definitely
be different from working in a garage, but I’m excited to get
in there and learn and embark on the next stage of my career.
Women need to know that it is okay to take that initial step, and
that there are other women working in the industry. Once you
get your foot in the door it is okay!”
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Strategic Report
Halfords remains a popular destination for
the end-of-life domestic and car batteries,
and we want to expand this service to a
more difficult, dangerous and expensive
type – Lithium Ion – which is the current
go-to for electric mobility products. As
the market-leader, Halfords has a critical
role to play in finding recycling and waste
management solutions for a fast-growing
consumable item.
Product, Packaging and Waste Management
Product Solutions
Halfords has a rich heritage as a
destination for cycling and motoring
service, maintenance and repair. Through
its full estate, Halfords is responsible for
millions of repairs each year and therefore
plays an important role in enhancing the
longevity of products and mitigating the
impact of a linear economy. We will expand
these strengths to offer this industry-leading
service in the emerging electric mobility
market, to reduce the impact of full-product
replacements by upskilling our store
colleagues in service and repairs – leading
to a better customer experience and
reduced environmental impact.
Waste Management
Through our packaging data improvements,
we have greater visibility on the amount of
packaging we use in our pre-store logistics.
Approximately 38% of our packaging is
commercial and industrial, and we aim
to make significant reductions to this
packaging usage. Where the packaging
is deemed essential, we aim to improve
on the current 75% recycling rate through
our waste management processes. We
are committed to transparency on the end
destination of this packaging within a two-
year period, to ensure that our waste has
the lowest possible environmental impact
and reduces the use of virgin materials.
Case Study
Packaging Data
Our improvement in data functionality has increased our ability to better manage
our packaging portfolio in the future. We have increased data accuracy giving us
better confidence in understanding our current packaging usage, which is around
12,700 tonnes of packaging each year; 96.6% of that is split between cardboard,
wood and plastics. Of our overall packaging use, 61% is in retail units that go out
to customers, and we are using this data to target our coverage of widely-recycled
packaging, with clear labelling to support customers in placing waste in the correct
bin.
One of the topical areas within the industry is plastic and we know that plastic is
visible in a large proportion of the products we sell. We are committed to report in
even further granularity to specifically target plastics so that we can increase our
overall widely-recycled packaging rate from 71% across all materials towards as
close as we can to the 100% figure.
We are in an exciting age of innovation within the plastics industry and want to take
a measured approach towards recyclable content, whilst also prioritising reduction
and refill approaches.
In the next year, we will explore options
for sustainable sourcing and waste-
management solutions for rubber-based
products, including tyres, tubes and car
mats, which represent a high proportion of
sales within our business.
Our firm commitments to consumer rights
and great customer service mean we
receive a significant volume of returned
goods that can often be repurposed with
minimal repair. This provides us with both a
commercial and environmental opportunity
to maximise the value of our returns, and
so in FY22 we will pilot the reselling of
reconditioned products for discounted
prices, helping to extend the lifecycle of
these products and ultimately reduce the
use of virgin materials. Specifically we will
trial a pilot of selling second-hand bikes
exploring the opportunity within this market.
Packaging Solutions
During the year, we have significantly
improved our ability to report on packaging
data, responding to heightened consumer
awareness and anticipation of more
stringent legislation. We are using this
improved dataset visibility to establish
metrics and targets that will help to evolve
our packaging portfolio, with recyclability
our primary focus, and longer term, looking
to reduce our use of virgin plastic within our
supply chain. Currently, 71% of our retail
packaging is known to be widely recyclable,
meaning we have a further 29% to aim
for. We appreciate that recyclability does
not always lead to recycling, so we will
join other leading retailers and brands by
introducing clear instructions via on-pack
recycling labels to raise awareness of end-
of-life packaging options.
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ESG Progress in FY21
Supply Chain Ethics
We are committed to maintaining the
highest ethical standards amongst our
suppliers.
We carry out a rolling programme of Code
of Conduct audits and assessments with
our suppliers across social, ethical and ESG
issues.
This rolling programme and regular review
ensures continued compliance with our
Sourcing Code of Conduct across our
supply-chain.
A risk-based (or tiered) approach is used
to devote most attention to the areas of
greatest risk. For Tier 1 suppliers, which
are those operating in higher risk countries,
we conduct in-depth audits, including in-
person factory visits, confirming compliance
every two years as standard, and every year
for bike suppliers.
Tier 2 suppliers are generally own-brand
manufacturers operating in low-risk
countries. For these, we may accept an
alternative audit report as a means of
validating compliance, and we will accept a
reduced frequency of audit.
We are strongly opposed to the exploitation
of workers and we will not tolerate
forced labour (including the most recent
Modern Slavery Act), or labour which
involves physical, verbal or psychological
harassment or intimidation. For further
information, please see our Modern Slavery
Statement on page 82.
We will not accept human trafficking or the
exploitation of children and young people in
our business and we undertake all possible
steps to ensure that these high standards
are maintained. We regularly review related
policies to ensure that they remain up to
date and fit for purpose.
Our Supplier Code of Conduct and its
principles are based on international
standards, including the International
Labour Organisation (“ILO”) conventions
and recommendations, which in turn are
based on the United Nations Universal
Declaration of Human Rights and
Convention on Rights of the Child.
Tier 3 suppliers are proprietary branded
goods for resale. Our standard terms
include conditions to explicitly reference
our Suppliers Code of Conduct which they
must sign up to.
During FY21, despite fewer visits due
to COVID-19 limiting global travel, we
have maintained our high standards
of compliance and no concerns of
unacceptable conduct were raised or
reported. As soon as restrictions allow, we
will ensure supplier compliance according
to our usual governance.
In FY22, we will engage further with our
supply chain in the following ways:
• Present, as usual, our Supplier Code
of Conduct at the Annual Supplier
Conference.
• Review our supplier Terms and
Conditions and update them for
enhancements to our ESG Strategy.
• Start to work with our suppliers to
understand their ESG and Ethical
Sourcing commitments in further depth.
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Strategic Report
Our Colleagues
Over the last year, our colleagues have
shown their dedication to our business,
going the extra mile to provide our
customers with the products and services
they needed to keep the UK moving. Have
worked hard to prioritise the health, safety
and wellbeing of all of our colleagues
and have recognised their unwavering
commitment with a number of support
initiatives.
• We made sure we had robust COVID-19
protocols in place from the start of the
first lockdown to keep our colleagues
and customers safe, such as sufficient
stocks of PPE, additional concierge staff,
and adjustments to colleague rotas.
• We launched over £4m of initiatives
to support our front-line colleagues,
including a Frontline Colleague Support
fund and Halfords Here to Help Fund.
• We developed and launched a
‘Wellbeing Hub’, where colleagues can
go to receive support and advice on a
range of issues. We have also signed up
to the Mental Health at Work initiative,
demonstrating the importance of mental
wellbeing and doing everything we can
to support our colleagues through such
a challenging period.
Colleague engagement is vital to our
success as a business. As such, it
is a measure in our Executive bonus
scheme and we set targets for improved
engagement right across the organisation.
Each year we conduct a colleague
engagement survey, administered by
a third party and providing actionable,
anonymised reports at a team level. This
year’s survey, conducted in April 2021, had
a response rate of 94% and an engagement
index score of 75%, strong numbers that
demonstrate high levels of colleague
engagement despite the impact of
COVID-19 and retail organisational design
changes. In response to the survey results,
every team produces an engagement plan
for the year ahead, which rolls up into
department and Group plans. Once again
our Retail business was placed in the ‘Best
25 Big Companies to Work For’ category
in The Sunday Times Best Big Companies
survey, for the seventh year running – an
achievement we are very proud of.
We remain committed to providing best-
in-class training to our colleagues. This
includes field-based training, such as
electric servicing, all the way to online
training courses via our intranet to upskill
colleagues who wish to progress their
career. Over the last year we have delivered
a change in our in-store operating model,
designed to ensure we have significantly
more services-trained colleagues across
the retail estate, providing a foundation for
electric servicing, as well as product-fitting,
WeChecks and Cycle care.
• Halfords Values delivered virtually to
c.2,700 leaders across the business,
who cascaded to all colleagues across
the Group.
• Over 2,500 colleagues completed
training courses, from PDI to ‘Silver
Service’ to WeFit services such as
Dashcams fitting.
• 77 colleagues completed an
Apprenticeship – 39 with a distinction.
• 79 colleagues achieved the IMI’s DVSA
MOT tester accreditation.
• 43 colleagues achieved IMI Level
3 accreditation, with a further 10
gaining IMI’s Hybrid Electric Vehicle
accreditation, which was lower than
previous years due to limited training
resource as a result of COVID-19
and the need to prioritise MOT tester
training.
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ESG Progress in FY21
Charity and Communities
Halfords is proud to support charities and
communities across the UK. The COVID-19
pandemic meant that much of our focus
was centred on supporting the UK’s key
front-line workers, to help keep them
moving so they can focus on keeping the
country safe in a national emergency.
Supporting our key workers
Throughout the pandemic, we carried out
over half a million services and repair jobs
on cars and bikes each month, playing an
essential role in keeping the UK moving.
We were privileged to offer free checks and
discounts to 480,000 key workers, including
NHS staff, teachers and Armed Forces, to
keep their vehicles safe and roadworthy.
Halfords Autocentres and McConechy’s
garages provided servicing, repair and tyre
services for ambulances, police cars and
border control vehicles, contracting with 49
emergency service agencies across the UK.
We were particularly proud to donate
E-scooters to the NHS Nightingale hospital
in Birmingham to help construction workers
complete the fit-out, and we donated
numerous bikes to individual doctors and
nurses whose bicycles had been stolen or
vandalised.
Case Study
Case Study
Re-Cycle
Halfords has worked with the Re-Cycle
charity since 2013 – an amazing charity
which repurposes bikes by sending
them to those in desperate need of
basic transport in African countries,
training mechanics in-country to
recondition the bikes and ultimately
giving the bike a second life. For the
people in these communities, a reliable
bike is essential for their livelihoods and
it is extremely important to us that we
can support them as much as we can.
We encourage our customers to donate
their old bikes at our stores, which are
then transported to our central distribution
centre before being shipped to the
main Re-Cycle hub. When the bikes are
received at Re-Cycle, they are assessed
for quality and suitability to send to Africa.
They are then sent to Re-Cycle’s Africa
Partners and ‘prepped’ by an amazing
team of volunteers, before being taken to
communities in desperate need. Re-Cycle
has a zero-waste policy and any parts or
components that cannot be repurposed
or reused are recycled. This is very much
aligned with our own ambitions to reduce
products and packaging ending up in
landfill and is a great example of how a
circular economy can help benefit the
planet in various ways.
Since we began our partnership, we
have donated more than 60,000 bikes,
and despite COVID-19 meaning the
partnership had to be put on hold until
the start of 2021, we still managed to
send 1,780 bikes to Re-Cycle between
April 2020 and April 2021.
Trussell Trust
We are active within many
communities across the UK and
actively help and support local
communities in which we operate.
One great example of this during
FY21 was supporting our local
foodbank via the Trussell Trust.
Despite the pandemic making
fundraising more challenging, we ran
a variety of events to raise money
for the Redditch foodbank and were
delighted to donate this money in
the period leading up to Christmas.
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Job Number 15 July 2021 7:09 pm Proof NumberMindAs part of our pledge to support both our colleagues and charities, we embarked on a Group-wide initiative to walk, run, swim and cycle the distance around the globe – an incredible 33,327 mile journey matching the route you would most likely take if you cycled around the world. Many colleagues were feeling the impact of COVID-19 lockdown and the dark evenings of winter, and this challenge provided a great opportunity to use exercising as a means to improve health and wellbeing. We were delighted with a total mileage of 141,733 miles and in doing so we donated £33,327 to the Mind charity. An incredible amount of money raised for Mind and great for colleague engagement – a great example of the Halfords ‘One Team’ value.Case StudyHMP Drake HallThe Halfords Academy at HMP Drake Hall was launched a number of years ago and it is a scheme which we remain firmly committed to. It offers participants the opportunity to train as cycle mechanics and create the prospect of steady employment upon release. The programme is tailored for each participant with an added focus on mechanics, customer services or retail.Since launch, the Halfords Academy has been a great success and although COVID-19 meant the programme had to pause, we have resumed training, and are currently training twelve female offenders. Twenty graduates have joined the business in a variety of roles following their release. Fully supported by Halfords colleagues, participants are subject to the same high standards of training as other colleagues within the Group – the training programme is thorough, designed to challenge participants and raise aspirations. The programme provides offenders with the opportunity to be trained and work on bikes that require reconditioning.The majority of the bikes are then donated to primary schools in disadvantaged areas to help children access cycling through the Halfords school bike donation scheme.Case StudyArmed Forces CovenantWe continue to offer guaranteed interviews to service leavers and reservists for all roles where candidates meet the minimum requirements. We also support service leavers and reservists by recruiting through the Career Transition Partnership, offering ten days additional unpaid leave for reservists and a range of discounts for those serving in the Armed Forces. As a result, we are now a Silver Level employer in the MOD’s Employer Recognition Scheme, and were also nominated for The Sun’s Military Awards, which are known as the ‘Millies’.Since signing up to the Armed Forces Covenant, Halfords is proud to have recruited 78 ex-services personnel into a variety of stores and garages roles.Case Study halfords.annualreport2021.com53Strategic Report30441-Halfords-Annual-Report-2021-Strategic.indd 5330441-Halfords-Annual-Report-2021-Strategic.indd 5315/07/2021 19:14:0215/07/2021 19:14:02 Our Key Performance Indicators
Shareholder KPIs
Underlying Profit
Before Tax1
Underlying Earnings
Per Share1
Performance
PBT finished £40.4m above
FY20 driven by share
gains in Motoring services,
profitability improvements
across the Group, and
share gains and strong
demand in Cycling.
Link to
Remuneration:
Bonus
Definition
Profit before income tax
and non-underlying items
as shown in the Group
Income Statement.
Commitment
The Board considers that this
measurement of profitability
provides stakeholders with
information on trends and
performance, before the
effect of non-underlying
items.
Historic Performance
Definition
Profit after income tax
and before non-underlying
items as shown in the
Group Income Statement,
divided by the number of
shares in issue
Commitment
EPS is a measure of our
investment thesis and as
such we aim to manage
revenues, margins and
invest in long-term growth.
Historic Performance
Performance
Underlying EPS grew
67.5% reflecting the strong
profit performance.
Link to
Remuneration:
Performance Share Plan
21
20
19
£55.9m
£58.8m
£96.3m
21
20
19
40.7p
24.3p
24.5p
Underlying EBIT and
Underlying EBITDA1
Definition
Underlying EBIT results
from operating activities
before non-underlying
items. Underlying
EBITDA further removes
Depreciation and
Amortisation.
Commitment
The Board considers that
these measurements of
profitability are a viable
alternative to underlying
profit and uses these
measures to incentivise
Management.
Performance
Underlying EBITDA
grew 47% reflecting the
strong profit performance
with depreciation 10%
above last year as capital
expenditure was moderated
due to COVID-19.
Historic Performance
The numbers below represent Underlying EBITDA
Dividend
Per Share1
Definition
Cash returned to
shareholders as a return
on their investment in the
Company.
Commitment
Our existing dividend
policy was suspended
last year in light of the
considerable uncertainty
that we faced during the
pandemic. We will reinstate
the ordinary dividend from
Historic Performance
FY22, intending this to be
progressive. Should surplus
cash remain in the business
that we feel we cannot
deploy with good rates of
return, we will return this to
shareholders in the most
appropriate way.
Performance
With the strong close to
FY21, the Board proposed
a final dividend of 5p.
21
20
19
£139.8m
£95.3m
£98.2m
5.00p
6.18p
21
20
19
18.57p
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Strategic Report
Free
Cash Flow2
Definition
Adjusted Operating
Cash Flow less capital
expenditure, net
finance costs, taxation,
exchange movement and
arrangement fees on loans.
Commitment
Our medium-term target
is to grow Free Cash Flow
over the current three
year period (FY19–FY21)
compared with the previous
three years (FY16– FY18).
Historic Performance
21
20
19
£54.6m
£42.7m
Like-for-Like
Sales1
Definition
Revenues from stores,
Autocentres and websites
that have been trading for at
least a year (but excluding
prior year sales of stores
and Autocentres closed
during the year) at constant
foreign exchange rates.
Commitment
Like-for-like sales is a
widely used indicator
of a retailer’s trading
Performance
Free Cash Flow was strong,
£91m above FY21 from the
strong profit performance
and working capital inflow.
We anticipate circa £36m of
the working capital inflow
to reverse in FY22.
Net Debt to Underlying
EBITDA Ratio2
Performance
The Group ended FY21
with net positive cash.
Definition
Represented by the ratio
of Net Debt to Underlying
EBITDA.
Commitment
We currently continue to
target a ratio of 1.05, with a
range of up to 1.55 to allow
for appropriate M&A. We
will arrive at the debt target
over time. This ratio helps to
compare the financial result
for the year to debt levels.
Historic Performance
£145.3m
21
N/A
20
19
0.8
0.8
1 All numbers presented are pre-IFRS 16 and
FY20 numbers are on a 52-week basis.
2 All numbers presented are pre-IFRS 16 and
FY20 numbers are on a 53-week basis.
Read the Remuneration Report
on pages 122 to 135.
performance, and is a
comparable measure of
our year-on-year sales
performance.
Performance
Group LFL was strong
driven by both growth in
our Autocentres business
and Cycling. Retail
Motoring saw a LFL decline
off the back of low traffic
levels from COVID-19.
FY21 LFL Sales Movement
Halfords Group
Retail
Motoring
Cycling
Autocentres
13.9%
14.6%
-12.1%
54.1%
9.7%
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55
Our Key Performance Indicators
Operational KPIs
Service-related Group
Sales Growth
Group Colleague
Engagement
Definition
Service-related Group sales
is the income derived from
the fitting or repair services
themselves along with the
associated product sold
within the same transaction.
Commitment
To grow service-related
Group sales faster than total
Group sales growth.
Performance
Service-related sales growth
was very strong, now
accounting for 28.7% of
Group sales. The growth was
driven by our Autocentres
business from both our FY20
acquisitions, the expansion
of our HME business and
market share gains across the
Autocentres.
Link to
Remuneration:
Bonus and Performance
Share Plan
Definition
The proportion of Group
colleagues who respond
positively to the questions in
the Colleague Engagement
Survey.
Commitment
We aim to improve Colleague
Engagement across the
Group with specific focus on
required areas identified by
colleagues.
Performance
Engagement fell 2% which
although disappointing
on face value was a
positive result given the
unprecedented challenges
and disruption felt by every
colleague within the business.
We launched several initiatives
to try and lessen the burden
both financially and their
mental and physical health.
Link to
Remuneration:
Bonus
73%
75%
79%
Historic Performance
Historic Performance
21
20
19
8.9%
1.6%
23%
21
20
19
Customer Net Promoter
Score (‘NPS’)
Definition
Measure the changes in
NPS of our Retail stores and
Autocentres.
Commitment
We are committed to
improving the score with our
customers across the Group.
Performance
NPS saw good positive
movements across both
Retail and Autocentres as
we focussed on enhancing
the customer experience
at multiple touch points.
Given the dramatic increase
in customer contact during
COVID-19, this was a
pleasing result reflecting our
investments in digital and
centralising customer contact.
Link to
Remuneration:
Bonus
Historic Performance
Retail
Autocentres
FY21
59.7
72.6
FY20
57.9
68.8
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Job Number 15 July 2021 7:09 pm Proof Number halfords.annualreport2021.com57Strategic Report30441-Halfords-Annual-Report-2021-Strategic.indd 5730441-Halfords-Annual-Report-2021-Strategic.indd 5715/07/2021 19:14:1115/07/2021 19:14:11 The FY21 financial results
reflect our operational agility
in year but also the positive
impact of longer-term
initiatives to improve the
efficiency and profitability
of our business.
Chief
Financial
Officer’s
Review
Loraine Woodhouse
Reportable Segments
Halfords Group operates through two reportable
business segments:
• Retail, operating in both the UK and Republic
of Ireland; and
• Autocentres, operating solely in the UK.
All references to Retail represent the consolidation
of the Halfords (“Halfords Retail”) and Cycle
Republic businesses, Boardman Bikes Limited
and Boardman International Limited (together,
“Boardman Bikes”), and Performance Cycling
Limited (together, “Tredz and Wheelies”) trading
entities. All references to Group represent the
consolidation of the Retail and Autocentres
segments.
The “FY21” accounting period represents trading
for the 52 weeks to 2 April 2021 (“the financial
year”). To ensure a meaningful comparison with the
prior year, all commentary unless otherwise stated
is for the 52-week period ended 27 March 2020
and is before non-underlying items. Most of our
commentary on profit and cost measures is before
the impact of IFRS 16, which is stated where
relevant. The impact of IFRS 16 is shown in the
table below and further details of this impact are
provided later within this report. The comparative
period “FY20” represents trading for the 53 weeks
to 3 April 2020 (“the prior year”).
2020/21
Highlights
+13.1%
Total Sales
Growth
-3.1ppts
Cost as a %
of Sales
£20.0m
Sustainable
Working
Capital
Reduction
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Chief
Financial
Officer’s
Review
Loraine Woodhouse
Group Financial Results
Group Revenue
Group Gross Profit
Underlying EBIT pre-IFRS 16*
Underlying EBITDA pre-IFRS 16*
Net Finance Costs
Underlying Profit Before Tax
pre-IFRS 16*
Net Non-Underlying Items
Impact of IFRS 16
Profit Before Tax post-IFRS 16
Underlying Basic Earnings per
Share pre-IFRS 16*
FY21
(52 weeks)
£m
FY20
(53 weeks)
£m
FY20
(52 weeks)
£m
1,292.3
656.3
101.8
139.8
(5.5)
96.3
(37.3)
5.5
64.5
1,155.1
589.7
55.4
92.6
(2.8)
52.6
(32.1)
(1.1)
19.4
52-week
change
+13.1%
+12.4%
+73.4%
+46.7%
+96.4%
1,142.4
584.0
58.7
95.3
(2.8)
55.9
(32.1)
(1.1)
22.7
+72.3%
+16.2%
–
+184.1%
40.7p
22.9p
24.3p
+67.5%
* This report includes Alternative Performance Measures (“APMs”) which we believe provide readers
with important additional information on the Group. A glossary of terms and reconciliation to IFRS
amounts is shown on page 201.
The speed with which COVID-19 hit,
and the subsequent implications, have
been the most significant test for every
business in living memory. Almost
overnight, demand and customer shopping
behaviour changed, cash flows and supply
chains were interrupted, and the resulting
operational challenges tested everyone
and everything. Although I believe the
financial strength of Halfords, and our
diverse portfolio of essential products and
services, positioned us well going into the
pandemic, I am pleased that the work in
the preceding 12 months was designed
for exactly this purpose - to strengthen the
resilience and profitability of the business
in an ever-changing retail environment.
The FY21 financial results therefore reflect
our operational agility in year but also the
positive impact of longer-term initiatives to
improve the efficiency and profitability of
our business. We saw revenues and profits
grow, gross margins improve in our core
categories and businesses, operational
costs fall as a proportion of sales, and a
closing net cash of £58.1m.
The customary financial metrics
undoubtedly demonstrate our strong
performance but, over and above this,
we also undertook further activity in year
to safeguard the Group. This included
securing £25m of CLBILS funding and
covenant waivers on our existing RCF at the
peak of the pandemic and, more notably,
the subsequent refinancing of the Group’s
debt facility for the next 3 years, securing a
competitive rate of borrowing on a reduced
facility size overall.
Group revenue in FY21, at £1,292.3m, was
up 13.1%, comprised of Retail revenues
of £1,039.8m and Autocentres revenue of
£252.5m. This compared to FY20 Group
revenue of £1,142.4m, which saw Retail
revenue of £950.6m and Autocentres
revenue of £191.8m. Group gross profit
at £656.3m (FY20: £584.0m) represented
50.8% of Group revenue (FY20: 51.1%),
comprising an increase in the Retail gross
margin of 10 basis points (“bps”) to 48.3%
and a decrease in the Autocentres gross
margin of 440bps to 61.1%, reflecting the
recent acquisition of lower gross margin
businesses. Although the headline Group
gross margin rate declined, -34bps, this
was a strong result given the dynamics
and volatility of the last 12 months and the
outcome reflects our focus on creating a
more profitable business. To context this
result, it is worth highlighting three key
components within the final overall Group
gross margin %. Within Retail, we saw a
significant, and adverse, change in mix,
out of higher margin motoring products
and into lower margin cycling. Motoring
revenues were impacted by the almost
continuous rhythm of lockdowns and
resultant fewer journeys. On the contrary,
our cycling performance was very strong
as we worked hard to capitalise on any
opportunity within this market and offset
the lost motoring revenue. Offsetting the
significant mix impact, we saw a particularly
strong margin rate improvement, reflecting
almost 18 months of work to improve the
profitability of our cycling business. The
overall improvement in cycling gross margin
was particularly pleasing, up almost 680bps
on FY20 and, alongside a smaller, but
Strategic Report
favourable, improvement in motoring this
completely mitigated the adverse mix effect
within Retail.
The final margin impact was seen within
our Autocentre Business. The overall
performance was -440bps vs FY20 but was
expected as we reported the first full year
of Tyres on the Drive and McConechy’s
Tyre Service Limited (“McConechy’s”). As
we highlighted last year, these businesses
generate a lower gross margin due to
a higher participation of tyre sales. The
operating model is different, but we see
an opportunity in the medium term as we
increase the participation of higher-margin
services, maintenance, and repair within
the product mix. Encouragingly, all three
Autocentre businesses saw their gross
margins improve vs FY20 as we continue
to optimise and take the first steps on this
journey.
Total underlying costs, pre-IFRS 16,
increased to £554.5m (FY20: £525.3m)
of which Retail comprised £410.6m
(FY20: £404.3m), Autocentres £141.6m
(FY20: £118.9m) and unallocated costs
£2.3m (FY20: £2.1m). Unallocated costs
represent amortisation charges in respect of
intangible assets acquired through business
combinations, namely the acquisition of
Autocentres in February 2010, Boardman
Bikes in June 2014, Tredz and Wheelies in
May 2016, McConechy’s in November 2020
and The Universal Tyre Company (Deptford)
Limited (“Universal”) in March 2021, which
arise on consolidation of the Group. Group
Underlying EBITDA pre-IFRS 16 increased
46.7% to £139.8m (FY20: £95.3m), whilst
net finance costs pre-IFRS 16 were £5.5m
(FY20: £2.8m).
Group operating costs before non-
underlying items and pre-IFRS 16 saw
an increase of 5.6% but decreased as a
proportion of sales by -3.1ppts to 42.9%,
demonstrating our increased efficiency.
As with revenue and gross margin, there
are several movements within this result
that give context to the performance. The
Group saw over £33m of costs as a result
of operating under COVID-19 restrictions,
driven by additional payroll to manage
colleague and customer safety, personal
protective equipment (‘PPE’) and safety
equipment, and higher fulfilment cost as
customers temporarily changed shopping
behaviour. During Q1, whilst the Groups
stores and centres were partially closed,
over 50% of colleagues were furloughed.
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Chief Financial Officer’s Review
At this point we utilised government
furlough schemes, receiving £10.5m of
support, which was later paid back in full
during Q4. We also recognised the difficult
environment through which our colleagues
have worked and, as a result, invested
in supporting them financially through
initiatives including the Front-Line Bonus
Scheme and a Hardship Fund totalling
£4m, whilst also adjusting holiday rules
to allow colleagues to take more time off
during FY22. These costs were offset by
the business rates relief of £39m across the
Group, of which the majority arose within
the Retail business.
We continued to drive our ongoing
efficiency programmes, delivering £7m
of Goods Not For Resale (“GNFR”) cost
savings, alongside those associated with
the closure of Cycle Republic, worth a
further £9m. We also achieved rental
savings within our Retail estate on 19 lease
renewals of circa -30% worth £0.6m in
FY21 and continued to convert most of
stores and garages to LED lighting saving
a further £0.4m. These underlying savings
were offset by the inevitable cost increases
associated with the growth of our business.
The annualisation of our acquisitions - Tyres
on the Drive and McConechy’s - added
£18m, strategic investments totalled £8m
and the significantly skewed mix into bikes,
and their increased volumes during FY21,
added a further £22m of additional cost.
Underlying Profit Before Tax pre-IFRS 16
for the year increased 72.3% at £96.3m
(FY20: £55.9m). Non-underlying items of
£37.3m in the year (FY20: £32.1m) related
predominantly to the closure of a number
of stores and garages following a strategic
review, as well as costs relating to a
significant organisational restructure. After
non-underlying items, Group Profit Before
Tax was £59.0m (FY20: £23.8m).
After non-underlying items and including
IFRS 16, Group Profit Before Tax was
£64.5m (FY20: £22.7m). The impact on the
Group of IFRS 16 in the period was a £5.5m
net increase to Group Profit Before Tax.
Retail
FY21
(52 weeks)
£m
FY20
(53 weeks)
£m
FY20
(52 weeks)
£m
Revenue
Gross Profit
Gross Margin
Operating Costs
Underlying EBIT pre-IFRS 16*
Non-underlying items
Impact of IFRS 16
EBIT post-IFRS 16
Underlying EBITDA pre-IFRS 16*
1,039.8
502.0
48.3%
(410.6)
91.4
(33.6)
14.2
72.0
120.5
961.0
462.8
48.2%
(410.8)
52.0
(29.5)
(1.2)
21.3
81.1
950.6
458.4
48.2%
(404.3)
54.1
(29.5)
(1.2)
23.4
82.7
52-week
change
+9.4%
+9.4%
+10bps
+1.6%
+68.9%
+13.9%
–
+207.7%
+45.7%
* This report includes Alternative Performance Measures (“APMs”) which we believe provide readers
with important additional information on the Group. A glossary of terms and reconciliation to IFRS
amounts is shown on page 201.
Like-for-like revenues and total sales
revenue mix for the Retail business are split
by category below:
FY21
LFL (%)
-12.1
+54.1
+14.6
Motoring
Cycling
Total
FY21
Total
sales
mix (%)
FY20
Total
sales mix
(%)
46.1
53.9
100.0
58.4
41.6
100.0
Gross profit for the Retail business, at
£502.0m (FY20: £458.4m) represented
48.3% of sales, an increase of +10bps on
the prior year (FY20: 48.2%). Underlying
gross margins of Cycling and Motoring
improved more significantly than the
headline number, which was diluted by
product mix into lower margin cycling
and a currency impact within the broader
gross margin due to fluctuations on the
year end spot rate. The gross margin
improvement within the categories reflected
the significant work carried out over the
last 18 months on our sourcing strategy for
both bikes and motoring products, as well
as our work to optimise promotional activity
throughout the year. Over the year, Cycling
gross margins improved by +680bps and
Motoring by +40bps vs. FY20.
Revenue for the Retail business of
£1,039.8m reflected, on a constant-currency
basis, a like-for-like (“LFL”) sales increase of
+14.6%. Total revenue in the year increased
9.4% after adjusting for the impact of
closed stores. The volatility of the trading
environment discussed earlier was most
evident in our Retail business, which made
forecasting particularly difficult. Demand
for our motoring products suffered from a
suppressed market throughout FY21 as
lockdowns markedly reduced the number
of journeys, with customers opting to work
from the safety of their homes. Motoring
like-for-like declined 12.1%, better than
transport data would suggest, but still
saw weekly LFLs ranging from -75% to
+20%. There were a number of positive
performances within motoring, such as our
touring products and car cleaning, but many
product areas saw LFL declines through
much of the year.
Our cycling performance was much
stronger, with like-for-like growth of 54.1%,
as we worked hard to source stock from
new and existing suppliers and serve the
increased demand within the market.
Cycling was equally hard to predict, and
although performed very well across H1,
with LFL peaks of over +100%, H2 saw
more volatility from week-to-week with LFL
declines late in Q3 and early Q4.
The differing category fortunes resulted in
the mix of motoring within Retail decline by
almost -12ppts vs. Cycling against last year.
The Retail Operational Review in the Chief
Executive’s Statement contains further
commentary on the trading performance in
the year.
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Retail operating costs before non-
underlying items and IFRS 16 were
£410.6m (FY20: £404.3m), an increase of
1.6% on FY20. The focus on operational
efficiency and procurement continued in
FY21, offsetting the impact of volume and
mix, whilst simultaneously allowing the
business to invest, albeit at a reduced level,
in our strategic initiatives. Some of the
highlights included centralising all customer
contact and further development of our
digital platform to enhance our customer
experience including bookable bike slots
and our WeCheck app. We saw almost
£7m of GNFR costs removed from the
Retail business through continued review
of services and tendering processes. We
saw 19 lease renewals, saving on average
-30% on annual rents, and we continued
to convert more stores to LED lighting and
building management systems, saving over
40% on annual converted stores utilities
consumption.
Naturally, due to the size of the Retail
business, a greater proportion of the costs
associated with COVID-19 were within its
costs. Of the £33m mentioned above, £25m
arose in Retail, offset by £33m of business
rates relief.
Autocentres
FY21
(52 weeks)
£m
FY20
(53 weeks)
£m
FY20
(52 weeks)
£m
Revenue
Gross Profit
Gross Margin
Operating Costs
Underlying EBIT pre-IFRS 16*
Non-underlying items
Impact of IFRS 16
EBIT post-IFRS 16
Underlying EBITDA pre-IFRS 16*
252.5
154.3
61.1%
(141.6)
12.7
(3.7)
0.8
9.8
19.3
194.1
126.9
65.4%
(121.4)
5.5
(2.6)
0.1
3.0
11.5
191.8
125.6
65.5%
(118.9)
6.7
(2.6)
0.1
4.2
12.6
52-week
change
+31.6%
+22.9%
-440bps
+19.1%
+89.6%
+42.3%
–
+133.3%
+53.2%
* This report includes Alternative Performance Measures (“APMs”) which we believe provide readers
with important additional information on the Group. A glossary of terms and reconciliation to IFRS
amounts is shown on page 201.
Autocentres generated total revenues of £252.5m (FY20: £191.8m), an increase of 31.6%
on the prior year, with a LFL increase of 9.8%. Non-LFL revenue in the year included
benefits from the acquisitions of both Tyres on the Drive and McConechy’s in November
2020, alongside existing Autocentres that have been open less than 12 months.
Gross profit, at £154.3m (FY20: £125.6m), represented a gross margin of 61.1%, a
decrease of 440bps on the prior year. As stated earlier, the decrease in gross margin % was
solely a result of annualisation of the FY20 acquisitions, which have a dilutive effect as the
operating model is quite different. These businesses tend to be lower gross margin but also
lower cost. There is an opportunity for us to grow margin, over time, through a greater mix
into service and repair, but the gross margin will remain lower than that of a core garage.
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Chief Financial Officer’s Review
All businesses saw their respective gross
margins improve during FY21, with the
continued development of our PACE Digital
Operating Platform supporting buying
efficiency across garages, boosted further
by a slightly lower mix into tyres, which tend
to be lower margin.
Operating costs were £141.6m, +£22.7m
above last year, of which £18m was a
result of the annualisation and growth of
our acquisitions from FY20. COVID-19
costs within Autocentres totalled £5.3m,
offset by £6.0m of relief through the Retail,
Hospitality and Leisure Grant Fund. The
remaining cost increase was the result of
growth in the underlying business.
Autocentres’ Underlying EBIT was £12.7m
before IFRS 16 (FY20: £6.7m), a strong
performance, reflecting the continued
growth and optimisation of our LFL
business alongside the annualisation and
expansion of FY20 acquisitions. Underlying
EBITDA before IFRS 16 of £19.3m (FY20:
£12.6m) was 53.2% higher than FY20.
Portfolio Management
The last 12-18 months have seen some
of the most significant changes in the
Group’s portfolio since the acquisition of
Autocentres over a decade ago. Within
Q3 FY20, we saw the acquisition of
McConechy’s Garages and Tyres on the
Drive, followed shortly by the closure of
our Cycle Republic business, including 22
stores, at the close FY20. Within FY21,
we have continued to grow our services
business, increasing the number of HME
vans and acquiring Universal Tyres at
the end of the financial year. We also,
however, took steps to further improve the
profitability and efficiency of our business
through the closure of 59 lower return
stores and garages.
overall cost base. Where there was term
remaining on any leases at the point of
closure, provision has been made in the
balance sheet to cover occupancy costs to
the point of lease expiry. A further 22 Cycle
Republic stores, along with the Boardman
Performance Centre, are also no longer part
of the trading portfolio.
The total number of fixed stores or centres
within the Group stood at 781, with a further
143 HME vans and a further 192 commercial
vans supporting mobile tyre fitting within
McConechys and Universal as at 2 April
2021. The portfolio comprised 404 stores
(end of FY20: 472) and 374 Autocentres (end
of FY20: 371). Mobile locations grew by 156
vans, increasing coverage of the most in-
demand regions within the UK.
The following table outlines the changes in
the portfolio over the year:
Retail Centres
Vans
Relocations
Leases
renegotiated
Refreshed
Openings/
Acquisitions
Closed
–
19
–
–
42
–
7
–
20
17
–
–
–
159
–
Within Retail, 42 low-return stores closed
during the year, largely in Q4. It was
considered more profitable to the Group,
on analysing the anticipated sales transfer
to other channels and neighbouring stores,
to close these stores and reduce the
The number of lease expiries, or breaks
under option, increases significantly within
the next five years. Retail will see two-thirds
of stores experience optionality within
five years, allowing for a high degree of
flexibility within the estate.
Within Autocentres, no new centres were
opened, but 20 locations were acquired in
the year. Seventeen were closed, taking
the total number of Autocentre locations to
374 as at 2 April 2021 (end of FY20: 371).
No Autocentres were refreshed in the year
(FY20:14).
With the exception of eight long leasehold,
and two freehold properties within
Autocentres, the Group’s operating sites
are occupied under operating leases, the
majority of which are on standard lease terms,
typically with a 5- to 15-year term at inception
and with an average lease length of under six
years. The acquisition of Universal resulted in
the purchase of 6 freehold properties but all
have been sold and leased back within the
first two periods of FY22.
Net Non-Underlying Items
The following table outlines the components
of the non-underlying items recognised in
the 52 weeks ended 2 April 2021:
Organisational
restructure costs (a)
Group-wide strategic
review (b)
Acquisition and
investment-related
fees (c)
One-off claims (d)
Closure costs (e)
Net non-underlying
items pre-IFRS 16
Closure costs (e)
Impairment of right-
of-use assets (f)
Net non-underlying
items post-IFRS 16
FY21
£m
FY20
£m
5.9
–
0.6
2.9
27.9
37.3
(1.9)
2.8
1.0
1.9
0.8
25.6
32.1
1.2
(0.4)
0.9
35.0
34.2
a.
In the current and prior period,
separate and unrelated organisational
restructuring activities were undertaken.
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Finance Expense
The net finance expense (before non-
underlying items and IFRS 16) for the 52
weeks ended 2 April 2021 was £5.5m
(FY20: £2.8m), reflecting the drawdown
of the Revolving Credit Facility (“RCF”)
early in the pandemic, alongside increased
amortisation and commitment fees relating
to the new RCF, which was renegotiated in
the period.
Taxation
The taxation charge on profit for the 52
weeks ended 2 April 2021 (before IFRS
16) was £10.3m (FY20: £2.8m), including a
£5.8m credit (FY20: £4.7m credit) in respect
of non-underlying items. The effective
tax rate of 17.5% (FY20: 13.9%) differs
from the UK corporation tax rate (19%)
principally due to the impact of deferred
tax on accounting for share options and
adjustments in respect of provisions held in
respect of prior periods.
Earnings Per Share (“EPS”)
Underlying Basic EPS before IFRS 16
was 40.7 pence and after non-underlying
items 24.7 pence (FY20: 22.9 pence and
8.9 pence after non-underlying items), a
77.7% and 177.5% increase on the prior
year. Basic weighted-average shares in
issue during the year were 197.1m (FY20:
197.0m).
Dividend (“DPS”)
In light of the COVID-19 pandemic and the
impact on short-term profitability, the Board
has taken a series of measures to preserve
cash, one of which was a suspension of
the dividend. After the strong close in
the final quarter of FY21, the Board has
recommended to shareholders that a final
dividend of 5.0p per share (FY20: nil) should
be paid.
the Group’s assessment of a range of
potential outcomes, management has
increased the provision to £3.4m which
represents management’s best estimate
of the value of underpayments and the
associated penalty charge.
e. Of the closure costs £28.5m represents
costs associated with the closure of a
number of stores and garages following
a strategic review of the profitability of
the physical estate. The costs mostly
relate to the impairment of right-of-use
assets (£12.2m) and tangible assets
and ongoing onerous commitments
under the lease agreements and other
costs associated with the property
exits.
In the prior period, they related to costs
associated with the closure of the
operations of Cycle Republic and the
Boardman Performance Centre (“Cycle
Republic”) following a strategic review
of the Group’s cycling businesses. The
costs mostly relate to the impairment
of right-of-use assets, as well as the
impairment of intangible and tangible
assets and inventories. £2.5m of these
costs have been reversed during
the year as the Group continues to
negotiate lease disposals and was able
to release stock provisions previously in
place (£1.8m).
In light of the ongoing COVID-19
pandemic, the Group has revised
future cash flow projections for stores
and garages. As a result, in the prior
period, £0.9m incremental impairment
was recognised in relation to garages
where the current and anticipated
future performance did not support
the carrying value of the right-of-use
asset and associated tangible assets.
This charge is directly attributable
to impairment due to COVID-19 and
relates primarily to the right-of-use
asset value. During the year, £0.4m of
this impairment has been reversed as
the stores and garages have returned
to a profitable position.
Current period costs comprised:
• During the year, a strategic redesign
of the in-store operating model
undertaken to better meet our
customers’ expectations and deliver a
consistent shopping experience across
our estate. Redundancy costs of £5.9m
were incurred to transition to the new
operating model. These costs have
materially been spent during the year.
Prior period costs comprised:
• Redundancy and transition costs
relating to roles which have been
outsourced or otherwise will not be
replaced (FY20: £1.4m); and
• Asset write-offs, principally resulting
from the strategic decision to re-
platform the Retail and Autocentres
websites (FY20: £1.4m).
b.
In the prior period, costs were incurred
in preparing and implementing the new
Group strategy. This included £0.4m
of external consultant cost and £0.6m
of store labour costs, point-of-sale
equipment and other associated costs
in completing the cycling space re-lay
across the store estate.
c.
In the current and prior periods,
costs were incurred in relation to the
investments in Universal, McConechy’s
and Tyres on the Drive.
• £0.6m (FY21) relating to professional
f.
fees in respect of the acquisition of
Universal;
• Tyres on the Drive acquisition costs
comprised £1.0m (FY20) principally
relating to the costs of dual running
Halfords Mobile Expert and Tyres on
the Drive, as well as the write-off of
the receivables balance due from
Tyres on the Drive related to Halfords
Mobile Expert prior to acquisition; and
• £0.9m (FY20) relating to professional
fees in respect of the acquisition of
McConechy’s.
d. During the prior year, the Group
incurred £0.2m in settling a court case.
In addition, a provision of £0.6m was
recognised in relation to the HMRC
audit relating to the national minimum
wage. The Group has continued to
work with HMRC and external advisors
during FY21 and a full data validation
exercise is underway to determine
the required Notice of Underpayment.
The exercise is in progress and based
on information available to date and
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Chief Financial Officer’s Review
IFRS 16
Underlying EBIT
Net finance costs
Underlying profit before tax
Net underlying items
Profit before tax
Underlying basic earnings per share
FY21 (52 weeks)
Pre-IFRS 16
£m
FY21 (52 weeks)
Post-IFRS 16
£m
Movement
£m
101.8
(5.5)
96.3
(37.3)
59.0
40.7p
114.5
(15.0)
99.5
(35.0)
64.5
41.7p
12.7
(9.5)
3.2
2.3
5.5
• Business Strategy
− Capability and capacity to effect
change
− Stakeholder support
− Value proposition
− Brand appeal and market share
• Financial
− Sustainable business model
• Compliance
− Regulatory and compliance
− Service quality
− Cyber security
• Operational
− Colleague engagement/culture
− Skills shortage
− IT infrastructure failure
− Critical physical infrastructure failure
(including supply chain disruption)
Specific risks associated with performance
include the success, or otherwise, of peak
trading periods (e.g. Christmas), as well
as weather-sensitive sales, particularly
within the Car Maintenance and Cycling
categories in the Retail business.
Loraine Woodhouse
Chief Financial Officer
16 June 2021
IFRS 16 has had the effect of increasing
profit by £5.5m. The two main drivers for
this being the increase in held over leases
which have decreased the depreciation
charge in comparison to the rental
payments, and the increased aging of the
lease portfolio which has led to a lower
interest charge in comparison to the rental
payments.
Cash Flow and Borrowings
Adjusted Operating Cash Flow was
£186.6m (FY20: £109.9m). After
acquisitions, taxation, capital expenditure
and net finance costs, Free Cash Flow of
£145.3m (FY20: £54.6m) was generated
in the year. Group Net Cash/(Debt) was
£58.1m (FY20: (£73.2m)). All these numbers
are pre-IFRS 16.
Within the cash flow is a working capital
inflow of approximately £42m. Within
this was approximately £20m of planned
and sustainable inventory reductions in
Retail and £36m which we anticipate will
reverse in FY22. The £36m is a result of
Retail inventories at year end which were
£14m lower than optimal due to the high
cycling demand, and year end creditors
worth £22m which saw our normal timing
differences alongside a VAT creditor that
was deferred from earlier in the year and
paid early in FY22.
Group net debt after IFRS 16 was £277.3m
(FY20: £479.8m).
Principal Risks and Uncertainties
The Board considers the assessment of
risk assessment and the identification of
mitigating actions and internal control to
be fundamental to achieving Halfords’
strategic corporate objectives. In the Annual
Report and Accounts, the Board sets
out what it considers to be the principal
commercial and financial risks to achieving
the Group’s objectives. The main areas of
potential risk and uncertainty in the balance
of the financial year are described in the
Strategic Report of the 2021 Annual Report
and Accounts. These include:
Capital Expenditure
Capital investment in the 52 weeks ended
2 April 2021 totalled £32.5m (FY20: £35.8m)
comprising £23.2m in Retail and £9.3m in
Autocentres. Within Retail, £6.0m (FY20:
£15.9m) was invested in stores. Additional
investments in Retail infrastructure included
a £13.1m investment in IT systems,
including the continued development of the
Group website.
The £9.3m (FY20: £4.8m) capital
expenditure in Autocentres principally
related to the replacement of garage
equipment and replacement of fixtures
and fittings, rebranding of McConechy’s
garages and further development of PACE,
our Garage Workflow System.
Inventories
Group inventory held as at the year-end
was £143.9m (FY20: £173.0m). Retail
inventory decreased to £134.3m (FY20:
£168.0m), reflecting reduced stock levels
and working capital efficiencies. The stock
levels within our cycling business were,
however, sub-optimal for much of the year
and, as such, the inventory reduction is
flattered. Inventory levels are likely to revert
to more normal levels in FY22.
Autocentres’ inventory was £9.6m (FY20:
£5.0m). The existing Autocentres business
model is such that only modest levels of
inventory are held, with most parts acquired
on an as-needed basis. The increase in
inventory related to the acquisition of tyre
stock within Universal.
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Our Principal Risks and Uncertainties
Board and Audit Committee
Overall oversight of risk management and internal control framework:
• Full annual review of effectiveness of risk management and internal control systems, corporate risk register, and risk appetite
undertaken by Audit Committee with assessment delivered to Board for approval.
• Update on changes to risk and internal control environment presented by Internal Audit to Audit Committee at each meeting.
Whistleblowing process
Regular KPI reporting
Regular management presentation to
Board and Audit Committee
Internal Audit Reports
Corporate Risk Register
Shops, Garages,
Distribution Centres
and Customer-Facing
Businesses
First Line Assurance
Operating within agreed policies
and procedures, for example:
• Delegated authorities
(‘How We Do Business’).
• Quality Standards.
• Retail guidelines (‘Retail
Basics’).
• Health and Safety policies.
• Colleague handbooks.
• Regular oversights.
• Performance monitoring.
• Regular management
presentation to Board and
Audit Committee.
Corporate
Functions
Internal
Audit
Second Line Assurance
Identify developments in
•
risk and internal control
environment.
• Develop and implement
strategy, policies, procedures
and controls to manage risk.
Third Line Assurance
•
Independently review quality
of key internal controls and
management assessment of
risk.
• Challenge management to
enhance control environment.
•
Internal audits.
• Maintain Corporate Risk
• Risk and internal control
analysis.
•
Internal audit reports.
• Corporate Risk Register.
Register.
Internal Audits
Risk and internal control analysis
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Emerging Risks
The evolution of risk is actively considered
at Board level and across the senior
management team. Emerging risk is seen
as an undefined risk that may eventually
develop to materially impact the business
in the future. The newly formed Risk
Committee now manages the identification
and progression of emerging risk with
further evaluation and discussion by the
Audit Committee. Climate change and
the electrification of vehicles continues to
be a developing area, representing both
an emerging risk and an opportunity. We
conduct horizon scanning with subject
matter experts, who contribute to the risk
management process with insight on key risk
themes such as economic, environmental,
technological, societal, and geopolitical.
Risk Appetite
The Board has defined risk appetite for
its principal risks based on the categories
of strategy, financial, compliance and
operational. By grouping risks into
categories, the Board is able to distinguish
the risk appetite for each of the principal
risks and whether mitigations are adequate.
Risk Management Framework
The Board has overall responsibility for the
management of risk and the identification of
principal risks that may affect the Group’s
strategic objectives. Specifically the Board
determines the nature and extent of risk
exposure that the business is willing to take in
pursuit of its strategy. The Audit Committee,
on behalf of the Board, has responsibility
for maintaining oversight of the Group’s
framework for risk management.
Whilst ultimate responsibility for the
oversight of risk management rests
with the Board, the effective day-to-day
management or risk is embedded within
the business through a layered assurance
approach.
During the year, additional rigour was
added into the overall management of risk
through the creation of a Risk Committee.
This Committee, comprising members of
the Executive Team, systematically reviews
existing risks, focuses on mitigating actions
and identifies emerging risks. Changes to
the risk profile of the business, alongside
significant and emerging risks, are
escalated to the Audit Committee, which
routinely receives deep dive analysis and
regulatory updates on key risks. Please see
page 117 for details of Audit Committee
activities during the year.
Principal Risks
The Audit Committee reviews the
effectiveness of the risk management
processes and monitors the assessment
of the Group’s principal risks, reflecting
on external factors and their impact on
strategic priorities. Each principal risk has
an Executive owner and is included within
a Corporate Risk Register, which is subject
to a ‘top-down’ review. Operational risk
registers are maintained to provide greater
granularity, a ‘bottom-up’ perspective and a
further means to identify emerging risks.
Principal risk changes:
• COVID-19 is a present threat but is
no longer regarded as a principal risk
having crystallised during the year.
Residual risk remains but we have
elected to treat this as an elevation of
our existing principal risks, many of
which continue to be impacted by the
pandemic.
• Brexit is no longer a principal risk
having been concluded during the year.
Any residual impact of the agreement is
monitored through the day-to-day risk
management process.
COVID-19
COVID-19 had a significant impact across all
sectors throughout 2020 with the imposition
of lockdowns and travel restrictions disrupting
global supply chains and changing consumer
behaviour. Halfords responded immediately
to the pandemic, with the fast set up of daily
COVID-19 ‘war rooms’ at senior management
and Executive level. All risks, whether health
and safety related, financial, commercial or
operational, were quickly identified, managed
and ultimately mitigated.
The Group was able to limit the impact of
the pandemic by continuing to trade safely
as an essential retailer and by making any
necessary proposition changes, such as
enhancing our online offer, to respond
to changes in customer behaviour. The
management of financial risks and liquidity
was strengthened to protect the business
and deliver a positive result for the year.
Throughout this period, risk management was
at the forefront of our response, designed to
protect both customers and colleagues.
The advancement of the vaccine
programme and the easing of lockdown
restrictions has enabled operations at
stores and centres to prepare for a return
to pre COVID-19 levels of customer traffic.
The risk of another rise in COVID-19
infections posed by virus variants and a
return to pandemic restrictions is under
constant review, and if necessary, our
proven response plan can be rapidly
redeployed.
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Our Principal Risks and Uncertainties
Capability and Capacity to Effect Change
If we do not have sufficient capacity and capability (in terms of our people, processes, and systems) to successfully implement the changes
necessary across the business, we will not realise the expected benefits of our strategy and the business will not be sustainable.
Current Mitigation
Focus in 2022
• The appointment of a Transformation Director and a strengthened
• Continue to align our Transformation Plan with the key
team with emphasis on project management enabled progress to be
maintained during a challenging period for capital investment. The
successful acquisition of the The Universal Tyre Company (Deptford)
Limited (“Universal”) in March 2021 demonstrated our intent and ability
to grow our services business.
• The continued advancement of our change programme is managed
through a Transformation Board, providing the necessary governance
for delivery of the strategy. The Transformation Board ensures there
is a robust approval process for each project, allocates resource and
monitors progress. Project managers are in place within the business
to whom projects can be assigned and this has been supplemented by
specialist resource to boost capability. In affecting change, Halfords
is requiring all contributing colleagues to observe the principles of
Responsible, Accountable, Consulted, and Informed (“RACI”).
objectives of our corporate strategy.
• Closely monitor progress on individual programmes,
realigning resources where necessary.
• Specifically, within the technology and digital teams,
address operating model shortcomings to enable
faster execution.
• Complete organisational design changes to align with
the strategic focus of the business.
Stakeholder Support
If we fail to maintain stakeholder confidence in our strategy, they may withdraw their support.
Current Mitigation
Focus in 2022
• Throughout the year, we demonstrated progress in the execution of our
strategy, building confidence in external and internal stakeholders. Our
share price responded positively, Customer NPS improved, and our
internal engagement scores remained high despite the disruption caused
by COVID-19.
• Maintain progress on the delivery of our strategic
objectives.
• Address colleague engagement challenges through a
regular cycle of survey and review.
• Proactive investor relations programme of events and
• Engagement continued throughout the year with customers, investors
communication.
and colleagues, keeping them informed of progress against our strategic
plans, changing customer propositions as well as the challenges
presented by the pandemic.
Value Proposition
Customers are not persuaded by our value proposition and we lose market share to online retailers and discounters. Purely competing on price
leads to a diminution of financial returns.
Current Mitigation
Focus in 2022
• To differentiate ourselves in a competitive retail market, our vision is to
consolidate Halfords as a super specialist in motoring and cycling. Our
strategy emphasises the importance of creating value for the customer
by delivering services alongside the sale of a product. Progress
continued through the development of new services and greater
accessibility through the growth of our Cycle-to-Work programme,
financial products, and Halfords Mobile Expert business.
• Optimisation of our Group website with payment online functionality
was further enhanced by investment in our fulfilment proposition and
enablement of cross-shop opportunities, aligned with more targeted
promotions, designed to appeal to customers.
• Launch of a Halfords Motoring loyalty programme,
designed to reward loyal customers and inspire a
greater proportion to shop across the Group.
• Further investment in pricing of motoring products to
deliver greater value for customers.
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Brand Appeal and Market Share
If we continue to lose brand relevance, we will be unable to maintain and grow our customer base and build market share.
Current Mitigation
Focus in 2022
• Building on a positive response to our status as an essential retailer,
• Continued investment in a Group services marketing
we have grown awareness of our HME and garage services. Customer
loyalty and satisfaction has achieved record levels for Trust Pilot and
Google scores for the Group.
•
Improvement of our cycling proposition, allied with better than market
availability and support for the cycle voucher scheme, has strengthened
market share.
campaign.
• A greater focus on E-bike and E-scooter product
sales, alongside a more general electric vehicle
servicing strategy.
•
•
Investment in fair pricing for motoring products.
Improve climate change credentials with ESG targets
defined.
Sustainable Business Model
Changes in the UK economy (including COVID-19, consumer confidence, tax and duty rates and the value of the Pound) could materially
impact our revenue and/or costs, and therefore the profitability of the business. Unless we can reduce our exposure to these economic
variables (e.g. our foreign exchange exposure), and improve our ability to take action quickly on our margins and operating costs, we will not
create a sustainable business model.
Current Mitigation
Focus in 2022
• Significant actions on cost and margin taken in FY21 have collectively
built financial resilience, including a successful project to reduce our
fixed cost base. A refinancing secured our funding for a three-year
period.
• A strategic focus on the growth of services will build more stable revenue
streams going forward, lessening the Group’s exposure to product
lifecycles and trends.
• The business has a hedging programme in place and is following a
working capital reduction programme, targeted at reducing stock holding
and aligning trade creditor terms.
• Maintain focus on reducing underlying costs, e.g.
rental costs through property renegotiations.
• Continuing to focus on margin improvement,
eliminating unnecessary cost through targeted
efficiencies and scale benefits.
Regulatory and Compliance
A failure to adhere to our legal and/or regulatory obligations for some or all of the Group’s activities leads to an inability to meet our
responsibilities to stakeholders and/or the imposition of financial penalties, placing a strain or financial cost on the business.
Current Mitigation
Focus in 2022
• The senior leadership team communicates tone from the top to provide
• Review and improvement of policies supported by
guidance to colleagues on all policy commitments.
training programmes for colleagues.
• A new health and safety structure was implemented with strong
• Regular training and information provided through
application of COVID-19 secure controls applied across all function of
the business.
user-friendly channels.
• Deep-dive analysis into specific risk areas carried out
• An external review of financial services compliance was undertaken in
on behalf of the Executive Risk Committee.
the year, allowing a targeted strategy of improvement.
• Regular horizon scanning is undertaken to capture new regulations and
requirements.
Key:
Risk increasing
Risk decreasing
No risk movement
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Our Principal Risks and Uncertainties
Service Quality
The service we provide to customers may fail to meet regulatory/safety requirements resulting in harm to customer and/or legal/
financial penalty.
Current Mitigation
Focus in 2022
• All colleagues are provided with dedicated training and adhere to
established quality control and safety procedures, with compliance
audits by management. We also have a dedicated compliance team
monitoring our regulated activities.
•
In Autocentres, we have introduced PACE, our digital operating platform,
enabling increased workflow, productivity, and quality assurance. A
new store operating model is also now in place with multi-skilled retail
colleagues operating across all departments.
• Store calls are now managed through a centralised contact centre,
improving response times and convenience to customers.
• Full roll-out of new store operating model, with
additional skills training completed for all retail
colleagues.
•
Introduction of in-store specialists, focused on
delivering excellence in our different service offerings.
• Ongoing programme of proactive store maintenance
and safety checks.
Cyber Security
If we fail to sufficiently detect, monitor, or respond to cyber-attacks against our systems they may result in disruption of service, compromise of
sensitive data, financial loss and reputational damage.
Current Mitigation
Focus in 2022
• Our information security team working with our security partner, TCS,
• Launch of a fully managed security operations centre,
provide valuable support by managing vulnerability scans and email and
website security.
increasing visibility and decreasing response time to
incidents.
• A perpetual education and awareness campaign is provided to all
colleagues. Regular briefings promote an understanding of the risks to
our data and the benefits of good security practices.
• The Audit Committee is regularly briefed by senior IT management on
the business’ IT security framework.
Colleague Engagement/Culture
Our employment model may not be sufficiently attractive to recruit and retain the talent that we need.
Current Mitigation
Focus in 2022
• Our status as an essential retailer during the pandemic provided a strong
sense of purpose and enhanced the culture and identity of Halfords as a
services business.
• Early in the year, we launched our new colleague values and behaviours
framework and appointed a colleague experience manager to focus on
engagement. An annual engagement survey provides us with reports at
team level. We have an environment that encourages colleagues to feed
back to us about how we can make Halfords an even better place to
work.
• During the year, a hardship fund was founded for the benefit of our
colleagues to provide support and assistance where needed. Equally, a
bonus scheme was established for those colleagues working in a front
line role during the early period of the pandemic.
• Regular survey activity to identify areas important to
colleagues in driving continued engagement.
• Ongoing wellbeing programme, providing ideas,
support and tips for a better work/life balance.
•
Identification and development of top talent, allowing
us to develop colleagues to fulfil their potential and, in
turn, strengthen our succession pipeline.
Key:
Risk increasing
Risk decreasing
No risk movement
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Skills Shortage
We may be unable to recruit, retain and develop enough people to have the different mix of skills that we need at all levels across the business,
in the near and longer term.
Current Mitigation
Focus in 2022
• We have a strategy that relies on attracting and retaining colleagues who
can inspire and support our customers and encourage them to build a
lifetime relationship with the brand.
• Material investment programme in skills training to
enhance colleague capability and, in turn, improve the
customer experience across our touch points.
• Our recruitment website highlights the importance of the Halfords
behaviours and details the skills and experience required of our
colleagues. New starters are given a full induction and all colleagues
receive a performance development review. We develop colleagues via
the application of a talent matrix, which supports them in fulfilling their
potential and enabling succession management.
• As the restrictions associated with COVID-19 ease,
develop a revised working model for our Support
Centre colleagues, balancing a desire for greater
flexibility with the connection and creativity that comes
from being in the right office environment.
• Extend our eLearning programme for the benefit of all
• Training and development are a fundamental part of our business and
a great attraction for new applicants. We apply a targeted approach to
further enhance skill levels for centres as we do with stores, by mapping
against the optimal skills mix.
colleagues.
IT Infrastructure Failure
Failure in our IT system(s) may cause significant disruption to, or prevention of, normal business-as-usual activities
Current Mitigation
Focus in 2022
• Extensive controls are in place to maintain the integrity of our systems
• Continue progression towards a fully cloud-based
and to ensure that systems changes are implemented in a controlled
manner. We have resilient infrastructure in place for remote working
colleagues to access Halfords hosted applications, such as SAP.
hosting structure with a transfer of risk to cloud-based
service providers who can maintain higher levels of
contracted availability.
• Halfords’ key trading systems are hosted securely within data centres
operated by a specialist company and in specialist cloud services
operated by Microsoft. These systems are supported by disaster
recovery arrangements, including comprehensive backup and patching
strategies. IT recovery processes are tested regularly.
• Deep-dive analysis into targeted areas of
infrastructure, managed through the Risk Committee.
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Our Principal Risks and Uncertainties
Critical Physical Infrastructure Failure (including supply chain disruption)
Severe damage or failure of physical infrastructure may disrupt our supply chain and/or business as usual activities and prevent the fulfilment of
customer orders.
Current Mitigation
Focus in 2022
• The need to respond to the pandemic in FY21 has tested our business
continuity plans and given us confidence in alternative supply chain
solutions and resilience.
• We maintain security and protection measures at our distribution centres
and have business continuity plans to manage any incidents that may
occur. Our logistics operations are overseen by a dedicated warehouse
and logistics team with extensive experience.
• Programme of development for warehouse and duty
management systems.
• Enhanced flexibility across the supplier base, using
a wider range of suppliers, where possible, and
additional providers of freight and transport solutions.
• Revised programme of supplier management for all
key suppliers.
• Extensive research is conducted into quality and ethics before the
Group procures products from any new country or supplier. A strong
management team in the Far East, with an understanding of local
culture, market regulations and risks, maintains close relationships with
both our suppliers and logistics partners to ensure that disruption to
production and supply are managed appropriately.
• Ongoing dialogue with existing and new suppliers
to build a joint programme of environmental
sustainability.
Key:
Risk increasing
Risk decreasing
No risk movement
Going Concern
In determining the appropriate basis of
preparation of the financial statements for
the year ended 2 April 2021, the Directors
are required to consider whether the Group
can continue in operational existence for
the foreseeable future. The Board has
concluded that it is appropriate to adopt the
Going Concern basis, having undertaken an
assessment of the financial forecasts.
The Group has significantly outperformed
the scenarios reviewed as part of the going
concern assessment in the Annual Report
and Accounts to 3 April 2020.
Management has updated the assessment
of going concern, which included reviewing
financial forecasts and projections to
30 June 2022. Within these financial
projections, management reviewed profit
and net cash flow, and tested financial
covenants in the period. No issues were
found.
The financial forecasts have been stress
tested to determine the required sales
decline versus the Going Concern scenario
before the covenant conditions were
breached. This assessment also included
variable and other cost saving measures the
Group would employ in this scenario and
showed that sales would have to reduce by
(24.0%) before the first covenant condition
is broken. Management believe that this is
a significant material event which is highly
unlikely to occur in the next 15 months.
If sales were to reduce by (24%), then
further actions could be taken by
management to prevent the breach. The key
mitigating action would be to halt strategic
investment in FY22, which would provide
further headroom of c.5% of sales decline.
The Audit Committee recently reviewed the
corporate risk register and confirmed that
it gave no reason not to adopt the Going
Concern principle.
The Group ended the year in a positive net
debt position pre-IFRS 16 of £58.1m and
continues to be cash generative. The Group
has a revolving credit facility of £180m
at the date of approval of these financial
statements, which expires on 3 December
2023, and has no other debt or facilities.
The Board has a reasonable expectation
that the Group and Company will be able to
continue in operation and meet its liabilities
as they fall due; retain sufficient available
cash and not breach any covenants under
any drawn facilities over the remaining term
of the debt facility. They do not consider
there to be a material uncertainty around
the Group or Company’s ability to continue
as a Going Concern.
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Strategic Report
revenue reduction per annum across
the next five years, and still remain
within existing facilities and covenants.
The downside scenario makes an
assumption on variable cost savings,
assuming that costs equating to 15% of
sales, or £54m per annum, are removed.
The downside scenario also incorporates
a further £55m of fixed and semi fixed
costs which would be saved annually
were this sales scenario to materialise,
with savings across a number of
business areas including performance
related incentives, transformation
programme investment and head office
costs. Based on their assessment of the
plan, the Directors believe a downside
sales scenario of this magnitude and
duration is unlikely to materialise. The
Group’s revolving credit facility was
re-negotiated during the year, the new
facility was set up from 4 December
2020 for three years, with two options to
extend by a further year.
Viability statement
Based on this review, the Directors confirm
that they have a reasonable expectation
that the Group will continue to meet its
liabilities as they fall due over the three-
year period.
Viability Statement
In accordance with the Corporate
Governance Code, the Directors have
assessed the viability of the Company
over a three-year period to 29 March 2024.
The Directors believe this period to be
appropriate as the Company’s strategic
planning encompasses this period, and
because it is a reasonable period over
which the impact of key risks can be
considered within a fast-moving retail
business. This period is consistent with the
approach last year, and with many other
retailers’ disclosures.
The Directors have assessed the prospects
of the Group by reference to its current
financial position, its recent and historical
financial performance, its business model
and strategy, and the principal risks and
mitigating factors described on pages 66
to 72. The Board regularly reviews financial
headroom and cash flow projections to
ensure that the business retains sufficient
liquidity to meet its liabilities in full as they
fall due.
The Group is, as results demonstrate,
financially strong, historically generating
cash and profit each year, which was true
throughout the year ended 2 April 2021
and is expected to continue. Actions taken
during the year have further strengthened
the cash position of the business, resulting
in a positive net debt position pre-IFRS 16
of £58.1m vs. net debt of £(73.2)m as at
3 April 2020. The business has materially
outperformed the scenarios developed as
part of the COVID-19 modelling during the
year end close process last year. As an
essential retailer and services provider, the
Group was able to remain open throughout
the lockdown periods starting in March
2020. The Group was, and will continue to
be, uniquely positioned to keep the UK’s
cars and bikes on the road.
In making this viability statement, the
Directors have reviewed the overall
resilience of the Group and have specifically
considered:
• The likelihood and impact of the
principal risks. At a recent review
by the Audit Committee, Directors
agreed that ‘the risk register identifies
no matters that may jeopardise a
reasonable expectation that the
Company will be able to continue in
operation and meet its liabilities as they
fall due in the reasonably foreseeable
future (i.e. three years)’. The Audit
Committee’s review included a robust
assessment of the impact, likelihood
and management of principal risks
facing the Group, including those
risks that could threaten its business
model, future performance, solvency,
liquidity or day-to-day operations
and existence. Mitigating actions that
would serve to protect the sustainability
of the business model include the
continued focus on reducing underlying
costs (e.g. rental costs through
property renegotiations) and margin
improvement, eliminating unnecessary
cost through targeted efficiencies and
scale benefits.
• Financial analysis and forecasts. The
Board recently reviewed the five-year
financial plan, including the current
financial position and performance,
cash flow projections, dividend strategy,
funding requirements and funding
facilities. Sensitivity and stress testing
was subsequently applied to the
financial plan to determine the extent
to which sales and cash would need to
deteriorate before breaching the financial
covenants embedded within the Group’s
bank facilities. The testing indicated
that the business could experience a
sustained reduction in sales of (23%),
amounting to an average of £350m
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Job Number 15 July 2021 5:33 pm Proof NumberOur GovernanceContentsBoard of Directors76Directors’ Report78Corporate Governance Report84Nomination Committee Report110ESG Committee Report114Audit Committee Report116Remuneration Committee Report122– Directors’ Remuneration Policy Summary124– Directors’ Remuneration Report125Directors’ Responsibilities13630441-Halfords-Annual-Report-2021-Governance.indd 7430441-Halfords-Annual-Report-2021-Governance.indd 7415/07/2021 19:14:5515/07/2021 19:14:55 Job Number 15 July 2021 5:33 pm Proof NumberOur Governance30441-Halfords-Annual-Report-2021-Governance.indd 7530441-Halfords-Annual-Report-2021-Governance.indd 7515/07/2021 19:14:5615/07/2021 19:14:56 Board of Directors
Keith Williams N
Chair
Graham Stapleton
Chief Executive Officer
Loraine Woodhouse
Chief Financial Officer
Helen Jones A E N R EV
Jill Caseberry A N R E
Tom Singer A N R E
Senior Independent Director
Independent Non-Executive Director
Independent Non-Executive Director
Current role
Appointed Chair of the Company and of the
Nomination Committee on 24 July 2018.
Current role
Graham was appointed Chief Executive
Officer (“CEO”) on 15 January 2018.
Current role
Chief Financial Officer (“CFO”) since
1 November 2018.
Additional roles held
Keith is the Non-Executive Chair of Royal
Mail Group (previously interim Executive
Chair). Keith is a qualified Chartered
Accountant.
Past roles
Keith was formerly a Non-Executive
Director and Deputy Chair of John Lewis,
a Non-Executive Director of Aviva plc,
and Chief Executive Officer and then
Executive Chair of British Airways, having
previously been at Boots, Reckitt and
Colman and Apple computer inc. Keith was
the independent Chair of the government-
supported Rail Review.
Key strengths
Keith brings extensive leadership and plc
board experience. He is a highly regarded
business leader with a proven record in
retail and deep experience in relevant areas
such as customer service and digital.
Additional roles held
Graham is a Non-Executive Director of
The Magic Bean Co. Limited.
Additional roles held
Loraine is a Non-Executive Director of
The British Land Company plc.
Past roles
Previously, Graham was CEO of Dixons
Carphone plc’s software business,
Honeybee. Prior to that he was CEO of
Dixons Carphone’s Connected World
Services Division from 2015 to 2017
and CEO of Carphone Warehouse UK &
Ireland from 2013 to 2015. Graham’s early
career covered senior leadership roles in
Kingfisher plc from 2001 to 2005 and Marks
and Spencer plc from 1994 to 2001, prior
to which Graham set up and ran his own
business for several years. Graham was a
Trustee of the Make-A-Wish charity.
Key strengths
Graham is an outstanding business leader
and brings extensive skills and experience
to the plc Board.
Past roles
Prior to joining Halfords, Loraine spent five
years in senior finance roles within the John
Lewis Partnership. In 2014 Loraine was
appointed Acting Group Finance Director
and then, subsequently, Finance Director of
Waitrose. Prior to that, Loraine was Chief
Financial Officer of Hobbs, Finance Director
of Capital Shopping Centres Limited (now
Intu plc) and Finance Director of Costa
Coffee Limited. Loraine’s early career
included finance and investor relations
roles at Kingfisher plc.
Key strengths
Loraine has extensive experience across
all finance disciplines and has worked
within many different sectors, latterly
focusing specifically on consumer service
businesses.
Committee Membership
A Audit Committee
E ESG Committee
EV Employee Voice Director
R Remuneration Committee
N Nomination Committee
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Current role
Current role
Current role
Non-Executive Director since 1 March
Non-Executive Director and Remuneration
Non-Executive Director since 16 September
2014 and Senior Independent Director
Committee Chair since 1 March 2019.
2020, and Chair of the Audit Committee
from 15 September 2020; Chair of the
Environmental, Social and Governance
Committee since 7 December 2015 and
Employee Voice Director since 1 May 2019.
Additional roles held
since 1 January 2021.
Jill is currently a Non-Executive Director,
Additional roles held
Remuneration Committee Chair and
Tom is a Non-Executive Director of
member of the Audit and Nomination
Mediclinic International plc.
Additional roles held
Committees of Bellway plc, a Non-
Helen is a Non-Executive Director and
Executive Director and Remuneration
Past roles
Chair of the Remuneration Committee and
Committee member of C&C Group plc and
a member of the Audit Committee of Fuller,
Bakkavor Group plc, and a Non-Executive
Smith & Turner plc and Virgin Wines UK plc,
Director and member of the Remuneration,
a Non-Executive Director and member of
Audit and Nomination Committees of
the Audit Committee of Premier Foods plc
St Austell Brewery.
Tom was the Senior Independent Director
and Chair of the Audit and Remuneration
Committees at DP Eurasia NV and
Chair of the Audit Committee at Liberty
Living. Previously, he served as CFO of
InterContinental Hotels Group plc, Group
Finance Director of British United Provident
and a Director of Hamsard 3145 Limited.
Helen is also a member of the Supervisory
Board of Directors of Ben and Jerry’s and a
Board member of the Toast Ale charity.
Past roles
Past roles
Previously, Jill was Non-Executive Director,
Association (“BUPA”), CFO and Chief
Remuneration Committee Chair and a
Operating Officer of William Hill plc and
member of the Audit and Nomination
Finance Director of Moss Bros plc, having
Committees of Northgate Plc. During her
started his career in professional services
Previously, Helen was a member of
executive career Jill gained extensive
and spending a total of 12 years at Price
the Supervisory Board and the Audit
sales, marketing and general management
Waterhouse and McKinsey.
Committee for Vapiano S.E. Prior to that
experience across a number of blue chip
Helen was the CEO of the Zizzi Restaurants
companies including Mars, PepsiCo and
Key strengths
Tom brings extensive experience of strategy
development, corporate governance and
numerous finance disciplines.
group and was also responsible for
Premier Foods. She also founded a soft
successfully launching the Ben & Jerry’s
drink company and established a sales
brand in the UK and Europe. Helen
and marketing consultancy.
previously held a senior executive role at
Key strengths
Jill brings extensive leadership experience
from senior sales and marketing roles in
Helen brings valuable and relevant
consumer goods businesses.
Caffé Nero.
Key strengths
operations, marketing and branding
experience in consumer-focused
businesses.
Governance
Keith Williams N
Chair
Graham Stapleton
Chief Executive Officer
Loraine Woodhouse
Chief Financial Officer
Helen Jones A E N R EV
Senior Independent Director
Jill Caseberry A N R E
Independent Non-Executive Director
Tom Singer A N R E
Independent Non-Executive Director
Current role
Current role
Current role
Appointed Chair of the Company and of the
Graham was appointed Chief Executive
Chief Financial Officer (“CFO”) since
Nomination Committee on 24 July 2018.
Officer (“CEO”) on 15 January 2018.
1 November 2018.
Additional roles held
Additional roles held
Additional roles held
Keith is the Non-Executive Chair of Royal
Graham is a Non-Executive Director of
Loraine is a Non-Executive Director of
Mail Group (previously interim Executive
The Magic Bean Co. Limited.
The British Land Company plc.
Chair). Keith is a qualified Chartered
Accountant.
Past roles
Past roles
Past roles
Previously, Graham was CEO of Dixons
Prior to joining Halfords, Loraine spent five
Carphone plc’s software business,
years in senior finance roles within the John
Keith was formerly a Non-Executive
Honeybee. Prior to that he was CEO of
Lewis Partnership. In 2014 Loraine was
Director and Deputy Chair of John Lewis,
Dixons Carphone’s Connected World
appointed Acting Group Finance Director
a Non-Executive Director of Aviva plc,
Services Division from 2015 to 2017
and then, subsequently, Finance Director of
and Chief Executive Officer and then
and CEO of Carphone Warehouse UK &
Waitrose. Prior to that, Loraine was Chief
Executive Chair of British Airways, having
Ireland from 2013 to 2015. Graham’s early
Financial Officer of Hobbs, Finance Director
previously been at Boots, Reckitt and
career covered senior leadership roles in
of Capital Shopping Centres Limited (now
Colman and Apple computer inc. Keith was
Kingfisher plc from 2001 to 2005 and Marks
Intu plc) and Finance Director of Costa
the independent Chair of the government-
and Spencer plc from 1994 to 2001, prior
Coffee Limited. Loraine’s early career
supported Rail Review.
to which Graham set up and ran his own
included finance and investor relations
Key strengths
Keith brings extensive leadership and plc
board experience. He is a highly regarded
Key strengths
business for several years. Graham was a
roles at Kingfisher plc.
Trustee of the Make-A-Wish charity.
Key strengths
Loraine has extensive experience across
business leader with a proven record in
Graham is an outstanding business leader
all finance disciplines and has worked
retail and deep experience in relevant areas
and brings extensive skills and experience
within many different sectors, latterly
such as customer service and digital.
to the plc Board.
focusing specifically on consumer service
businesses.
Current role
Non-Executive Director since 1 March
2014 and Senior Independent Director
from 15 September 2020; Chair of the
Environmental, Social and Governance
Committee since 7 December 2015 and
Employee Voice Director since 1 May 2019.
Additional roles held
Helen is a Non-Executive Director and
Chair of the Remuneration Committee and
a member of the Audit Committee of Fuller,
Smith & Turner plc and Virgin Wines UK plc,
a Non-Executive Director and member of
the Audit Committee of Premier Foods plc
and a Director of Hamsard 3145 Limited.
Helen is also a member of the Supervisory
Board of Directors of Ben and Jerry’s and a
Board member of the Toast Ale charity.
Past roles
Previously, Helen was a member of
the Supervisory Board and the Audit
Committee for Vapiano S.E. Prior to that
Helen was the CEO of the Zizzi Restaurants
group and was also responsible for
successfully launching the Ben & Jerry’s
brand in the UK and Europe. Helen
previously held a senior executive role at
Caffé Nero.
Key strengths
Helen brings valuable and relevant
operations, marketing and branding
experience in consumer-focused
businesses.
Current role
Non-Executive Director and Remuneration
Committee Chair since 1 March 2019.
Additional roles held
Jill is currently a Non-Executive Director,
Remuneration Committee Chair and
member of the Audit and Nomination
Committees of Bellway plc, a Non-
Executive Director and Remuneration
Committee member of C&C Group plc and
Bakkavor Group plc, and a Non-Executive
Director and member of the Remuneration,
Audit and Nomination Committees of
St Austell Brewery.
Past roles
Previously, Jill was Non-Executive Director,
Remuneration Committee Chair and a
member of the Audit and Nomination
Committees of Northgate Plc. During her
executive career Jill gained extensive
sales, marketing and general management
experience across a number of blue chip
companies including Mars, PepsiCo and
Premier Foods. She also founded a soft
drink company and established a sales
and marketing consultancy.
Key strengths
Jill brings extensive leadership experience
from senior sales and marketing roles in
consumer goods businesses.
Current role
Non-Executive Director since 16 September
2020, and Chair of the Audit Committee
since 1 January 2021.
Additional roles held
Tom is a Non-Executive Director of
Mediclinic International plc.
Past roles
Tom was the Senior Independent Director
and Chair of the Audit and Remuneration
Committees at DP Eurasia NV and
Chair of the Audit Committee at Liberty
Living. Previously, he served as CFO of
InterContinental Hotels Group plc, Group
Finance Director of British United Provident
Association (“BUPA”), CFO and Chief
Operating Officer of William Hill plc and
Finance Director of Moss Bros plc, having
started his career in professional services
and spending a total of 12 years at Price
Waterhouse and McKinsey.
Key strengths
Tom brings extensive experience of strategy
development, corporate governance and
numerous finance disciplines.
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77
Directors’ Report
The Directors present their report and the audited financial statements of Halfords Group plc (the “Company”) together with its subsidiary
undertakings (the “Group”) for the period ended 2 April 2021.
Halfords Group plc
Registered Number
Registered Office Address
Country of Incorporation
Type
04457314
Icknield Street Drive, Washford West, Redditch, Worcestershire, B98 0DE
England and Wales
Public Limited Company
Additional Disclosure
Other information that is relevant to this report and which is incorporated by reference, including information required in accordance with
the UK Companies Act 2006 and Listing Rule 9.8.4(R), can be located as follows:
Topic
Modern Slavery Statement
Appointment and removal of Directors
Articles of Association
Auditor
Audit Committee Report
Authority to issue or purchase shares
Board of Directors
Board effectiveness and leadership: role and composition of the
Board and Committees; meeting attendance; skills and experience;
independence; diversity and inclusion; induction and development;
evaluation; Directors and their other interests; and Board Committees
Branches outside of the UK
Charitable donations
Colleague engagement
Colleagues’ involvement; training, diversity and inclusion;
and disability
Community
Compensation for loss of office
Creditor payment policy
Culture
Directors’ biographies
Directors’ indemnities
Directors’ interests
Directors’ Remuneration Report and Remuneration Policy Summary Directors’ Remuneration Report
Directors’ Responsibilities Statement
Diversity and Inclusion
Energy and Carbon Emissions
Financial instruments
Future developments of the business
Financial position of the Group, its cash flows, liquidity position
and borrowing facilities
Report
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Audit Committee Report
Directors’ Report
Directors’ Report
Corporate Governance Report
Directors’ Report
Strategic Report: Our ESG Strategy
Strategic Report: Our ESG Strategy
Corporate Governance Report
Strategic Report: Our ESG Strategy
Corporate Governance Report
Nomination Committee Report
Strategic Report: Our ESG Strategy
Directors’ Report
Directors’ Report
Corporate Governance Report
Board of Directors
Directors’ Report
Directors’ Report
Directors’ Responsibilities Statement
Strategic Report: Our ESG Strategy
Corporate Governance Report
Nomination Committee Report
Strategic Report: Our ESG Strategy
Note 22 to the Group Financial Statements
Chief Executive Officer’s Statement
Chief Financial Officer’s Review
Page
82
80
82
82
116
80
80
84-108
82
52
51
95
43, 47-48, 51
105
113
52
82
82
94
76
81
80
122
136
47
105
113
45
180
18
58
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Governance
Report
Strategic Report: Our ESG Strategy
Principal Risks and Uncertainties
Corporate Governance Report
Directors’ Report
Independent Auditor’s Report
Corporate Governance Report
Directors’ Remuneration Report
Nomination Committee Report
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Strategic Report:
Corporate Governance Report
Directors’ Report
Note 23 to the Group Financial Statements
Directors’ Report
Note 4 to the Company Financial Statements
Strategic Report
Corporate Governance Report
Strategic Report
Strategic Report
Directors’ Report
Directors’ Report
Page
47
72
84
83
140
108
125-135
110-113
82
80
80
80
81
30
96
81
186
81
193
28
86
18
73
81
80
Topic
Gender
Going Concern
Governance
Important events since year end
Independent Auditor
Internal control and risk management
Long-term incentive schemes
Nomination Committee Report
Political donations
Powers of the Directors
Principal activities
Re-election of Directors
Restrictions on transfer of securities
Section 172 Statement
Share capital
Significant shareholders
Subsidiary and associated undertakings
Stakeholders
Statement of Corporate Governance
Strategic Report
Viability statement
Voting rights
Waiver of dividends
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79
Directors’ Report
UK Corporate Governance Code
The Company has applied the principles
of, and complied with, the provisions of the
2018 UK Corporate Governance Code (the
“Code”) throughout the year.
At the outset of the COVID-19 pandemic
in 2020, it was agreed that David Adams,
the then Senior Independent Director,
would stay in office until the end of 2020,
to ensure an orderly handover to the newly
appointed Non-Executive Director. The full
reasoning for this decision is detailed on
page 100. In the previous, period the Board
recognised that it had assessed that David
had ceased to be regarded as independent
for the purposes of the Code, and that
his extended tenure until December 2020
had created a technical breach of the
Code’s recommendation. However, the
Board agreed that this short-term situation
was justified in the unprecedented and
challenging circumstances which had been
brought about by the pandemic.
Principal Activities
The principal activities of the Group are:
the retailing and provision of motoring and
cycling products and services; and auto
servicing, maintenance and repairs through
garages and mobile vans. The principal
activity of the Company is that of a holding
company. The Company’s registrar is Link
Group, 10th Floor, Central Square, 29
Wellington Street, Leeds, LS1 4DL.
Profits and Dividends
The Group’s results for the year are set out in
the Consolidated Income Statement on page
148. The profit before tax was £64.5m (2020:
£19.4m) and the profit after tax amounted
to £53.2m (2020: £17.5m). The Board
proposed that a final dividend of 5.0 pence
per ordinary share to be paid on Friday 17
September 2021 to shareholders whose
names are on the register of members at the
close of business on Friday 13 August 2021.
As announced on 18 November 2020, the
Board did not propose an interim dividend in
respect of the period to 2 October 2020.
Computershare Trustees (Jersey) Limited,
trustee of the Halfords Employees’
Share Trust, has waived its entitlement to
dividends.
Performance Monitoring
The delivery of the Group’s strategic
objectives is monitored by the Board
through Key Performance Indicators
(“KPIs”) and periodic review of various
aspects of the Group’s operations. The
Group considers that the KPIs listed on
pages 54 to 56 are appropriate measures to
assess the delivery of the Group’s Strategy.
Directors
The following were Directors of the
Company during the period ended 2 April
2021 and at the date of this report:
• Keith Williams
• Graham Stapleton
• Loraine Woodhouse
• Helen Jones
• Jill Caseberry
• Tom Singer (appointed on
16 September 2020)
• David Adams was also a Director
during the period and resigned on
31 December 2020
In accordance with the Company’s Articles
of Association and the UK Corporate
Governance Code guidelines, all those
persons holding office as a Director of the
Company on 2 April 2021 will retire and
offer themselves for re-election at the 2021
Annual General Meeting, with the exception
of Tom Singer who was appointed on 16
September 2020. Tom will, instead, stand for
election for the first time at the 2021 AGM.
The Service Agreements of the Executive
Directors and the Letters of Appointment of
the Non-Executive Directors are available
for inspection at the registered office of the
Company. A summary of these documents
is also included in the annual Directors’
Remuneration Report on pages 131 and 132.
Appointment and Removal
of a Director
A Director may be appointed by an ordinary
resolution of shareholders in a general
meeting following recommendation by the
Nomination Committee in accordance with
its Terms of Reference, as approved by
the Board or by a member (or members)
entitled to vote at such a meeting.
Alternatively, a Director may be appointed
following retirement by rotation if the
Director chooses to seek re-election
at a general meeting. In addition, the
Directors may appoint a Director to fill a
vacancy or act as an additional Director,
provided that the individual retires at the
next Annual General Meeting and, if they
are to continue, they offer themselves for
election. A Director may be removed by the
Company in circumstances set out in the
Company’s Articles of Association or by a
special resolution of the Company.
Powers of the Directors
Subject to the Articles, the Companies Act
and any directions given by the Company
by special resolution and any relevant
statutes and regulations, the business of
the Company will be managed by the Board
who may exercise all the powers of the
Company. Specific powers relating to the
allotment and issuance of ordinary shares
and the ability of the Company to purchase
its own securities are also included within
the Articles, and such authorities are
submitted for approval by the shareholders
at the Annual General Meeting each year.
The authorities conferred on the Directors at
the 2020 Annual General Meeting (“AGM”),
held on 15 September 2020, will expire
on the date of the 2021 AGM. Since the
date of the 2020 AGM, the Directors have
not exercised any of their powers to issue,
or purchase, ordinary shares in the share
capital of the Company.
Directors’ Interests
The Directors’ interests in, and options over,
ordinary shares in the Company are shown
in the Directors’ Remuneration Report on
pages 125 to 135.
Since the end of the financial year and
the date of this report, there have been no
changes to such interests.
In line with the requirements of the
Companies Act, Directors have a statutory
duty to avoid situations in which they have,
or may have, interests that conflict with
those of the Company unless that conflict is
first authorised by the Board.
The Company has in place procedures
for managing conflicts of interest. The
Company’s Articles of Association contain
provisions to allow the Directors to
authorise potential conflicts of interest, so
that if approved, a Director will not be in
breach of his or her duty under company
law. In line with the requirements of the
Companies Act 2006, each Director has
notified the Company of any situation in
which he or she has, or could have, a direct
or indirect interest that conflicts, or possibly
may conflict, with the interests of the
Company (a situational conflict). Directors
have a continuing duty to update any
changes to their conflicts of interest and the
register is updated accordingly.
The Directors are also aware of their duties
under Section 172 of the Companies Act
2006 and so in making their decisions
they consider the long-term impact
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on the business as well as taking into
consideration the interests of stakeholders
such as colleagues, suppliers, customers
and the wider communities in which we
operate. More information on this can be
found on pages 28 to 29.
The Group takes a zero-tolerance approach
to matters of discrimination, harassment
and bullying in all aspects of its business
operations. Appropriate policies and
procedures are in place for reporting and
dealing with such matters.
Governance
ensures that arrangements are in place to
enable colleagues to raise concerns about
possible improprieties on a confidential
basis without fear of recrimination. The
Group is committed to conducting its
business with honesty and integrity, and
it expects all colleagues to maintain high
standards in accordance with its corporate
culture. An understanding of openness
and accountability is essential in order
to prevent illegal or unethical conduct
or malpractice and to enable any such
situations to be addressed should they
ever occur. The Whistleblowing Policy is
reviewed annually and communicated to all
colleagues around the Group.
Share Capital and
Shareholder Voting Rights
Details of the Company’s share capital and
of the rights attaching to the Company’s
ordinary shares are set out in Note 23 on
page 186. All ordinary shares, including
those acquired through Company share
schemes and plans, rank equally with no
special rights.
All members who hold ordinary shares are
entitled to attend, vote and speak at the
general meetings of the Company, appoint
proxies, receive any dividends, exercise
voting rights and transfer shares without
restriction. On a show of hands at a general
meeting every member present in person,
and every duly appointed proxy, shall have
one vote for every share held, and on a
poll, every member present in person or by
proxy shall have one vote for every ordinary
share held. The Company is not aware of
any arrangements that may restrict the
transfer of shares or voting rights.
Colleague Training
and Development
The Group strives to meet its business
objectives by motivating and encouraging
all colleagues to be responsive to the
needs of its customers and to continually
improve operational performance. To
achieve this we deliver a range of blended
training and development programmes,
across the Group, in our Retail, Autocentres
(including McConechy’s and Universal)
and Performance Cycling businesses. We
regard the training and development of our
people as being particularly important for
our business and also for the communities
in which we operate. For many years we
held strong relationships with a number of
Apprenticeship partners that allow us to
offer personal and professional growth. In
addition, the Group runs targeted Leadership
Development programmes to further build
capability in skills identified to both ensure
colleagues are successful in their chosen
roles, as well as to help colleagues identify
and develop skills that will support them to
be our leaders of the future. Revised Group
Values, trained through FY22 will also further
enhance our culture to underpin our strategy.
Further information on colleague training can
be found on page 51 of Our ESG Strategy.
Whistleblowing
The Group’s Whistleblowing Policy and
Procedure (the “Whistleblowing Policy”)
Significant Shareholders
As at 2 April 2021, the Company had been notified under the Disclosure Guidance and
Transparency Rules (DTR5) of the following notifiable interests representing 3% or more
of the Company’s issued share capital. The information provided below was correct at the
date of notification. These holdings are likely to have changed since the Company was
notified.
Manager
Fidelity International
JP Morgan Asset Management
Dimensional Fund Advisors
BlackRock
Vanguard Group
Janus Henderson Investors
Rathbones
Holding
19,757,740
10,763,925
9,318,862
8,353,149
6,596,052
6,529,812
6,557,923
% of Issued
Shares
9.92
5.41
4.68
4.20
3.31
3.28
3.29
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Directors’ Indemnities
Directors’ and Officers’ insurance has been
established for all Directors and Officers
to provide cover against their reasonable
actions on behalf of the Company.
The Directors of the Company and the
Company’s subsidiaries also have the
benefit of third-party indemnity provisions,
as defined by section 236 of the Companies
Act 2006, pursuant to the Company’s
Articles of Association.
Colleague Engagement
One of the Group’s key strengths is
engaged colleagues with great training.
Engagement with, and feedback from, our
colleagues across the business is vital to
the Group. The Group has an established
framework of colleague communications
providing regular information on business
performance and other important and
relevant matters. For more information see
Our ESG Strategy on pages 42 to 53.
Employment Policies
The Group encourages diversity and
inclusion and, as an equal opportunities
employer, is committed to providing
equal opportunities for all colleagues and
applicants during recruitment and selection,
training and career development and
promotion.
This commitment to equality of opportunity
applies regardless of anyone’s physical
ability, sexual orientation or gender identity,
pregnancy and maternity, race, religious
beliefs, age, nationality or ethnic origin.
This is underpinned by our Group’s policies
which ensure full and fair consideration to
employment applications from people from
diverse backgrounds, including those with
disabilities wherever suitable opportunities
exist, having regard to their particular
aptitudes and abilities. Should a colleague
become disabled, efforts are made to
ensure their continued employment with
the Group, with appropriate training as
necessary.
Further details of our Diversity Policy are
included in the Nomination Committee
Report on page 113.
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Directors’ Report
Modern Slavery Statement
In order to support its estate of Retail
stores, garages, moblie vans and online
operations, the Group sources products
from a large number of suppliers both within
the UK and overseas. In particular, the
international suppliers – managed largely by
the Halfords Global Sourcing (“HGS”) team
based in Hong Kong, Taiwan and Shanghai
– are bound contractually by the Group’s
policies on modern slavery and human
trafficking. These include, for example, the
Group’s Suppliers’ Code of Conduct Policy
which states that:
• suppliers are required to sign a
compliance declaration, confirming that
they have not been investigated for,
or convicted of, any offence under the
Modern Slavery Act 2015 or any other
equivalent law; and
• Halfords reserves the right to conduct
risk assessments in respect of its
suppliers and to implement the Group’s
Code of Conduct where necessary.
This is particularly pertinent to those
suppliers managed by the HGS team,
given that the Code of Conduct
encompasses principles of trading
based on international standards,
including the International Labour
Organisation (“ILO”) conventions and
recommendations. Moreover, the Code
reflects the Group’s opposition to the
exploitation of workers in all forms, its
support for fair and reasonable pay and
rewards, the requirement for health and
safety standards etc.
Additionally, the Group’s Terms of Business
require suppliers to comply with all
requirements under the Modern Slavery Act
2015. Thereafter, Halfords operates robust
due diligence processes which include,
where relevant, onsite inspections and
audits of the factories, warehouses and tied
accommodation operated by its suppliers.
The Group also provides comprehensive
training to appropriate colleagues which
ensures their understanding of all issues
relating to modern slavery and human
trafficking.
As a result of the above activity, during
FY21, no concerns were raised regarding
any of the Group’s suppliers, and therefore
Halfords continues to be assured that
no organisation within its supply chain
has breached its legal or contractual
obligations.
The Group’s Board of Directors reviews
its Modern Slavery Statement on an
annual basis. It was last approved on 15
September 2020.
Creditor Payment Policy
The Group does not follow any formal Code
of Practice on payment. Instead, it agrees
terms and conditions for transactions when
orders for goods or services are placed,
and includes relevant terms in contracts,
as appropriate. These arrangements are
adhered to when making payments, subject
to the terms and conditions being met by
suppliers. The number of trade creditor
days outstanding as at 2 April 2021 for the
Group was 73 days (2020: 69 days). The
Company is a holding company and has no
trade creditors.
Branches
The Company and its subsidiaries have
established branches in the different
countries in which they operate.
Auditor
The Company’s current Auditor is BDO LLP.
A resolution proposing the reappointment of
BDO LLP will be set out in the Notice of the
2021 Annual General Meeting and will be
put to shareholders at the meeting.
Authority to Purchase Shares
At the 2020 Annual General Meeting,
shareholders approved a special resolution
authorising the Company to purchase
a maximum of 19,911,663 shares,
representing not greater than 10% of the
Company’s issued share capital at
7 July 2020, such authority expiring
at the conclusion of the Annual General
Meeting to be held in 2021 or, if earlier,
on 30 September 2021.
Transactions with
Related Parties
During the period, the Company did not
enter into any material transactions with any
related parties.
Articles of Association
In accordance with the Companies Act
2006, the Articles of Association may only
be amended by a special resolution of
the Company’s shareholders in a general
meeting.
Political Donations
The Group made no political donations and
incurred no political expenditure during the
year (FY20: nil). It remains the Company’s
policy not to make political donations or
to incur political expenditure. However,
we recognise that the application of the
relevant provisions of the Companies Act
2006 is potentially very broad in nature
and, as last year, the Board is seeking
shareholder authority to ensure that the
Group does not inadvertently breach these
provisions as a result of the breadth of its
business activities. However, the Board
has no intention of using this shareholder
authority.
Credit Facilities, Change of
Control and Share Schemes
The Company’s revolving credit facilities
require the Company in the event of a
change of control to notify the Facility
Agent and, if required by the majority
lenders, these facilities may be cancelled.
The Company does not have agreements
with any Director or colleague that would
provide compensation for loss of office
or employment resulting from a takeover,
except that provisions of the Company’s
share schemes and Deferred Bonus Plan
may cause options and awards granted
to Directors and colleagues under such
schemes and plans to vest on a takeover.
Details of employee share plans are
provided in Note 24 on pages 186 to 189.
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Governance
Disclosure of Information to
the Auditor
In accordance with Section 418(2) of the
Companies Act 2006, each Director in office
at the date and approval of the Directors’
Report confirms that:
i. so far as the Directors are aware, there
is no relevant audit information of which
the Company’s Auditor is unaware; and
ii.
the Directors have taken all reasonable
steps to ascertain any relevant audit
information and to ensure that the
Company’s Auditor is aware of such
information.
Important Events Since Year End
There have been no significant events since
the year end.
Annual General Meeting (“AGM”)
The AGM will be held at the Halfords
Group plc Support Centre, Icknield Street
Drive, Washford West, Redditch, B98 0DE
on Wednesday 8 September 2021. The
Notice of the AGM and explanatory notes
regarding the ordinary and special business
to be put to the meeting will be set out in a
separate circular to shareholders.
By order of the Board
Tim O’Gorman
Group Company Secretary
16 June 2021
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The Board continues
to oversee and support
the transformation and
development of the
strategic vision
for the Group.
Chair’s
Letter
Keith Williams
Read our Corporate
Governance Report
on pages 84 to 108
Purpose and Culture
In FY21, Halfords has made strong progress on
the cultural journey. We saw the successful roll-out
of our new colleague values and behaviours which
follows on from the culture review undertaken
in FY20. The Board continues to recognise the
importance of ensuring that Halfords has a strong
culture and continues to support the work being
done towards becoming One Halfords Family.
As part of the roll-out we have seen colleagues
take part in leader-led workshops to introduce
them to the refreshed values. This has been
followed up by a number of initiatives to fully
embed the values in the organisation. The Board is
proud to note that in the Company’s most recent
Colleague Engagement Survey, 91% of colleagues
confirmed that they “know what Halfords values
are”.
Keeping the UK Moving During
COVID-19
The COVID-19 pandemic required a very agile
response from all decision-makers in the business
and you can read more about what we have done
in the overview section of this Annual Report. The
Board demonstrated flexibility and commitment to
engage with the management team throughout the
year but particularly in the first few months of the
crisis when uncertainty was at its highest. The key
priorities for the Board were to protect the health
and safety of our colleagues and customers and
to ensure the sustainability of the business in the
long-term.
Strategy
The Board continues to oversee and support
the transformation and development of the
strategic vision for the Group. Necessitated by
the emergence of the COVID-19 pandemic, the
Board engaged with the management team to
adapt our strategic execution for FY21, shifting the
emphasis to cost efficiencies, cash management
and supporting our colleagues. The Board was
further engaged in refreshing the existing strategy,
taking into account post-pandemic trends and the
interests of different stakeholders.
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Governance
Engaging with the Workforce
The disruption caused by the COVID-19 pandemic,
which saw the temporary closure of a number
of our stores, resulted in a different approach
to engagement, where we focused on remote
engagement and colleague wellbeing.
Read more on pages 12 and 13
2020 Annual General Meeting (“AGM”)
In 2020, to ensure the appropriate AGM
arrangements were put in place, the Board closely
monitored the evolving COVID-19 pandemic
together with the UK Government’s guidance
on social distancing and public gatherings. In
light of this, in September 2020, we made an
announcement to the London Stock Exchange to
update shareholders on changes required to the
2020 AGM arrangements which highlighted the
importance we place on the health and wellbeing
of our colleagues, shareholders and the wider
community.
Keith Williams
Chair
16 June 2021
Chair’s
Letter
Keith Williams
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85
Corporate Governance Report
Governance
at a Glance
Corporate Governance
Statement
The Board confirms that during the year
ended 2 April 2021, and as at the date
of this report, the Company has applied
the principles of, and complied with, the
provisions of the 2018 UK Corporate
Governance Code (“Code”) throughout
the year. As outlined in last year’s Annual
Report, it was agreed that David Adams,
the then Senior Independent Director,
would stay in office until the end of 2020,
given the exceptional circumstances
caused by the pandemic. The Board
recognised that it had assessed that David
had ceased to be regarded as independent
for the purposes of the Code, and that his
extended tenure until December 2020, had
created a technical breach of the Code’s
recommendation that the majority of the
Board be independent Non-Executive
Directors. In the previous period, the
Nomination Committee had agreed to
extend David’s term of appointment to
December 2020, to ensure an orderly
handover to the newly appointed Non-
Executive Director.
This report, together with the other statutory
disclosures and reports from the Audit,
Nomination and Remuneration Committees,
provide details of how the Company has
applied the principles of good governance
as set out in the Code during the period
under review. A copy of the Code is available
on the Financial Reporting Council’s website
at www.frc.org.uk. During the year, the
Company has formalised its ESG Committee
to put it on a similar footing to the other
Board Committees. For more information
please see the ESG Committee Report on
pages 114 to 115.
The Company has complied with the
relevant requirements under the Disclosure
Guidance and Transparency Rules, the
Listing Rules, the Directors’ Remuneration
Reporting regulations and narrative
reporting requirements.
Promoting our
purpose, culture
and long-term
success
Ensuring a clear
division of
responsibilities
Delivering
effectiveness
through a
balanced Board
Enabling
reporting
integrity and an
effective controls
environment
Board Leadership
and Company
Purpose
Description
The Company is led by an effective
Board, which promotes the long-
term success of the Company and
engages with its shareholders and
stakeholders.
The Board has established the
Company’s purpose, values and
strategy and is satisfied that these
and its culture are aligned.
The Board has established an
effective governance and risk
framework.
The Board has ensured that the
workforce is able to raise any
matters of concern, and that
all policies and practices are
consistent with the Company’s
values.
Division of
Responsibilities
Description
The Chair leads the Board
which includes an appropriate
combination of Executive Directors
and Non-Executive Directors.
The Non-Executive Directors
provide constructive challenge,
strategic guidance and advice, and
have sufficient time to meet their
Board responsibilities.
There is a clear division of
responsibilities between the running
of the Board and the running of the
business, and the Board has identified
certain ‘reserved matters’ that only
it can approve. Other matters,
responsibilities and authorities have
been delegated as appropriate,
and there are relevant policies and
processes in place for the Board to
function effectively and efficiently.
Read more:
Read more:
Read more:
Read more:
Read more:
Read more on stakeholder
engagement on pages 28
and 29.
Read more on culture on
pages 94 to 96.
Read more on principal risks
and uncertainties on pages
66 to 72.
Read more on Board
composition on page 100.
Read more on Board
responsibilities on page 100.
Read more on key Board and
Committee responsibilities on
pages 101 to 103.
Read more on Directors’
induction, training and
development on pages 112
and 113.
Read more on diversity and
inclusion in Our ESG Strategy
on pages 47 and 48.
Read more in the Audit
Committee Report on pages
116 to 121.
Read more on risk in the
Our Principal Risks and
Uncertainties Report on
pages 66 to 72.
Composition,
Succession and
Evaluation
Description
Audit, Risk and
Internal Control
Description
Description
A comprehensive and tailored
induction programme is in place
The Board has established
The Company has designed the
formal and transparent policies
remuneration policies and practices
for new Directors joining the Board.
and procedures to ensure the
to support strategy and promote
The induction programme facilitates
independence and effectiveness
long-term sustainable success. The
their understanding of the Group
of both internal and external audit
Executive remuneration is aligned
and the key drivers of the Group’s
functions. The Board satisfies itself
to the interests of our shareholders
performance.
A rigorous, effective and transparent
appointment process is in place,
which, together with the effective
succession plans, promotes
diversity of gender, social and ethnic
backgrounds, cognitive and personal
strengths.
on the integrity of financial and
narrative statements.
and to the Company’s purpose and
values and is clearly linked to the
successful delivery of our long-term
The Board presents a fair, balanced
and understandable assessment of
strategy.
the Group’s position and prospects.
There is a formal and transparent
The Board has established
procedures to manage risk, oversee
the internal control framework and
determine the nature and extent of
the principal risks of the Group.
Directors are able to exercise
Ensuring
alignment with
the successful
delivery of
our long-term
strategy
Remuneration
procedure for developing
Executive remuneration policy and
determining Director and senior
management remuneration.
independent judgement and discretion
when authorising remuneration
outcomes, taking into account
Company and individual performance
and wider circumstances.
Read more in the
Remuneration Committee
Report on pages 122 to 135.
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Promoting our
purpose, culture
and long-term
success
Ensuring a clear
division of
responsibilities
Board Leadership
and Company
Division of
Responsibilities
Purpose
Description
Description
The Company is led by an effective
The Chair leads the Board
Board, which promotes the long-
which includes an appropriate
term success of the Company and
combination of Executive Directors
engages with its shareholders and
and Non-Executive Directors.
stakeholders.
The Board has established the
The Non-Executive Directors
provide constructive challenge,
Company’s purpose, values and
strategic guidance and advice, and
strategy and is satisfied that these
have sufficient time to meet their
and its culture are aligned.
Board responsibilities.
The Board has established an
effective governance and risk
framework.
The Board has ensured that the
workforce is able to raise any
matters of concern, and that
all policies and practices are
consistent with the Company’s
values.
There is a clear division of
responsibilities between the running
of the Board and the running of the
business, and the Board has identified
certain ‘reserved matters’ that only
it can approve. Other matters,
responsibilities and authorities have
been delegated as appropriate,
and there are relevant policies and
processes in place for the Board to
function effectively and efficiently.
Read more on stakeholder
engagement on pages 28
and 29.
Read more on culture on
pages 94 to 96.
Read more on principal risks
and uncertainties on pages
66 to 72.
Read more on Board
composition on page 100.
Read more on Board
responsibilities on page 100.
Read more on key Board and
Committee responsibilities on
pages 101 to 103.
Delivering
effectiveness
through a
balanced Board
Enabling
reporting
integrity and an
effective controls
environment
Composition,
Succession and
Evaluation
Description
A comprehensive and tailored
induction programme is in place
for new Directors joining the Board.
The induction programme facilitates
their understanding of the Group
and the key drivers of the Group’s
performance.
A rigorous, effective and transparent
appointment process is in place,
which, together with the effective
succession plans, promotes
diversity of gender, social and ethnic
backgrounds, cognitive and personal
strengths.
Audit, Risk and
Internal Control
Description
The Board has established
formal and transparent policies
and procedures to ensure the
independence and effectiveness
of both internal and external audit
functions. The Board satisfies itself
on the integrity of financial and
narrative statements.
The Board presents a fair, balanced
and understandable assessment of
the Group’s position and prospects.
The Board has established
procedures to manage risk, oversee
the internal control framework and
determine the nature and extent of
the principal risks of the Group.
Governance
Ensuring
alignment with
the successful
delivery of
our long-term
strategy
Remuneration
Description
The Company has designed the
remuneration policies and practices
to support strategy and promote
long-term sustainable success. The
Executive remuneration is aligned
to the interests of our shareholders
and to the Company’s purpose and
values and is clearly linked to the
successful delivery of our long-term
strategy.
There is a formal and transparent
procedure for developing
Executive remuneration policy and
determining Director and senior
management remuneration.
Directors are able to exercise
independent judgement and discretion
when authorising remuneration
outcomes, taking into account
Company and individual performance
and wider circumstances.
Read more:
Read more:
Read more:
Read more:
Read more:
Read more on Directors’
induction, training and
development on pages 112
and 113.
Read more on diversity and
inclusion in Our ESG Strategy
on pages 47 and 48.
Read more in the Audit
Committee Report on pages
116 to 121.
Read more on risk in the
Our Principal Risks and
Uncertainties Report on
pages 66 to 72.
Read more in the
Remuneration Committee
Report on pages 122 to 135.
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87
Corporate Governance Report
Board Leadership and Company Purpose
Promoting Long-Term Sustainable Success of the Company
Addressing Opportunities
and Risks to the Future
Success of the Business
The Board’s primary role is to ensure
the long-term success of the Group,
by delivering sustainable value
for all its stakeholders. The Board
has responsibility for setting the
Group’s strategy and monitoring
its execution, for ensuring the
implementation of a robust risk
management framework, and for
overseeing financial and operational
performance. These responsibilities
are supported by the Group’s culture
and values, designed to drive the
right behaviours and by a strong
corporate governance framework.
Our purpose is to
Inspire and Support a
Lifetime of motoring
and cycling
The successful
implementation of
our strategy is critical
to the delivery of the
Group’s purpose and
is underpinned by the
values and behaviours
that shape our culture
and the way we
conduct our business.
How the Board Contributes
to the Delivery of Halfords’
Strategy
During the period, the Board
approved a new set of Company
values, further details of which are
provided on pages 06 to 08. These
values are critical in driving the right
behaviours and for underpinning the
culture of the Group.
The Sustainability of our
Business Model
Our current strategy was launched
in September 2018, built around our
purpose to ‘Inspire and Support a
Lifetime of motoring and cycling’.
Through formal Board meetings
and regular engagement with the
Executive Team, the Board continues
to oversee the implementation of this
strategy and ensure it remains fit-for-
purpose, thus providing the Group
with a sustainably differentiated
business model. Further details of
our strategy and business model are
provided on pages 08 to 09.
OUR PURPOSE
To Inspire and Support
a Lifetime of motoring
and cycling
OUR VISION
The super-specialist in motoring and
cycling, trusted by the nation
OUR MISSION
1. Make motoring easier, safer and more enjoyable for everyone.
2. Get more people cycling, more frequently.
Our Strategic Priorities
Inspire
Support
Lifetime
Inspire our customers
through a differentiated,
super-specialist shopping
experience
Support our customers
through an integrated,
unique and more
convenient services offer
Enable a lifetime of
motoring and cycling
Culture
A team inspired and motivated to drive towards delivering our Goals, Mission,
Vision and Purpose who live and breathe our brand values and represent the very best
of what we offer as a business to our customers.
Halfords Our Values
one halfords
family
With togetherness and
teamwork we have strength
and compassion
wow our
customers
We put customers first and
are obsessed with meeting
their needs
be better
every day
We act and behave as
market leaders
pride in
expertise
We continually develop
our skills to deliver market
leading services
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Governance
How we are working towards our vision: being a super-specialist
in motoring and cycling, trusted by the nation
Dynamic to the
Market Needs
Our Group operates in
markets in which customer
needs and expectations are
ever-changing. We need to
be able to evaluate external
trends so that we can make
the best strategic choices.
Skills our Board has
Retail industry-specific knowledge in relation to both our
core businesses and in those areas of increased focus under
our strategy (i.e. motoring services and offering financial
products that provide more convenient ways for customers
to pay).
Board members
• Keith Williams
• Jill Caseberry
• Tom Singer
Commitment to
Delivering Financial Value
Commitment to delivering
financial value to
shareholders.
Skills our Board has
Experience in setting and delivering financial KPIs in
challenging retail and services markets.
Board members
• Keith Williams
• Helen Jones
• Jill Caseberry
• Tom Singer
Engagement with our
Stakeholders
Engagement with our
stakeholders to maintain
trust and enhance
understanding of our
business.
Skills our Board has
Experience in stakeholder engagement activities, such as our
Employee Voice initiative and the shareholder consultation in
relation to our Remuneration Policy.
Board members
• Helen Jones
• Jill Caseberry
Sustainable
Operations
Commitment to operating in
a responsible way so that we
are a Company that people
want to work for and invest in.
Skills our Board has
Experience of the setting and delivery of ESG commitments,
including recycling, energy usage and sustainable electric
cars and bikes.
Board members
• Helen Jones
• Jill Caseberry
• Tom Singer
Read more about the skills of the Board on page 104
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Corporate Governance Report
Board Leadership and Company Purpose
How the Board Operates
The Board and its Committees have a scheduled forward programme of meetings. This ensures that sufficient time is allocated to each
relevant discussion and activity and the Board’s time is used effectively.
The table below shows the attendance of Directors at the Board and Committee meetings held during the year. In addition to those
scheduled meetings, unscheduled Board and Committee meetings were convened throughout the year as and when the need arose,
meeting particularly regularly through the initial stages of the COVID-19 pandemic. Two additional Board calls were held during the period
to discuss the release of the hedging strategy approval and a trading update. The Board had regular dialogue with management during the
early phase of the COVID-19 pandemic and held additional Board calls at this time. The additional Board meetings and Board calls were
all quorate, and all Directors received the relevant papers and provided the required approval. During the year, the Board also held strategy
sessions during the Board meetings to review and refresh the Company’s strategic direction.
Board member
Executive Directors
Graham Stapleton
Loraine Woodhouse
Non-Executive Directors
Keith Williams
Helen Jones
Jill Caseberry
Tom Singer (appointed 16/09/20)
David Adams (resigned 31/12/20)
Meetings attended
Possible meetings
Board
scheduled: 10
Audit Committee
scheduled: 3
Remuneration
Committee
scheduled: 7
Nomination
Committee
scheduled: 2
ESG Committee
scheduled: 3
10 10
10 10
10 10
10 10
10 10
6
7
6
7
N/A
N/A
N/A
3
3
2
2
3
3
2
2
N/A
N/A
7*
7
7
4
5
7
7
7
4
5
N/A
N/A
2
2
2
2
1
2
2
2
2
1
3
3
N/A
N/A
3
3
1
3
3
1
N/A
* Upon the recommendation of the Nomination Committee that the Remuneration Committee should only comprise of Non-Executive Directors and not the
Chair of the Company, Keith Williams stepped down as a member on 22 March 2021.
Other members of the Executive Team and professional advisors attended Board meetings by invitation as appropriate throughout
the year.
At each Board meeting, the Chief Executive Officer delivers a high-level update on the business, and the Board considers specific
reports, reviews business and financial performance, as well as key initiatives, risks and governance. In addition, throughout the year
the Executive Team and other colleagues deliver presentations to the Board on proposed initiatives and progress on projects.
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Governance
Board in Action
Case Study
Improvements to the Customer
Experience through FY21
during the COVID-19 pandemic
As FY21 began and the UK went into lockdown, like many
businesses we faced some serious operational challenges. A swift
and significant shift in customer behaviour to online shopping
exposed shortfalls in our end-to-end customer journeys. Over H1,
almost 50% of customer journeys began online, with customers
wanting to shop our products and services from the safety of
their home. A surge in demand for cycling through lockdown,
combined with very high levels of customer contact, made it clear
that we needed to adapt at pace and transform our customer
experience. With the support of the Board, we made the decision
to accelerate elements of our strategic plan, including end-to-end
customer journey improvements, improvements to the digital Bike
journey, and the integration of Halfords Mobile Expert services
into our Group website. Alongside this, the Board approved
accelerated investment to improve our contact answer rate by
centralising the Group Customer Contact Experience, reducing
weekly customer contact by 288,000 contacts a month across the
Group.
Combined, the changes to the digital customer journey and
improved levels of contact have resulted in the best Net
Promoter Scores (NPS) we have seen across the Group since
the programme was launched in 2017.
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Corporate Governance Report
Board Leadership and Company Purpose
Board Activities in FY21
Main Areas:
Strategy
Governance
Board Matters
• Reviewed and approved the
• Received updates from the
Key activities and discussions:
• Reviewed the progress and
delivery of the Group Strategy,
the Transformation Plan and the
Annual Budget.
Key activities and discussions:
• Received regular updates from
the Chairs of the Remuneration,
Audit, Nomination and ESG
Committees.
• Approved the refreshed and
• Reviewed and approved the
relaunched Company Investment
Case.
• Reviewed and approved
repayment of government
support, including furlough.
• Reviewed updates on the
acquisition strategy and M&A
activities.
• Reviewed updates on the ESG
Strategy.
Link to Stakeholder
FY20 Annual Report.
Directors’ Conflicts of Interests
Register, Group policies, the
Group Risk Register and the
roles of the Chair, the Chief
Executive Officer and Senior
Independent Director.
Link to Stakeholder
Financial Risk and
Management
Key activities and discussions:
• Reviewed monthly business
reviews and trading
performance.
• Reviewed and approved the
prelim, interim and trading
update approaches and
announcements.
• Reviewed updates on banking
arrangements, liquidity, cash
control, treasury matters and
currency hedging.
• Reviewed and approved the
Commercial Matters
Key activities and discussions:
• Reviewed and discussed plans
to re-open stores, garages and
Support Centre in line with
COVID-19 guidance.
• Received and approved the
permanent closure of 58 stores
and garages.
• Received and reviewed updates
on the impact of COVID-19
lockdowns and restrictions on
trading and customer contact
rates.
FY20 Group Viability Statement.
• Received updates on the
• Received an update on the
Group refinancing project.
• Reviewed and approved the
FY21 budget and forecast.
• Reviewed and approved the
appointment of a new joint
broker.
Link to Stakeholder
process for, and approval of, the
annual renewal of the Group’s
insurance policies.
• Reviewed and approved a
number of large commercial
contracts and spend.
• Reviewed the impact of Brexit on
trading.
Key activities and discussions:
• Reviewed the succession plans
for the Board and the restructure
of the senior management team.
• Reviewed the Board and
Committees’ programme and
forthcoming meeting schedule.
Nomination Committee on the
progress of the search for a new
Non-Executive Director, and new
Chief People Officer.
• Reviewed the post appointment
induction for the new Non-
Executive Director, Tom Singer.
• Discussed and agreed the scope of
the internal FY21 Board evaluation
and reviewed its outcome.
Link to Stakeholder
Shareholder and
Stakeholder Relations
Key activities and discussions:
• Reviewed results of colleague
engagement surveys and the launch
of the new Company Values.
• Discussed the work undertaken
on the Group’s colleague
engagement initiatives (e.g. One
Team Strategy, Huddles, Listening
Groups and SLT meetings).
• Discussed and approved colleague
health and wellbeing programmes.
• Reminder to Directors of their
obligations under Section 172 of
the Companies Act 2006.
• Reviewed monthly investor
relations reports and annual
shareholder body reports.
• Reviewed and approved the 2020
Notice of the Annual General
Meeting and the arrangements for
the 2020 Annual General Meeting
in a COVID-19 secure environment.
• Discussed, managed and
• Received an update on the
mitigated the risks presented by
the COVID-19 pandemic.
development of the new ESG
Strategy.
Link to Stakeholder
Link to Stakeholder
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Governance
Key:
Colleagues
Investors
Communities
Media
Customers
Suppliers
Environment
Government
Board Priorities for the Following Year
Main Areas:
Strategy
Governance
Board Matters
Key activities:
• Review the progress and
delivery of the Group Strategy,
particularly any changes required
in response to COVID-19.
Key activities:
• Receive regular updates from
the Chairs of the Remuneration,
Audit, Nomination and ESG
Committees.
• Review any potential M&A
• Review and approve the FY21
opportunities.
Link to Stakeholder
Annual Report.
• Review and approve the
Directors’ Conflicts of Interests
Register, Group policies, the
Group Risk Register and the
roles of the Chair, CEO and SID.
Key activities:
• Review succession plans
for the Board and the Senior
Management Team.
• Review the Board and
Committees’ programme and
forthcoming meeting schedule.
• Discuss and agree the scope of
the FY22 Board evaluation and
its outcome.
• Review the Board programme
of visits.
• Commence the process of
Link to Stakeholder
ensuring that the composition of
the Board is compliant with the
Parker Review.
Link to Stakeholder
Commercial Matters
Key activities:
• Review commercial matters
brought to the Board for
attention and potential approval.
Link to Stakeholder
Financial Risk and
Management
Key activities:
• Review monthly business
reviews and trading
performance.
• Review and approve trading
update approaches and
announcements.
• Review and approve the
dividend policy and any dividend
payments.
• Review and approve the FY22
updated forecast, the FY23
budget, banking arrangements
and the debt /hedging strategy.
Link to Stakeholder
Shareholder and
Stakeholder Relations
Key activities:
• Review colleague engagement
survey results and the progress
on the health and wellbeing
programme.
• Reminder to Directors of their
obligations under Section 172 of
the Companies Act 2006.
• Review monthly investor relations
reports and annual shareholder
body reports.
• Review and approve the 2021
Notice of the Annual General
Meeting.
Link to Stakeholder
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Corporate Governance Report
Board Leadership and Company Purpose
behaviours which underpin our strategy
took place in the first quarter of FY21.
Our Board has made progress against monitoring
culture in the past year
Our Culture Journey
The Board recognises the importance
of its role in ensuring the culture of the
organisation is aligned to its business
strategy and ambition to become a
customer led, market-leading services
business. In support of this, a full cultural
review was completed in FY20. This review
resulted in the refresh of colleague values
and behavioural frameworks which built on
the strength of prior leadership and ‘Hands
On’ colleague behaviours. The aim was to
create a One Halfords team approach and
unite all parts of the business, old and new.
The launch of the new colleague values and
We know that we will only be successful in
wowing our customers through engaging
the hearts and minds of our colleagues,
compelling them to work together, as One
Halfords Family, to continuously develop
and deliver expertise to meet the customers’
needs. The values and behaviour framework
defines how we expect colleagues across
the business to role model our values as they
progress their careers with us – from joining
as a colleague, to leading others, leading
teams, and ultimately leading the business.
Well established technical skills training
complements this framework by providing
the technical knowledge to support the
delivery of our market leading services.
Our values roll-out followed the activity
undertaken in FY20 in which 1,300
colleagues from across the group, were
involved in developing the framework.
The roll-out saw all colleagues across the
group attend leader-led workshops. These
workshops were followed by the launch of
a series of initiatives designed to both fully
embed our values and to recognise and
reward our values in action, as referenced in
the plan that we shared with you last year.
l
s
a
o
G
s
t
n
e
m
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v
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h
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A
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K
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O
Culture and Values
Create a ‘One Halfords’ performance culture where colleagues enjoy working efficiently and effectively together using
their skills and expertise to win the hearts and minds of our customers.
Values
Behaviours
Plan
Do
Act
Check
Work with colleagues across all
areas of the business, to define the
appropriate values and behaviours
for our Group as a whole, that
will underpin our forward strategy
and build on the language of our
purpose and create beliefs that are
active and give all our colleagues
clear direction.
Customers
• Will have a joined-up
experience wherever they
shop across the Group
Create a leader-led roll-out plan
that will introduce all colleagues
across the Group to the refreshed
values which will shape our culture
and offer all colleagues clarity and
a sense of belonging as part of the
One Halfords Family.
Integrate our newly defined
values into the performance
management framework and
appropriate elements of the
colleague lifecycle.
Colleagues
• Engaged colleagues will
work together and use their
skills and expertise to deliver
an excellent and efficient
customer experience
Shareholders
• Will benefit from our financial
commitments, through the
generation of additional
profitable sales and a
reduction in costs
Initiatives to embed the values included
integrating our values and behaviours into our
performance review framework, so ensuring
a link to pay and reward; as well as the
introduction of a values recognition scheme
which recognises and rewards colleagues
that role model our values. Under the scheme,
243 nominations were received in Q4 of FY21
alone. The success of the roll-out can be
measured through data collected in our most
recent engagement survey, in which 91%
of colleagues confirmed they “know what
Halfords values are”.
This activity was undertaken as part of
a broader programme of engagement
initiatives, which are referenced in the
section below.
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Governance
Workforce Engagement
Halfords has long established practices of
inviting feedback from colleagues across
all areas of the business, including holding
regular listening groups, appointing and
meeting with local colleague engagement
(“people”) champions, and conducting
regular colleague surveys.
This year the disruption arising from the
COVID-19 pandemic, which saw the
temporary closure of a number of our
stores, resulted in a different approach to
engagement in the first half of the year, in
which we focused on remote engagement
and colleague wellbeing. “Supporting
colleagues to feel safe and engaged,
putting One Halfords Family at the heart
of everything we do” was positioned as
one of our top three business priorities and
discussed weekly in colleague huddles
across all areas of the business. Additional
two-way communication channels were
also established, alongside newsletters and
videos to facilitate remote engagement. Two
full colleague surveys were conducted to
invite colleague feedback – with one of these
specifically focused on the impact of the
pandemic. In H2 a total of 36 listening groups
were held across the Group as a whole.
The role of the People Champions,
which represent the views of colleagues
across the business, has never been
more important than during the first half
of the year, with meetings used to gauge
how colleagues were feeling; inform
the programme of engagement and
wellbeing activities; and to shape ways of
working for colleagues required to work
remotely. During the course of the year
People Champions were invited to input
to broader business initiatives including
ESG and reward practice, so gaining an
understanding of corporate governance and
Executive remuneration.
In addition to the above, the Group has long
established grievance and whistleblowing
policies that facilitate colleagues’ ability
to raise any matters of concern more
formally, and in total confidence, should
the need arise. The Board reviews reports
relating to whistleblowing cases and the
process is outlined in the Audit Committee
Report on page 120. We know from the
calls received and the data obtained that
a large proportion of the whistleblowing
calls received via the helpline are from store
colleagues seeking clarification on HR or
safety issues, this shows that the process
works well as an adjunct to our normal HR
processes and ensures we provide the best
support we can to our colleagues.
The table below outlines the key culture,
values and engagement activities
undertaken this year:
0
2
Y
F
Q4
1,300 colleagues were engaged in defining the new colleague values and behaviour framework. The values and
behaviour framework was agreed with the Board and training was rolled out to Senior Leaders.
Q1
Q2
•
• Roll-out of the values and behaviour framework to
all colleagues across the Group commenced.
“Supporting colleagues to feel safe and engaged,
putting One Halfords Family at the heart of
everything we do” positioned as one of our top
three business priorities and discussed weekly in
colleague huddles.
Interim colleague survey conducted (focus on
COVID-19 response).
•
• Halfords Here for the Heroes recognition scheme
established.
1
2
Y
F
Q3
• Values and behaviour roll-out completed.
• Colleague recruitment and internal performance
management frameworks aligned to new values
and behaviours.
• Full annual colleague engagement survey
conducted (deferred from Q1 due to the pandemic).
• Engagement action planning undertaken.
• Bonusable engagement targets set for Executive
Directors and the Executive Committee and
approved by the Board.
Q4
• Performance related pay introduced aligned to
• Group values champions selected from all areas of
values.
the business.
• Additional investment in colleague engagement,
including the introduction of a new colleague
experience manager to lead the engagement and
diversity and inclusion agenda.
• Here to Help wellbeing scheme launched.
• Listening groups recommenced across all areas of
the business (following some COVID-19 disruption
in H1).
• Values recognition scheme launched to recognise
and reward colleagues that role model our values
and behaviours; 243 nominations were received
in Q4 from which 12 colleagues of the quarter
selected and rewarded.
• Thank you cards introduced to provide immediate
recognition for values in action.
• Listening groups remained ongoing with a total of
36 held across the year.
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Corporate Governance Report
Board Leadership and Company Purpose
Monitoring Culture
The Board monitors culture on an ongoing
basis both formally, and informally, through
the outputs of colleague engagement
surveys, and through regular listening groups
that are held across all areas of the business.
Q4 of the year saw the implementation of
changes to our store structures to better
support our strategy, with further alignment
across the broader organisation planned for
Q1 of FY22. We look forward to sharing a
further update with you in our next report.
Section 172(1) Statement
The Chair leads the Board which is
collectively responsible for the long-term
success of the Company. The Chair’s role is
to ensure that the Board contains the right
balance of skills, diversity and experience,
to set the strategy of the Company and
oversee the successful execution of it by
the business.
A key element of business success is having
good corporate governance. Halfords
has effective frameworks and practices to
ensure that high standards of governance,
as well as good values and behaviours, are
consistently applied throughout the Group.
Engagement with
Our Stakeholders
We understand the importance of
engagement with all our stakeholders. It is
of significant value to our decision making
and planning processes and ultimately, the
long-term success of the business.
Read more about how we engage
with stakeholders on pages 28 to 29.
Helen Jones, the Senior Independent
Director, with accountability for representing
the voice of our colleagues in Board
meetings, personally attends many of the
listening groups held, alongside other Board
and Executive colleagues.
Survey and listening group outputs and
associated actions are regularly reviewed
by the Board and are incorporated into
Executive Directors’ and Executive
Committee functional engagement plans. As
in prior years colleague engagement remains
a bonusable objective for this population.
Changes were made to our most recent
colleague survey to support us in
measuring the success of our values roll-
out programme, as referenced earlier, as
well as to enable us to collate and analyse
engagement scheme outputs through a
more detailed and diversity inclusion lens,
so informing our broader ESG action plan.
Further changes will be made to the survey
from FY21 to ensure greater alignment with
our new values, beyond the initial launch.
We look forward to sharing these changes
with you following implementation.
Our more holistic review of the culture of the
business in FY20 told us that Halfords is a
great, collaborative place to work, is engaging
and is values led with knowledgeable friendly
colleagues that go the extra mile to serve our
customers. Our most recent survey confirmed
that this remains the case today. Whilst,
unsurprisingly, our colleague engagement
index dipped slightly to 75% against the
backdrop of our implementation of significant
in-store changes that enabled us to both
safely and successfully trade through the
pandemic, our engagement index remains
in the upper quartile when compared with
external benchmarks.
This review also identified opportunities
for us to improve our rituals and routines,
control systems and structures to improve
our customer centricity through a One
Halfords team approach. The development
and roll-out of the colleague values and
behaviour framework in FY21 provided
the foundation on which to build broader
structural changes in support of this aim.
Case Study
Consultation with Shareholders
on Remuneration Policy
The views of our shareholders are very important to the Remuneration Committee
and it is our policy to consult with our largest shareholders in advance of making
any changes to the Executive remuneration arrangements. The Committee
consulted in detail regarding changes made to remuneration in 2020 during FY20
and into the early part of FY21. The final proposals were shaped by the feedback
provided.
This process began when we wrote to shareholders in 2020 ahead of our
implementation of the 2020 Directors’ Remuneration Policy. This policy was largely
the same as the previous, but amendments were made to reflect the introduction
of the 2018 UK Corporate Governance Code and to align with best practice and
shareholder expectations.
This consultation with shareholders also included a proposed change to incentive
performance measures to better reflect our key aims at the time, namely our
intention to accelerate the growth of the motoring services business by including
more focused services-related revenue metrics. We took feedback on board from
shareholders who were generally supportive and after some minor changes, settled
on our final proposals.
However, soon after we had undertaken this process the impact of the outbreak
of COVID-19 on the business became more apparent and the Remuneration
Committee took measures to ensure that the remuneration structures best reflected
the circumstances of the business. We therefore again wrote to shareholders in
early FY21, setting out our plans to change the performance measures under the
annual bonus and PSP to ensure that it focused management on the key financial
and strategic KPIs which were critical for the business. These amended metrics
were subsequently implemented after discussion with shareholders.
Moving forward from the initial impact of the pandemic, we feel we are now able
to revert to a more normalised approach to performance measures which are more
reflective of our ongoing strategy. Full details are disclosed elsewhere in the report,
but we remain committed to ongoing dialogue with shareholders and stakeholders
and will continue to consult on any future changes.
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Governance
Directors’ and their
Other Interests
Details of the Directors’ service contracts,
and emoluments, as well as the interests
of the Directors and their immediate
families in the share capital of the Company
and options to subscribe for Company
shares, are shown in the annual Directors’
Remuneration Report on pages 126 to 135.
In line with the requirement of the
Companies Act 2006, each Director has
notified the Company of any situation
in which he or she has, or could have, a
direct or indirect interest that conflicts, or
possibly may conflict, with the interests of
the Company (a situational conflict), and
a register of these is maintained by the
Company Secretary.
All Directors are aware of the need to
consult with the Company Secretary should
any possible situational conflict arise, so
that prior consideration can be given by the
Board as to whether or not such conflict will
be approved.
Concerns
The Chair seeks to resolve any concerns
raised by the Board, whether these arise in
a Board meeting or in another forum. Where
raised and unresolved in a Board meeting,
the unresolved business can be recorded
on behalf of a Director in the minutes of
the relevant meeting. A resigning Non-
Executive Director would also be able to
raise any concerns in a written letter to the
Chair, who would bring such concerns to
the attention of the Board.
No such concerns have been raised
throughout the period.
The Board considers these as being critical
factors for the integrity of the business
and in helping to maintain the trust of all
stakeholders in Halfords.
The full Section 172(1) Statement can
be found on pages 30 to 31.
Stakeholder Management
The Board understands the importance of
strong relationships with all stakeholders
and strongly values their input into
its decision making and planning
processes. The Board seeks to ensure
that engagement with our stakeholders
is effective, either by engaging directly
or through oversight of the management
team. This includes the monitoring of KPIs,
such as Customer Net Promoter Score and
Colleague Engagement Index. Further, the
Board ensured that stakeholder interests
were carefully considered in the Company’s
recent sustainability strategy review, playing
a key role in determining our key focus
areas for the years ahead.
Shareholder Engagement
Key Themes Discussed with
Shareholders in FY21
Investor Relations
Programme
• Resilience of the business and mitigating actions in
response to the challenges of the COVID-19 pandemic.
• Progress on our strategy, “To Inspire and Support a
Lifetime of motoring and cycling”, including our intention
to accelerate investment in our Services and B2B
businesses.
• The dynamics of the motoring and cycling markets,
including our growth opportunities and relative financial
returns from each segment.
• Capital allocation priorities, specifically the balance of
maintaining a prudent balance sheet, maintaining the
dividend and enabling investment for growth.
• Gross and operating margin performance.
The Chair is responsible for ensuring that appropriate
channels of communication are established between
Directors and shareholders and that Directors are aware of
any issues or concerns that major shareholders may have.
Regular engagement provides investors with an opportunity
to discuss any areas of interest and raise concerns.
The Group is eager to make sure that it understands
shareholders’ views and that it is able to communicate
its strategy in the most effective way. The Group engages
through regular communications, the Annual General
Meeting and other investor relations activity (such as the
investor perception study).
The Group has a comprehensive investor relations (“IR”)
programme through which the Chief Executive Officer,
Chief Financial Officer and the Corporate Finance Director
regularly engage with the Company’s largest shareholders
on a one-to-one basis, to discuss strategic issues and give
presentations on the Group’s results. Further communication
is achieved through the Annual Report and Accounts,
corporate website and investor meetings as follows:
• Annual Report and Accounts – this is the most
significant communication tool, ensuring that investors
are kept fully informed regarding Group developments.
Management continually strives to produce a clear and
easily accessible Annual Report and Accounts, which
provides a complete and transparent picture;
• The corporate website – provides investors with timely
information on the Group’s performance as well as
details of Environmental, Social and Governance
activities;
• Management roadshows – allow key investors access to
management. These are usually attended by the Chief
Executive Officer, the Chief Financial Officer and the
Corporate Finance Director; and
• Responding promptly – the Group is committed to
responding to any investor-related queries within a short
time frame.
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Corporate Governance Report
Board Leadership and Company Purpose
Workforce
Engagement
at a Glance
36
Listening groups
held across the
Group
25
Local colleague
engagement
champions
appointed
Q&A with
Helen Jones
Q. For you, what were the key
highlights this year?
A. The main highlights for me were the
overwhelmingly positive response to the
Company’s handling of colleague and customer
safety, as a result of the COVID-19 pandemic, and
the care taken to ensure everyone felt supported.
Being an essential services provider meant that
Halfords remained open throughout the lockdown
period. There were times when this was really
challenging for colleagues, but the team spirit
fostered as a result, ensuring we were able to keep
customers safe and on the move. It was great
to see. Listening groups continued, and despite
being prevented from meeting in person, we
managed surprisingly well using conference calls
for Halfords Autocentres and Microsoft Teams for
Retail.
Q. How do you ensure the employee
voice is heard on the Board?
A. Reporting to the Board on behalf of colleagues,
is a responsibility I take seriously. The Board is
committed to ensuring colleagues have a forum
where their views, suggestions or concerns will
be heard, so I provide that link. In addition to
the annual Colleague Engagement Survey, the
Company holds listening groups each year. I
typically attend around six sessions each quarter,
as well as making some informal store visits. In
each case, colleagues are actively encouraged
to be open and honest in their feedback and I
do my best to put them all at ease. I now report
quarterly to the Board on the main themes,
to include what is working well for colleagues
and what the Company should pay particular
attention to. In addition we recently started to
work with our Colleague Engagement Champions
on pay reporting to ensure they have a good
understanding of our approach to reward at
Halfords. We’re also inviting them to comment
on what we might consider when developing
future pay policies for Executives and colleagues
across the Group. I attended the initial session and
captured some of the early feedback for the Board.
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Governance
Q&A with
Helen Jones
Q. How do you share outcomes
with the wider employee base?
A. All feedback from listening groups
is captured in writing and then shared
with attendees. The information is
logged centrally and ‘You Said, We Did’
communications are now being shared
across the Halfords Group through the
various platforms. Subsequent listening
groups report on actions taken as a result of
the feedback and I’m aware that colleagues
really value the opportunity to share their
views in a safe space.
Q. What areas does the Board
want to focus on in future?
A. The Company has committed to
an ambitious ESG agenda, to include
promoting diversity and inclusion across
the Group. In addition, we are working
to strengthen our succession plans and
our talent pipeline. As we continue to
emphasise our services credentials,
ensuring we provide the appropriate training
to colleagues to deliver expertise across
motoring and cycling, remains an absolute
priority.
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Corporate Governance Report
Division of Responsibilities
Board Composition
At the date of this report, the Board of
Directors comprised of six members,
namely the Non-Executive Chair, three
other Non-Executive Directors and two
Executive Directors. The composition of
the Board is set out on page 80, and the
biographies of each Director, including any
other business commitments, are available
on pages 76 to 77. The Board believes it
has an appropriate balance of Executive
and independent Non-Executive Directors,
having regard to the size and nature of the
business. The Board is responsible for the
long-term success of the Company and
is committed to ensuring that it provides
leadership to the business as a whole,
having regard to the interests and views of
its shareholders and other stakeholders. It
is also responsible for setting the Group’s
strategy, values and standards. Details of
the Group’s business model and strategy
can be found on pages 08 to 09.
Chair
1
Executive Directors
2
Non-Executive Directors
3
Board Changes
In 2020 David Adams reached nine years
tenure, and in accordance with the 2018 UK
Corporate Governance Code (the “Code”)
and best practice, David was due to step
down from the Board. Whilst a search for a
new Non-Executive Director to replace David
commenced at the start of 2020, the search
was delayed due to the COVID-19 global
pandemic. Given the difficulties created by
this, it was announced in the 2020 Annual
Report that the Nomination Committee had
agreed to extend David’s term of appointment
until December 2020 and that a new Non-
Executive Director would be appointed later in
2020. On 13 August 2020 it was announced
that Tom Singer had been appointed as a
Non-Executive Director with effect from 16
September 2020 to replace David as Chair of
the Audit Committee, allowing for an orderly
handover before David left at the end of 2020.
David stepped down as Senior Independent
Director at the conclusion of the AGM on
Tuesday 15 September 2020 and Helen
Jones was appointed in his place.
Board Independence
The Non-Executive Directors bring wide
and varied experience to the Board and
its Committees. The Code recommends
that at least half of the Board of Directors,
excluding the Chair, should comprise Non-
Executive Directors, who are determined
by the Board to be independent and are
free from relationships or circumstances
which may affect or could appear to affect
the Non-Executive Director’s judgement.
Following a review, the Board considers
Helen Jones, Jill Caseberry and Tom
Singer to be independent in character and
judgement.
The Chair, Keith Williams was considered
independent upon his appointment.
Re-election and Election
In compliance with the Code and the
Company’s Articles of Association, as at
16 June 2021, the following Directors will
seek re-election at the 2021 Annual General
Meeting (“AGM”): Keith Williams, Helen
Jones, Jill Caseberry, Graham Stapleton
and Loraine Woodhouse.
Tom Singer will, for the first time at the 2021
AGM, seek election having been appointed
on 16 September 2020.
Board Key Responsibilities
The Board is responsible for the long-term
success of the Company and is committed
to ensuring that it provides leadership to the
business as a whole, having regard to the
interests and views of its shareholders and
other stakeholders. It is also responsible
for setting the Group’s strategy, values and
standards. Details of the Group’s business
model and strategy can be found on pages
08 to 09.
The Board – Key Responsibilities
The Board is collectively responsible for the
long-term success of the Company, with
due regard to the views of shareholders and
other stakeholders. It provides leadership
and direction on the Company’s culture,
values and purpose; sets the strategic
direction; agrees the risk framework and
ensures these are managed effectively. The
Board is accountable to shareholders for
the financial and operational performance of
the Group.
A complete list of Matters Reserved
for the Board is available on
the Company’s website www.
halfordscompany.com/governance/
matters-reserved-for-the-board
Division of Responsibilities
The roles of Chair and Chief Executive
Officer are separate and clearly defined,
with the division of responsibilities set out in
writing and agreed by the Board.
The Chair is responsible for effective
leadership, operation and governance
of the Board and its Committees. He
ensures effective communication with
shareholders, facilitates the contribution of
the Non-Executive Directors and ensures
constructive relations between Executive
and Non-Executive Directors.
The Chief Executive Officer is responsible
for the management of the Group’s
business and for implementing the Group’s
strategy.
The Directors, together, act in the best
interests of the Company via the Board and
its Committees, devoting sufficient time
and consideration as necessary to fulfil
their duties. Each Director brings different
skills, experience and knowledge to the
Company, with the Non-Executive Directors
additionally bringing independent thought
and judgement. This combination seeks to
ensure that no individual or group unduly
restricts or controls decision-making.
A formal schedule of matters reserved
for the Board is in place and is annually
reviewed as referred to above.
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Governance
Board Committees
The Board’s principal Committees are
the Audit Committee, the Nomination
Committee, the Remuneration Committee
and the Environmental, Social and
Governance (“ESG”) Committee. Each
Committee has its own Terms of Reference
which are approved and regularly reviewed
by the Board.
On the following pages each Committee
Chair reports how the Committee they chair
discharged its responsibilities in FY21 and
the material matters that were considered.
Following a Committee meeting, the
relevant Committee Chair provides a report
to the Board. Whilst not entitled to attend,
professional advisors and members of
senior management attend when invited
to do so, as do those Directors who are
not formally a member of the relevant
Committee. The external Auditor attends
Audit Committee meetings by invitation. No
person is present at Nomination Committee
or Remuneration Committee meetings
during discussions pertinent to them. The
Company Secretary acts as the secretary to
the principal Committees.
Matters which require Board approval
between scheduled Board meetings can
be approved by a Board Committee, which
consists of a minimum of two Directors.
The final wording of market announcements
is approved prior to release by a Disclosure
Committee which is made up of a minimum
of two Directors.
There were two Board Committee meetings
and eleven Disclosure Committee meetings
during the period.
At Executive level, the day-to-day
investment decisions of the Group are
approved by an Investment Committee,
chaired by the Chief Financial Officer.
Similarly, the treasury needs of the Group
are managed by the Treasury Committee,
chaired by the Chief Financial Officer;
the other members of these Executive
committees are senior members of the
Finance and Treasury teams.
The Board may establish other ad hoc
committees of the Board to consider
specific issues from time to time. No such
committees were formed during the year.
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To discharge these responsibilities effectively, the Board has a system of delegated
authorities, which enables the effective day-to-day operation of the business and ensures
that significant matters are brought to the attention of management and the Board as
appropriate. It is through this system that the Board is able to provide oversight and
direction to the Executive Directors, the Executive Team and the wider business.
Matters specifically reserved for the Board include: strategy and management; corporate
structure and capital; investor relations; audit, financial reporting and controls; nominations
to the Board; Executive remuneration and certain material contracts.
Director Tenure and Board Succession
Succession planning for the Board is monitored regularly and in particular is considered in
detail during the annual evaluation of the Board performance as described on pages 106
and 107. Details of the tenure for all Board members are as follows:
Keith Williams
Jill Caseberry
Helen Jones
Graham Stapleton
Loraine Woodhouse
Tom Singer
2 years, 10 months
2 years, 3 months
7 years, 3 months
3 years, 5 months
2 years, 7 months
2
1
0
2
l
i
r
p
A
1
3
1
0
2
l
i
r
p
A
1
4
1
0
2
l
i
r
p
A
1
5
1
0
2
l
i
r
p
A
1
6
1
0
2
l
i
r
p
A
1
7
1
0
2
l
i
r
p
A
1
8
1
0
2
l
i
r
p
A
1
9 months
9
1
0
2
l
i
r
p
A
1
0
2
0
2
l
i
r
p
A
1
1
2
0
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l
i
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A
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Corporate Governance Report
Division of Responsibilities
Halfords Group plc Board of Directors
Nomination Committee
Key Objectives
To ensure that the Board has the balanced skills, knowledge and experience to be effective in discharging its
responsibilities and to have oversight of all governance matters.
Main Responsibilities
Making appropriate recommendations to maintain the balance of skills and experience of the Board by:
•
•
•
considering the size, structure and composition of the Board;
considering Senior Management succession plans; and
identifying and making recommendations to the Board on potential Board candidates.
Audit Committee
Key Objectives
To provide effective governance over the Group’s financial reporting processes. This includes the internal audit
function and external Auditor. The Committee maintains oversight of the Group’s systems of internal controls
and risk management activities.
Main Responsibilities
• making recommendations to the Board on the appointment/removal of the external Auditor, and their terms
of engagement and fees;
reviewing and monitoring the integrity of the Company’s financial statements, including its annual and
interim reports and preliminary results announcements and any other formal announcement relating to its
financial performance, and recommending the same to the Board;
assisting the Board in achieving its obligations under the Code in areas of risk management and internal
control; and
focusing on compliance with legal requirements, whistleblowing, accounting standards and the Listing Rules.
•
•
•
Remuneration Committee
Key Objectives
To ensure that a Board policy exists for the remuneration of the Chief Executive Officer, the Chair, Non-Executive
Directors, other Executive Directors and members of the executive management.
Main Responsibilities
•
•
•
recommending to the Board the total individual remuneration package of Executive Directors and members
of the executive management;
approving senior executive remuneration and oversight of remuneration matters generally;
recommending the design of the Company’s share incentive plans to the Board, approving any awards
to Executive Directors and other executive managers under those plans and defining any performance
conditions attached to those awards;
• determining the Chair’s fee, following a proposal from the Chief Executive Officer; and
• maintaining an active dialogue with institutional investors and shareholder representatives.
ESG Committee
Key Objectives
To ensure that the Company has an ESG strategy which is aligned with the Company’s strategy.
Main Responsibilities
• development of an ESG strategy including the setting of appropriate targets; and
• monitoring progress against key targets and initiatives.
Chair:
Keith Williams
Members:
Helen Jones
Jill Caseberry
Tom Singer
Chair:
Tom Singer
Members:
Helen Jones
Jill Caseberry
Chair:
Jill Caseberry
Members:
Helen Jones
Tom Singer
Chair:
Helen Jones
Members:
Jill Caseberry
Tom Singer
Chief Executive Officer
Executive Committee
Key Objectives
•
responsible for the day-to-day management of the Company;
• develops the Group’s objectives and strategy for Board approval;
•
creates and recommends to the Board an annual budget and
financial plan;
• delivers the annual budget and plan and executes the agreed
•
Group strategy and other objectives;
identifies and executes new business opportunities and
potential acquisitions or disposals;
•
keeps the Chair informed on all important matters; and
• manages the Group’s risks in line with the Board-approved
risk profile.
Key Objectives
• oversees the creation of customer and commercial
•
strategy, approves marketing and digital creative, monitors
performance against the implementation of the commercial
plan, and approves investment against strategy;
acts as the senior steering group for the Transformation
Programme, approving and monitoring significant
programme spend and monitoring programme risk;
• oversees the Group’s risk management framework,
providing assurance over risk mitigation and scanning the
horizon for emerging risk; and
approves all Group financial investment.
•
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Chair
Key Responsibilities
• manages and provides leadership to the Board;
• builds an effective and complementary Board of Directors;
sets the agenda, style and tone of Board discussions;
facilitates and encourages active engagement in meetings,
promoting effective relationships and open communication;
ensures effective communication with shareholders and other
stakeholders;
ensures that the performance of individuals and of the Board as
a whole and of its Committees is evaluated at least once a year,
and the results are acted upon;
acts as an advisor to the Chief Executive Officer;
• meets with the Non-Executive Directors without Executive
Directors being present;
facilitates the effective contribution of Non-Executive Directors; and
ensures constructive relations between Executive Directors and
Non-Executive Directors.
Senior Independent Director
Key Responsibilities
• provides a sounding board for the Chair;
holds meetings with the other Non-Executive Directors
without the Chair at least once a year to appraise the Chair’s
concerns; and
performance;
acts as an intermediary for the other Directors;
channels.
is available to other Directors and shareholders in order to
address concerns that cannot be raised through the normal
attends meetings with a range of major shareholders and
financial analysts to listen to and understand their views and
•
•
•
•
•
•
•
•
•
•
•
Non-Executive Directors
Key Responsibilities
•
evaluate and appraise the performance of Executive Directors
and Senior Management against agreed targets;
• participate in the development of the Group’s strategy;
• monitor the financial information, risk management and controls
processes of the Group to make sure that they are sufficiently
• periodically visit Group sites, stores and Distribution Centres;
• meet together without the Executive Directors present;
• participate in a training programme, including store visits and
updates from management; and
•
formulate Executive Director remuneration and succession
planning.
robust;
• meet regularly with senior management;
Employee Voice Director
Key Responsibilities
•
ensures colleague feedback is brought to the attention of the
Board to help shape and influence some of the decisions that
are taken.
Company Secretary
Key Responsibilities
• works closely with the Chair, Group Chief Executive Officer
and Board Committee Chairs in setting the rolling calendar of
agenda items for the meetings of the Board and its Committees;
•
ensures accurate, timely and appropriate information flows
within the Board, the Committees and between the Directors
and Senior Management; and
• provides advice on Board matters, legal and regulatory issues,
corporate governance, Listing Rules compliance and best
practice.
Halfords Group plc Board of Directors
Nomination Committee
Key Objectives
To ensure that the Board has the balanced skills, knowledge and experience to be effective in discharging its
responsibilities and to have oversight of all governance matters.
Main Responsibilities
Making appropriate recommendations to maintain the balance of skills and experience of the Board by:
considering the size, structure and composition of the Board;
considering Senior Management succession plans; and
identifying and making recommendations to the Board on potential Board candidates.
Audit Committee
Key Objectives
and risk management activities.
Main Responsibilities
of engagement and fees;
To provide effective governance over the Group’s financial reporting processes. This includes the internal audit
function and external Auditor. The Committee maintains oversight of the Group’s systems of internal controls
• making recommendations to the Board on the appointment/removal of the external Auditor, and their terms
reviewing and monitoring the integrity of the Company’s financial statements, including its annual and
interim reports and preliminary results announcements and any other formal announcement relating to its
financial performance, and recommending the same to the Board;
assisting the Board in achieving its obligations under the Code in areas of risk management and internal
control; and
focusing on compliance with legal requirements, whistleblowing, accounting standards and the Listing Rules.
Remuneration Committee
Key Objectives
Main Responsibilities
of the executive management;
recommending to the Board the total individual remuneration package of Executive Directors and members
approving senior executive remuneration and oversight of remuneration matters generally;
recommending the design of the Company’s share incentive plans to the Board, approving any awards
to Executive Directors and other executive managers under those plans and defining any performance
conditions attached to those awards;
• determining the Chair’s fee, following a proposal from the Chief Executive Officer; and
• maintaining an active dialogue with institutional investors and shareholder representatives.
ESG Committee
Key Objectives
Main Responsibilities
To ensure that the Company has an ESG strategy which is aligned with the Company’s strategy.
• development of an ESG strategy including the setting of appropriate targets; and
• monitoring progress against key targets and initiatives.
Chair:
Keith Williams
Members:
Helen Jones
Jill Caseberry
Tom Singer
Chair:
Tom Singer
Members:
Helen Jones
Jill Caseberry
Chair:
Members:
Helen Jones
Tom Singer
Chair:
Helen Jones
Members:
Jill Caseberry
Tom Singer
To ensure that a Board policy exists for the remuneration of the Chief Executive Officer, the Chair, Non-Executive
Jill Caseberry
Directors, other Executive Directors and members of the executive management.
Chief Executive Officer
Key Objectives
Executive Committee
Key Objectives
responsible for the day-to-day management of the Company;
• develops the Group’s objectives and strategy for Board approval;
• oversees the creation of customer and commercial
strategy, approves marketing and digital creative, monitors
creates and recommends to the Board an annual budget and
performance against the implementation of the commercial
financial plan;
plan, and approves investment against strategy;
• delivers the annual budget and plan and executes the agreed
•
acts as the senior steering group for the Transformation
Group strategy and other objectives;
identifies and executes new business opportunities and
potential acquisitions or disposals;
keeps the Chair informed on all important matters; and
• manages the Group’s risks in line with the Board-approved
risk profile.
Programme, approving and monitoring significant
programme spend and monitoring programme risk;
• oversees the Group’s risk management framework,
providing assurance over risk mitigation and scanning the
horizon for emerging risk; and
•
approves all Group financial investment.
•
•
•
•
•
•
•
•
•
•
•
•
•
Governance
•
ensures that the performance of individuals and of the Board as
a whole and of its Committees is evaluated at least once a year,
and the results are acted upon;
acts as an advisor to the Chief Executive Officer;
•
• meets with the Non-Executive Directors without Executive
•
•
•
•
Directors being present;
facilitates the effective contribution of Non-Executive Directors; and
ensures constructive relations between Executive Directors and
Non-Executive Directors.
attends meetings with a range of major shareholders and
financial analysts to listen to and understand their views and
concerns; and
is available to other Directors and shareholders in order to
address concerns that cannot be raised through the normal
channels.
Chair
Key Responsibilities
• manages and provides leadership to the Board;
• builds an effective and complementary Board of Directors;
•
sets the agenda, style and tone of Board discussions;
•
facilitates and encourages active engagement in meetings,
promoting effective relationships and open communication;
ensures effective communication with shareholders and other
stakeholders;
•
Senior Independent Director
Key Responsibilities
• provides a sounding board for the Chair;
•
holds meetings with the other Non-Executive Directors
without the Chair at least once a year to appraise the Chair’s
performance;
acts as an intermediary for the other Directors;
•
Non-Executive Directors
Key Responsibilities
•
evaluate and appraise the performance of Executive Directors
and Senior Management against agreed targets;
• participate in the development of the Group’s strategy;
• monitor the financial information, risk management and controls
processes of the Group to make sure that they are sufficiently
robust;
• meet regularly with senior management;
• periodically visit Group sites, stores and Distribution Centres;
• meet together without the Executive Directors present;
• participate in a training programme, including store visits and
•
updates from management; and
formulate Executive Director remuneration and succession
planning.
Employee Voice Director
Key Responsibilities
•
ensures colleague feedback is brought to the attention of the
Board to help shape and influence some of the decisions that
are taken.
Company Secretary
Key Responsibilities
• works closely with the Chair, Group Chief Executive Officer
and Board Committee Chairs in setting the rolling calendar of
agenda items for the meetings of the Board and its Committees;
•
ensures accurate, timely and appropriate information flows
within the Board, the Committees and between the Directors
and Senior Management; and
• provides advice on Board matters, legal and regulatory issues,
corporate governance, Listing Rules compliance and best
practice.
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Corporate Governance Report
Composition, Succession and Evaluation
A Skilled and Experienced Board
The below graphic illustrates the number of Directors on the Board who have the relevant skills and experience alongside the years’ worth
of experience combined.
Supply Chain: 4
Total years: 73
Corporate: 6
Total years: 101
Banking: 3
Finance: 5
Total years: 186
Marketing: 4
Cross-Functional: 6
M&A: 4
Total years: 70
retail
Total years: 107
Total years: 131
Leadership: 6
Strategy: 6
Governance: 6
Total years: 400
Retail: 6
Total
years: 110
Customer Service: 5
Business Development/
Brand Building: 5
Digital: 4
Total years: 98
Total years: 126
Total years: 65
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Governance
Diversity and Inclusion
The Group recognises the importance
of diversity and inclusion, including
gender and ethnicity, at all levels of the
organisation. The Group’s Diversity Policy
(the “Policy”) is reviewed annually and
sets out our commitment to eliminating
unlawful discrimination and promoting
equality of opportunity. The Policy is
applied to the Group, including the Board,
and it is considered that the background
and experience brought to the Board by
each individual Director exemplifies and
personifies the Board’s commitment to its
Policy.
The Nomination Committee keeps under
review the composition and diversity of the
Board and the capability and capacity to
commit the necessary time to the role in
its recommendations to the Board. Whilst
the Group does not apply a fixed quota on
diversity to decisions regarding recruitment,
the Nomination Committee considers the
Policy and ensures we have a sufficiently
diverse Board in terms of age, gender and
educational and professional background
and that the Board members work together
effectively to achieve its objectives. The
intention is to ensure the appointment of
the most suitably qualified candidate to
complement the Board and to promote
diversity. Those appointed are deemed to
be the best able to help lead the Company
in its long-term strategy. At Halfords half
of the Board is female, which exceeds the
recommended target as published by the
Hampton-Alexander Review (“Improving
Gender Balance in FTSE Leadership”) in
November 2017, and we are committed
to improving ethnic diversity at Board and
senior management level with a target of
having at least one person of colour on
the Board by December 2023. The Board
is well placed by the mixture of skills,
experience and knowledge of its Directors
to act in the best interests of the Company
and its shareholders.
Gender
Female 50%
Male 50%
Educational Attainment
Level 7 – Master’s degree = 1
Level 6 – Bachelor’s degree = 3
Level 5 – Higher National Diploma = 2
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Corporate Governance Report
Composition, Succession and Evaluation
Board Evaluation
A formal Board effectiveness review is conducted on an annual basis. This includes an assessment of the Board, its Committees and
individual Directors.
FY20
FY21
External Evaluation by Lintstock
Internal Evaluation
FY22
Internal Evaluation
Evaluation Process
Step One
Step Two
Step Three
Step Four
Issued online surveys
and cross-surveys to the
Board members.
Received and analysed
the feedback with the
Chair of the Board. The
Chair then produced a
note of action points to
be addressed, which was
circulated to the Board
members.
The Chair of each Board
Committee received
the evaluation report
in relation to their
Committee, and time was
arranged to consider the
findings and agree an
action plan.
Implementation and
monitoring of the action
plans.
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Governance
The findings identified by the FY21 internal review are as follows:
Topic
Board composition
FY21 Outcomes
To ensure the Board has the right mix of skills, diversity and experience going forward.
Stakeholder oversight
To have more insight over suppliers and employee voice.
Succession and talent management
To ensure appropriate succession planning for Board and senior management.
The findings identified by the FY20 external review were as follows:
Topic
Strategic plan
FY20 Outcomes
The Board mentioned that continued delivery
and clear reporting of the progress against the
delivery plan is essential throughout the year.
NED programme
The introduction of a NED programme to ensure
the best contribution from the NEDs.
Progress Made in FY21
The Board was pleased to note that the
strategy outlined previously is regarded as
correct and appropriate for the Company
both in terms of longer-term aspiration and
dealing with the COVID-19 pandemic. The
Company has focused particularly on One
Halfords Family (keeping colleagues and
customers safe), and costs and efficiency
and Organisational Design to ensure optimum
performance of the business.
The regularity with which the NEDs visit the
business (stores, garages, DCs and to attend
listening groups). These activities help to ensure
the NEDs fully understand the needs of the
business.
Quality and structure of Board
meetings
The Board highlighted the importance of getting
out and about to the different locations around
the Group and to split some of the Board and
Committee meetings over two days. This would
allow more time for location visits and ensure
time is available to receive the required number
of management presentations.
Despite some changes to the Board schedule
due to the impact of COVID-19 which required
meetings to be held remotely, the plan to
conduct meetings over two days has been
progressed. During the period, additional time
was made available for committee activity and
a separate session was held on strategy.
Quality of Board packs
Culture and talent
The Board felt that more focus is required in
Board papers to ensure the Board is able to
effectively monitor the progress on delivery.
Being a people-driven, service-based business,
the Board felt that a renewed review of our
culture was necessary to ensure that it evolves
and remains fit for purpose. The Board will also
monitor the talent within the business and the
implication of appropriate succession planning.
Board training
All Board members to update on training they
have received.
The Board packs (particularly the financial
information) have been improved to allow and
ensure greater focus on the metrics which are
of key importance to the business.
The new Company Values have been agreed
and rolled out during the period. These have
been well received and engagement has
benefited as a result. This has been of particular
importance during the COVID-19 crisis which
has been challenging from an operational
perspective.
During the year, Directors have received
updates on changes in corporate governance
requirements and regular reports on
the progress of the Company’s Digital
Transformation.
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Corporate Governance Report
Composition, Succession and Evaluation
Risk Management and
Internal Control
The Board is responsible for the Group’s
risk management processes and the system
of internal control. The Board considers
its appetite in relation to the Group’s
risks, determining whether the risks and
mitigating actions are appropriate. During
the year, the Board conducted a review of
significant risks. The Group’s principal risks
and uncertainties, and mitigating actions,
are detailed in the Strategic Report on
pages 66 to 72.
The Board has established a continuous
process for identifying, evaluating and
managing risks faced by the Group and
assessing the effectiveness of related
controls to ensure an acceptable risk/
reward profile. The Audit Committee
considers the principal and emerging risks
of the business and reviews the mitigating
controls with senior management. During
the year, a Risk Committee was formed with
Executive Team support. The Committee
provides oversight of the development
of the risk management framework and
also reports to the Audit Committee on
regulatory and compliance risk. The Audit
Committee uses all forums to discuss
the management of risk and adequacy
of the control environment with senior
management.
The Internal Controls function was also
strengthened during 2021, with a number
of new colleagues focusing on ensuring the
business is ready for prospective changes
in the audit environment.
Our process for identifying, evaluating and
managing the significant risks faced by the
Group and assessing the effectiveness of
related controls routinely identifies areas
for improvement. The Board has neither
IR Calendar Dates
for FY20–21
17 June
2021
8 Sept
2021
8 Sept
2021
10 Nov
2021
13 Jan
2022
FY21 Prelim Results
FY22 20-week Trading Update
AGM
FY22 Interim Results
FY22 Q3 Trading Statement
identified nor been advised of any failings
or weaknesses that it has determined to be
material or significant.
The management of risk and review of the
internal control environment is a continual
process supported by all colleagues. The
Board supports the development of risk
maturity and a strong control culture and
will continue to improve the quality of risk
reporting.
Annual General Meeting (“AGM”)
We aim to encourage our shareholders
to receive communications by electronic
means, helping to make the Company
more environmentally friendly. Information
available on the Company’s website includes
current and historic copies of the Annual
Report and Accounts, full and half-year
financial statements, market announcements,
corporate governance information, the Terms
of Reference for the Audit, Nomination,
Remuneration and ESG Committees and the
Matters Reserved for the Board.
The AGM gives all shareholders the
opportunity to communicate directly
with the Board and their participation is
welcomed. It is the Company’s practice
to propose separate resolutions on each
substantial issue at the AGM. The Chair will
advise shareholders on the proxy voting
details at the meeting.
We very much hope that we will be able to
hold our 2021 AGM in person as we did in
2020, but we will continue to monitor the
COVID-19 situation and will have regard
to developments over the coming weeks
ahead of the meeting.
By order of the Board
Tim O’Gorman
Company Secretary
16 June 2021
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Governance
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109
The Committee’s key
objective is to ensure
that the Board comprises
of individuals with the
necessary skills, knowledge,
experience and diversity to
ensure it is effective.
Nomination
Committee
Report
Keith Williams
Chair’s Letter
The Committee’s key objective is to ensure that
the Board comprises of individuals with the
necessary skills, knowledge, experience and
diversity to ensure that the Board is effective in
discharging its responsibilities. During the year, the
Committee successfully secured the appointment
of Tom Singer to succeed David Adams as a
Non-Executive Director and Chair of the Audit
Committee. Tom was appointed on 16 September
2020, is a Chartered Accountant and has recent
and relevant financial experience. The Committee
also considered the succession arrangements for
the Board and its Senior Management Team.
Keith Williams
Chair of the Nomination Committee
16 June 2021
2
Nomination
Committee
meetings held
Committee
Composition
During the year, the
Committee comprised:
Keith Williams
Helen Jones
Jill Caseberry
Tom Singer
(appointed 16 September 2020)
David Adams resigned
31 December 2020
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Nomination
Committee
Report
Keith Williams
Governance
Main Responsibilities of the
Committee
• Review the size, structure and
composition of the Board and its
Committees.
• Ensure plans are in place for orderly
succession to the Board and senior
management positions.
Activities During the Year
• Successfully completed the recruitment
of Tom Singer as David Adams’
successor.
• Continued with the progression of the
succession and talent development
plan, taking into account the
recommendations of the Parker Review.
• Lead the process for appointments
• Reviewed the internal FY21 Board
by identifying and making
recommendations on potential
candidates to join the Board.
evaluation and subsequent action plan.
• Reviewed the composition of the Board
and its Committees.
• Carried out an annual review of the
Committee’s Terms of Reference.
• Recommended the re-election of the
Board at the 2020 Annual General
Meeting.
FY21 Key Activities
• Appointment of Tom Singer
as Non-Executive Director
and Audit Committee Chair
and Helen Jones as Senior
Independent Director as David
Adams’ successor.
• Progression of succession and
talent development plans.
• Approved the appointment of a
permanent Chief People Officer.
Areas of Focus in FY22
• Progression of succession
plans for the Board and senior
management team.
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Nomination Committee Report
The Appointment of Tom Singer
Tom Singer was appointed as Non-Executive Director on 16 September 2020. Tom became a member of the Remuneration,
Audit and Nomination Committees upon joining the Board. After a handover period, on 31 December 2020 Tom succeeded
David Adams as Chair of the Audit Committee.
I am delighted to have joined the Halfords’
Board and am excited about the business’
prospects as it takes advantage of the many
opportunities to accelerate future growth.
Tom Singer
Non-Executive Director
Appointed 16 September 2020
Tom Singer’s Induction
• Meetings with members of the Senior
Management Team and Executive
Committee conducted remotely.
•
•
In person Autocentre visits made at the
Weybridge and Slough garages, this
included HME vans.
In person Retail store visits made at
Slough and Farnborough.
• Tom was due to visit the Washford DC
and Tredz DC in Swansea, but these
were postponed due to COVID-19
restrictions in the autumn and
subsequent winter lockdowns. It is
expected that these can be resumed
when the COVID-19 restrictions have
been lifted.
Q&A
Q. What process did the
Q. What key attributes
were fundamental to the
Committee when looking
for this role?
A. This appointment was for a Non-
Executive Director and Chair of
the Audit Committee, and so the
successful candidate needed
to have recent and relevant
financial experience, to ensure
compliance with the 2018 UK
Corporate Governance Code.
Committee go through
to appoint a new
Non-Executive Director?
A. The first step is to appoint an
external search consultancy
who can identify and approach
suitable candidates. Suitable
candidates are then interviewed,
an offer is made to the
successful candidate and the
relevant announcement made to
the Stock Exchange. A suitable
induction programme is then
put in place which is tailored
to the successful candidate’s
requirements.
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Governance
Board
Female 50%
Male 50%
Senior Management Team
Female 37.5%
Male 62.5%
Senior Management Team
direct reports
Female 34%
Male 66%
that no colleague, potential colleague,
customer, visitor or contractor will receive
less favourable treatment on the grounds
of gender, race, ethnic origin, disability,
age, nationality, national origin, sexual
orientation, gender reassignment, marital
or civil partnership status, pregnancy or
maternity, religion, beliefs and social class.
The Company does not currently publish
specific diversity targets but, in practice, it
has created a more balanced and diverse
Board and Senior Management Team. Half
of the Board comprises of women; 37.5%
of the Senior Management Team is female
and 34% of their direct reports are women.
With regard to ethnic diversity, the Board is
committed to improving ethnic diversity at
Board and senior management level with
a target of having at least one person of
colour on the Board by December 2023.
Further information regarding
diversity and inclusion can be found
on pages 47 and 48.
Board Succession
The Halfords’ Board considers succession
planning each year in respect of both
Director roles and the Senior Management
Team. Senior Executives have well
developed skills and experience to fulfil
their roles, and their skills are constantly
updated as new challenges arise. A key
factor in making better decisions is that the
business has a diverse range of Directors,
Executives and colleagues. Diversity and
gender positions are monitored each year
to ensure Halfords is able to identify any
improvements and benefits.
Looking Ahead
The Strategy of the Company remains
on track and the performance during the
period has been strong. We will continue
to monitor the Digital Transformation and
the growth of our garage services business
and ensure that the Board has the right mix
of skills, diversity and experience to enable
this growth to continue.
Keith Williams
Chair of the Nomination Committee
16 June 2021
Director Training and
Development
All Directors have the opportunity for
ongoing development and support via:
• A programme of visits to the Support
Centre, Distribution Centres, stores and
Autocentres.
• Reviews with the Chair to identify any
training and development needs.
• Access to the Company Secretary
for advice on governance, regulatory
and legislative changes affecting the
business or their duties as Director.
• Access to independent professional
advice at the Company’s expense.
• Membership of the Deloitte Academy,
a training and guidance resource for
Boards and Directors.
Board Appointments
During the year, David Adams stepped
down as Senior Independent Director.
As detailed in last year’s Annual Report,
although David’s term of appointment
was due to expire in Spring 2020, under
Corporate Governance guidelines, David
agreed to stay until the end of 2020 to
ensure continuity for the Board through the
COVID-19 pandemic. In August 2020, it
was announced that Tom Singer had been
appointed as a Non-Executive Director with
effect from 16 September 2020. Odgers
Berndtson was appointed as advisor to
the Committee in the search for external
candidates for this role and this process
was led by myself as Chair, together with
the Committee. Odgers Berndtson does
not have any other connection with the
Company.
At the AGM, on 15 September 2020, David
stepped down as Senior Independent
Director, with Helen Jones appointed to
cover this position. David continued to
act as a Non-Executive Director until 31
December 2020, when he stepped down
fully from the Board, and Tom Singer was
appointed to cover the position of Chair of
the Audit Committee.
Diversity and Inclusion
The Group’s Diversity Policy (“Diversity
Policy”) sets out Halfords’ commitment to
eliminate discrimination and to encourage
diversity and inclusion across the Board
of Directors and amongst all colleagues.
Halfords’ Diversity Policy applies to all
activities, including its role as an employer
and as a provider of services, ensuring
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A significant achievement
this year has been the setting
of science-based targets for
the Group and I am delighted
that we are able to share
these in this report.
ESG
Committee
Report
Helen Jones
We are committed to an ESG agenda which aims
to exceed our stakeholders’ expectations. Building
on our strategy announced last year, we are now
starting to make meaningful progress.
Recognising the significance of ESG within our
business, this year we have formalised ESG as an
official Committee of the Board, with membership
limited exclusively to NEDs.
The Board is committed to improving ethnic
diversity at Board and senior management level
and during the year we will begin the process
of ensuring that the composition of the Board is
compliant with the Parker Review into corporate
governance.
Chair’s Letter
During the year, the Committee conducted a
refresh of our ESG strategy recognising the need
to fully integrate our ESG commitments into how
we do business and aligning with our corporate
strategy. We agreed upon the four key areas of
priority – Electrification, Net Zero Commitment,
Diversity & Inclusion, and Product, Packaging and
Waste Management – and developed a roadmap
for delivering against these priorities in the short-,
medium-, and long-term.
A significant achievement this year has been the
setting of science-based targets for the Group
and I am delighted that we are able to share
these in this report. Setting these targets shows
our commitment to reducing our emissions and
our determination to achieve our goal of net zero
emissions by 2050.
3
ESG Committee
meetings held
Committee
Composition
During the year, the
Committee comprised:
Helen Jones
Jill Caseberry
Tom Singer
(appointed on 31 March 2021)
Graham Stapleton
(stepped down on 31 March 2021)
Karen Bellairs
(stepped down on 31 March 2021)
Michelle Burton
(stepped down on 31 March 2021)
Andy Randall
(stepped down on 31 March 2021)
The Company’s Chair, Keith
Williams, whilst not a member
of the Committee, attends the
meetings upon the invitation of
the Committee Chair.
There were three Committee
meetings held during the year
and after each one, I reported
to the Board on the key issues
that we covered. I held informal
discussions between Committee
members and business leaders
throughout the year as the need
arose.
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ESG
Committee
Report
Helen Jones
Main Responsibilities of the
Committee
• Oversight and continued development
• Approved a Group-wide goal of
achieving net zero emissions by 2050.
• Agreed upon a set of key priorities for
of our ESG strategy.
FY22 and future years:
• Setting KPIs and targets and monitoring
progress against them.
• Ensuring the Group continues to meet
stakeholder expectations.
• Maintaining the highest possible
standards of ethical trading in our
supply chain.
Activities Undertaken
During the year, the Committee:
• Created a Steering Group comprising
of key ESG stakeholders around the
business, with the responsibility of
monitoring and ultimately delivering the
ESG strategy.
• Evaluated ESG strategies of peer group
companies to help inform our thinking.
• Reviewed and agreed upon a set of
science-based targets:
− Halfords will commit to achieve a
1.5ºC science-based target across
Scopes 1 and 2 by 2030, reducing
our emissions by 42% vs. a FY20
baseline.
− We also commit that 67% of our
suppliers by emissions covering
purchased goods and services and
capital goods will have science-
based targets by 2025.
− Electrification remains our North
Star and we will focus our efforts
in this space to meet all our
stakeholder expectations.
− Net Zero Commitment
− Diversity & Inclusion
− Product, Packaging and Waste
Management
• Reviewed and agreed upon a set of
ESG targets and KPIs which were taken
to the Remuneration Committee for
approval.
• Signed off end-to-end packaging audit.
Further information on ESG around the
Group, including environmental details on
emissions, can be found on pages 42 to 53
of the Strategic Report.
Looking Ahead
In FY22, our focus will be on making strong
progress against our key priorities and
maintaining pace with our ESG roadmap.
We will ensure we are prepared to report
against the TCFD framework no later
than the end of this financial year. We will
continue to keep in close contact with our
stakeholders and review the latest industry
expectations to ensure that our ESG
strategy remains up-to-date, relevant and
fit-for-purpose.
Helen Jones
Chair of the ESG Committee
16 June 2021
Read more about our ESG Strategy
on pages 42 to 53.
Governance
FY21 Key Activities
• Agreement to set intermediate
science-based targets – to
achieve a 1.5ºC target across
our own operations by 2030,
reducing our emissions by
42% vs. a FY20 baseline, and
that 67% of our suppliers by
emissions will set science-based
targets by 2025.
• Approved a Group-wide goal
of achieving net zero emissions
by 2050.
• Completed a refresh of
our ESG strategy including
agreement of our four areas
of priority: Electrification, Net
Zero Commitment, Diversity
& Inclusion, and Product,
Packaging and Waste
Management.
• Development of a roadmap for
delivering our ESG strategy over
the next 12–18 months.
• Reviewed and agreed upon a set
of ESG targets and KPIs which
were taken to the Remuneration
Committee for approval.
Areas of Focus in FY22
• Continuing to support our
customers as they switch
to electric, with increased
investment in the training of
colleagues to service electric
modes of transport.
•
Implementing measures to make
progress against our science-
based targets, such as switching
to 100% renewable energy.
• Establish D&I baseline data and
begin to implement a refreshed
Group inclusion policy.
• Pilot the selling of reconditioned
products, reducing the use of
virgin materials.
• Engaging with suppliers to begin
their net zero journey.
• Reporting against the TCFD
framework.
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The advent of COVID-19 has
highlighted the importance of
a robust control environment
and, accordingly, during the
year, the Audit Committee
has engaged across a wide
number of themes to satisfy
itself that the system of risk
management and control
continued to operate within
the challenging external
environment.
Audit
Committee
Report
Tom Singer
Chair’s Letter
I am pleased to present the report of the Audit
Committee for the 52 weeks ended 2 April 2021.
I was appointed as a Non-Executive Director on
16 September 2020 and became Chair of the
Committee on 1 January 2021 on the retirement
of David Adams. I would like to thank David for his
work as a member and Chair of the Committee
and, specifically, for his help and guidance as
I was inducted into the business.
This report describes how the Committee has
carried out its responsibilities during the year. The
Committee reviews financial reporting judgements
and monitors risk and the effectiveness of the
system of internal control through engagement
with executive management, internal audit and
the external Auditor.
During the year, the Committee considered a
number of key issues, most significantly:
•
•
the impact of COVID-19 on the Group, and
specifically whether the business remained
a Going Concern;
the refinancing of the Group’s revolving credit
facility;
•
•
•
•
•
•
judgements in respect of M&A and disposal
activity in the year;
the carrying value of investments, tangible and
intangible assets;
the recent BEIS proposals for Audit and
Corporate Governance reform, considering
the impact on our reporting and control
environment;
the acceleration of our business and financial
controls programme;
the ongoing review of the legal entity
restructure across the Group;
review of the Financial Reporting Council’s
correspondence in respect of the Annual
Report and Accounts for the period ended
3 April 2020; and
• updates to the Group’s Tax and Treasury policy
in relation to foreign exchange and hedging
requirements in light of the evolving Brexit position
Tom Singer
Chair of the Audit Committee
16 June 2021
3
Audit Committee
meetings held
Committee
Composition
During the year, the
Committee comprised:
Tom Singer (Chair)
(appointed 1 January 2021 and
as a member 16 September
2020)
Helen Jones
Jill Caseberry
David Adams
(resigned 31 December 2020)
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Audit
Committee
Report
Tom Singer
Governance
FY20/21 Key Activities
• Carried out our responsibilities as set out in the Terms of Reference, including
reviewing the external reporting to ensure it is fair, balanced and understandable.
• Reviewed the accounting policies and judgements made in applying IFRS16
on leases.
• Reviewed the accounting treatment associated with the acquisitions and
disposals made during the year.
• Reviewed and challenged the Longer-Term Viability Statement and Going Concern
basis of preparation in advance of approval by the Board, including a review of the
carrying value of goodwill in response to the ongoing COVID-19 pandemic. This
assessment was inclusive of stress testing to ascertain the level of headroom in
the plans against possible covenant breach.
• Reviewed and approved a legal entity restructure designed to simplify the Group
structure.
• Reviewed and challenged the external Auditor’s year-end and half-year reports.
• Reviewed the statement of external Auditor’s independence.
• Approved the non-audit fee policy.
• Reviewed key and emerging risks and the effectiveness of the Group’s risk
management framework.
• Reviewed and challenged progress of the Internal Audit plan and received regular
updates on internal control systems.
• Reviewed and approved the Internal Audit Charter.
• Received an update on the Group’s GDPR and compliance, and on health and
safety matters.
• Reviewed and approved the Group’s tax strategy and arrangements.
• Reviewed and approved the Committee’s updated Terms of Reference.
• Reviewed and approved the external Auditor’s audit strategy and fees.
• Reviewed and challenged the effectiveness of the Group’s whistleblowing
procedures and approved the Group Whistleblowing Policy.
• Reviewed and approved the Anti-Money Laundering Policy.
• Received regular updates on the Gifts and Hospitality register.
• The Group received a letter on 8 January 2021 from the Financial Reporting
Council (FRC) noting it had carried out a review of the Annual Report and
Accounts for the year ended 3 April 2020. The letter raised some specific queries
in regards to cash flow reporting relating to leases and classification of provisions
for closure costs. This was followed up by a letter received on 26 February 2021
raising further queries on the classification of provisions for closure costs and
impairment testing and related estimation uncertainty. As a result, the Group has
added additional disclosures within the accounts with regards to the classification
of provisions for closure costs in the prior year and sought to improve its goodwill
impairment disclosures and description of certain critical accounting estimates.
The Group recognises that the FRC’s review was solely based on a review of its
Annual Report and Accounts for the year ended 3 April 2020 and did not benefit
from detailed knowledge of the Company’s business or an understanding of the
underlying transactions. As a result, the review did not provide any assurance that
the Company’s Annual Report and Accounts are correct in all material respects.
The advent of COVID-19 has highlighted the
importance of a robust control environment
and, accordingly, during the year, the Audit
Committee has engaged across a wide
number of themes to satisfy itself that the
system of risk management and control
continued to operate within the challenging
external environment.
The Committee focused heavily on the impact
of COVID-19, specifically ensuring that the
application of the Going Concern principle
was appropriate. This included a detailed
review of the refinancing of the Group’s
Revolving Credit facility, recommending the
proposed structure to the Board.
The Group undertook a number of
transactions during the year, including the
purchase of The Universal Tyre Company
(Deptford) Limited (“Universal”) and the
closure of a number of stores and garages.
The Committee reviewed the accounting
treatment of each transaction, ensuring
that the necessary accounting judgements
made were appropriate.
Prior to and post the financial year-end, the
Group started to undertake a legal entity
reduction exercise, to simplify the corporate
structure. The Committee reviewed the
outcome of the restructure, ensuring that
distributable reserves were adequate to
support future dividend payments.
In March 2021, the Department for
Business, Energy and Industrial Strategy
(BEIS) published a consultation paper
on its proposals for significant reform to
UK audit and corporate governance. The
Committee discussed the early proposals
and, as the consultation develops, will
review the implications for the Group and
the way in which the Committee operates.
Ahead of the consultation, the Group had
recognised the likely requirement for an
enhanced control environment and an
internal team has been set up dedicated
to the enhanced documentation and
implementation of robust processes and
controls. The Committee will continue to
monitor progress in this regard.
Finally, the Committee reviewed the
company’s principal risks, ensuring that
robust risk mitigation was in effect during
the year and that emerging risks were
identified and flagged appropriately.
I would like to thank the members of the
Committee, the management team and our
external Auditor for the open discussions
that take place at our meetings and their
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Audit Committee Report
Area of Focus
• Continue to monitor the impact
upon the Group’s Viability and
Going Concern in response
to the ongoing impact of the
COVID-19 pandemic.
• Continued emphasis on the
quality of financial reporting,
including the application of
accounting judgements.
• Maintain focus on the adequacy
of the control environment and
further development of the
risk management framework,
focused on complying with
the outcome of the BEIS
recommendations on audit and
governance.
Committee also provide the opportunity for
the independent Non-Executive Directors
to meet without the Executive Directors
present and to raise any issues of concern
with the internal audit team and external
Auditor. There have been three such
meetings in the period ended 2 April 2021
and nothing of note was reported.
Principal Responsibilities
Financial Reporting
• Review the interim and final financial
statements of the Group and
assess whether appropriate suitable
accounting policies have been adopted,
and whether management has made
appropriate estimates and judgements.
Assess the appropriateness of
disclosures in the Annual Report and
Accounts and ensure that it is fair,
balanced and understandable.
Risk and Control Environment
• Assist the Board in achieving its
obligations under the UK Corporate
Governance Code in areas of risk
management and internal control,
focusing particularly on compliance
with legal requirements, accounting
standards and the Listing Rules.
• Review the risk management framework
and the principal risks and mitigation
strategies, including the investigation of
fraudulent activity.
Internal Audit
• Review reports from Internal Audit on
developments in the internal control
framework to ensure that an effective
system of internal financial and non-
financial control is maintained on an
ongoing basis.
External Audit
• Make recommendations to the Board
on the reappointment of the external
Auditor, including on effectiveness,
independence, non-audit work
undertaken (against a formal policy)
and remuneration.
contribution and support during the year.
Member
Role
Attendance
Tom Singer
Helen Jones
Jill Caseberry
David Adams
Chair
Member
Member
Chair
2/2
3/3
3/3
2/2
Three scheduled Committee meetings were
held during the year and attended by all
members. After each Committee meeting,
the Audit Committee Chair reported to the
Board on the key issues discussed.
Although the Company Chair, CEO and
CFO are not members of the Committee,
they do attend meetings regularly and so
contribute to the work of the Committee,
assisting with the fulfilment of its oversight
functions.
Membership and Remit of
the Audit Committee
During the year, the members of the
Audit Committee were considered to be
independent Non-Executive Directors.
Tom Singer was appointed as Chair of
the Audit Committee on 1 January 2021,
taking over from David Adams. Tom is
a Non-Executive Director of Mediclinic
International plc and was, until recently, the
Senior Independent Director and Chair of
the Audit and Remuneration Committees
at DP Eurasia NV. Previously, Tom served
as CFO of InterContinental Hotels Group
plc and Group Finance Director of British
United Provident Association (“BUPA”), and,
as such, is considered by the Board to have
recent and relevant financial experience
to chair the Committee. Each of the other
independent Non-Executive Directors has,
through their other business activities,
significant experience in financial matters.
The Audit Committee is considered to have
competence relevant to the sector in which
the Company operates. The effectiveness
of the Audit Committee is reviewed at least
annually through discussions at the Board
and Audit Committee and through a formal
Board survey.
The Company’s Chair, Executive Directors,
senior managers and key advisors are
invited to attend meetings, as appropriate,
in order to ensure that the Committee
maintains a current and well-informed view
of events within the business and reinforce
a strong risk management culture. The
Audit Committee meets according to the
requirements of the Company’s financial
calendar. The meetings of the Audit
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Governance
• The Audit Committee has received
detailed reports from Halfords’ finance
team and reports from the external
Auditor addressing this issue. The
finance team has undertaken detailed
work to consider the impairment of
goodwill associated with the CGUs.
Consideration has been given to
ensuring that cash flow models,
discount rates, sensitivity analysis and
store and centre profitability are all
reasonable. It was concluded that no
impairment is required. The Committee
concluded that it is satisfied with the
accounting treatment of impairment
of goodwill.
Valuation of Inventory Within
the Retail Division:
• With the business holding a wide
range of stock and changing consumer
demands, some lines will not be sold
or will be sold at below the carrying
value. Provisions are made to reflect
this. Given the difficulties in forecasting
market trends, there is a risk that
inventory provisions made will be
inappropriate or incomplete (see
Note 15 on page 177 of the Financial
Statements). Management has fully
reviewed the inventory provision in
the current year, with particular regard
to the impact of COVID-19 and the
effect this has had on differing stock
categories, and believe the level of
provisioning is appropriate. Range
reviews are regularly undertaken to
ensure that all discontinued inventory
is identified; and
• The Audit Committee has received
detailed reports from Halfords’ finance
team addressing this issue. The finance
team has undertaken detailed work
around the valuation of inventory within
the Retail division. After consideration
of the accuracy of the provisioning
model, the completeness and accuracy
of range reviews, and the reflection of
these reviews within the provisions, the
Committee concluded that it is satisfied
with the accounting treatment of the
valuation of inventory.
IFRS 16 ‘Leases’
The Group initially applied IFRS 16
Leases as at 30 March 2019. The work
to collect the relevant data, implement
a new accounting system and agree the
appropriate adoption method, accounting
policies and disclosures has been
significant. During both the previous and
current period, the Committee and external
Auditor received regular updates to ensure
that the Committee reviewed all aspects
of IFRS 16 adoption and application and is
satisfied that the methodology used, and
the judgements and assumptions applied,
are fair and reasonable. A number of
adjustments have been required this year,
these have been reviewed by the Audit
Committee.
Group Reorganisation
The Group has undergone a review of its
legal entity structure, with the primary
objective of eradicating a dividend block
arising in some of the intermediate holding
legal entities across Halfords Group. This
has resulted in streamlining the Companies
across the Group and the first stage of the
reorganisation has been accounted for in
the plc accounts as at 2 April 2021.
Non-underlying Costs Related to
the Closure of Non-Profit Making
Stores and Centres
Following the strategic review of the
Group’s stores and centres, the decision
was made to close 40 stores across the
Retail business and 15 centres across the
Autocentres business. The Committee
reviewed the treatment of the costs related
to these closures and is satisfied with the
estimation of all associated costs and their
relevant inclusion as a non-underlying item
for the period.
External Auditor
BDO UK LLP present their audit plan, risk
assessment, and audit findings to the
Committee, identifying their consideration
of the key audit risks for the year, and the
scope of their work. These reports are
discussed throughout the audit cycle.
Policies
• Approve a formal Whistleblowing Policy
whereby colleagues may, in confidence,
disclose issues of concern about
possible malpractice or wrongdoings by
any of the Group’s businesses or any of
its employees without fear of reprisal,
including arrangements to investigate
and respond to any issues raised.
• Approve the Company’s systems and
controls for the prevention of bribery
and corruption, including the receipt of
any reports on non-compliance.
• Approve the Group’s Tax Policy and
published tax strategy.
• Approve the Group’s Treasury Policy,
including foreign currency and interest
rate exposure.
The Audit Committee has reviewed its
Terms of Reference and its composition
during the year and believes that both
remain appropriate.
Copies of the full Terms of Reference are
available on the Company’s website or on
request from the Company Secretary.
The Terms of Reference for the Committees
are available at www.halfordscompany.com/
investors/governance
Matters Considered in Relation
to the Financial Statements
In order to discharge its responsibility
to consider accounting integrity, the
Committee carefully considers key
judgements applied in the preparation of
the consolidated financial statements which
are set out on pages 148 to 153.
The Committee has considered the following
key accounting judgements during the year:
Impairment of Goodwill Associated
with the Group’s Retail and Car
Servicing Cash Generating Units
(CGU):
• Following a number of business
combinations across both CGUs, the
Group holds significant goodwill. There
are a number of factors that could
impact on the future profitability of the
business (e.g. loss of key customers,
change in market behaviour) and,
therefore, there is a risk that the
business may not meet the growth
projections necessary to support the
carrying value of the intangible asset
(see Note 11 on page 173 to 174 of the
Financial Statements); and
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Audit Committee Report
Effectiveness of External Audit
The effectiveness of the external audit is
considered throughout the year through,
amongst other factors: assessment of the
degree of the audit firm’s challenge of key
estimates and judgements made by the
business; feedback from any external or
internal quality reviews on the audit; and
the wider quality of communication with the
Committee.
During the year, the FRC conducted an
Audit Quality Review of BDO’s audit of
the Group financial statements for the
year ended 3 April 2020. The resulting
assessment was “Limited improvements
required”, with no key findings. The Audit
Committee has reviewed the FRC report
and supports the actions proposed by
BDO.
In addition, at its meeting in March 2021,
the Committee reviewed the External Audit
Planning document prepared by BDO.
Following this, the Committee concluded
that:
• The overall audit approach, materiality,
threshold, and areas of audit focus were
appropriate to the business; and
• The audit team possessed the
necessary quality, expertise and
experience to provide an independent
and objective audit.
Approach to Appointment
or Reappointment
BDO UK LLP was appointed as external
Auditor to the Group in 2019 following
a formal tender process. The Audit
Committee considers that the relationship
with the Auditor is working well and is
satisfied with its independence, objectivity
and effectiveness and has not considered
it necessary to require BDO UK LLP to re-
tender for external audit work this year. The
Audit Committee has recommended to the
Board, for approval by shareholders at the
Annual General Meeting on 8 September
2021, the reappointment of BDO UK LLP
as external Auditor. The Audit Committee
monitors, and will continue to comply with,
best practice and external guidance in
respect of the frequency of audit tenders.
Approach to Safeguarding
Objectivity and Independence if
Non-Audit Services are Provided
The Audit Committee has established a
policy to ensure that any non-audit services
delivered by the external Auditor will not
jeopardise objectivity and independence.
The policy is consistent with the Ethical
Standards for Auditors.
The policy specifies:
“The external Auditor can be used to
provide non-audit services subject to any
non-audit engagement proposal provided
by the external Auditor being formally
approved by the Audit Committee before
contractual arrangements are entered
into, except for activities set out in a list of
prohibited activities. Other than for these,
for each separate service proposed to be
provided by the external Auditor, the Group
Chief Financial Officer will prepare a note
either to be tabled and minuted at an Audit
Committee meeting or to be circulated via
email to the Audit Committee members
and the Chief Executive Officer giving a
description of the work to be undertaken,
the reasons why the external Auditor is
involved in the proposal and how objectivity
and independence has, and is seen to be,
safeguarded.
In addition, the fees for any proposal for
non-audit services will not exceed 70%
of the three-year average statutory audit
fees when taken into consideration with
total fees for non-audit services already
committed in the financial year.
Consent is required from the Audit
Committee Chair, on behalf of the Audit
Committee, before the external Auditor can
be engaged for non-audit services.”
In addition, the external Auditor follows
its own ethical guidelines and continually
reviews its audit team to ensure that its
independence is not compromised.
An analysis of the fees earned by the
external Auditor is disclosed in Note 3 on
page 167 to the Financial Statements.
Role and Effectiveness
of Internal Audit
Internal Audit follows an annual risk-
based programme of audits to review the
effectiveness of the control environment.
The Audit Committee reviews the annual
audit programme for coverage and may
revise it according to changing business
circumstances or requirements. The
Audit Committee ensures that there are
sufficient resources to undertake the audit
programme.
The Head of Internal Audit attends each
Committee meeting, providing a summary
of audit findings and an update on progress
against the plan. The Committee also
reviews the status of implementation of
audit recommendations ranked by age and
level of risk to the business. All internal
audit reports are shared upon completion
with the external Auditor. During the
year, internal audits were carried out on
AEO compliance (Authorised Economic
Operator), Goods For Resale expenditure
controls, Halfords for Business, Cycle to
Work, Insurance and IT General Controls.
Alongside the Internal Audit programme, the
team also continued to drive the Group’s
risk management framework, with key areas
of progress outlined below. Internal Audit
reports to the Chief Financial Officer but
maintains direct and regular communication
to the Audit Committee Chair outside of
Committee meetings.
The Audit Committee is satisfied that
the Internal Audit team has the quality,
experience, and expertise appropriate for
the business.
Whistleblowing
A Whistleblowing Policy and procedure
(the “Policy”) enables colleagues to
report concerns on matters affecting
the Group or their employment, without
fear of recrimination. Posters publicising
whistleblowing channels are distributed to
all stores, Autocentres, Distribution Centres
and the Support Centre.
The Policy was reviewed and approved by
the Audit Committee and the Company
Secretary provides the Audit Committee
with a regular summary of whistleblowing
contacts and resolutions.
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Governance
CMA Order 2014
Statement of Compliance
The Group confirms that it was compliant
with the provisions of The Statutory
Audit Services for Large Companies
Market Investigation (Mandatory Use of
Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014
during the financial year ended 2 April 2021.
Tom Singer
Chair of the Audit Committee
16 June 2021
Anti-Bribery and Corruption
Policy
The Group’s Anti-Bribery and Corruption
Policy statement reinforces that the
Halfords Board is committed to conducting
its business affairs in a way that ensures
it does not engage in or facilitate any form
of corruption. It is Halfords’ policy to
prohibit all forms of corruption amongst its
colleagues, suppliers and any associated
parties acting on its behalf. The Group
has a detailed Anti-Bribery and Corruption
Policy and maintains a Gifts and Hospitality
Register. Anti-bribery expectations are
set out in standard purchasing terms and
conditions. Face-to-face and online training
has been provided to colleagues to raise
awareness of anti-bribery and corruption
legislation.
The Audit Committee has requested that
anti-bribery and corruption safeguards are
periodically reviewed by Internal Audit.
Internal Control and
Risk Management
The Board is responsible for the Group’s
risk management processes and the system
of internal control. The Audit Committee
contributes to this purpose by providing
oversight and challenge to the Group’s risk
management framework. A newly formed
Executive Risk Committee reports to the
Audit Committee on the risk management
framework, providing insight on principal
and emerging risks, risk appetite and
ongoing updates on regulatory and
compliance risk.
At each meeting during the year, the
Committee received a presentation on the
Group’s control framework in preparation
for changes in the UK’s governance and
reporting.
Further details of the Group’s internal
control and risk management framework
are set out on pages 66 to 72.
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We are pleased to have
achieved such strong
performance.
Remuneration
Committee
Report
7
Remuneration
Committee
meetings held
Committee
Composition
During the year, the
Committee comprised:
Jill Caseberry
Helen Jones
Tom Singer
(appointed 16 September 2020)
Keith Williams
(stepped down as a member
on 22 March 2021)
David Adams
(Resigned 31 December 2020)
Jill Caseberry
Chair’s Letter
Dear Shareholder
On behalf of the Remuneration Committee, I am
pleased to present the Remuneration Report for
the financial period ended 2 April 2021.
The Report consists of three sections:
• A summary of the pay outcomes for FY21, and
our approach for FY22;
• A summary of our Directors’ Remuneration
Policy – The Company’s Directors’
Remuneration Policy (the “Policy”) was
approved at the 2020 Annual General Meeting.
A copy of our full Policy is available on our
website; and
• The annual Directors’ Remuneration Report –
this summarises the remuneration outcomes
for FY21 and explains how we intend to apply
the Remuneration Policy in FY22.
2020 Directors’ Remuneration Policy
At the 2020 AGM we put forward our Directors’
Remuneration Policy (the “Policy”) to shareholders.
The policy was largely the same as the 2017
Directors’ Remuneration Policy however the
Committee made a number of changes to reflect the
introduction of the 2018 UK Corporate Governance
Code (the “Code”) and to align with best practice.
We were pleased that over 97% of shareholders
voted in support of the policy and the Committee
believes it remains appropriate in supporting the
Company’s execution of the strategy and long-term
shareholder value creation. As a result, no changes
have been made to the Policy and accordingly, we
are not seeking approval for a new Policy this year.
Performance in the Year
Against the backdrop of one of the most disrupted
trading environments in recent history, we are
pleased to have achieved such strong performance.
Although we have continued to experience
challenges across the year, overall performance has
been stronger than was initially anticipated across
the business, and full year underlying profit before
tax at £99.5m (post-IFRS 16) is higher than expected
at the start of the year and represents an increase
of 85.6% on the prior year. As a result, the Board
took the decision to repay in full £10.5m of support
received under government furlough schemes, and
reported profit is after this repayment.
Furthermore, despite journeys being 25% below
pre-pandemic levels, our Autocentre business
has continued to demonstrate signs of growing
market share, with strong demand for both our
garage business and Halfords Mobile Expert vans.
Cycling has also seen exceptional growth over the
year and is up 54% LFL.
This performance has not been without its
challenges. Although designated a key retailer,
at points through the year we were significantly
impacted by lockdown changes with our stores
often only able to open on a collection only basis.
Furthermore, there was considerable supply
disruption which remains at sub-optimal levels.
The safety of our colleagues and customers has
remained our number one priority throughout and
whilst we were subject to greater costs and challenges
in keeping our stores safe, we were pleased to
maintain high NPS and colleague engagement scores.
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Remuneration
Committee
Report
Jill Caseberry
Governance
I would like to take this opportunity to thank
all our colleagues for their work, and due to
their efforts, not only have we achieved great
results against this backdrop but throughout
the crisis, we were privileged to have been
able to offer free checks and discounts to
480,000 NHS workers, teachers and Armed
Forces staff to help them keep their vehicles
safe and roadworthy.
Therefore, given the key role that the CEO and
CFO played in implementing the strategy and
managing the operation of the business amid
such challenging circumstance to produce
these results the Committee felt that the pay
out of incentives was appropriate. As a result,
the Committee determined that no changes
needed to be made for the formulaic outcome
and the pay-outs were approved.
As restrictions continue to ease, we look
forward to continuing our progression in our
key areas of strategic focus with a renewed
emphasis on increasing services related
revenue, whilst continuing to deliver value
for shareholders. This approach has been
reflected in our performance measures for
FY22 as I outline below.
Remuneration in the Year
For FY21, to ensure that management
focused on the key financial and strategic
KPIs that were critical for the business during
a period of great uncertainty, the bonus was
based on underlying Group profit before tax –
15%, Net debt – 30%, Cost reduction – 25%,
Operating Cash Flow – 7.5% and 22.5%
based on strategic metrics (NPS, Employee
Engagement and Digital Sales). Full details
are available on page 127.
As a result of the strong performance in the
year, the annual bonus paid out at 92.5%of
maximum. Consistent financial metrics were
applicable across all central bonus schemes.
The 2018 Performance Share Plan (“PSP”)
also performed strongly with vesting at 84.9%.
Both our EPS and Free Cash Flow vested in
full whilst revenue was at 39.8% of maximum.
The Committee supports shareholder
sentiment that outcomes should reflect the
experience of the company, stakeholders
and colleagues. Therefore, as is the case
every year the Committee also evaluated
performance in the round against a range of
factors to assess whether the level of annual
bonus and PSP payout was appropriate.
In addition to the results discussed above,
the Committee considered that the Company
had made the decision to repay in full £10.5m
of furlough support received, the strong
performance of the share price in the year
(+260% based on a one month average to
the start and the end of the financial year),
that PBT was up by 85.6% from FY20 and
the continued support of colleagues, with
engagement remaining upper quartile when
compared externally and £2.3m invested in-
year in rewarding front line colleagues for their
support during the pandemic.
Remuneration for FY22
In light of the impact of the COVID-19
pandemic on the business and the wider
economy, the Committee re-assessed our
approach to assessing performance for the
annual bonus and PSP 2020/21 and sought
to ensure that pay reflected the current
circumstances of the business and the
experience of our shareholders.
In the annual bonus the Committee
broadened the range of financial measures
targeted to reflect our critical priorities of
cost reduction as well as debt and cash
management. Under the PSP we increased
the weighting on relative TSR in light of the
uncertainty around financial target setting
and to ensure that outcomes aligned with
the shareholders’ experience. We also
increased the weighting on Free Cash Flow
to ensure focus on the management of our
cash position during this critical period.
In 2019 we set out our intention to accelerate
growth of the motoring services business
and to generate higher and more sustainable
financial returns for shareholders.
As we progress from the initial impact of
the pandemic, we feel we are now able to
revert to a more normalised approach to
performance measures which are more
reflective of our ongoing strategy. Further
detail is set out below.
Annual Bonus
For FY22 the performance measures for
the annual bonus will be as follows: 50%
underlying Group PBT; 15% Group revenue;
15% operating cash flow; 5% Group NPS;
5% Group services-related sales; 5%
colleague engagement and 5% ESG.
This represents an increase in the weighting
of PBT, and the cash flow metric and includes
a new Group revenue metric. Both net debt
and cost reduction have now been removed.
To assist in implementing the new strategic
priorities of the business we have replaced
digital sales with Group services-related
sales and to reflect best practice, we will also
incorporate a new ESG metric.
PSP
Similarly, under the PSP, although
uncertainties in the market outlook remain, we
have reviewed the measures and weightings
and now feel we can revert to measures
and weightings that are best positioned to
support our ongoing strategy as we move
away from the initial impact of the pandemic.
We have therefore reduced TSR to 30% (from
40%) and increased EPS growth to 50%.
Group services-related sales will increase
to a 20% weighting reflecting our ongoing
focus on accelerating the growth of the motor
services business. Free Cash Flow has been
removed as a performance measure as the
Committee considered that this was no longer
appropriate in the context of our enhanced
investment plans.
The PSP will be weighted towards EPS
growth which the Committee considers
incentivises management to both grow
revenue and manage cost in a balanced way.
Additionally, given our continued focus on
increasing services related revenue the
Committee considered that it was appropriate
to increase the weighting of this metric whilst
relative total shareholder return is included
to ensure that PSP outcomes are aligned
with the value we have returned to our
shareholders relative to our key retail peers.
The Committee sees these metrics as a
good balance of reflecting the shareholder/
stakeholder experience, ensuring a renewed
focus on profit performance whilst helping
to drive forward the success of our current
strategy.
There will be no changes in incentive
opportunities for FY22 with the maximum
annual bonus remaining at 150% of base
salary and the PSP remaining at 200% of
base salary.
Concluding Remarks
I hope that you find the report clear,
transparent and informative. The Committee
has sought to promote a remuneration
environment that strongly aligns the
commercial direction of the Group with the
interests of shareholders, whilst reflecting best
practice developments and market trends.
I look forward to your support on the 2020/21
annual Directors’ Remuneration Report at the
Annual General Meeting.
Jill Caseberry
Chair of the Remuneration Committee
16 June 2021
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Remuneration Committee Report
Directors’ Remuneration Policy Summary Report
Our Directors’ Remuneration Policy was approved by shareholders at the 2020 AGM. The full Policy is available on the Company’s website,
but as context for the rest of this report, the main elements of the Policy, as well as how the Policy was implemented during the year and
how it will be implemented for FY22, are summarised below:
Elements
Base salary
Objective
To attract and retain
management of a high
calibre.
Key features
Reviewed annually with
increases effective from
1 October. Maximum salary
increases generally in line
with wider employees.
Benefits
Pension
Provide market
competitive benefits
consistent with the role.
To provide individuals
with retirement
arrangements.
Annual bonus
Incentivise the
achievement of annual
financial targets and
key strategic
objectives.
Set at an appropriate level
taking into account the
individual’s circumstances,
market practice and other
employees in the Group.
Directors eligible for defined
employer contribution,
payments into a personal
fund and/or a cash
allowance in lieu of pension.
Total contribution capped at
15% of salary for each of the
Executive Directors in role on
31 March 2019.
Contributions for Executive
Directors in role will be
aligned with the maximum
employer pension
contribution available to the
majority of the workforce
from 1 April 2023.
Maximum opportunity of
150% of salary with
one-year performance
period.
One-third of any award is
deferred into shares for
three years. Malus and
clawback provisions apply.
Implementation in FY21
Graham Stapleton: £565,530
Loraine Woodhouse:
£362,720
Increased by 1.8% in line
with the increases awarded
across the wider workforce
with effect from 1 October
2020.
Executive Directors received
benefits in relation to a
car plus fuel or a cash
allowance, private health
insurance, life assurance.
Executive Directors received
cash allowances of 15%
of salary.
Implementation in FY22
Salaries will next be reviewed
with effect from 1 October
2021 and it is expected that
any increase will be in line
with the increase received
for the wider workforce.
No changes proposed.
Current Executive Directors:
15% of salary.
For any new Executive
Director appointed to
the Board, the pension
opportunity will be in line
with the policy for the
majority of the workforce.
Based on 77.5% financial
measures and 22.5%
delivery of strategic
measures (full details
on page 127).
Both financial and non-
financial performance was
strong in the year and
the bonus paid out at 92.5%.
Maximum: 150% of salary.
For 2021/22 measures will
be 80% financial:
• Underlying Group PBT
(50%),
• Group revenue (15%)
• Operating cash flow
(15%)
20% non-financial measures
• Group NPS (5%)
• Group services-related
sales (£m) (5%)
• Group Colleague
Engagement (5%)
• ESG metric (5%)
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Governance
Implementation in FY21
Graham Stapleton and
Loraine Woodhouse were
granted awards of 200% of
salary in the year.
Awards granted in October
2020 were based on:
• EPS growth 20%
Implementation in FY22
Executive Directors will have
a maximum opportunity of
200% of salary for FY22.
FY22 awards will be based
on:
• EPS growth 50%
• Group services-related
• Group service-related
sales 20%
revenue 10%
• Free Cash Flow 30%
• Relative TSR vs the
FTSE All Share General
Retailers Index 40%
Targets are disclosed
on page 128.
Executive Directors were
subject to a 200% of salary
shareholding guideline.
• Relative TSR vs the
FTSE All Share General
Retailers Index 30%
No change.
Elements
Performance
Share Plan
Objective
Align Executive
Directors’ interests
with those of our
shareholders by
incentivising them to
deliver the Company
strategy and to create
a sustainable business
and maximise returns
to shareholders.
Key features
Maximum opportunity
of 200% of salary.
Three-year performance
period.
Two-year holding period
after vesting.
Malus and clawback
provisions apply.
Shareholding
guidelines
Align individuals with
shareholders.
Executive Directors are
expected to build and retain
a shareholding with a value
equal to at least 200% of
their annual base salary.
Expectation that 75% of any
post-tax shares that vest
from incentive plans are
retained until the guideline
is met.
Executive Directors will
normally be expected
to maintain a minimum
shareholding of 200% of
salary (or actual shareholding
if lower) for two years
following stepping down as
an Executive Director.
Structure and Content of the Remuneration Report
This Remuneration Report has been prepared in accordance with the provisions of the Companies Act 2006 and Schedule 8 of the Large
and Medium-sized Companies and Group (Accounts and Reports) (Amendment) Regulations 2013 (the “Regulations”). This report meets
the requirements of the UK Listing Rules and the Disclosure Guidance and Transparency Rules.
The information set out below represents auditable disclosures referred to in the Independent Auditor’s Report on pages 140 to 147, as
specified by the UK Listing Authority and the Regulations.
Committee Composition
During the year the Committee consisted of:
Jill Caseberry (Chair)
Helen Jones
Tom Singer (appointed 16 September 2020)
Keith Williams (stepped down as a member on 22 March 2021*)
David Adams (resigned 31 December 2020)
* On 22 March 2021, Keith Williams stepped down as a formal member of the Remuneration Committee but he continues to attend as part of his role as Chair
of the Board.
Seven scheduled Committee meetings were held during the year and were attended by all relevant members at the time of the meeting.
After each Committee meeting the Remuneration Committee Chair reported to the Board on the key issues that had been discussed. A
number of informal discussions were also held with the Committee members throughout the year when the need arose.
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Remuneration Committee Report
Shareholder Dialogue
The voting outcome from the 2020 AGM
reflected very strong individual and
institutional shareholders’ support for the
revised Directors’ Remuneration Policy
(“Policy”). We consulted extensively with
shareholders prior to introducing the revised
Policy. Furthermore, the voting outcome
from the 2020 AGM showed strong support
for our FY20 Directors’ Remuneration
Report.
The following table sets out the votes cast
at the 2020 AGM in respect of the Directors’
Remuneration Policy, and the FY20
Directors’ Remuneration Report.
% of
votes
For
% of
votes
Against
99.66%
0.34%
97.58%
2.42%
FY20 Directors’
Remuneration
Report *
FY20 Directors’
Remuneration
Policy †
* 28,958 votes (0.02% of votes) were withheld
in relation to this resolution.
† 40,378 votes (0.03% of votes) were withheld
in relation to this resolution.
We continue to be mindful of the
views of our shareholders and other
stakeholders and encourage discussion
with shareholders on any issue related to
Executive remuneration.
In the event of a substantial vote against
a resolution in relation to Directors’
remuneration, we would seek to understand
the reasons for any such vote to determine
appropriate actions and detail any such
actions in response to it in the Directors’
Remuneration Report.
Activities During the Year
During the year, the Committee has:
• prepared the revised Directors’
Remuneration Policy which was
submitted to shareholders for approval
at the 2020 AGM;
•
reviewed and approved the Directors’
Remuneration Report published in the
FY20 Annual Report and Accounts;
• considered the approach to reward
in light of COVID-19 including the
impact on all employee pay and wider
remuneration;
• discussed and approved incentive
outcomes for FY20;
• approved grants under the Performance
Share Plan (“PSP”), the Restricted
Management Share Plan (“MSP”) (to
senior managers below the Board) and
the Sharesave Scheme (“SAYE”);
• carefully considered expected pay-outs
for FY21 in the context of the impact
of COVID-19 on the business, the
experience of shareholders and wider
stakeholders, in particular employees;
• considered the approach to
implementing remuneration policy
for FY22, including setting Executive
Director salaries from 1 October 2020
and reviewing performance measures,
and considering the approach to
performance measures and setting for
FY22 annual bonus and performance
share plans;
•
reviewed the mechanics and assets of
the Employee Benefit Trust and hedging
arrangements;
• discussed and approved remuneration
arrangements for the Executive
management team below the Board;
reviewed the Committee’s Terms of
Reference;
reviewed remuneration arrangements
for the wider workforce and took
these into account when considering
Executive pay;
reviewed developments in shareholder
guidance particularly within the context
of COVID-19; and
reviewed and approved the
appointment of remuneration advisors.
•
•
•
•
Advisors and Other Attendees
During the year, the Committee has been
supported by Michelle Burton, Interim
Group People Director, together with Tim
O’Gorman, Company Secretary (who
acts as secretary to the Committee). The
Chief Executive Officer and Chief Financial
Officer also attend Committee meetings on
occasion, at the request of the Committee;
they are never present when their own
remuneration is discussed. In carrying
out its responsibilities, the Committee is
authorised to obtain the advice of external
independent remuneration consultants and
is solely responsible for their appointment,
retention and termination. During the year,
the Committee has taken advice from
Deloitte LLP (“Deloitte”), which advised
on remuneration reporting, share option
evaluations and other remuneration matters.
Deloitte also provided unrelated advice
on debt advisory work, tax services and
legal support during the year. Total fees
paid to Deloitte in respect of remuneration
advice were £39,025 charged on a time and
materials basis.
Deloitte is a founding member of the
Remuneration Consultants Group and
adheres to the Remuneration Consultants
Group Code of Conduct when providing
services. The Committee considers
Deloitte’s advice independent and
impartial and, is also satisfied that the
Deloitte engagement team does not
have connections with the Company
or its Directors that might impair their
independence. The Committee considered
the potential for conflicts of interest
and judged that there were appropriate
safeguards against such conflicts.
Willis Towers Watson also provided the
Committee with Executive salary market
data. Willis Towers Watson is also a
signatory of the Remuneration Consultants
Group Code of Conduct. Fees paid to Willis
Towers Watson for this advice were £4,200
charged on a time and materials basis.
Willis Towers Watson also provide insurance
broking services and employee benefits
services to the Group.
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How the Remuneration Policy was Implemented in FY21 – Executive Directors
Single remuneration figure (Audited)
Base
Salary
(£)
560,526
359,512
Benefits
(£)
20,816
12,517
Pension
(£)
84,079
53,927
550,611
353,150
44,862
12,479
82,592
52,973
Other1
(£)
377
377
—
—
Total
Fixed
(£)
665,798
426,333
678,065
418,602
Total
Variable
(£)
PSP
(£)
Total
“Single
Figure”
(£)
986,3582
670,0093
1,764,088
1,168,829
2,429,886
1,595,161
Bonus
(£)
777,730
498,820
–
–
–
–
–
–
678,065
418,602
2020/21
Graham Stapleton
Loraine Woodhouse
2019/20
Graham Stapleton
Loraine Woodhouse
1.
In December 2020, Graham Stapleton and Loraine Woodhouse each received a working from home payment, in line with all Support Centre Colleagues.
2. The share price used to value the awards for the purpose of the single figure was £3.049 compared to a share price of £3.197 on the date of the award.
Therefore, no portion of the value disclosed is attributable to share price appreciation. No discretion was exercised.
3. The share price used to value the awards for the purpose of the single figure was £3.049 compared to a share price of £3.079 on the date of the award.
Therefore, no portion of the value disclosed is attributable to share price appreciation. No discretion was exercised.
FY21 Annual Bonus
The annual bonuses for FY21 for the Executive Directors were based as follows:
Chief Executive Officer
Chief Financial Officer
Graham Stapleton
Loraine Woodhouse
77.5% financial measures and 22.5% delivery of
strategic measures
The targets and performance against these are set out below:
Performance measures for
FY21 annual bonus
Financial Measures
Net debt (30%)
Cost reduction (25%)2
Underlying profit before tax (15%)
Operating cash flow (7.5%)
Strategic Measures
NPS (7.5%)4
Employee engagement (7.5%)
Digital sales (7.5%)
77.5%
22.5%
Threshold
(15%
payable)
Target (50%
payable)
Maximum
(100%
payable) FY21 outturn
% maximum
bonus
achieved
(£36.5m)
44.7%
£11.2m
£58.1m
(£33.2m)
44.3%
£14.1m
£64.5m
(£29.8m)
43.9%
£21.1m
£71.0m
£73.1m1
42.9%
£96.3m
£217.9m3
–
–
–
–
Retail 64.0
Autocentres
70.5
79%
39.1%
Retail 64.5
Autocentres
71.5
80%
43.1%
Retail 65.3
Autocentres
76.1
75%
44.8%
100%
100%
100%
100%
100%
0%
100%
1. Excludes the Universal acquisition price.
2. Cost reduction is expressed as cost as a percentage of revenue.
3. Operating cash flow here is defined as EBITDA plus the movement in average working capital in FY21 compared to the prior year.
4.
In order for the NPS target to be met, both the Retail and Autocentres scores must be achieved. NPS achievement is based on P12 exit numbers.
In the year, although the Company continued to experience a disrupted trading environment, overall performance was exceptional far exceeding
our expectations at the start of the year. Underlying profit before tax was considerably higher than previous years at £99.5m (post-IFRS 16 but pre
non-underlying) and the Company’s share price increased by around 260% during the year (based on a one month average to the start and the end
of the financial year). Furthermore, we were pleased to increase our market share in key areas of the business whilst maintaining a high level in NPS
scores and colleague engagement.
We originally received support from government furlough schemes but on 1 March 2021 we announced our decision to repay in full
£10.5m of furlough income received. We were also pleased to deliver nearly £490m of shareholder value, delivering a shareholder return on
investment of c.250% in the twelve months to 31 March 2021 whilst outperforming our peer group (which delivered 49% return) and the
FTSE SmallCap Index (51% return).
Our strong performance through FY21 has also allowed us to share our successes across our colleagues, through our annual bonus
schemes and Frontline Colleague Support Scheme.
Throughout the year, the safety of our colleagues and customers has remained our number one priority and whilst we were subject to
greater costs and challenges in keeping our stores safe, we were pleased to maintain high NPS and colleague engagement scores. We
were privileged to have been able to offer free checks and discounts to 480,000 NHS workers, teachers and Armed Forces staff to help
keep their vehicles safe and roadworthy.
The Committee carefully considered bonus outcomes in the context of the business, the performance of the Directors in the year and
the remuneration arrangements for the wider workforce population and the experience of shareholders and other stakeholders to assess
whether the outcome was aligned.
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Given the key role that the CEO and CFO played in implementing the strategy and managing the operation of the business amid such
challenging circumstances to produce these results the Committee felt that the bonus paying out at 92.5% of maximum was appropriate.
Performance outcomes for 2018 PSP awards
Metric
Underlying EPS growth – CAGR
Group revenue growth – CAGR
Free Cash Flow (aggregate FY19 to FY21)
Total
* Straight-line vesting between threshold and maximum
Threshold
targets (25%
vesting)*
1.5%
3.5%
£125m
Weighting
50%
25%
25%
100%
Maximum
targets
(100%
vesting)* Performance
6.0%
8.0%
£165m
11.2%
4.4%
£242.6m
Estimated %
total award
vesting
100%
39.8%
100%
84.9%
As with the annual bonus, the Committee retains the discretion to adjust the PSP vesting outcome if it is not considered to be reflective
of underlying financial or non-financial performance of the business or the performance of the individual or where the outcome is not
considered appropriate in the context of the experience of shareholders or other stakeholders.
The Committee considered the outcome in the context of the business and determined that no changes to the formulaic outcomes were
required.
Benefits
Benefits include payments made in relation to a car plus fuel or a cash allowance, private health insurance, life assurance and a driver.
Pension
Pension payments represent contributions made either to defined contribution pension schemes or as a cash allowance. The CEO and
CFO both received a contribution of 15% of base salary. Pension contributions / allowances for the Executive Directors in role will be
aligned with the maximum employer pension contribution available to the majority of the workforce from 1 April 2023.
Share Awards Granted During the Year (Audited)
Performance Share Plan
During the period, the following awards were granted to the Executive Directors under the Performance Share Plan (“PSP”) as follows:
Graham Stapleton
Date
of award
16 October 2020
Loraine Woodhouse
16 October 2020
Type
of award
Nil cost option
(0p exercise price)
Nil cost option
(0p exercise price)
Maximum
face
value of
award2
£1,111,042
Threshold
vesting
(% of award)
25%
Number
of shares1
458,162
293,855
£712,598
25%
Performance
period
4 April 2020 to
31 March 2023
4 April 2020 to
31 March 2023
1. These awards were based on 200% of salary. For 2019 awards, given the share price at the time the Remuneration Committee determined that it was
appropriate to reduce the PSP awards granted to 175% of salary. After assessing share price performance prior to award, it was deemed appropriate to
make 2020 awards at the normal level of 200% of salary.
2. Based on the average mid-market price on three preceding days of the awards of £2.425 on 16 October 2020.
Performance Conditions
The performance conditions and targets for PSP awards granted during FY21 are as follows:
Group services
-related sales
(total of sales for
FY21 to FY23)
(10% of the award)
35%
Between 30%
and 35%
Underlying EPS
growth – CAGR
(20% of the award)
8%
Between 2.5%
and 8%
100% vesting
Straight-line vesting
Award
(200% of salary)
25% vesting
0% vesting
30%
Below 30%
2.5%
Below 2.5%
Free Cash Flow
(aggregate FY21 to
FY23)
(30% of the award)
£128m
Between £117m
and £128m
Relative TSR
(40% of the award)
Upper quartile
Between market
median and upper
quartile
Market median
Below £117m Below market median
£117m
In addition to achieving these targets, the vesting of awards will be subject to meeting a zero net debt underpin at FY23 year end. The
award shares that vest will become exercisable in 2023. The shares that vest will be subject to a two-year holding period.
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Outstanding Share Awards (Audited)
Performance Share Plan (“PSP”)
The following summarises outstanding awards under the PSP:
Awards
held
4 April
2020
3.5173 359,215
Grant
price5
(£)
Awarded
during
the
period
–
Dividend
reinvest-
ment6
–
Forfeited
during
the
period
Lapsed
during
the
period
– 359,215
Exercised
during
the
period
–
Awards
held
2 April
2021
–
Perform-
ance period
years to
03/04/20
Award
date
24/01/181
Graham
Stapleton
05/10/182
20/09/193
16/10/204
09/11/182
20/09/193
16/10/204
3.1970 381,040
1.696 585,611
–
2.425
3.079 258,832
1.696 375,598
–
2.425
–
–
458,162
–
–
293,855
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 381,040
– 585,611
– 458,162
– 258,832
– 375,598
– 293,855
02/04/21
01/04/22
31/03/23
02/03/21
01/03/22
31/03/23
Loraine
Woodhouse
Holding
period to
50% to
03/04/21,
50% to
03/04/22
02/04/23
01/04/24
31/03/25
02/04/23
01/04/24
31/03/25
1. FY18 awards were subject 25% to Group revenue growth targets (25% vesting for 3.5% p.a. growth, 100% vesting for 7% p.a. growth) and 75% to
underlying EPS growth (25% vesting for 1.5% p.a. growth, 100% vesting for 6% p.a. growth). In addition, any vesting of the PSP was subject to an
underpin whereby the net debt to EBITDA ratio remained below 1.5 times on average for the three years of the plan. The performance targets for this
award were not met based on performance for FY20 and the award lapsed in April 2020.
2. FY19 awards are subject 50% to underlying EPS growth (25% vesting for 1.5% p.a. growth, 100% vesting for 6.0% p.a. growth), 25% to Group revenue
growth targets (25% vesting for 3.5% p.a. growth, 100% vesting for 8% p.a. growth), and 25% subject to Free Cash Flow (25% vesting for £125m, 100%
vesting for £165m). In addition, any vesting of the PSP will be subject to an underpin whereby the net debt to EBITDA ratio remains below 1.5 times on
average for the three years of the plan. The performance targets for this award were met in part based on performance for FY21 and therefore 84.9% of
this award will vest.
3. FY20 awards are subject 50% to underlying EPS growth (25% vesting for 5% p.a. growth, 100% vesting for 10.0% p.a. growth), 25% to Group revenue
growth targets (25% vesting for 3.5% p.a. growth, 100% vesting for 6% p.a. growth), and 25% subject to Free Cash Flow (25% vesting for £125m, 100%
vesting for £165m). In addition, any vesting of the PSP will be subject to an underpin whereby the net debt to EBITDA ratio remains below 1.5 times on
average for the three years of the plan.
4. FY21 awards are subject 40% to Relative TSR vs the FTSE All Share General Retailers Index (25% vesting achieving below market median, 100% vesting
achieving upper quartile), 30% to Free Cash Flow (25% vesting for £117m, 100% vesting for £128m), 20% to underlying EPS growth (25% vesting for
2.5% p.a. growth, 100% vesting for 8% p.a. growth), and 10% to Group services related sales (25% vesting for 30% p.a. growth, 100% vesting for 35%
p.a. growth). In addition, any vesting of the PSP will be subject to meeting a zero net debt underpin at FY23 close.
5. The grant price is calculated by taking the mid-market average across the three preceding days prior to the grant date.
6. No interim and final dividends were paid during the period.
Deferred Bonus Plan (“DPB”)
Grant
price1
(£)
Awards
held
4 Apr
2020
Awarded
during
the
period
Dividend
reinvest-
ment2
Forfeited
during
the
period
Lapsed
during
the
period
Exercised
during
the
period
Awards
held
2 Apr
2021
Award
date
Graham
Stapleton
31/05/18
3.3760
13,499
–
–
–
–
–
13,499
Vesting
31/05/21–
31/05/22
1. The grant price is calculated by using the mid-market quotation on the date of grant.
2. No interim and final dividends were paid during the period.
Initial Share Award
To compensate Graham Stapleton for remuneration forfeited when leaving his previous employer, he received an award of 185,872 shares.
These shares were released to Graham on 15 January 2021 following the end of the three-year retention period. Details of Graham’s buy-
out awards were included in the 2018 Remuneration Report and the value of this award was included in the 2018 single figure in-line with
the regulations.
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Remuneration Committee Report
CEO Pay Compared to Performance
The following graph shows the TSR performance of the Company since April 2010, against the FTSE All Share General Retailers Index
(which was chosen because it represents a broad equity market index of which the Company is a constituent).
250
200
150
100
50
0
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
Halfords Group
FTSE All-Share General Retailers
Source: Thompson Research
The following table summarises the CEO single figure for the past ten years and outlines the proportion of annual bonus paid as a
percentage of the maximum opportunity and the proportion of PSP awards vesting as a percentage of the maximum opportunity. The
annual bonus is shown based on the year to which performance related and the PSP is shown for the last year of the performance period.
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
–
–
–
–
531
CEO Single Figure (£000)
Graham Stapleton1
Jonny Mason2
Jill McDonald3
Matt Davies4
David Wild5
Annual Bonus (% of maximum)
Graham Stapleton1
Jonny Mason2
Jill McDonald3
Matt Davies4
David Wild5
PSP Vesting (% of maximum)
Graham Stapleton1
Jonny Mason2
Jill McDonald3
Matt Davies4
David Wild5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
617
–
–
–
–
0%
–
–
–
–
99%
–
–
–
499
198
–
–
–
1,372
–
–
–
–
645
–
–
–
–
–
–
–
50% 97.5%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
851
54
–
–
–
23.5%
–
–
–
–
–
–
–
–
–
741
–
–
–
–
–
–
–
–
–
–
–
–
1,818
236
295
–
–
70%
42.3%
–
–
–
–
–
–
–
–
670
–
–
–
–
678
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,430
–
–
–
–
92.5%
–
–
–
–
84.9%
–
–
–
–
1. Graham Stapleton was appointed in January 2018. An incorrect benefits figure was reported for FY19 in error, this has been corrected and reflected in the
total for FY19.
2. Jonny Mason was appointed as interim Chief Executive Officer for the period from September 2017 to the date of Graham Stapleton joining in January
2018, and the figures represent pro-rated amounts of his bonus and overall remuneration for FY18.
3. Jill McDonald was appointed in May 2015 and resigned as CEO in September 2017.
4. Matt Davies was appointed in October 2012 and resigned as CEO in April 2015.
5. David Wild resigned as CEO in July 2012.
Shareholding Guidelines
The Committee believes that it is important that Executive Directors’ interests are aligned with those of the shareholders. Executive
Directors are encouraged to acquire and retain shares with a value equal to 200% of their annual base salary. Executive Directors are
expected to retain 75% of any post-tax shares that vest under any share incentive plans until this shareholding guideline is met.
Shareholding guideline
Shareholding as at 2 April 2021
Current value (based on share price on 2 April 2021)
Current % of salary
Graham Stapleton
200%
28,748
£107,058
19.6%
Loraine Woodhouse
200%
22,395
£83,399
23.8%
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These figures include those of their spouse or civil partner and infant children, or stepchildren, as required by Section 822 of the
Companies Act 2006. There was no change in these beneficial interests between 2 April 2021 and 16 June 2021.
In light of the Code and evolving market practice, in FY20, the Committee introduced a post-employment shareholding guideline to support the
alignment of interests between Executive Directors and shareholders following an Executive’s departure from the Board. Under this guideline,
Executive Directors are expected to retain their shareholding guideline (200% of salary) for a period of two years post stepping down as an
Executive Director. This post-employment shareholding guideline applies to any performance incentive shares that vest from 1 April 2020.
Executive Directors’ Appointments
Director
Graham Stapleton
Loraine Woodhouse
Date of Service Agreement
8 September 2017
12 July 2018
Notice Period
6 months
6 months
Outside Appointments
Halfords recognises that its Executive Directors may be invited to become Non-Executive Directors of other companies. Such Non-
Executive duties can broaden experience and knowledge which can benefit Halfords. Subject to approval by the Board, Executive
Directors are allowed to accept Non-Executive appointments and retain the fees received, provided that these appointments are not likely
to lead to conflicts of interest. During the year, Graham Stapleton was appointed as a Non-Executive Director of The Magic Bean Co.
Limited on 21 January 2021 and, Loraine Woodhouse was appointed as a Non-Executive Director of The British Land Company plc with
effect from 1 March 2021. Both Graham and Loraine retained their earnings for these roles.
Loss of Office Payments (Audited)
No loss of office payment was made to a Director during the year.
Payments to Former Directors (Audited)
No payments were made to former Directors during the year.
How the Remuneration Policy was Implemented in FY21 – Non-Executive Directors
Non-Executive Director single figure comparison (Audited)
Senior
Independent
Director fee
(£)
–
5,455
Board fees
(£)
192,400
52,000
Committee
Chair /
Employee
Voice
Director fees
(£)
–
10,000
Taxable
benefits1
(£)
–
93
Total “Single
Figure”2
2021
(£)
192,400
67,548
Total “Single
Figure”
2020
(£)
192,400
63,1805
52,000
28,167
39,000
–
10,000
–
4,545
2,500
7,500
–
–
183
62,000
62,7155
30,667
51,228
–7
74,2245
Role
Director
Keith Williams3 Company Chair
Helen Jones4
Senior Independent
Director, ESG Committee
Chair and Employee
Voice Director
Jill Caseberry6 Remuneration
Committee Chair
Audit Committee Chair
Tom Singer7
David Adams8 Senior Independent
Director and Audit
Committee Chair
1.
Includes hotel and travel costs incurred when attending Halfords’ meetings and Board visits.
2. The Chair and Non-Executive Directors are not entitled to participate in any of the Group’s incentive plans or pension plans so all pay is fixed.
3. Keith Williams did not claim any taxable benefits during the year.
4. Helen Jones was appointed Senior Independent Director with effect from 15 September 2020.
5. Due to a payroll error, a portion of fees which related to FY19 were actually paid in FY20. These amounts were: £2,000 for Helen Jones; £164 for
Jill Caseberry; and £2,000 for David Adams.
6. Jill Caseberry did not claim any taxable benefits during the year.
7. Tom Singer was appointed as a Non-Executive Director on 16 September 2020, and as Audit Committee Chair on 1 January 2021. Tom did not claim
any taxable benefits during the year.
8. David Adams stepped down as Senior Independent Director on 15 September 2020, and as Audit Committee Chair and Non-Executive Director on
31 December 2020.
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Remuneration Committee Report
Non-Executive Director Shareholding
Director
Keith Williams
Helen Jones
Jill Caseberry
Tom Singer
David Adams
2021
130,000
3,000
–
30,000
9,041
2020
130,000
3,000
–
N/A
9,041
These figures include those of their spouses, civil partners and infant children, or stepchildren, as required by Section 822 of the
Companies Act 2006. There was no change in these beneficial interests between 2 April 2021 and 16 June 2021.
Non-Executive Directors do not have a shareholding guideline but they are encouraged to buy shares in the Company.
David Adams stepped down from the Board on 31 December 2020 and his shareholdings are shown at this date.
Non-Executive Directors’ Appointments
None of the Non-Executive Directors has an employment contract with the Company. However, each had entered into a letter of
appointment with the Company confirming their appointment for a period of three years, unless terminated by either party giving the other
not less than three months’ notice or by the Company on payment of fees in lieu of notice.
Director
Jill Caseberry
Helen Jones
Tom Singer
Keith Williams
Appointed
01-Mar-19
01-Mar-14
16-Sep-20
24-Jul-18
Date of current
appointment
01-Mar-19
01-Mar-20
16-Sep-20
24-Jul-18
Expiry date
28-Feb-22
28-Feb-23
15-Sep-23
23-Jul-21
Unexpired term at the
date of this report
8 months
20 months
27 months
1 month
Their appointments are subject to the provisions of the Companies Act 2006 and the Company’s Articles of Association, and in particular,
the need for re-election. Continuation of an individual Non-Executive Director’s appointment is also contingent on that Non-Executive
Director’s satisfactory performance, which is evaluated annually. The Non-Executive Directors’ letters of appointment are available for
inspection by shareholders at the Company’s registered office.
How the Remuneration Policy will be Implemented for FY22 – Executive Directors
Salary
Salaries for Executive Directors were increased by 1.8 % with effect from 1 October 2020 in line with the increase received across the
wider workforce. Current salaries for the Executive Directors are as follows:
Chief Executive Officer
Chief Financial Officer
Salaries will next be reviewed with effect from 1 October 2021.
£565,530
£362,720
Pension
Executive Directors will continue to receive a pension allowance of 15% of base salary. The Committee carefully considered the level of
pension allowance for Executive Directors and no changes were made to this allowance for 2020/21 and 2021/22. While the Committee
acknowledges that this level of pension is above the rate that is available to the wider workforce in the UK, the Committee did not consider
that it was appropriate to lower the pension allowance for Executive Directors at this stage, given their existing contractual entitlements
and limited tenure in role. However, mindful of shareholder guidance that pensions for Executives should be aligned with the pension
provision available for the wider workforce, the Executive Directors have, however, agreed to reduce their pension to be in line with the rate
available for the wider workforce from 1 April 2023.
For any new Executive Director appointed to the Board, the pension opportunity will be in line with the policy for the majority of the
workforce.
Annual Bonus
The normal maximum annual bonus for the CEO and CFO is 150% of base salary with 2/3 paid in cash and 1/3 paid in Halfords’ shares
deferred for three years.
For FY21, given the uncertainty caused by the pandemic we changed measures to ensure that it focused management on the key financial
and strategic KPIs that were critical for the business over the following 12 months. Therefore, the Committee broadened the range of
financial measures to include the critical priorities of cost reduction as well as debt and cash management.
As we progress from the initial impact of the pandemic, we feel we are now able to revert to more normalised measures. We will increase
the weighting of PBT from 15% to 50%, increase the cash flow metric from 7.5% to 15% and include a new Group revenue metric. Both
net debt and cost reduction have now been removed.
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Finally, in order to incorporate a new ESG metric, we have reduced each strategic measure to 5% and also replaced Digital Sales with
Group Services Related Sales to assist in implementing the new strategic priorities of the business.
Performance measures for FY22 annual bonus
Financial Measures
• Underlying Group PBT (post exceptions) – 50%
• Group revenue – 15%
• Operating cash flow – 15%
Strategic Measures
• Group NPS – 5%
• Group services-related sales – 5%
• Group colleague engagement – 5%
• ESG Metric – 5%
80%
20%
Targets have not been disclosed at the current time as they are considered to be commercially sensitive. The Committee intends to
disclose targets in next year’s Directors’ Remuneration Report.
Performance Share Plan (“PSP”)
The normal PSP award for Executive Directors is 200% of base salary. The Committee is mindful of shareholder guidance that award levels
should be adjusted where the share price has fallen significantly compared to prior years. The Committee will take this into account when
determining award levels in September.
FY22 PSP awards will be based on the following performance measures:
• 30% based on Relative TSR versus the FTSE All Share General Retailers Index;
• 50% based on EPS growth; and
• 20% based on Group services-related sales. Vesting will also be subject to the Company maintaining an appropriate margin on
services revenue.
Our normal practice is to grant awards in September.
In the event that there is a material acquisition or disposal during the performance period then the Committee would look to review the
targets to ensure they remained suitably stretching.
In light of the impact of the COVID-19 pandemic on the business, and the wider economy the Committee re-assessed the performance
measures for 2020/21 and sought to ensure that pay reflected the current circumstances of the business and the experience of our
shareholders.
As a result, for FY21 PSP awards an increase was applied to the weighting on relative TSR in light of the uncertainty around financial target
setting and to ensure that outcomes were aligned with the shareholders’ experience. We also increased the weighting on Free Cash Flow
to ensure focus on the management of our cash position during this critical period.
Although uncertainties in the market outlook remain, we have reviewed the measures and weightings and now feel we can revert to
measures and weightings that are best positioned to support our ongoing strategy as we move away from the initial impact of the
pandemic. We have therefore reduced TSR to 30% (from 40%) and increased EPS growth to 50%. Group services-related sales will
increase to a 20% weighting, whilst Free Cash Flow has been removed.
The PSP will be weighted towards EPS growth which the Committee considers incentivises management to both grow revenue and
manage cost in a balanced way.
Additionally, given our continued focus on increasing services-related revenue the Committee considered that it was appropriate to
increase the weighting of this metric whilst relative total shareholder return is included to ensure that PSP outcomes are aligned with the
value we have returned to our shareholders relative to our key retail peers.
Free Cash Flow has been removed as a performance measure as the Committee considered that this was no longer an appropriate
measure in the context of our enhanced investment plans.
These measures are in line with the current priorities of the business. The Committee feels they will serve to incentivise and reward
management for delivering against our intention to accelerate the growth of the motoring services business, to generate higher and more
sustainable financial returns for shareholders and to best reflect the wider stakeholder experience.
In determining whether any annual bonuses are payable or performance share plan awards vest, the Committee retains the discretionary
authority to adjust incentive pay-outs (both upwards and downwards) if the original outcome is not considered to reflect the underlying
performance of the Company or the participant over the period, the outcome is not considered appropriate in the context of circumstances
that were unexpected or unforeseen at the time the targets were set, or where the outcome is not considered appropriate in the context of
the experience of shareholders or other stakeholders over the performance period.
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Remuneration Committee Report
These measures are in line with the current priorities of the business. The Committee feels they will serve to incentivise and reward
management for delivering against our intention to accelerate the growth of the motoring services business, to generate higher and more
sustainable financial returns for shareholders and to best reflect the wider stakeholder experience.
In determining whether any annual bonuses are payable or performance share plan awards vest, the Committee retains the discretionary
authority to adjust incentive pay-outs (both upwards and downwards) if the original outcome is not considered to reflect the underlying
performance of the Company or the participant over the period, the outcome is not considered appropriate in the context of circumstances
that were unexpected or unforeseen at the time the targets were set, or where the outcome is not considered appropriate in the context of
the experience of shareholders or other stakeholders over the performance period.
How the Remuneration Policy will be Implemented for FY22 – Non-Executive Directors
Fees
The fees of Non-Executive Directors are normally reviewed every two years. Any changes to these fees will be approved by the Board as a
whole following a recommendation from the Chief Executive Officer.
The fees of the Non-Executive Directors were reviewed in March 2020 and at the time it was agreed that a fee increase would not be
appropriate due to the COVID-19 pandemic, instead the next fee review was set for March 2021. In March 2021, the Remuneration
Committee decided that the NED fee review would be considered later in the year, and if any changes are agreed, these will be effective
from October 2021, in line with the rest of the business.
Current fees for Non-Executive Directors are as follows:
Chair
Base fee
Additional fees
Senior Independent Director
Committee Chair (Audit and Remuneration)
Employee Voice Director
Committee Chair (ESG)
Change in Remuneration of Directors Compared to Group Employees
The table below sets out the increase in total remuneration of the Directors and that of all colleagues.
FY21
£192,400
£52,000
£10,000
£10,000
£5,000
£5,000
FY20
£192,400
£52,000
£10,000
£10,000
£5,000
£5,000
Chief Executive Officer
Chief Financial Officer
Keith Williams
Helen Jones4
Jill Caseberry
Tom Singer5
David Adams6
All colleagues
1. No bonus payable for FY20.
% change in
base salary
FY20 to FY21
% change in
bonus paid
FY20 to FY21
% change in
benefits
FY20 to FY21
1.8%
1.8%
0%
9.5%
0%
N/A
N/A
4.02%
-%1
-%1
%
-%7
-%7
-%7
-%7
45.42%2
-3
-3
-3
-3
-3
-3
-3
-3
2. Based on all colleagues who were paid a bonus during FY20 and FY21. Includes the Frontline Fund bonus paid to all eligible colleagues in August 2020.
3. No change to the benefits available for both Directors and colleagues.
4. Helen Jones was appointed as Senior Independent Director on 15 September 2020.
5. Tom Singer was appointed as a Non-Executive Director on 16 September 2020, and as Audit Committee Chair on 1 January 2021.
6. David Adams stepped down as Senior Independent Director on 15 September 2020, and as Audit Committee Chair and Non-Executive Director on
31 December 2020.
7. Not eligible for a bonus.
CEO Pay Ratio
Halfords being a UK listed Company with more than 250 employees means that the Company is required to disclose annually the ratio of
its CEO’s pay to the median, lower quartile and upper quartile pay of their UK employees. Details of this can be found in the table below.
Year
2020/21
2019/20
Method
Option B
Option B
25th percentile
pay ratio
143:1
40:1
Median
pay ratio
126:1
36:1
75th percentile
pay ratio
99:1
28:1
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In addition to the ratio of the CEO’s pay to the 25th, median and 75th percentile of UK employees, companies are also required to disclose:
• an explanation of the methodology used, including an explanation of the reason where any components of total remuneration have
been omitted and a brief explanation of any assumptions used to determine full-time equivalent remuneration;
•
the total remuneration and salary value (the £ value) for the 25th, median and 75th percentile employees used in the pay ratio
calculation;
• an explanation for changes to the ratio year on year (not applicable for first year disclosures); and
• whether the Company considers the median pay ratio consistent with the Company’s wider policies on employee pay, reward and
progression.
Of the three options set out in the new legislation for calculating the CEO pay ratio, we have used Option B using Gender Pay Gap
data. This option was chosen as it represents the most efficient method to determine the respective pay ratios. The colleagues at the
three quartiles were identified and their respective single figure values calculated as of 5 April 2020. To ensure the identified colleagues
were representative, the total remuneration for a group of individuals above and below the identified colleague at each quartile was also
reviewed.
The Board has confirmed that the ratio is consistent with the Company’s wider policies on employee pay, reward and progression.
In order to determine the full-time equivalent salary component for the representative colleagues, the hourly rate was multiplied by full-time
hours to calculate the full-time equivalent salary. No component of total remuneration was omitted. The base salary and total remuneration
for each representative colleague are outlined below.
There is an increase in the CEO pay ratio in 2021 compared to 2020. As is appropriate the remuneration arrangements for the Executive
Directors are more closely linked to performance. Given the very strong performance for FY21, remuneration for the CEO has risen more
than for the wider workforce.
Component
Base Salary
Total Remuneration
P25
P50
P75
£16,986.45
£16,986.45
£18,920.85
£19,349.78
£23,918.05
£24,555.39
Workforce Engagement in Remuneration
As referenced on page 51, Halfords has long established practices of engaging with colleagues across all areas of the business, including
holding regular listening groups, appointing and meeting with local colleague engagement (“people”) champions, and conducting regular
colleague surveys.
During the course of the year People Champions were invited to input to a number of broader business initiatives including ESG and
reward practice, so gaining an understanding of corporate governance and Executive remuneration. The content of the remuneration
session specifically talked to how Executive pay aligns with wider company pay policy, including benefits provision, and invited feedback
from People Champions in respect of the reward framework. Detailed remuneration briefing sessions were also held with senior leaders on
launch of the FY21 bonus and PSP plans.
Gender Pay Gap Report
Details of the Group’s Gender Pay Gap Report for 5 April 2020 are available at www.halfordscompany.com/corporate-responsibility/
colleagues/gender-pay-gap/.
Relative Importance of Pay
The Committee is also aware of shareholders’ views on remuneration and its relationship to other cash disbursements. The following table
shows the relationship between the Company’s financial performance, payments made to shareholders, payments made to tax authorities
and expenditure on payroll.
EBITDA (underlying)
PBT (underlying)
Payments to employees:
Wages and salaries
Executive Directors1
Dividend paid to shareholders and share buybacks
1. Based on the single figure calculation, not all of which is included within wages and salary costs.
2021
£233.0m
£99.5m
£262.3m
£4.0m
£nil
2020
£185.9m
£53.6m
£232.7m
£1.1m
£36.6m
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Directors’ Responsibilities
Pursuant to DTR4
The Directors confirm to the best of their
knowledge:
•
•
the financial statements have been
prepared in accordance with the
applicable set of accounting standards
and Article 4 of the IAS Regulation and
give a true and fair view of the assets,
liabilities, financial position and profit and
loss of the Group; and
the Annual Report includes a fair review
of the development and performance of
the business and the financial position
of the Group and Company, together
with a description of the principal risks
and uncertainties that they face.
Approved by order of the Board.
Keith Williams
Chair
16 June 2021
Directors’ Responsibilities
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business; and
• prepare a Director’s Report, a Strategic
Report and Director’s Remuneration
Report which comply with the
requirements of the Companies
Act 2006.
The Directors are responsible for keeping
adequate accounting records that
are sufficient to show and explain the
Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Company and
enable them to ensure that the financial
statements comply with the Companies Act
2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
They are also responsible for safeguarding
the assets of the Company and hence
for taking reasonable steps for the
prevention and detection of fraud and other
irregularities. The Directors are responsible
for ensuring that the Annual Report and
Accounts, taken as a whole, are fair,
balanced and understandable, and provides
the information necessary for shareholders
to assess the Group’s performance,
business model and strategy.
Website Publication
The Directors are responsible for
ensuring the Annual Report and the
financial statements are made available
on a website. Financial statements are
published on the Company’s website in
accordance with legislation in the United
Kingdom governing the preparation and
dissemination of financial statements,
which may vary from legislation in other
jurisdictions. The maintenance and
integrity of the Company’s website is
the responsibility of the Directors. The
Directors’ responsibility also extends to the
ongoing integrity of the financial statements
contained therein.
The Directors are responsible for preparing
the Annual Report and the financial
statements in accordance with international
standards in conformity with the
requirements of the Companies Act 2006
and applicable law and regulations.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law the Directors
are required to prepare the Group financial
statements in accordance with international
accounting standards in conformity with the
requirements of the Companies Act 2006
and, have elected to prepare the Company
financial statements in accordance with
United Kingdom Generally Accepted
Accounting Practice (United Kingdom
Accounting Standards and applicable law).
Under company law the Directors must not
approve the financial statements unless
they are satisfied that they give a true and
fair view of the state of affairs of the Group
and Company and of the profit or loss for
the Group for that period. The Directors
are also required to prepare financial
statements in accordance with international
financial reporting standards adopted
pursuant to Regulation (EC) No. 1606/2002
as it applies in the European Union.
In preparing these financial statements,
the Directors are required to:
• select suitable accounting policies and
then apply them consistently;
• make judgements and accounting
estimates that are reasonable and
prudent;
•
•
for the Group financial statements,
state whether they have been prepared
in accordance with international
accounting standards in conformity
with the requirements of the Companies
Act 2006 and, additionally for the
Group, international financial reporting
standards adopted pursuant to
Regulation (EC) No 1606/2002 as it
applies in the European Union;
for the parent Company financial
statements, state whether applicable
UK Accounting Standards comprising
FRS 101 have been followed, subject
to any material departures disclosed
and explained in the parent Company
financial statements;
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Job Number 15 July 2021 5:28 pm Proof NumberOur FinancialsIndependent Auditors’ Report140Consolidated Income Statement148Consolidated Statement of Comprehensive Income149Consolidated Statement of Financial Position150Consolidated Statement of Changes in Shareholders’ Equity151Consolidated Statement of Cash Flows152Note to Consolidated Statement of Cash Flows153Accounting Policies154Notes to the Financial Statements165Company Balance Sheet190Company Statement of Changes in Shareholders’ Equity191Accounting Policies192Notes to the Financial Statements193Contents30441-Halfords-Annual-Report-2021-Financials.indd 13830441-Halfords-Annual-Report-2021-Financials.indd 13815/07/2021 19:15:2215/07/2021 19:15:22 Job Number 15 July 2021 5:28 pm Proof NumberOur Financials30441-Halfords-Annual-Report-2021-Financials.indd 13930441-Halfords-Annual-Report-2021-Financials.indd 13915/07/2021 19:15:2215/07/2021 19:15:22 Independent Auditor’s Report to the
Members of Halfords Group plc
Opinion on the financial statements
In our opinion:
•
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 2 April 2021 and
of the Group’s profit for the 52 weeks then ended;
the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006;
the Group financial statements have been properly prepared in accordance with international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union;
the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006; and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements of Halfords Group Plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the 52 weeks
ended 2 April 2021 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the
Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Shareholders’ Equity, the Company Balance
Sheet, the Company Statement of Changes in Shareholders’ Equity, the Consolidated Statement of Cash Flows and notes to the financial
statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their
preparation is applicable law and international accounting standards in conformity with the requirements of the Companies Act 2006 and
international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The
financial reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and
United Kingdom Accounting Standards, including Financial Reporting Standard 101 Reduced Disclosure Framework (United Kingdom
Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is
consistent with the additional report to the audit committee.
Independence
Following the recommendation of the audit committee, we were appointed by the Board of Directors on 13 July 2019 to audit the
financial statements for the year ended 3 April 2020 and subsequent financial periods. In respect of the year ended 2 April 2021, we were
reappointed by the Parent Company’s members on 15 September 2020 at the Annual General Meeting. The period of total uninterrupted
engagement including retenders and reappointments is two years, covering the years ending 3 April 2020 to 2 April 2021. We remain
independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard were not provided
to the Group or the Parent Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to
continue to adopt the going concern basis of accounting included:
• Assessment of assumptions within the projected cash flows: we evaluated the reasonableness of the assumptions and future
plans modelled within the Board approved going concern forecasts, covering the period to 30 June 2022 and including the impact
of strategic initiatives (including store closures and planned investments in FY22) as well as the ongoing and uncertain impact of
COVID-19. We considered whether the forecasts aligned with how the Group had traded through the pandemic and post year end.
• Financing: confirmed the Group had financing facilities in place throughout the period of the going concern review as modelled in its
forecasts. We also confirmed the calculations supporting covenant compliance and headroom throughout the going concern period.
• Sensitivity analysis: evaluation of sensitivities of the Group’s cash flow forecasts with reference to the financial covenants in place over
the existing financing facilities. The analysis considered reasonably possible adverse effects that could arise as well as a stress test to
consider the level of future revenue reduction the Group could support.
• Post year end trading performance: comparison of the post year end trading results to the forecasts so as to evaluate the accuracy
and achievability of the forecasts prepared.
• Disclosures: evaluation of the adequacy of the disclosures in relation to the risks posed and scenarios the Group has considered in
reaching their going concern assessment.
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Financial Statements
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group’s and Parent Company’s ability to continue as a going concern for a period of at
least twelve months from when the financial statements are authorised for issue.
In relation to the Parent Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add
or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate
to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this
report.
Overview
Coverage1
Key audit
matters
93% (FY20: 98%) of Group profit before tax and non-underlying items
91% (FY20: 95%) of Group revenue
94% (FY20: 97%) of Group total assets
Going Concern
Goodwill impairment
Inventory valuation
Cycle Republic closure costs
IFRS16 – leases
Costs related to store and autocentre closure programme
FY21
FY20
4
4
4
4
4
4
4
FY20 included key audit matters in relation to going concern, goodwill impairment and inventory valuation
principally owing to the increased management judgement and higher estimation uncertainty required as a result
of the onset of the COVID-19 pandemic. However owing to the Group’s FY21 performance and financial position,
whilst these remain audit risk in these areas, they are no longer considered key audit matters.
The closure of Cycle Republic was a one off non-recurring event.
Materiality
Group financial statements as a whole
£3.4m (2020: £2.6m) based on 5% of normalised (3 year average) profit before tax and non-underlying items.
(2020: 5% of profit before tax and non-underlying items).
1. These are areas which have been subject to a full scope audit by the group engagement team.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal
control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override
of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material
misstatement.
In establishing the overall approach to the Group audit, we assessed the audit significance of each reporting unit in the Group by reference
to both its financial significance and other indicators of audit risk, such as the complexity of operations and the degree of estimation and
judgement in the financial results.
All of the Group’s three significant components (inclusive of Halfords Group Plc) were subjected to full scope audits for Group purposes.
All components are located in the UK and were audited by the Group audit team. The remaining components were not significant and
subject to analytical review procedures by the Group audit team.
The significant components within the scope of our work accounted for 91% of group revenues and 94% of total assets.
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Independent Auditor’s Report to the
Members of Halfords Group plc
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we
identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing
the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and
in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
IFRS 16 – Leases
(Accounting polices,
Note 14 Leases –
closing right-of-use
assets £282.8m,
lease liabilities
£344.3m)
The Group has a large portfolio of
retail and autocentre sites, with the
majority of properties being leased.
The ongoing impact to the financial
statements of IFRS 16 is therefore
significant.
The calculation of right-of-use
assets and lease liabilities involves
adjustments relating to changes
in lease arrangements and
assumptions over the lease term
and the incremental borrowing
rate. Small changes to lease
arrangements and management
applied assumptions across a
number of leases could lead to a
material change in the valuation
of right-of-use assets and lease
liabilities.
Owing to the magnitude of the
right-of-use assets and lease liability
balances and the estimation and
judgement required in accurately
assessing these balances, the
application of IFRS16 was raised as
a key audit matter.
How the scope of our audit addressed the key audit matter
Our audit procedures included:
• Technical analysis: assessing the calculation methodology driving
the lease liability and right-of-use asset against the requirements
of the accounting standard.
• Sample testing: testing the completeness and accuracy of the
right-of-use asset and lease liability figures calculated by re-
performing the calculation for a sample of new leases agreed
in the year, lease modifications, and lease exits. To confirm
completeness we agreed the brought forward balances to
the prior year closing balances in the consolidated financial
statements.
• Lease length assumptions: evaluating assumed lease terms
with reference to both the underlying lease agreements and
consideration of the broader economics of the lease contracts,
including enquiry of management and review of historical trends.
• Valuation assumptions: corroboration of the inputs applied within
the incremental borrowing rate calculation with assistance from
BDO Valuations specialists to confirm the approach to compiling
the incremental borrowing rate was in line with the requirements
of IFRS 16 and based on appropriate inputs reflective of the
lease portfolio.
Key observations:
As a result of the testing above we did not find any material matters
to report.
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Financial Statements
Key audit matter
How the scope of our audit addressed the key audit matter
Costs related to
store and autocentre
closure programme
During FY21 the Group announced
plans to close a number of stores
and autocentres.
(Note 5 Non
underlying items -
£28.5m)
Material impairments and
provisions are recorded in relation
to redundancies and other costs
associated with the closures which
also resulted in property plant and
equipment and right of use assets
having a reduced recoverable
amount.
Provisioning and impairment are key
areas of judgement and particularly
owing to the proximity to the
year end this and the associated
disclosure within the financial
statements was considered a key
audit matter.
Our audit procedures included:
• Discussions with management: to understand the nature, extent
and timing of the store closure programme.
• Technical analysis: evaluation as to whether costs were
appropriately provided in accordance with IAS 37.
• Lease testing: recalculation of a sample of lease modification
adjustments with reference to the underlying lease agreement
where the Group intended to exercise the break option. Our
work also considered the sublease assumptions applied by
management within the right of use asset impairment and other
property cost provisioning assessments.
• Redundancy costs: confirmation of a communicated redundancy
program prior to the year-end and recalculation of a sample of
redundancies payments.
• Corroborative work: corroboration of management’s estimates
of the costs associated with the planned exit of store leases with
reference to comparable costs previously incurred by the Group
or estimates the Group have received for the work required. We
also assessed the completeness of the provision by comparing
to our expectations the cost categories and stores that had been
included within management’s workings.
• Property plant and equipment impairments: Agreement of charges
incurred to the underlying asset registers and evaluation of the
assumptions made by management in relation to the recoverability
of the carrying value of store and autocentre property plant and
equipment, which was largely estimated to be £Nil.
• Disclosure: assessment of the adequacy of the Group’s
disclosures concerning both the income statement, inclusive
of consideration as to whether the closure costs met with the
Group’s definition of a non-underlying item owing to their size,
nature and incidence and provisions on the balance sheet, with
reference to relevant accounting standard requirements.
Key observations:
As a result of the testing above we did not find any material matters to
report.
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Independent Auditor’s Report to the
Members of Halfords Group plc
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider
materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users
that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily
be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their
occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality
as follows:
Group financial statements
Parent company financial statements
2021
£m
2020
£m
2021
£m
2020
£m
Materiality
3.4
2.6
1.7
1.3
5% of profit before tax
and non-underlying
items.
Determined with
reference to 50% of
Group materiality.
Determined with
reference to 50% of
Group materiality.
We consider profit
before tax and non-
underlying items to be
the most appropriate
benchmark as it
provides a more stable
measure year on year
than group profit before
tax.
Considered appropriate
in the context of both
the Group financial
statements and
Halfords Group Plc
Company balance
sheet.
Considered appropriate
in the context of both
the Group financial
statements and
Halfords Group Plc
Company balance
sheet.
Basis for determining
materiality
Rationale for the
benchmark applied
Performance
materiality
5% of normalised
(3 year average) profit
before tax and non-
underlying items.
We consider profit
before tax and non-
underlying items to be
the most appropriate
benchmark as it
provides a more stable
measure year on year
than group profit before
tax.
For FY21 a normalised
(3 year average) has
been taken owing to the
significant impact of the
COVID-19 pandemic on
the FY21 financial year.
65% of materiality.
Basis for determining
performance
materiality
Performance materiality is the application of materiality at the individual account or balance level set at
an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds materiality for the financial statements as a whole.
Performance materiality was set at 65% of materiality. In setting the level of performance materiality we
considered a number of factors including the expected total value of known and likely misstatements.
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Financial Statements
Component materiality
We set materiality for each component of the Group based on a percentage of between 50% and 90% of Group materiality dependent on
the size and our assessment of the risk of material misstatement of that component. Component materiality ranged from £1.7m to £3.1m.
In the audit of each component, we further applied performance materiality levels of 65% of the component materiality to our testing to
ensure that the risk of errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £70k (2020:£52k). We also
agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report
and accounts other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives
rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the parent company’s compliance with the provisions of the UK Corporate Governance
Statement specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements or our knowledge obtained during the audit.
Going concern
and longer-term
viability
Other Code
provisions
• The Directors’ statement with regards to the appropriateness of adopting the going concern basis of
accounting and any material uncertainties identified set out on page 72; and
• The Directors’ explanation as to its assessment of the entity’s prospects, the period this assessment covers
and why the period is appropriate set out on page 73.
• Directors’ statement on fair, balanced and understandable set out on page 87;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out
on page 108;
• The section of the annual report that describes the review of effectiveness of risk management and internal
control systems set out on page 108; and
• The section describing the work of the audit committee set out on page 116.
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Independent Auditor’s Report to the
Members of Halfords Group plc
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies
Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report
and Directors’
report
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic report and the Directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the Strategic report and the Directors’ report have been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding of the Group and Parent Company and its environment
obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the
Directors’ report.
Directors’
remuneration
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Matters on which
we are required
to report by
exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit
have not been received from branches not visited by us; or
•
the Parent Company financial statements and the part of the Directors’ remuneration report to be audited are
not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities, the Directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but
to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
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Financial Statements
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below:
• We gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it operates,
and considered the risk of acts by the Group which were contrary to applicable laws and regulations, including fraud. These included
but were not limited to compliance with Companies Act 2006, the FCA listing and DTR rules, the principles of the UK Corporate
Governance Code, and IFRSs.
• We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and
remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
• We assessed the susceptibility of the Group’s financial statements to material misstatement, including understanding where and how
fraud might occur.
• We obtained an understanding of the procedures and controls that the Group has established to address risks identified, or that
otherwise prevent, deter and detect fraud. Where the risk was considered to be higher, we performed audit procedures to address
each identified fraud risk. These procedures were designed to provide reasonable assurance that the financial statements were free of
fraud or error.
• Based on the understanding obtained we designed audit procedures to identify non-compliance with the laws and regulations, as
noted above. This included enquiries of in-house legal counsel, Management, the Audit Committee, review of Board minutes, and
correspondence with legal counsel and regulators.
• We tested journal entries, focusing on journal entries containing characteristics of audit interest, year end consolidation journals,
journals processed by users with privileged IT access rights and those relating to revenue.
• We tested and challenged the key estimates and judgements made by management in preparing the financial statements for
indications of bias or management override when presenting the results and financial position of the Group, including the costs related
to store and autocentre closure programme identified as a key audit matter.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of
not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit
procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in
the financial statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Parent Company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the Parent Company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
Diane Campbell (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
16 June 2021
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
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147
Consolidated Income Statement
52 weeks to 2 April 2021
53 weeks to 3 April 2020
For the period
Notes
Before
non-
underlying
items
£m
Non-
underlying
items
(Note 5)
£m
Revenue
Cost of sales
Gross profit
Operating expenses
Results from operating activities
Finance costs
Finance income
Net finance expense
Profit before income tax
Income tax expense
Profit for the financial period
attributable to equity shareholders
Earnings per share
Basic
Diluted
–
–
–
(35.0)
(35.0)
–
–
–
(35.0)
6.1
(28.9)
1
2
3
6
6
7
9
9
1,292.3
(636.0)
656.3
(541.8)
114.5
(15.0)
–
(15.0)
99.5
(17.4)
82.1
41.7p
40.7p
Before
non-
underlying
items
£m
Non-
underlying
items
(Note 5)
£m
Total
£m
1,292.3
(636.0)
656.3
(576.8)
79.5
(15.0)
–
(15.0)
64.5
(11.3)
1,155.1
(565.4)
589.7
(522.5)
67.2
(13.9)
0.3
(13.6)
53.6
(6.9)
53.2
46.7
27.1p
26.4p
23.7p
23.3p
–
–
–
(34.2)
(34.2)
–
–
–
(34.2)
5.0
(29.2)
Total
£m
1,155.1
(565.4)
589.7
(556.7)
33.0
(13.9)
0.3
(13.6)
19.4
(1.9)
17.5
8.9p
8.7p
All results relate to continuing operations of the Group.
The notes on pages 165 to 189 are an integral part of these consolidated financial statements.
148
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Consolidated Statement of
Comprehensive Income
Profit for the period
Other comprehensive income
Cash flow hedges:
Fair value changes in the period
Income tax on other comprehensive income
Other comprehensive income for the period, net of income tax
Total comprehensive income for the period attributable to equity shareholders
Financial Statements
Notes
7
52 weeks to
2 April
2021
£m
53 weeks to
3 April
2020
£m
53.2
17.5
(9.6)
1.6
(8.0)
45.2
7.9
(0.7)
7.2
24.7
All items within the Consolidated Statement of Comprehensive Income are classified as items that are or may be recycled to the
consolidated income statement.
The notes on pages 165 to 189 are an integral part of these consolidated financial statements.
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149
Consolidated Statement of
Financial Position
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Derivative financial instruments
Deferred tax asset
Total non-current assets
Current assets
Inventories
Trade and other receivables
Assets held for sale
Derivative financial instruments
Current tax assets
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Borrowings
Lease liabilities
Derivative financial instruments
Trade and other payables
Provisions
Total current liabilities
Net current (liabilities)/assets
Non-current liabilities
Borrowings
Lease liabilities
Derivative financial instruments
Trade and other payables
Provisions
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Share premium
Investment in own shares
Other reserves
Retained earnings
Total equity attributable to equity holders of the Company
Notes
11
12
14
22
21
15
16
13
22
7
17
18
18
22
19
20
18
18
22
19
20
23
23
23
23
2 April
2021
£m
398.3
81.3
282.8
0.1
12.3
774.8
143.9
86.1
6.0
0.5
3.1
67.2
306.8
1,081.6
(0.2)
(63.4)
(5.9)
(270.2)
(24.5)
(364.2)
(57.4)
–
(280.9)
(0.4)
(3.3)
(15.0)
(299.6)
(663.8)
417.8
2.0
151.0
(10.0)
(1.8)
276.6
417.8
3 April
2020
£m
395.7
83.1
349.9
–
7.3
836.0
173.0
53.5
–
8.7
8.2
115.5
358.9
1,194.9
(0.2)
(83.2)
(1.1)
(217.0)
(9.7)
(311.2)
47.7
(179.1)
(332.8)
–
(1.9)
(4.1)
(517.9)
(829.1)
365.8
2.0
151.0
(10.0)
4.9
217.9
365.8
The notes on pages 165 to 189 are an integral part of these consolidated financial statements.
The financial statements on pages 148 to 189 were approved by the Board of Directors on 16 June 2021 and were signed on its behalf by:
Loraine Woodhouse
Chief Financial Officer
Company Number: 04457314
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Consolidated Statement of Changes in
Shareholders’ Equity
Financial Statements
Attributable to the equity holders of the Company
Other reserves
Share
premium
account
£m
Investment
in own
shares
£m
Capital
redemption
reserve
£m
Hedging
reserve
£m
Retained
Earnings*
£m
Closing balance at 29 March 2019
Impact of adoption of IFRS 16*
Opening balance at 30 March 2019
Total comprehensive income for the period
Profit for the period
Other comprehensive income
Cash flow hedges: fair value changes in the
period
Income tax on other comprehensive income
Total other comprehensive income for
the period net of tax
Total comprehensive income for the period
Hedging gains and losses transferred to
the cost of inventory
Transactions with owners
Share-based payment transactions
Income tax on share-based payment
transactions
Dividends to equity holders
Total transactions with owners
Closing balance at 3 April 2020
Total comprehensive income for the period
Profit for the period
Other comprehensive income
Cash flow hedges: fair value changes in the
period
Income tax on other comprehensive income
Total other comprehensive income for
the period net of tax
Total comprehensive income for the period
Other
Hedging gains and losses transferred to the
cost of inventory
Transactions with owners
Share options exercised
Share-based payment transactions
Income tax on share-based payment
transactions
Dividends to equity holders
Total transactions with owners
Balance at 2 April 2021
Share
capital
£m
2.0
–
2.0
–
–
–
–
–
–
–
–
–
–
2.0
–
–
–
–
–
–
–
–
–
151.0
–
151.0
(10.0)
–
(10.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
151.0
–
–
–
(10.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.0
–
–
–
151.0
–
–
–
(10.0)
Total
equity
£m
409.3
(27.0)
384.2
264.4
(27.0)
239.3
17.5
17.5
(2.3)
(0.8)
(3.1)
14.4
–
1.0
(0.2)
(36.6)
(35.8)
217.9
5.6
(1.5)
4.1
21.6
(4.2)
1.0
(0.2)
(36.6)
(35.8)
365.8
53.2
53.2
–
–
–
53.2
(1.3)
–
–
6.4
0.4
–
6.8
276.6
(9.6)
1.6
(8.0)
45.2
(1.3)
1.3
–
6.4
0.4
–
6.8
417.8
0.3
–
0.3
–
–
–
–
–
–
–
–
–
–
0.3
–
–
–
–
–
–
–
–
–
–
–
–
0.3
1.6
–
1.6
–
7.9
(0.7)
7.2
7.2
(4.2)
–
–
–
–
4.6
–
(9.6)
1.6
(8.0)
(8.0)
–
1.3
–
–
–
–
–
(2.1)
* The Group initially applied IFRS 16 at 30 March 2019, using the modified retrospective approach. Under this approach, comparative information is not
restated and the cumulative effect of applying IFRS 16 is recognised in Retained earnings at the date of initial application.
The notes on pages 165 to 189 are an integral part of these consolidated financial statements.
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Consolidated Statement of Cash Flows
Cash flows from operating activities
Profit after tax for the period, before non-underlying items
Non-underlying items
Profit after tax for the period
Depreciation – property, plant and equipment
Impairment – property, plant and equipment
Amortisation and impairment of right-of-use assets
Amortisation – intangible assets
Net finance costs
Loss on disposal of property, plant and equipment and intangibles
Equity-settled share-based payment transactions
Exchange movement
Income tax expense
Decrease in inventories
Increase in trade and other receivables*
Increase in trade and other payables*
Increase/(decrease) in provisions*
Income tax paid
Net cash from operating activities
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired
Purchase of intangible assets
Purchase of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Finance income received
Finance costs paid
Payment of loan following acquisition
Proceeds from loans, net of transaction costs
Repayment of borrowings
Interest paid on lease liabilities*
Payment of capital element of leases*
Dividends paid
Net cash used in financing activities
Net (decrease)/increase in cash and bank overdrafts
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
52 weeks to
2 April
2021
£m
52 weeks to
3 April
2020
(Restated)*
£m
Notes
82.1
(28.9)
53.2
21.0
2.8
81.8
12.9
15.0
1.7
6.4
2.1
11.3
35.0
(26.2)
40.2
25.7
(10.8)
272.1
(11.5)
(11.8)
(15.7)
(39.0)
–
(5.5)
–
–
(180.0)
(10.0)
(85.9)
–
(281.4)
(48.3)
115.3
67.0
46.7
(29.2)
17.5
24.3
5.4
83.0
11.4
13.6
2.8
1.0
(2.0)
1.9
3.9
(1.0)
35.4
(0.7)
(16.3)
180.2
(10.9)
(12.5)
(21.1)
(44.5)
0.3
(2.2)
(1.8)
1,377.0
(1,262.0)
(11.3)
(76.4)
(36.6)
(13.0)
122.7
(7.4)
115.3
12
12
14
11
6
3
8
I.
I.
Cash and cash equivalents at the period end consist of £67.2m (2020: £115.5m) of liquid assets and £0.2m (2020: £0.2m) of bank
overdrafts.
* Adjustment to reported 3 April 2020 results. See note 30.
The notes on pages 165 to 189 are an integral part of these consolidated financial statements.
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Financial Statements
Note to Consolidated Statement of
Cash Flows
I. Analysis of movements in the Group’s net debt in the period
Cash and cash equivalents at bank and in hand
Debt due after one year
Total net debt excluding leases
Current lease liabilities
Non-current lease liabilities
Total lease liabilities
Total net debt
Cash and cash equivalents at bank and in hand
Debt due after one year
Total net debt excluding leases
Current lease liabilities
Non-current lease liabilities
Total lease liabilities
Total net debt
At
3 April
2020
£m
115.3
(179.1)
(63.8)
(83.2)
(332.8)
(416.0)
(479.8)
Cash flow
£m
(48.3)
180.0
131.7
95.9
–
95.9
227.6
At
29 March
2019
£m
(7.4)
(63.8)
(71.2)
(1.3)
(9.3)
(10.6)
(81.8)
Cash flow
£m
Recognised
on adoption
of IFRS 16
122.7
(115.0)
7.7
87.7
–
87.7
95.4
–
–
–
(79.4)
(377.4)
(456.8)
(456.8)
Other
non-cash
changes
£m
–
(0.9)
(0.9)
(76.1)
51.9
(24.2)
(25.1)
Other
non-cash
changes
£m
–
(0.3)
(0.3)
(90.2)
53.9
(36.3)
(36.6)
At
2 April
2021
£m
67.0
–
67.0
(63.4)
(280.9)
(344.3)
(277.3)
At
3 April
2020
£m
115.3
(179.1)
(63.8)
(83.2)
(332.8)
(416.0)
(479.8)
Non-cash changes include finance costs in relation to the amortisation of capitalised debt issue costs of £1.1m (2020: £0.4m), additions of
new leases, modifications to leases and foreign exchange movements and changes in classification between amounts due within and after
one year.
Cash and cash equivalents at the period end consist of £67.2m (2020: £115.5m) of liquid assets and £0.2m (2020: £0.2m) of bank
overdrafts. Included within cash and cash equivalent is £6.4m (2020: £5.1m) held by the trustee of the Group’s employee benefit trust in
relation to the share scheme for employees (£5.1m) and ‘Here to Help’ fund (£1.3m). These funds are restricted and are not available to
circulate within the Group on demand.
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Accounting Policies
General Information
Halfords Group plc is a company domiciled in the United Kingdom. The consolidated financial statements of the Company as at and for
the period ended 2 April 2021 comprise the Company and its subsidiary undertakings.
Statement of Compliance
The consolidated financial statements have been prepared in accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union.
Basis of Preparation
The consolidated financial statements of Halfords Group plc and its subsidiary undertakings (together the “Group”) are prepared on a
going concern basis for the reasons set out below, and under the historical cost convention, except where adopted IFRSs require an
alternative treatment. The principal variations relate to financial instruments (IFRS 9 “Financial instruments”), share-based payments (IFRS
2 “Share-based payment”) and leases (IFRS 16 “Leases”). Management have undergone rigorous financial reviews taking into account
specific consideration in regards to the trading position of the Group in the context of the current COVID-19 pandemic in the UK.
The financial statements are presented in millions of UK pounds, rounded to the nearest £0.1m.
The accounts of the Group are prepared for the period up to the Friday closest to 31 March each year. Consequently, the financial
statements for the current period cover the 52 weeks to 2 April 2021, whilst the comparative period covered the 53 weeks to 3 April 2020.
Going Concern
In determining the appropriate basis of preparation of the financial statements for the year ended 2 April 2021, the Directors are required to
consider whether the Group & Company can continue in operational existence for the foreseeable future. The Board has concluded that it
is appropriate to adopt the Going Concern basis, having undertaken a rigorous assessment of financial forecasts.
The Group has significantly outperformed the scenarios reviewed as part of the Going Concern assessment in the Annual Report and
Accounts to 3 April 2020.
Management has updated the assessment of Going Concern, which included reviewing financial forecasts and projections to 30 June
2022. Within these financial projections, management reviewed profit and net cash flow, and tested financial covenants in the period. No
issues were found.
The financial forecasts have been stress tested to determine the required sales decline versus the Going Concern scenario before the
covenant conditions were breached. This assessment also included variable and other cost saving measures the Group would employ in
this scenario and showed that sales would have to reduce by (24.0%) before the first covenant condition is broken. Management believe
that this is a significant material event which is highly unlikely to occur in the next 15 months.
If sales were to reduce by (24%), then further actions could be taken by management to prevent the breach. The key mitigating action
would be to halt strategic investment in FY22, which would provide further headroom of c.5% of sales decline.
The Audit Committee recently reviewed the corporate risk register and confirmed that it gave no reason not to adopt the Going Concern
principle.
The Group ended the year in a positive net debt position pre-IFRS 16 of £58.1m and continues to be cash generative. The Group has a
revolving credit facility of £180.0m at the date of approval of these financial statements, expiring on 3 December 2023. The Group has no
other debt or facilities. Significant headroom exists on both financial covenants contained within the banking agreement.
Covenant
Interest payable to EBITDAR >1.5
Net borrowings to EBITDA <3.0
FY21
2.5
(0.4)
FY20
2.1
0.8
The Group ends the year in a net current liabilities position (£57.4m). If required to settle the amount, the Group would utilise the undrawn
revolving credit facility.
The Board has a reasonable expectation that the Group and the Company will be able to continue in operation and meet its liabilities as
they fall due; retain sufficient available cash and not breach any covenants under any drawn facilities over the remaining term of the current
facilities. They do not consider there to be a material uncertainty around the Group’s or the Company’s ability to continue as a Going Concern.
Government Support
Support payments are recognised only when there is reasonable assurance that the Group will comply with the conditions attached to
them and that the monies will be received.
Support payments receivable as compensation for expenses already incurred are recognised in profit or loss within operating costs, in the
period in which they become receivable. During the period support and other payments received equated to £49.6m in relation to business
rates relief, furlough support and related salary savings. The Group has made the decision to repay the amounts received in relation to
furlough support (£10.5m), this was repaid during the period therefore, a £nil balance will be presented in Note 4.
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Financial Statements
Basis of Consolidation
Subsidiary Undertakings
A subsidiary investment is an entity controlled by Halfords. Control is achieved when Halfords is exposed, or has rights to, variable returns
from its involvement with the investee and has the ability to affect those returns through its power, directly or indirectly, over the investee.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred, in which case an
appropriate adjustment would be made.
The financial statements of all subsidiary undertakings are prepared to the same reporting date as the Company. All subsidiary
undertakings have been consolidated.
The subsidiary undertakings of the Company at 2 April 2021 are detailed in Note 4 to the Company balance sheet on page 193.
Business Combinations
The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of
the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in
exchange for control of the acquiree. Acquisition-related costs are recognised as expenses in the period in which the costs are incurred.
The identifiable assets, liabilities and contingent liabilities of the acquired entity that meet the conditions for recognition under IFRS 3
“Business combinations” are recognised at their fair value at the acquisition date.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business
combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after
reassessment, the Group’s interest in the net fair value of these elements exceeds the cost of the business combination, the excess is
recognised immediately in the income statement.
Revenue Recognition
The Group recognises revenue when it has satisfied its performance obligations to external customers and the customer has obtained
control of the goods or services being transferred.
The revenue recognised is measured at the transaction price received and is recognised net of value added tax, discounts, and
commission charged and received from third parties for providing credit to customers.
The Group operations comprise the retailing of automotive, leisure and cycling products and car servicing and repair operations. The table
below summarises the revenue recognition policies for different categories of products and services offered by the Group.
For the vast majority of revenue streams, there is a low level of judgement applied in determining the transaction price or the timing of
transfer of control.
Products and services
Automotive, leisure and cycling
products, car servicing and repair
operations
Service and repair plans
Product warranties
Nature, timing and satisfaction of performance obligations and significant payment terms
The majority (both value and volume) of the Group’s sales are for standalone products and
services made direct to customers at standard prices either in-store or online. In these cases all
performance obligations are satisfied, and revenue recognised, when the product or service is
transferred to the customer. The customer pays in full at the same point in time. Where customers
pay in advance online, the sale is recognised upon collection of the goods.
In the case of Cycle to Work a company will pay to be part of the scheme on a contracted basis
but the balance will be held on the balance sheet until the product or service has been transferred
to the customer, at which point revenue is recognised.
The Group offers various service and repair plans to customers. The Group recognises revenue
on these on a straight-line basis over the period of the plan. The performance obligation of
the Group, being the level of service and repair offered with the plan, will be the period of the
plan and therefore revenue should be recognised over this period. The product is paid for on
commencement of the plan, and unrecognised income is held within trade and other payables.
Certain products, principally motoring and cycling, have a warranty period attached which is
built in to the price of the product rather than being sold separately as an incremental purchase.
The warranty element has been identified as a separate performance obligation to the sale of the
product, and given it is not sold separately, a transaction price has been allocated for the warranty
element based on the expected cost approach.
This element of revenue is recognised on a straight-line basis over the period of the plan. The
performance obligation of the Group, being the rectification of faults on products sold, will be the
period over which the customer can exercise their rights under the warranty and therefore revenue
should be recognised over this period. The full price of the product is paid for on commencement
of the warranty, and unrecognised income is held within trade and other payables.
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Accounting Policies
Returns
A provision for estimated returns is made based on the value of goods sold during the year which are expected to be returned and
refunded after the year end based on past experience.
The sales value of the expected returns is recognised within provisions, with the cost value of goods expected to be returned recognised
as a current asset within inventories.
Gift Cards
Deferred income in relation to gift card redemptions is estimated on the basis of historical returns and redemption rates.
Supplier Income
As is common in the retail industry, the Group receives income from their suppliers based on specific agreements in place. These enable
the Group to share the costs and benefits of promotional activity and volume growth and are explained below. This supplier income
received is recognised as a deduction from cost of sales based on the entitlement that has been earned up to the balance sheet date for
each relevant supplier agreement. The Group receives other contributions that do not meet the definition of supplier income, including, but
not limited to, marketing, advertising and promotion contributions that are offset against the costs included in administrative expenses to
which they relate.
The supplier income arrangements are often not co-terminus with Group’s financial period end. Such income is only recognised when
there is reasonable certainty that the conditions for recognition have been met by the Group, and the income can be reliably measured
based on the terms of the contract. The Group is sometimes required to estimate the amounts due from suppliers at year end. However,
as the majority of supplier income is confirmed before the year end, the level of estimation and judgement required is limited.
Supplier income is recognised on an accruals basis, based on the entitlement that has been earned up to the balance sheet date for each
relevant supplier contract. The accrued supplier income is included within trade and other receivables.
Supplier income comprises:
• Rebates – typically these are based on the volume of purchases of goods for resale. These are earned based on purchase triggers
over set periods of time. In some cases, rebates will also be received to support promotional pricing.
• Fixed contributions – typically these will be for cost price discounts or for favourable positioning of products in store.
Supplier income recognised is recorded against cost of sales and inventory, which is adjusted to reflect the lower purchase cost for the
goods on which the income has been earned. Depending on the agreement with the supplier, supplier income is either received in cash
from the supplier or netted off payments made to suppliers.
Finance Income
Finance income comprises interest income on funds invested. Income is recognised, as it accrues in profit or loss, using the effective
interest rate method.
Non-underlying Items
Non-underlying items are those items that are unusual because of their size, nature (one-off, non-trading costs) or incidence, or relate to
significant strategic projects. The Group’s management considers that these items should be separately identified within their relevant
income statement category to enable a full understanding of the Group’s results.
Earnings Per Share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit
or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the
period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and
the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary
shares, which comprise share options granted to employees.
The Group has also chosen to present an alternative earnings per share measure, with profit adjusted for non-underlying items. A
reconciliation of this alternative measure to the statutory measure required by IFRS is given in Note 9.
Foreign Currency Translation
Functional and Presentation Currency
The consolidated financial statements are presented in pounds sterling, which is the Group’s presentation currency and are rounded to the
nearest hundred thousand. Items included in the financial statements of the Group’s entities are measured in pounds sterling which is the
currency of the primary economic environment in which the entity operates (the functional currency).
Transactions and Balances
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. At each balance sheet date,
monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange rate prevailing at the balance sheet date.
Translation differences on monetary items are taken to the income statement with the exception of differences on transactions that are
subject to effective cash flow hedges, which are recognised in other comprehensive income.
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Financial Statements
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated at the exchange rate
at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss, except
for differences arising on qualifying cash flow hedges, which are recognised in other comprehensive income.
The assets and liabilities of foreign operations are translated to sterling at the exchange rate at the reporting date. The income and
expenses of foreign operations are translated to sterling at an average exchange rate. Foreign currency differences are recognised in other
comprehensive income and a separate component of equity. When a foreign operation is disposed of, the relevant amount in equity is
transferred to profit or loss.
Employee Benefits
i) Pensions
The Halfords Pension Plan is a contract-based plan, where each member has their own individual pension policy, which they monitor
independently. The Group pays fixed contributions and has no legal or constructive obligation to pay further amounts. The costs of
contributions to the scheme are charged to the income statement in the period that they arise.
ii) Share-based Payment Transactions
The Group operates a number of equity-settled share-based compensation plans.
The fair value of the employee services received under such schemes is recognised as an expense in the income statement. Fair values
are determined by use of an appropriate pricing model and incorporate an assessment of relevant market performance conditions.
The amount to be expensed over the vesting period is adjusted to reflect the number of awards for which the related service and non-
market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of
awards that meet the related service and non-market performance conditions at the vesting date.
At each balance sheet date, the Group revises its estimates of the number of share incentives that are expected to vest. The impact of the
revision of original estimates, if any, is recognised in the income statement, with a corresponding adjustment to equity.
Taxation
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent
that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively
enacted, at the reporting date, and any adjustment to tax payable in respect of previous years.
The tax base of an asset is the amount that will be deductible for tax purposes against any taxable economic benefits that will flow to an
entity when it recovers the carrying amount of the asset. If those economic benefits will not be taxable, the tax base of the asset is equal to
its carrying amount.
The tax base of a liability is its carrying amount, less any amount that will be deductible for tax purposes in respect of that liability in future
periods. In the case of revenue which is received in advance, the tax base of the resulting liability is its carrying amount, less any amount of
the revenue that will not be taxable in future periods.
Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred taxation arises from initial
recognition of an asset or liability in a transaction other than a business combination, that at the time of the transaction affects neither
accounting nor taxable profit or loss, it is not accounted for. Deferred taxation is calculated using rates that are expected to apply when the
related deferred asset is realised or the deferred taxation liability is settled.
Deferred taxation assets are recognised to the extent that it is probable that future taxable profit will be available against which the
temporary differences can be utilised.
Under IFRIC23, the Group holds no provisions against uncertain tax positions.
Dividends
Final dividends are recognised in the Group’s financial statements in the period in which the dividends are approved by shareholders.
Interim equity dividends are recognised in the period they are paid.
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Accounting Policies
Intangible Assets
i) Goodwill
Goodwill is initially recognised as an asset at cost and is reviewed for impairment at least annually. Goodwill is subsequently measured at
cost less any accumulated impairment losses. An impairment charge is recognised in profit or loss for any amount by which the carrying
value of goodwill exceeds its recoverable amount.
For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the
synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more
frequently when there is an indication that the unit may be impaired.
For acquisitions prior to 3 April 2010 costs directly attributable to business combinations formed part of the consideration payable when
calculating goodwill. Adjustments to contingent consideration, and therefore the consideration payable and goodwill, are made at each
reporting date until the consideration is finally determined.
Acquisitions after this date fall under the provisions of ‘Revised IFRS 3 Business Combinations (2008)’. For these acquisitions transaction
costs, other than share and debt issue costs, will be expensed as incurred and subsequent adjustments to the fair value of contingent
consideration payable will be recognised in profit or loss.
ii) Computer Software
Costs that are directly associated with identifiable and unique software products controlled by the Group, and that will generate economic
benefits beyond one year are recognised as intangible assets. These intangible assets are stated at cost less accumulated amortisation
and impairment losses. Software is amortised over three to five years, depending on the estimated useful economic life.
iii) Acquired Intangible Assets
Intangible assets that are acquired as a result of a business combination are recorded at fair value at the acquisition date, provided they
are identifiable and capable of reliable measurement.
Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill,
from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic
benefits embodied in the asset. The estimated useful lives for the current and comparative periods are as follows:
• Brand names and trademarks – 2 years, in respect of Autocentres, and 10 years in respect of c.Boardman;
• Supplier relationships – 5 to 15 years;
• Customer relationships – 5 to 15 years; and
• Favourable leases – over the term of the lease.
Amortisation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.
Property, Plant and Equipment
Property, plant and equipment is held at cost less accumulated depreciation and any accumulated impairment losses.
Depreciation of property, plant and equipment is provided to write off the cost, less residual value, on a straight-line basis over their useful
economic lives as follows:
• Freehold properties are depreciated over 50 years;
• Leasehold premises with lease terms of 50 years or less are depreciated over the remaining period of the lease;
• Leasehold improvements are depreciated over the period of the lease to a maximum of 25 years;
• Motor vehicles are depreciated over 3 years;
• Fixtures, fittings and equipment are depreciated over 4 to 10 years according to the estimated life of the asset;
• Computer equipment is depreciated over 3 years; and
• Land is not depreciated.
Depreciation is expensed to the income statement within operating expenses.
Residual values, remaining useful economic lives and depreciation periods and methods are reviewed annually and adjusted if appropriate.
Impairment of Assets
Tangible and intangible assets that are subject to amortisation and depreciation are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which
the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to
sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units). Property, plant and equipment relating to Retail stores or for Car Servicing garages are
grouped on an individual store or garage basis.
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Financial Statements
Assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale if it is highly probable that they will
be recovered primarily through sale rather than through continuing use. Such assets, or disposal groups, are generally measured at the
lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group is allocated first to goodwill, and
then to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred
tax assets, employee benefit assets, investment property or biological assets, which continue to be measured in accordance with the
Group’s other accounting policies. Impairment losses on initial classification as held-for-sale or held-for distribution and subsequent gains
and losses on remeasurement are recognised in profit or loss. Once classified as held-for-sale, intangible assets and property, plant and
equipment are no longer amortised or depreciated, and any equity-accounted investee is no longer equity accounted.
Leases
The Group initially applied IFRS 16 at 30 March 2019, using the modified retrospective approach. Under this approach, comparative
information is not restated and the cumulative effect of applying IFRS 16 is recognised in Retained earnings at the date of initial
application.
As lessee
The Group leases various offices, warehouses, retail stores, car servicing garages, equipment and vehicles. Rental contracts are typically
made for fixed periods between 3 months and 25 years, but may have break clauses or extension options.
Contracts may contain both lease and non-lease components. The group allocates the consideration in the contract to the lease and
non-lease components based on their relative stand-alone prices. However, for leases of real estate for which the Group is a lessee, it has
elected not to separate lease and non-lease components and instead accounts for these as a single lease component.
At the commencement date of property leases the Group determines the lease term to be the full term of the lease. Extension options
(or periods after termination options) are included in the lease term if there is reasonable certainty of exercising these options. Leases
are regularly reviewed on an individual basis and will be revalued if it becomes likely that a break clause or option to extend the lease is
exercised. These are used to maximise the operational flexibility in terms of managing the assets used in the Group’s operations.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of
the following lease payments:
•
fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date;
• amounts expected to be payable by the Group under residual value guarantees;
•
the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
• payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally
the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to
pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with
similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
• where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in
financing conditions since third party financing was received;
• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group; and
• makes adjustments specific to the lease, for example location, type of property.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in
the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is
reassessed and adjusted against the right-of-use asset. Lease payments are allocated between principal and finance cost. The finance
cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the
liability for each period.
Right-of-use assets are measured at cost comprising the following:
•
the amount of the initial measurement of lease liability;
• any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs; and
•
restoration costs.
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Accounting Policies
For leases acquired as part of a business combination, the lease liability is measured at the present value of the remaining lease payments.
The right-of-use asset is measured at the same amount as the lease liability adjusted to reflect favourable or unfavourable terms of the
lease when compared to market terms.
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding
and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease
or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or
termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised
term, which are discounted at the same discount rate that applied on lease commencement. The carrying value of lease liabilities is
similarly revised when the variable element of future lease payments dependent on a rate or index is revised. In both cases an equivalent
adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining
(revised) lease term. If the carrying value of the right-of-use asset is adjusted to zero, any further reduction is recognised in profit or loss.
The right-of-use assets are considered for impairment at each reporting date, see note 14.
When the Group renegotiates the contractual terms of a lease with the lessor, the accounting depends on the nature of the modification:
•
•
•
if the renegotiation results in one or more additional assets being leased for an amount commensurate with the standalone price for the
additional rights-of-use obtained, the modification is accounted for as a separate lease in accordance with the above policy
in all other cases where the renegotiated increases the scope of the lease (whether that is an extension to the lease term, or one or
more additional assets being leased), the lease liability is remeasured using the discount rate applicable on the modification date, with
the right-of-use asset being adjusted by the same amount
if the renegotiation results in a decrease in the scope of the lease, both the carrying amount of the lease liability and right-of-use asset
are reduced by the same proportion to reflect the partial of full termination of the lease with any difference recognised in profit or loss.
The lease liability is then further adjusted to ensure its carrying amount reflects the amount of the renegotiated payments over the
renegotiated term, with the modified lease payments discounted at the rate applicable on the modification date. The right-of-use asset
is adjusted by the same amount.
Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets (<£5,000) are recognised on a
straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets
comprise warehousing, IT and telephone equipment.
As lessor
Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as
operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in revenue in the
statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added
to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are
recognised as revenue in the period in which they are earned.
Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the weighted average cost
principle and includes purchase costs, adjusted for rebates and other costs incurred in bringing them to their existing location.
Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated
reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the
risks specific to the liability. The unwinding of the discount is recognised as a finance cost.
Details of the provisions recognised and the estimates and judgements can be seen in Note 21.
Where the Group expects a provision to be reimbursed, the reimbursement is recognised as a separate asset when the reimbursement
is certain.
A wear and tear provision is recognised when there is future obligation relating to the maintenance of leasehold properties. The provision is
based on management’s best estimate of the obligation which forms part of the Group’s unavoidable cost of meeting its obligations under
the lease contracts. Key uncertainties are the estimates of amounts due.
Provisions for employer and product liability claims are recognised when an incident occurs or when a claim made against the Group is
received that could lead to there being an outflow of benefits from the Group. The provision is based on management’s best estimate of
the settlement assisted by an external third party. The main uncertainty is the likelihood of success of the claimant and hence the pay-out,
however, a provision is only recognised where there is considered to be reasonable grounds for the claim.
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Financial Statements
Cash and Cash Equivalents
Cash and cash equivalents on the consolidated statement of financial position comprise cash at bank and in hand, cash held in trust
and short-term deposits with original maturities of less than 90 days which are subject to an insignificant risk of changes in value. In the
consolidated statement of cash flows, net cash and cash equivalents comprise cash and cash equivalents, as defined above, net of bank
overdrafts.
Financial Instruments
i) Recognition and Initial Measurement
Trade receivables are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised
when the Group becomes a party to the contractual provisions of the instrument.
On initial recognition, a financial asset is measured at: amortised cost; Fair Value through Other Comprehensive Income (FVOCI) – equity
instrument; or Fair Value through Profit or Loss (FVTPL). A financial liability is measured at either amortised costs or FVTPL.
ii) Classification and Subsequent Measurement
Financial assets
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing
financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change
in the business model.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:
•
•
It is held within a business model whose objective is to hold assets to collect contractual cash flows; and
Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding.
On initial recognition of an equity instrument that is not held for trading, the Group may irrevocably elect to present subsequent changes
in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.
All financial assets not measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative
financial assets (Note 22). On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the
requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting
mismatch that would otherwise arise.
Financial assets: Business model assessment
The Group makes an assessment of the objective of the business model in which a financial asset is held at a CGU level because this best
reflects the way the business is managed and information is provided to management. The information considered includes:
• The stated policies and objectives for the business unit and the operation of those policies in practice. This includes whether
management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate portfolio, matching the
duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the
sale of the assets;
• How the performance of the business unit is evaluated and reported to Group’s management;
• The risks that affect the performance of the business model (and the financial assets held within that business unit) and how those
risks are managed;
• The frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future
sales activity.
Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.
Financial assets: Assessment whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined
as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular
period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin.
In assessing whether contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of
the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of
contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers:
• Contingent events that would change the amount or timing of cash flows;
• Terms that may adjust the contractual coupon rate, including variable rate features;
• Prepayment and extension features; and
• Terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse features).
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Accounting Policies
Financial assets: Subsequent measurement and gains and losses
Financial assets at FVTPL
Financial assets at amortised cost
Equity investments at FVOCI
These assets are subsequently measured at fair value. Net gains and losses, including any interest
or dividend income, are recognised in profit and loss. However, see Note 22 for derivatives
designated as hedging instruments.
These assets are subsequently measured at amortised cost using the effective interest method.
The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains
and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is
recognised in profit or loss.
These assets are subsequently measured at fair value. Dividends are recognised as income in
profit or loss unless the dividend clearly represents a recovery of part of the cost of investment.
Other net gains and losses are recognised in OCI and never reclassified to profit or loss.
Financial liabilities: Classification, subsequent measurement and gains and losses
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as FVTPL if it is classified as held
for trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net
gains and losses, including any interest expense, are recognised in profit and loss. All other financial liabilities are recognised initially
at their fair value and subsequently measured at amortised cost using the effective interest method.
iii) Derecognition
Financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the
rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial
asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does
not retain control of the financial asset.
Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also
derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which
case a new financial liability based on the modified terms is recognised at fair value.
On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any
non-cash assets transferred or liabilities assumed) is recognised in profit or loss.
iv) Offsetting
Financial assets and financial liabilities are offset and the net position presented in the statement of financial position when, and only when,
the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the
asset and settle the liability simultaneously.
v) Derivatives
Derivative financial instruments are used to manage risks arising from changes in foreign currency exchange rates relating to the purchase
of overseas sourced products. The Group does not hold or issue derivative financial instruments for trading purposes. The Group uses the
derivatives to hedge highly probable forecast transactions and therefore the instruments are largely designated as cash flow hedges.
Derivatives are initially recognised at fair value on the date a contract is entered into and are subsequently remeasured at their fair value.
At inception of designated hedging relationships, the Group documents the risk management objective and strategy for undertaking the
hedge. The Group also documents the economic relationship between the hedged item and the hedging instrument, including whether the
changes in the cash flows of the hedged item and hedging instrument are expected to offset each other.
The effective element of any gain or loss from remeasuring the derivative instrument is recognised in OCI and accumulated in the hedging
reserve. Any element of the remeasurement of the derivative instrument that does not meet the criteria for an effective hedge is recognised
immediately in the Group Income Statement within cost of sales.
When the hedged forecast transaction subsequently results in the recognition of a non-financial item, such as inventory, the amount
accumulated in the hedging reserve is included directly in the initial cost of the non-financial item when it is recognised.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain
or loss existing in other comprehensive income at that time remains in other comprehensive income and is recognised when the forecast
transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative
gain or loss that was reported in other comprehensive income is recognised immediately in profit or loss.
The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more
than 12 months or, as a current asset or liability, if the remaining maturity of the hedged item is less than 12 months.
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Financial Statements
vi) Impairment
The Group recognises loss allowances for expected credit losses (“ECLs”) on financial asset measured at amortised cost. Trade
receivables are always measured at an amount equal to lifetime ECL. The maximum period considered when estimating ECLs is the
maximum contractual period over which the Group is exposed to credit risk. There is limited exposure to ECLs due to the business model.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL,
the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both
qualitative and quantitative information and analysis, based on the Group’s historical experience and informed credit assessment and
forward-looking information.
The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due. The Group
considers a financial asset to be in default when the financial asset is more than 90 days past due.
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of
recovery. This is generally the case when the Group determines that the debtor does not have the assets or sources of income that could
generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be
subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.
Estimates and Judgements
The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the
results of which form the basis of making judgements about the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from the estimates.
The judgements and key sources of estimation uncertainty that have a significant effect on the amounts recognised in the financial
statements are detailed below:
Allowances Against the Carrying Value of Inventories
The Group reviews the market value of and demand for its inventories on a periodic basis to ensure that recorded inventory is stated at the
lower of cost and net realisable value. In assessing the ultimate realisation of inventories, the Group is required to make estimates as to
future demand requirements and to compare these with the current or committed inventory levels. Assumptions have been made relating
to the timing and success of product ranges, which would impact estimated demand and selling prices. These assumptions have been
reviewed in light of COVID-19.
A sensitivity analysis has been carried out on the carrying value of inventory, including consideration of the uncertainties arising from
COVID-19. A 10% change in provisions applied to clearance stock would impact the net realisable value of inventories by £0.7m. A 10%
change in the current selling price of products would impact the net realisable value of inventories by £0.2m.
Impairment of Assets within Retail and Car Servicing
Goodwill and other assets are subject to impairment reviews based on whether current or future events and circumstances suggest that
their recoverable value may be less than their carrying value. Recoverable amount is based on a calculation of expected future cash flows,
which includes management assumptions and estimates of future performance. Details of the assumptions used in the impairment review
of goodwill and other assets are explained in Note 11.
The carrying amount of these assets and liabilities can be seen in the notes to the financial statements on pages 165 to 189. Sensitivity
analysis on the key assumption in the value-in-use calculations has been undertaken on the two Group cash-generating units (Retail and
Car Servicing) independently of one another, which found that there is adequate amount of headroom before an impairment could be
triggered. For further information see Note 11.
Lease Terms and Incremental Borrowing Rate
Under IFRS 16, the Group recognises a right-of-use asset representing its right to use the underlying asset and a lease liability
representing its obligation to make lease payments. The lease liability is initially measured at the present value of the remaining lease
payments, discounted using the Group’s incremental borrowing rate, adjusted to take into account the risk associated with the length of
the lease which ranges between 1 and 25 years and the location of the lease. The Group has therefore made a judgement to determine the
incremental borrowing rate used. The weighted average incremental borrowing rate in FY21 was 2.51%. Halfords review the incremental
borrowing rate against the property yields to ensure the rates move appropriately against the weighted average reference rate for UK
properties and concluded the rates appear reasonable.
Management exercises judgment in determining the lease term of its lease contracts. In determining lease terms, management considers
all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option.
Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended
(or not terminated).
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Accounting Policies
For leases of warehouses, retail stores, autocentres and equipment, the following factors are normally the most relevant:
• Review of profitability of each store and garage
•
•
If there are significant penalties to terminate (or not extend), the Group is typically reasonably certain to extend (or not terminate)
If any leasehold improvements are expected to have a significant remaining value, the Group is typically reasonably certain to extend
(or not terminate)
Otherwise, the Group considers other factors including historical lease durations and the costs and business disruption required to replace
the leased asset. Most extension options in vehicle leases have not been included in the lease liability, because the Group could replace
the assets without significant cost or business disruption.
National Minimum Wage
HMRC conducted an investigation into national minimum wage liability across the Halfords Group. The Group has continued to
work with HMRC and external advisors during FY21 and a full data validation exercise is underway to determine the required Notice
of Underpayment. The exercise is in progress and based on information available to date and the Group’s assessment of a range of
potential outcomes, management has increased the provision to £3.4m which represents management’s best estimate of the value of
underpayments and the associated penalty charge.
Adoption of New and Revised Standards
The following standards and interpretations are applicable to the Group and were adopted in the current period as they were mandatory for
the year ended 2 April 2021 but either had no material impact on the result or net assets of the Group or were not applicable.
• Definition of a Business (Amendments to IFRS 3);
•
Interest Rate Benchmark Reform – IBOR ‘phase 2’ (Amendments to IFRS 9, IAS 39 and IFRS 7); and
• COVID-19 Related Rent Concessions (Amendments to IFRS 16).
Other new and amended standards and Interpretations issued by the IASB that will apply for the first time in the next annual financial
statements are not expected to impact the Group as they are either not relevant to the Group’s activities or considered immaterial.
New Standards and Interpretations Not Yet Adopted
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective
in future accounting periods that the Group has decided not to adopt early. The most significant of these are as follows, which are all
effective for the period beginning 3 April 2021:
• Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37);
• Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
• Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
• Amendments to IAS 1: Classification of Liabilities as Current or Non-current.
The Group is currently assessing the impact of these new accounting standards and amendments.
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Notes to the Financial Statements
Financial Statements
1. Operating Segments
The Group has two reportable segments, Retail and Car Servicing, which are the Group’s strategic business units. Car Servicing became a
reporting segment of the Group as a result of the acquisition of Nationwide Autocentres on 17 February 2010. The strategic business units
offer different products and services, and are managed separately because they require different operational, technological and marketing
strategies.
The operations of the Retail reporting segment comprise the retailing of automotive, leisure and cycling products through retail stores. The
operations of the Car Servicing reporting segment comprise car servicing and repair performed from Autocentres and mobile vans.
The Chief Operating Decision Maker is the Executive Directors. Internal management reports for each of the segments are reviewed by
the Executive Directors on a monthly basis. Key measures used to evaluate performance are Revenue and Operating Profit. Management
believes that these measures are the most relevant in evaluating the performance of the segment and for making resource allocation
decisions.
The following summary describes the operations in each of the Group’s reportable segments. Performance is measured based on segment
operating profit, as included in the management reports that are reviewed by the Executive Directors. These internal reports are prepared
in accordance with IFRS accounting policies, with IFRS 16 accounting entries applied at a Group level.
All material operations of the reportable segments are carried out in the UK and Republic of Ireland and all material non-current assets are
located in the UK and Republic of Ireland. Revenue from stores within the Republic of Ireland were £40.0m, 3.8% of retail revenue (FY20:
£41.3m, 4.3% of retail revenue). The Group’s revenue is driven by the consolidation of individual small value transactions and, as a result,
Group revenue is not reliant on a major customer or group of customers. All revenue is from external customers.
Income statement
Revenue
Segment result before non-underlying items
Non-underlying items
Segment result
Unallocated expenses1
Operating profit pre IFRS 16
IFRS 16 – underlying
IFRS 16 – non-underlying
Operating profit post IFRS 16
Finance income
Finance costs
Profit before tax
Taxation
Profit for the year
Products and services transferred at a point in time
Products and services transferred over time
Revenue
Retail
£m
Car Servicing
£m
1,039.8
91.4
(33.6)
57.8
252.5
12.7
(3.7)
9.0
983.9
55.9
1,039.8
226.5
26.0
252.5
52 weeks to
2 April 2021
Total
£m
1,292.3
104.1
(37.3)
66.8
(2.3)
64.5
12.7
2.3
79.5
–
(15.0)
64.5
(11.3)
53.2
1,210.4
81.9
1,292.3
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165
Notes to the Financial Statements
1. Operating Segments continued
Income statement
Revenue
Segment result before non-underlying items
Non-underlying items
Segment result
Unallocated expenses1
Operating profit pre IFRS 16
IFRS 16 – underlying
IFRS 16 – non-underlying
Operating profit post IFRS 16
Finance income
Finance costs
Profit before tax
Taxation
Profit for the year
Products and services transferred at a point in time
Products and services transferred over time
Revenue
Retail
£m
961.0
52.0
(29.5)
22.5
Car
Servicing
£m
194.1
5.5
(2.6)
2.9
913.5
47.5
961.0
168.3
25.8
194.1
53 weeks to
3 April
2020
Total
£m
1,155.1
57.5
(32.1)
25.4
(2.1)
23.3
11.8
(2.1)
33.0
0.3
(13.9)
19.4
(1.9)
17.5
1,081.8
73.3
1,155.1
1. Unallocated expenses have been disclosed to reflect the format of the internal management reports reviewed by the Chief Operating Decision Maker and
include an amortisation charge of £2.3m in respect of assets acquired through business combinations (2020: £2.1m).
Other segment items:
Capital expenditure
Depreciation and impairment expense of property, plant and equipment
Impairment of right-of-use asset
Amortisation of right-of-use assets
Amortisation expense
Other segment items:
Capital expenditure
Depreciation and impairment expense of property, plant and equipment and intangibles
Impairment of right-of-use asset
Amortisation of right-of-use assets
Amortisation expense
52 weeks to
2 April
2021
Total
£m
Car
Servicing
£m
22.0
4.7
0.6
11.4
1.2
Car
Servicing
£m
18.0
4.7
0.9
9.9
0.8
45.2
23.8
12.2
69.6
10.8
53 weeks to
3 April
2020
Total
£m
46.8
29.7
9.4
73.6
9.3
Retail
£m
23.3
19.1
11.6
58.2
9.6
Retail
£m
28.8
25.0
8.5
63.7
8.5
There have been no transactions between segments in the 52 weeks ended 2 April 2021 (2020: £nil).
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2. Operating Expenses
For the period
Selling and distribution costs
Administrative expenses, before non-underlying items
Non-underlying administrative expenses (see note 5)
3. Operating Profit
For the period
Operating profit is arrived at after charging/(crediting) the following
expenses/(incomes) as categorised by nature:
Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets
Expenses relating to short term leases
Rentals receivable under operating leases
Landlord surrender premiums
Loss on disposal of property, plant and equipment and intangibles
Amortisation of intangible assets
Amortisation of right-of-use assets
Depreciation of:
– owned property, plant and equipment
Impairment of:
– owned property, plant and equipment
– impairment of right-of-use assets
Trade receivables impairment
Staff costs (see Note 4)
Cost of inventories consumed in cost of sales
Financial Statements
52 weeks to
2 April
2021
£m
53 weeks to
3 April
2020
£m
422.9
422.9
118.9
35.0
153.9
576.8
436.0
436.0
86.5
34.2
120.7
556.7
52 weeks to
2 April
2021
£m
53 weeks to
3 April
2020
£m
0.7
5.6
(2.7)
0.1
1.7
12.9
69.6
21.0
2.8
12.2
0.1
299.6
629.1
0.6
2.5
(3.0)
(0.6)
2.8
11.4
73.6
24.3
5.4
9.4
0.2
256.2
563.8
The total fees payable by the Group to BDO LLP and their associates during the period was £0.6m (2020: £0.6m), in respect of the services
detailed below:
For the period
Fees payable for the audit of the Company’s accounts
Fees payable to BDO LLP and their associates in respect of:
The audit of the Company’s subsidiary undertakings, pursuant to legislation
Audit-related assurance services
Other
52 weeks to
2 April
2021
£000
53 weeks to
3 April
2020
£000
43.0
447.0
78.0
11.0
579.0
43.0
487.0
55.0
–
585.0
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Notes to the Financial Statements
4. Staff Costs
For the period
The aggregated remuneration of all employees, including Directors, comprised:
Wages and salaries
Redundancies included in non-underlying items
Social security costs
Equity settled share-based payment transactions (Note 24)
Contributions to defined contribution plans (Note 26)
For the period
Average number of persons employed by the Group, including Directors, during the period:
Stores/Autocentres
Central warehousing
Support Centre
52 weeks to
2 April
2021
£m
53 weeks to
3 April
2020
£m
262.3
5.9
19.2
6.4
5.8
299.6
232.1
0.6
17.0
1.1
5.4
256.2
Number
Number
9,635
642
1,009
11,286
9,437
595
975
11,007
Furlough payments of £10.5m were received during the period, these were subsequently repaid on the basis of improved trading results.
Key Management Compensation
For the period
Salaries and short-term benefits
Compensation for loss of office
Social security costs
Pensions
Share-based payment charge
52 weeks to
2 April
2021
£m
53 weeks to
3 April
2020
£m
6.4
0.3
0.6
0.3
3.5
11.1
3.1
–
0.5
0.3
–
3.9
Key management compensation includes the emoluments of the Board of Directors (including Non-Executive Directors) and the
emoluments of the Halfords Limited and Halfords Autocentres management boards.
Full details of the Directors’ remuneration and interests are set out in the audited tables in the Directors’ Remuneration Report on pages
126 to 135 which form part of these financial statements.
5. Non-underlying Items
For the period
Non-underlying operating expenses:
Organisational restructure costs (a)
Group-wide strategic review (b)
Closure costs (c)
Acquisition and investment-related fees (d)
One-off claims (e)
Impairment of right-of-use asset (f)
Non-underlying items before tax
Tax on non-underlying items (g)
Non-underlying items after tax
52 weeks to
2 April
2021
£m
53 weeks to
3 April
2020
£m
5.9
–
26.0
0.6
2.9
(0.4)
35.0
(6.1)
28.9
2.8
1.0
26.8
1.9
0.8
0.9
34.2
(5.0)
29.2
a.
In the current and prior period separate and unrelated organisational restructuring activities were undertaken.
Current period costs comprised:
• Costs relating to a strategic redesign of our instore operating model undertaken to better meet our customers’ expectations and
deliver a consistent shopping experience across our estate. Redundancy costs of £5.9m were incurred to transition to the new
operating model. These costs have materially been spent during the year.
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Financial Statements
5. Non-underlying Items continued
Prior period costs comprised:
• Redundancy and transition costs of £1.4m relating to roles which have been outsourced or otherwise will not be replaced; and
• £1.4m of asset write offs, principally resulting from the strategic decision to re-platform the Retail and Autocentres websites.
b.
In the prior period costs were incurred in preparing and implementing the new Group strategy.
• £0.4m of external consultant costs; and
• £0.6m of store labour costs, point of sale equipment and other associated costs in completing the cycling space relay across the
store estate.
c. Of the closure costs £28.5m represents costs associated with the closure of a number of stores and garages following a strategic
review of the profitability of the physical estate. The costs mostly relate to the impairment of right-of-use assets (£12.2m), tangible
assets and ongoing onerous commitments under the lease agreements and other costs associated with the property exits.
Closure costs in the prior period represented costs associated with the closure of the operations of Cycle Republic and the Boardman
Performance Centre (“Cycle Republic”) following a strategic review of the Group’s cycling businesses. The costs mostly relate to the
impairment of right-of-use assets, intangible assets, tangible assets and inventories. £2.5m of these costs have been reversed during
the year as the Group continues to negotiate lease disposals and was able to release stock provisions previously in place (£1.8m).
d.
In the current and prior period costs were incurred in relation to the investment in Universal Tyres, McConechy’s Tyre Services and
Tyres On The Drive.
•
In FY21, £0.6m relating to professional fees in respect of the acquisition of Universal Tyre Services;
• Tyres On The Drive acquisition costs comprised of £1.0m (FY20) principally relating to the costs of dual running Halfords Mobile
Expert and Tyres on The Drive, as well as the write off of sales income due from Tyres On the Drive in respect of Halfords Mobile
Expert prior to acquisition; and
• £0.9m (FY20) relating to professional fees in respect of the acquisition of McConechy’s Tyres Services
e. During the prior year, the Group incurred £0.2m in settling a court case. In addition, a provision of £0.6m was created in relation to the
HMRC audit relating to the national minimum wage. The Group has continued to work with HMRC and external advisors during FY21
and a full data validation exercise is underway to determine the required Notice of Underpayment. The exercise is in progress and
based on information available to date and the Group’s assessment of a range of potential outcomes, management has increased the
provision to £3.4m which represents management’s best estimate of the value of underpayments and the associated penalty charge.
f.
In light of the ongoing COVID-19 pandemic, the Group revised future cash flow projections for stores and garages. As a result, in
FY20 £0.9m incremental impairment has been recognised in relation to garages where the current and anticipated future performance
did not support the carrying value of the right-of-use asset and associated tangible assets. This charge is directly attributable to
impairment due to COVID-19 and relates primarily to the right-of-use asset value. During the year, £0.4m of this impairment has been
reversed as the stores and garages have returned to a profitable position.
g. The tax credit of £6.1m represents a tax rate of 17.4% applied to non-underlying items. The prior period represents a tax credit at
14.6% applied to non-underlying items.
6. Finance Income and Costs
Recognised in profit or loss for the period
Finance costs:
Bank borrowings
Amortisation of issue costs on loans
Commitment and guarantee fees
Other interest payable
Interest payable on lease liabilities
Finance costs
Finance income:
Bank and similar interest
Finance income
Net finance costs
52 weeks to
2 April
2021
£m
53 weeks to
3 April
2020
£m
(2.5)
(1.1)
(1.1)
(0.3)
(10.0)
(15.0)
–
–
(15.0)
(1.6)
(0.4)
(0.6)
–
(11.3)
(13.9)
0.3
0.3
(13.6)
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Notes to the Financial Statements
7. Taxation
For the period
Current taxation
UK corporation tax charge for the period
Adjustment in respect of prior periods
Deferred taxation
Origination and reversal of temporary differences
Adjustment in respect of prior periods
Total tax charge for the period
The tax charge is reconciled with the standard rate of UK corporation tax as follows:
For the period
Profit before tax
UK corporation tax at standard rate of 19% (2020: 19%)
Factors affecting the charge for the period:
Depreciation on expenditure not eligible for tax relief
Employee share options
Other disallowable expenses
Adjustment in respect of prior periods
Impact of overseas tax rates
Impact of change in tax rate on deferred tax balance
Total tax charge for the period
52 weeks to
2 April
2021
£m
53 weeks to
3 April
2020
£m
16.9
(1.0)
15.9
(4.7)
0.1
(4.6)
11.3
5.4
(0.5)
4.9
(1.5)
(1.5)
(3.0)
1.9
52 weeks to
2 April
2021
£m
53 weeks to
3 April
2020
£m
64.5
12.3
0.9
(1.3)
0.6
(0.9)
(0.3)
–
11.3
19.4
3.7
0.5
-
0.8
(1.9)
(0.3)
(0.9)
1.9
The March 2021 Budget announced a further increase to the main rate of corporation tax to 25% from 1 April 2023. This rate has not been
substantively enacted at the balance sheet date, as result deferred tax balances as at 2 April 2021 continue to be measured at 19%. If all
of the deferred tax was to reverse at the amended rate the impact to the closing deferred tax position would be to increase the deferred
tax asset by £3.9m.
The effective tax rate of 17.5% (2020: 9.7%) is lower than the UK corporation tax rate principally due to the impact of deferred tax on
accounting for share options and adjustments in respect of provisions held in respect of prior periods.
The tax charge for the period was £11.3m (2020: £1.9m), including a £6.1m credit (2020: £5.0m credit) in respect of tax on non-underlying
items.
An income tax credit of £1.6m (2020: £0.7m charge) on other comprehensive income relates to the movement in fair valuing forward
currency contracts outstanding at the year end. No other items within other comprehensive income have a tax impact.
The Group engages openly and proactively with tax authorities both in the UK and internationally, where it trades and sources products,
and is considered low risk by HM Revenue & Customs (“HMRC”). The Company is fully committed to complying with all of its tax payment
and reporting obligations.
In this period, the Group’s contribution from both taxes paid and collected exceeded £170m (2020: £208m) with the main taxes including
corporation tax of £10.8m (2020: £16.3m), net VAT of £97.4m (2020: £101.4m), employment taxes of £61.2m (2020: £54.3m) and business
rates of £0.9m (2020: £36.3m).
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Financial Statements
8. Dividends
For the period
Equity – ordinary shares
Final for the 52 weeks to 3 April 2020 – (52 weeks to 29 March 2019: 12.39p)
Interim for the 52 weeks to 2 April 2021 – (53 weeks to 3 April 2020: 6.18p)
52 weeks to
2 April
2021
£m
53 weeks to
3 April
2020
£m
–
–
–
24.4
12.2
36.6
In addition, the Directors are proposing a final dividend of £9.9m at 5.0p per share (2020: £nil) in respect of the financial period ended
2 April 2021.
9. Earnings Per Share
Basic earnings per share are calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of
ordinary shares in issue during the period. The weighted average number of shares excludes shares held by an Employee Benefit Trust
(see Note 23) and has been adjusted for the issue/purchase of shares during the period.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive
potential ordinary shares. These represent share options granted to employees where the exercise price is less than the average market
price of the Company’s ordinary shares during the 52 weeks to 2 April 2021.
The Group has also chosen to present an alternative earnings per share measure, underlying earnings per share, with profit adjusted for
non-underlying items because it better reflects the Group’s underlying performance. This measure is defined on page 201.
For the period
Weighted average number of shares in issue
Less: shares held by the Employee Benefit Trust (weighted average)
Weighted average number of shares for calculating basic earnings per share
Weighted average number of dilutive shares
Weighted average number of shares for calculating diluted earnings per share
For the period
Basic earnings attributable to equity shareholders
Non-underlying items (see Note 5):
Operating expenses
Tax on non-underlying items
Underlying earnings before non-underlying items
Earnings per share is calculated as follows:
For the period
Basic earnings per ordinary share
Diluted earnings per ordinary share
Basic underlying earnings per ordinary share
Diluted underlying earnings per ordinary share
52 weeks to
2 April
2021
Number of
shares
m
53 weeks to
3 April
2020
Number of
shares
m
199.1
(2.0)
197.1
4.9
202.0
199.1
(2.1)
197.0
3.3
200.3
52 weeks to
2 April
2021
£m
53 weeks to
3 April
2020
£m
53.2
35.0
(6.1)
82.1
17.5
34.2
(5.0)
46.7
52 weeks to
2 April
2021
53 weeks to
3 April
2020
27.1p
26.4p
41.7p
40.7p
8.9p
8.7p
23.7p
23.3p
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Notes to the Financial Statements
10. Acquisition of Subsidiaries
Universal
On 18 March 2021, the Group acquired 100% of the issued share capital of The Universal Tyre Company (Deptford) Limited and its
subsidiary companies (see page 193) (“Universal”) for a cash consideration of £14.0m (excluding transaction costs) and deferred
consideration of £1.0m. The acquired businesses comprise a number of garages and a fleet of vans which provide support for commercial
customers, based in the South East of England. The principal reason for the acquisition was to build on the commercial fleet customer
base and expand presence in the South and South East of England.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows (fair value is used
apart from leases, contingent liabilities and income taxes).
Book value
£m
Fair value
adjustment
£m
IFRS 16
adjustment
£m
Final fair
value
£m
Universal net assets at the acquisition date
Intangible assets
Tangible assets
Inventories
Assets held for sale
Trade and other receivables
Cash
Trade and other payables
Other taxation and social security
Borrowings
Current tax liabilities
Deferred tax liability
Total
Goodwill
Goodwill was recognised as a result of the acquisition as follows:
Total cash consideration
Total deferred consideration
Less fair value of identifiable (assets)/liabilities
Goodwill
Intangible Assets:
Customer relationships
Other
Brand names
Total
0.5
6.0
3.2
0.4
5.7
4.2
(6.6)
(1.0)
(1.7)
(0.2)
(0.2)
10.3
2.1
1.4
–
–
–
–
(0.4)
–
–
–
(0.5)
2.6
–
2.7
–
–
–
–
(2.7)
–
–
–
–
–
2.6
10.1
3.2
0.4
5.7
4.2
(9.7)
(1.0)
(1.7)
(0.2)
(0.7)
12.9
£m
14.0
1.0
(12.9)
2.1
1.6
0.2
0.8
2.6
None of the goodwill acquired is expected to be deductible for income tax purposes. The goodwill constitutes value of locational benefits
giving Halfords ability to expand growth within the South and South East of England and also increase presence in the commercial fleet
marketplace.
The Universal businesses contributed £1.4m revenue and a profit of £0.1m to the Group’s profit before tax for the period between the date
of acquisition and the balance sheet date.
If the acquisition of the Universal businesses had been completed on the first day of the financial year, Group revenues for the period
would have been £30.0m higher and Group profit before tax would have been £1.0m higher (before amortisation of intangible assets
arising on consolidation £nil).
Acquisition costs of £0.6m arose as a result of the transaction. These have been recognised as part of non-underlying costs in the
consolidated income statement.
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Financial Statements
11. Intangible Assets
Cost
At 29 March 2019
Additions
Reclassification to right-of-use assets
Disposals
At 3 April 2020
Additions
Disposals
At 2 April 2021
Amortisation and impairment
At 29 March 2019
Charge for the period
Reclassification to right-of-use assets
Disposals
At 3 April 2020
Charge for the period
Disposals
At 2 April 2021
Net book value at 2 April 2021
Net book value at 3 April 2020
Brand
names and
trademarks
£m
Customer
relationships
£m
Supplier
relationships
£m
Favourable
leases
£m
Computer
software
£m
Goodwill
£m
9.8
0.7
–
–
10.5
1.0
–
11.5
3.6
0.7
–
–
4.3
0.8
–
5.1
6.4
6.2
14.9
2.0
–
–
16.9
–
–
16.9
11.3
0.7
–
–
12.0
0.7
–
12.7
4.2
4.9
7.8
–
–
–
7.8
1.6
–
9.4
1.4
0.5
–
–
1.9
0.5
–
2.4
7.0
5.9
2.3
–
(2.3)
–
–
–
–
–
0.8
0.1
(0.9)
–
–
–
–
–
–
–
67.6
12.5
–
(2.1)
78.0
11.8
(2.1)
87.7
40.9
9.4
–
(0.4)
49.9
10.9
(1.1)
59.7
28.0
28.1
364.7
7.6
–
–
372.3
2.1
–
374.4
21.7
–
–
–
21.7
–
–
21.7
352.7
350.6
Total
£m
467.1
22.8
(2.3)
(2.0)
485.5
16.5
(2.1)
499.9
79.7
11.4
(0.9)
(0.4)
89.8
12.9
(1.1)
101.6
398.3
395.7
No intangible assets are held as security for external borrowings.
Goodwill is allocated to two groups of cash-generating units (CGU’s), being Retail and Car Servicing as follows:
1) Retail
Goodwill of £253.1m arose on the acquisition of Halfords Holdings Limited by the Company on 31 August 2002 and is allocated to the
Retail segment. The goodwill relates to a portfolio of sites within the UK which management monitors on an overall basis as a group of
cash-generating units being Retail. Goodwill of £10.7m arose on the acquisition of Boardman Bikes Limited and Boardman International
Limited on 4 June 2014 which form part of the Retail offering.
Goodwill of £9.5m arose on the acquisition of Tredz Limited and Wheelies Direct Limited on 23 May 2016 and is allocated to the Retail
segment. The goodwill relates to the two entities which management monitors on an overall basis as part of the Retail cash-generating unit.
2) Car Servicing
Goodwill of £69.7m arose on the acquisition of Nationwide Autocentres on 17 February 2010 and is allocated to the Car Servicing
segment. The goodwill relates to a portfolio of centres within the UK which management monitors on an overall basis as a group of cash-
generating units being Car Servicing.
During the current period Autocentres acquired The Universal Tyre Company (Deptford) Limited with goodwill of £2.1m. This acquisition
has been allocated to the Car Servicing segment. The goodwill relates to a portfolio of garages and fleet vans within the south of England
which management monitors on an overall basis as part of the Car Servicing cash-generating unit.
During the prior period Autocentres acquired McConechy’s Tyre Service Limited with goodwill of £6.9m and Tyres on the Drive with
goodwill of £0.7m. These acquisitions were allocated to the Car Servicing segment. The goodwill relates to a portfolio of garages within
Scotland which management monitors on an overall basis as part of the Car Servicing cash-generating unit.
The goodwill arising on the acquisition of the Nationwide Autocentres is attributable to a) future income to be generated from new retail, fleet
customer contracts and related relationships, b) the workforce, c) the value of immaterial other intangible assets, and d) operating synergies.
The goodwill on acquisition of the Boardman Bikes is attributable to a) operating synergies and increased control of operations, b) the value
of immaterial other intangible assets, and c) future income to be generated from new retail customer contracts and related relationships. The
goodwill on acquisition of Tredz and Wheelies is attributable to a) assembled workforce and b) future expansion and growth opportunities.
The Group is required to test, on an annual basis, whether goodwill has suffered any impairment. The recoverable amount of goodwill is
determined based on “value-in-use” calculations for each of the two groups of cash-generating units, being Retail and Car Servicing. This
is the lowest level within the Group at which the goodwill is monitored for internal management purposes, which is not higher than the
Group’s operating segments as reported in Note 1.
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Notes to the Financial Statements
11. Intangible Assets (continued)
This requires estimation of the present value of future cash flows expected to arise from the continuing operation of the CGU. Cash flow
projections are based on financial budgets approved by management covering a five-year period, which are reviewed by the Board.
Budgets are based on both past performance and expectations for future market development, linked to the strategy of the Group as set
out in the Strategic Report section in these financial statements.
The five-year plan assumes like for like sales growth to remain at the same level as that applied within the FY22 going concern projections
within the Retail Motoring Markets, a small growth on the FY22 going concern projections in the Autocentres (4%) and McConechys (1%)
market due to share gains and a stronger growth in the Halfords Mobile Expert (8.8%) market as we scale the number of vans from 143 to
at least 200. Retail Cycling has a single digit growth rate assumed as we expect infrastructure investments by the Government suggesting
strong growth rate in the market. Forecasts prepared have been risk adjusted to recognise ongoing uncertainty caused by COVID-19.
Cash outflows required to replace leased assets which are essential to the ongoing operation of the CGU were also considered and the
estimates informed by the Group’s recent lease negotiations. Management has considered other reasonably possible changes in key
assumptions that would cause the carrying amounts of goodwill to exceed the value in use for each asset.
The growth rates used to extrapolate cash flows beyond the plan period, as set out in the table below, do not exceed long-term industry
averages and reflect the revenue growth and ongoing efficiency initiatives, and the relative maturity of the two CGUs. The growth rates for
both the retail and car servicing CGUs have been reviewed and updated as required to reflect the current strategy.
The discount rate is a pre-tax rate that reflects the current market assessment of the time value of money and the risks specific to the
cash-generating units. The pre-tax discount rates used to calculate value in use are derived from the Group’s post-tax weighted average
cost of capital, incorporating the impact of IFRS 16, and adjusted for the specific risks relating to each cash-generating unit as required.
The discount rates used are shown below:
Discount rate
Growth rate
Notes
1
2
Retail
Car Servicing
2021
9.9%
1.0%
2020
10.6%
1.0%
2021
9.9%
1.0%
2020
10.6%
1.0%
Goodwill for the retail CGU was £273.3m (2020: £273.3m) and for the car servicing CGU was £79.4m (2020: £77.3m).
Notes:
1. Pre-tax discount rate applied to the cash flow projections.
2. Growth rate used to extrapolate cash flows beyond the five-year budget period.
Sensitivity analysis over the key assumptions in the value-in-use calculations has been undertaken inclusive of considerations of the
ongoing effect of COVID-19. Modelling included looking at the effect of a 1% decrease in terminal growth rate and a 1% increase in the
discount rate. Both separately and combined, these showed adequate headroom and due to the maturity of the business it is not deemed
reasonable that these would move further. Further stress testing also took place which showed EBIT, and thus sales, would need to move
by a significant percentage before an impairment would be triggered. Management did not believe this percentage movement was likely.
Results of this sensitivity analysis are shown below:
Original headroom
Headroom using a discount rate increased by 1%
Headroom using 0% long term growth rate
Headroom combining -1% long term growth rate and +1% discount rate
Retail
2021
£m
365.0
247.0
212.0
132.0
Car Servicing
2021
£m
162.0
121.0
117.0
87.0
Further modelling was also undertaken to review the point headroom would be reduced to £nil. For the carrying amount and recoverable
amount to be equal within Retail cash generating unit, EBIT (pre-IFRS 16) would need to decrease by 43%, the pre-tax discount rate
would need to increase by 3.2% and the long term growth rate would need to decrease by 3% (each sensitivity applied individually). For
the carrying amount and recoverable amount to be equal within Car Servicing cash generating unit, EBIT (pre-IFRS 16) would need to
decrease by 55%, the pre-tax discount rate would need to increase by 8.6% the long term growth rate would need to decrease by 5.7%
(each sensitivity applied individually).
Based on the analysis summarised above the Directors were satisfied that no reasonably possible change in key assumptions would lead
to an impairment, the Directors have concluded that the recoverable value of the Group’s CGUs exceeded their carrying amount.
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Financial Statements
Fixtures,
fittings
and
equipment
£m
Land and
buildings
£m
80.4
(13.7)
3.3
(0.4)
69.6
3.2
6.7
(6.0)
(0.9)
72.6
50.9
(7.5)
4.2
0.6
(0.4)
47.8
4.2
0.4
(0.6)
51.8
20.8
21.8
240.3
(3.5)
20.7
(2.2)
255.3
17.7
1.1
–
(2.5)
271.6
172.5
(1.6)
20.1
4.8
(1.8)
194.0
16.8
2.4
(2.1)
211.1
60.5
61.3
Total
£m
320.7
(17.2)
24.0
(2.6)
324.9
20.9
7.8
(6.0)
(3.4)
344.2
223.4
(9.1)
24.3
5.4
(2.2)
241.8
21.0
2.8
(2.7)
262.9
81.3
83.1
12. Property, Plant and Equipment
Cost
At 29 March 2019
Reclassification to right-of-use assets
Additions
Disposals
At 3 April 2020
Additions
Additions from acquisitions
Transfer to assets held for sale
Disposals
At 2 April 2021
Depreciation and impairment
At 29 March 2019
Reclassification to right-of-use assets
Depreciation for the period
Impairment for the period
Disposals
At 3 April 2020
Depreciation for the period
Impairment for the period
Disposals
At 2 April 2021
Net book value at 2 April 2021
Net book value at 3 April 2020
No fixed assets are held as security for external borrowings.
The impairment charge for the period of £2.8m mostly relates to tangible assets written off as part of the closure costs disclosed within
non-underlying items (note 5).
13. Assets held for sale
Freehold land and buildings
Total
2 April
2021
£m
6.0
6.0
3 April
2020
£m
–
–
Freehold land and buildings are stated at their carrying value. It relates to seven buildings acquired as part of the acquisition of The
Universal Tyre Services (Deptford) Limited. Of the properties classified as held for sale six have been sold and leased back by the Group
since the year end on lease terms of 15 years with a 10 year break.
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Notes to the Financial Statements
14. Leases
All leases where the Group is a lessee are accounted for by recognising a right-of-use asset and a lease liability except for:
• Leases of low value assets; and
• Leases with a term of 12 months or less.
i) Amounts recognised in the balance sheet
Right-of-Use Assets
At 30 March 2019
Reclassification from intangible assets
Additions on acquisition of subsidiary
Additions to right-of-use assets
Amortisation charge for the year
Effect of modification of lease
Derecognition of right-of-use assets
Impairment
At 3 April 2020
At 3 April 2020
Additions on acquisition of subsidiary
Additions to right-of-use assets
Amortisation charge for the year
Effect of modification of lease
Derecognition of right-of-use assets
Impairment
At 2 April 2021
Land and
buildings
£m
Equipment
£m
388.5
2.4
11.1
10.0
(70.2)
11.6
–
(9.4)
344.0
344.0
2.7
12.5
(66.1)
5.8
(6.8)
(12.2)
279.9
7.8
–
0.3
1.9
(3.4)
–
(0.7)
–
5.9
5.9
–
0.6
(3.5)
–
(0.1)
–
2.9
Total
£m
396.3
2.4
11.4
11.9
(73.6)
11.6
(0.7)
(9.4)
349.9
349.9
2.7
13.1
(69.6)
5.8
(6.9)
(12.2)
282.8
The impairment charge for the period of £12.2m (2020: £9.4m) relates to the impairment of right-of-use assets in relation to the strategic
project to close loss-making stores where a lease obligation still exists.
Lease Liabilities
At 30 March 2019
Additions on acquisition of subsidiary
Additions to lease liabilities
Interest expense
Effect of modification to lease
Lease payments
Foreign exchange movements
At 3 April 2020
At 3 April 2020
Additions on acquisition of subsidiary
Additions to lease liabilities
Interest expense
Effect of modification to lease
Lease payments
Disposals to lease liabilities
Foreign exchange movements
At 2 April 2021
Carrying value of lease liabilities included in the statement of financial position
Current liabilities
Non-current liabilities
Land and
buildings
£m
Equipment
£m
448.6
11.0
10.5
11.1
11.7
(83.8)
0.7
409.8
409.8
2.7
12.6
9.8
5.9
(92.7)
(6.8)
(0.7)
340.6
8.2
0.2
1.8
0.2
–
(4.2)
–
6.2
6.2
–
0.5
0.2
–
(3.2)
–
–
3.7
2 April
2021
£m
63.4
280.9
Total
£m
456.8
11.2
12.3
11.3
11.7
(88.0)
0.7
416.0
416.0
2.7
13.1
10.0
5.9
(95.9)
(6.8)
(0.7)
344.3
3 April
2020
£m
83.2
332.8
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Financial Statements
2 April
2021
£m
3 April
2020
£m
71.2
68.8
64.4
55.1
43.2
28.4
19.3
12.1
5.3
3.5
3.5
374.8
Land and
buildings
£m
Equipment
£m
66.1
9.8
5.6
–
70.2
11.1
2.5
–
3.5
0.2
–
0.7
3.4
0.2
–
0.6
2021
£m
143.9
92.9
76.5
65.1
60.4
51.6
41.9
27.3
18.2
11.1
4.3
5.9
455.2
Total
£m
69.6
10.0
5.6
0.7
73.6
11.3
2.5
0.6
2020
£m
173.0
14. Leases continued
Lease liabilities
Maturity analysis – contractual undiscounted cash flows
Less than one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Between five and six years
Between six and seven years
Between seven and eight years
Between eight and nine years
Between nine and ten years
After ten years
Total contractual cash flows
ii) Amounts recognised in the Consolidated Income Statement
52 weeks ended 2 April 2021
Amortisation charge on right-of-use assets
Interest on lease liabilities
Expenses relating to short-term leases
Expenses relating to leases of low-value assets, excluding short-term leases
of low-value assets
53 weeks ended 3 April 2020
Amortisation charge on right-of-use assets
Interest on lease liabilities
Expenses relating to short-term leases
Expenses relating to leases of low-value assets, excluding short-term leases
of low-value assets
iii) Amounts recognised in Statement of Cash Flows
The total cash outflow for leases for the period ended 2 April 2021 was £95.9m (2020: £87.7m).
15. Inventories
Finished goods for resale
Finished goods inventories include £14.9m (2020: £18.0m) of provisions to carry inventories at net realisable value where such value is
lower than cost. During the period £1.8m of inventory provisions were released (no reversals in the prior period).
During the period £3.0m was recognised as an expense in respect of the write-down of inventories (2020: £6.9m) to net realisable value.
No inventories are held as security for external borrowings.
Goods bought for resale recognised as a cost of sale amounted to £629.1m (2020: £563.8m).
Inventories at 2 April 2021 include a right to recover returned goods amounting to £2.1m (2020: £1.9m). These are measured by reference
to the former carrying amount of the sold inventories.
An amount of £2.3m (FY20: £0.3m deduction) relating to supplier income was recognised as an increase in cost of sales in the period and
the balance included in the year end provision is £5.6m (FY20: £7.9m).
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Notes to the Financial Statements
16. Trade and Other Receivables
Falling due within one year:
Trade receivables
Other receivables
Prepayments and accrued income
2021
£m
29.5
27.9
28.7
86.1
2020
£m
16.6
14.3
22.6
53.5
Information about the Group’s exposure to credit and market risks and impairment losses for trade and other receivables is included in
Note 22.
Trade and other receivables at 2 April 2021 includes £7.5m (2020: £7.1m) relating to supplier income.
17. Cash and Cash Equivalents
Cash at bank and in hand
2021
£m
67.2
2020
£m
115.5
The Group’s banking arrangements are subject to a netting facility whereby credit balances may be offset against the indebtedness of
certain other Group companies. £6.4m (2020: £5.1m) of the Group’s cash and cash equivalents included in the balance sheet and the
cash flow statement, is held by the trustee of the Group’s employee benefit trust in relation to the share scheme for employees (£5.1m)
and ‘Here to Help’ fund (£1.3m). Therefore, these funds are restricted and are not available to circulate within the Group on demand.
18. Borrowings
Current
Unsecured bank overdraft
Lease liabilities (see note 14)
Non-current
Unsecured bank loan and other borrowings1
Lease liabilities (see note 14)
2021
£m
0.2
63.4
63.6
–
280.9
280.9
2020
£m
0.2
83.2
83.4
179.1
332.8
511.9
1. The above borrowings are stated net of unamortised issue costs of £1.6m (2020: £0.9m).
The Group’s borrowing facility was extended in the year. The previous facility, a five-year £200m revolving credit facility began on 4 September
2017 and would have expired on 3 September 2022. A new facility was set up from 4 December 2020 for three years, with two options to
extend by a further year. The new facility is a £180m revolving credit facility. The facility carries an interest rate of SONIA plus a margin which
is variable based on the gearing measures as set out in the facility covenant certificate and which is currently 200 basis points. Both utilisation
and non-utilisation fees are also applicable, being charged when utilisation rises above a set percentage with non-utilisation based on a set
percentage of the applicable margin. These charges are based on market rates as are the commitment fees.
Significant headroom exists on both financial covenants contained within the banking agreement.
Covenant
Interest payable to EBITDAR >1.5
Net borrowings to EBITDA <3.0
FY21
2.5
(0.4)
FY20
2.1
0.8
The Group had the following undrawn committed borrowing facilities available at each balance sheet date in respect of which all conditions
precedent had been met:
Expiring within one year
Expiring between one and two years
Expiring between two and five years
2021
£m
20.0
–
160.0
180.0
2020
£m
20.0
–
–
20.0
The overdraft facility expiring within one year is an annual facility subject to review at various dates during the period. The facility of
£160.0m (2020: £nil) relates to the Group’s revolving credit facility. All these facilities incurred commitment fees at market rates.
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19. Trade and Other Payables
Current liabilities
Trade payables
Other taxation and social security payable
Other payables
Accruals and other deferred income
Non-current liabilities
Accruals and other deferred income
Financial Statements
2021
£m
131.7
34.5
21.6
82.4
270.2
3.3
3.3
2020
£m
106.7
33.2
12.3
64.8
217.0
1.9
1.9
Trade and other payables at 2 April 2021 includes £7.9m (2020: £3.4m) of deferred income in relation to product warranties and service
and repair plans; of which £4.6m (2020: £1.5m) is in current liabilities and £3.3m (2020: £1.9m) is in non-current liabilities.
20. Provisions
At 3 April 2020
Charged during the period
Reclassification from accruals*
Utilised during the period
Released during the period
At 2 April 2021
Analysed as:
Current liabilities
Non-current liabilities
Property
related
£m
Other
trading
£m
6.5
14.6
9.0
(2.5)
(0.5)
27.1
13.6
13.5
7.3
11.3
–
(4.7)
(4.9)
9.0
7.5
1.5
Other
£m
–
3.4
–
–
–
3.4
3.4
–
Total
£m
13.8
29.3
9.0
(7.2)
(5.4)
39.5
24.5
15.0
*The reclassification corrects an error in the presentation of the Cycle Republic closure costs provision as at 3 April 2020. £9.0m has been
reclassified during the year from accruals and other deferred income to provisions, which mostly relates to costs associated with property
leases that have become onerous as a result of the closures and will be utilised over the residual remaining lease term. The average
remaining lease term was 4.9 years.
The reclassification has no effect on net assets but serves to reduce current liabilities, and increase non-current liabilities by £5.1m
resulting in an increase to net current assets of £5.1m owing to the ageing of the balance.
Management considered a number of factors in assessing whether this classification was material and took into account that it did not
affect net assets, the income statement, covenants, ratios used to evaluate the entity’s financial position and results, and does not affect
other information included in the entity’s Annual report that may reasonably be expected to influence the economic decisions of the users
of the financial statements. It was therefore concluded that the misclassification was not considered material.
Property-related provisions consist of costs associated wear and tear incurred on leasehold properties, other ongoing onerous
commitments associated with property leases (excluding rent), and costs related to the exit of closed stores. The property related
provisions will be utilised over the average remaining lease term of 3.9 years.
Other trading provisions comprise a sales returns provision and an employer/product liability provision (of which £1.5m is expected to be
realised in >12 months) and provision for unused gift vouchers in issue.
Other provisions comprise an amount payable to HMRC in relation to the national minimum wage investigation (see estimates and
judgements accounting policy for further details).
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Notes to the Financial Statements
21. Deferred Tax
The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon in the current and prior
reporting periods.
At 29 March 2019
Adjustment on adoption of IFRS 16
Acquisition of subsidiary
Credit/(charge) to the income statement
Charge to other comprehensive income
At 3 April 2020
Acquisition of subsidiary
Credit/(charge) to the income statement
Credit to other comprehensive income
At 2 April 2021
Property-
related
items
£m
Short-term
timing
differences
£m
Share-based
payments
£m
Intangible
assets
£m
3.3
6.2
(0.2)
2.1
–
11.4
(0.2)
–
–
11.2
(0.9)
–
–
1.0
(0.7)
(0.6)
–
0.7
1.6
1.7
0.4
–
–
–
(0.2)
0.2
–
2.6
0.4
3.2
(2.9)
–
(0.7)
(0.1)
–
(3.7)
(0.5)
0.4
–
(3.8)
Total
£m
(0.1)
6.2
(0.9)
3.0
(0.9)
7.3
(0.7)
3.7
2.0
12.3
Deferred income tax assets and liabilities are offset when the Group has a legally enforceable right to do so and when the deferred income
taxes relate to the same fiscal authority. The offset amounts are as follows:
52 weeks to
2 April
2021
53 weeks to
3 April
2020
16.1
(3.8)
12.3
11.6
(4.3)
7.3
Deferred tax assets
Deferred tax liabilities
22. Financial Instruments and Related Disclosures
a. Treasury Policy
The Group’s treasury department’s main responsibilities are to:
• Ensure adequate funding and liquidity for the Group;
• Manage the interest risk of the Group’s debt;
•
Invest surplus cash;
• Manage the clearing bank operations of the Group, and
• Manage the foreign exchange risk on its non-sterling cash flows.
Treasury activities are delegated by the Board to the Chief Financial Officer (“CFO”). The CFO controls policy and performance through the
line management structure to the Group Treasurer and by reference to the Treasury Committee. The Treasury Committee meets regularly to
monitor the performance of the Treasury function.
Policies for managing financial risks are governed by Board-approved policies and procedures, which are reviewed on an annual basis.
The Group’s debt management policy is to provide an appropriate level of funding to finance the Business Plan over the medium term at
a competitive cost and ensure flexibility to meet the changing needs of the Group. Details of the Group’s current borrowing facilities are
contained in Note 18.
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Financial Statements
22. Financial Instruments and Related Disclosures continued
b. Accounting Classifications and Fair Value
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair
value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying
amount is a reasonable approximation of fair value.
Fair value
– hedging
instruments
£m
Mandatorily
at FVTPL
– others
£m
Note
Carrying amount
FVOCI
– equity
instruments
£m
Amortised
cost
£m
Other
financial
liabilities
£m
Total
carrying
amount
£m
2 April 2021
Financial assets measured at fair value
Forward exchange contracts used for hedging
Financial assets not measured at fair value
Trade and other receivables*
Current tax assets
Cash and cash equivalents
16
17
Financial liabilities measured at fair value
Forward exchange contracts used for hedging
Financial liabilities not measured at fair value
Borrowings
Lease liabilities
Trade and other payables**
18
18
19
0.6
0.6
–
–
–
–
(6.3)
(6.3)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
57.4
2.5
67.2
127.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.2)
(344.3)
(209.4)
(553.9)
0.6
0.6
57.4
2.5
67.2
127.1
(6.3)
(6.3)
(0.2)
(344.3)
(209.4)
(553.9)
* Prepayments and accrued income of £28.7m are not included as a financial asset.
** Other taxation and social security payables of £34.5m, deferred income of £7.9m, and other payables of £21.6m are not included as a financial liability.
3 April 2020
Financial assets measured at fair value
Forward exchange contracts used for hedging
Financial assets not measured at fair value
Trade and other receivables*
Current tax liabilities
Cash and cash equivalents
Financial liabilities measured at fair value
Forward exchange contracts used for hedging
Financial liabilities not measured at fair value
Borrowings
Lease liabilities
Trade and other payables**
Fair value
– hedging
instruments
£m
Mandatorily
at FVTPL
– others
£m
Note
Carrying amount
FVOCI
– equity
instruments
£m
Amortised
cost
£m
Other
financial
liabilities
£m
Total
carrying
amount
£m
8.7
8.7
–
–
–
–
(1.1)
(1.1)
–
–
–
–
16
17
18
18
19
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
30.9
8.2
115.5
154.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(179.3)
(416.0)
(106.7)
(702.0)
8.7
8.7
30.9
8.2
115.5
154.6
(1.1)
(1.1)
(179.3)
(416.0)
(106.7)
(702.0)
* Prepayments and accrued income of £22.6m are not included as a financial asset.
** Other taxation and social security payables of £33.2m, deferred income and accruals of £66.7m and other payables of £12.3m are not included as a
financial liability.
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Notes to the Financial Statements
22. Financial Instruments and Related Disclosures continued
The fair values of each class of financial assets and liabilities is the carrying amount, based on the following assumptions:
Trade receivables, trade payables and
lease obligations, short-term deposits and
borrowings
Long-term borrowings
Forward currency contracts
The fair value approximates to the carrying amount predominantly because of the
short maturity of these instruments.
The fair value of bank loans and other loans approximates to the carrying value
reported in the balance sheet as the majority are floating rate where payments
are reset to market rates at intervals of less than one year.
The fair value is determined using the mark to market rates at the reporting
date and the outright contract rate.
Fair Value Hierarchy
Financial instruments carried at fair value are required to be measured by reference to the following levels:
• Level 1: quoted prices in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
All financial instruments carried at fair value have been measured by a Level 2 valuation method.
c. Financial Risk Management
The Group has exposure to the following risks arising from financial instruments:
• Credit risk
• Liquidity risk; and
• Market risk.
i) Risk management framework
The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management
framework. The Board of Directors are responsible for establishing the Group’s risk management policies.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits
and controls and to monitor risks and adherence to limits. Risk management policies and systems are regularly reviewed to reflect changes
in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to
maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Group Audit Committee oversees how management monitors compliance with the Group’s risk management framework in relation to
the risks faced by the Group. The Group Audit Committee is assisted in its oversight role by internal audit. Internal audit undertakes both
regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
ii) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Group’s receivables from customers.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting
date was £127.7m (2020: £163.3m).
Impairment losses on financial assets recognised in profit or loss were as follows:
£m
Impairment loss on trade and other receivables
Impairment loss on cash and cash equivalents
52 weeks to
2 April
2021
53 weeks to
3 April
2020
0.1
–
0.1
0.2
–
0.2
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Financial Statements
22. Financial Instruments and Related Disclosures continued
Trade receivables
The Group does not have any individually significant customers and so no significant concentration of credit risk.
The majority of the Group’s sales are paid in cash at point of sale which further limits the Group’s exposure. The Group’s exposure to credit
risk is influenced mainly by the individual characteristics of each customer. The Board of Directors has established a credit policy under
which each new customer is analysed individually for creditworthiness before the Group’s standard payment terms and conditions are
offered. The Group limits its exposure to credit risk from trade receivables by establishing a maximum payment period of one month for
customers. All trade receivables are based in the United Kingdom.
The Group has taken into account the historic credit losses incurred on trade receivables and adjusted it for forward-looking estimates.
The movement in the allowance for impairment in respect of trade receivables during the year was £0.1m.
Cash and cash equivalents
The Group held cash and cash equivalents of £67.2m at 2 April 2021 (2020: £115.5m). The cash and cash equivalents are held with bank
and financial institution counterparties which are designated ‘A-’ by Standard & Poor and Fitch and A2 or better by Moody’s. The Group
does not consider there to be any impairment loss in respect of these balances (2020: £nil).
Derivatives
The derivatives are entered into with bank and financial institutions counterparties which are designated at least BBB by Standard & Poor
and Fitch and Baa3 by Moody’s.
iii) Market risk
The Group’s exposure to market risk predominantly relates to interest, currency and commodity risk. These are discussed further below.
Commodity risk is due to the Group’s products being manufactured from metals and other raw materials, subject to price fluctuation.
The Group mitigates this risk through negotiating fixed purchase costs or maintaining flexibility over the specification of finished products
produced by its supply chain to meet fluctuations.
Foreign currency risk
The Group has a significant transaction exposure with increasing direct-sourced purchases from its suppliers in the Far East, with most of
the trade being in US dollars. The Group’s policy is to manage the foreign exchange transaction exposures of the business to ensure the
actual costs do not exceed the budget costs by more than 10% (excluding increases in the base cost of the product).
The Group does not hedge either economic exposure or the translation exposure arising from the profits, assets and liabilities of non-
sterling businesses whilst they remain less significant.
The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency,
amount and timing of their respective cash flows. The Group assesses whether the derivative designated in each hedging relationship is
expected to be and has been effective in offsetting changes in cash flows of the hedging item using the hypothetical derivative method.
In these hedge relationships, the main sources of ineffectiveness are:
• The effect of the counterparty and Group’s own credit risk on the fair value of the forward exchange contracts, which is not reflected in
the change in the fair value of the hedged cash flows attributable to the change in exchange rates; and
• Changes in the timing of the hedged item.
During the 52 weeks to 2 April 2021, the foreign exchange management policy was to hedge via forward contract purchases between 75%
and 100% of the material foreign exchange purchase transaction exposures on a rolling 18-month basis. Hedging is performed through the
use of foreign currency bank accounts and forward foreign exchange contracts.
At 2 April 2021, the Group held the following instruments to hedge exposures to changes in foreign currency:
Forward exchange contracts
Net exposure (in £m)
Average GBP:USD forward contract rate
1–6
months
101.6
1.3336
At 3 April 2020, the Group held the following instruments to hedge exposures to changes in foreign currency:
Forward exchange contracts
Net exposure (in £m)
Average GBP:USD forward contract rate
1–6
months
57.1
1.3084
Maturity
6–12
months
55.7
1.3622
Maturity
6–12
months
28.3
1.3060
More than
one year
26.3
1.3677
More than
one year
15.3
1.3097
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Notes to the Financial Statements
22. Financial Instruments and Related Disclosures continued
The amounts at the reporting date relating to items designated as hedged items were as follows:
Forward currency risk
At 2 April 2021
Inventory purchases
At 3 April 2020
Inventory purchases
Cash flow
hedge reserve
£m
3.1
5.3
Balances remaining in the cash
flow hedge reserve from hedging
relationships for which hedge
accounting is no longer applied
£m
–
–
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date is as
follows:
Cash and cash equivalents
Trade and other payables
2 April 2021
3 April 2020
USD
£m
–
(35.1)
(35.1)
Other
£m
14.1
(1.6)
12.5
USD
£m
2.4
(44.2)
(41.8)
Other
£m
2.8
(0.6)
2.2
The table below shows the Group’s sensitivity to foreign exchange rates on its US dollar financial instruments, the major currency in which
the Group’s derivatives are denominated.
10% appreciation of the US dollar
10% depreciation of the US dollar
2021
Increase/
(decrease) in
equity
£m
2020
Increase/
(decrease) in
equity
£m
22.0
(18.0)
17.6
(14.4)
A strengthening/weakening of sterling, as indicated, against the USD at 2 April 2021 would have increased/(decreased) equity and profit or loss
by the amounts shown above. This analysis is based on foreign currency exchange rate variances that the Group considered to be possible at
the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant.
The movements in equity relates to the fair value movements on the Group’s forward contracts that are used to hedge future stock
purchases.
Interest rate risk
The Group’s policy aims to manage the interest cost of the Group within the constraints of the Business Plan and its financial covenants. The
Group’s borrowings are currently subject to floating rate interest rates and the Group will continue to monitor movements in the swap market.
If interest rates on floating rate borrowings (i.e. cash and cash equivalents and bank borrowings which attract interest at floating rates)
were to change by + or – 1% the impact on the results in the Income Statement and equity would be a decrease/increase of £0.8m
(2020: £0.7m).
Interest rate movements on deposits, obligations under finance leases, trade payables, trade receivables, and other financial instruments
do not present a material exposure to the Group’s statement of financial position.
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt.
The Group manages capital by operating within a debt ratio, which is calculated as the ratio of net debt to underlying EBITDA pre IFRS 16.
The Group was in a net cash position at the end of FY21 (2020: net debt ratio of 0.8:1).
Pension liability risk
The Group has no association with any defined-benefit pension scheme and therefore carries no deferred, current or future liabilities in
respect of such a scheme. The Group operates a number of Group Personal Pension Plans for colleagues.
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Financial Statements
22. Financial Instruments and Related Disclosures continued
Liquidity risk
The Group ensures that it has sufficient cash or loan facilities to meet all its commitments when they fall due by ensuring that there is
sufficient cash or working capital facilities to meet the cash requirements of the Group for the current Business Plan. The minimum liquidity
level is currently set at £30m, such that under Treasury Policy the maximum drawings would be £150m of the £180m available facility, to
include the Overdraft Facility of £20m.
The process to manage the risk is to ensure there are contracts in place for key suppliers, detailing the payment terms, and for providers
of debt, the Group ensured that such counterparties used for credit transactions held at least an investment grade at the time of the
refinancing (December 2020). The Group may, subject to Board approval in any and every such incidence, allow a counterparty to have a
credit rating of less than investment grade at the time of signing the facilities on the basis that the counterparty only has a junior role in the
debt syndicate and has zero ancillary business until if/when its credit rating is designated A-. At the year-end the banks within the banking
group maintained a credit rating of BBB- or above, in line with Treasury policy. The counterparty credit risk is reviewed by the Chief
Financial Officer regularly as part of the Treasury Committee process. In addition, the Head of Tax & Treasury reviews credit exposure
on a daily basis.
The risk is measured through review of forecast liquidity each month by the Head of Tax & Treasury to determine whether there are
sufficient credit facilities to meet forecast requirements, and through monitoring covenants on a regular basis to ensure there are no
significant breaches, which would lead to an “Event of Default”. Calculations are submitted biannually to the Group banking agent. There
have been no breaches of covenants during the reported periods.
The contractual maturities of lease liabilities are disclosed in Note 14. All trade and other payables are due within one year.
The contractual maturity of bank borrowings, including estimated interest payments and excluding the impact of netting agreements is
shown below:
Due less than one year
Expiring between one and two years
Expiring between two and five years
Expiring after five years
Contractual cash flows
Carrying amount
2 April
2021
Bank
borrowings
£m
3 April
2020
Bank
borrowings
£m
–
–
–
–
–
–
0.9
0.9
180.0
–
181.8
179.1
The following table provides an analysis of the anticipated contractual cash flows for the Group’s forward currency contracts. Cash flows
receivable in foreign currencies are translated using spot rates as at 2 April 2021 (3 April 2020).
Due less than one year
Due between one and two years
Contractual cash flows
Fair value of derivatives
2021
Receivables
£m
2021
Payables
£m
2020
Receivables
£m
2020
Payables
£m
33.3
7.2
41.1
0.6
(151.7)
(18.8)
(170.5)
(6.3)
146.1
17.5
163.6
8.7
(90.7)
(6.4)
(97.1)
(1.1)
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.
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Notes to the Financial Statements
23. Capital and Reserves
Ordinary shares of 1p each:
Allotted, called up and fully paid
2021
Number of
shares
2021
£000
2020
Number of
shares
199,116,632
1,991
199,116,632
2020
£000
1,991
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at
meetings of the Company. All shares rank equally with regard to the Company’s residual assets.
There has been no change in share premium, which has remained at £151.0m (2020: £151.0m).
In total the Company received proceeds of £Nil (2020: £Nil) from the exercise of share options. During the year the Company purchased
£Nil (2020: £Nil) of its own shares.
Investment in Own Shares
At 2 April 2021 the Company held in Trust 1,637,101 (2020: 2,134,139) of its own shares with a nominal value of £16,371 (2020: £21,341).
The Trust has waived any entitlement to the receipt of dividends in respect of its holding of the Company’s ordinary shares. The market
value of these shares at 2 April 2021 was £6.1m (2020: £1.4m). In the current period nil (2020: nil) were repurchased and transferred into
the Trust, with nil (2020: nil) reissued on exercise of share options.
Other Reserves
Capital Redemption Reserve
The capital redemption reserve has arisen following the purchase by the Company of its own shares and comprises the amount by which
the distributable profits were reduced on these transactions in accordance with the Companies Act 2006.
Hedging Reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related
to hedged transactions that have not yet occurred.
24. Share-based Payments
The Group has six share award plans, all of which are equity-settled schemes. The Group Income Statement charge recognised in respect
of share-based payments for the current period is £6.4m (2020: £1.0m).
1. Halfords Company Share Option Scheme
The CSOS was introduced in June 2004 and the Company has made annual grants up to and including 2016. Options were granted with a
fixed exercise price equal to the market price of the shares under option at the date of grant. The contractual life of an option is ten years.
Options granted before August 2013 became exercisable on the third anniversary of the date of grant, subject to the achievement of a
three-year performance condition. For grants up to 150% of basic salary the options can only be exercised if the increase in earnings
per share (“EPS”) over the period is not less than the increase in the Retail Price Index (“RPI”) plus 3.5% per year. In the case of grants in
excess of 150% of basic salary, the excess can only be exercised in full if the increase is not less than RPI plus 10% per year. Exercise of
an option is subject to continued employment.
Changes to the performance criteria of the CSOS scheme in relation to the awards granted from August 2013 onwards were made by the
Remuneration Committee. These changes were made in order to create better alignment with the Group’s three-year strategic priorities
following the Moving Up A Gear programme. The awards are dependent on EBITDA performance and are only exercisable if EBITDA
growth exceeds a compound annual growth rate of 2.5% over the three-year performance period, or a total growth rate of 8.4%. Exercise
of an option is subject to continued employment.
The expected volatility is based on historical volatility of a peer group of companies since the IPO in June 2004. The expected life is the
average expected period to exercise. The risk free rate of return is the yield on zero-coupon UK government bonds.
Options were valued using the Black–Scholes option-pricing models. No performance conditions were included in the fair value
calculations.
2. Management Share Plan (‘MSP’)
The CSOS has been replaced by the MSP. Nil cost options have been granted which can be exercised on or after the third anniversary of
the date on which they are granted. The option cannot be exercised later than ten years from the date on which it was granted. Exercise
of an option is subject to continued employment.
The expected volatility is based on historical volatility of a peer group of companies. The expected life is the average expected period to
exercise. The risk free rate of return is the yield on zero-coupon UK government bonds.
Options were valued using the Black–Scholes option-pricing models. No performance conditions were included in the fair value
calculations.
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Financial Statements
24. Share-based Payments continued
3. Halfords Sharesave Scheme (“SAYE”)
The SAYE is open to all employees with eligible employment service. Options may be exercised under the scheme if the option holder
completes their saving contract for a period of three years and then not more than six months thereafter. Special provisions allow early
exercise in the case of death, injury, disability, redundancy, retirement or because the company or business which employs the option
holder is transferred out of the Group, or in the event of a change in control, reconstruction or winding up of the Company.
Options were valued using the Black–Scholes option-pricing models.
4. Performance Share Plan
The introduction of a Performance Share Plan (“PSP”) was approved at the Annual General Meeting in August 2005, awarding the
Executive Directors and certain senior management conditional rights to receive shares. Annual schemes have been approved for each
year from 2005.
For 2009 awards onwards, the Committee has recommended the reinvestment of dividends earned on award shares, such shares to vest
in proportion to the vesting of the original award shares. The shares awarded under the Performance Share Plan (“PSP”) in 2016 and 2017
earned final dividends of 12.03p per share and were reinvested in shares at a cost of £3.23 per share. Shares awarded in 2016, 2017 and
2018 under the PSP earned interim dividends of 6.18p per share and were reinvested in shares at a cost of £2.41 per share.
For schemes prior to 2018 the PSP performance criteria was weighted 25% towards Group revenue growth targets and 75% towards
Group EPS growth targets. For the 2018 & 2019 awards the PSP performance criteria is weighted 50% towards Group EPS growth,
25% towards Group revenue growth and 25% towards Group Free Cash Flow. The 2020 PSP scheme performance criteria is weighted
20% towards Group EPS growth, 30% towards Group Free Cash Flow, 10% towards Group service-related sales and 40% towards total
shareholder return. In order to focus management the awards will be underpinned by the Remuneration Committee determining whether,
in its opinion, the extent to which the performance conditions have been satisfied is a genuine reflection of the Company’s underlying
financial performance and has generated value for Company’s shareholders over the performance period, and by a net debt to EBITDA
ratio no greater than 1.5 throughout the three-year performance period.
For other senior participants conditions are based on the performance of the individual business units. The awards are weighted 37.5%
towards Group EPS growth targets, 12.5% weighted towards Group revenue growth targets and 50% weighted toward EBIT of the
individual business unit.
Options were valued using the Black–Scholes option-pricing models. For the 2020 scheme options relating to the total shareholder return
tranche were valued using the Monte Carlo option-pricing model.
5. Deferred Bonus Plan (‘DBP’)
Under the Deferred Bonus Plan (“DBP”) one third of the executive’s annual bonus is deferred as shares for three years.
6. Restricted Share Plan – Senior Management Plan (‘RSP-SMP’)
Two RSP-SMP awards were granted to senior management excluding the CEO and CFO. They were granted to participants on
13 September 2017 and have two different performance period end dates: 29 March 2019 and 3 April 2020.
Nil cost options have been granted which can be exercised on the first anniversary and second anniversary of the grant date for the
2018 and 2020 schemes respectively. Exercise of an option is subject to performance conditions in relation to Group PBT and continued
employment.
Options were valued using the Black–Scholes option-pricing models.
The following tables reconcile the number of share options outstanding and the weighted average exercise price (“WAEP”) for all share
award plans.
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Notes to the Financial Statements
24. Share-based Payments continued
For the period ended 2 April 2021
CSOS
MSP
SAYE
PSP
RSP-SMP
Number
(‘000)
WAEP
(£)
Number
(‘000)
WAEP
(£)
Number
(‘000)
WAEP
(£)
Number
(‘000)
WAEP
(£)
Number
(‘000)
WAEP
(£)
Outstanding at start of year
Granted
Shares representing
dividends reinvested
Forfeited
Exercised
Lapsed
Outstanding at end of year
Exercisable at end of year
728
–
–
–
–
(38)
690
–
3.71
–
–
–
–
3.71
3.71
Exercise price range (£)
Weighted average remaining
contractual life (years)
3.07-5.43
2.3
1,398
567
–
–
(149)
(139)
1,677
–
–
8.5
1.94
2.25
–
–
2.78
2.25
1.95
2,958
6,378
–
(96)
(51)
(1,942)
7,247
–
1.34-2.78
2.6
2.00
1.34
–
1.44
2.44
1.87
1.45
4,237
1,879
–
–
(868)
–
5,248
–
–
1.8
–
–
–
–
–
–
–
57
–
–
–
(57)
–
–
–
–
–
–
–
–
–
–
–
–
For the period ended 3 April 2020
CSOS
MSP
SAYE
PSP
PSP
Outstanding at start of year
Granted
Shares representing
dividends reinvested
Forfeited
Exercised
Lapsed
Outstanding at end of year
Exercisable at end of year
Number
(‘000)
2,363
–
–
–
–
(1,635)
728
–
Exercise price range (£)
Weighted average remaining
contractual life (years)
3.07-5.43
3.3
WAEP
(£)
Number
(‘000)
WAEP
(£)
Number
(‘000)
WAEP
(£)
Number
(‘000)
WAEP
(£)
Number
(‘000)
WAEP
(£)
3.63
–
–
–
–
3.38
3.71
713
746
–
–
–
(61)
1,398
–
–
8.8
2.73
1.25
–
–
–
0.34
1.94
2,996
2,937
–
(12)
–
(2,963)
2,958
–
1.77-2.78
2.71
1.8
–
2.7
–
2.2
2.0
2,262
2,161
271
(134)
–
(323)
4,237
–
–
–
–
–
–
–
–
2.6
1.8
323
–
–
(9)
–
(257)
57
–
–
–
–
–
–
–
–
–
–
The following table gives the assumptions applied to the options granted in the respective periods shown:
Grant date
Share price at grant date (£)
Exercise price (£)
Expected volatility
Option life (years)
Expected life (years)
Risk free rate
Expected dividend yield
Probability of forfeiture
Weighted average fair value of options granted (£)
52 weeks to 2 April 2021
MSP
2.43
–
59.14%
10
3
–
2.63%
33%
2.25
SAYE
1.34
1.07
53.02%
3
3.5
–
3.99%
38%
0.6
PSP
2.43
–
64.22%
3
2.47
–
–
21%
2.43
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Financial Statements
53 weeks to 3 April 2020
MSP
2.30/1.70
–
31.87%/29.7%
10
3
–
8.22%/10.86%
33%
1.78/2.22
SAYE
2.10
1.77
30.46%
3
3.5
0.46%
9.06%
41%
0.27
PSP
1.70
–
30.11%
3
2.53
–
–
39%
1.70
24. Share-based Payments continued
Grant date
Share price at grant date (£)
Exercise price (£)
Expected volatility
Option life (years)
Expected life (years)
Risk free rate
Expected dividend yield
Probability of forfeiture
Weighted average fair value of options granted (£)
As the MSP, PSP and RSP-SMP awards have a nil exercise price the risk free rate of return does not have any effect on the estimated fair
value and therefore is excluded from the above table.
25. Commitments
Capital expenditure: Contracted but not provided
2021
£m
0.2
2020
£m
1.2
26. Pensions
Employees are offered membership of the Halfords Pension, which is a contract-based plan, where each member has their own individual
pension policy, which they monitor independently. The costs of contributions to the scheme are charged to the income statement in the
period that they arise. The contributions to the scheme for the period amounted to £5.8m (2020: £5.4m).
In accordance with Government initiatives Halfords operates an automatic enrolment process with regards to its pension arrangements.
Employees who are aged between 22 and state pension age, earn more than £10,000 a year, and work in the UK are automatically enrolled
into the Group pension arrangement. Employees retain the right to withdraw from this pension arrangement, however election of this
choice must be made.
27. Contingent Liabilities
The Group’s banking arrangements include the facility for the bank to provide a number of guarantees in respect of liabilities owed by the
Group during the course of its trading. In the event of any amount being immediately payable under the guarantee, the bank has the right
to recover the sum in full from the Group. The total amount of guarantees in place at 2 April 2021 amounted to £1.5m (2020: £1.5m).
The Group’s banking arrangements are subject to a netting facility whereby credit balances may be offset against the indebtedness of
other Group companies.
28. Related Party Transactions
The Group’s ultimate parent company is Halfords Group plc. A listing of all related undertakings is shown within the financial statements of
the Company on pages 190 to 196.
Transactions with Key Management Personnel
The key management personnel of the Group comprise the Executive and Non-Executive Directors and the Halfords Limited and Halfords
Autocentres management boards. The details of the remuneration, long-term incentive plans, shareholdings and share option entitlements
of individual Directors are included in the audited tables of the Directors’ Remuneration Report on pages 126 to 135. Key management
compensation is disclosed in Note 4.
Directors of the Company control 0.11% of the ordinary shares of the Company.
29. Off Balance Sheet Arrangements
The Group has no off balance sheet arrangements to disclose as required by S410A of the Companies Act 2006.
30. Prior Period Adjustment
Following refinements to Halfords IFRS 16 reporting process, the consolidated statement of cash flows for the 53 weeks to 3 April 2020
was adjusted to reduce the cash outflow for capital payments on leases (in financing activities) by £11.3m and to reduce the working capital
movements across other payables, receivables and provisions (in operating activities) by the same amount to exclude from these line items
amounts that had been eliminated from the balance sheet for IFRS 16 reporting purposes and should have similarly been eliminated in the
operating cash flow reconciliation. These adjustments have had no impact on the reported profit or net assets of the Group.
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Company Balance Sheet
Fixed assets
Investments
Current assets
Debtors: amounts falling due within one year
Cash and cash equivalents
Creditors: amounts falling due within one year
Net current (liabilities)/assets
Creditors: amounts falling due after more than one year
Net assets
Capital and reserves
Called up share capital
Share premium account
Investment in own shares
Capital redemption reserve
Profit and loss account
Total shareholders’ funds
Notes
4
5
6
7
7
9
9
9
12
2 April
2021
£m
3 April
2020
£m
803.6
22.2
2.1
5.1
7.2
(606.7)
(599.5)
–
204.1
2.0
151.0
(10.0)
0.3
60.8
204.1
501.1
71.4
572.5
(218.5)
354.0
(179.1)
197.1
2.0
151.0
(10.0)
0.3
53.8
197.1
The notes on pages 193 to 196 are an integral part of the Company’s financial statements.
The Company has elected to prepare its financial statements under FRS 101 and the accounting policies are outlined on page 192.
The Company made a profit before dividends paid for the period of £0.6m (53 week period to 3 April 2020: £3.1m).
The financial statements on pages 190 to 196 were approved by the Board of Directors on 16 June 2021 and were signed on its behalf by:
Loraine Woodhouse
Chief Financial Officer
Company number: 04457314
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Company Statement of Changes in
Shareholders’ Equity
Financial Statements
At 29 March 2019
Profit for the period
Share options exercised
Issue of new shares
Share-based payments
Dividends paid
At 3 April 2020
Profit for the period
Share options exercised
Issue of new shares
Share-based payments
Dividends paid
At 2 April 2021
Share
capital
£m
Share
premium
£m
Investment
in own
shares
£m
Capital
redemption
£m
Retained
earnings
£m
2.0
–
–
–
–
–
2.0
–
–
–
–
–
2.0
151.0
–
–
–
–
–
151.0
–
–
–
–
–
151.0
(10.0)
–
–
–
–
–
(10.0)
–
–
–
–
–
(10.0)
0.3
–
–
–
–
–
0.3
–
–
–
–
–
0.3
86.3
3.1
–
–
1.0
(36.6)
53.8
0.6
–
–
6.4
–
60.8
Total
£m
229.6
3.1
–
–
1.0
(36.6)
197.1
0.6
–
–
6.4
–
204.1
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191
Accounting Policies
Accounting Convention
The accounts of the Company are prepared for the period up to the Friday closest to 31 March each year. Consequently, the financial
statements for the current period cover the 52 weeks to 2 April 2021, whilst the comparative period covered the 53 weeks to 3 April 2020.
The accounts are prepared under the historical cost convention, except where Financial Reporting Standards requires an alternative
treatment in accordance with applicable UK accounting standards and specifically in accordance with the accounting policies set out
below. The principal variation to the historical cost convention relates to share-based payments.
Basis of Preparation
The Company financial statements of Halfords Group plc are prepared on a going concern basis for the reasons set out in the Directors’
Report on page 72, and under the historical cost convention.
The Company meets the definition of a qualifying entity under Financial Reporting Standard 100 (FRS 100). The Company financial
statements have been prepared in accordance with FRS 101 ‘Reduced Disclosure Framework’ and has ceased to apply all UK Accounting
Standards issued prior to FRS 100. Therefore, the recognition and measurement requirements of international financial reporting standards
adopted pursuant to Regulation (EC) have been applied, with amendments where necessary in order to comply with Companies Act 2006.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to
share-based payments, financial instruments, standards not yet effective, impairment of assets and related party transactions. Where
required, equivalent disclosures are given in the Group financial statements.
As permitted by section 408 of the Companies Act 2006, no profit or loss account is presented for this company. Additionally, no cash flow
statement is presented as permitted by FRS 101.8 (h). The profit for the year is disclosed in Note 1 to the financial statements.
Employee Benefit Trusts (“EBTs”) are accounted for under IFRS 10 and are consolidated on the basis that the parent has control, thus the
assets and liabilities of the EBT are included on the Company balance sheet and shares held by the EBT in the Company are presented as
a deduction from equity.
Share-based Payments
The Company operates a number of equity-settled, share-based compensation plans that are awarded to employees of the Company’s
subsidiary undertakings.
In accordance with FRS 101 ‘Group and treasury share transactions’, the fair value of the employee services received under such schemes
is recognised as an expense in the subsidiary undertaking’s financial statements, which benefit from the employee services. The Company
has recognised the fair value of the share-based payments as an increase to equity with a corresponding adjustment to investments.
Fair values are determined using appropriate option pricing models. The total fair value recognised is adjusted to reflect the number
of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately
recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at
the vesting date.
At each balance sheet date, the Company revises its estimates of the number of share incentives that are expected to vest. The impact of
the revision of original estimates, if any, is recognised as an adjustment to equity, with a corresponding adjustment to investments, over
the remaining vesting period.
Investments
Investments in subsidiary undertakings are stated at the cost of the investments. Provision is made against cost where, in the opinion of
the Directors, the value of the investments has been impaired.
Cash and Cash Equivalents
Cash and cash equivalents on the statement of financial position comprise cash at bank and in hand and short-term deposits
with original maturities of less than 90 days which are subject to an insignificant risk of changes in value.
Dividends
Final dividends are recognised in the Company’s financial statements in the period in which the dividends are approved by shareholders.
Interim equity dividends are recognised in the period they are paid.
192
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Notes to the Financial Statements
Financial Statements
1. Profit and Loss Account
The Company made a profit before dividends paid for the period of £0.6m (53 week period to 3 April 2020: £3.1m). The Directors have
taken advantage of the exemption available under section 408 of the Companies Act 2006 and not presented a profit and loss account
for the Company alone.
2. Fees Payable to the Auditors
Fees payable by the Group to BDO LLP and their associates during the current and prior period are detailed in Note 3 to the Group
financial statements.
3. Staff Costs
The Company has no employees other than the Directors. Full details of the Directors’ remuneration and interests, including those details
required by Schedule 5, are set out in the Remuneration Report on pages 126 to 135 which forms part of the audited information.
4. Investments
Shares in Group undertaking
Cost
At 3 April 2020
Additions
Additions – share-based payments
At 2 April 2021
£m
22.2
775.0
6.4
803.6
The investments represent shares in the following subsidiary undertakings as at 2 April 2021 and the fair value of share-based
compensation plans that are awarded to employees of the Company’s subsidiary undertakings.
Subsidiary undertaking
Halfords Group Holdings Limited
Incorporated in
Great Britain*
Ordinary shares
percentage owned
%
Principal
Activities
100 Intermediate holding company
* Registered in England and Wales. Registered office; Icknield St Dr, Washford Ln, Redditch B98 0DE
In the opinion of the Directors the value of the investments in the subsidiary undertakings is not less than the amount shown above.
During the year, the Group has commenced a reorganisation of the Group structure with the objective to reduce the number of non-trading
entities within the Group. As part of this exercise, a new intermediate holding company was formed, Halfords Group Holdings Limited,
which is a wholly owned subsidiary of Halfords Group plc. The investments in Halfords Limited and Halfords Autocentres Limited
previously held within the wider Group structure, are now directly held by Halfords Group Holdings Limited.
As part of the reorganisation, Halfords Group plc released Halfords Holdings (2006) Limited from its obligation to settle its intercompany
receivable of £308.2m. This resulted in a decrease in intercompany receivables (see Note 5) and the recognition of an investment in
Halfords Holdings (2006) Limited. This investment was then reassigned to an investment in Halfords Group Holdings Limited as it now
forms part of the parent company’s investment in the underlying trading Group.
The additions to investments in the year of £775.0m represents the £308.2m reassigned from Halfords Holdings (2006) Limited and the
transfer value of the investments in Halfords Limited and Halfords Autocentres Limited held by Halfords Group Holdings Limited.
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Notes to the Financial Statements
4. Investments continued
The related undertakings of the Company at 2 April 2021 are as follows:
Principal activity
Subsidiary undertaking
Subsidiaries registered in England & Wales, with a registered address of:
Icknield Street Drive, Redditch, Worcestershire, B98 0DE
Halfords Group Holdings Limited
Halfords Holdings (2006) Limited*
Halfords Holdings Limited*
Halfords Finance Limited*
Halfords Limited*
Halfords Payment Services Limited*
Halfords Autocentres Holdings Limited*
Halfords Autocentres Funding Limited*
Halfords Autocentres Limited*
Halfords Autocentres Acquisitions Limited*
NW Autocentres Limited*
Halfords Autocentres Developments Limited*
Stop N’ Steer Limited*
Halfords Vehicle Management Limited*
McConechy’s Tyres Services Holdings Limited*
McConechy’s Tyre Services Limited*
Strathclyde Tyre Services Limited*
The Universal Tyre Company (Deptford) Limited*
G W Autoserve (Ipswich) Limited*
G W Commercial Tyres Limited*
Boardman Bikes Limited*
Boardman International Limited*
Cycle Republic Limited*
Performance Cycling Holdings Limited*
Tredz Limited*
Wheelies Direct Limited*
Performance Cycling Limited*
Giant (Wales) Limited*
Subsidiary registered in the Republic of Ireland, with a registered address of:
c/o DWF Dublin, 4 George’s Dock, IFSC, Dublin 1, DO1 X8N7
Halfords (Ireland)*
Dormant
Other equity investment, registered in Northern Ireland, with a registered address of:
22 Derryall Road, Portadown, Craigavon, Northern Ireland, BT62 1PL
Hamilton Internet Services Limited*
Other equity investment , registered in England & Wales, with a registered address of:
272 Bath Street, Glasgow, Scotland, G2 4JR
ULM Services Limited*
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Retailing of auto parts, accessories, cycles and cycle accessories
Dormant
Intermediate holding company
Dormant
Car servicing
Dormant
Dormant
Dormant
Dormant
Dormant
Intermediate holding company
Car servicing
Dormant
Car servicing
Non-trading
Non-trading
Non-trading
Non-trading
Dormant
Intermediate holding company
Non-trading
Dormant
Retailing of cycles and cycle accessories
Non-trading
E-Commerce
Car servicing
% Ownership
of ordinary
equity shares
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
0.06
47.3
* Shares held indirectly through subsidiary undertakings.
The only subsidiaries to trade during the year were Halfords Limited, Halfords Autocentres Limited, Performance Cycling Limited,
McConechy’s Tyre Services Limited, The Universal Tyre Company (Deptford) Limited and ULM Services Limited.
194
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5. Debtors
Falling due within one year:
Amounts owed by Group undertakings
Financial Statements
2021
£m
2.1
2.1
2020
£m
501.1
501.1
Amounts owed by Group undertakings were subject to interest. At 2 April 2021, the amounts bear interest at a rate of 1.31% (2020: 1.92%)
Amounts owed by Group undertakings were reduced in the current year as part of the Group reorganisation (see Note 4).
6. Cash and Cash Equivalents
Cash at bank and in hand
2021
£m
5.1
2020
£m
71.4
£5.1m (2020: £5.1m) of the Company’s cash and cash equivalents included in the balance sheet is held by the trustee of the Company’s
employee benefit trust in relation to the share scheme for employees. Therefore, these funds are restricted and are not available to be
circulated on demand.
7. Creditors
Falling due within one year:
Bank borrowings (Note 8)
Amounts owed to Group undertakings
Accruals and deferred income
Falling due after more than one year:
Bank borrowings (Note 8)
2021
£m
16.5
589.9
0.3
606.7
–
–
2020
£m
–
217.3
1.2
218.5
179.1
179.1
Amounts owed to Group undertakings were increased in the current year as part of the Group reorganisation (see Note 4). Amounts owed
to Group undertakings are repayable on demand and have therefore been classified as due within one year, although it is expected that not
all of this amount will be repaid within 12 months of the balance sheet.
8. Borrowings
Current
Unsecured bank overdraft
Non-current
Unsecured bank loan and other borrowings (expiring between two and five years)
The above borrowings are stated net of unamortised issue costs of £1.6m (2020: £0.9m).
Details of the Company’s borrowing facilities are in Note 18 to the Group’s financial statements.
2021
£m
16.5
–
16.5
2020
£m
–
179.1
179.1
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Notes to the Financial Statements
9. Equity Share Capital
Ordinary shares of 1p each:
Allotted, called up and fully paid
2021
Number of
shares
2021
£000
2020
Number of
shares
199,116,632
1,991
199,116,632
2020
£000
1,991
During the current period the Company has not changed its share capital. There has been no change in share premium, which has
remained at £151.0m (2020: £151.0m).
In total the Company received proceeds of £nil (2020: £nil) from the exercise of share options. During the year the Company purchased £nil
(2020: £nil) of its own shares.
Potential Issue of Ordinary Shares
The Company has a number of employee share option schemes. Further information regarding these schemes can be found in Note 24 to
the Group’s financial statements.
Investment in Own Shares
At 2 April 2021 the Company held in Trust 1,637,101 (2020: 2,134,139) of its own shares with a nominal value of £16,371 (2020: £21,341).
The Trust has waived any entitlement to the receipt of dividends in respect of its holding of the Company’s ordinary shares. The market
value of these shares at 2 April 2021 was £6.1m (2020: £1.4m). In the current period nil (2020: nil) were repurchased and transferred into
the Trust, with nil (2020: nil) reissued on exercise of share options.
10. Share-based Payments
Share based payments during the period were £6.4m bringing the balance at 2 April 2021 to £28.5m (2020: £22.1m).
11. Profits available for distribution
Distributable reserves in the company balance sheet total £32.3m at 2 April 2021.
12. Reserves
The Company settled dividends of £nil (2020: £36.6m) in the period, as detailed in Note 8 to the Group’s financial statements.
13. Related Party Disclosures
Under FRS 101 “Related party disclosures” the Company is exempt from disclosing related party transactions with entities which it wholly owns.
14. Contingent Liabilities
The Group’s banking arrangements include the facility for the bank to provide a number of guarantees in respect of liabilities owed by the
Group during the course of its trading. In the event of any amount being immediately payable under the guarantee, the bank has the right
to recover the sum in full from the Group. The total amount of guarantees in place at 2 April 2021 amounted to £1.5m (2020: £1.5m).
The Company’s banking arrangements are subject to a netting facility whereby credit balances may be offset against the indebtedness of
other Group companies.
15. Off Balance Sheet Arrangements
The Company has no off balance sheet arrangements to disclose as required by S410A of the Companies Act 2006.
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Financial Statements
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Job Number 15 July 2021 5:28 pm Proof NumberShareholder InformationFive Year Record200Glossary of Alternative Performance Measures201Company Information202Contents30441-Halfords-Annual-Report-2021-Financials.indd 19830441-Halfords-Annual-Report-2021-Financials.indd 19815/07/2021 19:15:3215/07/2021 19:15:32 Job Number 15 July 2021 5:28 pm Proof NumberShareholder Information30441-Halfords-Annual-Report-2021-Financials.indd 19930441-Halfords-Annual-Report-2021-Financials.indd 19915/07/2021 19:15:3315/07/2021 19:15:33 Five Year Record
Revenue
Cost of sales
Gross profit
Operating expenses
Operating profit before non-underlying items
Non-underlying operating expenses
Operating profit
Net finance costs
Underlying Profit Before Tax**
Non-underlying operating expenses
Non-underlying finance costs
Profit before tax
Taxation
Taxation on non-underlying items
Profit attributable to equity shareholders
Basic earnings per share before IFRS 16
Basic underlying earnings per share before IFRS 16**
Weighted average number of shares
52 weeks to
31 March
2017
(audited)
£m
52 weeks to
30 March
2018
(audited)
£m
52 weeks to
29 March
2019
(audited)
£m
52 weeks to
27 March
2020*
£m
52 weeks to
2 April
2021
(audited)
£m
1,095.0
(536.4)
558.6
(481.5)
77.1
(3.4)
73.7
(2.3)
75.4
(3.4)
(0.6)
71.4
(15.9)
0.9
56.4
28.7p
30.3p
196.6m
1,135.1
(564.9)
570.2
(495.6)
74.6
(4.8)
69.8
(2.7)
71.6
(4.8)
0.3
67.1
(13.2)
0.8
54.7
27.8p
29.6p
197.0m
1,138.6
(559.6)
579.0
(516.8)
62.2
(7.8)
54.4
(3.4)
58.8
(7.8)
–
51.0
(10.5)
1.4
41.9
21.2p
24.5p
197.1m
1,142.4
(558.4)
584.0
(525.3)
58.7
(32.1)
26.6
(2.8)
55.9
(32.1)
–
23.8
(8.0)
4.7
20.5
10.3p
24.3p
197.0m
1,292.3
(636.0)
656.3
(554.5)
101.8
(37.3)
64.5
(5.5)
96.3
(37.3)
–
59.0
(16.1)
5.8
48.7
24.7p
40.7p
197.1m
* The statutory 53-week period to 3 April 2020 comprises results that are non-comparable to the 52 week periods reported in other years. To provide a more
meaningful comparison, the above tables include the unaudited pro forma 52 weeks to 27 March 2020.
** These alternative performance measures are defined on page 201.
*** The numbers above are all stated pre-IFRS 16 to enable meaningful comparison to other periods.
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Shareholder Information
Glossary of Alternative
Performance Measures
In the reporting of financial information, the Directors have adopted
various Alternative Performance Measures (“APMs”), previously
termed as ‘Non-GAAP measures’. APMs should be considered
in addition to IFRS measurements, of which some are shown on
page 148. The Directors believe that these APMs assist in providing
useful information on the underlying performance of the Group,
enhance the comparability of information between reporting
periods, and are used internally by the Directors to measure the
Group’s performance.
The key APMs that the Group focuses on are as follows:
1. Like-for-like (“LFL”) sales represent revenues from stores,
centres and websites that have been trading for at least a year
(but excluding prior year sales of stores and centres closed
during the year) at constant foreign exchange rates.
2. Underlying EBIT is results from operating activities before non-
underlying items, as shown in the Group Income Statement.
Underlying EBITDA further removes depreciation and
amortisation.
3. Underlying Profit Before Tax is profit before income tax and
non-underlying items as shown in the Group Income Statement.
4. Underlying Earnings Per Share is profit after income tax before
non-underlying items as shown in the Group Income Statement,
divided by the number of shares in issue.
5. Net Debt is current and non-current borrowings less cash and
cash equivalents, both in-hand and at bank, as shown in the
Consolidated Statement of Financial Position; as reconciled
below:
FY21
Pre-
IFRS 16
£m
FY21
Post-
IFRS 16
£m
FY20
Pre-
IFRS 16
£m
FY20
Post-
IFRS 16
£m
67.2
(2.2)
67.2
(63.6)
115.5
(1.8)
115.5
(83.4)
(6.9)
58.1
(280.9)
(277.3)
(186.9)
(73.2)
(511.9)
(479.8)
Cash and cash
equivalents**
Borrowings – current
Borrowings –
non-current
Net Debt*
* The statutory 53-week period to 3 April 2020 comprises reported
results that are non-comparable to the 52-week periods reported in
the current period.
** Included within cash and cash equivalents is an amount of £6.3m
which is restricted and is not available to circulate within the Group
on demand.
6. Net Debt to Underlying EBITDA ratio is represented by the ratio
of Net Debt to Underlying EBITDA (both of which are defined
above).
7. Adjusted Operating Cash Flow is defined as EBITDA plus share
based payment transactions and loss on disposal of property,
plant and equipment, less working capital movements and
movement in provisions; as reconciled below.
FY21
Pre-
IFRS 16
£m
101.8
FY21
Post-
IFRS 16
£m
114.5
FY20
Pre-
IFRS 16
£m
55.4
FY20
Post-
IFRS 16
£m
67.2
38.0
139.8
118.5
233.0
37.2
92.6
118.7
185.9
(37.3)
102.5
(35.0)
198.0
(32.1)
60.5
(34.2)
151.7
6.4
6.4
1.0
1.0
1.7
1.7
2.8
2.8
43.4
49.0
48.7
38.3
32.6
25.7
(3.1)
(0.7)
186.6
280.8
109.9
193.1
Underlying EBIT
Depreciation &
amortisation
Underlying EBITDA
Non-underlying
operating expenses
EBITDA
Share-based payment
transactions
Loss on disposal
of property, plant
& equipment &
intangibles
Working capital
movements**
Provisions movement
& other**
Adjusted Operating
Cash Flow*
* The statutory 53-week period 3 April 2020 comprises reported results
that are non-comparable to the 52-week periods reported in the
current period.
** As restated see note 30.
8. Free Cash Flow is defined as Adjusted Operating Cash Flow
(as defined above) less capital expenditure, net finance costs,
taxation, exchange movement and arrangement fees on loans;
as reconciled below.
FY21
Pre-
IFRS 16
£m
FY21
Post-
IFRS 16
£m
FY20
Pre-
IFRS 16
£m
FY20
Post-
IFRS 16
£m
186.6
(28.0)
(5.5)
(10.8)
3.0
145.3
280.8
(27.5)
(15.5)
(10.8)
2.1
229.1
109.9
(34.1)
(2.4)
(16.3)
(2.5)
54.6
193.1
(33.6)
(13.2)
(16.3)
(2.0)
128.0
Adjusted Operating
Cash Flow**
Capital expenditure
Net finance costs
Taxation
Exchange movement
Free Cash Flow*
* The statutory 53-week period to 3 April 2020 comprises reported
results that are non-comparable to the 52-week periods reported in
the current period.
** As restated see note 30.
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Company Information
Financial Calendar
Friday 13 August 2021
Final Dividend Record Date
Wednesday 8 September 2021
Annual General Meeting
Wednesday 8 September 2021
20 Week Trading Update
Friday 17 September 2021
Final Dividend Payment Date
Wednesday 10 November 2021
Interim Results
13 January 2022
FY22 Q3 Trading Statement
Registered Office
Halfords Group plc
Icknield Street Drive
Redditch
Worcestershire
B98 0DE
Registrars
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
Joint Brokers
Investec plc
30 Gresham Street
London
EC2V 7QP
Peel Hunt LLP
100 Liverpool Street
London
EC2M 2AT
Solicitors
Clifford Chance LLP
10 Upper Bank Street
London
E14 5JJ
202
Halfords Group plc Annual Report and Accounts for the period ended 2 April 2021
30441-Halfords-Annual-Report-2021-Financials.indd 202
30441-Halfords-Annual-Report-2021-Financials.indd 202
Job Number
15 July 2021 5:28 pm
Proof Number
15/07/2021 19:15:33
15/07/2021 19:15:33
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15/07/2021 19:15:33
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Corporate and IR Website
www.halfordscompany.com
Online Annual Report 2021
halfords.annualreport2021.com
Commercial Website
www.halfords.com
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Job Number
15 July 2021 7:09 pm
Proof Number
15/07/2021 19:12:34
15/07/2021 19:12:34