Halfords Group Annual Report 2022

FY2022 Annual Report · Halfords Group

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Halfords Group plc
Annual Report and Accounts
for the period ended 1 April 2022

To Inspire
and Support
a Lifetime of
motoring and
cycling.

Contents

Group Overview

Scale of Change
Group Highlights
Our Purpose, Values, Strategy and
Culture
Group at a Glance
Chair’s Statement
Investment Case

Strategic Report

02
04

06
08
10
12

16
Chief Executive Officer’s Statement
22
Our Marketplace
26
Our Engagement with Stakeholders
28
Section 172(1) Statement
30
How We Create Value
32
Our Strategy
40
Environmental, Social and Governance
56
Key Performance Indicators
60
Chief Financial Officer’s Review
Risk Management
66
– Climate-related Financial Disclosure (TCFD) 68
72
Our Principal Risks and Uncertainties
79
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 Auditor’s 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
Notes 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

82
86
92
118
122
124
130

137
138
150

154
162

163

164

165

166

167
168
179
203

204
205
206

212

213
214

Welcome to our
2022 Annual Report

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 medium-term goal is to evolve into
a consumer and B2B services-focused
business.

Our Integrated Report
This is our eighth 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.annualreport2022.com

Corporate Website
Catch up with our latest news and learn more about Halfords
on our corporate website: www.halfordscompany.com

We’re making significant
progress in changing the shape
and scale of our business.

Over the course of this year, we have further developed our
business, making significant progress in our plans to evolve
into a services-focused business – we have acquired three
businesses, significantly increased our electric services and
solutions capabilities and launched our Motoring Loyalty Club.

Read more on Matters Reserved

for the Board on page 110

Read more on Board Appointments
and Induction on page 119

Read more on the Audit
Committee on pages 124 to 129

Read more on Directors’
Remuneration on pages 130 to 149

Read more on Board Evaluation
on page 116

Read more on Risk Management
on pages 66 to 78

Read more on Risk Management
and Internal Control on page 117

halfords.annualreport2022.comOUR GOVERNANCECorporate 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.

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 to
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 32 to 39.

How the Board Contributes
to the Delivery of Halfords’
Strategy

These values are critical in driving the
right behaviours and for underpinning
the culture of the Group.

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.

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

Inspire our customers through a
differentiated, super-specialist
shopping experience

Support our customers through
an integrated, unique and more
convenient services offer

Lifetime

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.

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

Our approach to ESG
Enabling better decision making everyday.

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCEO
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How we are working towards our vision: being a super-specialist
in motoring and cycling, trusted by the nation

Dynamic to the
Market Needs

Engagement with
our Stakeholders

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

• Helen Jones

• 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 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 shareholder consultation in
relation to our Remuneration Policy.

Board members
• Keith Williams

• Helen Jones

• Jill Caseberry

• Tom Singer

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
• Keith Williams

• Helen Jones

• Jill Caseberry

• Tom Singer

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Corporate Governance Report
Board Leadership and Company Purpose

Task Force on Climate-related Financial Disclosures (“TCFD”)
We recognise the importance of managing and mitigating our impact on the environment as well as the risks and opportunities we are
faced with from a changing climate. We have published our first climate-related disclosure in line with the requirements set out by the
TCFD, see pages 68 to 71, where we report our approach to climate-related governance, strategy, risk management, and metrics and
targets, detailing how scenario analysis has helped to inform our approach.

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCEHow 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.
An additional Board call was held during the period to discuss the capital structure approval as part of the acquisition of Axle Group
Holdings Limited (“National”) in December 2021. 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

Board
scheduled: 12

Audit Committee
scheduled: 4

Remuneration
Committee
scheduled: 5

Nomination
Committee
scheduled: 3

ESG Committee
scheduled: 2

12 12

N/A

Meetings attended

Possible meetings

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.

Case Study
Board in Action

Our colleagues are our greatest asset,
and a focus on colleague engagement
across the Group is one of our key
priorities every year.

To ensure that we capture feedback from
every part of the business, a comprehensive
programme of listening groups is in place,
bringing together colleagues from across
the Group with senior leaders, to discuss
how we can make Halfords an even better
place to work.

These forums encourage debate around
what’s going well, what’s on colleagues’
minds, ideas and solutions colleagues
may have developed in their role or
part of the business, and sharing best

practice from across other parts of the
retail and garage industry.

Listening Groups are attended by
regional and divisional managers,
members of our senior leadership team,
and our Executive team. Non-Executive
Director and Employee Voice Director,
Helen Jones, also attends Listening
Groups across a diverse cross-section of
the business.

The feedback captured is then used to
identify common Group-wide themes,
issues specific to certain business areas,
and ideas which can be scaled up and
form part of our ongoing colleague
engagement plan.

halfords.annualreport2022.comOUR GOVERNANCECorporate Governance Report
Board Leadership and Company Purpose

Board Activities in FY22

Main Areas:

Strategy

Governance

Board Matters

• Received updates on FY22 key

strategic initiatives and operational
highlights.

• Received regular updates from the
Chairs of the Remuneration, Audit,
Nomination and ESG Committees.

• Reviewed the succession plans for
the Board and the restructure of the
senior management team.

• Discussed and reviewed updates on
the acquisition strategy and M&A
activities.

• Received an update on Group

Strategy and Budget.

• Received an update on the Tredz
Strategy and an update on the
Transformation milestone plan.

• Discussed and reviewed a presentation
on external competitive benchmarking.

• Discussed the integration plan
for National and agreed the
required capex.

• Discussed and reviewed the long-term
recruitment and retention strategy.

Link to Stakeholder

Link to Strategy
1 2 3

Financial and Risk
Management

• 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 FY21

Group Viability Statement.

• Received an update on the Group
legal entity reduction project.

• Reviewed and approved the FY22

budget and forecast.

• Reviewed the FY23 stress test.

Link to Stakeholder

Link to Strategy

1 2 3

100

• Reviewed and approved the FY21

• Reviewed the Board and

Annual Report.

• Reviewed and approved the

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.

• Reviewed and approved the

proposal to engage an external third-
party whistleblowing helpline.

• Discussed and reviewed the Group’s

ESG targets and disclosures.

• Discussed the joining arrangements
of the new Chief Financial Officer.

• Received regular corporate

governance updates.

Link to Stakeholder

Link to Strategy
1 2 3

Commercial Matters

• Received updates on the 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.

• Discussed, managed and mitigated

the risks presented by the COVID-19
pandemic.

Link to Stakeholder

Link to Strategy
1 2 3

Committees’ programme and
forthcoming meeting schedule.

• Received updates from the

Nomination Committee on the
progress of the search for a new
Chief Financial Officer.

• Discussed and agreed the scope of
the internal FY22 Board evaluation.

Link to Stakeholder

Link to Strategy
1 2 3

Shareholder and
Stakeholder Relations

• Reviewed results of colleague

engagement surveys and the launch
of the new Company Values.

• 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 2021
Notice of the Annual General
Meeting and the arrangements for
the 2021 Annual General Meeting.

Link to Stakeholder

Link to Strategy
1 2 3

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCE

Key to stakeholders:

Colleagues

Investors

Communities

Media

Customers

Suppliers

Environment

Government

Key to strategy:
1 Inspire
2 Support
3 Lifetime

Board Priorities for FY23:

Main Areas:

Strategy

Governance

Board Matters

• Review the annual strategy

• Receive regular updates from the

• Review succession plans

refresh and associated financial
business plan.

Chairs of the Remuneration, Audit,
Nomination and ESG Committees.

for the Board and the Senior
Management Team.

• Review any potential M&A

• Review and approve the FY22

• Review the Board and Committees’

opportunities.

Link to Stakeholder

Link to Strategy
1 2 3

Annual Report.

• Review and approve the Directors’

programme and forthcoming
meeting schedule.

Conflicts of Interests Register, Group
policies, the Group Risk Register and
the roles of the Chair, CEO and SID.

• Discuss the outcome of the FY22
Board evaluation and agree the
scope of the FY23 Board evaluation.

• Continue the process to ensure that
the composition of the Board is
compliant with the Parker Review.

Link to Stakeholder

• Review the Board programme of

visits.

Link to Stakeholder

Link to Strategy
1 2 3

Financial and Risk
Management

Commercial Matters

Shareholder and
Stakeholder Relations

• Review monthly business reviews

• Review commercial matters brought

• Review colleague engagement

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 FY23

updated forecast, the FY24 budget,
banking arrangements and the
debt/hedging strategy.

Link to Stakeholder

Link to Strategy
1 2 3

to the Board for attention and
potential approval.

survey results and the progress on
the health and wellbeing programme.

• Discuss and review deep dives on

• Focus on ESG agenda, particularly

the supply chain, on commercial
margin, on garage capacity and the
roll-out of selling training and tools
across the estate.

Link to Stakeholder

Link to Strategy
1 2 3

environmental issues.

• 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 2022 Notice

of the Annual General Meeting.

Link to Stakeholder

Link to Strategy

1 2 3

101

halfords.annualreport2022.comOUR GOVERNANCE

Corporate Governance Report
Board Leadership and Company Purpose

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 early 2021 which resulted in
the refresh of colleague values with several
activities undertaken to embed the values.
Our Colleague Engagement Survey in April
2021 told us that over 90% of colleagues
know and feel aligned with our values.
During FY22 we created a One Halfords
team approach and united all parts of the
business, including new acquisitions.

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.
During FY22 we invested heavily in
technical skills training and increased skills
from 16,000 to 40,000 additional skills.

We continued to embed our values. 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.
A refreshed Group induction programme
was launched in April 2022. This has
been designed to ensure all colleagues
have a warm welcome to Halfords and

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

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

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102

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCE
can immediately see our values living and
breathing through a number of values-led
activities. All new colleagues are introduced
to our values as part of their induction,
we also now review annual performance
against the values, and colleagues are
assessed against the behaviours that
underpin each value. To further support
embedding our values, we have introduced
a recognition programme which recognises
our “Colleague of the Quarter”. We received
over 800 nominations throughout the year,
over 50 colleagues were recognised as a
“Colleague of the Quarter” and at the end of
FY22, three colleagues were recognised as
“Colleague of the Year”.

As a truly amazing place to work, we
recognise that some of our colleagues may,
at times, unfortunately have to deal with
difficult personal issues and/or financial
difficulties. We are committed to supporting
colleagues through difficult times to help them
move through the challenges they face and
return to normality as quickly as possible.
The Halfords “Here to Help” Fund has been
set up by the Halfords Group to enable us
to provide grants to colleagues who suffer
significant financial hardship or who find
themselves at risk of significant financial
hardship. Colleagues who are eligible can
apply to the Halfords “Here to Help” fund
for a grant to support them through their

situation. We really care about the wellbeing
of our colleagues and believe this intervention
supports our wellbeing strategy.

We have also launched Wagestream, which
is a financial benefit App that gives our
colleagues greater control over their pay
and can help educate on better money
management. The App has four modules,
these are:

• Track – gives colleagues visibility of

earnt wages in real time and supports
personal finance management;

• Stream – allows colleagues to have
early access to earnt wages through
the month. Streaming is capped at
30% of wages earnt that month, which
helps them to absorb a financial shock
without getting into debt;

• Learn – access to a trusted and

impartial financial education hub, to
help build money confidence. Delivering
a range of bite-sized topics, to enable
colleagues to be in a better position
to engage with their finances and start
planning for their future; and

• Save – encouraging colleagues to

build an emergency or rainy-day fund.
Colleagues can choose to contribute a
set amount each month, with no penalties
for accessing or pausing contributions.

In FY23, we will be designing leadership
capability programmes for all. These
programmes are designed to ensure that
all our managers and leaders are immersed
immediately into an experience that clearly
sets out ‘how to be a great Halfords
manager and leader’ and how we live
and breathe our values and leadership
behaviours through strong communication
and team management. The programme is
also intended to provide the opportunity to
further practice and enhance these skills.

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, 800 nominations were
received throughout FY22. The success of
the roll out can be measured through data
collected in our most recent engagement
survey, in which 90% 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.

• Roll out of the values and behaviour framework to all

• Halfords launched the Wagestream App.

colleagues across the Group commenced.

• Annual pay review for all hourly colleagues

completed.

• Full annual colleague engagement survey conducted.

•

“Supporting colleagues to feel safe and engaged,
putting One Halfords Family at the heart of
everything we do” is positioned as one of our top
three business priorities and discussed weekly in
colleague huddles.

2
2
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• Group-wide intranet was launched to all colleagues.

• Colleague of the Year launched – values recognition.

• Bonusable engagement targets set for Executive

Directors and the Executive Committee and approved
by the Board.

• Listening groups recommenced across all areas of

• Selected a national charity partner, as part of

the business.

colleague nomination process.

• Mental Health First Aider training rolled out.

• Launched four Colleague Network groups.

• Wellbeing toolkit launched to all managers.

• First “Colleague of the Year” winner announced and

• Annual pay review for all management colleagues

received a prize of £5,000.

across the Group.

103

halfords.annualreport2022.comOUR GOVERNANCECorporate Governance Report
Board Leadership and Company Purpose

Workforce Engagement
Halfords has a long established practice 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.

The People Champions hold meetings to
gauge how colleagues are feeling which
informs the programme of engagement and
wellbeing activities. During the course of
the year, People Champions were invited to
provide input into broader business initiatives,
including ESG and reward practice, to gain an
understanding of corporate governance and
executive remuneration.

To support colleague communications,
a Group-wide intranet was launched
during FY22. This site has a dedicated
wellbeing hub with useful tools and links
for colleagues to access. Colleagues also
have access to Mental Health First Aiders.
We rolled out Mental Health training to
managers to be better placed to support
their colleagues. The intranet is a one stop
shop for access to benefits and high street
discounts, further supporting financial
wellbeing. Over 3,000 colleagues are
enrolled on the Wagestream App, allowing

them to have early access to their earnings,
to better control their finances and to tap
into financial education information.

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 129. 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 on page 102 outlines the key
culture, values and engagement activities
undertaken this year:

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.

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.

Our more holistic review of the culture of the
business 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
with our colleague engagement index
at 81%, which means our engagement
index remains in the upper quartile when
compared with other benchmarks.

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 26 to 29.

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.
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.

Read our Section 172(1) Statement
on pages 28 to 29.

104

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCEBoard Listening Approach

Non-Executive Director Employee Voice

Virtual focus groups

What This Channel Brings
• Provides a forum for colleagues to express their views, suggestions
or concerns to ensure they are heard and acted upon where possible.
Insights and feedback from colleagues employed in different parts of the
Group focused on a particular topic such as communication, wellbeing
or engagement.

•

Colleague engagement survey

• Measures how engaged colleagues are and how they feel about working

Blogs and written communications

at Halfords. The insights are used to identify priority areas and drive actions
to improve these measures.

• Connects colleagues across all areas of the Group with our Halfords’
strategy by sharing updates from senior leaders on the latest business
performance, transformation activity, strategic commercial and customer
experience initiatives as well as colleague engagement activity.

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. Furthermore,
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.

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 130 to 149.

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.

105

halfords.annualreport2022.comOUR GOVERNANCECorporate Governance Report
Board Leadership and Company Purpose

Stakeholder Engagement

Key Themes Discussed with
Shareholders in FY22

• Resilience of the business and mitigating actions in

response to the global COVID-19 pandemic and its ongoing
implications on the global supply chain.

• 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, short and longer-term
trends given the significant disruption of the last two years,
and relative financial returns from each segment.

• Risk and opportunities caused by macroeconomic trends
or legislation such as Government spending on cycling
infrastructure or the ban on combustion engines from 2030.

• 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).

Investor Relations
Programme

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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Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCEO
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107

Corporate Governance Report
Board Leadership and Company Purpose

The Board is committed to ensuring
colleagues have a forum where
their views, suggestions or
concerns will be heard.

Helen Jones
Senior Independent Director
Employee Voice Director

Workforce Engagement
at a Glance

Colleague of the Year
winners announced

Colleague Network
groups launched

Q&A with our Employee
Voice Director, Helen Jones

Q. How do you ensure
the employee voice is
heard on the Board?

A. I was nominated by the Board to be
the representative for colleagues back
in 2018. Since then, I’ve attended many
listening groups across the business, both
in person and more recently via virtual
sessions. The Board is committed to
ensuring colleagues have a forum where
their views, suggestions or concerns will
be heard, so I provide that link. This is a
responsibility I take very seriously, and I
always encourage colleagues to be open
and honest when providing their feedback.
In addition to these listening groups, the
Company conducts an annual Colleague
Engagement Survey which also provides a
wealth of valuable insight and data. During

FY22, I attended over 20 listening sessions
across Retail, Halfords Autocentres, Tredz,
Halfords Mobile Expert and the Support
Centre. I also visited a number of stores
throughout the year, both independently
and with members of the Senior Leadership
team. I continue to report to the Board
quarterly, highlighting the key themes,
including what’s working well for colleagues
but also, importantly, those of concern
which the Company should address. The
work with our Colleague Engagement
Champions on pay reporting to ensure
they have a good understanding of our
approach to reward at Halfords is ongoing.
The People team also invite colleagues
to comment on what we might consider
when developing future pay policies for
Executives and colleagues across the
Group.

108

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCEQ. 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 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 appreciate these sessions and 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 Group continues to expand its
garage services business and expertise
across motoring and cycling. The ambitious
ESG agenda is now gaining traction with a
clear plan in place to achieve our net zero
targets. In addition, we continue to promote
diversity and inclusion across the Group
and are working to further strengthen our
succession plans and talent pipeline. As
we continue to emphasise our specialist
credentials, ensuring we provide the
appropriate skills training to colleagues
and therefore exceptional levels of expert
service to our customers, remains a priority.

Q. For you, what were
the key highlights
this year?
A. The positive sentiment expressed
towards the Company and in particular the
prospects for colleagues, given our focus
on multi-skills training. The opportunity to
develop and progress as we strengthen
our expertise in services was noted by
colleagues along with our investment
in systems, enabling them to serve our
customers more effectively and efficiently.
The team spirit is evident across the Group
and colleagues feel well supported despite
the many challenges faced during, and
as a result of the pandemic. The impact
on families has, in some instances, taken
its toll and we’re mindful to ensure our
colleagues’ health and wellbeing are
prioritised. Whilst there will always be
issues which need to be brought to the
Board’s attention and addressed, I was
struck this year by the overwhelming sense
of pride our colleagues feel for Halfords
as we progress towards a market-leading,
digitally enabled services business.

109

halfords.annualreport2022.comOUR GOVERNANCECorporate Governance Report
Division of Responsibilities

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
15 June 2022, the following Directors will
seek re-election at the 2022 Annual General
Meeting (“AGM”) on 7 September 2022:
Keith Williams, Helen Jones, Jill Caseberry,
Tom Singer and Graham Stapleton.

Jo Hartley, having been appointed on
16 June 2022, will seek election for the
first time at the 2022 AGM.

Board Key Responsibilities
The Board is collectively 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
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.
Details of the Group’s business model and
strategy can be found on pages 32 to 39.

A complete list of Matters Reserved
for the Board is available on
the Company’s website www.
halfordscompany.com/environmental-
social-and-governance/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.

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.

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 88, and the biographies of
each Director, including any other business
commitments, are available on pages 82 to
83. 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
32 to 39.

Chair 1

Executive Directors 2

Non-Executive Directors 3

Board Changes
In October 2021 it was announced that
Jo Hartley would be joining the business
in mid-April 2022, replacing Loraine
Woodhouse who announced her intention
to retire from a full-time plc. In order to
ensure a smooth transition, Loraine will
remain in post until 16 June 2022 at which
point she will step down from her role and
pass her responsibilities to Jo. Loraine will
leave the business on 1 July 2022.

110

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCEDirector 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 page 116.
Details of the tenure for all Board members are as follows:

Keith Williams

Jill Caseberry

3 years, 10 months, 15 days

3 years, 3 months, 15 days

Helen Jones

8 years, 3 months, 15 days

Graham Stapleton

4 years, 5 months, 15 days

Loraine Woodhouse

3 years, 7 months, 15 days

Tom Singer

1 years, 9 months, 15 days

3
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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 FY22 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.

There were no Board Committee meetings
held during the period.

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. Six Disclosure Committee
meetings were held 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. During
the year, the Finance Risk Committee was
established, the purpose of which is to
progress governance over areas of financial
crime exposure concerning HMRC and
FCA, as well as anti-fraud measures and
existing policy areas such as Anti Money
Laundering.

111

OUR GOVERNANCE

Corporate Governance Report
Division of Responsibilities

Halfords Group plc Board of Directors

Nomination Committee

Chair

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 Board and Executive Team succession plans with a commitment to improving gender and
ethnic diversity; 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
•
• develops the Group’s objectives and strategy for Board

responsible for the day-to-day management of the Company;

•

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.

•

112

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

performance;

acts as an intermediary for the other Directors; and

•

is available to other Directors and shareholders in order to address

concerns that cannot be raised through the normal channels.

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

• 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

controls processes of the Group to make sure that they are

planning.

sufficiently 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 Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCEHalfords 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 Board and Executive Team succession plans with a commitment to improving gender and

ethnic diversity; and

identifying and making recommendations to the Board on potential Board candidates.

Audit Committee

Key Objectives

and risk management activities.

Main Responsibilities

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 of

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;

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.

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:

Jill Caseberry

Members:

Helen Jones

Tom Singer

Chair:

Helen Jones

Members:

Jill Caseberry

Tom Singer

Key Objectives

approval;

financial plan;

responsible for the day-to-day management of the Company;

• develops the Group’s objectives and strategy for Board

creates and recommends to the Board an annual budget and

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;

• 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.

•

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; and

•

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.

is available to other Directors and shareholders in order to address
concerns that cannot be raised through the normal channels.

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.

Chief Executive Officer

Executive Committee

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.

113

halfords.annualreport2022.comOUR GOVERNANCEOUR
GOVERNANCE

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: 77

Corporate: 6

Total years: 107

Banking: 3

Finance: 5

Total years: 194

Marketing: 4

Cross-Functional: 6

M&A: 5

Total years: 84

retail

Total years: 111

Total years: 137

Leadership: 6

Strategy: 6

Governance: 6

Total years: 416

Retail: 6

Total
years: 116

Customer Service: 5

Business Development/
Brand Building: 5

Digital: 5

Total years: 103

Total years: 131

Total years: 70

114

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022

Board Training Sessions

Jun 2021 Diversity and

Inclusion
Employee voice updates

Nov 2021 ESG

ESG horizon scanning
update from PwC and
climate risk training

Nov 2021 Governance

Restoring Trust in Audit
and Corporate Governance
update from BDO

Remuneration update from
Deloitte

Cyber
Cyber risk update

Mar 2022 Diversity and

Inclusion
Gender Pay

Jan 2022 Diversity and

Inclusion
Employee voice updates

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

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,
ethnicity 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 improving ethnicity
on the Board by December 2023, more
information can be found in the Nomination
Committee Report on pages 118 to 121.
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.

115

halfords.annualreport2022.comOUR GOVERNANCECorporate 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.

FY21

Internal Evaluation

FY22

Internal Evaluation

FY23

External 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
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.

The findings identified by the FY22 internal review are as follows:

Topic
ESG

Diversity within the Board

FY22 Outcomes
The Board is fully committed to the Company’s ESG strategy, and during the year under the
Board’s direction, the business made strong progress on the key priority areas of: electrification;
net zero commitment; diversity and inclusion; and product, packaging and waste management.
As the regulatory landscape continues to evolve in response to climate change, supply chain
transparency and corporate due diligence, the Board will develop its approach to ensure we
achieve a sustainable business for all our stakeholders.

The Group is committed to providing equal opportunities to colleagues and candidates, and
during the year has worked hard to build a strategy which develops how Halfords thinks about
diversity, inclusivity and equal opportunities across all areas of the business. We are committed
to creating a Board that has an appropriate level of diversity. In 2023, Helen Jones, the Senior
Independent Director, will step down from the Board as she will reach her nine-year tenure, this
will provide an opportunity to improve ethnic diversity on the Board in line with the Parker Review.

Transformation across the Business A key part of our transformation is the development of our digital journey which includes
the integration of our newly acquired businesses. The Board will continue to support the
transformation journey as we develop an omni-channel business that is agile and therefore
able to respond fully to the ever-changing needs of our customers.

The findings identified by the FY21 external review were as follows:

Topic
Board composition

FY21 Outcomes
To ensure the Board has the right mix of skills,
diversity and experience going forward.

Progress Made in FY22
The Nomination Committee keeps the
composition and diversity of the Board
constantly under review to ensure the Board
is sufficiently diverse in terms of age, gender,
ethnicity, experience, and educational and
professional background. In 2023, Helen Jones,
the Senior Independent Director, will reach the
end of her nine-year tenure and so will step
down from the Board. This will provide the
opportunity to improve Board diversity in line
with the Parker Review.

116

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCETopic
Stakeholder oversight

FY21 Outcomes
To have more insight over suppliers and
employee voice.

Succession and talent
management

To ensure appropriate succession planning
for Board and senior management.

Progress Made in FY22
We continue to work closely with our suppliers
to foster engagement with them and develop
long-standing relationships into the future. We
will do this by increasing the integration and
use of supplier score cards and working with
them to ensure we comply with the Green
Claims code which will enable customers to
make greener choices.

On 13 October 2021, the Board was delighted
to announce the appointment of Jo Hartley as
Chief Financial Officer. She will replace Loraine
Woodhouse when she retires in the summer
of 2022. During the year, the Nomination
Committee and all the Directors reviewed and
updated the succession plans for the Board
and the senior management team.

IR Calendar Dates

16 Jun
2022

FY22 Prelim
Results

7 Sept
2022

FY23 20-week
Trading Update

7 Sept
2022

AGM

Risk Management and Internal Control
The Board is responsible for the Group’s risk management processes and the system
of internal control. The Audit Committee has a delegated responsibility to keep under
review the effectiveness of the Group’s risk management and internal control framework.
Throughout the year, the Committee maintained oversight to ensure a robust process is in
place to monitor and evaluate the principal risks of the group. The Group’s principal risks and
uncertainties, and mitigating actions, are detailed in the Strategic Report on pages 72 to 78.

The Audit Committee considers the principal and emerging risks of the business and
reviews the mitigating controls with senior management. The Group Risk Committee
reports on the development of the risk management framework and provides insight to the
Audit Committee on regulatory and compliance risks.

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 Committee has neither identified nor been advised of any failings or
weaknesses that it has determined to be material or significant.

16 Nov
2022

FY23 Interim
Results

The management of risk and review of the internal control environment is a continual
process supported by all colleagues. The Committee supports the development of risk
maturity and a strong control culture.

12 Jan
2023

FY23 Q3 Trading
Statement

Annual General Meeting (“AGM”)
We aim to encourage our shareholders to receive communications by electronic means,
helping to make the Company more environmentally friendly. The 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 once again hold our 2022 AGM in person and
look forward to seeing shareholders on 7 September 2022.

Tim O’Gorman
Company Secretary

15 June 2022

117

halfords.annualreport2022.comOUR GOVERNANCENomination Committee Report

The Committee successfully secured
the appointment of Jo Hartley
to succeed Loraine Woodhouse
as Chief Financial Officer.

Keith Williams
Chair of the Nomination Committee

Committee Composition
During the year, the Committee
comprised:

Keith Williams (Chair)

Helen Jones

Jill Caseberry

Tom Singer

Nomination Committee
meetings held:

118

Chair’s Letter
The Nomination Committee’s objective is to
ensure that the Board comprises individuals
with the necessary skills, knowledge,
experience and diversity to ensure that
the Board is effective in discharging its
responsibilities. The Committee also
ensures that the composition and structure
of the Board and its Committees are kept
under constant review and nominates
candidates for appointment as Directors
to the Board. The Committee monitors
and develops Board and Executive
succession plans.

During the year, the Committee successfully
secured the appointment of Jo Hartley
to succeed Loraine Woodhouse as Chief
Financial Officer. Jo joined the business on
19 April 2022 and will be appointed as Chief
Financial Officer on 16 June 2022 when
Loraine retires from the role. The Committee
also undertook an annual Board evaluation,
the details of this internal evaluation can
be found on page 116 in the Corporate
Governance Report.

Looking ahead, long-term succession
planning at Board and Executive level will
remain a key priority of the Committee. As
announced in last year’s annual report, we
are committed to creating a Board that has
an appropriate level of gender diversity and
ethnic diversity. Helen Jones, our Senior
Independent Non-Executive Director, will
reach her nine-year tenure in 2023 and
will consequently step down during 2023,
this will provide the opportunity for us to
improve ethnic diversity on the Board in line
with the Parker review.

By order of the Board

Keith Williams
Chair of the Nomination Committee

15 June 2022

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 Jo Hartley as Chief Financial Officer
as successor to Loraine Woodhouse.

• 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 action plan and distributed
the internal FY22 Board evaluation
action plan.

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCE• Reviewed the composition of the Board

and its Committees.

• Carried out an annual review of the
Committee’s Terms of Reference.

• Approved the appointment of Paul
O’Hara as the People and Property
Director following the resignation of
Wendy Taylor, the Chief People Officer.

• Recommended the re-election of the
Board at the 2021 Annual General
Meeting.

Areas of Focus in FY23
• Progression of succession plans for the
Board and senior management team.

FY22 Key Activities
• Appointment of Jo Hartley as Chief
Financial Officer as successor to
Loraine Woodhouse.

• Progression of succession and talent

development plans.

• Recruit a new Non-Executive Director
from a more diverse background.

Board Appointments
On 13 October 2021, we announced that Loraine Woodhouse would be retiring
as Chief Financial Officer in the summer of 2022, and that Jo Hartley would be
appointed in her place. Jo joined the business on 19 April 2022 and, to ensure
a smooth transition, Loraine will remain with the business and in post until
16 June 2022, at which point she will step down from her role and pass her
responsibilities to Jo.

Odgers Berndtson was appointed as advisor to the Committee in the search for
external candidates for this role and this process was led by Keith Williams as Chair,
together with the Committee. Odgers Berndtson does not have any other connection
with the Company.

Jo Hartley’s Induction
•

Introductory meetings with members of the Senior Management Team and
Executive Committee.

• Retail store and Autocentre visits, including an introduction to Halfords Mobile

Expert.

• Visit to Washford and Coventry distribution centres.

•

In-depth teach-ins with functional experts across the business, including
Strategy, ESG, Customer, Commercial and People Teams.

•

Introductory meeting with Corporate Broking teams and advisors.

• Meetings with specialist financial stakeholders, including Auditors, consultants

and lending banks.

Prior to joining Halfords, Jo was the Group
Chief Financial Officer for Virgin Active for
over six years. Before that, Jo worked at
Tesco plc in a number of finance roles in
the UK and internationally, having qualified
as a chartered accountant at Deloitte UK.
Jo has extensive experience across all
finance functions gained within consumer-
facing businesses.

119

halfords.annualreport2022.comOUR GOVERNANCENomination Committee Report

What process did the Committee go through to appoint a new Chief Financial Officer?

1 Appointed an external search

consultancy to identify and approach
suitable candidates.

2 Developed a detailed candidate spec

aligned to the Group’s values and
culture.

3 Created a long list of suitable and

diverse candidates.

4 Commenced the interview process,

encompassing Executive and Non-
Executive Directors.

5 Made an offer to the successful

candidate and the relevant
announcement made to the London
Stock Exchange.

6 A suitable induction programme put

in place and tailored to the successful
candidate’s requirements.

120

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCEDirector 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.

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
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; 44%
of the Senior Management Team is female
and 28% of their direct reports are women.
The Board is committed to improving
diversity at Board and senior management
level. In 2021 we announced in our annual
report that we had a target of improving
ethnic diversity on the Board by 2023.

In this regard, the Board has recently
appointed a well-known firm of head
hunters to progress this appointment,
which will need to be considered in the
context of Helen Jones retiring as a
Director and Senior Independent Director in
2023. The Board is reviewing all the options
and expects to make an appropriate
appointment in 2023.

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 and, as
detailed above, we have an action plan to
ensure compliance with the Parker review
by 2023.

Looking Ahead
Looking ahead, long-term succession
planning at Board and Executive level will
remain a key priority of the Committee,
together with creating a Board that has an
appropriate level of gender diversity and
ethnic diversity.

Keith Williams
Chair of the Nomination Committee

15 June 2022

Board

Female 50%

Male 50%

Senior Management Team

Female 44%

Male 56%

Senior Management
Team direct reports

Female 28%

Male 72%

121

halfords.annualreport2022.comOUR GOVERNANCEESG Committee Report

Building on the strategy work that we
undertook last year, we are pleased with
the strong progress that we’ve made
this year.

Helen Jones
Chair of the ESG Committee

Chair’s Letter
During the year, the Committee’s focus has
been to ensure the ongoing delivery against
objectives and targets for the four priority
areas: Electrification; Net Zero; Diversity
and Inclusion; and Product, Packaging
and Waste Management. We are pleased
with the strong progress made across all
four areas, particularly meeting our electric
servicing target, which formed part of our
first ESG Executive bonus target.

Recognising the importance of managing
and mitigating our impact on the
environment, as well as the risks and
opportunities we are faced with from a
changing climate, the November 2021 ESG
Committee meeting was extended to all
Board and Executive members to undergo
a climate training session. Facilitated by
PwC, the session focused on climate risks

and opportunities and the requirements set
out by the Task Force on Climate-related
Financial Disclosure (“TCFD”). We are
pleased with our first disclosure against
the TCFD framework and see this as an
important step forward on our journey
to net zero. See pages 68 to 71 for more
information.

In addition to the two meetings held this
year, we also met as a Board to review and
approve the revised Global Sourcing Code.
Along with investment in systems, the
revised Code will support strengthening due
diligence processes, ensuring we remain
compliant with increasing supply chain
transparency requirements. This is a notable
improvement, ensuring we continue to drive
the right behaviours and culture to deliver
long-term sustainable growth.

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 two 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 regularly throughout the year.

Building on the strategy work that we
undertook last year, we are pleased with the
strong progress that we’ve made this year.

As the regulatory landscape continues
to evolve in response to climate change,
supply chain transparency and corporate
due diligence, we remain committed to
evolving our approach and ensuring we
have a sustainable business that delivers for
all stakeholders.

The Board remains committed to improving
diversity at Board and senior management
level. In line with the recommendations
set out in the Parker Review, the Board is
reviewing all the options and expects to
make an appropriate appointment in 2023,
please see page 121 for further information.

Committee Composition
During the year, the Committee
comprised:

Helen Jones (Chair)

Jill Caseberry

Tom Singer
ESG Committee
meetings held:

FY22 Key Achievements: We
delivered strong performance against
ESG priority issues. To highlight our
commitment, we recruited a new
Head of ESG and dedicated ESG
expertise within packaging to ensure
the successful ongoing delivery of
our ESG strategy.

Areas of focus in FY23: Maintain
momentum against priority ESG issues.
As well as strengthen stakeholder
engagement with colleagues, suppliers
and customers to ensure our strategy
remains effective in delivering long-
term sustainable growth.

122

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCEMain Responsibilities of the Committee
• Oversight and continued development of our ESG strategy.

• Setting KPIs and targets and monitoring progress.

• 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 the ESG Board, comprising members of the Senior Leadership Team, with the

responsibility of leading ongoing ESG strategic direction.

• Participated in climate risk and opportunity training.

• Challenged ESG performance throughout the year.

• Reviewed and approved the Global Sourcing Code.

• Reviewed and agreed our science-based targets to strengthen short-term carbon

reduction commitments.

•

Inputted into and approved the TCFD statement.

• Supported with the recruitment of the newly appointed Head of ESG.

Further information on the Group’s approach to managing ESG, performance against
the priority areas and performance data can be found on pages 40 to 55 of the Strategic
Report.

Looking Ahead
In FY23, our focus will be to maintain the momentum from this year and continue to deliver
positively towards our ESG targets. We will continue to engage with stakeholders, to ensure
our strategy and governance systems and approach remain effective. This will include
engagement with customers to ensure we continue to respond to their needs; engagement
with our suppliers as we roll out the revised Global Sourcing Code and begin scope 3 data
collection; and importantly, further colleague engagement to ensure we continue to drive
the right culture to deliver our ESG ambitions.

Helen Jones
Chair of the ESG Committee

15 June 2022

123

halfords.annualreport2022.comOUR GOVERNANCEAudit Committee Report

The Committee has continued to
play an important role in engaging
with the management team to ensure
the integrity of financial reporting,
internal controls and risk management
processes.

Tom Singer
Chair of the Audit Committee

Committee Composition
During the year, the Committee
comprised:

Tom Singer (Chair)

Helen Jones

Jill Caseberry

Audit Committee
meetings held:

Chair’s Letter
I am pleased to present the report of the
Audit Committee for the 52 weeks ended
1 April 2022.

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
several key issues, most notably:

•

the impact of COVID-19 and the war in
Ukraine, and specifically whether the
business remained a Going Concern;

the extension of the Group’s revolving
credit facility;

judgements in respect of M&A activity
in the year;

the carrying value of investments,
tangible and intangible assets;

•

the BEIS proposals for Audit and
Corporate Governance reform,
considering the impact on our reporting
and control environment;

the application of the new IFRIC in
regards to IAS 38;

the acceleration of our business and
financial controls programme; and

the concluded review of the legal entity
restructure across the Group.

We announced in October that Jo Hartley
would be joining the Halfords Board as
Chief Financial Officer, succeeding Loraine
Woodhouse. I would like to express my
thanks to Loraine for her dedication and
commitment to Halfords and I wish her well
with her non-executive career.

Tom Singer
Chair of the Audit Committee

15 June 2022

124

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCEFY22 Key Activities
• Reviewed and approved the Committee’s updated Terms of Reference.

• 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 treatment associated with the acquisitions 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. This assessment was inclusive of stress testing to
ascertain the level of headroom in the plans against possible covenant breach.

• Review preparations for inaugural TCFD reporting

• Reviewed and challenged the external Auditor’s year-end and half-year reports.

• Reviewed the statement of external Auditor’s independence.

• Reviewed and approved the external Auditor’s audit strategy and fees.

• 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.

• Review and approve Information Security Management Policy

• Review Cyber risk and associated strategy

• 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 challenged the effectiveness of the Group’s whistleblowing procedures

and approved the Group Whistleblowing Policy.

• Reviewed and approved the Anti-Money Laundering Policy.

• Reviewed and approved the Anti-Bribery and Corruption Policy.

• Received regular updates on the Gifts and Hospitality register.

• Reviewed and approved the Group’s tax strategy and arrangements.

• Reviewed plan for Halfords response to BEIS proposals.

• Ensured the finance function is appropriately resourced and has qualified executives

in key positions, and that a well-managed succession planning process is in place.

Areas of Focus
• Continue to monitor the impact of

macroeconomic issues upon the
Group’s Viability and Going Concern.

• Continue 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, focus on
complying with the outcome of the
BEIS recommendations on audit and
governance.

The effects of COVID-19 continued
into FY22, which, together with the war
in Ukraine, has led to a challenging
macroeconomic environment for UK
consumer-facing businesses. This further
underlines the importance of a robust risk
management process and strong financial
controls, key topics that have been high
on the agenda for the Audit Committee
in FY22.

Halfords Group completed three
acquisitions during the year, including that
of Axle Group Holdings, the owner of the
National Tyres brand. The Audit Committee
reviewed the accounting treatment of each
transaction, ensuring that the judgements
were appropriate.

The Group’s legal entity reduction exercise
was completed during the year, which
simplified the corporate structure and ensured
that distributable reserves were sufficient to
support future dividend payments.

After the Department for Business, Energy
and Industrial Strategy (BEIS) published
their consultation paper on proposals for
significant reform to UK audit and corporate
governance in March 2021, the Audit
Committee has stayed abreast of updates
and reviewed Halfords’ preparedness for
the most likely final proposals. The most
significant impact of the BEIS proposals
on Halfords is the likely requirement for an
enhanced financial control environment,
for which the Committee has overseen
an investment in people and processes
that will enable Halfords to meet the
requirements within the timeframe.

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
contribution and support during the year.

Member
Tom Singer
Helen Jones
Jill Caseberry

Role
Chair
Member
Member

Attendance
4/4
4/4
4/4

Four 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.

125

halfords.annualreport2022.comOUR GOVERNANCEMatters 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 167 to 167.

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 several 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 CGUs (see
Note 11 on page 187 of the Financial
Statements);

• The Audit Committee has received

detailed reports from Halfords’ finance
team 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. The Committee concluded
that it is satisfied with the impairment
assessment of goodwill.

Audit Committee Report

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 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
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 four such
meetings in the period ended 1 April 2022
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.

126

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.

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/environment-social-and-governance/
governance/committees-terms-of-
reference/.

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCEValuation 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 inherent difficulties of
forecasting market trends, there is a
risk that inventory provisions made will
be inappropriate or incomplete (see
Note 15 on page 190 of the Financial
Statements). Management has fully
reviewed the inventory provision in
the current year, 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.

Impact of new IFRIC agenda decision
regarding IAS38 Intangible Assets
During the year, the IFRS Interpretations
Committee (IFRIC) issued a clarification on
‘Configuration or Customisation Costs in
a Cloud Computing Arrangement (IAS38
Intangible Assets)’. Management undertook
a review of their capitalisation policy and
associated processes to ensure that the
new guidelines have been applied correctly.
The Audit Committee has received the
detailed reports from Halfords’ finance
team addressing this issue and are satisfied
with the resulting accounting treatment.

127

halfords.annualreport2022.comOUR GOVERNANCEAudit Committee Report

Non-Underlying items and Alternative
Performance Measures
The Group recorded a net credit of £6.8m
in Non-Underlying items in FY22, having
recorded larger debits in the two years
prior. This credit was driven by the release
of a provision relating to an HMRC audit
of National Minimum Wage practices,
and the utilisation of provisions relating
to the closure of stores and garages in
FY21. The Audit Committee has reviewed
management’s assessment of Non-
Underlying items and are satisfied that the
correct accounting treatment has been
applied.

Management has continued to use
Alternative Performance Measures (“APM”)
to provide the reader with a more insightful
analysis of the Group’s performance. In
particular, management has chosen to
place greater emphasis on comparing
FY22 performance to FY20, alongside
the prior year FY21. This was considered
to be appropriate given that FY21 was
significantly disrupted by COVID-19 and
the Government’s response to it through,
for example, providing business rates relief.
The Audit Committee has reviewed the use
of APM and are satisfied this strikes an
appropriate balance for the benefit of the
reader of the accounts.

Halfords’ preparedness for BEIS’
proposed reforms to audit and
corporate governance
The proposed reforms are wide-ranging
and, if introduced, are likely to impact
Halfords in several material ways. The
Committee continues to stay abreast of
updates from the Government and reviews
Halfords preparedness for the reforms
at each meeting. The most significant
piece of reform is the likely requirement
for enhanced internal controls and the
associated reporting of their effectiveness.
The Group’s response to this is well
underway, having invested in a team of
controls specialists to put in place Risk and
Controls matrices and testing programmes.

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.

Effectiveness of External Audit
The effectiveness of the external audit is
considered throughout the year through,

128

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.

In addition, at its meeting in March 2022,
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 7 September
2022, 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 180 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. Internal audits
are financial and non-financial and during
the year included Cyber Security, Data
Governance, Supplier Management,
Financial Controls and Health & Safety
Framework.

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCEThe 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 72 to 77.

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 1 April 2022.

Tom Singer
Chair of the Audit Committee

15 June 2022

The Head of Internal Audit reports to the
Chief Financial Officer but maintains direct
and regular communication with 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.

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.

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.

129

halfords.annualreport2022.comOUR GOVERNANCERemuneration Committee Report
Chair’s Letter

Another strong performance
for the Group, against a
challenging backdrop.

Jill Caseberry
Chair of the Remuneration Committee

Committee Composition
During the year, the Committee
comprised:

Jill Caseberry (Chair)

Helen Jones

Tom Singer

Remuneration Committee
meetings held:

130

Chair’s Letter
Dear Shareholder
On behalf of the Remuneration Committee,
I am pleased to present the Remuneration
Report for the financial period ended
1 April 2022.

The Report consists of three sections:

• A summary of the pay outcomes for
FY22, and our approach for FY23;

• 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 FY22 and
explains how we intend to apply the
Remuneration Policy in FY23.

FY22 Key Achievements
During FY22 we reverted to a more normalised
approach to setting performance measures
following changes in FY21 in light of the impact
of COVID-19.

A pay review was undertaken of our hourly
paid colleagues in retail, the new adult rate
increased to £10 per hour, which is 50p
over the National Minimum Wage rate.

Areas of focus in FY23
During FY23 we will continue to monitor the
approach to remuneration to ensure that
it remains aligned with our strategy and
operational focus.

We will continue to monitor the impact of
rising inflation on our colleagues.

2020 Directors’
Remuneration Policy
At the 2020 AGM we put forward our
Directors’ Remuneration Policy (the
“Policy”) to shareholders. The Policy was
largely based on the same principles 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
Our Group results in FY22 were very strong,
with underlying profit before tax of £89.8m,
representing growth of £36.2m versus
FY20 (pre-pandemic). This is particularly
impressive given the macro-headwinds that
were present throughout the year.

In the UK, we started the year attempting
to return to some form of “post-pandemic”
normality, but the reality was that COVID-19
still very much disrupted FY22. Not only did
illness and self-isolation impact many of
our colleagues, but we also saw significant
supply chain disruption, particularly from
products and componentry shipped from
countries still feeling the impact of peak
COVID-19.

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCEThe annual bonus will continue to be based
80% on financial measures (Group profit
before tax – 50%, Group revenue – 15%,
Operating Cash Flow – 15%) and 20%
on strategic metrics (NPS, Employee
Engagement, Group Services-Related Sales
and ESG, all equally weighted). Last year
we introduced an Environmental, Social and
Governance (ESG) measure to our annual
bonus scheme which was well received by
our stakeholders and this will continue to be
included this year.

In light of the macroeconomic uncertainty,
the Committee is currently reviewing the
performance measures and targets for the
2022 PSP awards. Performance measures
and targets will be disclosed in the RNS
announcement at the time of award. It is
the Committee’s intention that TSR and
EPS will continue to be included as key
measures of profit progress and shareholder
value creation.

Further details of the performance
measures for the FY23 annual bonus are set
out on page 146.

The Committee remains mindful of the
increasing shareholder expectation that
incentive outturns should be carefully
considered to ensure that they reflect
the underlying financial and non-financial
performance of the Group, as well as
the experience of our stakeholders and
colleagues. Therefore, as is the case in
prior years, the Committee evaluated
performance in the round against a range
of factors to assess whether the level
of annual bonus and PSP payout was
appropriate.

Given the strong performance of the
Group and the individual performance of
our Executive Directors, the Committee
felt comfortable that the outturns were
appropriate. The Committee, therefore,
determined that no changes needed to
be made for the formulaic outcome nor
adjustments were required based on the
share price, and the pay-outs were approved.

Remuneration for FY23
Having reviewed the structure of our
incentive awards, it was agreed that the
overall approach to the annual bonus and
PSP will remain largely unchanged for
FY23. The maximum incentive opportunities
will remain at 150% of base salary for the
annual bonus and 200% of base salary for
the PSP.

I’d like to extend my sincere thanks to all
of our amazing colleagues who worked
tirelessly throughout the year to keep
each other and our customers safe, whilst
continuing to provide record customer
service levels.

As we enter FY23, we see new challenges
emerging – this time, in the way of
unprecedented inflation and the worst cost
of living crisis for a generation. We will
inevitably see some impact in our more
discretionary, high value product areas.
That said, these conditions only serve to
underline the importance of our strategic
direction towards becoming an increasingly
consumer and B2B focused motoring
services business, with a greater proportion
of needs-based revenue, generating more
predictable returns.

The performance measures in FY23 reflect
our desire to continue this strategic journey,
as we remain convinced it is the right one.

Remuneration in the Year
For FY22, we were pleased to be able
to revert back to our more normalised
approach to performance measures which
are considered to be more reflective of
our ongoing strategy and our Group’s key
strategic KPIs. Further detail is set out
below and on pages 56 to 58.

The annual bonus was assessed against
underlying Group profit before tax – 50%,
Group revenue – 15%, Operating Cash
Flow – 15% and strategic metrics (NPS,
Employee Engagement, Group Services-
Related Sales and ESG – all equally
weighted) – 20%.

During the year, Group profit before tax was
£89.8m, Group revenue was £1,369.6m and
Operating cash flow was £101.0m.

Taking into account the strong financial and
non-financial performance delivered during
the year, the Remuneration Committee
determined that the Executive Directors
would receive annual bonuses of 79.37%
of maximum. Consistent financial metrics
were applicable across all central bonus
schemes.

The 2019 Performance Share Plan (“PSP”)
also performed very strongly with vesting
at 100% reflecting our excellent progress
in delivering the strategy and value for
shareholders over the past three years. All
our measures vested in full - EPS (50% of
award), Revenue (25% of award) and Free
Cash Flow (25% of award).

131

halfords.annualreport2022.comOUR GOVERNANCERemuneration Committee Report
Chair’s Letter

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 FY22
annual Directors’ Remuneration Report at
the Annual General Meeting.

Jill Caseberry
Chair of the Remuneration Committee

15 June 2022

Changes to Executive Directors
As announced in October 2021, Loraine
Woodhouse will retire from the Board during
the summer, having served as our Chief
Financial Officer (CFO) for the past four
years. I would like to take this opportunity
to thank Loraine for her integral support
over the last few years, particularly during
the COVID-19 pandemic where she
demonstrated exceptional leadership.

Loraine’s departure terms will be
consistent with the shareholder-approved
Remuneration Policy. In respect of her
outstanding share awards, she will be
treated as a good leaver with all awards
being subject to performance and time
pro-rating, vesting at the normal time in line
with plan rules. She will also be expected
to comply with the post-employment
shareholding requirement for two years
after her departure.

In April 2022, we were delighted to welcome
Jo Hartley to the business. Jo will be
assuming the role of CFO on 16 June 2022
when Loraine retires from the role. Jo was
appointed on a salary of £395,000 and her
pension contribution has been set in line with
the wider workforce at 3% of salary. For the
first year of her appointment, her incentive
opportunities have been set at a lower level
to her predecessor at 125% of salary and
150% of salary for the annual bonus and
PSP respectively. Subject to her personal
performance, the current intention is that her
maximum opportunities will be increased
in line with the Remuneration Policy and
her predecessor. Upon appointment, she
also received a like-for-like cash payment
of £112,000 to replace a bonus she was
required to repay on cessation of previous
employment. The Committee recognises that
Jo’s base salary is set at a level above the
previous CFO’s salary but the Committee
considers this appropriate taking into
account the level of Jo’s fixed pay in her
previous role which was at a similar level to
that which she will receive at Halfords.

Further details of Loraine’s and Jo’s
remuneration terms can be found on
page 144.

132

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCEO
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halfords.annualreport2022.com

133

Remuneration Committee Report
Remuneration at a Glance

At Halfords, the reward framework is consistent across all colleague
populations – although benefit levels vary to reflect market salary and
benefits benchmarks across all roles.

Colleagues Managers

Senior
Managers

Executive
Team

Element

Salary

Pension

Paid holiday

Share plans

Bonus/incentives

Death in service

✔

Car allowance

Job need

Private medical

✗

✔

Reward at Halfords
underpinned by our values

one halfords
family

wow our
customers

be better
every day

pride in
expertise

Why is Reward Structured Differently at Senior Levels?
The Corporate Governance Code protects the interests of shareholders by ensuring that
reward is structured in a way that ensures executives make the right long-term decisions
for the business. As a consequence, a high proportion of executive reward is directly
linked to long-term performance, resulting in ‘variable pay’ which only pays out when the
Company does well. The Executive Directors participate in two variable reward plans as
follows (further details can be found on pages 137 to 149):

Typical Fixed versus
Variable Pay

Colleagues

Annual Bonus

Targets are assessed over the financial year (a
proportion of any payment is deferred for three years
after payment).

Performance
Share Plan

Targets are assessed over three financial years.
Vested awards are subject to a two-year holding
period.

Variable

Fixed

Executive

Variable

Fixed

134

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCEExecutive Directors’ Remuneration

Single Total Figure of Remuneration
for Executive Directors
for the year ended 1 April 2022

Fixed pay comprises base salary, benefits and pension.
Variable pay comprises of the annual bonus and PSP award.
Further information on the single figure of remuneration can
be seen on page 140.

3,500

3,000

2,500

2,000

1,500

1,000

500

Fixed pay
Annual bonus
PSP

£3,146k

£1,788k

£2,016k

£679k

£1,147k

£435k

£433k

CEO (Graham Stapleton)

CFO (Loraine Woodhouse)

Aligning Pay with Performance

Key Performance
Indicator
2021/22 Annual Bonus*
Underlying Group PBT

Group revenue

Result

£79.6m

£1,314.0m

Operating cash flow

£101.0m

Group NPS

Group services-related
sales (£m)
Group Colleague
Engagement
ESG metric

2019 PSP
EPS growth

68.4%

£476.2m

81%

86.6%

35.5p

Group revenue growth

£1,369.6m

Free cash flow

£185.1m

* Excluding government support and acquisition profit.

Below threshold target

Between threshold and stretch target

At or above stretch target

Annual Bonus and Long-Term Plan Incentives Outcomes
The charts below show the results of the performance targets for the annual bonus and PSP. Further information about the annual
bonus is shown on page 140 and about the PSP on page 141.

2021/22 Annual Bonus

100%

20%

15%

79%

14%

15%

50%

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

100%

25%

100%

25%

50%

2019 PSP

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

Maximum

Actual

Maximum

Actual

Non-financial measures
Revenue

Operating cash flow
Profit before tax

Free cash flow
Group revenue growth
Underlying EPS growth

135

halfords.annualreport2022.comOUR GOVERNANCERemuneration Committee Report
Remuneration at a Glance

Aligning Our Performance Measures to Our Strategy
Over the past few years, our strategy has remained unchanged with motoring and cycling products remaining at the core of our
proposition. However, as we continue to evolve into a consumer and B2B services-focused business, we placed greater emphasis
on motoring, generating higher and more sustainable financial returns.

As such, we have sought to ensure that the performance measures for our incentive awards reflect our strategic ambitions. The table
below provides a summary of our alignment.

Alignment to Strategy

Alignment to
Our Stakeholders’ Interests

Annual Bonus Bonus

Underlying
Group PBT

• PBT is one of our main KPIs assessing the profitability of our

business.

Customer NPS

• As our business evolves to be more consumer and B2B

services-focused, this measure focuses on our commitment
to customer service both in Retail and Autocentres.

ESG

• We are committed to an ambitious ESG agenda and strategy
that works towards promoting electrification, reducing plastics
from packaging and promoting diversity and inclusion across
the Group.

Performance Share Plan

Relative TSR

• Aligns management with the wider shareholder experience.

EPS

• EPS is a measure of our investment thesis and indicates whether
we are achieving our aim to manage revenues, margins and
invest in long-term growth.

Group-services
related sales

Key to stakeholders:

• Sales are a key indicator of a retailer’s trading and performance.

ESG

Financial

Customers

Shareholder

For details of how our Remuneration Policy aligns with the UK Corporate Governance Code, please see page 122 of the 2020 Annual
Report and Accounts.

136

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCE

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 FY23, 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. Salary
increases generally in line with
wider employees.

Benefits

Pension

Provide market
competitive benefits
consistent with the
role.

Set at an appropriate level taking
into account the individual’s
circumstances, market practice
and other employees in the Group.

To provide individuals
with retirement
arrangements.

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 Graham Stapleton and
Loraine Woodhouse.

Contributions for Graham Stapleton
will be aligned with the maximum
employer pension contribution
available to the majority of the
workforce from 1 April 2023.

New Executive Director’s pension
contribution is to be aligned with
the wider workforce.
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.

Annual
bonus

Incentivise the
achievement of
annual financial
targets and key
strategic objectives.

Implementation in FY22
Graham Stapleton: £575,710

Loraine Woodhouse:
£369,250

Increased by 1.8% in line with
the increases awarded across
the wider workforce with
effect from 1 October 2021.

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 FY23
Salaries will next be reviewed
with effect from 1 October
2022 and it is expected that
any increase will be in line
with the increase received
for the wider workforce.

Jo Hartley’s salary was set at
£395,000 upon appointment.
No changes proposed.

Graham Stapleton: 15%
of salary.

Loraine Woodhouse: 15%
of salary.

Jo Hartley: 3% of salary
(in line with workforce).

Based on 80% financial
measures and 20% delivery
of strategic measures (full
details on page 140).

Graham Stapleton: 150% of
salary.

Loraine Woodhouse: 150%
of salary.

Both financial and non-
financial performance was
strong in the year and the
bonus paid out at 79.37%.

Jo Hartley: 125% of salary
(first year of appointment).

For 2022/23 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%)

137

halfords.annualreport2022.comOUR GOVERNANCERemuneration Committee Report
Remuneration at a Glance

Implementation in FY22
Graham Stapleton and
Loraine Woodhouse were
granted awards of 200% of
salary in the year.

Awards granted in October
2021 were based on:

• EPS growth 50%

• Group service-related

revenue 20%

• Relative TSR vs the

FTSE All Share General
Retailers Index 30%

Targets are disclosed
on page 141.
Executive Directors were
subject to a 200% of salary
shareholding guideline.

Implementation in FY23
Graham Stapleton: 200% of
salary.

Jo Hartley: 150% of salary
(first year of appointment).

FY23 awards will be based
on:

• EPS growth 50%

• Group services-related

revenue 20%

• 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 154 to 161, 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

Five 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.

138

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCEActivities During the Year
During the year, the Policy operated as
intended. The Committee undertook the
following activities:

•

reviewed and approved the Directors’
Remuneration Report published in the
FY21 Annual Report and Accounts;

• discussed and approved incentive

outcomes for FY22;

• approved grants under the Company’s

share schemes;

• considered the approach to

implementing remuneration policy
for FY22, including setting Executive
Director and Non-Executive Director
salaries from 1 October 2021;

reviewing considering and setting the
approach to performance measures
for the 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 and approved the Company’s
share plan rules to ensure compliance
with UK GDPR;

reviewed remuneration arrangements
for the wider workforce and took
these into account when considering
Executive pay; and

reviewed and approved the
appointment of remuneration advisors
and set the appropriate fee.

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 2021 AGM showed strong support
for our FY21 Directors’ Remuneration
Report.

The following table sets out the votes cast
at the 2020 AGM in respect of the Directors’
Remuneration Policy, and the votes cast
at the 2021 AGM in respect of the FY21
Directors’ Remuneration Report.

% of
votes
For

% of
votes
Against

96.86%

3.14%

97.58%

2.42%

FY21 Directors’
Remuneration
Report*
FY20 Directors’
Remuneration
Policy†

* 63,020 votes (0.04% 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.

Advisors and Other Attendees
During the year, the Committee has been
supported by Wendy Taylor, Chief People
Officer, 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 £43,500 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 that advises
the Remuneration Committee 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.

WTW (previously known as Willis Towers
Watson) also provided the Committee with
executive salary market data. WTW is also a
signatory of the Remuneration Consultants
Group Code of Conduct. Fees paid to WTW
for this advice were £4,125 charged on a
time and materials basis. WTW also provide
insurance broking services and employee
benefits services to the Group.

139

halfords.annualreport2022.comOUR GOVERNANCE
Remuneration Committee Report
Annual Report on Remuneration

How the Remuneration Policy was Implemented in FY22 – Executive Directors
Single Remuneration Figure (Audited)

Base
Salary
(£)
570,619
365,985

Benefits
(£)
22,767
12,510

Pension
(£)
85,593
54,898

Other1
(£)
–
–

Total
Fixed
(£)
678,979
433,393

Bonus
(£)

PSP
(£)
679,352 1,787,7132
435,723 1,146,6012

Total
Variable
(£)
2,467,065
1,582,324

Total
“Single
Figure”
(£)
3,146,045
2,015,716

560,526
359,512

20,816
12,517

84,079
53,927

377
377

665,798
426,333

777,730 1,255,1913
852,6243
498,820

2,032,921
1,351,444

2,698,719
1,777,777

2021/22
Graham Stapleton
Loraine Woodhouse
2020/21
Graham Stapleton
Loraine Woodhouse

In December 2020, Graham Stapleton and Loraine Woodhouse each received a working from home payment of £377, in line with all Support Centre
Colleagues.

2. For 2021/22, the 2019/20 PSP has been valued based on the average share price during the three-month period to 1 April 2022 of £2.978 and a vesting

outcome of 100% as referenced on page 141. The share price used to determine the level of award was £1.696; therefore, of the vested amount £1.2824
relates to share price appreciation over the performance period. No discretion has been exercised in relation to share price changes.

3. For 2021/22, the 2018/19 PSP value has been restated to reflect the share price at the date of vesting of £3.88 and a vesting outcome of 84.9%. No

discretion has been exercised in relation to share price changes.

FY22 Annual Bonus
The annual bonuses for FY22 for the Executive Directors were based as follows:
Chief Executive Officer
Chief Financial Officer

Graham Stapleton
Loraine Woodhouse

80% financial measures and 20% delivery of
strategic measures

The targets and performance against these are set out below:

Performance measures for
FY22 annual bonus*
Financial Measures
Profit before tax (50%)
Operating cash flow (15%)1
Revenue (15%)
Strategic Measures
NPS (5%)2
Services-related sales (5%)
Employee engagement (5%)

ESG (5%)

Threshold
(15%
payable)

Target
(50%
payable)

Maximum
(100%
payable)

FY22
outturn

% maximum
bonus
achieved

80%

20%

£65.7m
£57.2m
£1,397.6m

£69.2m
£59.2m
£1,440.8m

£77.4m
£71.0m
£1,484.0m

£78.6m
£101.0m
£1,326.5m

–
–

67.2%
£500.9m
76%

67.7%
£515.9m
78%

68.4%
£476.2m
81%
See targets and summary of performance
below

100%
100%
0%

100%
0%
100%

86.6%

1. Operating cash flow here is defined as EBITDA plus the movement in average working capital in FY22 compared to the prior year.

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.

* Excluding government support and acquisition profit.

ESG Measure (5% of award)
The ESG portion of the annual bonus was based on an assessment of progress against key objectives in this area. For target performance,
electrification targets were set for both Retail (30%) and Autocentres (50%). Maximum performance was assessed against the first-year delivery
of our multi-year programmes, including our Group inclusion policy and recommendations from the packaging review.

The Committee reflected on the Group’s performance against the above targets. It also took into consideration our wider diversity and inclusion
(“D&I”) ambitions such as the development of our overall D&I strategy, the launch of our colleague network groups and the delivery of a masterclass
to our senior leaders in D&I (50 senior leaders).

Overall Performance
The performance in the year is summarised on page 130.

140

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCEPerformance Outcomes for 2019 PSP Awards

Metric
Underlying EPS growth – CAGR
Group revenue growth – CAGR
Free Cash Flow (aggregate FY20 to FY22)
Total

* Straight-line vesting between threshold and maximum.

Threshold
targets
(25%
vesting)*
5.0%
3.5%
£125m

Maximum
targets
(100%

vesting)* Performance
13.2%
6.4%
£185.1m

10.0%
6.0%
£165m

Estimated %
total award
vesting
100%
100%
100%
100%

Weighting
50%
25%
25%
100%

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. Graham
Stapleton and Loraine Woodhouse 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
7 October 2021

Loraine Woodhouse

7 October 2021

Type
of award
Nil cost option
(0p exercise price)
Nil cost option
(0p exercise price)

1. These awards were based on 200% of salary.

Maximum
face
value of
award2
£1,131,060

Threshold
vesting
(% of award)
25%

Number
of shares1
387,216

248,353

£725,440

25%

Performance
period
3 April 2021 to
29 March 2024
3 April 2021 to
29 March 2024

2. Based on the average mid-market price on three preceding days of the awards of £2.921 on 7 October 2021.

Performance Conditions
The performance conditions and targets for PSP awards granted during FY22 are as follows:

Award
(200% of salary)

100% vesting
Straight-line vesting

25% vesting
0% vesting

Underlying EPS
growth – CAGR
(50% of the award)
12%
Between 5%
and 12%

Relative TSR
(30% of the award)
Upper quartile
Between market
median and upper
quartile
Market median
Below 5% Below market median

Group services
-related sales
(total of sales for
FY22 to FY24)
(20% of the award)
£617.0m
Between £586.2m
and £617.0m

£586.2m
Below £586.2m

The award shares that vest will become exercisable in 2024. The shares that vest will be subject to a two-year holding period.

141

halfords.annualreport2022.comOUR GOVERNANCERemuneration Committee Report
Annual Report on Remuneration

Deferred Bonus Plan
During the period, the following awards were granted to the Executive Directors under the Deferred Bonus Plan (“DBP”) as follows:

Graham Stapleton
Loraine Woodhouse

Date of
award
30 June 2021
30 June 2021

Number of
shares1
60,121
38,560

Maximum
face value of
award2
£259,242
£166,271

Vesting
30 June 2024–30 June 2025
30 June 2024–30 June 2025

1. One third of the FY21 bonus was deferred into shares for a period of three years. These awards are not subject to further performance conditions.

2. Based on the average mid-market price on the date of the award of £4.312 on 30 June 2021.

Outstanding Share Awards (Audited)
Performance Share Plan (“PSP”)
The following summarises outstanding awards under the PSP:

Grant
price5
(£)

Awards
held
3 April
2021
3.1970 381,040
1.696 585,611
2.425 458,162
2.921
–
3.079 258,832
1.696 375,598
2.425 293,855
–
2.921

Awarded
during
the
period
–
–
–
387,216
–
–
–
248,353

Dividend
reinvest-
ment6
8,073
14,615
11,434
3,376
5,484
9,374
7,333
2,165

Forfeited
during
the
period
57,538
–
–
–
39,084
–
–
–

Lapsed
during
the
period
–
–
–
–
–
–
–
–

Award
date
5 Oct 20181
20 Sept 20192
16 Oct 20203
7 Oct 20214
9 Nov 20181
20 Sept 20192
16 Oct 20203
7 Oct 20214

Exercised
during
the
period

Awards
Perform-
held
Holding
ance period
1 April
period to
years to
2022
2 Apr 2023
2 Apr 2021
– 331,575
– 600,226
1 Apr 2024
1 Apr 2022
– 469,596 31 Mar 2023 31 Mar 2025
– 390,592 29 Mar 2024 29 Mar 2026
2 Apr 2023
2 Apr 2021
– 225,232
– 384,972
1 Apr 2024
1 Apr 2022
– 301,188 31 Mar 2023 31 Mar 2025
– 250,518 29 Mar 2024 29 Mar 2026

Graham
Stapleton

Loraine
Woodhouse

1. 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 based on performance for FY21 and 84.9% of the award vested
in FY21 and 15.1% was forfeited. A two-year deferral period was applied and the award will remain in the EBT until June 2023 when it will become
exercisable.

2. 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.

3. FY21 awards are subject 40% to Relative TSR (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 an underpin whereby the net debt to EBITDA ratio remains below 1.5 times on average for the three years of the plan.

4. FY22 awards are subject to 50% underlying EPS growth (25% vesting for 5.0% p.a. growth, 100% vesting for 12% p.a. growth), 30% to Relative TSR

targets (25% vesting for lower quartile and 100% for upper quartile) and 20% to Group Revenue Growth targets (25% vesting for £586.2m of sales, 100%
for £617m of sales).

5. The grant price is calculated by taking the mid-market average across the three preceding days prior to the grant date.

6. The interim and final dividends have been reinvested in shares at prices between £3.11 and £3.44.

Deferred Bonus Plan (“DPB”)

Award
date
31 May
2018
30 June
2021
30 June
2021

Graham
Stapleton

Loraine
Woodhouse

Grant
price1
(£)

Awards
held
3 Apr
2021

Awarded
during
the
period

Dividend
reinvest-
ment2

Forfeited
during
the
period

Lapsed
during
the
period

Exercised
during
the
period

Awards
held
1 Apr
2022

3.3760

13,499

–

336

4.312

–

60,121

1,499

38,560

961

–

13,8353

61,620

39,521

Vesting
31/05/21–
31/05/22
30/06/24–
30/06/25
30/06/24–
30/06/25

1. The grant price is calculated by using the mid-market quotation on the date of grant.

2. The interim and final dividends have been reinvested in shares at prices between £3.11 and £3.44.

3. Graham exercised his 2018 DBP award on 13 April 2022 achieving a share price of £2.50, after the payment of tax liabilities, Graham retained the

balance of 7,145 shares.

142

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCECEO Pay Compared to Performance
The following graph shows the TSR performance of the Company since April 2012, 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

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

2
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.

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

FY22

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

–
–
–
499
198

–
–
–
1,372
–

–
–
–
645
–

–
–
–

–
–
–
50% 97.5%
–

–

–
–
–
–
–

–
–
851
54
–

–
–
23.5%
–
–

–
–
–
–
–

–
–
741
–
–

–
–
–
–
–

1,818
236
295
–
–

70%
42.3%
–
–
–

–
–
–
–
–

670
–
–
–
–

678
–
–
–
–

2,699
–
–
–
–

3,146
–
–
–
–

–
–
–
–
–

92.5% 79.37%
–
–
–
–

–
–
–
–

84.9%
–
–
–
–

100%
–
–
–
–

1. Graham Stapleton was appointed in January 2018. An incorrect benefits figure was reported for FY19 in error, this was corrected and reflected in the total

for FY19. The single figure for FY21 has been restated to reflect the share price of the PSP at the date of vesting on 9 June 2021 of £3.88.

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.

143

halfords.annualreport2022.comOUR GOVERNANCERemuneration Committee Report
Annual Report on Remuneration

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. For FY22,
neither Executive Director met their shareholding guidelines but made good progress towards the requirement.

Shareholding guideline
Shareholding as at 1 April 2022
Current value (based on share price on 1 April 2022)
Current % of salary

Graham Stapleton
200%
235,7261
£611,003
106.13%

Loraine Woodhouse
200%
167,2161
£433,424
117.38%

1 The shareholding figure include the vested shares from the 2018 Performance Share Plan award (on a net of tax basis) which are currently being held in a

two-year deferral period in the EBT. The figure also includes the shares held in the EBT in relation to the Deferred Bonus Plan grants made in 2021 (on a net
of tax basis). Historically, shares granted under the Deferred Bonus Plan had not been included in the Directors’ shareholdings but have now been included
in line with recent guidance from the Investment Association.

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. On 13 April 2022, Graham exercised the Deferred Bonus Plan award granted to him on 31 May 2018; this resulted in Graham receiving
7,145 shares, bringing his total shareholding to 242,871 shares. There was no change in the beneficial interest of Loraine Woodhouse between
1 April 2022 and 15 June 2022.

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 Director appointments and retain the fees received, provided that these appointments are not likely to lead to conflicts of interest.
Graham Stapleton is a Non-Executive Director of The Magic Bean Co. Limited (appointed on 21 January 2021) and Loraine Woodhouse is a Non-
Executive Director of The British Land Company plc (appointed on 1 March 2021). Both Graham and Loraine retain their earnings for these roles.

Appointment Terms for Jo Hartley
Jo Hartley joined Halfords on 19 April 2022 and will assume the role of Chief Financial Officer upon Loraine Woodhouse’s departure in the
summer.

She was appointed on a base salary of £395,000 per annum. Her benefits package is in line with our Remuneration Policy, with a pension
contribution of 3% of base salary in line with the wider workforce. The Committee recognises that Jo’s base salary is set at a level above
the previous CFO’s salary but the Committee considers this appropriate, taking into account the level of Jo’s fixed pay in her previous role
which was at a similar level to that which she will receive at Halfords.

For the first year of appointment, her annual bonus and PSP awards has been set at 125% and 150% of base salary respectively. This is
below the maximum opportunities under our Policy and below the incentive opportunities of her predecessor. From FY24, the Committee
intends, subject to satisfactory individual performance, to increase her annual bonus and PSP award opportunities to 150% and 200% of
base salary respectively in line with the incentive opportunities for the previous CFO.

On joining, she received a gross payment of £112,000 to replace a cash bonus she was required to repay on cessation of employment
from her previous employer. The value of this payment directly mirrored the amount repaid to the previous employer. The award is to be
subject to malus and clawback provisions for a period of six months.

Leaving Arrangements for Loraine Woodhouse (Audited)
As announced in October 2021, Loraine Woodhouse will be retiring from the Board in the summer of 2022 following four years as Chief
Financial Officer.

In line with the Remuneration Policy, the Remuneration Committee has approved good leaver status for Loraine in relation to her outstanding
share awards. The awards will be pro-rated for the portion of the performance period elapsed on departure and will vest on the ‘normal’ date
subject to the assessment of performance conditions. In line with plan rules, the deferred bonus awards will vest on cessation of employment.

144

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCELoraine will be required to hold her actual shareholding for two years post-cessation. Shareholding during this period will be monitored
by the Company, and shares may only be sold with the prior consent of the Chair or by compulsory purchase.

Loraine was eligible to receive an annual bonus for FY22 as outlined above. The Committee has also determined that Loraine will be
eligible to participate in the FY23 annual bonus on a pro-rated basis given that she will be employed for part of the year. Any payment will
be made after the end of the financial year, be pro-rated for the period up until her departure from the Company and be paid fully in cash
given deferred bonus awards will vest on cessation. She will not receive a PSP award in 2022.

Her salary, benefits and pension will be paid up until her departure date and there will be no payment in lieu of notice.

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 FY22 – Non-Executive Directors
Non-Executive Director single figure comparison (Audited)

Senior
Independent
Director fee
(£)
–
10,000

Board fees
(£)
194,135
52,470

Committee
Chair/
Employee
Voice
Director fees
(£)
–
10,000

Taxable
benefits1
(£)
–
93

Total “Single
Figure”2
2022
(£)
194,135
72,563

Total “Single
Figure”
2021
(£)
192,400
67,548

52,470

–

10,000

133

–

62,603

62,000

62,470

30,667

Role

Director
Keith Williams3 Company Chair
Helen Jones

Senior Independent
Director, ESG Committee
Chair and Employee
Voice Director
Jill Caseberry Remuneration

Tom Singer4

Committee Chair
Audit Committee Chair

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. 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.

Non-Executive Director Shareholding
Director

Keith Williams
Helen Jones
Jill Caseberry
Tom Singer

2022

150,000
8,000
3,125
30,000

2021

130,000
3,000
–
30,000

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 1 April 2022 and 15 June 2022.

Non-Executive Directors do not have a shareholding guideline but they are encouraged to buy shares in the Company.

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-22
01-Mar-20
16-Sep-20
24-Jul-21

Expiry date

28-Feb-25
28-Feb-23
15-Sep-23
23-Jul-24

Unexpired term at the
date of this report

32 months
8 months
15 months
25 months

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halfords.annualreport2022.comOUR GOVERNANCERemuneration Committee Report
Annual Report on Remuneration

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 FY23 – Executive Directors
Salary
Salaries for Executive Directors were increased by 1.8% with effect from 1 October 2021 in line with the increase received across the wider
workforce. The salaries for the current Executive Directors are as follows:

CEO - Graham Stapleton
CFO (incoming) – Jo Hartley1
CFO (departing) – Loraine Woodhouse2

£575,710
£395,000
£369,250

1. Jo Hartley joined Halfords 19 April 2022 and will assume the role of Chief Financial Officer upon Loraine Woodhouse’s departure.

2. As announced in October 2021, Loraine Woodhouse will retire from the Board on 16 June 2022. In order to ensure a smooth transition, she will remain in

post until this date, stepping down after the FY22 Preliminary Results.

Salaries will next be reviewed with effect from 1 October 2022.

Pension
Graham Stapleton and Loraine Woodhouse will continue to receive a pension allowance of 15% of base salary. The Committee acknowledges
that this level of pension is above the rate that is available to the wider workforce in the UK; however, given the existing contractual
entitlements and limited tenure in role it was deemed appropriate that the pension level remained unchanged at this stage. However, mindful
of shareholder guidance that pensions for Executives should be aligned with the pension provision available for the wider workforce, Graham
Stapleton has agreed to reduce his pension to be in line with the rate available for the wider workforce from 1 April 2023.

In line with the Remuneration Policy, the newly appointed CFO (Jo Hartley) will receive a pension opportunity of 3% of salary. This rate is
in line with the policy for the majority of the workforce.

Annual Bonus
The normal maximum annual bonus for Executive Directors is 150% of base salary with 2/3 paid in cash and 1/3 paid in Halfords’ shares
deferred for three years.

For the incoming CFO, it was agreed that her annual bonus opportunity would be 125% of base salary for the first year of her appointment.
From FY24, the Committee intends, subject to satisfactory individual performance, to increase the bonus opportunity to 150% of base
salary in line with the Remuneration Policy and the opportunity level of her predecessor.

For FY23, following a review of the performance measures, the Committee agreed that there would be no changes to the annual bonus
performance measures from prior year. The performance measures and their weightings have been summarised below.

Performance measures for FY23 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.

146

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCEPerformance Share Plan (“PSP”)
The normal PSP award for Executive
Directors is 200% of base salary.

For the incoming CFO, Jo Hartley, it was
agreed that her PSP opportunity would be
150% of base salary for the first year of
her appointment. Similarly to the annual
bonus, the current intention is that for FY24
onwards her maximum opportunity will
increase to 200% of base salary, subject to
individual performance during the year. The
departing CFO will not be entitled to a PSP
award in 2022.

The Committee is mindful of shareholder
guidance that award levels should be
adjusted where the share price has fallen
significantly compared to prior years. Based
on the current share price, no adjustment is
required; however, the Committee will take

this into account when determining award
levels in September.

Our normal practice is to grant awards in
September.

The Committee believes that these
performance measures provide an appropriate
balance between incentivising management
to drive shareholder value creation, deliver

improved financial performance and to execute
our strategy to focus the business more on
service-related offerings.

How the Remuneration Policy
will be Implemented for FY23 –
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 October 2021, where
a 1.8% fee increase was applied to the
Chair’s fee and the base Non-Executive
Director fee; however, no increase was
applied to the Committee Chair fees. The
next fee review will be in October 2022.

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)

FY22
£195,870
£52,940

£10,000
£10,000
£5,000
£5,000

FY21
£192,400
£52,000

£10,000
£10,000
£5,000
£5,000

Change in Remuneration of Directors compared to Group Colleagues
The table below sets out the increase in total remuneration of the Director and that of all colleagues in FY22 compared with the prior year.

Executive Directors
Graham Stapleton
Loraine Woodhouse
Non-Executive Directors
Keith Williams
Helen Jones1
Jill Caseberry
Tom Singer2
David Adams3
Average pay of all colleagues in the
Group

Base salary/
fees %
change

FY21 to FY22
Annual
bonus %
change

FY20 to FY21

Benefits %
change

Base salary/
fees %
change

Annual bonus
% change

Benefits %
change

1.8%
1.8%

1.8%
1.8%
1.8%
1.8%
N/A

100%4
100%4

–7
–7
–7
–7
N/A

–5
–5

–8
–8
–8
–8
N/A

1.8%
1.8%

0.0%
9.5%
0.0%
N/A
N/A

–6
–6

–7
–7
–7
–7
–7

2.8%

76.3%9

–5

4.02%

45.42%10

–5
–5

–8
–8
–8
–8
–8

–5

1. Helen Jones was appointed as Senior Independent Director on 15 September 2020.

2. Tom Singer was appointed as a Non-Executive Director on 16 September 2020, and as Audit Committee Chair on 1 January 2021.

3. 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.

4. Bonus payable for FY21.

5. No change to the benefits available for both Directors and colleagues.

6. No bonus payable for FY20.

7. Not eligible for a bonus.

8. Not eligible for benefits.

Increase due to more bonus and incentive potential available in operational roles.

10. 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.

147

halfords.annualreport2022.comOUR GOVERNANCERemuneration Committee Report
Annual Report on Remuneration

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
2021/22
2020/21

Method
Option B
Option B

25th percentile
pay ratio
167:1
143:1

Median
pay ratio
147:1
126:1

75th percentile
pay ratio
90:1
99:1

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 2021. 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 2022 compared to 2021. As is appropriate, the remuneration arrangements for the Executive
Directors are more closely linked to performance. Given the strong performance for FY22, remuneration for the CEO has risen more than
for the wider workforce.

Component
Base Salary
Total Remuneration

P25
£18,860.40
£18,860.40

P50
£20,714.20
£21,456.72

P75
£30,819.36
£34,819.93

Workforce Engagement in Remuneration
As referenced on pages 51 and 104, 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
the launch of the FY22 bonus and PSP plans.

148

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCEGender Pay Gap Report
Details of the Group’s Gender Pay Gap Report for 5 April 2021 are available at www.Halfordscompany.com/environmental-social-and-
governance/our-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

2022
£207.1m
£89.8m

£283.4m
£5.2m
£16.5m

2021
£233.0m
£99.5m

£262.3m
£4.5m2
£nil

1. Based on the single figure calculation, not all of which is included within wages and salary costs.

2. The FY21 figure has been restated to reflect the share price of the PSP award at the date of vesting, further information is available in the Single

Remuneration Figure table on page 140.

149

halfords.annualreport2022.comOUR GOVERNANCEDirectors’ Responsibilities

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,
give a true and fair view of the assets,
liabilities, financial position and profit
and loss of the group.

• 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

15 June 2022

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.

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.

Directors’ responsibilities
The directors are responsible for preparing
the annual report and the financial
statements in accordance with UK adopted
international accounting standards 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 UK adopted
international accounting standards and
have elected to prepare the company
financial statements in accordance with
United Kingdom Generally Accepted
Accounting Practice (United Kingdom
Accounting Standards and applicable laws).
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.

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;

• state whether they have been prepared

in accordance with UK adopted
international accounting standards,
subject to any material departures
disclosed and explained in the financial
statements;

• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
group and the company will continue in
business;

• prepare a directors’ report, a strategic
report and directors’ remuneration
report which comply with the
requirements of the Companies
Act 2006.

150

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR GOVERNANCE halfords.annualreport2022.com

151

OUR GOVERNANCEi

s
a
c
n
a
n
F
r
u
O

Contents

163

164

154
162

Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated Statement of Financial
Position
Consolidated Statement of Changes in
Shareholders’ Equity
165
Consolidated Statement of Cash Flows 166
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

167
168
179
203

204
205
206

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 1 April 2022 and
of the Group’s profit for the 52 weeks then ended;

the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards;

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.

We have audited the financial statements of Halfords Group Plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the 52
weeks ended 1 April 2022 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 Consolidated
Statement of Cash Flows, the Notes to the Consolidated Statement of Cash Flows, the Company Balance Sheet, the Company Statement
of Changes in Shareholders’ Equity, the Accounting policies and notes to the financial statements, including a summary of significant
accounting policies.

The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and UK
adopted international accounting standards. 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 conclusion of a formal tender process led by the Group’s Audit Committee, the Board proposed appointment of BDO LLP as
the Company’s auditor for the financial year ended 3 April 2020 and subsequent financial periods. The appointment was approved by the
Company’s shareholders at the Annual General Meeting on 31 July 2019.

The period of total uninterrupted engagement including reappointments is three years, covering the years ended 3 April 2020 to 1 April 2022.
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 2023 and including the impact of
strategic initiatives as well as the ongoing and uncertain impact of current macro-economic factors including rising energy prices
and interest rates. This involved evaluation of the budgeted figures compared to FY22, consideration of inflationary uplifts and other
adjustments applied by the Directors to agreed pricing with certain suppliers and external data supporting assumptions.

• Financing: confirmed the Group had financing facilities in place throughout the period of the going concern review as modelled in its

forecasts. We also recomputed the calculations supporting covenant compliance and headroom throughout the going concern period
with reference to the facility agreement.

• 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. We recomputed the Directors prepared sensitivities applied to
the forecasts and further considered these by applying additional sensitivity testing.

• 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 Directors have considered in

reaching their going concern assessment and the accounting framework.

154

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALSBased 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 and the 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

Materiality

94% (FY21: 93%) of Group profit before tax and non-underlying items
86% (FY21: 91%) of Group revenue
84% (FY21: 94%) of Group total assets

IFRS16 – leases
Project Paris
Acquistion of Axle Group (trading as National Tyre
Services)
Accounting treatment of capitalised software costs
Carrying value of the Parent Company’s investment in
subsidiaries

FY21
✓
✓

FY22

✓
✓

✓

During FY21 the Group announced plans to close a number of stores across both the Retail
and Car servicing segments so as to right-size their physical estate ‘Project Paris’

Material impairments and provisions were therefore recorded in relation to redundancies
and costs associated with the store closures which also resulted in property, plant and
equipment, right of use assets and inventory having a reduced recoverable amount. This was
a one off non-recurring event.

IFRS 16 was previously noted as a key audit matter owing to its magnitude and the
management judgement required in the accurate assessment of the balances. However as
this is the third financial year of implementation management now have well established
policies and procedures in place to record and report these balances. Whilst this remains an
audit risk area it is no longer considered a key audit matter.
Group financial statements as a whole

£4m (FY21: £3.4m) 5% of normalised (3 year average) profit before tax and non-underlying
items (FY21: 5% of normalised (3 year average) 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.

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 assessed as non
significant and subject to specified audit and analytical review procedures by the Group audit team

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.

155

halfords.annualreport2022.comOUR FINANCIALSIndependent Auditor’s Report to the
Members of Halfords Group plc

Key audit matter
Acquistion of Axle Group
Holdings Limited and
subsidiaries

(The accounting policies
and critical judgements
and estimates applied
are disclosed within
the Group’s accounting
policies

The acquisition
balances are
disclosed in Note 10)

On 9 December 2021 the Group
completed the acquisition of 100% of
the share capital of Axle Group Holdings
Limited for cash consideration of £61.5m
(excluding transaction costs).

The accounting for the acquisition
balance sheet at 9 December 2021
and the subsequent Purchase Price
Allocation (“PPA”) assessment, involved
the alignment of material accounting
policies, the fair value of consideration,
identification and valuation of intangible
assets at acquisition date and the
subsequent goodwill. Management
engaged an external expert to undertake
the PPA assessment and assist with
the assessment of corporation tax and
deferred tax balances associated with
the transaction.

This was a material, non routine
transaction for the group, the accounting
considerations and disclosures are
complex and include significant
management estimates and judgements.
We have therefore raised this as a key
audit matter.

How the scope of our audit addressed the key audit matter
Our audit procedures included:
• Review of the Sale and Purchase Agreement to understand

the structure of the transaction and to confirm the
consideration paid.

• Engaging with our own internal valuation specialists to review
and challenge the PPA, including the identification of amounts
related to customer relationships, and other intangibles.

• Evaluating the capabilities, competence and objectivity of the
external valuation experts engaged by management for the
PPA assessment.

• Evaluating and concluding on the appropriateness of the

external valuation expert’s conclusions by comparing them to
our knowledge of the industry.

• Checking the cashflow forecasts including inputs and

assumptions used to assess the fair value of the intangible
assets acquired by comparing to actual and historical results
and the reasonableness of the underlying information used.

• Assessing the suitability of the valuation methods applied

against industry norms and considering the appropriateness
of the discount rate used to determine the fair values with
reference to relevant supporting information.

• Performing audit procedures, on a sample basis, to confirm
the completeness, accuracy and carrying value of the
amounts included on the acquisition balance sheet.

• Checking the alignment to group accounting policies with

specific reference to IFRS 16 Leases.

• Confirming the acquisition accounting entries in the group
financial statements and the calculation of goodwill against
the requirements of the financial reporting standard.

• Reviewing the corporation and deferred tax entries associated

with the transaction and the recoverability of the deferred tax
asset recognised. The review work was inclusive of input from
our tax specialists.

• Reviewing the adequacy of the disclosure notes in the

financial statements in relation to the acquisition to ensure
it complied with the requirements of IFRS 2 Business
Combinations.

Key observations:
Based on the procedures performed, the methodology and
assumptions used in the Acquistion of Axle Group Holdings
Limited and subsidiaries are appropriate.

156

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALSKey audit matter
Costs capitalised
related to software
development £21.4m
(FY21: £11.8m)

(The accounting policies
and critical judgements
and estimates applied
are disclosed within
the Group’s accounting
policies

The capitalised
balances are
disclosed in Note 11)

Carrying value of the
parent Company’s
investment in subsidiaries
£811.4m (FY21: £803.6m)

(The accounting policy
applied is disclosed
within the parent
Company and the
Group’s accounting
policies

The investment balance
is disclosed in Note 4 to
the Company Financial
statements)

The Group capitalises certain internal
and external costs in respect of the
development of software. In April 2021,
the IFRS Interpretations Committee
(“IFRIC”) published an agenda decision
in relation to configuration and
customisation expenditure relating to
cloud computing arrangements, including
Software-as-a-Service (“SaaS”).

Following the interpretation being
published, the Group has now updated
its accounting policy in relation to
IAS38 Intangible Assets, which includes
accounting for such SaaS arrangements.
The risk is that the accounting policy
change is not appropriately applied to
nor appropriately disclosed in relation to
both the current and prior financial
years.

We have therefore raised this as a key
audit matter.
The parent Company’s investment in
subsidiaries represents its investment
in the underlying trading businesses
of the Group. The recoverability of the
investment is dependent on the future
cashflows of these subsidiaries. The
directors have prepared a value-in-use
assessment to support the carrying value
and have determined that there is no
impairment. Due to the materiality of the
investment in the context of the parent
Company financial statements this was
raised as a key audit matter for our
parent Company audit.

How the scope of our audit addressed the key audit matter
Our procedures included:
• Assessing the accounting clarification of the IFRIC April 2021
agenda decision against the Group’s updated accounting
policy.

• Agreeing a sample of internal and external costs related to

software to supporting documentation and other relevant
project information to understand the nature of the items and
considered this against the accounting standards and related
interpretations.

• Making enquiries with the project owners to corroborate the

nature of the work performed and considered this against the
accounting standards and related interpretations.

• Assessing the adequacy of the Group’s related disclosures
in respect of the change in accounting policy and the
judgements taken by the directors.

Key observations:
We found the accounting treatment of capitalised costs related
to software development including expenditure relating to cloud
computing arrangements to be acceptable.

Our audit procedures included:
• Comparing the carrying value of the investment to the market

capitalisation as at the period end date and post period end.

• Comparing the carrying value of the investment to the net

asset value of the subsidiaries.

• Obtaining the directors assessment of the carrying value

and confirming whether this was in line with the value in use
calculations performed for goodwill impairment testing for the
Retail and Car Servicing CGUs.

• Assessing the forecast models prepared to support the value-
in-use calculation by testing the appropriateness of key inputs
into the calculations.

• Performing sensitivity analysis on the key assumptions and
checking whether the directors had identified reasonably
possible downside scenarios in their sensitivity analysis.

Key observations:
Based on the procedures performed, we found the Company’s
conclusion that there is no impairment of its investment in
subsidiaries to be acceptable.

157

halfords.annualreport2022.comOUR FINANCIALSIndependent 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

Materiality
Basis for determining
materiality

Rationale for the
benchmark applied

FY22
£m
4.0
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.

FY21
£m
3.4
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.

FY22
£m
2.0
Determined with
reference to 50%
of Group materiality.

FY21
£m
1.7
Determined with
reference to 50%
of Group materiality.

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.

For FY22 a normalised
(3 year average)
has been taken owing
to the significant impact
of the COVID-19
pandemic on the FY22
and FY21 financial years.

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.
£2.21m

Performance materiality
Basis for determining
performance materiality

£2.6m

£1.1m
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.

£1.3m

Component Materiality
We set materiality for each significant component of the Group, including the parent company, based on a percentage of between 49%
and 95% (FY21: 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 £1.95m to £3.8m (FY21: £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 £80k (FY21:£70k). We also
agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.

158

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALSOther 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 Code
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

• 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 78; and

• The Directors’ explanation as to their assessment of the Group’s prospects, the period this assessment

covers and why the period is appropriate set out on page 79.

Other Code provisions

• Directors’ statement on fair, balanced and understandable set out on page 95;

• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set

out on page 117;

• The section of the annual report that describes the review of effectiveness of risk management and

internal control systems set out on page 117; and

• The section describing the work of the audit committee set out on page 124.

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

Directors’ remuneration

Matters on which we
are required to report by
exception

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.
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in
accordance with the Companies Act 2006.

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.

159

halfords.annualreport2022.comOUR FINANCIALSIndependent Auditor’s Report to the
Members of Halfords Group plc

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.

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, its components 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 Financial Conduct Authority regulations, including the UK
Listing Rules, the principles of the UK Corporate Governance Code, IFRSs, UK GAAP for the parent company, and tax legislation covering
corporation tax, employee taxes, VAT and duty.

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, we considered the following:

•

the nature of the industry, control environment and business performance including the design of the group’s remuneration policies,
key drivers for Directors’ remuneration and performance targets;

the results of our enquiries of management, internal audit and the Audit Committee about their own identification of the risk of
irregularities;

• any matters we identified having obtained and reviewed the group’s documentation of their policies and procedures; and

•

the matters discussed among the audit engagement team regarding how and where fraud might occur in the financial statements and
any potential indicator of fraud. We also discussed the potential for non-compliance with laws and regulations.

We focused on laws and regulations that could give rise to a material misstatement in the financial statements. We also considered the
susceptibility of the Group and Parent company financial statements to misstatement as a result of fraud, and believed that the areas in
which fraud might occur were related to revenue recognition and management override of controls.

Our tests included, but were not limited to:

•

identifying and testing 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;

•

journal entries posted to revenue, those with unusual account combinations and journals posted by unexpected users;

• enquiries with management, the Audit Committee and enquiries of internal legal counsel to identify any known or suspected non-

compliance or fraud;

•

review of minutes of Board meetings throughout the year to identify any non-compliance with laws and regulations, and fraud, not
already disclosed by management;

•

review of tax compliance and involvement of our tax specialists in the audit;

• challenging assumptions and judgements made by management in their significant accounting estimates and judgements, including

impairment testing, the measurement of provisions, revenue recognition for a new revenue stream, capitalisation policies for intangible
software assets and going concern, and

•

the procedures in the key audit matters section above in relation to the acquisition in the year.

160

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALSWe communicated relevant identified laws and regulations and potential fraud risks to all engagement team members, who were all
deemed to have appropriate competence and capabilities, to remain alert to any indications of fraud or non-compliance with laws and
regulations throughout the audit.

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

16 June 2022

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

161

halfords.annualreport2022.comOUR FINANCIALSConsolidated Income Statement

52 weeks to 1 April 2022

52 weeks to 2 April 2021

Before
Non-
underlying
Items
£m
1,369.6
(647.9)
721.7
(620.6)
101.1
(11.3)
(11.3)
89.8
(17.2)

Non-
underlying
items
(Note 5)
£m
–
–
–
6.8
6.8
–
–
6.8
(1.7)

Before
Non-
underlying
Items
£m
1,292.3
(636.0)
656.3
(541.8)
114.5
(15.0)
(15.0)
99.5
(17.4)

Non-
underlying
items
(Note 5)
£m
–
–
–
(35.0)
(35.0)
–
–
(35.0)
6.1

Total
£m
1,369.6
(647.9)
721.7
(613.8)
107.9
(11.3)
(11.3)
96.6
(18.9)

Total
£m
1,292.3
(636.0)
656.3
(576.8)
79.5
(15.0)
(15.0)
64.5
(11.3)

72.6

5.1

77.7

82.1

(28.9)

53.2

35.5p
34.0p

37.9p
36.4p

41.7p
40.7p

27.1p
26.4p

Notes
1

2
3
6

9
9

For the period
Revenue
Cost of sales
Gross profit
Operating expenses
Results from operating activities
Finance costs
Net finance expense
Profit before income tax
Income tax expense
Profit for the financial period
attributable to equity shareholders
Earnings per share
Basic
Diluted

All results relate to continuing operations of the Group.

The notes on pages 168 to 202 are an integral part of these consolidated financial statements.

162

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALSConsolidated 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

Notes

52 weeks to
1 April
2022
£m
77.7

52 weeks to
2 April
2021
£m
53.2

6.5
(1.3)
5.2
82.9

(9.6)
1.6
(8.0)
45.2

All items within the Consolidated Statement of Comprehensive Income are classified as items that are or may be recycled to the Income
Statement.

The notes on pages 168 to 202 are an integral part of these consolidated financial statements.

163

halfords.annualreport2022.comOUR FINANCIALS
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*
Current tax liabilities
Provisions
Total current liabilities
Net current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Derivative financial instruments
Trade and other payables
Deferred tax liability
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

* Please refer to Note 30 for further detail.

Notes

11
12
14
22
21

15
16
13
22

18
18
22
19

18
18
22
19
21
20

23
23
23
23

1 April
2022
£m

442.4
101.7
350.2
–
14.7
909.0

222.1
92.6
–
4.2
3.9
46.3
369.1
1,278.1

(0.2)
(74.5)
(0.5)
(299.6)
(4.0)
(20.5)
(399.3)
(30.2)

–
(316.5)
–
(4.9)
–
(6.4)
(327.8)
(727.1)
551.0

2.2
212.4
(11.6)
2.0
346.0
551.0

2 April
2021
Restated*
£m

398.3
81.3
282.8
0.1
12.3
774.8

143.9
74.1
6.0
0.5
3.1
67.2
294.8
1,069.6

(0.2)
(63.4)
(5.9)
(258.2)
–
(24.5)
(352.2)
(57.4)

–
(280.9)
(0.4)
(3.3)
–
(15.0)
(299.6)
(651.8)
417.8

2.0
151.0
(10.0)
(1.8)
276.6
417.8

The notes on pages 168 to 202 are an integral part of these consolidated financial statements.

The financial statements on pages 162 to 202 were approved by the Board of Directors on 15 June 2022 and were signed on its behalf by:

Loraine Woodhouse
Chief Financial Officer

Company Number: 04457314

164

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALSConsolidated Statement of Changes
in Shareholders’ Equity

Attributable to the equity holders of the Company

Share
capital
£m
2.0

Share
premium
account
£m
151.0

Investment
in own
shares
£m
(10.0)

Other reserves
Capital
redemption
reserve
£m
0.3

Hedging
reserve
£m
4.6

Note

Retained
earnings
£m
217.9

Total
equity
£m
365.8

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 and costs
of hedging transferred to the cost of
inventory
Transactions with owners
Share-based payment transactions
Income tax on share-based payment
transactions
Total transactions with owners
Closing balance at 2 April 2021
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 and costs
of hedging transferred to the cost of
inventory
Transactions with owners
Issue of Ordinary shares*
Acquisition of Treasury shares
Share options exercised*
Share-based payment transactions
Income tax on share-based payment
transactions
Dividends to equity holders
Total transactions with owners
Balance at 1 April 2022

* Amounts shown are net of share issue costs.

23
23

–

–
–

–

–
–

–

–
–

–

–
–

–

–
–

–

–
–

–

–
–

–

–
–

–

53.2

(9.6)
1.6

(8.0)

(8.0)
–

–
–

–

53.2
(1.3)

1.3

–

6.4

(9.6)
1.6

(8.0)

45.2
(1.3)

1.3

6.4

0.4
6.8
417.8

–
–
2.0

–
–
151.0

–
–
(10.0)

–
–
0.3

–
–
(2.1)

0.4
6.8
276.6

–

–
–

–

0.2
–
–
–

–
–
0.2
2.2

–

–
–

–

61.4
–
–
–

–
–
61.4
212.4

–

–
–

–

–
(3.0)
1.4
–

–
–
(1.6)
(11.6)

–

–
–

–

–
–
–
–

–
–
–
0.3

–

77.7

6.4
(1.3)

5.1

–
–

–

6.4
(1.3)

5.1

77.7

82.8

(1.3)

–

(1.3)

–
–
–
–

–
–
–

1.7

–
–
–
7.8

0.4
(16.5)
(8.3)
346.0

61.6
(3.0)
1.4
7.8

0.4
(16.5)
51.7
551.0

The notes on pages 168 to 202 are an integral part of these consolidated financial statements.

165

halfords.annualreport2022.comOUR FINANCIALSConsolidated 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 of property, plant and equipment
(Reversal)/Impairment of property, plant and equipment
Amortisation and impairment of right-of-use assets
Amortisation of intangible assets
Net finance costs
Loss on disposal of property, plant and equipment, and intangibles
Gain on sale and leaseback of assets held for sale
Gain on disposal of leases
Equity-settled share-based payment transactions
Exchange movement
Income tax expense
(Increase)/Decrease in inventories
(Increase)/Decrease in trade and other receivables*
(Decrease)/Increase in trade and other payables*
(Decrease)/increase in provisions
Income tax paid
Net cash from operating activities
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired
Proceeds from sale of assets held for sale
Purchase of intangible assets
Purchase of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of share capital (Net of transaction costs)
Repurchase of treasury shares
Proceeds from share options exercised
Finance costs paid
Repayment of borrowings
Interest paid on lease liabilities
Payment of capital element of leases
Dividends paid
Net cash used in financing activities
Net decrease 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

* Please refer to Note 30 for further detail.

The notes on pages 168 to 202 are an integral part of these consolidated financial statements.

52 weeks to
1 April
2022
£m

Notes

52 weeks to
2 April
2021
Restated*
£m

72.6
5.1
77.7
20.6
(0.3)
69.9
15.8
11.3
1.8
(0.4)
(6.6)
7.8
0.9
18.9
(66.7)
1.3
(4.6)
(14.7)
(12.2)
120.5

(58.5)
7.5
(22.0)
(25.3)
(98.3)

61.6
(3.0)
1.4
(1.6)
–
(9.0)
(76.0)
(16.5)
(43.1)
(20.9)
67.0
46.1

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
(22.4)
36.4
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

12
12
14
11
6
3
13

166

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALSNote 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 lease liabilities
Current lease liabilities
Non-current lease liabilities
Total lease liabilities
Total net debt

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)

Cash flow
£m
(20.9)
–
(20.9)
85.0
–
85.0
64.1

Cash flow
£m
(48.3)
180.0
131.7
95.9
–
95.9
227.6

Other non-
cash changes
£m
–
–
–
(96.1)
(35.6)
(131.7)
(131.7)

Other non-
cash changes
£m
–
(0.9)
(0.9)
(76.1)
51.9
(24.2)
(25.1)

At 1 April
2022
£m
46.1
–
46.1
(74.5)
(316.5)
(391.0)
(344.9)

At 2 April
2021
£m
67.0
–
67.0
(63.4)
(280.9)
(344.3)
(277.3)

Non-cash changes include additions of new leases from acquisitions, modifications to leases, foreign exchange movements, and changes
in classifications between amounts due within and after one year.

Cash and cash equivalents at the period end consist of £46.1m (2021: £67.2m) of liquid assets and £0.2m (2021: £0.2m) of bank
overdrafts.

£4.5m (1 April: £6.4m) of the Group’s cash and cash equivalents is held by the trustee of the Group’s employee benefit trust in relation to
the share scheme for employees (£3.5m) and in relation to the ‘Here to Help’ fund (£1.0m). Therefore, these funds are restricted and are not
available to circulate within the Group on demand.

167

halfords.annualreport2022.comOUR FINANCIALSAccounting 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 1 April 2022 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 UK adopted international financial reporting standards.

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”), acquisition of business
combinations (IFRS 3 “Business Combinations”), share-based payments (IFRS 2 “Share-based payment”) and leases (IFRS 16 “Leases”).

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 1 April 2022, whilst the comparative period covered the 52 weeks to 2 April 2021.

Going Concern
In determining the appropriate basis of preparation of the financial statements for the year ended 1 April 2022, the Directors are required to
consider whether the Group and Company can continue in operational existence for the foreseeable future. The Directors have assessed
going concern over the 12-month period to 30 June 2023. The Board has concluded that it is appropriate to adopt the Going Concern basis,
having undertaken a rigorous assessment of financial forecasts, which included consideration of the effects of the Ukrainian war, and with
specific consideration to the trading position of the Group. In regards to the Ukraine war there has been limited effect on the Group as it has
no direct connections with either Russia or Ukraine. The financial forecasts have been stress tested and management believe the level at
which sales would need to drop to trigger any concern with cash flow or banking covenants is unlikely to happen.

The Group has a revolving credit facility of £180.0m at the date of approval of these financial statements, expiring on 4 December 2024.
The Group has no other debt or facilities. Significant headroom exists on both financial covenants contained within the banking agreement.
The Group’s financial covenants are calculated on a pre-IFRS 16 basis.

Covenant
Interest payable to EBITDAR>1.5
Net Borrowings to EBITDA<3.0

FY22
2.7
(0.3)

FY21
2.5
(0.4)

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.

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 can 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. Subsidiary undertakings acquired during the year are consolidated from the date of acquisition.

The subsidiary undertakings of the Company at 1 April 2022 are detailed in Note 4 to the Company Balance Sheet on page 207.

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 acquired, liabilities incurred or assumed, and equity instruments issued by the Group in
exchange for control of the acquiree. Acquisition costs are recognised as expenses in the period in which the costs are incurred as non-
underlying items.

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.

168

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALSRevenue 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 most 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

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 majority of the time the customer pays in full at the same point in time.

Service and repair plans

Product warranties

Software-as-a-Service ("SaaS)

In the case of Cycle to Work, a letter of collection (“LOC”) is issued when payment is received 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. Breakages are recognised for unredeemed vouchers
based on historic redemption rates. An LOC can also be redeemed by customers through a network
of independent bike dealers, who invoice the Group for the value of the LOC, at which point the
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 is held within accruals and deferred income.
Certain products, principally motoring and cycling, have a warranty period attached, which is built into
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 deferred income is held within trade and other payables.
The Group operates a Software-as-a-Service business, which provides customers access to a
bespoke version of our mobile scheduling and operations software. This is currently operating within
North America. The model employed consists of an up front development fee, with on-going license
fees depending on usage of the software by the customer, with minimum license fee levels agreed
over the term of the contract. The upfront development services cannot be unbundled from the
ongoing hosting and service obligations under the contract and therefore the upfront development
fee and minimum license fee payable is recognised evenly over the life of the contract, with any
license fees receivable above the minimum level recognised in the period to which they relate.

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 based on historic 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. The 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.

169

halfords.annualreport2022.comOUR FINANCIALSAccounting Policies

The supplier income arrangements are often not co-terminus with the 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 most of the supplier income is confirmed before the year end, the level of estimation and judgement required is limited.

Supplier income is recognised on an accrual 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.

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.

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.

170

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALSii) 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 that 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.

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.

171

halfords.annualreport2022.comOUR FINANCIALSAccounting Policies

Where the Group controls software relating to Software as a Service (“SaaS”) arrangements, configuration and customisation costs are
capitalised as part of bringing the identified intangible asset into use. Where the Group does not have control of the costs are expensed
over the SaaS contract term if the related configuration and customisation costs are not distinct from access to the software. In all other
circumstances, configuration and customisation costs are recognised as an expense as incurred except in the limited instances where
these costs result in a separately identifiable intangible asset. Under the new IFRIC guidance given in the current year for the recognition
of SAAS arrangements, where software is deemed to fall under the IAS 38 definition of a SAAS arrangement, the costs will be expensed to
the profit or loss account.

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 –10 years;

• 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 inflows (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.

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 or
deferred tax 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.

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.

172

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALSAs 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, assuming that any
option to break or extend the lease is unlikely to be exercised. 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.

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 payments 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.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. 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 or 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 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.

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.

173

halfords.annualreport2022.comOUR FINANCIALSAccounting Policies

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 or 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.

When the Group is an intermediate lessor, it accounts for the head lease and the sublease as two separate contracts. The sublease is
classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.

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, cash flow hedges, 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. When material 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 20.

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.

Cash and Cash Equivalents
Cash and cash equivalents on the consolidated 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. In the consolidated statement of
cash flows, net cash and cash equivalents comprise cash and cash equivalents, as defined above, net of bank overdrafts. Cash in transit is
recognised within Other receivables.

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.

174

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALSii) 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 Other Comprehensive Income (“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 assesses the objective of the business model in which financial assets are held at a Cash-Generating Unit (“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 the 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; and

• 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 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).

Financial assets: 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.

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halfords.annualreport2022.comOUR FINANCIALSAccounting Policies

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 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.

vi) Impairment
The Group recognises loss allowances for expected credit losses (“ECLs”) on financial assets measured at amortised cost. These 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.

176

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALSThe 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.

Estimates
The key sources of estimation uncertainty that have a significant effect on the amounts recognised in the financial statements are detailed below:

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 187 to 188. 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 a more than adequate amount of headroom before an impairment
could be triggered. For further information see Note 11.

Judgements
The key judgements 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
regarding future demand 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.

A sensitivity analysis has been carried out on the carrying value of inventory. This showed a 10% change in provisions applied to clearance
stock would impact the net realisable value of inventories by £0.2m. A 10% change in the current selling price of products would impact
the net realisable value of inventories by £0.2m.

Acquisition of National
On acquisition of National, the Group have used judgement in assessing the fair value of assets and liabilities acquired as a business
combination. The Group have also used judgement in assessing the value of intangibles held within the opening balance sheet.
On assessment, the below categories of intangible asset were identified:

• Customer relationships with the B2B customers in contract with the business; and

• The value of the brands acquired.

On application of IFRS 16 Leases, a number of leases which were favourable to market rates were identified, which created a right of use
asset value in excess of the right of use liability.

An exercise was also completed to assess the value and useful lives of property, plant and equipment, with a fair value adjustment applied
as a result of this exercise.

An adjustment to the deferred tax asset was made related to the total value of the intangible assets, favourable leases and fixed asset
valuation changes.

In assessing the forecasted future cash flows, synergies which were expected to impact the acquired business have been included, where
other market participants would also be in the position to benefit from these synergies. This forecast, when compared with the purchase
consideration, generated a discount rate which was in turn used to value the intangible assets recognised.

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 FY22 was 2.34%. 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.

177

halfords.annualreport2022.comOUR FINANCIALSAccounting Policies

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).

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); and

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.

Capitalisation of internal costs
Where a project is deemed to meet the requirements of IAS 38, the Group capitalises material internal costs using a blended rate on the

basis of time recorded against projects. This is calculated using actual salaries of relevant colleagues during the current year.

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 1 April 2022 but either had no material impact on the result or net assets of the Group or were not applicable.

• 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

• References to Conceptual Framework (Amendments to IFRS 3).

The Group has also considered the two final agenda decisions of the IFRS Interpretations Committee (“IFRIC”) relating to cloud computing
arrangements in March 2019 and April 2021, which have not had a material impact on the result or net assets of the Group. See
accounting policy for further details.

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 2 April 2022:

• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);

• Definition of Accounting Estimates (Amendments to IAS 8); and

• Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).

In January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine whether liabilities are classified as
current or non-current. These amendments clarify that current or non-current classification is based on whether an entity has a right at the
end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period. The amendments also clarify
that “settlement” includes the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity instruments
arises from a conversion feature classified as an equity instrument separately from the liability component of a compound financial
instrument. The amendments were originally effective for annual reporting periods beginning on or after 1 January 2022. However, in May
2020, the effective date was deferred to annual reporting periods beginning on or after 1 January 2023.

In response to feedback and enquiries from stakeholders, in December 2020, the IFRS Interpretations Committee (“IFRIC”) issued a Tentative
Agenda Decision, analysing the applicability of the amendments to three scenarios. However, given the comments received and concerns raised
on some aspects of the amendments, in April 2021, IFRIC decided not to finalise the agenda decision and referred the matter to the IASB. In
its June 2021 meeting, the IASB tentatively decided to amend the requirements of IAS 1 with respect to the classification of liabilities subject to
conditions and disclosure of information about such conditions and to defer the effective date of the 2020 amendment by at least one year.

The Group is currently assessing the impact of these new accounting standards and amendments. The Group will assess the impact of
the final amendments to IAS 1 on classification of its liabilities once those are issued by the IASB. The Group does not believe that the
amendments to IAS 1, in their present form, will have a significant impact on the classification of its liabilities.

178

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALSNotes to the 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 repairs performed from garages and vans to both retail and
commercial customers, as well as the Group’s Software as a Service business.

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
believe 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 Ireland, and all material non-current assets are located
in the UK and Ireland. 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 operating profit before non-underlying items
Non-underlying items
Segment operating profit
Unallocated expenses1
Operating profit
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

52 weeks to
1 April
2022
Total
£m
1,369.6
104.2
6.8
111.0
(3.1)
107.9
(11.3)
96.6
(18.9)
77.7
1,288.1
81.5
1,369.6

52 weeks to
2 April
2021
Total
£m
1,292.3
116.8
(35.0)
81.8
(2.3)
79.5
(15.0)
64.5
(11.3)
53.2
1,210.4
81.9
1,292.3

Retail
£m
1,001.6
89.8
8.9
98.7

Car Servicing
£m
368.0
14.4
(2.1)
12.3

948.9
52.7
1,001.6

339.2
28.8
368.0

Retail
£m
1,039.8
103.7
(31.7)
72.0

Car Servicing
£m
252.5
13.1
(3.3)
9.8

983.9
55.9
1,039.8

226.5
26.0
252.5

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 £3.1m in respect of assets acquired through business combinations (2021: £2.3m).

179

halfords.annualreport2022.comOUR FINANCIALSNotes to the Financial Statements

1. Operating Segments continued

Other segment items:
Capital expenditure
Depreciation and impairment expense
Amortisation of right-of-use asset
Amortisation expense

Other segment items:
Capital expenditure
Depreciation and impairment expense
Impairment of right-of-use asset
Amortisation of right-of-use asset
Amortisation expense

Retail
£m
31.1
13.1
54.1
14.2

Car
Servicing
£m
18.1
7.2
15.8
1.6

Retail
£m
23.3
19.1
11.6
58.2
9.6

Car Servicing
£m
22.0
4.7
0.6
11.4
1.2

52 weeks to
1 April
2022
Total
£m
49.2
20.3
69.9
15.8

52 weeks to
2 April
2021
Total
£m
45.3
23.8
12.2
69.6
10.8

There have been no significant transactions between segments in the 52 weeks ended 1 April 2022 (2021: £nil).

2. Operating Expenses

For the period
Selling and distribution costs
Selling and distribution costs
Administrative income/expenses, before non-underlying items
Non-underlying administrative income/expenses
Administrative income/expenses
Operating expenses

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 lease 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

– right-of-use assets
Trade receivables impairment
Staff costs (see Note 4)
Cost of inventories consumed in cost of sales

180

52 weeks to
1 April
2022
£m
472.6
472.6
148.0
(6.8)
141.2
613.8

52 weeks to
2 April
2021
£m
422.9
422.9
118.9
35.0
153.9
576.8

52 weeks to
1 April
2022
£m

52 weeks to
2 April
2021
£m

1.6
8.8
(2.6)
(0.8)
1.8
15.8
69.9
20.6

(0.3)

–
0.1
319.5
655.0

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

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALS3. Operating Profit continued
The total fees payable by the Group to BDO LLP and their associates during the period was £0.9m (2021: £0.6m), in respect of the services
detailed below:

For the period
Fees payable to for the audit of the Company’s accounts
Fees payable to BDO LLP and their associates for other services:
The audit of the Company’s subsidiary undertakings, pursuant to legislation
Audit-related assurance services
Other

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)

Staff costs recognised within Intangible asset additions in the period totalled £6.6m (2021: £3.6m).

Average number of persons employed by the Group, including Directors, during the period:
Stores/Garages/Vans
Central warehousing
Support Centre

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
1 April
2022
£’000
55

52 weeks to
2 April
2021
£’000
43

849
115
–
1,019

447
78
11
579

52 weeks to
1 April
2022
£m

52 weeks to
2 April
2021
£m

288.2
0.3
23.1
7.8
6.7
326.1

262.3
5.9
19.2
6.4
5.8
299.6

Number

9,959
633
920
11,512

9,635
642
1,009
11,286

52 weeks to
1 April
2022
£m
6.6
–
0.9
0.3
3.8
11.6

52 weeks to
2 April
2021
£m
6.4
0.3
0.6
0.3
3.5
11.1

Key management compensation includes the emoluments of the Board of Directors and the emoluments of the Halfords Limited and
Halfords Autocentres management boards.

Full details of Directors’ remuneration and interests are set out in the Directors’ Remuneration Report on pages 130 to 149, which form part
of these financial statements.

181

halfords.annualreport2022.comOUR FINANCIALSNotes to the Financial Statements

5. Non-underlying Items

For the period
Non-underlying operating expenses:
Organisational restructure costs (a)
Acquisition and investment-related fee (b)
Provision for expected settlement of an ongoing legal case (c)
Closure costs (d)
Impairment of right-of-use asset (e)

Replacement of warehouse management system (f)
Non-underlying items before tax
Tax on non-underlying items
Non-underlying items after tax

52 weeks to
1 April
2022
£m

52 weeks to
2 April
2021
£m

0.3
2.8
(2.2)
(8.5)
–

0.8
(6.8)
1.7
(5.1)

5.9
0.6
2.9
26.0
(0.4)

–
35.0
(6.1)
28.9

In the current and prior period, a strategic redesign of the in-store operating model was undertaken to better meet our customers’

expectations and deliver a consistent shopping experience across our estate. Redundancy costs of £0.3m (2021: £5.9m) were incurred

during the transition to the new operating model.

In the current and prior periods, costs were incurred in relation to the investments in National Tyres, Iverson, havebike and Universal.

− In FY22, £2.5m relating to professional fees in respect of the acquisition of National Tyres;

− £0.2m related to the acquisition of trade and assets of both Iverson and havebike;

− £0.1m (2021: £0.6m) related to the acquisition of Universal.

c. During the prior period, a provision of £2.9m was held in the accounts in relation to the HMRC audit relating to the national minimum
wage. This was management’s best estimate based on information available at the time. During the current period, this has been fully
settled and paid, which has led to a release of the provision of £2.2m.

d. During FY20 and FY21 the group completed a strategic review of the profitability of the physical estate and subsequently closed a

number of stores and garages. Assets were impaired and costs associated with the ongoing onerous commitments under the lease
agreements and other costs associated with the property exits were provided for accordingly. In the current period £8.5m (costs of
£26m during FY21) of provisions and lease liabilities have been released as the group continues to negotiate lease disposals and
review provisions held in place. At the year end property provisions carried forward included an amount of £10.2m in relation to these
store and garage closures. These will continue to unwind as property exits are negotiated with landlords or tenants, and could result in
further amounts being released to the income statement due to the significant estimation uncertainty over the timing of exits and the
final negotiated settlements.

In light of the COVID-19 pandemic, the Group had revised future cash flow projections for stores and garages in FY20, which led to the
recognition of an impairment 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. During the prior year, £0.4m of this impairment was reversed as the
stores and garages had returned to a profitable position.

f. An additional balance of £0.8m was incurred during the current period as a result of the replacement of the Warehouse Management
System. Under the new IFRIC guidance in regards to IAS 38 this can not be capitalised and therefore, owing to the nature of this cost
(non-trading cost), this is disclosed as a non-underlying expense.

6. Finance 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

182

52 weeks to
1 April
2022
£m

52 weeks to
2 April
2021
£m

(0.1)
(0.7)
(1.5)
–
(9.0)
(11.3)

(2.5)
(1.1)
(1.1)
(0.3)
(10.0)
(15.0)

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALS7. Taxation
Amounts recognised through Income Statement

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
Effect of changes in tax rates
Adjustment in respect of prior periods

Total tax charge for the period

Amounts recognised through Other Comprehensive Income

For the period
Deferred taxation
Origination and reversal of temporary differences
Adjustment in respect of prior periods
Total tax charge to OCI for the period

52 weeks to
1 April
2022
£m

52 weeks to
2 April
2021
£m

15.9
(0.4)
15.5

3.4
(1.7)
1.7
3.4
18.9

16.9
(1.0)
15.9

(4.7)
–
0.1
(4.6)
11.3

52 weeks to
1 April
2022
£m

52 weeks to
2 April
2021
£m

1.2
0.1
1.3

(1.6)
–
(1.6)

Amounts recognised directly in Equity
A credit of £0.4m (2021:£0.4m credit) has been recognised directly in Equity in relation to the origination and reversal of temporary
differences on share based payment transactions.

Reconciliation of effective tax rate
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% (2021: 19%)
Factors affecting the charge for the period:
Depreciation on expenditure not eligible for tax relief
Impact of super deduction capital allowances uplift
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
1 April
2022
£m
96.6
18.4

52 weeks to
2 April
2021
£m
64.5
12.3

0.3
(1.3)
1.5
0.8
1.3
(0.3)
(1.8)
18.9

0.9
–
(1.3)
0.6
(0.9)
(0.3)
–
11.3

An increase to the main rate of corporation tax to 25% from 1 April 2023 was substantively enacted on 24 May 2021. This will increase the
Company’s future current tax charge accordingly. The closing deferred tax asset at 1 April 2022 has been calculated at the rates expected
to apply when the temporary differences unwind.

The effective tax rate of 19.5% (2021: 17.5%) is higher than the UK corporation tax rate principally due to increased disallowable
expenditure this year (in part relating to the share issue and National acquisition) and adjustments in respect of prior periods.

The tax charge for the period was £18.9m (2021: £11.3m), including a £1.7m charge (2021: £6.1m credit) in respect of tax on non-recurring items.

The Group engages openly and pro-actively with tax authorities both in the UK and internationally, where it trades and sources products,
and is considered low risk by HM Revenue and Customs (“HMRC”).The Company is fully committed to complying with all of its tax
payment and reporting obligations.

183

halfords.annualreport2022.comOUR FINANCIALSNotes to the Financial Statements

7. Taxation continued
In this period, the Group’s contribution to the UK Exchequer from both taxes paid and collected exceeded £232m (2021: £170m) with
the main taxes including corporation tax £12.2m (2021: £10.8m), net VAT £116.9m (2021: £97.4m), employment taxes of £69.5m (2021:
£61.2m) and business rates £25.3m (2021: £0.9m).

At 1 April 2022, the Group has unused tax losses of £62.6m (2021: £nil) and fixed asset temporary differences of £21.9m (2021: £nil)
available for offset against future profits. A deferred tax asset has been recognised in respect of £28.9m (2021: £nil) of the losses and
£21.9m of the fixed asset temporary difference where management considers it probable there will be future taxable profits available
for offset. The net impact of this recognition is a deferred tax asset of £6.9m in relation to losses and £5.5m in relation to fixed asset
temporary differences.

No deferred tax asset has been recognised in respect of the remaining £33.7m (2021: £nil) relating to tax losses as it is not considered
probable that there will be future taxable profits available for offset. The net impact of this balance is an unrecognised deferred tax asset
of £8.4m. These losses may be carried forward indefinitely.

8. Dividends

For the period
Equity – ordinary shares
Final for the 52 weeks to 2 April 2021 – paid 5.0p per share (53 weeks to 3 April 2020: nil)
Interim for the 52 weeks to 1 April 2022 – paid 3.0p per share (52 weeks to 2 April 2021: nil)

52 weeks to
1 April
2022
£m

52 weeks to
2 April
2021
£m

9.9
6.6
16.5

–
–
–

In addition, the Directors are proposing a final dividend in respect of the financial period ended 1 April 2022 of 6.0p per share (2021:
5.0p per share), which will absorb an estimated £13m (2021: £9.9m) of shareholders’ funds. It will be paid on 16 September 2022 to
shareholders who are on the register of members.

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 22) 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 1 April 2022.

The Group has also chosen to present an alternative earnings per share measure, with profit adjusted for non-underlying items because it
better reflects the Group’s underlying performance.

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
Total 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 income/expenses
Tax on non-underlying items

Underlying earnings before non-underlying items

184

52 weeks to
1 April
2022
Number of
shares
m
205.7
(1.0)
204.7
9.0
213.7

52 weeks to
1 April
2022
£m
77.7

52 weeks to
2 April
2021
Number of
shares
m
199.1
(2.0)
197.1
4.9
202.0

52 weeks to
2 April
2021
£m
53.2

(6.8)
1.7
72.6

35.0
(6.1)
82.1

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALS
9. Earnings Per Share continued

For the period
Basic earnings per ordinary share
Diluted earnings per ordinary share
Basic earnings per ordinary share before non-underlying items
Diluted earnings per ordinary share before non-underlying items

52 weeks to
1 April
2022
37.9p
36.4p
35.5p
34.0p

52 weeks to
2 April
2021
27.1p
26.4p
41.7p
40.7p

10. Acquisition of Subsidiaries
a) National
On 9 December 2021, the Group acquired 100% of the issued share capital of Axle Group Holdings Limited and its subsidiary companies
(see page 207) for a cash consideration of £61.5m (excluding transaction costs). The acquired businesses comprise over 200 garages and
a fleet of vans, which provide support for retail and B2B customers, with centres across Great Britain and the Isle of Man.

The principal reason for the acquisition was to build on the already successful Halfords Autocentres and Halfords Mobile Expert
businesses and expand the availability for customers across the whole of Britain, as well as acquiring a tyre wholesale business to better
manage our tyre supply chain.

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

The Axle Group net assets at the acquisition date
Intangible assets
Tangible assets
Right-of-use asset
Inventories
Trade and other receivables
Cash
Trade and other payables
Lease liability
Other taxation and social security
Current tax liabilities
Provisions
Deferred tax asset/ (liability)
Total

Goodwill
Goodwill was recognised as a result of the acquisition as follows:

Total consideration (£58.5m net of cash acquired £3.0m)
Less fair value of identifiable (assets)/liabilities
Goodwill
Intangible assets:
Customer relationships
Brand names
Total

–
11.9
–
15.1
20.5
3.0
(38.5)
–
(5.3)
–
(2.1)
10.6
15.2

7.0
3.4
–
–
–
–
–
–
–
–
–
(1.7)
8.7

–
–
82.0
–
–
–
–
(73.2)
–
–
–
(2.2)
6.6

7.0
15.3
82.0
15.1
20.5
3.0
(38.5)
(73.2)
(5.3)
–
(2.1)
6.7
30.5

£m
61.5
(30.5)
31.0

6.2
0.8
7.0

None of the goodwill acquired is expected to be deductible for income tax purposes. The goodwill constitutes the value of locational
benefits giving Halfords the ability to expand growth across the UK for both retail and B2B customers, as well as the acquisition of a tyre
wholesale business, which will allow to us better manage supply chains.

The Axle Group businesses contributed £55.6m of revenue and broke even on a profit before tax basis for the period between the date of
acquisition and the balance sheet date.

If the acquisition of the Axle Group business had been completed on the first day of the financial year, Group revenues for the period would
have been £127.3m higher and Group profit before tax for the period would have been £0.4m higher (before amortisation of intangible
assets arising on consolidation).

185

halfords.annualreport2022.comOUR FINANCIALSNotes to the Financial Statements

10. Acquisition of Subsidiaries continued
Acquisition costs of £2.5m arose as a result of the transaction. These have been recognised as part of non-underlying costs in the
Consolidated Income Statement (see Note 5).

b) Iverson – acquisition of trade and assets
On 1 December 2021, the Group acquired the trade and assets of Iverson Tyres Limited for an immaterial amount. The acquisition secured
four garages within a strategically important location around the M25 and M4 corridor, increasing the availability of the Group's garage
services in a popular area for fleet businesses. Goodwill of £0.6m arose on acquisition.

c) Havebike – acquisition of trade and assets
On 15 March 2022, the Group acquired the trade and assets of HaveBike Limited for an immaterial amount. The acquisition secured the
outright ownership of mobile cycling services software for Halfords Mobile Expert and acts as a significant enabler in the Group’s plans to
grow that business within cycling, on top of the mobile motoring services business already in place. No goodwill arose on acquisition.

11. Intangible Assets

Cost
At 3 April 2020
Additions
Additions from acquisition of subsidiaries
Disposals
At 2 April 2021
Additions
Additions from acquisition of subsidiaries
Disposals
At 1 April 2022
Amortisation and impairment
At 3 April 2020

Charge for the period
Disposals
At 2 April 2021
Charge for the period
Disposals
At 1 April 2022
Net book value at 1 April 2022
Net book value at 2 April 2021

Brand
names and
trademarks
£m

Customer
relationships
£m

Supplier
relationships
£m

Computer
software
£m

Goodwill
£m

10.5
–
1.0
–
11.5
–
0.8
–
12.3

4.3

0.8
–
5.1
0.8
–
5.9
6.4
6.4

16.9
–
–
–
16.9
–
6.2
–
23.1

12.0

0.7
–
12.7
0.9
–
13.6
9.5
4.2

7.8
–
1.6
–
9.4
–
–
–
9.4

1.9

0.5
–
2.4
0.7
–
3.1
6.3
7.0

78.0
11.8
–
(2.1)
87.7
21.4
–
(0.8)
108.3

49.9

10.9
(1.1)
59.7
13.4
(0.7)
72.4
35.9
28.0

372.3
–
2.1
–
374.4
0.6
31.0
–
406.0

21.7

–
–
21.7
–
–
21.7
384.3
352.7

Total
£m

485.5
11.8
4.7
(2.1)
499.9
22.0
38.0
(0.8)
559.1

89.8

12.9
(1.1)
101.6
15.8
(0.7)
116.7
442.4
398.3

No intangible assets are held as security for external borrowings.

Goodwill is allocated to two groups of cash-generating units (“CGUs”), 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 CGU.

2) Car Servicing
During the current year, goodwill of £31.0m arose on the acquisition of National, and goodwill of £0.6m arose on the acquisition of
Iverson Tyres Limited and is allocated to the Car Servicing segment. The goodwill relates to a portfolio of garages across the UK, which
management monitors on an overall basis as part of the Car Servicing CGU.

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 part of the
Car Servicing CGU.

186

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALS11. Intangible Assets continued
Goodwill of £6.9m arose on the acquisition of McConechy’s Tyre Service Limited on 5 November 2019 and £0.7m on the acquisition of the
trade and assets of Victor Holdings Limited (“Tyres on the Drive”) on 14 October 2019. The goodwill relates to a portfolio of garages within
Scotland, and a fleet of mobile vans across the UK which management monitors on an overall basis as part of the Car Servicing CGU.

Goodwill of £2.1m arose on the acquisition of The Universal Tyre Company (Deptford) Limited and was 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 CGU.

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.

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 business plans approved by management covering a five-year period, which are reviewed by the Board.

Plans 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.

These estimates require assumptions over future sales performance; future costs; and long-term growth rates, as well as the application
of an appropriate discount rate. Management have used the five-year projections approved by the Board for the basis of the impairment
reviews. This was based on small like for like growth within retail and car servicing, including the impact of acquisitions made in the current
period. 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. The discount
rates used are shown below:

Discount rate1
Growth rate2

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

Retail

Car Servicing

2022
10.1%
1.0%

2021
9.9%
1.0%

2022
10.1%
1.0%

2021
9.9%
1.0%

Sensitivity analysis on the key assumptions in the value-in-use calculations has been undertaken. This found that there is a more than
adequate amount of headroom before an impairment would be triggered. In the table below we have summarised reasonably possible
changes in key assumptions for Retail and Car Servicing, including those relating to future sales performance and future costs. Modelling
included looking at the effect of a 1% decrease in terminal growth rate and a 1% increase in weighted average cost of capital (“WACC”),
as well as the combined impact of a 0.5% reduction in terminal growth rate and a 0.5% increase in WACC. 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

(see below). 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 a 1% reduction in terminal growth rate
Headroom using a combined -0.5% terminal growth rate and +0.5% discount rate

Retail
2022
£m
135.4
51.6
16.7
36.1

Car Servicing
2022
£m
151.7
97.0
88.2
93.3

187

halfords.annualreport2022.comOUR FINANCIALSNotes to the Financial Statements

11. Intangible Assets continued
Further modelling was also undertaken to review the point at which headroom would be reduced to £nil. For the carrying amount and
recoverable amount to be equal within Retail cash-generating unit, EBIT would need to decrease by 18%, post-tax discount rate would
need to increase by 1.8% and long-term growth rate would need to decrease by 1.2%. For the carrying amount and recoverable amount to
be equal within Car Servicing cash-generating unit, EBIT would need to decrease by 30%, post-tax discount rate would need to increase
by 3.7% and long-term growth rate would need to decrease by 3.0% (each sensitivity applied individually).

Based on the analysis summarised above, the Directors were satisfied that reasonably possible changes in key assumptions would not
lead to an impairment and therefore, the Directors have concluded that the recoverable value of the Group’s CGUs exceeded their carrying
amount.

12. Property, Plant and Equipment

Cost
At 3 April 2020
Additions
Additions from acquisitions
Transfer to assets held for sale
Disposals
At 2 April 2021
Additions
Additions from acquisitions
Disposals
At 1 April 2022
Depreciation
At 3 April 2020
Depreciation for the period
Impairment charge
Disposals
At 2 April 2021
Depreciation for the period
Impairment reversal
Disposals
At 1 April 2022
Net book value at 1 April 2022
Net book value at 2 April 2021

No fixed assets are held as security for external borrowings.

13. Assets Held For Sale

Freehold land and buildings
Total

Fixtures,
fittings
and
equipment
£m

Land and
buildings
£m

69.6
3.2
6.7
(6.0)
(0.9)
72.6
5.8
5.8
(0.5)
83.7

47.8
4.2
0.4
(0.6)
51.8
4.0
–
–
55.8
27.9
20.8

255.3
17.7
1.1
–
(2.5)
271.6
21.4
9.5
(3.8)
298.7

194.0
16.8
2.4
(2.1)
211.1
16.6
(0.3)
(2.5)
224.9
73.8
60.5

1 April
2022
£m
–
–

Total
£m

324.9
20.9
7.8
(6.0)
(3.4)
344.2
27.2
15.3
(4.3)
382.4

241.8
21.0
2.8
(2.7)
262.9
20.6
(0.3)
(2.5)
280.7
101.7
81.3

2 April
2021
£m
6.0
6.0

Freehold land and buildings are stated at their carrying value. Assets held for sale in the prior period related to seven buildings acquired
as part of the acquisition of The Universal Tyre Services (Deptford) Limited. Of the properties classified as held for sale, all were sold and
leased back by the Group in the current period on lease terms of 15 years with a 10 year break for total consideration of £7.5m.

188

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALS14. 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 Consolidated Statement of Financial Position

Right-of-Use Assets

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
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 1 April 2022

Land and
buildings
£m
344.0
2.7
12.5
(66.1)
5.8
(6.8)
(12.2)
279.9
82.0
44.6
(66.4)
6.8
(1.3)
–
345.6

Equipment
£m
5.9
–
0.6
(3.5)
–
(0.1)
–
2.9
–
5.0
(3.5)
0.4
(0.2)
–
4.6

Total
£m
349.9
2.7
13.1
(69.6)
5.8
(6.9)
(12.2)
282.8
82.0
49.6
(69.9)
7.2
(1.5)
–
350.2

The impairment charge for the prior period of £12.2m relates to the impairment of right-of-use assets in relation to a strategic project to

close low-returning stores where a lease obligation still exists.

Lease Liabilities
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
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 1 April 2022

Carrying value of lease liabilities included in the statement of financial position
Current liabilities
Non-current liabilities

Land and
buildings
£m
409.8
2.7
12.6
9.8
5.9
(92.7)
(6.8)
(0.7)
340.6
73.2
44.6
8.8
6.8
(81.7)
(7.0)
(0.2)
385.1

Equipment
£m
6.2
–
0.5
0.2
–
(3.2)
–
–
3.7
–
4.9
0.2
0.4
(3.3)
–
–
5.9

1 April
2022
£m
74.5
316.5

Total
£m
416.0
2.7
13.1
10.0
5.9
(95.9)
(6.8)
(0.7)
344.3
73.2
49.5
9.0
7.2
(85.0)
(7.0)
(0.2)
391.0

2 April
2021
£m
63.4
280.9

189

halfords.annualreport2022.comOUR FINANCIALSNotes to the Financial Statements

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 Consolidated Income Statement

52 weeks ended 1 April 2022
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
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

iii) Amounts recognised in Consolidated Statement of Cash Flows
The total cash outflow for leases in the period ended 1 April 2022 was £85.0m (2021: £95.9m).

15. Inventories

Finished goods for resale

1 April
2022
£m

81.2
80.5
72.7
59.4
39.0
26.9
18.7
12.7
10.7
8.2
9.0
419.0

Land and
buildings
£m

Equipment
£m

66.4
8.8
6.8

–

66.1
9.8
5.6

–

3.5
0.2
–

1.6

3.5
0.2
–

0.7

2 April
2021
£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

Total
£m

69.9
9.0
6.8

1.6

69.6
10.0
5.6

0.7

2022
£m
222.1

2021
£m
143.9

Finished goods inventories include £17.2m (2021: £14.9m) of provisions to carry inventories at fair value less costs to sell where such value
is lower than cost. During the period, £1.4m of inventory provisions were released (2021: £1.8m).

During the period, £7.5m was recognised as an expense in respect of the write down of inventories (2021: £3.0m) 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 £655.0m (2021: £629.1m).

Inventories at 1 April 2022 include a right to recover returned goods amounting to £2.0m (2021: £2.1m). These are measured by reference
to the former carrying amount of the sold inventories.

190

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALS16. Trade and Other Receivables

Falling due within one year:
Trade receivables
Less: provision for impairment of receivables
Trade receivables-net
Other receivables
Prepayments and accrued income*

* Please refer to Note 30 for further detail.

2022
£m

35.4
(0.8)
34.6
32.9
25.1
92.6

2021
Restated*
£m

30.2
(0.7)
29.5
27.9
16.7
74.1

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 1 April 2022 includes £31.3m (2021: £17.0m) (amended from the £7.5m reported in the FY21 annual report)
relating to supplier income.

Other receivables at 1 April 2022 includes £1.5m (2021:£1.6m) relating to unamortised issue costs on the Group’s borrowing facilities .

17. Cash and Cash Equivalents

Cash at bank and in hand

2022
£m
46.3

2021
£m
67.2

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. £4.5m (2021: £6.4m) of the Group’s cash and cash equivalents included in the balance sheet and the cash
flow statement and is held by the trustee of the Group’s employee benefit trust, in relation to the share scheme for employees (£3.5m) and
‘Here to Help’ fund (£1.0m). Therefore, these funds are restricted and are not available to circulate within the Group on demand.

18. Borrowings

Current
Unsecured bank overdraft
Lease liabilities

Non-current
Unsecured bank loan and other borrowings
Lease liabilities

2022
£m

0.2
74.5
74.7

–
316.5
316.5

2021
£m

0.2
63.4
63.6

–
280.9
280.9

The Group’s borrowing facility is a three-year £160m revolving credit facility, which began on 4 December 2020, with two options to extend
by a further year. During the current period, the facility was extended with the expiry date now 4 December 2024. 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. The Group’s financial covenants are calculated on a pre-IFRS 16 basis.

Significant headroom exists on both financial covenants contained within the banking arrangement

Interest payable to EBITDAR >1.5
Net borrowings to EBITDA <3.0

2022
2.7
(0.3)

2021
2.5
(0.4)

191

halfords.annualreport2022.comOUR FINANCIALSNotes to the Financial Statements

18. Borrowings continued
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

2022
£m
20.0
–
160.0
180.0

2021
£m
20.0
–
160.0
180.0

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 (2021: £160.0m) relates to the Group’s revolving credit facility. All these facilities incurred commitment fees at market rates.

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

* Please refer to Note 30 for further detail.

2022
£m

177.6
33.3
21.3
67.4
299.6

2021
Restated*
£m

131.7
34.5
21.6
70.4
258.2

4.9

3.3

Trade and other payables at 1 April 2022 includes £7.2m (2021: £7.9m) of deferred income in relation to product warranties and service
and repair plans, of which £3.6m (2021: £4.6m) is in current liabilities and £3.6m (2021: £3.3m) is in non-current liabilities.

In the current period Trade payables have increased due to the acquisition of the National (Note 10).

20. Provisions

At 2 April 2021
Additions from acquisitions
Charged during the period
Utilised during the period
Released during the period
At 1 April 2022

Analysed as:
Current liabilities
Non-current liabilities

Property
related
£m
27.1
2.1
1.0
(5.1)
(4.6)
20.5

Other
trading
£m
9.0
–
0.7
(2.2)
(1.1)
6.4

Non-
trading
£m
3.4
–
–
(1.0)
(2.4)
–

15.1
5.4

5.4
1.0

–
–

Total
£m
39.5
2.1
1.7
(3.5)
(12.9)
26.9

20.5
6.4

Property-related provisions consist of costs of 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 3.1 years.

Other trading provisions comprise a sales returns provision and an employer/product liability provision (of which £1m is expected to be
realised in >12 months).

Non-trading provisions comprised an amount payable to HMRC in relation to the national minimum wage investigation, this has been fully
settled in the current period, which has led to a release of £2.4m.

192

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALS21. 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 3 April 2020
Credit to the Income Statement
Credit to Other Comprehensive Income
Acquisition of subsidiary
Credit to Equity
At 2 April 2021
Credit/(charge) to the Income Statement
Charge to Other Comprehensive Income
Acquisition of subsidiary
Credit to Equity
At 1 April 2022

Property
related items
£m
11.4
–
–
(0.2)
–
11.2
(3.6)
–
1.8
–
9.4

Short-term
temporary
differences
£m
(0.6)
0.7
1.6
–
–
1.7
0.5
(1.3)
(0.4)
–
0.5

Share-based
payments
£m
0.2
2.6
–
–
0.4
3.2
0.5
–
–
0.4
4.1

Intangible
assets
£m
(3.7)
0.4
–
(0.5)
–
(3.8)
(0.8)
–
(1.6)
–
(6.2)

Tax Losses
£m
–
–
–
–
–
–
–
–
6.9
–
6.9

Total
£m
7.3
3.7
1.6
(0.7)
0.4
12.3
(3.4)
(1.3)
6.7
0.4
14.7

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:

1 April
2022
£m
26.8
(12.1)
14.7

2 April
2021
£m
16.1
(3.8)
12.3

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.

193

halfords.annualreport2022.comOUR FINANCIALSNotes to the Financial Statements

22. Financial Instruments and Related Disclosures continued
b. Accounting Classifications and Fair Value

1 April 2022
Financial assets measured at fair value
Forward exchange contracts used for hedging

Financial assets not measured at fair value
Trade and other receivables1
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 payables2

Carrying amount

Fair value
– hedging
instruments
£m

Mandatorily
at FVTPL –
others
£m

FVOCI
– equity
instruments
£m

Amortised
cost
£m

Other
financial
liabilities
£m

Total
carrying
amount
£m

Notes

4.2
4.2

–
–
–

(0.5)
(0.5)

–
–
–
–

16
17

18
14
19

–
–

–
–
–

–
–

–
–
–
–

–
–

–
–
–

–
–

–
–
–
–

–
–

67.5
46.3
113.8

–
–

–
–
–
–

–
–

–
–
–

–
–

(0.2)
(391.0)
(242.7)
(633.9)

4.2
4.2

67.5
46.3
113.8

(0.5)
(0.5)

(0.2)
(391.0)
(242.7)
(633.9)

1. Prepayments and accrued income of £25.1m are not included as a financial asset

2. Other taxation and social security payables of £33.3m, deferred income and of £7.2m and other payables of £21.3m are not included as a financial liability

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 receivables1
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 payables2, 3

Carrying amount

Fair value
– hedging
instruments
£m

Mandatorily
at FVTPL –
others
£m

FVOCI
– equity
instruments
£m

Amortised
cost
£m

Note

Other
financial
liabilities
Restated3
£m

Total
carrying
amount
£m

0.6
0.6

–
–
–

(6.3)
(6.3)

–
–
–
–

16
17

18
18
19

–
–

–
–
–

–
–

–
–
–
–

–
–

–
–
–

–
–

–
–
–
–

–
–

57.4
67.2
124.6

–
–

–
–
–
–

–
–

–
–
–

–
–

(0.2)
(344.3)
(197.5)
(542.0)

0.6
0.6

57.4
67.2
124.6

(6.3)
(6.3)

(0.2)
(344.3)
(197.5)
(542.0)

1. Prepayments and accrued income of £16.7m are not included as a financial asset

2. 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. Refer to Note 30 for further details.

194

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALS22. 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 the 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 £118.0m (2021: £125.2m).

Impairment losses on financial assets recognised in profit or loss were as follows:

£m
Impairment loss on trade and other receivables

52 weeks to
1 April
2022
0.1
0.1

52 weeks to
2 April
2021
0.1
0.1

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. The majority of trade receivables are based in the United Kingdom.

195

halfords.annualreport2022.comOUR FINANCIALSNotes to the Financial Statements

22. Financial Instruments and Related Disclosures continued
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 £46.3m at 1 April 2022 (2021: £67.2m). 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 (2021: £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 and Europe,
with most of the trade being in US dollars (“USD”). 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 immaterial.

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 1 April 2022, the foreign exchange management policy was to hedge via forward contract purchase between 75%
and 100% of the material foreign exchange 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 1 April 2022, 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
76.8
1.3578

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

Maturity

6–12
months
31.4
1.3423

Maturity

6–12
months
55.7
1.3622

More than
one year
4.5
1.3389

More than
one year
26.3
1.3677

196

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALS22. 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 1 April 2022
Inventory purchases
At 2 April 2021
Inventory purchases

Balances remaining in the
cash flow hedge reserve
from hedging relationships
for which hedge accounting
is no longer applied
£m

Cash flow hedge reserve
£m

2.2

3.1

–

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

1 April 2022
USD
£m
1.1
(24.3)
(23.2)

Other
£m
5.2
(0.7)
4.5

2 April 2021
USD
£m
–
(35.1)
(35.1)

Other
£m
14.1
(1.6)
12.5

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

2022
Increase/
(decrease) in
equity
£m
12.9
(10.6)

2021
Increase/
(decrease) in
equity
£m
22.0
(18.0)

A strengthening/weakening of Sterling, as indicated, against the USD at 2 April 2022 would have (decreased)/ increased 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
reasonably 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 relate 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 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 £nil
(2021: £0.8m).

Interest rate movements on deposits, lease liabilities, 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. The Group
was in a net cash position as at 1 April 2022 (2021: net cash).

197

halfords.annualreport2022.comOUR FINANCIALSNotes to the Financial Statements

22. Financial Instruments and Related Disclosures continued
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.

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 the 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 credit rating 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 Treasury reviews credit exposure on a
daily basis.

The risk is measured through review of forecast liquidity each month by the Head of 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 leases liabilities are disclosed in Note 14. All trade and other payables are due within one year.

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 1 April 2022 (Prior year: 2 April 2021).

Due less than one year
Due between one and two years
Contractual cash flows
Fair value of derivatives

2022

2021

Receivables
£m
130.6
12.2
142.8
4.2

Payables
£m
13.0
3.8
16.8
(0.5)

Receivables
£m
33.3
7.2
40.5
0.6

Payables
£m
(151.7)
(18.8)
(170.5)
(6.3)

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

23. Capital and Reserves

Ordinary shares of 1p each:
Allotted, called up and fully paid

2022
Number of
shares
218,928,736

2021
Number of
shares
199,116,632

2022
£’000
2,189

2021
£’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.

The parent company issued 19,812,104 new ordinary shares with a par value of 1p per share on 2 December 2021.

Proceeds from the share issue recognised within Share Premium totalled £61.4m (2021: £nil), net of transaction costs of £1.8m (2021: £nil).
Total Share Premium at 1 April 2022 was £212.4m (2021: £151.0m).

In total the Company received proceeds of £1.4m (2021: £nil) from the exercise of share options. During the year, the Company purchased
£3.0m (2021: £nil) of its own shares through the employee benefit trust.

Investment in Own Shares
At 1 April 2022, the Company held in Trust 1,460,702 (2021: 1,637,101) of its own shares with a nominal value of £14,607 (2021: £16,371).
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 1 April 2022 was £3.8m (2021: £6.1m). In the current period, 1,036,147 (2021: nil) were repurchased and
transferred into the Trust, with 1,208,087 (2021: nil) reissued on exercise of share options.

198

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALS23. Capital and Reserves continued
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 £7.8m (2021: £6.4m).

1. Halfords Company Share Option Scheme (“CSOS”)
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 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.

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 (“PSP”)
The introduction of a 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 invest in proportion to the vesting of the original award shares. The shares awarded under the PSP in 2018, 2019 and 2020 earned
a final dividend of 5p per share and were reinvested at a cost of £3.11 per share. Shares awarded in 2018, 2019, 2020 and 2021 earned
an interim dividend of 3p per share and were reinvested at a cost of £3.44 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 and 2019 schemes the PSP performance criteria is weighted 50% towards Group EPS growth,
25% towards Group revenue growth and 25% towards Group Free Cash Flow.

199

halfords.annualreport2022.comOUR FINANCIALSNotes to the Financial Statements

24. Share based payments continued
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. 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. The 2021 PSP scheme performance
criteria was weighted 50% towards Group EPS growth, 20% towards Group services-related sales and 30% towards total shareholder
return.

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 and 2021 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”) a portion 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 had two different performance period end dates: 29 March 2019 and 3 April 2020.

Nil cost options were granted, which were exerciseable and 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.

For the period ended
1 April 2022
Outstanding at start of year
Granted
Shares representing
dividends reinvested
Forfeited
Exercised
Lapsed
Outstanding at end of year
Exercisable at end of year
Exercise price range (£)
Weighted average remaining
contractual life (years)

For the period ended
2 April 2021
Outstanding at start of year
Granted
Shares representing
dividends reinvested
Forfeited
Exercised
Lapsed
Outstanding at end of year
Exercisable at end of year
Exercise price range (£)
Weighted average remaining
contractual life (years)

CSOS

MSP

SAYE

PSP

RSP–SMP

Number
(‘000)
690
–

WAEP
(£)
3.71
–

Number
(‘000)
1,677
596

WAEP
(£)
1.95
2.92

Number
(‘000)
7,247
630

WAEP
(£)
1.45
1.79

Number
(‘000)
5,248
1,644

WAEP
(£)
–
–

Number
(‘000)
–
–

WAEP
(£)
–
–

–
–
(156)
(152)
382
–
–

–
–
3.71
3.71
3.71
–
3.71

–
–
(227)
(299)
1,747
–
–

–
–
2.66
1.96
2.28
–
–

–
–
1.51
(288)
2.10
(320)
1.50
(790)
1.44
6,479
–
–
– 1.77–2.78

112
(193)
(505)
–
6,306
–
–

–
–
–
–
–
–
–

–

1.3

–

8.3

–

1.8

–

8.2

–
–
–
–
–
–

–

–
–
–
–
–
–
–

–

CSOS

MSP

SAYE

PSP

RSP–SMP

Number
(‘000)
728

WAEP
(£)
3.71

Number
(‘000)
1,398
567

WAEP
(£)
1.94
2.25

Number
(‘000)
2,958
6,378

WAEP
(£)
2.00
1.55

Number
(‘000)
4,237
1,879

WAEP
(£)
–
–

Number
(‘000)
57

WAEP
(£)
–

(38)
690
–

3.71
3.71

3.07–5.43

2.3

(149)
(139)
1,677
–

2.78
2.25
1.95

–

8.5

(96)
(51)
(1,942)
7,247
–

1.63
2.48
1.89
1.45

(806)
(62)

5,248
–

1.77–2.78

–
–
–
–
–

–

(57)

–
–

2.6

1.8

–

200

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALS24. Share based payments continued
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 1 April 2022
MSP
2.92
–
61.84%
10
2.75
–
–
33%

SAYE
2.99
2.99
61.19%
3
3
0.20%
–
44%

PSP
2.92
–
65.12%
3
3
–
–
–

52 weeks to 2 April 2021

MSP
2.43
–
59.14%
10
3.0
–
2.63%
33%

SAYE
1.55
1.07
53.02%
3
3.5
–
3.99%
38%

PSP
2.43
–
64.22%
3
2.47
–
0%
21%

2.92

1.79

1.72

2.25

0.60

2.43

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

2022
£m
0.5

2021
£m
0.2

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 £6.7m (2021: £5.8m).

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 1 April 2022 amounted to £1.5m (2021: £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.

201

halfords.annualreport2022.comOUR FINANCIALSNotes to the Financial Statements

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 203 to 209.

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 of Halfords Group plc are included in the Directors’ Remuneration Report on pages 130 to 149. Key management
compensation is disclosed in Note 4.

Directors of the Company control 0.27% 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
During the preparation of the financial statements, a mapping error was identified relating to the reduction in the Cycle to Work contract
liability in respect of expected breakage. This reduction in the liability had in previous years been mapped to Prepayments and Accrued
Income in the financial statements rather than being mapped to the Cycle to Work liability in Accruals and Deferred Income.

£12.0m was incorrectly included in Prepayments and Accrued Income as at the prior period end of 2 April 2021. The error at the period
end of 3 April 2020 is £8.2m.

To correct for this error, in the Consolidated Statement of Financial Position, Trade and other receivables at 2 April 2021 have been reduced
by £12.0m with a corresponding adjustment to Trade and other payables. Within net cash from operating activities in the Consolidated
Statement of Cash Flows, Increase in trade and other receivables has increased by £3.8m with a corresponding adjustment to Increase in
trade and other payables.

In correcting this error, there is no impact on the Consolidated Income Statement or Net Assets.

31. Post Balance Sheet Events
Post the balance sheet year end Halfords Group have acquired APT Tyre Distributors Limited on 6 April 2022 this was not a material
transaction.

202

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALSCompany Balance Sheet

Fixed assets
Investments
Current assets
Debtors falling due within one year
Cash and cash equivalents

Creditors: amounts falling due within one year
Net current liabilities
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

5
6

9
9
9
9
9

1 April
2022
£m

2 April
2021
£m

811.4

803.6

68.5
3.6
72.1
(354.9)
(282.8)
–
528.6

2.2
212.4
(11.6)
0.3
325.3
528.6

2.1
5.1
7.2
(606.7)
(599.5)
–
204.1

2.0
151.0
(10.0)
0.3
60.8
204.1

The notes on pages 205 to 209 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 205.

The Company made a profit before dividends paid for the period of £273.2m (52-week period to 2 April 2021: £0.6m). The profit for the
period reflected the receipt of a dividend on the liquidation of Halfords Holdings (2006) Limited.

The financial statements on pages 203 to 209 were approved by the Board of Directors on 15 June 2022 and were signed on its behalf by:

Loraine Woodhouse
Chief Financial Officer

Company number: 04457314

203

halfords.annualreport2022.comOUR FINANCIALSCompany Statement of Changes in
Shareholders’ Equity

At 3 April 2020
Profit for the period
Share options exercised
Share based payments
Dividends paid
At 2 April 2021
Profit for the period
Issue of new shares (net of share issue costs)
Acquisition of Treasury Shares
Share options exercised
Share based payments
Dividends paid
At 1 April 2022

Share Capital
£m
2.0
–
–
–
–
2.0
–
0.2
–
–
–
–
2.2

Share
Premium
£m
151.0
–
–
–
–
151.0
–
61.4
–
–
–
–
212.4

Investment
in own
shares
£m
(10.0)
–
–
–
–
(10.0)
–
–
(3.0)
1.4
–
–
(11.6)

Capital
redemption
£m
0.3
–
–
–
–
0.3
–
–
–
–
–
–
0.3

Retained
Earnings
£m
53.8
0.6
–
6.4
–
60.8
273.2
–
–
–
7.8
(16.5)
325.3

Total
£m
197.1
0.6
–
6.4
–
204.1
273.2
61.6
(3.0)
1.4
7.8
(16.5)
528.6

204

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALSAccounting 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 1 April 2022, whilst the comparative period covered the 52 weeks to 2 April 2021.
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 78, 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 the UK adopted international financial
reporting standards 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 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 original cost of the investments. Provision is made against cost where, in the
opinion of the Directors, the value of the investments has been impaired.

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.

205

halfords.annualreport2022.comOUR FINANCIALSNotes to the Financial Statements

1. Profit and Loss Account
The Company made a profit before dividends paid for the 52 week period to 1 April 2022 of £273.2m (52 week period to 2 April 2021:
£0.6m profit). The profit for the period reflected the receipt of a dividend on the liquidation of Halfords Holdings (2006) Limited of £273.0m.
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 130 to 149, which forms part of the audited information.

4. Investments

Shares in Group undertaking
Cost
As at 2 April 2021
Additions – share-based payments
At 1 April 2022

£m

803.6
7.8
811.4

The investments represent shares in the following subsidiary undertaking as at 1 April 2022 and the fair value of share-based
compensation plans that are awarded to employees of the Company’s subsidiary undertakings.

Management have conducted an impairment review which has been undertaken on the Group’s Retail and Car servicing cash-generating
units of which the Company’s investment form part. The results of this review are disclosed in note 11, including a sensitivity analysis.
In this review, the combined value in use as at 1 April 2022 exceeds the investments held in subsidiary undertakings of £811.4m (FY21:
£803.6m), and therefore management have concluded that under IAS36, no impairment has been identified with regard to the Company’s
investments in subsidiaries.

Halfords Group Holdings Limited

Incorporated
in
Great Britain1

Ordinary
shares
percentage
owned %

Principal activities
100 Intermediate holding company

1. Registered in England and Wales. Registered office: Icknield St Dr, Washford Ln, Redditch B98 0DE

In the opinion of the Directors, the recoverable amount of the investments in the subsidiary undertaking is not less than the amount
shown above.

206

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALS4. Investments continued
The related undertakings of the Company at 1 April 2022 are as follows:

Principal activity

Intermediate holding company
In Liquidation
In Liquidation
In Liquidation
Retailing of auto parts, accessories, cycles and cycle accessories
In Liquidation
In Liquidation
In Liquidation
Car servicing
In Liquidation
Dormant
Dormant
Dormant
Dormant
Car servicing
In Liquidation
In Liquidation
Non-trading
Non-trading
Dormant
Intermediate holding company
Retailing of cycles and cycle accessories
Dormant
Non-trading
Non-trading
Dormant
Dormant
Car servicing
Dormant
Dormant
Software as a Service Provider

% Ownership
of ordinary
equity shares
Subsidiary undertaking
Subsidiaries registered in England & Wales, with a registered address of: Icknield Street Drive, Redditch, Worcestershire B98 0DE
100
Halfords Group Holdings Limited
100
Halfords Holdings (2006) Limited*
100
Halfords Holdings Limited
100
Halfords Finance Limited*
100
Halfords Limited*
100
Halfords Payment Services Limited*
100
Halfords Autocentres Holdings Limited*
100
Halfords Autocentres Funding Limited*
100
Halfords Autocentres Limited*
100
Halfords Autocentres Acquisitions Limited*
100
NW Autocentres Limited*
100
Halfords Autocentres Developments Limited*
100
Stop N’ Steer Limited*
100
Halfords Vehicle Management Limited*
100
The Universal Tyre Company (Deptford) Limited*
100
G W Autoserve (Ipswich) Limited*
100
G W Commercial Tyres Limited*
100
Boardman Bikes Limited*
100
Boardman International Limited*
100
Cycle Republic Limited*
100
Performance Cycling Holdings Limited*
100
Performance Cycling Limited*
100
Wheelies Direct Limited*
100
Tredz Limited*
100
Giant (Wales) Limited*
100
National Tyre and Autofit Limited*
100
Tyre and Autofit Limited*
100
National Tyre Service Limited*
100
The Marsham Tyre Company Limited*
100
W. Briggs & Co Limited*
Halfords Software Services Division Limited*
100
Subsidiaries registered in Scotland, with a registered address of: The Ca’D’Oro, 45 Gordon Street, Glasgow, Scotland, G1 3PE
McConechy's Tyres Services Holdings Limited*
McConechy's Tyres Services Limited*
Strathclyde Tyre Services Limited*
Axle Group Holdings Limited*
Axle Group Limited*
Viking International Limited*
Step Grades Motor Accessories Limited*
Birkenshaw Tyre Company Limited*
Constant Price Monitor Limited*
Birkenshaw Distributors Limited*
Acorn (Paisley) Limited*
Subsidiary registered in the Republic of Ireland, with a registered address of: c/o DWF Dublin, Unit 2, The Park, Dublin D18 KP73
Halfords (Ireland) Limited*
Subsidiary registered in Delaware USA, with a registered address of: c/o Corporation Service Company, 251 Little Falls Drive,
Wilmington, DE 19808
Halfords Software Services Division LLC*
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*

Intermediate holding company
Car servicing
Dormant
Intermediate holding company
Intermediate holding company
Dormant
Car servicing
Dormant
Car servicing
Car servicing
Dormant

100
100
100
100
100
100
100
100
100
100
100

Software as a Service Provider

E-Commerce

Dormant

0.03

100

* 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, National Tyre Service Limited, Stepgrade Motor
Accessories Limited, Halfords Software Services Division Limited, Halfords Software Services Division LLC, Constant Price Monitor
Limited, Birkenshaw Distributors Limited, and ULM Services Limited.

207

halfords.annualreport2022.comOUR FINANCIALSNotes to the Financial Statements

5. Debtors

Falling due within one year:
Prepayments
Amounts owed by Group undertakings

2022
£m

1.5
67.0
68.5

2021
£m

–
2.1
2.1

Amounts owed by Group undertakings are subject to interest. At 1 April 2022, the amounts bear interest at a rate of 2.48% (2021: 1.31%).

The increase in Amounts owed by Group undertakings in the period relates to a loan of amounts raised through the share issue in the
period (Note 9), to Halfords Autocentres Limited to fund the acquisition of the Axle Group.

6. Cash and Cash Equivalents

Falling due within one year:
Cash at bank and in hand

2022
£m

3.6
3.6

2021
£m

5.1
5.1

£3.5m (2021: £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)

2022
£m

–
354.9
–
354.9

–
–

2021
£m

16.5
589.9
0.3
606.7

–
–

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 date.

8. Borrowings

Current
Unsecured bank overdraft
Non-current
Expiring between two and five years

2022
£m

–

–
–

2021
£m

16.5

–
16.5

The above borrowings are stated net of unamortised issue costs of £1.5m (2021: £1.6m), which is included within prepayments.

Details of the Company’s borrowing facilities are in Note 18 of the Group’s financial statements.

208

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022OUR FINANCIALS9. Equity Share Capital

Ordinary shares of 1p each:
Allotted, called up and fully paid

2022
Number of
shares
218,928,736

2021
Number of
shares
199,116,632

2022
£000
2,189

2021
£000
1,991

The Company issued 19,812,104 new ordinary shares with a par value of 1p per share on 2 December 2021.

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 of
the Group’s financial statements.

Investment in Own Shares
At 1 April 2022, the Company held in Trust 1,460,702 (2021: 1,637,101) of its own shares with a nominal value of £14,607 (2021: £16,371).
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 1 April 2022 was £3.8m (2021: £6.1m). In the current period 1,036,147 (2021: nil) were repurchased and transferred
into the Trust, with 1,208,087 (2021: nil) reissued on exercise of share options.

10. Share-based Payments
Share-based payments during the period were £7.8m (2021: £6.4m), bringing the balance at 1 April 2022 to £36.5m (2021: £28.5m).

11. Profits Available For Distribution
Distributable reserves in the Company Balance Sheet total £289.0m at 1 April 2022.

12. Reserves
The Company settled dividends of £16.5m (2021: £nil) 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 1 April 2022 amounted to £1.5m (2021: £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.

209

halfords.annualreport2022.comOUR FINANCIALSn
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Contents

Five-Year Record
Glossary of Alternative
Performance Measures
Company Information

212

213
214

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 Tax2
Non-recurring operating expenses
Non-recurring finance costs
Profit before tax
Taxation
Taxation on non-underlying items
Profit attributable to equity shareholders
Basic earnings per share
Basic earnings per share before non-underlying items
Weighted average number of shares

52 weeks
to
30 March
20181
(audited)
£m
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

52 weeks
to
29 March
20191
(audited)
£m
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

52 weeks
to
27 March
20202
£m
1,142.4
(558.4)
584.0
(513.5)
70.5
(34.2)
36.3
(13.6)
56.9
(34.2)
–
22.7
(6.9)
5.0
20.8
10.6p
25.4p
197.0m

52 weeks
to
2 April
2021
(audited)
£m
1,292.3
(636.0)
656.3
(541.8)
114.5
(35.0)
79.5
(15.0)
99.5
(35.0)
–
64.5
(17.4)
6.1
53.2
27.1p
41.7p
197.1m

52 weeks
to
1 April
2022
(audited)
£m
1,369.6
(647.9)
721.7
(620.6)
101.1
6.8
107.9
(11.3)
89.8
6.8
–
96.6
(17.2)
(1.7)
77.7
37.9p
35.5p
204.7m

1. All FY18 and FY19 financials are stated on a pre-IFRS-16 basis

2. The statutory 53-week period to 3 April 2020 comprises results that are non-comparable to the 52 weeks periods reported in other years. To provide a

more meaningful comparison, the above table includes the unaudited pro forma 52 weeks to 27 March 2020

212

Halfords Group plc Annual Report and Accounts for the period ended 1 April 2022SHAREHOLDER INFORMATIONGlossary 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
164. 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. 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.

Cash & cash equivalents
Borrowings – current
Borrowings – non-current
Net Cash/(Debt)*

FY22
£m
46.3
(74.7)
(316.5)
(344.9)

FY21
£m
67.2
(63.6)
(280.9)
(277.3)

FY20
£m
115.5
(83.4)
(511.9)
(479.8)

* The statutory 53-week period to 3 April 2020 comprises reported

results that are non-comparable to the 52-week period reported in the
current and prior period.

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.

Underlying EBIT
Depreciation,
amortisation &
impairment
Underlying EBITDA
Non-underlying
operating expenses
EBITDA
Share-based payment
transactions
Loss on disposal
of property, plant &
equipment
Working capital
movements
Provisions movement
and other
Adjusted Operating
Cash Flow*

FY22
£m
101.1

106.0
207.1

6.8
213.9

FY20
(53 weeks)
£m
67.2

FY21
£m
114.5

118.5
233.0

(35.0)
198.0

118.7
185.9

(34.2)
151.7

7.8

6.4

1.0

(5.2)

1.7

2.8

(70.0)

49.0

52.0

(14.7)

25.7

(3.1)

131.8

280.8

204.4

* The statutory 53-week period to 3 April 2020 comprises reported

results that are non-comparable to the 52-week period reported in the
current and prior period.

8. Free Cash Flow is defined as Adjusted Operating Cash Flow
(as defined above) less capital expenditure, net finance
costs, taxation, exchange movements, lease payments, and
arrangement fees on loans; as reconciled below.

Adjusted Operating
Cash Flow

Capital expenditure
Net finance costs
Taxation
Sales and Leaseback
Exchange movement
Lease Payments
Adjusted Operating
Cash Flow*

FY22
£m

FY20
(53 weeks)
£m

FY21
£m

131.8

280.8

193.1

(47.3)
(10.6)
(12.2)
7.5
0.9
(85.0)

(27.5)
(15.5)
(10.8)
–
2.1
(95.9)

(33.6)
(13.2)
(16.3)
–
(2.0)
(87.7)

(14.9)

133.2

40.3

9. Group Services revenue was £531m during the period, the

remainder £838.6m relates to Product only revenue.

213

halfords.annualreport2022.comSHAREHOLDER INFORMATION