Halfords Group Annual Report 2023

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FY2023 Annual Report · Halfords Group

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Halfords Group plc
Annual Report and Accounts
for the period ended 31 March 2023

To Inspire
and Support
a Lifetime of
motoring and
cycling.

Contents

Group Overview

Group Highlights
Our Year in Review
Our Purpose Framework
Our Culture
Group at a Glance
Our Business Today
Our Journey

Strategic Report

Chair’s Statement
Chief Executive Officer’s Statement
Our Marketplace
Our Business Model
Our Engagement with Stakeholders
Key Performance Indicators
Our Strategy
ESG Performance Overview
ESG Progress in FY23
Task Force on Climate-related
Financial Disclosures (“TCFD”)
Chief Financial Officer’s Statement
Risk Management
Our Principal Risks and Uncertainties
Going Concern and Viability Statement

Our Governance

Governance at a glance
Board of Directors
– Executive Team
Directors’ Report
Corporate Governance Report
Nomination Committee Report
ESG Committee Report
Audit Committee Report
Remuneration Committee Report
– Directors’ Remuneration Policy
– 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

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Welcome to our
2023 Annual Report

Halfords is the UK’s
leading provider of
motoring and cycling
products and services.

Halfords has a clear strategy
that we are delivering...

We have evolved into a consumer and B2B services focused business, with a greater
emphasis on motoring, on a journey towards generating higher and more sustainable
financial returns.

Our unique market position and data-driven approach means we can offer customers
products and services for all their motoring and cycling needs under the Halfords
brand. We have proven that our strategic direction is right and with our highly skilled
colleagues and strong culture, we are well positioned to deliver for all our stakeholders.

Online Annual Report
Read our Annual Report online, including a link
to the full Remuneration Policy:
halfords.annualreport2023.com

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

Capital Markets Day
See the latest investor presentation on our
corporate website:
www.halfordscompany.com

Our Integrated Report
This is our ninth 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.

The Group has two reportable segments, Retail and Car Servicing, which are the Group’s strategic business
units. 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 and services through retail stores
and online. The operations of the Car Servicing reporting segment comprise car servicing and repair performed
from garages and vans. These are the definitions which are used within the financial parts of our Annual Report.
Elsewhere, this segment is referred to as Autocentres.

Group
Highlights
Financial

Revenue

Underlying profit
before tax

Profit before tax

Dividend per
ordinary share

Underlying basic
earnings per share

Basic earnings
per share

+15.3%

-42.7%

-55.0%

+11.1%

-49.3%

-58.8%

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Strategic

Operational

Sustainability

• Following the success of our ‘Fusion’
towns in Colchester and Halifax, this
year we rolled out the most capital
efficient parts of this programme to
50 towns in our estate. In these towns
we have upgraded the retail car park
service provision. In addition, we have
also empowered more of our colleagues
with the tools to sell full solutions to our
customers, every time.

• Since the launch of our Motoring Loyalty
Club in March 2022, we have now signed
up over 1.7 million members, significantly
in excess of our initial target. This has
driven new customers across the Group,
as well as encouraging customers to
cross shop across both our retail and
garage businesses.

• In April 2023, we held a Capital Markets

Day for analysts and institutional
investors. Here we outlined the Group’s
plan to leverage the platform that
has been built since 2018 and deliver
improved revenue, profit and return on
capital employed over the mid-term and
mid-to-long term.

• In October 2022, we acquired Lodge
Tyre, supporting our strategic aim of
becoming a motoring services-focused
business. The acquisition has resulted
in Halfords becoming the UK’s largest
commercial tyre service provider and
has given our commercial fleet services
business much greater nationwide
coverage.

• Avayler, our unique industry leading
proprietary software business, has
continued to develop rapidly, establishing
an external international client base.
The growth of Avayler supports our
strategy to grow our B2B offering, with
the opportunity to deliver more resilient
revenue at a high operating margin.

• Last year we invested in the Ecovadis
platform to support the collection of
accurate data from our suppliers. We
have made significant progress this year
in engaging with our top suppliers and
capturing carbon data, a crucial first
step on our journey to net zero. We have
worked with suppliers and have managed
to obtain primary carbon data for 79%
of our spend with suppliers, giving us
a much better insight into our Scope 3
emissions.

• The Bike Xchange programme, launched

in late FY22, has seen customers
trade-in over 11,000 bikes in exchange
for Halfords vouchers. This scheme
puts Halfords into the rapidly growing
second-hand market for bicycles,
promotes a circular economy and
helps keep products in use for longer.
The success of this scheme during the
year has resulted in it being expanded
to cover kids’ bikes. In addition, Bike
Xchange has shown the value of second-
hand markets and this year we have
also started selling refurbished E-bikes
online, reducing the entry price point for
customers to the E-bike market.

halfords.annualreport2023.com
Our Purpose
Framework

The successful implementation of our strategy is critical to the delivery of the
Group’s purpose and is underpinned by the values and behaviours that shape
our culture and the way that we conduct our business.

Our
Purpose
Inspire and Support
a Lifetime of motoring
and cycling

Our Vision
The super-specialist in motoring and
cycling, trusted by the nation

Our Mission
Make motoring easier, safer and more enjoyable for everyone
Get people cycling, more frequently

Inspire

Inspire our customers
with a differentiated and
super-specialist offer.

Our Strategic Priorities

Support

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

Lifetime

Enable a Lifetime of motoring
and cycling.

Read more on page 88.

halfords.annualreport2023.com

Board of
Directors

Keith Williams N
Chair

Graham Stapleton

Chief Executive Officer

Jo Hartley

Chief Financial Officer

Helen Jones A E N R EV

Jill Caseberry A N R E

Tom Singer A N R E

Senior Independent Director

Independent Non-Executive Director

Current role
Appointed Chair of the Company and of the
Nomination Committee on 24 July 2018.

Current role
Graham was appointed Chief Executive
Officer (“CEO”) on 15 January 2018.

Current role
Chief Financial Officer (“CFO”) since
16 June 2022.

Additional roles held
Keith is the Non-Executive Chair of Royal
Mail Group (previously interim Executive
Chair). Keith is a qualified Chartered
Accountant.

Past roles
Keith was formerly a Non-Executive
Director and Deputy Chair of John Lewis,
a Non-Executive Director of Aviva plc, and
Chief Executive Officer and then Executive
Chair of British Airways, having previously
been at Boots, Reckitt and Colman,
and Apple Computer Inc. Keith was the
independent Chair of the government-
supported Rail Review.

Key strengths
Keith brings extensive leadership and plc
board experience. He is a highly regarded
business leader with a proven record in
retail and deep experience in relevant areas
such as customer service and digital.

Additional roles held
None

Past roles
Prior to joining Halfords, Jo was the
Group CFO 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.

Key strengths
Jo has extensive experience across all
finance functions gained within consumer
facing businesses.

Past roles
Previously, Graham was Chief Executive
Officer (“CEO”) of Dixons Carphone plc’s
software business, Honeybee. Prior to
that he was CEO of Dixons Carphone’s
Connected World Services Division from
2015 to 2017 and CEO of Carphone
Warehouse UK & Ireland from 2013 to
2015. Graham’s early career covered senior
leadership roles in Kingfisher plc from 2001
to 2005 and Marks and Spencer plc from
1994 to 2001, prior to which Graham set up
and ran his own business for several years.
Graham was a Trustee of the Make-A-Wish
charity. Graham was also previously a Non-
Executive Director of The Magic Bean Co.
Limited and a Non-Executive Director of
Loyalty Angels Limited (known as Bink)

Key strengths
Graham is an outstanding business leader
and brings extensive skills and experience
to the plc Board.

Committee Membership

A Audit Committee E ESG Committee EV Employee Voice Director N Nomination Committee R Remuneration Committee

Current role

Non-Executive Director since 1 March

Non-Executive Director and Remuneration

Non-Executive Director since 16 September

2014 and Senior Independent Director

Committee Chair since 1 March 2019.

2020, and Chair of the Audit Committee

from 15 September 2020; Chair of the

Environmental, Social and Governance

(“ESG”) Committee since 7 December 2015

and Employee Voice Director since

1 May 2019.

Additional roles held

since 1 January 2021.

Jill is currently a Non-Executive Director,

Additional roles held

Remuneration Committee Chair and

Tom is a Non-executive Director of Mukuru

member of the Audit and Nomination

and a Non-Executive Director and Audit

Committees of Bellway plc; a Non-

Committee Chair of Vue International

Additional roles held

Executive Director and member of the

Group.

Helen is a Non-Executive Director and

Remuneration and ESG Committees of C&C

Chair of the Remuneration Committee and

Group plc; the Senior Independent Director,

Past roles

a member of the Audit Committee of Fuller,

Remuneration Committee Chair and a

Smith & Turner plc and Virgin Wines UK

member of the Nomination Committees of

plc; a Non-Executive Director and Chair of

Bakkavor Group plc; Jill is also a Senior

the Remuneration Committee of Premier

Independent Director, Remuneration

Foods plc; and a Director of Hamsard 3145

Committee Chair and member of the Audit

Limited. Helen is a Board member of the

and Nomination Committees of St Austell

Toast Ale charity.

Past roles

Brewery.

Past roles

Tom was the Senior Independent Director

and Chair of the Audit and Remuneration

Committees at DP Eurasia NV, Chair of

the Audit Committee at Liberty Living and

a Non-Executive Director at Mediclinic

International plc. Previously, he served as

CFO of InterContinental Hotels Group plc,

Group Finance Director of British United

Provident Association (“BUPA”), CFO and

Previously, Helen was a member of

Previously, Jill was Non-Executive Director,

Chief Operating Officer of William Hill plc

the Supervisory Board and the Audit

Remuneration Committee Chair and a

and Finance Director of Moss Bros plc,

Committee for Vapiano S.E. and a member

member of the Audit and Nomination

having started his career in professional

of the Supervisory Board of Directors of

Committees of Northgate plc. During her

services and spending a total of 12 years at

Ben & Jerry’s. Prior to that Helen was the

Executive career Jill gained extensive

Price Waterhouse and McKinsey.

CEO of the Zizzi Restaurants group and

sales, marketing and general management

was also responsible for successfully

experience across a number of blue chip

launching the Ben & Jerry’s brand in the UK

companies, including Mars, PepsiCo and

and Europe. Helen previously held a senior

Premier Foods. She also founded a soft

Key strengths

Tom brings extensive experience of strategy

development, corporate governance and

numerous finance disciplines.

executive role at Caffé Nero.

Key strengths

Helen brings valuable and relevant

operations, marketing and branding

experience in consumer-focused

businesses.

drink company and established a sales

and marketing consultancy. She also

was previously the Designated Workforce

Engagement Non-Executive Director of

Bakkavor Group plc.

Key strengths

Jill brings extensive leadership experience

from senior sales and marketing roles in

consumer goods businesses.

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEKeith Williams N

Chair

Graham Stapleton

Chief Executive Officer

Jo Hartley

Chief Financial Officer

Helen Jones A E N R EV
Senior Independent Director

Jill Caseberry A N R E
Independent Non-Executive Director

Tom Singer A N R E
Independent Non-Executive Director

Current role

Appointed Chair of the Company and of the

Graham was appointed Chief Executive

Chief Financial Officer (“CFO”) since

Nomination Committee on 24 July 2018.

Officer (“CEO”) on 15 January 2018.

16 June 2022.

Additional roles held

Keith is the Non-Executive Chair of Royal

None

Mail Group (previously interim Executive

Chair). Keith is a qualified Chartered

Past roles

None

Past roles

Accountant.

Past roles

Previously, Graham was Chief Executive

Prior to joining Halfords, Jo was the

Officer (“CEO”) of Dixons Carphone plc’s

Group CFO for Virgin Active for over six

software business, Honeybee. Prior to

years. Before that, Jo worked at Tesco

Keith was formerly a Non-Executive

that he was CEO of Dixons Carphone’s

plc in a number of finance roles in the UK

Director and Deputy Chair of John Lewis,

Connected World Services Division from

and internationally, having qualified as a

a Non-Executive Director of Aviva plc, and

2015 to 2017 and CEO of Carphone

chartered accountant at Deloitte UK.

Chief Executive Officer and then Executive

Warehouse UK & Ireland from 2013 to

Chair of British Airways, having previously

2015. Graham’s early career covered senior

been at Boots, Reckitt and Colman,

leadership roles in Kingfisher plc from 2001

and Apple Computer Inc. Keith was the

to 2005 and Marks and Spencer plc from

independent Chair of the government-

1994 to 2001, prior to which Graham set up

Key strengths

Jo has extensive experience across all

finance functions gained within consumer

facing businesses.

supported Rail Review.

Key strengths

Keith brings extensive leadership and plc

board experience. He is a highly regarded

business leader with a proven record in

retail and deep experience in relevant areas

and ran his own business for several years.

Graham was a Trustee of the Make-A-Wish

charity. Graham was also previously a Non-

Executive Director of The Magic Bean Co.

Limited and a Non-Executive Director of

Loyalty Angels Limited (known as Bink)

such as customer service and digital.

Key strengths

Graham is an outstanding business leader

and brings extensive skills and experience

to the plc Board.

Current role
Non-Executive Director since 1 March
2014 and Senior Independent Director
from 15 September 2020; Chair of the
Environmental, Social and Governance
(“ESG”) Committee since 7 December 2015
and Employee Voice Director since
1 May 2019.

Additional roles held
Helen is a Non-Executive Director and
Chair of the Remuneration Committee and
a member of the Audit Committee of Fuller,
Smith & Turner plc and Virgin Wines UK
plc; a Non-Executive Director and Chair of
the Remuneration Committee of Premier
Foods plc; and a Director of Hamsard 3145
Limited. Helen is a Board member of the
Toast Ale charity.

Past roles
Previously, Helen was a member of
the Supervisory Board and the Audit
Committee for Vapiano S.E. and a member
of the Supervisory Board of Directors of
Ben & Jerry’s. Prior to that Helen was the
CEO of the Zizzi Restaurants group and
was also responsible for successfully
launching the Ben & Jerry’s brand in the UK
and Europe. Helen previously held a senior
executive role at Caffé Nero.

Key strengths
Helen brings valuable and relevant
operations, marketing and branding
experience in consumer-focused
businesses.

Current role
Non-Executive Director and Remuneration
Committee Chair since 1 March 2019.

Additional roles held
Jill is currently a Non-Executive Director,
Remuneration Committee Chair and
member of the Audit and Nomination
Committees of Bellway plc; a Non-
Executive Director and member of the
Remuneration and ESG Committees of C&C
Group plc; the Senior Independent Director,
Remuneration Committee Chair and a
member of the Nomination Committees of
Bakkavor Group plc; Jill is also a Senior
Independent Director, Remuneration
Committee Chair and member of the Audit
and Nomination Committees of St Austell
Brewery.

Past roles
Previously, Jill was Non-Executive Director,
Remuneration Committee Chair and a
member of the Audit and Nomination
Committees of Northgate plc. During her
Executive career Jill gained extensive
sales, marketing and general management
experience across a number of blue chip
companies, including Mars, PepsiCo and
Premier Foods. She also founded a soft
drink company and established a sales
and marketing consultancy. She also
was previously the Designated Workforce
Engagement Non-Executive Director of
Bakkavor Group plc.

Key strengths
Jill brings extensive leadership experience
from senior sales and marketing roles in
consumer goods businesses.

Current role
Non-Executive Director since 16 September
2020, and Chair of the Audit Committee
since 1 January 2021.

Additional roles held
Tom is a Non-executive Director of Mukuru
and a Non-Executive Director and Audit
Committee Chair of Vue International
Group.

Past roles
Tom was the Senior Independent Director
and Chair of the Audit and Remuneration
Committees at DP Eurasia NV, Chair of
the Audit Committee at Liberty Living and
a Non-Executive Director at Mediclinic
International plc. Previously, he served as
CFO of InterContinental Hotels Group plc,
Group Finance Director of British United
Provident Association (“BUPA”), CFO and
Chief Operating Officer of William Hill plc
and Finance Director of Moss Bros plc,
having started his career in professional
services and spending a total of 12 years at
Price Waterhouse and McKinsey.

Key strengths
Tom brings extensive experience of strategy
development, corporate governance and
numerous finance disciplines.

halfords.annualreport2023.comExecutive Team

See the Executive Teams biographies
at www.halfordscompany.com/

Karen Bellairs

Paul O’Hara

Chief Customer and Commercial Officer

Chief People and Property Officer

Please see full biography on the corporate
website: www.halfordscompany.com/
about-us/our-executive-team/

Neil Holden

Rob Keates

Chief Information Officer

Chief Operating Officer

Please see full biography on the corporate
website: www.halfordscompany.com/
about-us/our-executive-team/

CASE STUDY

BOARD IN ACTION – HERE TO HELP FUND (“HHF”)

Our colleagues are our greatest asset, and
a focus on their engagement and wellbeing
is one of our key priorities. To ensure that
we support our colleagues in times of
financial hardship, we continue to offer
our Here to Help hardship fund (“HHF”)
that was set up in 2020. Colleagues from
across the Group can make an application
to the HHF for financial support. The
maximum grant available for a single or
multiple claims is £2,000.

The HHF Committee receives applications
from eligible current and former colleagues
of the Company. Applications are vetted

for validity, following which the HHF
makes a recommendation to the Trustee to
either approve or reject, depending on set
criteria.

Examples of events qualifying for
assistance:

• death of a family member;

• uninsured medical expenses caused by

severe illness or accident;

• uninsured expenses for the care of a

family member;

• loss of a family income – through death/

redundancy;

• losses to primary residence (rental
properties where the lessor is the
applicant are excluded) caused by fire,
crime, flood or other disasters; and

• insupportable indebtedness occurring
for reasons beyond the individual’s
control.

To date, the HHF has supported 618
colleagues.

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCE
halfords.annualreport2023.com

Directors’ Report

The Directors present their report and the audited financial statements of Halfords Group plc (the “Company”) together with its subsidiary
undertakings (the “Group”) for the period ended 31 March 2023.

Halfords Group plc

Registered Number
Registered Office Address
Country of Incorporation
Type

04457314
Icknield Street Drive, Washford West, Redditch, Worcestershire, B98 0DE
England and Wales
Public Limited Company

Additional Disclosure
The Company, in accordance with Section 414C of the Companies Act 2006, has chosen to provide disclosures and information to the extent
necessary to understand the Company’s development, performance and position and the impact of its activity, relating to, as a minimum:
environmental matters, the Company’s employees, social matters, respect for human rights and anti-corruption and anti-bribery matters.
These matters and cross-references to the relevant sections of this Annual Report are shown in the table below:

Topic
Appointment and removal of Directors
Anti Bribery and Corruption
Articles of Association
Auditor
Audit Committee Report
Authority to issue or purchase shares
Board of Directors
Board effectiveness and leadership: role and composition of the
Board and Committees; meeting attendance; skills and experience;
independence; diversity; induction and development; evaluation;
Directors and their other interests; and Board Committees
Branches
Charitable donations
Colleague engagement

Location
Directors’ Report
Audit Committee Report
Directors’ Report
Directors’ Report
Audit Committee Report
Directors’ Report
Directors’ Report
Corporate Governance Report

Directors’ Report
Strategic Report: ESG Performance Overview
Corporate Governance Report
Strategic Report: ESG Performance Overview
Directors’ Report
Colleagues’ involvement; training, diversity and inclusion;
Strategic Report: ESG Performance Overview
and disability
Strategic Report: ESG Performance Overview
Community
Directors’ Report
Compensation for loss of office
Directors’ Report
Creditor payment policy
Corporate Governance Report
Culture
Board of Directors
Directors’ biographies
Directors’ Report
Directors’ indemnities
Directors’ interests
Directors’ Remuneration Report
Directors’ Remuneration Report and Remuneration Policy Summary Directors’ Remuneration Report
Directors’ Responsibilities Statement
Diversity and Inclusion

Directors’ Responsibilities Statement
Directors’ Report, Corporate Governance Report and
Nomination Committee Report

Energy and Carbon Emissions
Financial instruments
Future developments of the business
Financial position of the Group, its cash flows, liquidity position
and borrowing facilities
Gender
Going concern
Governance
Important events since year-end
Independent Auditor
Internal control and risk management
Modern Slavery Statement
Nomination Committee Report
Political donations

Strategic Report: ESG Performance Overview
Note 21 to the Group Financial Statements
Chief Executive Officer’s Statement
Chief Financial Officer’s Statement

Strategic Report: ESG Performance Overview
Principal Risks and Uncertainties
Corporate Governance Report
Directors’ Report
Independent Auditor’s Report
Corporate Governance Report
Directors’ Report
Nomination Committee Report
Directors’ Report

Page
96
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98
99
122
98
90
112

99
58
106
54
97
54
54
98
99
104
90
97
148
128
153
54
112
119
61
197
22
68

54
82
100
99
156
117
98
118
98

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCETopic
Powers of the Directors
Principal activities
Re-election of Directors
Restrictions on transfer of securities
Section 172 statement

Share capital

Significant shareholders
Subsidiary and associated undertakings
Stakeholders
Statement of Corporate Governance
Strategic Report
Viability statement
Voting rights

Location
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Strategic Report
Corporate Governance Report
Directors’ Report
Note 22 to the Group Financial Statements
Directors’ Report
Note 4 to the Company Financial Statements
Corporate Governance Report
Corporate Governance Report
Strategic Report
Strategic Report
Directors’ Report

Page
96
96
96
97
34
107
97
203
97
210
32
100
20
83
97

Disclosures required under Listing Rule 9.8.4R
The Company, in accordance with Listing Rule 9.8.4C, has disclosed the information required to be included in the Annual Report under
Listing Rule 9.8.4R. This information can be found on the following pages of the Annual Report:

Topic
Statement of the amount of interest capitalised
Long-term incentive schemes
Waiver of dividends

Report
Note 15 to the Financial Statements
Directors’ Remuneration Report
Director’s Report

Page
193
128
96

No other disclosures under Listing Rule 9.8.4 are required.

Disclosures Required under Listing Rule 9.8.6
The Company, in accordance with Listing Rule 9.8.6, has included climate-related financial disclosures consistent with the Task Force on
Climate-related Financial Disclosures (“TCFD”) recommendations and recommended disclosures. This information can be found on the
following page of the Annual Report:

Topic
Risk Management: Task Force on Climate-related Financial
Disclosures (“TCFD”)

No other disclosures under Listing Rule 9.8.6 are required.

Report
Strategic Report: Principle Risks and Uncertainties

Page
76

halfords.annualreport2023.comDirectors’ Report

UK Corporate Governance Code
The Company has applied the principles
of, and complied with, the provisions of the
2018 UK Corporate Governance Code (the
“Code”) throughout the year. It has been
agreed that Helen Jones will stay in office
until the end of the AGM on 6 September
2023. The Board recognises that as it
has assessed that Helen will no longer be
regarded as independent for the purpose of
the Code, because of her extended tenure,
this has created a technical breach of the
Code’s recommendation that the majority of
the Board be independent Non-Executive
Directors. However, the Board believes
that this short-term situation is justified
to ensure that the correct candidate is
appointed to the Board in Helen’s place.

The Corporate Governance report as
set out from page 100 forms part of the
Directors Report.

Principal Activities
The principal activities of the Group are:
the retailing and provision of motoring
and cycling products and services; auto
servicing, maintenance and repairs through
garages and mobile vans; and the provision
of software as a service. The principal
activity of the Company is that of a holding
company. The Company’s registrar is Link
Group, 10th Floor, Central Square, 29
Wellington Street, Leeds, LS1 4DL.

Profits and Dividends
The Group’s results for the year are set
out in the Consolidated Income Statement
on page 166. The profit before tax was
£43.5m (2022: £96.6m) and the profit after
tax amounted to £34.0m (2022: £77.7m).
The Board proposed that a final dividend
of 7.0 pence per ordinary share be paid on
15 September 2023 to shareholders whose
names are on the register of members at the
close of business on 11 August 2023. An
interim dividend payment of 3.0 pence per
ordinary share was paid on 20 January 2023.

Computershare Trustees (Jersey) Limited,
trustee of the Halfords Employees’ Share
Trust, has waived its entitlement to dividends.

Performance Monitoring
The delivery of the Group’s strategic
objectives is monitored by the Board
through Key Performance Indicators
(“KPIs”) and periodic review of various
aspects of the Group’s operations. The
Group considers that the KPIs listed on
pages 36 to 38 are appropriate measures to
assess the delivery of the Group’s Strategy.

Directors
The following were Directors of the
Company during the period ended 31
March 2023 and at the date of this report:

• Keith Williams

• Graham Stapleton

• Jo Hartley (appointed 16 June 2022)

• Helen Jones

• Jill Caseberry

• Tom Singer

• Loraine Woodhouse

(resigned 16 June 2022)

On 20 June 2023, Tanvi Gokhale was
appointed as a non-executive director.

In accordance with the Company’s Articles
of Association and the UK Corporate
Governance Code guidelines, all those
persons holding office as a Director of
the Company on 31 March 2023 will retire
and offer themselves for re-election at the
2023 Annual General Meeting (“AGM”),
with the exception of Helen Jones. On 20
June 2023, it was announced that Helen
will retire from her position at the AGM on
6 September 2023 and Tanvi Gokhale was
appointed as a Non-Executive Director
to join the Board, the Nomination, Audit,
Remuneration and ESG Committees. Tanvi
will stand for election for the first time at the
AGM on 6 September 2023, if she is elected
she will also succeed Helen as Chair of the
ESG Committee and as the Employee Voice
Director.

The Service Agreements of the Executive
Directors and the Letters of Appointment of
the Non-Executive Directors are available
for inspection at the registered office of the
Company. A summary of these documents
is also included in the annual Directors’
Remuneration Report on pages 148 to 149.

Appointment and
Removal of a Director
A Director may be appointed by an ordinary
resolution of shareholders in a general
meeting following a recommendation by
the Nomination Committee in accordance
with its Terms of Reference, as approved
by the Board or by a member (or members)
entitled to vote at such a meeting.
Alternatively, a Director may be appointed
following retirement by rotation if the
Director chooses to seek re-election
at a general meeting. In addition, the
Directors may appoint a Director to fill a
vacancy or act as an additional Director,
provided that the individual retires at the

next Annual General Meeting and, if they
are to continue, they offer themselves for
election. A Director may be removed by the
Company in circumstances set out in the
Company’s Articles of Association or by a
special resolution of the Company.

Powers of the Directors
Subject to the Articles, the Companies Act
and any directions given by the Company
by special resolution and any relevant
statutes and regulations, the business of
the Company will be managed by the Board
who may exercise all the powers of the
Company. Specific powers relating to the
allotment and issuance of ordinary shares,
and the ability of the Company to purchase
its own securities, are also included within
the Articles, and such authorities are
submitted for approval by the shareholders
at the Annual General Meeting each year.
The authorities conferred on the Directors at
the 2022 Annual General Meeting (“AGM”),
held on 7 September 2022, will expire on
the date of the 2023 AGM.

Directors’ Interests
The Directors’ interests in, and options over,
ordinary shares in the Company are shown
in the Directors’ Remuneration Report on
pages 148 and 149.

Since the end of the financial year and
the date of this report, there have been no
changes to such interests.

In line with the requirements of the
Companies Act, Directors have a statutory
duty to avoid situations in which they have,
or may have, interests that conflict with
those of the Company unless that conflict is
first authorised by the Board.

The Company has procedures in place
for managing conflicts of interest. The
Company’s Articles of Association contain
provisions to allow the Directors to
authorise potential conflicts of interest, so
that if approved, a Director will not be in
breach of his or her duty under company
law. In line with the requirements of the
Companies Act 2006, each Director has
notified the Company of any situation in
which he or she has, or could have, a direct
or indirect interest that conflicts, or possibly
may conflict, with the interests of the
Company (a situational conflict). Directors
have a continuing duty to update any
changes to their conflicts of interest and the
register is updated accordingly.

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEDuring the year, the Whistleblowing
Policy was reviewed and approved by
the Audit Committee, and the Audit
Committee receives regular summaries of
whistleblowing contacts and resolutions.

Share Capital and
Shareholder Voting Rights
Details of the Company’s share capital and
of the rights attached to the Company’s
ordinary shares are set out in Note 22 on
page 203. All ordinary shares, including
those acquired through Company share
schemes and plans, rank equally with no
special rights.

All members who hold ordinary shares are
entitled to attend, vote and speak at the
general meetings of the Company, appoint
proxies, receive any dividends, exercise
voting rights and transfer shares without
restriction. On a show of hands at a general
meeting every member present in person,
and every duly appointed proxy, shall have
one vote for every share held, and on a
poll, every member present in person or by
proxy shall have one vote for every ordinary
share held. The Company is not aware of
any arrangements that may restrict the
transfer of shares or voting rights.

Significant Shareholders
As at 31 March 2023, the Company had
been notified under the Disclosure Guidance
and Transparency Rules (DTR5) of the
following notifiable interests representing
3% or more of the Company’s issued share
capital. The information provided below was
correct at the date of notification. These
holdings are likely to have changed since
the Company was notified.

The Directors are also aware of their duties
under Section 172 of the Companies Act
2006 and so, in making their decisions,
they consider the long-term impact
on the business as well as taking into
consideration the interests of stakeholders
such as colleagues, suppliers, customers
and the wider communities in which we
operate. More information on this can be
found on pages 34 to 35.

Directors’ Indemnities
Directors’ and Officers’ insurance has
been established for all Directors and
Officers to provide cover against their
reasonable actions on behalf of the
Company. The Directors of the Company
and the Company’s subsidiaries also
have the benefit of third-party indemnity
provisions, as defined by Section 236 of
the Companies Act 2006, pursuant to the
Company’s Articles of Association.

Colleague Engagement
One of the Group’s key strengths is
engaging colleagues in great training.

Engagement with, and feedback from, our
colleagues across the business is vital to
the Group. The Group has an established
framework of colleague communications
providing regular information on business
performance and other important and
relevant matters. For more information see
Our ESG Strategy on pages 48 to 63.

Employment Policies
The Group encourages diversity and
inclusion and, as an equal opportunities
employer, is committed to providing
equal opportunities for all colleagues and
applicants during recruitment and selection,
training and career development and
promotion.

This commitment to equality of opportunity
applies regardless of anyone’s physical
ability, sexual orientation or gender identity,
pregnancy and maternity, race, religious
beliefs, age, nationality or ethnic origin. This
is underpinned by our Group’s policies,
which ensure full and fair consideration to
employment applications from people from
diverse backgrounds, including those with
disabilities wherever suitable opportunities
exist, having regard to their particular
aptitudes and abilities. Should a colleague
become disabled, efforts are made to
ensure their continued employment with
the Group, with appropriate training as
necessary.

Further details of our Diversity Policy are
included in the Nomination Committee
Report on page 119.

The Group takes a zero-tolerance approach
to matters of discrimination, harassment
and bullying in all aspects of its business
operations. Appropriate policies and
procedures are in place for reporting and
dealing with such matters.

Colleague Training
and Development
The Group strives to meet its business
objectives by motivating and encouraging
all colleagues to be responsive to the needs
of its customers and to, continually, improve
operational performance. To achieve this,
we deliver a range of blended training and
development programmes, across the
Group, in Retail, Autocentres (including
National, McConechy’s, Lodge Tyre and
Universal) and Performance Cycling
businesses. We regard the training and
development of our colleagues as being
particularly important for our business
and also for the communities in which we
operate.

For many years we held strong relationships
with a number of apprenticeship partners
that allow us to offer personal and
professional growth. In addition, the Group
runs targeted Leadership Development
programmes and operational succession
programmes to further build capability
in skills identified to both ensure that
colleagues are successful in their chosen
roles, as well as to help colleagues identify
and develop skills that will support them to
be our future leaders.

Whistleblowing
The Group’s Whistleblowing Policy and
Procedure (the “Whistleblowing Policy”)
enables colleagues to report concerns
on matters affecting the Group or their
employment, without fear of recrimination.
As part of our commitment to ensuring a
culture of honesty and integrity, in FY22, we
partnered with SeeHearSpeakUp in order
to launch externally operated reporting
channels, including a new web-based
channel. Posters publicising whistleblowing
channels are distributed to all stores,
Autocentres, Distribution Centres and the
Support Centre.

halfords.annualreport2023.comDirectors’ Report

Fund Manager
Fidelity International
BlackRock
Schroder Investment Management
Jupiter Asset Management
Janus Henderson Investors
Dimensional Fund Advisors
Columbia Threadneedle Investments
Vanguard Group
Lombard Odier Investment Managers
Gresham House Asset Management

% at
28 March
2023
9.75
7.46
7.10
7.07
5.51
4.32
4.08
3.92
3.05
2.74

Shares
21,342,904
15,961,591
15,542,037
15,487,711
12,055,855
9,460,862
8,945,784
8,572,370
7,005,003
6,000,042

Authority to Purchase Shares
At the 2022 Annual General Meeting,
shareholders approved a special resolution
authorising the Company to purchase
a maximum of 21,892,874 shares,
representing not greater than 10% of
the Company’s issued share capital at 7
July 2022, such authority expiring at the
conclusion of the Annual General Meeting
to be held in 2023 or, if earlier, on 30
September 2023.

Transactions with
Related Parties
During the period, the Company did not
enter into any material transactions with any
related parties.

Articles of Association
In accordance with the Companies Act
2006, the Articles of Association may only
be amended by a special resolution of
the Company’s shareholders in a general
meeting.

Political Donations
The Group made no political donations and
incurred no political expenditure during the
year (FY22: nil). It remains the Company’s
policy not to make political donations or
to incur political expenditure. However,
we recognise that the application of the
relevant provisions of the Companies Act
2006 is potentially very broad in nature
and, as last year, the Board is seeking

shareholder authority to ensure that the
Group does not inadvertently breach these
provisions as a result of the breadth of its
business activities. However, the Board
has no intention of using this shareholder
authority.

Credit Facilities, Change of
Control and Share Schemes
The Company’s revolving credit facilities
require the Company, in the event of a
change of control, to notify the Facility
Agent and, if required by the majority
lenders, these facilities may be cancelled.
The Company does not have agreements
with any Director or colleague that would
provide compensation for loss of office
or employment resulting from a takeover,
except that provisions of the Company’s
share schemes and Deferred Bonus Plan
may cause options and awards granted
to Directors and colleagues under such
schemes and plans to vest on a takeover.

Details of employee share plans are
provided in Note 23 on pages 203 to 205.

Modern Slavery Statement
In order to support its estate of Retail
stores, garages, mobile vans and online
operations, the Group sources products
from a large number of suppliers both within
the UK and overseas. In particular, the

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEImportant Events Since Year End
There have not been any important events
since the year end.

Annual General Meeting (“AGM”)
The AGM will be held at the Halfords
Group plc Support Centre, Icknield Street
Drive, Washford West, Redditch B98 0DE
on Wednesday 6 September 2023. The
Notice of the AGM and explanatory notes
regarding the ordinary and special business
to be put to the meeting will be set out in a
separate circular to shareholders.

By order of the Board

Tim O’Gorman
Group Company Secretary

21 June 2023

international suppliers – managed largely by
the Halfords Global Sourcing (“HGS”) team
based in Hong Kong, Taiwan and Shanghai
– are bound contractually by the Group’s
policies on modern slavery and human
trafficking, as detailed within the Global
Sourcing Code (the “Sourcing Code”).

The Company is committed to ensuring due
diligence processes remain robust, and, as
such, during the year, the Global Sourcing
Code was revised to further strengthen
minimum expectations in relation to
labour practices, including modern slavery
and environmental management. The
Sourcing Code supports the Company’s
commitment to respect human rights and
uphold international standards, including
the United Nations (UN) Guiding Principles
on Business and Human Rights and the
Organisation for Economic Cooperation
and Development (OECD) Guidelines for
Multinational Enterprises. The Company
has partnered with EcoVadis, a platform
which rates the environmental, social and
governance performance of suppliers.
The output of this data will support due
diligence process – and will assess good
supplier performance as well as where
corrective action, remediation or additional
audits may be required.

In line with the requirements of the Modern
Slavery Act, all colleagues are trained
on the issue of modern slavery. During
the year, a new e-learning module was
launched to support colleagues with their
understanding and what they should do if
they suspect modern slavery taking place.

The Company is proud to have supported
the Freewheel remediation programme with
cycle accessories. The programme seeks to
empower survivors of modern slavery and
human trafficking to cycle to support their
physical and mental health, independence,
mobility, and their reintegration into society.
There are hubs in the West Midlands and
in Barking and Dagenham and at each
site, the intention is to support recovery for
up to 20–30 survivors per year by giving
them a bike and accessories, including
helmets, locks and lights, providing
them with cycling proficiency and road
awareness training. Further information on
the Freewheel programme can be found on
their website https://rideforfreedom.org.uk/
what-we-do/.

During the year, no concerns were raised
regarding any of the Group’s suppliers. It
is recognised that whilst no incidents were
raised (through contractual mechanisms)
this does not mean issues do not
potentially exist. The Company, therefore,
remains committed to further enhancing
its approach and understanding and
enhancing its due diligence process.

The Group’s Board of Directors reviews
its Modern Slavery Statement on an
annual basis. It was last approved on 7
September 2022.

Creditor Payment Policy
The Group does not follow any formal Code
of Practice on payment. Instead, it agrees
terms and conditions for transactions when
orders for goods or services are placed,
and includes relevant terms in contracts,
as appropriate. These arrangements are
adhered to when making payments, subject
to the terms and conditions being met by
suppliers. The number of trade creditor
days outstanding as at 31 March 2023 for
the Group was 77 days (2022: 70 days).
The Company is a holding company and
has no trade creditors.

Branches
The Company and its subsidiaries, where
relevant, have established overseas
branches in the countries in which they
operate.

Auditor
The Company’s current Auditor is BDO LLP.
A resolution proposing the reappointment of
BDO LLP will be set out in the Notice of the
2023 Annual General Meeting and will be
put to shareholders at the meeting.

Disclosure of Information
to the Auditor
In accordance with Section 418(2) of the
Companies Act 2006, each Director in office
at the date and approval of the Directors’
Report confirms that:

i. so far as the Directors are aware, there is
no relevant audit information of which the
Company’s Auditor is unaware; and

ii. the Directors have taken all reasonable
steps to ascertain any relevant audit
information and to ensure that the
Company’s Auditor is aware of such
information.

halfords.annualreport2023.comCorporate Governance Report

“ We continued to embed our values
through our Group induction programme
and recognition scheme.”

Keith Williams
Chair

Strategy
Our Group strategy - “To Inspire and
Support a Lifetime of motoring and
cycling”, remains our focus. We have
invested considerably in this strategy and
have built a platform which provides the
opportunity for further growth. This year, we
continued our growth strategy, acquiring
Lodge Tyre Company (“Lodge Tyre”) to the
One Halfords family. More details of our
strategy can be found on page 20 and on
pages 40 to 47 in the Strategic Report.

Purpose, Culture and Engaging
with the Workforce
During FY23, we continued to make strong
progress on aligning the culture of our
organisation with our business strategy.
We know that we will only continue to be
successful in wowing our customers if
we engage the hearts and minds of our
colleagues, and enable them to work
together as One Halfords Family for the
benefit of our customers.

Achieving this will help us to, continuously,
develop our expertise to meet the needs of
our customers.

We continued to embed our values through
our Group induction programme and
recognition scheme. We have created a
one Halfords team approach, which aims
to unite all parts of the business, including
the acquisitions we make from time to time.

In FY23 we received over 680 nominations
for our “Colleague of the Quarter
programme, of which 46 were successful.
Furthermore, we recognised three
individuals as “Colleague of the Year”, one
winner and two runners-up.

Annual General Meeting (“AGM”)
Once again, we look forward to being able
to welcome shareholders to the AGM to be
held at our Support Centre. Further details
of the AGM arrangements can be found on
pages 99 and 117 of this report.

Board changes
Finally, as announced on 20 June 2023,
Helen Jones will be stepping down from
the Board as a Non-Executive Director and
Senior Independent Director at the AGM
on Wednesday 6 September 2023. On 20
June 2023, Tanvi Gokhale was appointed
as a Non-Executive Director to join the
Board, the Nomination, Audit, Remuneration
and ESG Committees. Tanvi will stand for
election for the first time at the AGM on 6
September 2023, if she is elected she will
also succeed Helen as Chair of the ESG
Committee and as the Employee Voice
Director. These arrangements will allow
for an orderly handover period which we
regard as being very beneficial. I would like
to thank Helen for all her considerable work
and support over the period.

Keith Williams
Chair

21 June 2023

Corporate Governance
Statement
The Board confirms that, throughout the
year ended 31 March 2023 and, as at
the date of this report, the Company has
applied the principles of, and complied
with, the provisions of the 2018 UK
Corporate Governance Code (“Code”).
It has been agreed that Helen Jones will
stay in office until the end of the AGM on
6 September 2023. The Board recognises
that, as it has assessed that Helen will no
longer be regarded as independent for
the purpose of the Code, because of her
extended tenure, this created a technical
breach of the Code’s recommendation that
the majority of the Board be independent
Non-Executive Directors. However, we
believe that this short-term situation (which
was resolved on 20 June 2023 when Tanvi
Gokhale was appointed) was justified to
ensure that the correct candidate could be
appointed to the Board in Helen’s place and
an orderly handover can be undertaken.

This report, together with the other statutory
disclosures and reports from the Audit,
Nomination and Remuneration Committees,
provides details of how the Company has
applied the principles of good governance
as set out in the Code during the period
under review. A copy of the Code is
available on the Financial Reporting
Council’s website at www.frc.org.uk.

The Company has complied with the
relevant requirements under the Disclosure
Guidance and Transparency Rules, the
Listing Rules, the Directors’ Remuneration
Reporting regulations and narrative
reporting requirements.

100

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEPromoting Our Purpose, Culture and Long-Term Success
Board Leadership and Company Purpose
Description: The Company is led by an effective Board, which promotes the long-term success of the
Company and engages with its shareholders and stakeholders.

The Board has established the Company’s purpose, values and strategy and is satisfied that these and its
culture are aligned.

The Board has established an effective governance and risk framework.

The Board has ensured that the workforce is able to raise any matters of concern, and that all policies and
practices are consistent with the Company’s values.

Read more on our Strategy
on pages 40 to 47.

Read more on our Culture
on pages 104 to 107.

Read more on Risk
Management
on pages 74 to 81.

Ensuring a Clear Division of Responsibilities
Division of Responsibilities
Description: The Chair leads the Board, which includes an appropriate combination of Executive Directors and
Non-Executive Directors.

Read more on Board
Composition
on pages 86 and 112.

The Non-Executive Directors provide constructive challenge, strategic guidance and advice and, have sufficient
time to meet their Board responsibilities.

There is a clear division of responsibilities between the running of the Board and the running of the business, and
the Board has identified certain “reserved matters” that only it can approve. Other matters, responsibilities and
authorities have been delegated as appropriate, and there are relevant policies and processes in place for the
Board to function effectively and efficiently.

Read more on Division of
Responsibilities on pages 112
and 114 to 115.

Read more on Risk
Management approach
on pages 74 to 81.

Delivering Effectiveness Through a Balanced Board
Composition, Succession and Evaluation
Description: A comprehensive and tailored induction programme is in place for new Directors joining the
Board. The induction programme facilitates their understanding of the Group and the key drivers of the

Group’s performance.

A rigorous, effective and transparent appointment process is in place, which, together with the effective
succession plans, promotes diversity of gender, social and ethnic backgrounds, cognitive and personal
strengths.

Read more on Board
Appointments and induction
on pages 119.

Read more on Board Evaluation
on pages 116 and 117.

Enabling Reporting Integrity and an Effective Controls Environment
Audit Risk and Internal Control
Description: The Board has established formal and transparent policies and procedures to ensure the
independence and effectiveness of both internal and external audit functions. The Board satisfies itself on the

integrity of financial and narrative statements.

The Board presents a fair, balanced and understandable assessment of the Group’s position and prospects.

The Board has established procedures to manage risk, oversee the internal control framework and determine
the nature and extent of the principal risks of the Group.

Read more on the Audit
Committee on pages 122
to 127.

Read more on Risk
Management and Internal
Control on pages 74 to 81.

Ensuring Alignment With the Successful Delivery of Our Long-Term Strategy
Remuneration
Description: The Company has designed the remuneration policies and practices to support strategy
and promote long-term sustainable success. The Executive remuneration is aligned to the interests of our

shareholders and to the Company’s purpose and values and is clearly linked to the successful delivery of our

Read more on Director
Remuneration on pages 130
to 152.

long-term strategy.

There is a formal and transparent procedure for developing Executive remuneration policy and determining
Director and senior management remuneration.

Directors are able to exercise independent judgement and discretion when authorising remuneration
outcomes, taking into account Company and individual performance and wider circumstances.

101

halfords.annualreport2023.comCorporate Governance Report

Board Leadership and Company Purpose

Board Priorities for FY23: Main Areas:

Strategy

Governance

Board Matters

• Received updates on FY23 key strategic

initiatives and operational highlights.

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

• Discussed and approved the acquisition

of Lodge Tyre Company.

• Received an update on Group Strategy,
the Capital Markets Day, the five-year
plan and Budget.

Link to Stakeholder

Link to Strategy
1 2 3

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

• Reviewed and approved the FY22

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.

• Discussed and reviewed the Group’s

ESG targets and disclosures.

• Received regular corporate

governance updates.

Link to Stakeholder

Link to Strategy
1 2 3

• Reviewed the succession plans for the
Board and the restructure of the senior
management team, including the
appointment of a new Non-Executive
Director.

• Reviewed the Board and Committees’
programme and forthcoming meeting
schedule.

• Received updates from the

Nomination Committee on the
progress of the search for a new Non-
Executive Director.

• Discussed and agreed the scope of
the internal FY23 Board evaluation.

Link to Stakeholder

Link to Strategy
1 2 3

Financial and Risk
Management

• Reviewed monthly business and

trading performance.

• Reviewed and approved the

Commercial Matters

Shareholder and
Stakeholder Relations

• Received updates on the process for,
and approval of, the annual renewal of
the Group’s insurance policies.

• Reviewed results of colleague

engagement surveys and the launch
of the new Company Values.

prelim, interim and trading update
approaches and announcements.

• Reviewed and approved a number of

large commercial contracts and spend.

• Discussed and approved colleague
health and wellbeing programmes.

Link to Stakeholder

Link to Strategy
1 2 3

• Reviewed and approved the interim

dividend and recommended payment
of the final dividend.

• Reviewed updates on banking

arrangements, liquidity, cash control,
treasury matters and currency hedging.

• Reviewed and approved the

Group Going Concern and Viability
Statement.

• Reviewed and approved the five-year
plan, the FY24 budget and forecast.

Link to Stakeholder

Link to Strategy
1 2 3

102

• Reminded the 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 2022

Notice of the Annual General Meeting
and the arrangements for the 2022
Annual General Meeting.

• Reviewed and approved the April

2023 Capital Markets Day content and
materials.

Link to Stakeholder

Link to Strategy
1 2 3

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCE

Key to stakeholders:

Colleagues

Investors

Communities

Media

Key to Strategy links:

Customers

Suppliers

Environment

Government

1 Inspire

2 Support

3 Lifetime

Board Priorities for FY24: Main Areas:

Strategy

Governance

Board Matters

• Review the annual strategy refresh and
associated financial business plan.

• Review any potential M&A opportunities.

• Receive regular updates from the

• Review the nomination and

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

appointment of a new Non-Executive
Director.

Link to Stakeholder

Link to Strategy
1 2 3

• Review and approve the FY23

• Review succession plans

Annual Report.

• Review and approve the Directors’

Conflicts of Interests Register, Group
policies, the Group Risk Register and
the roles of the Chair, the CEO and
Senior Independent Director.

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

Link to Stakeholder

for the Board and the Senior
Management Team.

• Review the Board and Committees’

programme and forthcoming meeting
schedule.

• Discuss the outcome of the FY23
external Board evaluation and
agree the scope of the FY24 Board
evaluation.

• 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 and trading

• Review commercial matters brought

performance.

• Review and approve trading update

to the Board for attention and
potential approval.

• Review colleague engagement survey
results and the progress on the health
and wellbeing programme.

announcements.

• Discuss and review deep dives on

• Focus on ESG agenda, particularly

• Review and approve the dividend
policy and any dividend payments.

• Review and approve the FY24

updated forecast, the FY25 budget,
banking arrangements, the financing
arrangements and FX hedging strategy.

Link to Stakeholder

the supply chain, commercial margin
and garage utilisation and profitability
growth.

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 2023 Notice

of the Annual General Meeting.

Link to Stakeholder

Link to Strategy
1 2 3

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Corporate Governance Report

Board Leadership and Company Purpose

Our Board has made progress against monitoring culture in the past year,
with focus on supporting colleagues through the cost of living crisis.

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,
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 that 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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Our Culture Journey
The Board continues to recognise 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. During
2021, a full cultural review was completed,
which resulted in a refresh of our Halfords
Group values, and several activities were
undertaken to embed the values amongst
colleagues. During FY23, we continued to
embed our Halfords values and created
the One Halfords team approach by uniting
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 FY23,
we invested in training to upskill over 1,000
managers in our garages and retail stores to
effectively sell, teach and coach their teams
and improve their selling skills.

We continued to embed our values through
our Group induction programme and
recognition scheme. In FY23, we continue to
include values into our annual performance
conversations, and colleagues are assessed
against the behaviours that underpin each
value. To further support embedding our
values, we continued to run our recognition
programme, which recognises our
“Colleague of the Quarter”. We received
over 680 nominations throughout the year
from across the Halfords Group, over 46
colleagues were recognised as a “Colleague
of the Quarter” and, at the end of FY23,
with two runners up and one overall winner
of our prestigious “Colleague of the Year”
award. Our winner was awarded £5,000,
second place runner up £2,000 and third
place runner up £1,000. All winners were
also invited to a celebratory lunch with the
Executive Team.

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Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCE
Through the cost-of-living crisis, we have
focused on supporting colleagues with
continuing investment in our Halfords
“Here to Help” Fund, which was set up by
the Halfords Group 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 continued
to offer 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 gives colleagues visibility of earnt
wages in real time and supports personal
finance management; gives colleagues
early access to earnt wages throughout the

month; access to a trusted and impartial
financial education hub, to help build money
confidence; and encourages 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.

We also offer great discounts and cashback
at thousands of retailers, provided free
MOTs to colleagues in the UK and in ROI &
NI a £25/€20 Winter Essentials voucher and
extended our friends and family discount
scheme to run for three weeks in October.

To help colleagues manage stress and
support their mental wellbeing, we’ve
continued to create awareness of all the
benefits and resources available on the
colleague intranet and through promotional
material sent to all colleagues. We have
continued to roll out our mental health
awareness training to a further 100

managers across the Group and increased
the number of qualified mental health first
aiders. Our three-year partnership with
mental health charities Mind, SAMH and
Inspire has provided access to free mental
health information and resources. In October,
we held our Wellbeing Week, which focused
on all aspects of our wellbeing.

In FY23, we started the design of our
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.

• Annual pay review for all hourly colleagues completed.

• Celebrated Pride Month across the Halfords Group to

• Full annual colleague engagement survey conducted.

• Engagement targets set for Board and Executive Team.

• Three-year charity partnership launched with mental
health charities Mind (England and Wales), SAMH
(Scotland) and Inspire (ROI/NI).

raise awareness of LGBTQIA+ colleague network group
and promote Diversity and Inclusion.

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• Supporting colleagues through cost of living crisis is
positioned as one of our top three business priorities
and discussed weekly in colleague huddles.

• Mental Health First Aider training and mental health

awareness sessions for managers.

• All colleagues engaged in a Wellbeing Week across

the Halfords Group to promote support and resources
available to colleagues and charity fundraising in stores
to support World Mental Health Day in October 2022.

• Pay review for all MOT Testers in Halfords Autocentres.

• D&I colleague network groups ran online broadcasts
with speakers on topics such as black history month,
menopause and disabilities to raise awareness and
promote inclusivity at Halfords.

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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
champions (“People Champions”), and
conducting regular colleague surveys.

People Champions hold meetings to gauge
how colleagues are feeling, which informs the
programme of engagement and wellbeing
activities. During 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,
our Group-wide intranet 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 3,500 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 127. 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.

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 and regularly reports
back to the Board on the issues raised.

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.

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Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEOur 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. The
survey conducted in April 2022 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 32
and 35.

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 34 to 35.

Board Listening Approach

Non-Executive Director
Employee Voice

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.

Virtual focus groups

• Insights and feedback from colleagues employed

Colleague engagement
survey

Blogs and written
communications

in different parts of the Group focused on a
particular topic such as communication, wellbeing
or engagement.

• Measures how engaged colleagues are and how

they feel about working 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.

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.

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 144 to 152.

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.

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halfords.annualreport2023.comCorporate Governance Report

Board Leadership and Company Purpose

Stakeholder Engagement

Key Themes Discussed with Shareholders in FY23

• 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.

Investor Relations Programme

The Group has a comprehensive investor relations (“IR”)
programme through which the Chief Executive Officer, Chief
Financial Officer and 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:

• 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 activities
(such as the investor perception study).

• 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 following our trading and results
updates, and our 2023 Capital Markets Day; and

• Responding promptly – the Group is committed to

responding to any investor-related queries within a short
time frame.

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109

Corporate Governance Report

Board Leadership and Company Purpose

“ We communicate on a regular basis through
various channels. All key points captured
through listening groups are shared in
quarterly cascades across the business.”

Helen Jones
Senior Independent Director

Q&A

with our Employee Voice Director, Helen Jones

Have there been any changes to the
employee feedback process this year?

We continue to hold regular listening
sessions across the Group. These are
chaired by a Divisional Director, supported
by a member of our People team with up
to ten colleagues in attendance. My role is
to encourage openness and honesty and
to listen. We devote an hour to discussion
on what’s working well, what we should
pay attention to and what we might learn
from best practice in other businesses.

We try to involve as many colleagues as
possible in these sessions throughout the
year. Having an opportunity to express
opinions is important and, although
there are always common themes,
solutions to specific issues often come
from colleagues as they are dealing with
our customers every day. This year, we
invited colleagues from our Continuous
Improvement team to join the sessions.
As a result, they’re able to capture new
suggestions and update on initiatives that
have already been introduced.

Every year, we conduct a Colleague
Engagement survey and, in 2023, we
achieved an index score of 82%, a slight
increase on 2022. The annual survey
provided valuable insight as to colleague
sentiment across the Group and what we
need to focus on to help make Halfords a
better place to work. Overall, our colleagues
are very positive and committed to Halfords.
They feel trusted to do their jobs, are treated
with respect and there’s a great team spirit
across both stores and garages. However,
we were also told that we sometimes
struggle to meet customer demand and this
leads to increased workload, particularly for
the most skilled and experienced colleagues.
We’ve, subsequently, focussed on recruiting,
inducting and training technicians across the
Group to deliver the many services we offer.

We’re also aware that increased workload
can be very stressful, so we’ve continued
to build awareness of all the resources
available to colleagues to help support
their wellbeing, as well as increasing
the number of mental health first aiders.
We’ve continued to offer great discounts
and cashback at thousands of retailers,
free access to Wagestream to support
colleagues with flexible pay options, and
our ‘Here to Help Fund’ provides for any
colleague in a financial crisis, along with
free MOTs and winter essentials vouchers.

Colleague of the Year winners
announced

Number of
nominations received

680

Number of colleagues
recognised as Colleague
of the Quarter

110

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEQ

For you, what were the key
highlights in FY23?

How do you share outcomes
with the wider employee base?

What areas does the Board
want to focus on in future?

We introduced sessions this year to
discuss the new Personal Development
Review process. We need to ensure that
all colleagues feel supported in advancing
their careers with Halfords and that
their aspirations to progress within the
Group are known. Enabling colleagues
to participate in this session, and how it
might be adapted to best meet the needs
of line managers and colleagues at all
levels, was really helpful. Establishing
a process, which helps colleagues
understand how their particular role
influences overall Group performance,
is essential.

Another particular highlight for me, was
a listening session in February with
seven of our colleagues from our Retail
stores. Their combined years of service
to Halfords amounted to 130 years! A
reminder of the tremendous loyalty shown
by many colleagues across the Group and
how we benefit both in expertise, but also
culturally from this depth of experience.

We communicate on a regular basis
through various channels. All key points
captured through listening groups are
shared in quarterly cascades across the
business. Being heard is as important as
listening so where we’re able to address
concerns, we do, and for those where a
solution may not be immediately available,
we explain why.

Our colleagues represent the Halfords
brand in every interaction across the
Group. Ensuring we attract, retain and
support all colleagues is always a priority.
In the coming year, we will focus on the
recruitment, induction and training for
all specialist roles to ensure customer
demand can be met and the best possible
experience delivered every time. This
applies not only to our long-serving
colleagues, but also to those who have
joined the Group through our acquisitions.

We’re also very aware of the pressure
being felt as a result of the cost-of-living
crisis. The Remuneration Committee
and the entire Board are mindful of the
need to consider all our colleagues
working tirelessly across the Group, when
determining Executive pay arrangements.

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Division of Responsibilities

Board Composition
At the date of this report, the Board of
Directors comprised of six members,
namely the Non-Executive Chair, three other
Non-Executive Directors and two Executive
Directors. The composition of the Board is
set out on page 96, and the biographies of
each Director, including any other business
commitments, are available on pages 90 to
92. 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
40 to 47.

Chair 1

Executive Directors 2

Non-Executive Directors 3

Board Changes
In April 2022 Jo Hartley joined the business
and was appointed as Chief Financial
Officer on 16 June 2022 to replace Loraine
Woodhouse who stepped down from the
Board on 16 June 2022 and retired from the
business on 1 July 2022.

112

Details of the Group’s business model and
strategy can be found on pages 40 to 47.

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.

Together, the Directors 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 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
that may affect, or could appear to affect,
the Non-Executive Director’s judgement.
Following a review, the Board considers
Jill Caseberry and Tom Singer to be
independent in character and judgement.
However, due to the length of Helen Jones’
tenure, the Board has assessed that Helen
is no longer regarded, as independent
for the purposes of the Code. Helen has
agreed to stay on until the AGM on 6
September 2023 to ensure continuity for the
Board. Whilst this has created a technical
breach of the Code’s recommendation that
the majority of the Board be independent
Non-Executive Directors, the Board
believes that this short-term situation has
been justified. As explained on page 96
Tanvi Gokhale has now joined the Board
and is independent on appointment.

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
20 June 2023, the following Directors will
seek re-election at the 2023 Annual General
Meeting (“AGM”) on 6 September 2023:
Keith Williams, Jill Caseberry, Tom Singer,
Graham Stapleton and Jo Hartley.

As has been announced, Helen Jones, will
step down as a Non-Executive Director at
the 2023 AGM and her replacement Tanvi
Gokhale, who was appointed to the Board
on 20 June 2023, will stand for election for
the first time at the 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.

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR 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:

Matters which require Board approval
between scheduled Board meetings can
be approved by a Board Committee, which
consists of a minimum of two Directors.

Jo Hartley

Jill Caseberry

4 years, 3 months,14 days

0 years,11 months,14 days

Helen Jones

9 years, 3 months,14 days

Tom Singer

2 years, 8 months,14 days

Graham Stapleton

5 years, 5 months,14 days

Keith Williams

4 years,10 months,14 days

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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 FY23 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.

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.

113

halfords.annualreport2023.com

Corporate Governance Report

Division of Responsibilities

Halfords Group plc Board of Directors

Nomination Committee

Key Objectives
To ensure that the Board has the balanced skills, knowledge and experience to be effective in discharging its
responsibilities and to have oversight of all governance matters.

Main Responsibilities
Making appropriate recommendations to maintain the balance of skills and experience of the Board by:
• considering the size, structure and composition of the Board;
• considering 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.

Chair:
Keith Williams

Members:
Helen Jones
Jill Caseberry
Tom Singer

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

Chair:
Tom Singer

Members:
Helen Jones
Jill Caseberry

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
• 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.
• Maintaining an active dialogue with institutional investors and shareholder representatives.

ESG Committee

Key Objectives
To ensure that the Company has an ESG strategy that is aligned with the Company’s strategy.

Main Responsibilities
• Development of an ESG strategy including the setting of appropriate targets.
• Monitoring progress against key targets and initiatives.

Chair:
Jill Caseberry

Members:
Helen Jones
Tom Singer

Chair:
Helen Jones

Members:
Jill Caseberry
Tom Singer

Chief Executive Officer

Executive Committee

Key Objectives
• Responsible for the day-to-day management of the Company.
• Develops the Group’s objectives and strategy for Board approval.
• Creates and recommends to the Board an annual budget and

financial plan.

• Delivers the annual budget and plan and executes the agreed Group

strategy and other objectives.

• Identifies and executes new business opportunities and potential

acquisitions or disposals.

• Keeps the Chair informed on all important matters.
• Manages the Group’s risks in line with the Board-approved risk profile.

Key Objectives
• 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.

• Approves all Group financial investment.

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Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR 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.

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

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

Main Responsibilities

diversity; and

Audit Committee

Key Objectives

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 and risk

• 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

• Focusing on compliance with legal requirements, whistleblowing, accounting standards and the Listing Rules.

Remuneration Committee

Key Objectives

Main Responsibilities

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 of the

• 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.

• 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 that is aligned with the Company’s strategy.

• Development of an ESG strategy including the setting of appropriate targets.

• 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

Key Objectives

Executive Committee

Key Objectives

• Responsible for the day-to-day management of the Company.

• Monitors performance against the implementation of the

• Develops the Group’s objectives and strategy for Board approval.

• Creates and recommends to the Board an annual budget and

• Delivers the annual budget and plan and executes the agreed Group

financial plan.

strategy and other objectives.

acquisitions or disposals.

• Identifies and executes new business opportunities and potential

• Keeps the Chair informed on all important matters.

• Manages the Group’s risks in line with the Board-approved risk profile.

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.

• Approves all Group financial investment.

• 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.
• 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.

• Periodically visit Group sites, stores and Distribution Centres.
• Meet without the Executive Directors present.
• Participate in a training programme, including store visits and

updates from management.

• Formulate Executive Director remuneration and succession planning.

Chair

Key Responsibilities
• Manages and provides leadership to the Board.
• Builds an effective and complementary Board of Directors.
• Sets the agenda, style and tone of Board discussions.
• Facilitates and encourages active engagement in meetings,
promoting effective relationships and open communication.
• Ensures effective communication with shareholders and other

stakeholders.

Senior Independent Director

Key Responsibilities
• Provides a sounding board for the Chair.
• Holds meetings with the other Non-Executive Directors without

the Chair at least once a year to appraise the Chair’s performance.

• Acts as an intermediary for the other Directors.

Non-Executive Directors

Key Responsibilities
• Evaluate and appraise the performance of Executive

Directors and Senior Management against agreed targets.

• Participate in the development of the Group’s strategy.
• Monitor the financial information, risk management and
controls processes of the Group to make sure that they
are sufficiently robust.

• Meet regularly with senior management.

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.

• Provides advice on Board matters, legal and regulatory issues,

corporate governance, Listing Rules compliance and best practice.

115

halfords.annualreport2023.comCorporate 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.

FY22

Internal Evaluation

FY23

External Evaluation

FY24

Internal Evaluation

FY23 Evaluation Process

Step One

Step Two

Step Three

Step Four

Online surveys issues 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

FY22 Outcomes

Progress Made in FY23

To develop an approach
to ensure a sustainable
business for stakeholders.

In FY23, we continued our virgin plastic reduction programme (started in
FY22), and we have now reduced 37.5% of our virgin plastic, achieved
through reduction of packaging weight, swapping to alternative materials, or
using recycled content).

Halfway through the year, we made a full switch over to Adblue pouches, a
much lighter plastic type, saving 95 tonnes of plastic. This will prevent 175
tonnes of plastic being used in FY24, representing over a 10% reduction of
the plastic packaging we used in FY22 (1,600 tonnes).

We improved oil bottle packaging by using 35% recycled content, saving
40 tonnes of virgin plastic.

We swapped the oddpack range (700 products) over to 80% recycled
plastic, saving over 10 tonnes of virgin plastic.

With the appointment of Tanvi Gokhale, we consider this progresses our
compliance with the Parker Review.

We significantly progressed our strategic transformation in FY23. As we
outlined at our Capital Markets Day in April 2023, we have created an
omni-channel network, which will act as a platform to allow future growth.
We believe this truly differentiates us from our competitors.

Diversity within
the Board

Transformation across
the business

To maintain and improve
diversity on the Board in
line with the Parker Review.

To continue to support
the transformation journey
as we develop an omni-
channel business that is
agile and able to respond
fully to the ever-changing
needs of our customers.

116

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEThe findings identified by the FY23 external review were as follows:

Topic

Strategy

FY23 Outcomes

• To continue to focus on the delivery of the strategy creating value to shareholders. Continue the work on

understanding Halfords’ customers.

Board and Composition

• Successful recruitment of a new Non-Executive Director (“NED”) to replace Helen Jones, being mindful

of the importance of diversity and Parker Review requirements.

• Review and develop the Board induction programme for the new NED.

• Introduce a more formal training programme for Board members and to aide in the delivery of the Group

strategy.

Company Culture

• Focus on Company culture to understand how this can be developed further to ensure delivery of the

strategy is fully supported.

IR Calendar Dates

21 Jun 2023

FY23 Preliminary Results

6 Sept 2023

FY24 20-week Trading Update

6 Sept 2023

AGM

22 Nov 2023

FY24 Interim Results

18 Jan 2024

FY24 Q3 Trading Statement

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
76 to 81.

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.

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, once
again, be able to hold our 2023 AGM
in person and look forward to seeing
shareholders on 6 September 2023.

Tim O’Gorman
Company Secretary

21 June 2023

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.

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.

117

halfords.annualreport2023.comNomination Committee Report

“ The Committee monitors and develops
Board and Executive succession plans.”

Keith Williams
Chair of the Nomination Committee

Looking ahead, the key priorities for the
Committee are:

• Long-term succession planning at Board

and Executive level;

• Ensuring the successful induction of the

new Non-Executive Director, and

• Successful delivery of the actions arising
from the external Board evaluation as
referenced on page 117.

By order of the Board

Keith Williams
Chair of the Nomination Committee

21 June 2023

Committee Composition
During the year, the
Committee comprised:

Helen Jones

Jill Caseberry

Tom Singer

Nomination Committee
meetings held:

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 was appointed as Chief
Financial Officer on 16 June 2022 when
Loraine retired from the role. The Committee
also undertook a search for a new Non-
Executive Director to replace Helen Jones,
who has reached her nine-year tenure and
will, consequently, step down from the
Board at the AGM on 6 September 2023.
Following this search we have appointed
Tanvi Gokhale (as announced on 20 June
2023), which maintains our compliance with
the Parker Review. Finally, the Committee
undertook an annual Board evaluation,
conducted by Anne Whalley Consulting
Limited. The details of this external
evaluation can be found on page 117 in the
Corporate Governance Report.

118

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCE
Main Responsibilities of
the Committee
• Review the size, structure and

composition of the Board and its
Committees.

• Ensure plans are in place for orderly
succession to the Board and senior
management positions.

• Lead the process for appointments by

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

Activities During the Year
• Commenced the search for a new Non-

Executive Director to replace Helen Jones.

• Continued with the progression of the

succession and talent development plan,
taking into account the recommendations
of the Parker Review.

• Reviewed the internal FY22 Board

evaluation action plan.

• Engaged Anne Whalley Consulting

Limited to undertake an external FY23
Board evaluation.

• Reviewed the composition of the Board

and its Committees.

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

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

FY23 Key Activities
• Commencement of the search for a new
Non-Executive Director from a more
diverse background.

• Progression of succession and talent

development plans.

Areas of Focus in FY24
• Progression of succession plans for the
Board and senior management team.

• Induction of the new Non-Executive

Director.

Board Appointments
On 19 April 2022, Jo Hartley joined
the business and, to ensure a smooth
transition, Loraine Woodhouse remained
with the business and in post as Chief
Financial Officer until 16 June 2022, at
which point Loraine stepped down from her
role and passed her responsibilities to Jo.

Odgers 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 does not have
any other connection with the Company.

As announced on 20 June 2023 Tanvi
Gokhale will join, with immediate effect,
Halfords as the new Non-Executive
Director to replace Helen Jones, who will
step down from the Board at the AGM on 6
September 2023.

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.

Board Induction Programme
Introductory meetings
• Meetings held with members of the

Senior Management Team and Executive
Committee.

Site Visits
• Retail store and Autocentre visits,

including an introduction to Halfords
Mobile Expert; and

• Visit to Washford and Coventry

distribution centres.

Deep Dive Sessions
• 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.

Director Training
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 Directors;

• access to independent professional

advice at the Company’s expense; and

• 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

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 is comprised of women: 29%
of the Senior Management Team is female
and 19% 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, during the year, the Board
appointed the executive search consultancy
Heidrick & Struggles to progress the
appointment of a new Non-Executive
Director to replace Helen Jones who
will be retiring as a Director and Senior
Independent Director at the AGM on 6
September 2023. Following this search
Tanvi Gokhale was appointed on 20
June 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.

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

21 June 2023

119

halfords.annualreport2023.comESG Committee Report

“ Our ambition is to minimise our environmental
impact and increase our transparency whilst
continuing to pursue sustainability opportunities
within our product portfolio.”

Helen Jones
Chair of the ESG Committee

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 ESG business leaders
regularly throughout the year, as well as
attending listening groups with colleagues
from across the business.

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.

Main 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 practices in our
supply chain.

Chair’s Letter
During the year, the Committee’s focus
has been to ensure the ongoing delivery
against targets set for the four priority
areas: electrification; net zero; diversity
and inclusion; and product, packaging and
waste management. We are particularly
pleased with the progress made with
our suppliers as part of the Net Zero
workstream; engaging with top strategic
suppliers and gathering data to better
inform our Scope 3 carbon emissions. In
our response to the CDP Climate Change
questionnaire, we were awarded a B for
our work engaging our suppliers, giving us
external verification for the great work we
are doing.

Recognising the need for continued training
at a senior level, the November 2022 ESG
Committee meeting was extended to all
Board members to undergo training on
Director’s Liability on Human Rights and
Environmental Due Diligence, facilitated by
an external agency.

As a Committee, we also approved the
revised Environmental Policy outlining
Halfords’ commitment to reduce our
impact on the environment through
close monitoring of targets and effective
governance.

The Company’s Chair, Keith Williams, and
Chief Executive Officer, Graham Stapleton,
whilst not members of the Committee,
attend the meetings upon the invitation
of the Committee Chair. There were two

Committee Composition
During the year, the
Committee comprised:

Helen Jones

Jill Caseberry

Tom Singer

ESG Committee
meetings held:

120

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEActivities Undertaken
During the year:

• Monitored progress of the ESG strategy.

• Challenged ESG performance throughout

the year.

• Signed off and acted on the findings
and recommendations of the internal
ESG audit.

• Participated in Board-level training on

Director’s Liability on Human Rights and
Environmental Due Diligence.

• Reviewed and agreed upon a set of ESG
targets and KPIs which were taken to the
Remuneration Committee for approval.

• Approval of the Environmental Policy.

Further information on the Group’s
approach to managing ESG, performance
against the priority areas and performance
data can be found on pages 48 to 61 of the
Strategic Report.

Looking Ahead
In FY24, our focus will be on maintaining
momentum and continuing to deliver
positively towards our ESG targets. Our
preparations to make the company ready
for electric mobility continues to be of
paramount importance as we look to the
future. The transition to lower-carbon forms
of transport is clearly an essential part of
achieving ambitious Net Zero goals - both
for Halfords but also the UK. Our new
three-year D&I strategy is a step-change
in how we think about the colleagues in
our business but also the communities
and industries we work in. Halfords is
committed to becoming a truly inclusive
place to work and to be representative of
the customers and communities it serves.

Finally, I would like to add that, as this is my
last year as a Non-Executive Director for
Halfords, I am extremely proud of the work
that has been achieved by the business,
creating a compelling ESG strategy and
making significant progress in delivering it.
I remain committed to the Halfords

ESG plans and look forward to seeing the
continued great work in the future.

Helen Jones
Chair of the ESG Committee

21 June 2023

FY23 Key Activities
• Invested in equipment and colleague
training to ensure we remain market
leaders in EV servicing.

• Excellent progress made with our
science-based targets for carbon
emissions, reducing Scope 1 and 2 by
27% vs. FY20 baseline.

• Rolled-out a third-party platform to
support the collection of accurate
Scope 3 carbon data.

• 75% of supplier spend attached,
providing a reliable and verifiable
baseline for Scope 3 emissions.

• Significant progress made to reduce

packaging. Since 2021, we’ve
eliminated 38% of virgin plastic from
own-label products.

• Developed 3-year Group D&I strategy.

• Following the success of our Bike
Xchange programme (over 11,000
bikes donated by customers) this
was rolled out to include kids’ bikes
to promote the longevity of these
products and to reduce waste. A
significant number were also donated
to our charity partners, including
Re-Cycle.

• Continued support of our corporate
charity, Mind, and other community-
based initiatives such as the HMP
Drake Hall initiative - where we offer
bike technician training to female
detainees, enabling them to pursue
employment on their release.

Areas of Focus in FY24:
• Introduction of EV servicing into our
mobile servicing proposition for both
customer owned and commercial
vehicles.

• Increasing the number of EV-ready

centres.

• Continue to gather primary carbon
data from our suppliers to better
understand Scope 3 emissions.

• Begin implementation of our 3-year
D&I strategy, including building
awareness across the Group.

• Continue to support the industry

to understand how the automotive
sector can be more attractive for
all individuals but specifically those
currently under-represented in the
workforce.

• Further reduce virgin plastic use in our

own-label packaging.

• Actively pursue recycling solutions for

all waste products.

121

halfords.annualreport2023.comAudit 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

Chair’s Letter
I am pleased to present the report of the
Audit Committee for the 52 weeks ended
31 March 2023.

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 the cost-of-living crisis,
and specifically whether the business
remained a Going Concern;

• 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;

Areas of Focus
• Continue to monitor the impact of
macroeconomic issues upon the
Group’s Viability Statement and
Going Concern assessment.

• 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.

• Monitor FRC consultation and

final standard on the Corporation
Governance Code, to be
published FY24.

• Carry out a formal assessment of
BDO’s performance in relation to
the FY23 audit.

• the relationship with a third party logistics

• Consider impact of new

expectations in relation to
consumer organisations (Customer
Duty rules).

provider and the related accounting
treatment;

• the acceleration of our business and
financial controls programme; and

• the review of the accounting treatment in
regards to the acquisition of Lodge Tyre.

Tom Singer
Chair of the Audit Committee

21 June 2023

Committee Composition
During the year, the
Committee comprised:

Tom Singer: Chair

Helen Jones

Jill Caseberry

Audit Committee
meetings held:

122

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEThe effects of the cost of living crisis
have 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 FY23.

Halfords Group completed the acquisition
of Lodge Tyre during the current financial
year. The Audit Committee reviewed the
accounting treatment of each transaction,
ensuring that the judgements were
appropriate.

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.

FY23 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.

• Reviewed and challenged the external

Auditor’s year-end and half-year
reports.

• 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.

• Reviewed the Corporate offence of
failure to prevent tax evasion policy.

• Reviewed the approach to Halfords
Identity access management project.

• Reviewed and strengthened controls
over accounting for SaaS related
spend in accordance with IAS38, with
a particular focus on Avayler.

• Reviewed the statement of external

• Reviewed the policy and accounting

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 and
considered risk appetite.

• Reviewed and challenged progress of
the Internal Audit plan and received
regular updates on internal control
systems.

• Reviewed and approved 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 compliance, and on health and
safety matters.

for foreign exchange hedging
transactions.

• Requested internal Audit to advise on
the formalisation of our approach to
determining risk appetite.

• Requested regular reports from

management on our approach to
managing cyber risks and access
controls over information technology
systems.

• Carried out a formal assessment of

BDO’s performance in relation to the
FY22 audit.

• Reviewed and ensured FCA

compliance.

• Checked to ensure we have adequate
distribution reserves to legally pay
dividends.

123

halfords.annualreport2023.comAudit 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. The
Board recognises that Helen Jones is no
longer regarded as independent because of
her extended tenure. Whilst we recognise
that this has created a technical breach
of the UK Corporate Governance Code,
we believe that this short-term situation is
justified to ensure that the correct candidate
is appointed to the Board in Helen’s place.
Please see page 96 for further information.

Tom Singer is a Non-Executive Director
of Mukuru and a Non-Executive Director
and Chair of the Audit Committee of Vue
International Group and was, until recently,
the Senior Independent Director and Chair
of the Audit and Remuneration Committees
at DP Eurasia NV and a Non-Executive
Director of Mediclinic International
PLC. 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 31 March
2023 and nothing of note was reported.

Principal Responsibilities
Financial Reporting
• Review the interim and final financial
statements of the Group and assess
whether appropriate suitable accounting
policies have been adopted, and whether
management has made appropriate
estimates and judgements. Assess
the appropriateness of disclosures in
the Annual Report and Accounts and
ensure that it is fair, balanced and
understandable.

Risk and Control Environment
• Assist the Board in achieving its

obligations under the UK Corporate
Governance Code in areas of risk
management and internal control,
focusing particularly on compliance with
legal requirements, accounting standards
and the Listing Rules.

• Review the risk management framework
and the principal risks and mitigation
strategies, including the investigation of
fraudulent activity.

Internal Audit
• Review reports from Internal Audit on
developments in the internal control
framework to ensure that an effective
system of internal financial and non-
financial control is maintained on an
ongoing basis.

External Audit
• Make recommendations to the Board
on the reappointment of the external
Auditor, including on effectiveness,
independence, non-audit work
undertaken (against a formal policy) and
remuneration.

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/.

Matters Considered in Relation
to the Financial Statements
In order to discharge its responsibility
to consider accounting integrity, the
Committee carefully considers key
judgements applied in the preparation
of the consolidated financial statements,
which are set out on pages 166 to 171.

The Committee has considered the
following key accounting judgements during
the year:

124

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEImpairment of Goodwill Associated with
the Group’s Retail and Car Servicing
groups of Cash Generating Units (CGU):
• Following several business combinations
across Retail and Car Servicing 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 to
190 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 goodwill of
the Parent company has also been
considered on the same basis. The
Committee concluded that it is satisfied
with the impairment assessment of
goodwill.The Audit Committee have
also reviewed the carrying value of the
investments held by the Parent company,
using the same cashflow projections as
those used for Goodwill impairment. The
Committee has similarly concluded that
there should be no impairment of the
carrying value of the investments.

Valuation of Inventory Within the
Retail Division:
• With the business holding a wide range of
stock and changing consumer demands,
some lines will not be sold or will be sold
at below the carrying value. Provisions are
made to reflect this. Given the inherent
difficulties of forecasting market trends,
there is a risk that inventory provisions
made will be inappropriate or incomplete
(see Note 15 on page 195 of the Financial
Statements). Management has fully
reviewed the inventory provision in the
current year, and believes the level of
provisioning is appropriate. Range reviews
are regularly undertaken to ensure that all
discontinued inventory is identified

• 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.

Non-Underlying Items and Alternative
Performance Measures
The Group recorded a net debit of £8.0m
in Non-Underlying items in FY23, having
recorded a larger credit in the previous
year. This credit was driven by the release
of a provision relating to an HMRC audit
of National Minimum Wage practices, and
the release of provisions relating to the
closure of stores and garages in FY21. The
debit in the current year was materially due
to strategic redundancy costs due to the

restructure of the support centre, acquisition
costs in regards to Lodge Tyre, and closure
costs of a number of garages due to the
reorganisation of the business as a result
of the acquisition of Axle Group. 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
FY23 performance to FY20, alongside the
prior year FY22. This was considered to be
appropriate given that FY22 and FY21 were
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.

125

halfords.annualreport2023.comRole 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 the 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.

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.

Audit Committee Report

Diane Campbell was appointed as the Lead
Audit Partner since the 2019/20 audit and
is therefore now in her fourth annual audit
cycle. Diane will serve a maximum term of
five annual audit cycles.

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 to the
Financial Statements on pages 184 to 185.

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,
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 2023,
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
Halfords confirms that it was in compliance
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 throughout the
financial year ended 31 March 2023.

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 6 September
2023, 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 to the frequency of audit tenders.

126

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEAt each meeting during the year, the
Committee received a presentation on the
Group’s control framework in preparation
for changes to the UK’s governance and
reporting.

Further details of the Group’s internal
control and risk management framework
are set out on pages 74 to 75.

Tom Singer
Chair of the Audit Committee

21 June 2023

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.

The Audit Committee has requested that
anti-bribery and corruption safeguards are
periodically reviewed by Internal Audit.

Internal Control and
Risk Management
The Board is responsible for the Group’s
risk management processes and the system
of internal control. The Audit Committee
contributes to this purpose by providing
oversight and challenge to the Group’s risk
management framework. A newly formed
Executive Risk Committee reports to the
Audit Committee on the risk management
framework, providing insight on principal
and emerging risks, risk appetite and
ongoing updates on regulatory and
compliance risk.

halfords.annualreport2023.com

127

Remuneration Committee Report

“ The key focus for the Committee this year has been
reviewing the Directors’ Remuneration Report in advance
of submitting a new Policy to shareholders at the AGM
in September and considering how best to support our
colleagues in the context of the cost of living challenges.”

Jill Caseberry
Chair of the Remuneration Committee

Chair’s Letter
Dear shareholder
On behalf of the Remuneration Committee,
I am pleased to present the Remuneration
Report for the financial period ended
31 March 2023.

The Report consists of four sections:

• This Chair’s statement providing a

summary of pay outcomes for FY23 and
our approach for FY24;

• Remuneration at a glance;

• The 2023 Directors’ Remuneration

Policy – in accordance with the Directors’
Remuneration Reporting Regulations,
Halfords is bringing a revised Directors’
Remuneration Policy to the Annual
General Meeting (“AGM”) in September
2023 for shareholder approval; and

• The annual Directors’ Remuneration

Report – this summarises the
remuneration outcomes for FY23 and
explains how we intend to apply the
Remuneration Policy in FY24.

Supporting Colleagues Through
the Cost of Living Crisis
To reflect the cost of living challenges faced
by our colleagues and good performance in
the year, we were pleased to be able to award
average salary increases to our workforce
higher than in previous years of 4%.

Our benefits package gives access to
discounts on everyday essential spend
such as supermarket shopping. Used well,
the average colleague can save up to 1%
of their annual salary. For colleagues who
need short-term emergency support on
unexpected spend such as home repairs,
funeral costs and travel to work expenses,

the Halfords Here to Help Fund (“HHF
Fund”) can support with up to £2,000 of
one-off funding, and throughout last year,
the Fund distributed payments to 258
colleagues in such cases. During FY24,
we will continue to monitor the impact of
rising inflation on our colleagues.

Performance in the Year
Our underlying profit before tax of £51.5m
in FY23 was a resilient performance, given
the macro-economic climate we operated
in throughout the year. We estimate that we
have experienced over £95m of headwinds
in the year, driven by an unenviable
combination of our core markets being
depressed versus pre-COVID, coupled with
some of the most extreme cost inflation our
business has seen.

Our focus in the year was on impacting the
things within our control, and as a result
we delivered a very effective cost and
efficiency programme which exceeded our
targets. We also continued to strategically
invest in the transformation programme
that the business has been on since 2018,
whilst also ensuring we support customers
through the ongoing cost-of-living crisis.

As we look forward, FY24 will be another
year where we face both cost and market
pressures, but the strategic transformation
in our business leaves us confident that
Halfords still has a bright future ahead of it.

Remuneration Outcomes
in Respect of the Year
The annual bonus for FY23 was based 80%
on financial measures (Group profit before
tax – 50%, Group revenue – 15%, Free
Cash Flow – 15%) and 20% on strategic
metrics (NPS, Employee Engagement,

Committee Composition
During the year, the
Committee comprised:

Jill Caseberry Chair

Helen Jones

Tom Singer

Remuneration
Committee meetings
held:

128

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEGroup Services-Related Sales and ESG
(electrification, D&I and collection of Scope
3 data), all equally weighted.

During the year, Group profit before
tax was £51.5m, Group revenue was
£1,591.6m and Free Cash Flow was £3.1m.
Further detail on performance against
strategic targets can be found on page 36.
Performance against targets set resulted
in an annual bonus outcome of 23.75% of
maximum.

However, the Committee considered the
overall outcome in the context of wider
business performance in the year and
determined that downwards discretion should
be applied and no bonus should be paid. In
making this decision, the Committee took
into account a number of factors including
overall stakeholder experience and payouts
for colleagues who received no bonus due to
a PBT threshold being missed. The annual
bonus for FY23 will therefore be 0%.

The FY21 Performance Share Plan (“PSP”)
was based on Underlying EPS (20% of the
award), Group Services related sales (10%
of award), Free Cash Flow (30% of award)
and Relative TSR (40% of the award). Based
on performance against the targets set the
vesting outcome would have been 60.6%

The Committee is mindful of shareholder
expectations 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 pay-out was appropriate.

The Committee considered the outcome
in the context of the shareholder and
stakeholder experience. While the Committee
considered that there has been strong
progress over the three-year performance
period, the Committee recognised the
challenges in the most recent financial year
and determined that it was appropriate to
exercise downward discretion to reduce
vesting to 50% of maximum. This was felt to
be a better reflection of the overall experience
for all stakeholders within the business.

The Committee was also aware of
expectations around adjustments for
windfall gains. However, as 2020 awards
were made at a higher share price to those
in 2019 (and the current share price is lower
than for 2020 awards) it was determined
that there was no windfall gain.

2022 PSP awards
PSP awards were granted in October 2022.
The original intention was to grant an award
of 200% of base salary to the CEO and
an award of 150% of base salary to the
CFO (a reduced award for the first year of
her employment was agreed on joining).
However, taking into account the share
price prior to award and how this compared
to the share price used to determine the
2021 awards, the Committee determined
that it was appropriate to reduce the CEO’s
award to 175% of base salary to guard
against windfall gains. The CFO’s award
remained at 150% of salary given that she
was new to the business and a reduced
award was already proposed.

Awards were based on Underlying EPS
Growth (50%), Relative TSR (30%) and
Group Services-Related Sales (20%). In
light of the macroeconomic uncertainty
around the time of award, the Committee
was still reviewing the performance
measures and targets for the 2022 PSP
awards and these were not disclosed with
the 2022 Remuneration Report. These
targets were determined before award and
are now set out on page 150.

Remuneration for FY24
The current Directors Remuneration Policy
was last approved by shareholders in
September 2020 and is, therefore, due for
renewal at the 2023 AGM. As part of this
process, the Remuneration Committee
reviewed the current policy to assess
whether it remained fit for purpose and
continued to best support the business.
It was decided that, given the high level of
shareholder support received for the previous
policy and the general view that the current
structure remains appropriate to support
the strategy, no major amendments would
be made to the structure of pay, incentive
opportunities or governance features.

The maximum incentive opportunities will
remain at 150% of base salary for the annual
bonus and 200% of base salary for the PSP.

For our new CFO, Jo Hartley, for the first
year of appointment, her annual bonus
and PSP awards were set at 125% and
150% of base salary, respectively, with
the intention that, for FY24 onwards, her
maximum opportunity would increase to
150% and 200% of base salary, subject
to individual performance during the year.
The Committee concluded that Jo has
performed strongly since her appointment
and that her incentive opportunities should
be increased as planned.

After undertaking a thorough review of
performance metrics in the year, the
Committee determined that the majority of
measures remained aligned to the ongoing
focus and strategy of the business, minor
changes have been made to the annual
bonus measures and the PSP measures
are unchanged (although the Committee is
currently reviewing the relative weightings
of the measures). The Annual Bonus for
FY24 will continue to be based 80% on
financial measures and 20% on strategic
and ESG measures. Financial measures for
the year will include underlying PBT, Group
Revenue Growth, Free Cash Flow and
Cost. Cost has been introduced for FY24 to
reflect the importance of cost management
over the next 12 months. Strategic and
ESG measures will include customer NPS,
market share, colleague engagement
and colleague turnover. These are also
considered to be key strategic objectives
for the forthcoming year. The 2023 PSP will
be based on relative TSR, EPS and Group
services-related sales.

Salaries will be reviewed in the year with
increases effective from 1 October 2023.
The Committee’s intentions are that
increases will not exceed those for the
wider workforce. Pension contributions for
both Directors have been aligned with the
maximum employer pension contribution
available to the majority of the workforce
(currently c.3%).

Concluding Remarks
The Committee is committed to an open
dialogue with shareholders and institutional
investor bodies on remuneration matters
and considered shareholder perspectives
in developing the Policy. The Committee
also considers voting on Annual General
Meeting resolutions and is pleased with the
high level of support received, historically,
for its Annual Reports on Remuneration
and for the three-yearly renewal of the
Remuneration Policy. Additionally, the
Committee has sought to promote a
remuneration environment that strongly
aligns the commercial direction of the
Group with the interests of shareholders,
and regularly keeps up to date with best
practice developments and market trends.

I look forward to your support on both the
2023 Directors’ Remuneration Policy and
the FY23 Annual Directors’ Remuneration
Report at the Annual General Meeting.

Jill Caseberry
Chair of the Remuneration Committee

21 June 2023

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halfords.annualreport2023.comRemuneration Committee Report

Remuneration at a Glance

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

Colleagues

Managers

Senior Managers Executive Team

Salary

Pension

Paid holiday

Share plans

Bonus/incentives

Death in service

✔

Car allowance

Job need

Market
dependent

Private medical

✘

✔

Why is Reward Structured Differently at Senior Levels?
The UK 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 to
deliver sustainable long-term shareholder value in a way that is consistent with our culture and values.
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 144 to 146):

Reward at Halfords
underpinned by our values

one halfords
family

wow our
customers

be better
every day

pride in
expertise

Annual Bonus

Targets are assessed over the financial year based on performance against financial and strategic measures
(one-third of any payment is deferred into a Deferred Bonus Plan for three years after payment).

Performance Share
Plan (“PSP”)

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

130

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEExecutive Directors’ Remuneration

Single Total Figure of Remuneration for Executive Directors
for the year ended 31 March 2023

Aligning Pay with Performance

Key Performance Indicator

Result

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 144.

1200

1000

800

600

400

200

£1,189k

£489k

£0k

£511k

£0k

£700k

£511k

CEO (Graham Stapleton)

CFO (Jo Hartley)

Fixed pay

Annual bonus

PSP

2022/23 Annual Bonus
Underlying Group PBT

Group revenue

Free cash flow

Group NPS

£51.5m

£1,591.6m

£3.1m

64.8

Group services-related sales

£700.1m

Group Colleague Engagement 82%

ESG metric

Electric sales

Gender/Diversity

18.75%

6.5%

13.3%

Inclusivity engagement score 81%

Carbon emissions

78.7%

2020 PSP*
Relative TSR

Free cash flow

Underlying basic EPS

upper quartile

£118.5m

-9.8%/17.8p

Services related revenue

37.9%

* Despite the cash flow and some of the strategic targets being met, in
light of the overall PBT performance the Committee determined that no
annual bonus would be paid. The Committee also exercised discretion
to reduce the vesting for the 2020 PSP award to 50% of maximum.

Below threshold target

Between threshold and stretch target

At or above stretch target

Discretion applied to overall outcome, please see page 145
for further detail

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 144 and about the PSP on page 145.

2022/23 Annual Bonus

100

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

100%

20%

15%

50%

30
80

20
10

0
5

Maximum

Actual
after discretion

2020 PSP

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

30%

10%

20%

50%

10%

40%

Maximum

Actual
after discretion

Non-financial measures

Free cash flow

Underlying EPS growth

Revenue

Profit before tax

Service related sales

TSR

Discretion applied to overall outcome, please see page 144 for detail

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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

Underlying
Group PBT

Group Revenue

Free
Cash Flow

Cost

Group NPS

PBT is one of our main KPIs assessing the profitability of
our business and provides stakeholders with information
on trends and performance before the effect of non-
underlying items.

Financial, shareholder

This remains a key indicator of the overall performance of
a retail business as well as the effectiveness of the ongoing
strategy to increase predictable and recurring revenue.

Financial, shareholder

Strong cash flow enables investment in our plan and
returns to shareholders whilst aligning with broader aims to
maintain a strong balance sheet

Financial, shareholder

Cost management is a key focus for FY24, aligned with
delivering our profit ambitions and shareholder value
generation.

Financial, shareholder

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.

Customers, shareholder

Market share

Growing our market share across categories is a key
objective to delivery growth and generate returns for
shareholders.

Financial, shareholder

ESG and colleague
engagement

We are committed to an ambitious ESG agenda and
strategy. For FY24, measures within the annual bonus will
focus on colleague engagement and colleague turnover.
We believe these are key metrics to motivate the workforce,
reduce cost and delivery shareholder value.

Performance Share Plan

ESG, financial, customers, shareholder

Relative TSR

EPS

Aligns management with the wider shareholder experience
and reinforces our ongoing focus in shareholder value
creation.

Financial, shareholder

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.

Financial, shareholder

Group services-
related sales

An indicator of our progress towards the ambition to
become a consumer and B2B Services-focused business
with over half of our business in Services.

Financial, customer, shareholder

132

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCERemuneration Committee Report

Directors’ Remuneration Policy

Directors’ Remuneration Policy
Pages 133 to 143 of this report sets out the Directors’ Remuneration Policy (the “Policy”) that the Company intends to apply, subject to
shareholder approval, from the date of the AGM on 6 September 2023. It is intended that this Policy will apply until the 2026 AGM, unless
the Company seeks shareholder approval for a revised Policy which comes into force before this date. This Policy applies equally to any
individual who is required to be treated as a director under the applicable regulations.

The Directors Remuneration Report addresses provision 40 of the UK Corporate Governance Code, which states that when determining
Executive Director remuneration policy and practices, the Remuneration Committee should address the following:

• clarity – remuneration arrangements should be transparent and promote effective engagement with shareholders and the workforce;

• simplicity – remuneration structures should avoid complexity and their rationale and operation should be easy to understand;

• risk – remuneration arrangements should ensure reputational and other risks from excessive rewards, and behavioural risks that can

arise from target-based incentive plans, are identified and mitigated;

• predictability – the range of possible values of rewards to individual directors and any other limits or discretions should be identified and

explained at the time of approving the policy;

• proportionality – the link between individual awards, the delivery of strategy and the long-term performance of the company should be

clear. Outcomes should not reward poor performance; and

• alignment to culture – incentive schemes should drive behaviours consistent with company purpose, values and strategy.

Base salary

Purpose and link to Strategy

Maximum Opportunity

While there is no maximum salary level, salary increases will
generally be in line with or below increases awarded to other
colleagues in the Group.

However, larger increases may be made at the discretion of the
Committee to take into account circumstances such as:

• changes in an individual’s role or responsibility;

• to reflect an individual’s progression and increase in experience

in the role;

• where a salary is significantly out of line with market practice;

• a significant change in the size and/or scope of the

business; or

• any other exceptional circumstance.

Performance Measures

The payment of salary is not subject to performance conditions.
However, when determining salary increases the performance of
Executive Directors is taken into account.

Base salary is payable in cash. It is set at an appropriate level
to attract and retain management of a high calibre with the
necessary retail, customer-service, financial, digital and service-
industry skills and credentials required to deliver a sustainable
business model and drive shareholder returns.

Operation

Base salaries are normally reviewed annually with increases
effective from 1 October for Executive Directors but may
be reviewed at other times if the Committee c onsiders this
appropriate.

In determining base salary levels and any salary increase,
consideration is usually given to:

• the individual’s experience and the performance of the Group

and the individual;

• salary levels at other companies of a similar size and

complexity and at other UK listed retailers; and

• the pay levels and increases for other employees in the Group.

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Directors’ Remuneration Policy

Benefits

Purpose and link to Strategy

Maximum Opportunity

To provide Executive Directors with market-competitive benefits
consistent with the role.

• The overall level of benefits will depend on the cost of

providing individual items and the individual’s circumstances.
Therefore, there is no maximum level of benefit.

• The maximum participation levels for all-employee share plans
is the same as any maximum applicable to other employees
(and consistent with any relevant HMRC limits).

Operation

Performance Measures

The Committee’s Policy is to set benefits at an appropriate level,
taking into account the individual’s circumstances and market
practice.

None.

Executive Directors can currently receive a car plus fuel or a
cash allowance, private health insurance and life assurance as
standard benefits.

However, the Committee may determine that additional benefits
may be provided based on individual circumstances when it is
considered appropriate.

In the event that an Executive Director is required to relocate to
perform their role then additional one-off or ongoing benefits may
be provided such as relocation expenses, a housing allowance
and education expenses.

The Company reimburses reasonable business expenses and
may pay any tax incurred in relation to these.

Executive Directors are also eligible to participate in any all-
employee share plans operated by the Company on the same
basis as other employees.

Pension

Purpose and link to Strategy

Maximum opportunity

To enable the Company to offer market-competitive remuneration
through the provision of additional retirement benefits.

Pension contributions/allowances for the Executive Directors in
role are aligned with the maximum employer pension contribution
available to the majority of the UK workforce (currently 3% of
base salary).

Operation

Performance Measures

Executive Directors are eligible for defined employer contribution
funding to the Halfords Pension Plan, payments into a personal
fund and/or a cash allowance in lieu of pension or a combination
of the above.

None.

The Committee may determine that alternative arrangements
should apply (including for new hires). When determining such
arrangements, the Committee will consider cost and market
practice (subject to the overall limit set out in the maximum
column).

134

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEAnnual Bonus

Purpose and link to Strategy

Maximum Opportunity

To incentivise Executive Directors to achieve annual financial
targets and performance against key strategic objectives.
Deferral of bonus under the Deferred Bonus Plan (“DBP”) further
incentivises Executive Directors to manage risk and align their
long-term interests with those of shareholders.

The maximum annual bonus opportunity is 150% of base salary.

Operation

Performance Measures

The annual bonus is normally based on performance over one
financial year.

The Committee determines the extent to which targets have
been met.

The Committee may, in its discretion, adjust annual bonus
payments, if it considers that the outcome does not reflect
the underlying financial or non-financial performance of the
participant or the Group over the relevant period, or that such
payout level is not appropriate in the context of circumstances
that were unexpected or unforeseen when the targets were
set. When making this judgement the Committee may take into
account such factors as the Committee considers relevant.

Normally, up to two-thirds of the total bonus is paid in cash.
The remaining one-third of the bonus is normally deferred
as shares. In exceptional circumstances the Committee may
determine that a different portion of the bonus will be paid in
shares or that the bonus may be paid in cash.

Deferred awards normally vest three years from award (or after
such other period as the Committee determines) and have no
additional performance conditions.

Malus and clawback provisions apply, detailed on page 137.
Bonuses are non-pensionable.

The annual bonus measures may be based on financial, strategic,
operational or ESG measures. Measures are selected each year
by the Committee to ensure continued focus on the Company’s
Strategy. At least 50% of the bonus will be based on financial
measures.

Performance measures are set annually to ensure they are
appropriately stretching for the delivery of threshold, target and
maximum performance.

No bonus will be paid for below threshold performance, typically
around 50% of the bonus will be paid for achieving ‘target’ levels
of performance and 100% of bonus will be paid for achieving a
stretching performance target.

Performance targets are set by the Remuneration Committee with
reference to prior year performance, the Group’s business plan as
well as external expectations of performance.

Targets are considered to be commercially sensitive and will be
disclosed retrospectively following completion of the relevant
financial year.

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Directors’ Remuneration Policy

Performance Share Plan (“PSP”)

Purpose and link to Strategy

Maximum Opportunity

To attract and retain Executive Directors of a high calibre. To 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.

Maximum award under the PSP is 200% of base salary.

Operation

Performance Measures

Annual awards of shares with vesting normally based on
performance over a three-year period (or such other period as
the Committee determines). The vesting of awards to Executive
Directors is subject to the satisfaction of performance conditions.

PSP awards may be based on financial, operational/strategic,
ESG or share price related performance measures.

Normally up to 25% of the award may vest for entry-level
performance.

For future awards, the Committee may determine that different
financial, operational/strategic or share price related performance
measures may apply to awards or that a different weighting
between performance measures may apply to ensure continued
alignment with our evolving Strategy.

Targets for the measures will normally be set ahead of each
annual grant by reference to the latest strategic plan, long-term
financial goals and market expectations.

The Committee may, in its discretion, adjust PSP vesting
outcomes, if it considers that the outcome does not reflect
the underlying financial or non-financial performance of the
participant or the Group over the relevant period, or that such
payout level is not appropriate in the context of circumstances
that were unexpected or unforeseen when the targets were
set. When making this judgement the Committee may take into
account such factors as the Committee considers relevant.

A post-vesting retention period will apply to awards granted
under the PSP. Shares that vest will not normally be released
to Executive Directors (and nil-cost options will not normally
become exercisable) for a further two-year period (unless the
Committee determines otherwise) from the point at which the
Committee determined that the performance conditions have
been met. Malus and clawback provisions apply, as detailed on
page 137.

Share ownership guidelines

Purpose and link to Strategy

Maximum opportunity

Align the interests of Executive Directors and shareholders and
encourage long-term shareholding and commitment to the
Company both in and post-employment.

n/a

Operation

Performance Measures

Executive Directors are expected to build and retain a
shareholding with a value equal to at least 200% of their annual
base salary.

n/a

Executive Directors are normally expected to retain 75% of any
post-tax shares that vest under any performance share incentive
plans until this shareholding is reached.

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. The Committee retains discretion to waive this
guideline if it is not considered to be appropriate in the specific
circumstance.

136

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEApproved Payments
The Committee reserves the right to
make any remuneration payments and/
or payments for loss of office (including
exercising any discretions available to
it in connection with such payments),
notwithstanding that they are not in line
with the Policy set out above where the
terms of the payment were agreed (i)
before the Policy set out above came
into effect, provided that the terms of
the payment were consistent with any
applicable shareholder- approved Directors’
Remuneration Policy in force at the time
they were agreed or where otherwise
approved by shareholders; or (ii) at a time
when the relevant individual was not a
Director of the Company (or other persons
to whom the Policy set out above applies)
and, in the opinion of the Committee,
the payment was not in consideration
for the individual becoming a Director of
the Company or such other person. For
these purposes “payments” includes the
Committee satisfying awards of variable
remuneration and, in relation to an award
over shares, the terms of the payment are
“agreed” no later than the time the award is
granted. This Policy applies equally to any
individual who is required to be treated as
a director under the applicable regulations.
This Policy will also inform the remuneration
of colleagues below the executive level.

Information Supporting
the Policy
Malus and Clawback
Malus and clawback provisions apply to
the cash bonus payments and deferred
share awards for a period of three years
from award. Malus and clawback provisions
apply to PSP awards for a period of two
years following its vesting.

The circumstances in which malus and
clawback provisions may apply include: a
material misstatement of the Company’s
results; or misconduct by the Executive
Director; or where there is a material failure
of risk management; or corporate failure;
or serious reputational damage; or if the
Committee considers there are other
circumstances which mean that the malus
and/or clawback provisions should apply.

Share Plan Operation
Awards under the Company’s DBP
and PSP:

• may be granted as conditional share

awards or nil-cost options or in
such other form that the Committee
determines has the same economic
effect;

• may have any performance conditions
applicable to them amended by the
Committee if an event occurs which
causes the Committee to consider that
the existing performance condition
should be amended to ensure that
the objective criteria against which
performance will be measured will be a
fairer measure of such performance and
that the amended performance condition
will afford a more effective incentive to
the Executive Director;

• when assessing the level of vesting under
the PSP, the Committee will consider the
underlying financial performance of the
Company and the value generated for
shareholders and may adjust the level of
vesting if it considers that the outcome
based on the assessment of performance
against targets does not reflect this;

• may incorporate the right to receive
additional shares to the value of
dividends which would have been paid
on the shares under an award that
vests up to the time such shares are
delivered. This amount may be calculated
assuming that the dividends have been
reinvested in the Company’s shares on a
cumulative basis;

• may in respect of the PSP, be settled
in cash or with the grant of a vested
option at the Committee’s discretion.
For Executive Directors, this provision
will only be used in exceptional
circumstances such as where, for
regulatory reasons, it is not possible to
settle awards in shares; and

• may be adjusted in the event of any

alteration of the Company’s share capital
by way of capitalisation or rights issue,
sub-division, consolidation or reduction,
the payment of a special dividend, a
demerger or any other variation of the
share capital of the Company.

Summary of Decision-Making
Process and Changes to Policy
The previous Policy is considered to be
fit for purpose and therefore no material
changes are proposed. In determining the
new Remuneration Policy, the Committee
followed a robust process which included
discussions on the content of the Policy
at Remuneration Committee meetings
during the year. The Committee considered
the input from management and our
independent advisors, and as well as
considering best practice and shareholder
guidance from major shareholders. The
main change for the 2023 Policy compared
to the 2020 Policy is that pension
contributions / allowances for all Executive
Directors in role will now be aligned with the
maximum employer pension contribution
available to the majority of the workforce
(currently 3% of base salary) following the
reduction in the pension allowance for
the CEO from 1 April 2023. Other minor
changes have been made to the wording of
the Policy to aid operation and to increase
clarity or flexibility.

Selection of
Performance Measures
Annual Bonus:
The bonus is subject to a mix of financial
and strategic measures. These measures are
selected each year to provide an appropriate
balance between financial and strategic
objectives and to incentivise individual
Executive Directors to meet corporate
targets and drive individual performance.

Performance Share Plan (“PSP”):
The performance measures for FY24 awards
are (1) EPS growth; (2) Group Services-
Related Revenue; and (3) relative TSR.

EPS growth has been included to incentivise
management to both grow revenue and
manage cost in a balanced way. Group
Services -Related Revenue has been
included to reflect our strategic focus on
increasing services-related revenue to
generate a higher and more sustainable
financial return for shareholders. Relative
TSR is included to ensure vesting levels are
aligned with relative returns to shareholders.

The Committee may determine that different
performance measures will apply to future
PSP awards.

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Directors’ Remuneration Policy

Remuneration Arrangements
elsewhere in the Group
Whilst our Remuneration Policy follows
the same principles across the Group,
remuneration packages for colleagues
reflect their different roles and experiences,
and market practice for similar roles.

The remuneration policy for senior
executives in the Group is similar to the
Policy for Executive Directors as set out
in this report – a substantial proportion of
remuneration is performance-related in
order to encourage and reward superior
business performance and shareholder
returns and remuneration is linked to both
individual and Company performance.

Basic salary is targeted at normal
commercial rates for comparable roles
and is benchmarked on a regular basis.
Bonuses can be earned on a similar basis
as the Executive Directors (there are some
variations to take account of the specific
role performed by the relevant senior
executive). Senior executives below Board
level also benefit from participation in
the PSP.

Increases to executive managers’ base
salaries are considered at the same time
as all other colleagues across the Group
and increases are generally in line with all
colleagues.

For the majority of our colleagues, overall,
the Remuneration Policy for the Executive
Directors is more heavily weighted towards
variable pay. This ensures that there is
a clear link between value created for
shareholders and remuneration received
by Executive Directors and it recognises
that Executive Directors should have the
greatest accountability and responsibility for
increasing shareholder value.

All of the Group’s c.12,000 colleagues are
eligible to join the Halfords Sharesave
Plan (also known as “SAYE”) after they
have served one complete month’s
service. Where appropriate, some groups
of colleagues are eligible for a quarterly or
full-year bonus, although the type, limits
and performance conditions vary according
to job level. Senior managers and other key
management individuals are invited to join
the Restricted Share Plan.

All newly appointed colleagues and other
existing colleagues who had experienced
a ‘joining-trigger’ event were automatically
enrolled into the Halfords Pension Plan
2009. All eligible colleagues who have met
the auto enrolment criteria have the option
to choose to join the Pension Plan from
their first day of employment. All members
of the Pension Plan are required to make
a minimum contribution of 5% and the
Company also contributes a minimum of

3%, dependent on length of service and
seniority.

During the year, the Company has met
its obligations under the pensions auto
enrolment legislation, auto enrolling all other
colleagues as appropriate.

Remuneration Outcomes in
Different Performance Scenarios
As outlined above, the Remuneration Policy
is designed to ensure that a substantial
proportion of the Executive Directors’
remuneration is variable and performance-
related.

By linking the remuneration of the individual
Executive Director to the performance of
the Company, the Committee seeks, as
far as possible, to motivate that individual
towards superior business performance
and shareholder value creation, and to
only pay rewards when these goals have
been realised. Performance measures
are aligned with strategic goals so that
remuneration arrangements are transparent
to Executive Directors, shareholders and
other stakeholders.

The charts below illustrate remuneration
arrangements in different performance
scenarios. The assumptions for each
scenario are outlined below:

Below threshold performance

Mid-range performance

Maximum performance

Fixed remuneration

No annual bonus pay-out

No vesting under the PSP

Fixed remuneration

50% annual bonus pay-out

50% vesting under the PSP

Fixed remuneration

100% annual bonus pay-out

100% vesting under the PSP

Maximum performance plus 50% share price growth

Fixed remuneration

100% annual bonus pay-out

100% vesting under the PSP + 50% share price growth

138

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEFour performance scenarios have been illustrated for each Executive Director:

• When determining any such “buy-out”,

The charts have been prepared on the following basis:

• Base salary – the base salary in place at 31 March 2023.

• Benefits – based on the disclosed benefits value in the single figure for 2022/23.

• Pensions – based on a contribution of 3% of salary.

• Bonus – based on the maximum award of 150% of base salary.

• PSP – based on the maximum award of 200% of base salary.

No payment of dividend equivalents has been assumed. Potential benefits under all-employee
plans have not been included. No share price growth has been assumed other than where stated.

£3,500,000

£3,000,000

£2,500,000

£2,000,000

£1,500,000

£1,000,000

£500,000

£0

£3,335,842

£2,737,104

54%

£1,689,313

44%

35%

£641,521

27%

33%

27%

£2,195,952

£1,800,952

£1,109,702

44%

54%

36%

£418,452

27%

33%

27%

100%

38%

23%

19%

100%

38%

23%

19%

Minimum

On-target Maximum Maximum
with 50%
share price
increase

Minimum On-target Maximum Maximum
with 50%
share price
increase

Chief Executive Officer – Graham Stapleton

Chief Financial Officer – Jo Hartley

Fixed pay

Annual bonus

PSP

Fixed pay has been calculated as follows:

CEO
CFO

Base salary
£598,738
£395,000

Benefits
£24,821
£11,602

Pension
£17,962
£11,850

Total Fixed Pay
£641,521
£418,452

Remuneration Policy for
Newly Appointed Directors
When determining the remuneration
package for a newly appointed Executive
Director, the Committee would seek to
apply the following principles:

• The package should be market competitive
to facilitate the recruitment of individuals
of sufficient calibre to lead the business.
At the same time, the Committee would
intend to pay no more than it believes is
necessary to secure the required talent.

• New Executive Directors will normally
receive a base salary, benefits and
pension contributions in line with the
Policy described on pages 133 to 143
and would also be eligible to join the
bonus and share incentive plans up to
the limits set out in the Policy.

• In addition, the Committee has discretion

to include any other remuneration
component or award which it feels
is appropriate, taking into account
the specific circumstances of the
recruitment, subject to the limit on variable
remuneration set out below. The key terms
and rationale for any such component
would be disclosed as appropriate in the
Remuneration Report for the relevant year.

• Where an individual forfeits outstanding
variable pay opportunities or contractual
rights at a previous employer as a result
of appointment, the Committee may offer
compensatory payments or awards, in
such form as the Committee considers
appropriate, taking into account all
relevant factors, including the form of
awards, expected value and vesting
timeframe of forfeited opportunities.

the guiding principle would be that awards
would generally be on a “like-for-like” basis
unless this is considered by the Committee
not to be practical or appropriate.

• The maximum level of variable

remuneration which may be awarded
(excluding any “buy-out” awards referred
to above) in respect of recruitment is
350% of salary, which is in line with the
current maximum limit under the annual
bonus and PSP.

• Where an Executive Director is required to
relocate from their home location to take
up their role, the Committee may provide
assistance with relocation (either via one-
off or ongoing payments or benefits).

• In the event that an internal candidate

is promoted to the Board, legacy terms
and conditions would normally be
honoured, including any accrued pension
entitlements and any outstanding
incentive awards.

To facilitate any buy-out awards outlined
above, in the event of recruitment, the
Committee may grant awards to a new
Executive Director relying on the exemption
in the Listing Rules which allows for the
grant of awards, to facilitate, in unusual
circumstances, the recruitment of an
Executive Director, without seeking prior
shareholder approval or under any other
appropriate Company incentive plan.
The remuneration package for a newly
appointed Non-Executive Director would
normally be in line with the structure set
out in the policy table for Non-Executive
Directors on page 141.

Executive Directors’
Service Agreements
Term and Notice Periods
The Company’s policy in relation to
contractual terms on termination, and
any payments made, is that they should
be fair to the individual, the Company
and shareholders. Failure should not be
rewarded and the departing Executive
Director’s duty to mitigate any loss he or
she suffers should be recognised. The
notice period for the current Executive
Directors is six months on either side. The
Committee policy is that the notice period
for new Executive Directors will be no
more than 12 months. The Committee will
continue to review this policy, to ensure that
it remains in line with the Company’s overall
Remuneration Policy.

139

halfords.annualreport2023.comRemuneration Committee Report

Directors’ Remuneration Policy

Graham Stapleton
Jo Hartley

Date of service agreement
8 September 2017
19 April 2022

Notice period
6 months
6 months

Termination of Contract
No compensation would be payable if a
service contract were to be terminated by
notice from an Executive Director or for
lawful termination by the Company (other
than as set out below). The Company
may terminate service agreements in
accordance with the appropriate notice
periods. In the event of termination for any
reason (other than for a reason justifying
summary termination in accordance with
the terms of the service agreement) the
Company may (but is not obliged to) pay
to the Executive Director, in lieu of notice, a
sum equal to the Executive Director’s then
salary, benefits and pension contributions,
which he or she would have received during
the contractual notice period, the sum of
which shall normally be payable in monthly
instalments (but may be paid in a fixed
amount at the discretion of the Committee).

Executive Directors who are considered
to be good leavers may, if the Committee
determines, receive a bonus for the financial
year in which they leave employment. Such

bonus will normally be calculated on a pro
rata basis by reference to their period of
service in the financial period in which their
employment is terminated and performance
against targets.

The Committee reserves the right to make
any other payments in connection with a
Director’s cessation of office or employment
where the payments are made in good faith
in discharge of an existing legal obligation
(or by way of damages for breach of such
an obligation) or by way of settlement
of any claim arising in connection with
the cessation of a Director’s office or
employment. In addition, the Committee
reserves the right, acting in good faith, to
pay fees for outplacement assistance and/
or the Director’s legal and/or professional
advice fees in connection with his or her
cessation of office or employment.

Mitigation on Termination
Where a contract has been terminated
early, and the Executive Director is
engaged to provide services (under a
service agreement, consultancy, or any

other arrangement or understanding), with
effect from the date upon which these
services are provided each subsequent
instalment of pay in lieu shall be reduced by
an amount equal to any basic salary, fees,
remuneration or other financial benefits
received during the monthly interval prior to
the payment of each instalment.

In good leaver circumstances, the Executive
Director might be offered a lump sum
termination payment paid at the time they
cease employment.

Change of Control
The service agreements of Executive
Directors do not provide for any enhanced
payments in the event of a change of
control of the Company.

Inspection of Contracts
The Executive Directors’ services contracts
are available for inspection by shareholders
at the Company’s registered office.

Share Plans – Leaver Treatment
The treatment of outstanding share awards
in the event that an Executive Director
ceases to hold office or employment with
the Group of the Company’s associated
companies is governed by the relevant
share plan rules.

The following table summarises leaver
provisions under the executive share plans:

Leavers in other circumstances
(other than gross misconduct)

Unvested awards lapse on leaving.

Awards for which the performance condition has been met at the
time of leaving but which were subject to a retention period will
continue to be released at the end of the retention period.

The Executive Director has 12 months from either leaving,
or, if later, the end of the retention period to exercise vested
but unexercised options (if applicable) unless the Committee
determines otherwise.

‘Good leavers’ as determined by the Committee

Performance Share Plan (“PSP”)

Awards will normally vest at the end of the performance period
and be released at the end of the retention period.

The Committee will determine the level of vesting, having due
regard to the extent to which the performance conditions have
been met and, unless the Committee determines otherwise, the
proportion of the performance period that had elapsed at leaving.

The Executive Director has 12 months from the end of the
retention period to exercise options if awards are structured as
nil-cost options.

Alternatively, the Committee may determine that awards should
vest and be released at the time of leaving on the basis set out
above. In these circumstances the Executive Director has 12
months from his or her date of leaving to exercise options if
awards are structured as nil-cost options.

Deferred Bonus Plan (“DBP”)

Performance Measures

Outstanding awards vest on leaving.

Awards will lapse on leaving.

The Executive Director has six months from leaving to exercise
options (12 months in the case of death).

140

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCE‘Good leavers’ include death, injury, ill-
health, disability, redundancy, retirement,
sale of the individual’s employing business
or company out of the Group or to a
company which is not associated with the
Company or in any other circumstances the
Committee determines.

Change of Control
In the event of a change of control of the
Company, PSP awards may vest and
be released (pro-rated for time elapsed

in the performance period unless the
Committee determines otherwise) to the
extent that the Committee determines the
performance condition should be deemed
satisfied having regarding to the Company’s
progress towards that condition. The
Committee may allow awards to vest on
the same basis in the event of a voluntary
winding up or reconstruction of the
Company or a demerger except that in the

event of a demerger the Committee may
determine the extent to which awards shall
be time pro-rated.

DBP awards may vest on a change of
control, reconstruction, winding up or
demerger of the Company.

Alternatively, awards may be rolled over into
equivalent awards in a different company.

Remuneration Policy table for Non-Executive Directors

Purpose
and Link
to Strategy

To attract and
retain high-calibre
individuals to serve
as Non-Executive
Directors.

Maximum value

Overall fees paid to
Directors will remain
within the limit stated in
the Company’s Articles
of Association, currently
£600,000.

Non-Executive Directors
and the Chair are not
entitled to participate in
any cash or share incentive
schemes.

Operation

Fee levels are set to reflect the time, commitment and experience of the Chair
of the Company and the Non-Executive Directors, taking into account fee levels
at other companies of a similar size and complexity and at other UK listed
retailers.

The fees of Non-Executive Directors shall be reviewed at appropriate intervals
to ensure that they are in line with market conditions and any changes to fees
will be approved by the Board as a whole following a recommendation from the
Chief Executive Officer.

Fees for the Chair of the Company shall be reviewed at appropriate intervals to
ensure that they are in line with market conditions and any changes to said fees
will be approved by the Board as a whole.

The fees are normally paid in cash quarterly but may be paid in shares if this is
considered appropriate.

The Company Chair is paid a single fee which includes the chairmanship of the
Nomination Committee.

The Non-Executive Directors are paid a base fee plus additional fees for the
chairing of a Board Committee. An additional fee is also paid to the Senior
Independent Director.

Further additional fees may be paid to reflect additional time, commitments, or
Committee or Board responsibilities if this is considered appropriate.

The Company reimburses reasonable business expenses and may settle any
tax incurred in relation to these.

The Company Chair and Non-Executive Directors are not entitled to participate
in any of the Group’s incentive plans or pension plans.

The Company Chair and Non-Executive Directors do not currently receive other
benefits, but reasonable benefits may be provided in the future if appropriate.

141

halfords.annualreport2023.com

Remuneration Committee Report

Directors’ Remuneration Policy

Appointment
None of the Non-Executive Directors has an employment contract with the Company. However, each has 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.

The remuneration package for a newly appointed Non-Executive Director would normally be in line with the structure set out in the policy
table for Non-Executive Directors above.

The appointment period for each Non-Executive Director is set out below:

Director
Keith Williams
Helen Jones
Jill Caseberry
Tom Singer

Date of current appointment
24 July 2021
1 March 2023
1 March 2022
16 September 2020

Expiry date
23 July 2024
6 September 2023
28 February 2025
15 September 2023

Unexpired term at the
date of report
13 months
3 months
20 months
3 months

Terms and Conditions for the Chair of the
Company and Non-Executive Directors
The Company Chair and Non-Executive
Directors serve the Company on the
basis of renewable letters of appointment
which can be terminated by written notice
by either party. The Company Chair’s
appointment is subject to three months’
notice and the other Non-Executive
Directors are also subject to three months’
notice. No compensation is awarded on
termination. Letters of appointment are
available for inspection at the AGM and the
Company’s registered office.

Termination of Non-Executive Directors’
Letters of Appointment
No compensation would be payable to
a Non-Executive Director if his or her
engagement were terminated as a result of
him or her retiring by rotation at an Annual
General Meeting, not being elected or re-
elected at an Annual General Meeting or
otherwise ceasing to hold office under the
provisions of the Articles of Association of
the Company. There are no provisions for
compensation being payable upon early
termination of the appointment of a Non-
Executive Director.

Their appointments are subject to the
provisions of the Companies Act 1985
and 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 by the Company
Chair. The Company Chair is evaluated by
the Senior Independent Director.

Inspection of Contracts
The Non-Executive Directors’ letters of
appointment are available for inspection by
shareholders at the Company’s registered
offices.

Dialogue with Shareholders
The views of our shareholders are very
important to the Committee and it is
our policy to consult with our largest
shareholders in advance of making
any material changes to the executive
remuneration arrangements.

The Remuneration Committee considered
the guidelines issued by bodies
representing institutional shareholders and
feedback from shareholders on the Group’s
remuneration policies and practices.

Details of votes cast for and against the
resolution to approve the prior year’s
remuneration report and any matters
discussed with shareholders during the
year are referred to in the Annual Report
on Remuneration which can be viewed on
page 143.

Dialogue with Colleagues
The Committee generally considers pay and
employment conditions elsewhere in the
Group when considering pay for Executive
Directors and senior management. When
considering base salary increases, the
Committee reviews overall levels of base
pay increases offered to other colleagues in
the Group.

The Committee does not consult directly
with colleagues regarding Executive
Directors’ remuneration. However, at
regular intervals, the Company conducts
a survey of the views of colleagues in
respect of their experience of working at
Halfords, including their own reward. The
Company also conducts regular listening
groups across the Group; these are chaired
by senior executives or Director-level
colleagues and cover a wide range of
subjects, including communication, pay,
benefits and ESG issues.

The Committee is also mindful of any
changes to the pay and benefit conditions
for employees more generally when
considering the policy for Directors’ pay.
When determining incentive outcomes for
Directors, including if discretion should be
applied, the committee will also consider
workforce pay and broader incentive
outcomes.

142

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEStructure 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
156 to 165, 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

Six 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.

Activities 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
FY22 Annual Report and Accounts.

• Developed, discussed and reviewed the
Remuneration Policy for shareholder
approval at 2023 AGM.

• Discussed and approved incentive

outcomes for FY23.

• Reviewed and approved the

organisational design changes.

• Approved grants under the Company’s

share schemes.

• Considered the approach to

implementing remuneration policy for
FY23, including setting Executive Director
and Non-Executive Director salaries from
1 October 2022.

• Reviewed considering and setting the

approach to performance measures for
the FY23 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.

• Received a market update on the

executive pay landscape.

• Reviewed and approved the appointment

of remuneration advisors and set the
appropriate fee.

Advisors and Other Attendees
During the year, the Committee has
been supported by the Chief People
Officer, the Head of Reward together with
the 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 not 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 £47,900 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 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 £4,445 charged on a
time and materials basis. WTW also provide
insurance broking services and employee
benefits services to the Group.

Shareholder Dialogue
The voting outcome from the 2022 AGM
showed strong support for our FY22
Directors’ Remuneration Report. The
following table sets out the votes cast at the
2022 AGM in respect of the FY22 Directors’
Remuneration Report.

FY22 Directors’ Remuneration Report*
FY20 Remuneration Policy**

* 45,248 votes (0.03% of votes) were withheld in relation to this resolution
** 40,378 votes (0.03% of votes) were withheld in relation to this resolution

% of votes
For
90.75%
97.58%

% of votes
Against
9.25%
2.42%

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.

143

halfords.annualreport2023.comRemuneration Committee Report

Annual Report on Remuneration

How the Remuneration Policy was Implemented in FY23 – Executive Directors
Single Remuneration Figure (Audited)

2022/23

Graham Stapleton
Jo Hartley4
Loraine Woodhouse5
2021/22
Graham Stapleton
Loraine Woodhouse

Base
Salary
(£)

587,224
376,190
93,778

570,619
365,985

Benefits
(£)

Pension
(£)

24,821
11,602
3,096

22,767
12,510

88,084
11,286
13,996

85,593
54,898

Other
(£)

–
112,017
–

Total
Fixed
(£)

700,129
511,095
110,870

Bonus3
(£)

–
–
–

PSP
(£)

489,2551
–
222,9121

Total
Variable
(£)

489,255
–
222,912

Total
“Single
Figure”
(£)

1,189,384
511,095
333,782

–
–

678,979
433,393

679,352 1,394,1602
846,9382
435,723

2,073,513
1,282,661

2,752,491
1,716,054

1 For 2022/23, the 2020/21 PSP has been valued based on the average share price during the three-month period to 31 March 2023 of £1.97 and a vesting outcome of 50% as

referenced on page 145. The share price used to determine the level of award was £2.425; therefore, no portion of the value disclosed is attributable to share price appreciation over
the performance period. No discretion has been exercised in relation to share price changes.

2 For 2021/22, the 2019/20 PSP value had been restated to reflect the share price at the date of vesting of £2.20 compared to the average three month share price of £2.98 used in

the FY22 Remuneration Report. The values disclosed in FY22 was £1,787,713 for Graham Stapleton and £1,146,601 for Loraine Woodhouse. No discretion was applied in relation to
share price changes.

3 One-third of the annual bonus is deferred into shares for three years.
4 Jo Hartley recieved a payment of £112,017 upon joining to replace a cash bonus she was required to repay on cessation of employment from her previous employer.
5 Loraine Woodhouse has retired. The single figure sums relate to her work during the transitory period until June 2022.

Benefits
Benefits include payments made in relation to a car plus fuel or a cash allowance, private health insurance and life assurance. For Graham
Stapleton, the car plus fuel allowance came to £22,026, for Jo Hartley £10,640 and Loraine Woodhouse £2,830.

Pension
Pension payments represent contributions made either to defined contribution pension schemes or as a cash allowance. Graham
Stapleton received a contribution of 15% of base salary until 1 April 2023 when Graham’s contribution reduced to 3% of base salary to
ensure alignment with the maximum employer pension contribution available to the majority of the workforce. As a new joiner during the
year, Jo Hartley received a contribution of 3% of base salary in line with the majority of the workforce.

FY23 Annual Bonus
The annual bonuses for FY23 for the Executive Directors were based as follows:

Underlying PBT (£m)
Group Revenue (£m)
Free Cash Flow (£m)1

Threshold

£60
£1,556.9
£(25.9)

Target

£70
£1,585
£(17.8)

Maximum

£90
£1,641.1
£(1.6)

FY23
Achievement

FY23 Outturn
before discretion

FY23 Outturn
post discretion

£53
£1,591.6
£3.1

0%
0%
100%

0%
0%
0%

Target

Strategic
Measures (50%
of award)
Group Colleague
Engagement
Group NPS
(FY23 score)
Group Services
Related Sales (£m) £697.9m
ESG2

80-82%

65.3

• Increase
electric
sales as
a % of
total group
sales –
from 5.9%
to 6.2%

FY23 Achievement

FY23 Outturn
before discretion

FY23 Outturn
post discretion

82%

64.8

£700.1m
Electric: 6.5%
Gender: 13.3%
D&I: 81%
Scope 3: 78.7%

50%

0%
Total vesting: 0%

50%
Electric: 100%

Gender: 0%

D&I: 0%

Scope 3: 100%

Stretch

83%

65.8

£716.7m
Diversity and Inclusion
• Improve gender/diversity within our
management positions in our retail
stores and Autocentres from 13%
to 15.8%

• Maintain the better than

average engagement score on
inclusivity – 84%

• Collect carbon emissions data from
our supply base for 70% of our total
group spend (scope 3)

1 Cash flow here is defined as EBITDA plus the movement in average working capital in FY23 compared to the prior year.
2 For the ESG KPI, the stretch element of the target will be split evenly between the scope 3 (50%) and D&I targets (25% for gender diversity and 25% for engagement).

Based on the performance of targets set, the aggregate outcome would have been 23.75%, however, the Committee considered the
overall outcome in the context of wider business performance in the year and determined that downwards discretion should be applied
and no bonus should be paid. In making this decision, the committee took into account a number of factors including overall stakeholder
experience and payouts for employees who received no bonus due to a PBT threshold being missed. The annual bonus outcome for FY23
was therefore 0%.

144

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEPerformance Outcomes for 2020 PSP Awards

Metric
Group services-related sales (total of
sales for FY21 to FY23)
Underlying EPS growth – CAGR
Free Cash Flow (aggregate FY21
to FY23)
Relative TSR
Total

Threshold
targets (25%
vesting)

Maximum
targets (100%
vesting)

Weighting

Estimated %
total award
vesting
before discretion

Estimated %
total award
vesting
post discretion

Performance

10%
20%

30%
2.5%

35%
8%

37.9%
(-9.8%)

30%
£118.5m
40% Market median Upper quartile Above upper quartile

£117m

£128m

100%
0%

35.23%
100%
60.6%

50%

The Committee considered the outcome in the context of the shareholder and stakeholder experience. While the Committee considered
that there has been strong progress over the three-year performance period, the Committee recognised the challenges in the most recent
financial year and determined that it was appropriate to exercise downward discretion to reduce vesting to 50% of maximum. This was felt
to be a better reflection of the overall experience for all stakeholders within the business.

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
21 October 2022

Jo Hartley

21 October 2022

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

Number
of shares1
627,0451

Maximum face
value of award3
£1,047,792

Threshold vesting
(% of award)
25%

354,5782

£592,500

25%

Performance
period
2 April 2022 to
28 March 2025
2 April 2022 to
28 March 2025

The original intention was to grant an award of 200% of salary to the CEO and an award of 150% of base salary to the CFO (a reduced award for the first year of her employment
was agreed on joining). However, taking into account the share price prior to award and how this compared to the share price used to determine the 2021 awards, the Committee
determined that it was appropriate to reduce the CEO’s award to 175% of base salary to guard against windfall gains. The CFO’s award remained at 150% of salary given that she
was new to the business and a reduced award was already proposed.

2 This award was based on 150% of salary as it was agreed that the CFO would receive a reduced award for the first year in role.

3 Based on the average mid-market price on three preceding days of the awards of £1.671 on 21 October 2022.

Performance Conditions
The performance conditions and targets for PSP awards granted during FY23 are as follows:

Award
(175% for the CEO and 150%
of salary for the CFO)

100% vesting
Straight-line vesting

25% vesting
0% vesting

Underlying EPS
growth – CAGR
(50% of the award)
34.5 pence or higher
Between 24.7 pence
and 34.5 pence

Relative TSR
(30% of the award)
Upper quartile
Between market
median and upper
quartile
Market median
Below 24.7 pence Below market median

24.7 pence

Group services
-related sales
(total of sales for
FY23 to FY25)
(20% of the award)
Above £934.0m
Between £840.6m
and £934.0m

£840.6m
Below £840.6m

The award shares that vest will become exercisable in 2025. The shares that vest will be subject to a two-year holding period.

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 2022
30 June 20223

Number of
shares1
158,467
101,638

Maximum
face value of
award2
£226,449
£145,241

Vesting
30 June 2025–30 June 2026
30 June 2025–30 June 2026

1 One third of the FY22 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 £1.429 on 30 June 2022.
3 Loraine left the business on 1 July 2022 and, as a good leaver, she exercised her award on 11 August 2022.

145

halfords.annualreport2023.comRemuneration Committee Report

Annual Report on Remuneration

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

Grant
price8
(£)

Awards
held
2 April
2022

Awarded
during the
period

Dividend
reinvest-
ment9

Forfeited
during
the
period

Lapsed
during
the
period

Exercised
during the
period

Award date

Graham
Stapleton

Jo Hartley1
Loraine
Woodhouse2

5 Oct 20183

3.1970

331,575

20 Sept 20194

16 Oct 20205

7 Oct 20216

21 Oct 20227

9 Nov 20182

20 Sept 20194

16 Oct 20205

7 Oct 20216

1.696

2.425

2.921

1.671

3.079

1.696

2.425

2.921

–

600,226

469,596

390,592

–

627,045

354,578

225,232

384,972

301,188

250,518

–

18,496

33,483

26,195

21,788

10,374

5,866

–

75,297

146,136

–

Awards
held
31 Mar
2023

350,071

633,709

Perform-
ance period
years to

Holding
period to

2 Apr 2021

2 Apr 2023

1 Apr 2022

1 Apr 2024

495,791

31 Mar 2023

31 Mar 2025

412,380

29 Mar 2024

3 Apr 2026

637,419

28 Mar 2025

28 Mar 2027

360,444

28 Mar 2025

28 Mar 2027

225,232

384,972

2 Apr 2021

2 Apr 2023

1 Apr 2022

1 Apr 2024

225,891

31 Mar 2023

31 Mar 2025

104,383

29 Mar 2024

3 Apr 2026

1 Jo Hartley was appointed CFO on 16 June 2022.

2 Loraine Woodhouse left the business due to retirement on 1 July 2022. The award granted on 9 November 2018 vested prior to Loraine’s departure, therefore Loraine was entitled to
retain the entire award until vesting. The unvested awards granted on 16 October 2020 and 7 October 2021 have been pro-rated accordingly. Loraine did not receive a PSP award
in 2022.

3 The FY19 award granted in 2018 vested at 84.9% in April 2021, a two-year deferral period is attached to the award. The deferral is applied as a gross holding retention period which
means the award cannot be exercised until the second anniversary of vesting (April 2023). The award continues to attract dividend reinvestment shares during the deferral period.

4 The FY20 award granted on 20 September 2019 vested at 100% in April 2022, a two-year deferral period is attached to the award. The deferral is applied as a gross holding retention

period which means the award cannot be exercised until the second anniversary of vesting (April 2024). The award continues to attract dividend reinvestment shares during the
deferral period.

5 The FY21 award granted on 16 October 2020 is subject to 40% 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 a net debt underpin.

6 The FY22 award granted on 7 October 2021 is subject to 50% underlying EPS growth (25% vesting at 5% CAGR. 100% vesting at 12% CAGR), 30% to Relative TSR (25% vesting

achieving below market median. 100% vesting achieving upper quartile), and 20% to Group services related sales (25% vesting for £586.2m, 100% vesting for £617.0m).

7 The FY23 award granted on 21 October 2022 is subject to 50% underlying EPS growth (25% vesting at 24.7p in FY25. 100% vesting at 34.5p in FY25), 30% to Relative TSR (25%
vesting achieving below market median. 100% vesting achieving upper quartile), and 20% to Group services related sales (25% vesting for £840.6m, 100% vesting for £943.0m).

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

9 The interim and final dividends have been reinvested in shares at prices between £1.5544 and £1.813199.

Deferred Bonus Plan (“DPB”)

Grant
price1
(£)

Awards
held
2 Apr
2022

Awarded
during
the
period

Dividend
reinvest-
ment2

Forfeited
during
the
period

Lapsed
during
the
period

Exercised
during
the
period

Awards
held
31 Mar
2023

Graham
Stapleton

Loraine
Woodhouse4

Award
date
31 May
2018

30 June
2021

30 June
2022
30 June
2021
30 June
2022

3.3760

13,835

4.312

61,620

–

3,436

1.429

–

158,467

8,839

4.312

39,521

–

1.429

–

101,638

–

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 £1.554 and £1.813199.

3 Graham exercised the award on 13 April 2022.

4 Loraine left the business as a good leaver on 1 July 2022 and exercised her awards on 11 August 2022.

146

–

13,8353

–

Vesting

N/A
30 June
2024-
30 June
2025
30 June
2025-
30 June
2026

–

65,056

–

167,306

39,521

101,638

–

N/A

–

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCECEO Pay Compared to Performance
The following graph shows the TSR performance of the Company since April 2013, 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).

180

160

140

120

100

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

3
2
0
2

Halfords Group

FTSE All-Share General Retailers

Source: Thomson Reuters Datastream

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.

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23

CEO Single Figure (£000)
Graham Stapleton1
Jonny Mason2
Jill McDonald3
Matt Davies4
Annual Bonus (% of maximum)
Graham Stapleton1
Jonny Mason2
Jill McDonald3
Matt Davies4
PSP Vesting (% of maximum)
Graham Stapleton1
Jonny Mason2
Jill McDonald3
Matt Davies4

–
–
–
1,372

–
–
–
97.5%

–
–
–
–

–
–
–
645

–
–
–
–

–
–
851
54

–
–
23.5%
–

–
–
–
–

–
–
741
–

–
–
–
–

1,818
236
295
–

70%
42.3%
–
–

–
–
–
–

670
–
–
–

678
–
–
–

2,699
–
–
–

2,752
–
–
–

–
–
–
–

92.5% 79.37%
–
–
–

–
–
–

84.9%
–
–
–

100%
–
–
–

1,189
–
–
–

0%
–
–
–

50%
–
–
–

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.

147

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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.

Shareholding guideline
Shareholding as at 31 March 2023
Current value (based on share price on 31 March 2023)
Current % of salary

1 Jo Hartley was appointed as CFO on 16 June 2022.

Graham Stapleton
200%
683,9462
£1,195,538
199.68%

Jo Hartley1
200%
-
£-
-%

Loraine Woodhouse3
200%
412,2992
N/A
N/A

2 The shareholding figure include the vested shares from the 2018 and 2019 Performance Share Plan awards (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 and 2022 (on a net of tax basis).

3 Loraine Woodhouse left the business due to retirement in 2022. The figures shown are as of 1 July 2022 being her date of departure.

These figures include those of their spouse or civil partner and infant children, or stepchildren, as required by Section 822 of the
Companies Act 2006. There was no change in the beneficial interest of Graham Stapleton and Jo Hartley between 31 March 2023 and 20
June 2023.

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
vested from 1 April 2020.

Executive Directors’ Appointments
Director
Graham Stapleton
Jo Hartley

Date of Service Agreement
8 September 2017
1 October 2021

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.

Appointment Terms for Jo Hartley
Jo Hartley joined Halfords on 19 April 2022 and assumed the role of Chief Financial Officer on 16 June 2022 upon Loraine Woodhouse’s
departure.

Jo 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 recognised 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 were 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. As outlined in last years report, the
intention was subject to satisfactory individual performance, to increase Jo’s annual bonus and PSP award opportunities in line with the
incentive opportunities for the previous CFO. The Committee is of the view that Jo has performed strongly during the year and therefore
Jo’s annual bonus and PSP opportunity will be increased to 150% and 200% of base salary respectively.

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 was
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 retired from the Board on 1 July 2022 following four years as Chief Financial Officer.

In line with the Remuneration Policy, the Remuneration Committee approved good leaver status for Loraine in relation to her outstanding
share awards. The awards were 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 vested on cessation of employment.

Loraine 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.

148

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEThe Committee determined that Loraine was eligible to participate in the FY23 annual bonus on a pro-rated basis given that she was
employed for part of the year. As noted above, there was no bonus payout in FY23. Loraine did not receive a PSP award in 2022.

Her salary, benefits and pension were paid up until her departure date and there was 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 FY23 – Non-Executive Directors
Non-Executive Director single figure comparison (Audited)

Senior
Independent
Director fee
(£)
–
10,000

Board fees
(£)
199,787
53,999

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

Taxable
benefits1
(£)
–
213

Total “Single
Figure”2
2023
(£)
199,787
74,212

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

53,999

–

10,000

438

346

64,437

62,600

64,345

62,470

Role

Director
Keith Williams3 Company Chair
Helen Jones

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

Tom Singer

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.

Keith Williams did not claim any taxable benefits during the year.

Non-Executive Director Shareholding
Director

Keith Williams
Helen Jones
Jill Caseberry
Tom Singer

2023

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

2022

150,000
8,000
3,125
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 31 March 2023 and 21 June 2023.

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 have 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 Jones1
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-23
16-Sep-20
24-Jul-21

Expiry date

28-Feb-25
06-Sep-231
15-Sep-23
23-Jul-24

Unexpired term at the
date of this report

20 months
3 months
3 months
13 months

1 Helen Jones has reached her nine-year tenure and will step down from the Board at the AGM on 6 September 2023.

149

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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 FY24 – Executive Directors
Salary
The salary for the CEO, Graham Stapleton, was increased by 4% with effect from 1 October 2022 in line with the increase received across
the wider workforce. As Jo Hartley had joined the business after 1 April 2022, she was not eligible for the pay review on 1 October 2022.

The salaries for the current Executive Directors are as follows:

CEO – Graham Stapleton
CFO – Jo Hartley

Salaries will next be reviewed with effect from 1 October 2023.

£598,738
£395,000

Pension
In line with the Remuneration Policy, on 1 April 2023, Graham Stapleton’s pension allowance was reduced from 15% to 3% to be in line
with the rate available for the wider workforce. Jo Hartley received a pension opportunity of 3% of salary upon appointment.

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.
As previously disclosed it was intended that subject to satisfactory individual performance, from FY24 the bonus opportunity would to
150% of base salary in line with the Remuneration Policy and the opportunity level of her predecessor. The Committee is of the view that
Jo has performed strongly since her appointment and the bonus opportunity will, therefore, be 150% of salary.

For FY24, following a review of the performance measures, the Committee agreed the overall annual bonus measures work well and
support the strategy and only minor changes are proposed. A cost measure will be introduced alongside the existing financial measures
reflecting the importance of cost management over the next 12 months. The strategic and ESG measures for FY24 will be linked to
colleague engagement, customer NPS, market share and colleague turnover.

Performance measures for FY24 annual bonus
Financial Measures
• Underlying PBT (£m) - 50%

• Group Revenue (£m) - 10%

• Free Cash Flow (£m) - 10%

• Cost (£m) - 10%
Strategic Measures
• Engagement - 5%

• NPS - 5%

• Market Share - 5%

• Colleague Turnover - 5%

80%

20%

Targets have not been disclosed at the current time as they are considered to be commercially sensitive. The Committee intends to
disclose targets in next year’s Directors’ Remuneration Report.

Performance Share Plan (“PSP”)
The normal PSP award for Executive Directors is 200% of base salary.

For Jo Hartley, it was agreed that her PSP opportunity would be 150% of base salary for the first year of her appointment. As with the
annual bonus, it was agreed that for FY24 onwards her maximum opportunity would increase to 200% of base salary, subject to individual
performance during the year. The Committee is of the view that Jo has performed strongly since her appointment and therefore her PSP
opportunity will be increased to 200% of base salary for FY24.

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, which is higher than the price used to determine the 2022 awards, the committee
is off the view that 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 the autumn.

150

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEFY24 PSP awards are due to be granted later in the year. These awards will continue to vest based on relative TSR vs. FTSE All-Share
General Retailers Index, on EPS performance for FY26, and on Group Services Related Revenue for FY26. The Committee is currently
reviewing the relative weighting of these measures. 25% of the TSR element will vest for median performance with 100% vesting for upper
quartile TSR performance. Targets for the EPS and Group Services Related Revenue measures will be determined and disclosed by the
Committee in due course.

How the Remuneration Policy will be Implemented for FY24 – Non-Executive Directors Fees
The fees of Non-Executive Directors are reviewed regularly. Any changes to these fees will be approved by the Board as a whole following
a recommendation from the Chief Executive Officer and the Remuneration Committee.

The fees of the Non-Executive Directors were reviewed in October 2022, where a 4% 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 2023.

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)

FY23
£203,705
£55,058

£10,000
£10,000
£5,000
£5,000

FY22
£198,870
£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 FY23 compared with the prior year.

FY22 to FY23

FY21 to FY22

FY20 to FY21

Base
salary/
fees %
change

Annual
bonus %
change

Benefits
% change

Base
salary/
fees %
change

Annual
bonus %
change

Benefits
% change

Annual
bonus %
change

Benefits
% change

Executive Directors
Graham Stapleton
Jo Hartley1
Loraine Woodhouse2
Non-Executive Directors
Keith Williams
Helen Jones
Jill Caseberry
Tom Singer
Average pay of all
colleagues in the Group

4.00% -13.00%
N/A
-13.00%

N/A
N/A

4.00%
4.00%
4.00%
4.00%

–
–
–
–

5.91%

8.58%

1 Jo Hartley was appointed as Chief Financial Officer on 16 June 2022.

2 Loraine Woodhouse retired from the Board on 1 July 2022.

–

–
–
–
–

–

Base
salary/
fees %
change

1.80%
1.80%

0.00%
9.50%
0.00%
N/A

–
–

–
–
–
–

1.80% 100.00%

1.80%
1.80%
1.80%
1.80%

–

–
–
_
_

2.80% 76.30%

4.02% 45.42%

–
–

–
–
–
–

–

151

halfords.annualreport2023.comRemuneration 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
2022/23
2021/22
2020/21

Method
Option B
Option B
Option B

25th percentile
pay ratio
61:1
167:1
143:1

Median
pay ratio
56:1
147:1
126:1

75th percentile
pay ratio
34:1
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 2022. 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 a decrease in the CEO pay ratio in 2023 compared
to 2022. As is appropriate, the remuneration arrangements for the Executive Directors are more closely linked to performance, and this is
reflected in the year on year change.

Component
Base Salary
Total Remuneration

P25
£19,364.15
£19,405.70

P50
£20,533.50
£21,136.04

P75
£33,748.00
£35,245.55

Workforce Engagement in Remuneration
As referenced on pages 106 and 107, 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 a colleague engagement survey.

Gender Pay Gap Report
Details of the Group’s Gender Pay Gap Report for 5 April 2022 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

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

2023
£186.0m
£51.5m

£321.0m
£2.0m
£19.5m

2022
£207.1m
£89.8m

£283.4m
£4.5m
£16.5m

152

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR GOVERNANCEDirectors’ Responsibilities

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
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.

• The Report and Financial statements,
taken as a whole, is fair, balanced
and understandable and provides the
information necessary for Shareholders
to assess the Group’s position and
performance, business model and
strategy.

Approved by order of the Board.

Keith Williams
Chair

21 June 2023

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.

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.

153

halfords.annualreport2023.com3

Our
Financials

Contents

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

156
166

167

168

169

170

171
172
183
207

208
209
210

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 31
March 2023 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 31 March 2023 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 Company
Balance Sheet, the Company Statement of
Changes in Shareholders’ Equity and the
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

156

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 Audit Committee, the
Board proposed appointment of BDO
LLP as the Parent Company’s auditor
for the financial year ended 3 April 2020
and subsequent financial periods. The
appointment was approved by the Parent
Company’s shareholders at the Annual
General Meeting on 31 July 2019. The period
of total uninterrupted engagement including
retenders and reappointments is four years,
covering the years ended 3 April 2020 to
31 March 2023. 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
2024 including the impact of strategic
initiatives as well as the ongoing and
uncertain impact of current macro-
economic factors including consumer
spending, rising energy prices and
interest rates. This involved evaluation
of the budgeted figures compared to
FY23, consideration of inflationary
impacts and other adjustments applied
by the Directors reflecting pricing
communications with certain suppliers
and external data used to support
assumptions.

• Financing: confirmed the Group has

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 revolving credit facility
agreement.

• Sensitivity analysis: evaluation of

sensitivities of the Group’s cash flow
forecasts with reference to the headroom
and 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 before breaching covenants.
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 performing
their going concern assessment and
the requirements of the accounting
framework.

Based on the work we have performed,
we have not identified any material
uncertainties relating to events or conditions
that, individually or collectively, may cast
significant doubt on the Group 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.

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALSFY23

FY22

P
P
P

P
P

Overview

Coverage

Key audit matters

89% (2022: 94%) of Group profit before tax and non-underlying items.

90% (2022: 86%) of Group revenue

92% (2022: 84%) of Group total assets

1. Acquisition of LTC Trading Holdings Limited and subsidiaries

(“Lodge Tyre”) (PY acquisition of Axle Group)

2. Goodwill impairment testing for the Retail and Car Servicing Segments
3. Third Party Logistics Arrangement
4. Carrying value of the Parent Company’s Investment in subsidiaries and

intercompany receivables1

5. The consolidation of the Group results and financial position
6. Accounting treatment of capitalised software costs2
1 This key audit matter has been expanded in the current year to include intercompany receivables due to a significant increase in this

balance during the year.

2 The accounting treatment of capitalised software costs was previously noted as a key audit matter owing to the first-year implementation
of complex new accounting guidance on the capitalisation of software development costs. While this remains an audit risk area it is no
longer considered a key audit matter.

Materiality

Group financial statements as a whole

£3.3m (FY22: £4m) 5% of normalised profit before tax and non-underlying items
(FY22: 5% of normalised before tax and non-underlying items).

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.

A full scope audit was completed in
respect of three significant components.
The remaining components were
assessed as non-significant and subject
to specified audit and analytical review
procedures. BDO LLP, through either the
Group audit team or a component audit
team completed the audits of the three
significant components and specified audit
and analytical review procedures for all
non-significant components, apart from
one. For one non-significant component
the specified audit procedures were
completed by a non-BDO member firm. All
components are located in the UK.

Our involvement with
component auditors
For the work performed by component
auditors, the Group audit team determined
the level of involvement needed in order

to be able to conclude whether sufficient
appropriate audit evidence has been
obtained as a basis for our opinion on the
Group financial statements as a whole.
Our involvement with component auditors
included the following:

• Issuing Group reporting instructions,
detailing the significant areas to be
covered by their audit (including
applicable key audit matters as detailed
below), materiality levels, and matters
relating to irregularities and fraud. The
instructions also set out the information
required to be reported to the Group
audit team;

• Regular communication with the

component auditors throughout the
planning, execution and completion
phases of the audit;

• Attending a number of component

management meetings relating to the
key audit matter (Third Party Logistics
Arrangement) and ongoing dialogue with
the component audit partner relating to
this throughout the audit; and

• Review of selected component audit

working papers.

Climate change
Our work on the assessment of potential
impacts on climate-related risks on the
Group’s operations and financial statements
included:

• Enquiries and challenge of management
to understand the actions they have
taken to identify climate-related risks and
their potential impacts on the financial
statements and adequately disclose
climate-related risks within the annual
report;

• Our own qualitative risk assessment
taking into consideration the sector
in which the Group operates and how
climate change affects this particular
sector; and

• Review of the minutes of Board, Audit
and ESG Committee meetings and
other papers related to climate change
and performed a risk assessment as to
how the impact, if any, of the Group’s
commitments as set out in the ESG
Performance overview on page 48,
may affect the financial statements and
our audit.

We challenged the extent to which climate-
related considerations, including the
expected cash flows from the initiatives
and commitments, if applicable, have
been reflected, where appropriate, in the
Directors’ going concern assessment and
viability assessment.

We also assessed the consistency of
management’s disclosures included as
Statutory Other Information on page 62
with the financial statements and with our
knowledge obtained from the audit.

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halfords.annualreport2023.comIndependent Auditor’s Report to the
Members of Halfords Group plc

Based on our risk assessment procedures,
we did not identify there to be any
Key Audit Matters materially impacted
by climate-related risks and related
commitments.

Key audit matters
Key audit matters are those matters that, in
our professional judgement, were of most
significance in our audit of the financial
statements of the current period and
include the most significant assessed risks
of material misstatement (whether or not
due to fraud) that we identified, including
those which had the greatest effect on:

the overall audit strategy, the allocation of
resources in the audit, and directing the
efforts of the engagement team. These
matters were addressed in the context of
our audit of the financial statements as a
whole, and in forming our opinion thereon,
and we do not provide a separate opinion
on these matters.

Key audit matter

Acquisition of LTC
Trading Holdings
Limited and subsidiaries
(“Lodge Tyre”)

(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 4 October 2022 the Group
completed the acquisition of 100% of
the share capital of Lodge Tyre for an
initial cash consideration of £33.5m
(excluding transaction costs).

The accounting for the acquisition
balance sheet at 4 October 2022
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.

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 experts 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. We assessed the reasonableness of the
underlying information used in the forecasts by comparing to
actual and historical results.

• 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.

• Checking the calculation of the fair value of contingent

consideration payable in March 2024 of £3.2m to the terms
contained in the Sale and Purchase Agreement.

• Confirming the acquisition accounting entries in the Group
financial statements and reperforming the calculation of
goodwill.

• 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 3 Business
Combinations.

Key observations:
Based on the procedures performed, we consider that the
methodology and assumptions used in the accounting for the
acquisition of Lodge Tyre and the related disclosures in the
Group financial statements are appropriate.

158

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALSGoodwill impairment
testing for the Retail and
Car Servicing Segments

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

The goodwill balances
of £403m are included
in Note 11)

The goodwill balances on the Group
balance sheet for the Retail and Car
Servicing segments are significant and
subject to annual impairment testing.

In assessing the carrying value of
goodwill the Group has to estimate
the recoverable amount of its cash
generating units in the Retail and Car
Servicing segments which requires the
forecasting and discounting of future
cashflows for inclusion within a value in
use model.

The value in use model includes a high
degree of management judgement
and estimation uncertainty, particularly
owing to the impact of current macro-
economic trends and the impact that
has on consumer demand. The goodwill
impairment review has therefore been
raised as a key audit matter.

Our audit procedures included:

• Assessing the judgements and methodology applied by

the Group in the goodwill impairment testing model against
the relevant accounting standards and considering the
requirements of IAS36 (Impairment) and IFRS8 (Operating
Segments).

• Challenging management’s assessment of cash generating
units (CGUs) and the level at which goodwill was tested for
impairment.

• Assessing the reasonableness of the Group’s budgets and
forecasts by considering the historical accuracy of previous
forecasts.

• Confirming that the cashflows modelled agreed to the Board
approved budgets and cashflow forecasts used to support
the Group’s going concern and viability assessment.

• With the assistance of our internal valuation experts

assessing the reasonableness of the Group’s discount
rate applied, by corroborating the relevant inputs into the
calculation to external sources.

• Challenging management to understand the most significant
assumptions in the cashflow forecasts and corroborating
these to source documentation and information available
externally.

• Considering the sensitivity analysis performed by the Group

that included the assessment of reasonably possible adverse
effects that could arise as a result of a decrease in revenue
from weaker consumer demand as applied to the going
concern considerations.

• We also performed our own sensitivity analysis applying
different scenarios targeted at discretionary spend, cost
mitigation actions and inflation.

• Assessing whether the Group’s disclosures provide sufficient
details on the key judgements within the impairment model
and sources of estimation uncertainty, including sensitivity
disclosures.

Key observations:
Based on the procedures performed, we found the judgements
and estimates made in Group’s conclusion that there is no
impairment of the goodwill in the Retail and Car Servicing
segments to be appropriate.

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Members of Halfords Group plc

During the year, the Group entered
into an arrangement with a third
party to assist in the storage of tyres
and distribution to its garages when
required. The transactions are material
and involve a number of balance
sheet accounts across entities in the
Group and determining the accounting
considerations and disclosures is
complex and includes management
judgement and estimates. We therefore
considered this together with the related
disclosures to be a key audit matter.

Third Party Logistics
Arrangement

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

The Cashflows
are classified as
cashflows from
financing activites
on the face of the
Cashflow statement.
The supplier financing
receivable is
separately disclosed in
Note 15.

Carrying value of the
parent Company’s
investment in
subsidiaries of £813.8m
(FY22: £811.4m)
and intercompany
receivables of £127.2m.

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

The investment
and intercompany
balances are disclosed
in Notes 4 and 5 to
the parent Company
Financial statements)

The Parent Company’s investment in
subsidiaries represents its investment in
the underlying trading businesses of the
Group. The intercompany receivables
include amounts loaned to subsidiary
undertakings. The recoverability of
the investment and the intercompany
receivables 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 and the receivables
balances in the context of the Parent
Company financial statements this
together with the related disclosures
was raised as a key audit matter for our
Parent Company audit.

Our audit procedures included:

• Reviewing the underlying agreement and enquiry with the

Group’s commercial, purchasing and finance representatives
to understand the nature of the arrangement.

• Obtaining a confirmation from the third party to support the
value of the transactions during the year and the balances
outstanding at the year-end date.

• Assessing the appropriateness of the accounting for the

transactions during the year against the accounting standards
and agreeing a sample of transactions to supporting
documentation.

• Challenging management on the timing of the receipts and
payments which resulted in a cash advantage to the Group
and assessing the appropriateness of the conclusion that
the cashflows in the arrangement were financing in nature
and therefore the required disclosures are in line with the
accounting standards.

• Assessing the classification and disclosure of these

transactions and the balances outstanding at the year-end
date against the requirements of IAS 1 and considering the
upcoming amendments to IAS 7 and IFRS 7.

Key observations:
Based on the procedures performed, the accounting for
the transaction is materially correct and the disclosures are
considered sufficient to enable the users to understand the
nature of the arrangement and the impact on the Group’s cash
flows.

Our audit procedures included:

• Comparing the carrying value of the investment to the market
capitalisation of the Group as at the period end date and post
period end.

• Comparing the carrying value of the investment and the
receivables to the net asset value of the subsidiaries.

• Agreeing the terms of the intercompany loan balances to loan

documents where appropriate.

• Obtaining the directors’ assessment of the carrying values

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 cashflow 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.

• Reviewing the disclosure notes in the Group and Parent

company financial statements to ensure that these covered
any key estimates and judgements related to the carrying
values as appropriate.

Key observations:
Based on the procedures performed, we found managements
conclusion that there is no impairment of investment in and
amounts due from subsidiaries in the Parent Company to be
appropriate.

160

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALSThe consolidation of
the Group results and
financial position

The Halfords Group structure has
grown significantly in recent years
through acquisitions, mainly in
the Car Servicing segment, and
organically through the development
of new services and products across
the Group. This has increased the
complexity of the Group consolidation
process and the audit effort that is
required to complete our work.

The consolidation of the Group results
and financial position has therefore
been raised as a key audit matter.

Our audit procedures included:

• Understanding the controls and processes that the Group

had put in place over the compilation of the consolidation and
challenging management to make amendments where we
considered necessary.

• Testing intercompany eliminations to ensure that these

were materially complete and accurate and in line with our
understanding of the cross-company transactions within
the Group.

• Testing consolidation entries to ensure that they had been
correctly reflected and were appropriate. This included
reviewing historic consolidation entries to ensure that they
were still required and that any changes were appropriate.

• Testing the arithmetical accuracy of the consolidation, the

inclusion of all group entities and agreeing balances back to
the underlying trial balances.

• Testing the acquisition accounting entries in the consolidation
for Lodge Tyre that was acquired during the year as set out in
the key audit matter above.

• Agreeing the finalised consolidation of the Group’s results
and financial information to the financial statements to
ensure that these had been mapped to the correct financial
statement lines.

• Performing detailed analytical review procedures on the

final Group numbers to identify any material mis-postings,
mapping errors and other anomalies.

Key observations:
Based on the procedures performed, we found the Group
consolidation to be materially complete and accurately
prepared.

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.

161

halfords.annualreport2023.comIndependent Auditor’s Report to the
Members of Halfords Group plc

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

2023

£3.3m

2022

£4m

2023

£1.8m

2022

£2m

5% of normalised (3
year average) profit
before tax and non-
underlying items.

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 in a single
year, due to the volatility
caused by external
factors over the past
three years.

Determined with
reference to 1% of
total assets (Capped
at Group non-
significant components
materiality to reduce
aggregation risk).

Determined with
reference to 1% of total
assets (Capped at 50%
of Group materiality to
reduce aggregation risk).

We consider an asset
based measure to best
reflect the nature of
the Parent Company
which acts as a holding
company for the Group’s
investments in subsidiary
undertakings.

Materiality has been
capped at a percentage
of Group materiality
given the assessment
of the components
aggregation risk.

£2.3m

£2.6m

£1.29m

£1.1m

Performance materiality was set at 70% 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 based on
past experience.

Materiality

Basis for
determining
materiality

Rationale for the
benchmark applied

Performance
materiality

Basis for
determining
performance
materiality and the
rationale for the
percentage applied.

Component materiality
We set materiality for each significant
component of the Group, based on a
percentage of between 48% and 85%
(FY22: 49% and 95%) of Group materiality
dependent on the size and our assessment
of the risk of material misstatement of
that component. Component materiality
ranged from £1.57m to £2.8m (FY22:
£1.95m to £3.8m). In the audit of each
component, we further applied performance
materiality levels of 70% (FY22: 70%) 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 £105K (FY22:
£80K). We also agreed to report differences
below this threshold that, in our view,
warranted reporting on qualitative grounds.

Other information
The directors are responsible for the
other information. The other information
comprises the information included in
the Annual Report and Accounts other
than the financial statements and our
auditor’s report thereon. Our opinion on
the financial statements does not cover the
other information and, except to the extent
otherwise explicitly stated in our report,
we do not express any form of assurance

conclusion thereon. Our responsibility is
to read the other information and, in doing
so, consider whether the other information
is materially inconsistent with the financial
statements or our knowledge obtained
in the course of the audit, or otherwise
appears to be materially misstated. If we
identify such material inconsistencies
or apparent material misstatements, we
are required to determine whether this
gives rise to a material misstatement in
the financial statements themselves. If,
based on the work we have performed,
we conclude that there is a material
misstatement of this other information, we
are required to report that fact.

We have nothing to report in this regard.

162

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALSCorporate 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 pages 82 - 83.

• 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 83.

Other Code
provisions

• Directors’ statement on fair, balanced and understandable set out on pages 94 - 99.

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

pages 76 - 81.

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

control systems set out on pages 74 - 75.

• The section describing the work of the audit committee set out on pages 122 - 127.

Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies
Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.

Strategic report and
Directors’ report

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the Strategic report and the Directors’ report for the financial year for which the

financial statements are prepared is consistent with the financial statements; and

• the Strategic report and the Directors’ report have been prepared in accordance with applicable legal

requirements.

In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained
in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors’
report.

Directors’
remuneration

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

Matters on which
we are required to
report by exception

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit

have not been received from branches not visited by us; or

• the Parent Company financial statements and the part of the Directors’ remuneration report to be audited are

not in agreement with the accounting records and returns; or

• certain disclosures of Directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

163

halfords.annualreport2023.comIndependent 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:

Non-compliance with laws
and regulations
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, UK adopted international accounting
standards, 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, the Group’s
control environment and business
performance including the design of the
Group’s remuneration policies;

• the results of our enquiries of

management, the Audit Committee,
Internal audit and legal counsel 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

engagement team regarding how and
where fraud might occur in the financial
statements and any potential indicators
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 material misstatement as a result of
fraud, and considered that the areas in
which fraud might occur were related to
the existence and recoverability of supplier
rebates, revenue recognition relating to the
judgements and estimates involved in the
timing of revenue recognition and possible
overstatement of revenue and management
override of controls.

Our procedures in response to the above
included:

• review of financial statement

disclosures and agreeing to supporting
documentation;

• identifying and testing journal entries
through obtaining an understanding
of the rationale of the journal and
agreeing to supporting documentation,
focusing on journal entries containing
characteristics of audit interest, year-
end consolidation journals, journals
processed by users with privileged IT
access rights, 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 with laws and
regulations or fraud;

• review of minutes of Board meetings

throughout the year to identify any non-
compliance with laws and regulations,
or fraud, not already disclosed by
management;

• review of tax compliance and involvement

of our tax specialists in the audit;

• with regards to the risk of fraud

in existence and recoverability of
supplier rebates, we have audited a
sample of supplier rebates to 3rd party
confirmations and we have challenged
management on the recoverability of
year end rebates through assessing post
year end debit notes raised and/or cash
receipts.

• with regards to the risk of fraud in

revenue recognition we have challenged
the assumptions and judgements made
by management in the measurement of
gift card, warranty and returns provisions
and the assumptions made in revenue
recognition for new revenue streams
and deferred revenue by agreeing
assumptions to relevant supporting
documentation.

164

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALSUse 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

21 June 2023

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

• we have challenged significant

accounting estimates and judgements
made by management including:

– the capitalisation policies for

intangible software assets against
the requirements of the applicable
accounting standards;

– estimates and judgements made
by the Directors in their going
concern assumption as set out in the
Conclusions relating to going concern
section of the report; and

– estimates and judgements made in

accounting for new third party logistics
arrangements and acquisitions and in
the assessment of goodwill impairment
and carrying value of the Parent
Company’s investment in subsidiaries
and intercompany receivables as set
out in the Key Audit Matters section of
the report.

We communicated relevant identified laws
and regulations and potential fraud risks
to all engagement team members and
component 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. We have also reviewed the relevant
work performed by the component team
members in this regard.

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.

165

halfords.annualreport2023.comConsolidated
Income Statement

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

Notes

2
3
6

9
9

Non-
underlying
items
(Note 5)
£m

52 weeks to 31 March 2023
Before
Non-
underlying
Items
£m
1,593.5
(808.2)
785.3
(721.7)
63.6
(12.1)
(12.1)
51.5
(10.6)

–
–
–
(8.0)
(8.0)
–
–
(8.0)
1.1

Total
£m
1,593.5
(808.2)
785.3
(729.7)
55.6
(12.1)
(12.1)
43.5
(9.5)

52 weeks to 1 April 2022

Before
Non-
underlying
Items*
£m
1,382.4
(660.7)
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)

Total
£m
1,382.4
(660.7)
721.7
(613.8)
107.9
(11.3)
(11.3)
96.6
(18.9)

40.9

(6.9)

34.0

72.6

5.1

77.7

18.8p
18.0p

15.6p
15.0p

35.5p
34.0p

37.9p
36.4p

All results relate to continuing operations of the Group.

The notes on pages 172 to 206 are an integral part of these consolidated financial statements.

* Prior period restated – see Note 29 for further details.

166

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR 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
31 March
2023
£m
34.0

52 weeks to
1 April
2022
£m
77.7

2.7
1.1
3.8
37.8

6.5
(1.3)
5.2
82.9

All items within the Other Comprehensive Income are classified as items that are, or may be, recycled to the income statement.

The notes on pages 172 to 206 are an integral part of these consolidated financial statements.

167

halfords.annualreport2023.comConsolidated Statement
of Financial Position

Assets
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Deferred tax asset
Total non-current assets
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Current tax assets
Cash and cash equivalents
Total current 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
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

31 March
2023
£m

Notes

11
12
13
20

14
15
21

17
17
21
18

17
17
21
18
19

22
22
22
22

482.0
97.8
312.6
10.9
903.3

256.2
144.6
1.1
–
41.9
443.8

(9.7)
(77.6)
(3.7)
(355.0)
(5.0)
(11.2)
(462.2)
(18.4)

(34.0)
(269.3)
(0.5)
(3.5)
(14.8)
(322.1)
(784.3)
562.8

2.2
212.4
(12.7)
(1.1)
362.0
562.8

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

(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

The notes on pages 172 to 206 are an integral part of these consolidated financial statements.

The financial statements on pages 166 to 206 were approved by the Board of Directors on 21 June 2023 and were signed on its behalf by:

Jo Hartley
Chief Financial Officer

Company Number: 04457314

168

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALSConsolidated Statement of
Changes in Shareholders’ Equity

Attributable to the equity holders of the Company

Share
premium
account
£m
151.0

Investment
in own
shares
£m
(10.0)

Share
capital
£m
2.0

Note

Other reserves
Capital
redemption
reserve
£m
0.3

Hedging
reserve
£m
(2.1)

Retained
earnings
£m
276.6

Total
equity
£m
417.8

–

–
–

–

0.2
–
–
–
–
–
0.2
2.2

–

–
–

–

–
–
–
–
–
–
–
2.2

–

–
–

–

61.4
–
–
–
–
–
61.4
212.4

–

–
–

–

–
–
–
–
–
–
–
212.4

–

–
–

–

–
(3.0)
1.4
–
–
–
(1.6)
(11.6)

–

–
–

–

–
(1.5)
0.4
–
–
–
(1.1)
(12.7)

22
22

–

–
–

–

77.7

6.4
(1.3)

5.1
5.1

–
–

6.4
(1.3)

–
77.7

5.1
82.8

–

(1.3)

–

(1.3)

–
–
–
–
–
–
–
0.3

–

–
–

–
–
–
–
–
–
–
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

–

34.0

2.7
1.1

3.8
3.8

–
–

2.7
1.1

–
34.0

3.8
37.8

–

(6.9)

–

(6.9)

–
–
–
–
–
–
–
0.3

–
–
–
–
–
–
–
(1.4)

–
–
–
2.4
(0.9)
(19.5)
(18.0)
362.0

–
(1.5)
0.4
2.4
(0.9)
(19.5)
(19.1)
562.8

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
Shares issued
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
Closing balance at 1 April 2022
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
Shares issued
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 31 March 2023

The notes on pages 172 to 206 are an integral part of these consolidated financial statements.

169

halfords.annualreport2023.comConsolidated 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
Impairment/(Reversal) of property, plant and equipment

Amortisation of right-of-use assets
Impairment of right-of-use assets
Amortisation of intangible assets
Finance costs payable
Loss on disposal of property, plant and equipment
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) in inventories

(Increase)/Decrease in trade and other receivables
Increase/(Decrease) in trade and other payables
(Decrease) 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
Repurchase of treasury shares
Proceeds from share options exercised
Finance costs paid
RCF transaction costs
RCF draw downs
RCF repayments
Repayment of loan
Interest paid on lease liabilities
Payment of capital element of leases
Payments relating to supplier financing
Receipts relating to supplier financing
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

The notes on pages 172 to 206 are an integral part of these consolidated financial statements.

170

52 weeks to
31 March
2023
£m

52 weeks to
1 April
2022
£m

Notes

12
12

13
13
11
6
3
13

40.9
(6.9)
34.0
28.1
1.2

77.5
(2.3)
17.9
12.1
1.7
–
(0.4)
2.4
(8.0)
9.5
(12.7)

(32.2)
32.0
(1.3)
(4.7)
154.8

(32.6)
–
(25.4)
(29.0)
(87.0)

–
(1.5)
0.4
(2.5)
(1.8)

337.0
(302.0)
(1.7)
(8.8)
(80.5)
(23.5)
22.7
(19.5)
(81.7)
(13.9)
46.1
32.2

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

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALSNotes to the 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
Bank Overdrafts
Net Cash and cash equivalents at bank and in hand
Debt due in less than one year
Debt due after one year
Total net debt excluding lease liabilities
Current lease liabilities
Non-current lease liabilities
Total lease liabilities
Total net debt

Cash and cash equivalents at bank and in hand
Bank Overdrafts
Net 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 1 April
2022
£m
46.3
(0.2)
46.1
–
–
46.1
(74.5)
(316.5)
(391.0)
(344.9)

At 2 April
2021
£m
67.2
(0.2)
67.0
–
67.0
(63.4)
(280.9)
(344.3)
(277.3)

Cash flow
£m
(4.4)
(9.5)
(13.9)
–

(34.0)
(47.9)
89.3
–
89.3
41.4

Other non-
cash changes
£m

–
–
–
–
–
–
(92.4)
47.2
(45.2)
(45.2)

At 31 March
2023
£m
41.9
(9.7)
32.2
–
(34.0)
(1.8)
(77.6)
(269.3)
(346.9)
(348.7)

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

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

At 1 April
2022
£m
46.3
(0.2)
46.1

–
46.1
(74.5)
(316.5)
(391.0)
(344.9)

Non-cash changes include additions of new leases, 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 £41.9m (FY22: £46.3) of liquid assets offset by £9.7m (FY22: £0.2m) of bank
overdrafts. Some of this cash is restricted due to the Halfords Here to Help Fund and the Employee Benefit Trust, see Note 16 for further
information.

171

halfords.annualreport2023.comAccounting
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 31 March 2023, 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 accounting 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 31 March 2023, whilst the comparative period covered the 52 weeks to
1 April 2022.

Going Concern
In determining the appropriate basis of preparation of the financial statements for the year ended 31 March 2023, the Directors are required
to consider whether the Group and Company can continue in operational existence for the foreseeable future. The Board has concluded
that it is appropriate to adopt the Going Concern basis, having undertaken a rigorous assessment of financial forecasts, which included
consideration of the affects of the Ukrainian war and the current economic climate, and with specific consideration to the trading position
of the Group. 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 highly unlikely to happen.

The Group has a revolving credit facility of £160.0m plus an overdraft of £20.0m at the date of approval of these financial statements,
expiring on 4 December 2025. 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

FY23

2.2
0.1

FY22

2.7
(0.3)

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 and will retain sufficient available cash and not breach any covenants under any drawn facilities over the remaining term of the current
facilities. The Board does 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.

The subsidiary undertakings of the Company at 31 March 2023 are detailed in Note 4 to the Company balance sheet on page 210.

Business Combinations
The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of
the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in
exchange for control of the acquiree. Acquisition-related costs are recognised as expenses in the period in which the costs are incurred.

The identifiable assets, liabilities and contingent liabilities of the acquired entity that meet the conditions for recognition under IFRS 3
“Business combinations” are recognised at their fair value at the acquisition date.

Goodwill arising on acquisition is recognised as an asset and is, 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.

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Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR 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, car servicing and repair operations and the
provision of software as a service. 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

Nature, timing and satisfaction of performance obligations and significant payment terms

Automotive, leisure and
cycling products, car
servicing and repair
operations

Service and repair plans

Loyalty Scheme

Product warranties

Software-as-a-Service
(SaaS)

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.

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. Deferred income of unredeemed vouchers is released 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 and any discounts at the point of sale. 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 deferred income is held within trade and other payables.

The Group launched its Loyalty Scheme in March 2022, with revenue being recognised when the individual
benefits associated to club membership are expected to be incurred. Any breakages are recognised at the
end of the membership period.

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 with 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 ongoing licence fees
depending on usage of the software by the customer, with minimum licence 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 licence
fee payable is recognised evenly over the life of the contract, with any licence 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 historical returns and redemption rates.

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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, which 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.

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.

Accrued income relates to supplier income recognised on an accruals basis, based on the expected entitlement that has been earned up
to the balance sheet date for each relevant supplier contract.

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.

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Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALSEmployee Benefits
i) Pensions
The Halfords Pension Plan is a contract-based plan, where each member has their own individual pension policy, which they monitor
independently. The Group pays fixed contributions and has no legal or constructive obligation to pay further amounts. The costs of
contributions to the scheme are charged to the income statement in the period that they arise.

ii) Share-based Payment Transactions
The Group operates a number of equity-settled share-based compensation plans.

The fair value of the employee services received under such schemes is recognised as an expense in the income statement. Fair values
are determined by use of an appropriate pricing model and incorporate an assessment of relevant market performance conditions.

The amount to be expensed over the vesting period is adjusted to reflect the number of awards for which the related service and non-
market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of
awards that meet the related service and non-market performance conditions at the vesting date.

At each balance sheet date, the Group revises its estimates of the number of share incentives that are expected to vest. The impact of the
revision of original estimates, if any, is recognised in the income statement, with a corresponding adjustment to equity.

Taxation
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent
that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively
enacted, at the reporting date, and any adjustment to tax payable in respect of previous years.

The tax base of an asset is the amount that will be deductible for tax purposes against any taxable economic benefits that will flow to an
entity when it recovers the carrying amount of the asset. If those economic benefits will not be taxable, the tax base of the asset is equal to
its carrying amount.

The tax base of a liability is its carrying amount, less any amount that will be deductible for tax purposes in respect of that liability in future
periods. In the case of revenue 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, which, 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.

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.

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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.

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 software costs, these
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.

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.

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.

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Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR 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, 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 13.

When the Group renegotiates the contractual terms of a lease with the lessor, the accounting depends on the nature of the modification:

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• 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 and other costs incurred in bringing them to their existing location.

Where inventory is held by third parties but for which Halfords exercises control over the inventory, Halfords recognises the value of
that inventory on its balance sheet. Control is determined by Halfords retaining the title to the inventory and restricting its use by the
third party.

Supplier Financing
Where Halfords operates invoicing arrangements with third party suppliers, whereby the timing of receipts from a supplier creates a cash
flow timing advantage at periods during the year for Halfords, such arrangements are considered akin to a supplier financing arrangement.
The cash flows paid and received under the arrangement are separately disclosed as financing in the cash flow statement. The amount
due to or from the supplier at the year-end date is shown in other creditors or other debtors as appropriate.

Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated
reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the
risks specific to the liability. The unwinding of the discount is recognised as a finance cost.

Details of the provisions recognised, and the estimates and judgements, can be seen in Note 19.

Where the Group expects a provision to be reimbursed, the reimbursement is recognised as a separate asset when the reimbursement is
certain.

A dilapidation 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 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 when 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.

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Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALSFinancial Instruments
i) Recognition and Initial Measurement
Trade receivables are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised
when the Group becomes a party to the contractual provisions of the instrument.

On initial recognition, a financial asset is measured at: amortised cost; Fair Value through Other Comprehensive Income (FVOCI) – equity
instrument; or Fair Value through Profit or Loss (FVTPL). A financial liability is measured at either amortised costs or FVTPL.

ii) Classification and Subsequent Measurement
Financial assets
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing
financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change
in the business model.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

• It is held within a business model whose objective is to hold assets to collect contractual cash flows; and

• Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount

outstanding.

On initial recognition of an equity instrument that is not held for trading, the Group may, irrevocably, elect to present subsequent changes
in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.

All financial assets not measured at amortised cost or FVOCI, as described above, are measured at FVTPL. This includes all derivative
financial assets (Note 21). 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 CGU level, because this best reflects the
way the business is managed and information is provided to management. The information considered includes:

• The stated policies and objectives for the business unit and the operation of those policies in practice. This includes whether

management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate portfolio, matching the
duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale
of the assets;

• How the performance of the business unit is evaluated and reported to Group’s management;

• The risks that affect the performance of the business model (and the financial assets held within that business unit) and how those risks

are managed;

• The frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future

sales activity.

Financial assets that are held for trading or are managed, and whose performance is evaluated on a fair value basis, are measured at
FVTPL.

Financial assets: Assessment whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, “principal” is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined
as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular
period 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).

179

halfords.annualreport2023.comAccounting
Policies

Financial assets: measurement and gains and losses

Financial assets at FVTPL

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 21 for derivatives
designated as hedging instruments.

Financial assets at amortised cost

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.

Equity investments at FVOCI

These assets are, subsequently, measured at fair value. Dividends are recognised as income in profit
or loss unless the dividend clearly represents a recovery of part of the cost of investment. Other net
gains and losses are recognised in OCI and never reclassified to profit or loss.

Financial liabilities: Classification, subsequent measurement and gains and losses
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as FVTPL if it is classified as held
for trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net
gains and losses, including any interest expense, are recognised in profit and loss. All other financial liabilities are recognised, initially, at
their fair value and are, 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, cancelled or expired. 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 finance income or 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.

180

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALSvi) Impairment
The Group recognises loss allowances for expected credit losses (“ECLs”) on trade receivables, contract assets and lease receivables
measured at amortised cost. This includes the Parent Company receivables. 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.

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of
recovery. This is generally the case when the Group determines that the debtor does not have the assets or sources of income that could
generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be
subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.

Estimates and Judgements
The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the
results of which form the basis of making judgements about the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from the estimates.

Estimates are monetary amounts in the financial statement that are subject to measurement uncertainty and judgements are decisions
taken by management on accounting measurements and recognition criteria.

The judgements and 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 191 to 192. Sensitivity
analysis on the key assumption in the value-in-use calculations has been undertaken on the two groups of 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.

Halfords have also considered the carrying value of the intercompany balances in the Parent Company accounts. The same future cash
flows that were used in the goodwill sensitivity modelling were used for this impairment assessment, no issues were found.

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 £0.3m. A 10% change in the current selling price of products would impact
the net realisable value of inventories by £1.8m.

Hedging Stock Turn

The group uses average inventory days to identify the effective fair value gains and losses on foreign currency forwards designated in the
cash flow hedge accounting relationship to be removed from the cash flow hedge reserve and recognised as an adjustment to the carrying
amount of the inventory at each reporting date. The group calculates average inventory days based on the Groups’ foreign currency cost
of sales and inventory balances at each reporting date.

181

halfords.annualreport2023.comAccounting
Policies

Acquisition of Lodge
On acquisition of Lodge, 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 identifying and assessing the fair 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.

An adjustment to the deferred tax liability was made related to the total value of the intangible assets 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 FY23 was 2.23%. 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.

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).

• 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 Group has applied the following interpretations and amendments for the first time in these financial statements:

• Reference to Conceptual Framework – amendments to IFRS 3.

• Property, Plant and Equipment – Proceeds before Intended Use – amendments to IAS 16.

• Onerous Contracts – Cost of Fulfilling a Contract – amendments to IAS 37.

• Annual Improvements to IFRS Standards 2018–2020.

The application of these new interpretations and amendments did not have a material impact on the financial statements.

New Standards and Interpretations Not Yet Adopted
Certain new accounting standards and interpretations have been published that are not yet effective and have not been adopted by
the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on
foreseeable future transactions.

182

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR 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 and services through
retail stores and online. The operations of the Car Servicing reporting segment comprise car servicing and repair performed from garages
and vans.

The Chief Operating Decision Maker is the Executive Directors. Internal management reports for each of the segments are reviewed by
the Executive Directors on a monthly basis. Key measures used to evaluate performance are Revenue and Operating Profit. Management
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 all material non-current assets are located in the UK. The
Group’s revenue is driven by the consolidation of individual small value transactions and as a result Group revenue is not reliant on a major
customer or Group of customers. All revenue is from external customers.

Income statement
Revenue
Segment result before non-underlying items
Non-underlying items
Segment result
Unallocated expenses1
Operating profit
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
31 March
2023
Total
£m
1,593.5
69.0
(8.0)
61.0
(5.4)
55.6
(12.1)
43.5
(9.5)

34.0
1,495.1
98.4
1,593.5

Retail
£m
979.6
58.6
(0.7)
57.9

Car Servicing
£m
613.9
10.4
(7.3)
3.1

915.7
63.9
979.6

579.4
34.5
613.9

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 £5.4m in respect of assets acquired through business combinations (2022: £3.1m).

Income statement
Revenue
Segment result before non-underlying items
Non-underlying items
Segment result
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

*Restated, see Note 29 for further information.

Retail
£m
1,001.6
89.8
8.9
98.7

Car Servicing
£m
380.8
14.4
(2.1)
12.3

948.9
52.7
1,001.6

352.0
28.8
380.8

52 weeks to
1 April
2022*
Total
£m
1,382.4
104.2
6.8
111.0
(3.1)
107.9
(11.3)
96.6
(18.9)
77.7
1,300.9
81.5
1,382.4

183

halfords.annualreport2023.comNotes to the
Financial Statements

1. Operating Segments continued

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

52 weeks to
31 March
2023
Total
£m
48.1
29.3
(2.3)
77.5
17.9

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

Retail
£m
26.6
17.2
(2.3)
53.0
15.5

Car Servicing
£m
21.5
12.1
–
24.5
2.4

Retail
£m
31.1
13.1
–
54.1
14.2

Car Servicing
£m
18.1
7.2
–
15.8
1.6

There have been no significant transactions between segments in the 52 weeks ended 31 March 2023 (2022: £nil).

2. Operating Expenses

For the period
Selling and distribution costs
Administrative expenses, before non-underlying items
Non-underlying administrative expenses (See Note 5)
Administrative 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

184

52 weeks to
31 March
2023
£m
590.6
131.1
8.0
139.1
729.7

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

52 weeks to
31 March
2023
£m

52 weeks to
1 April
2022
£m

2.0
4.8
(2.6)
(1.0)
1.7
17.9
77.5
28.1

1.2
(2.3)
(0.3)
359.1
792.5

1.6
8.8
(2.6)
(0.8)
1.8
15.8
69.6
20.6

(0.3)
–
0.1
319.5
655.0

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALS3. Operating Profit continued

The total fees payable by the Group to BDO LLP and their associates during the period was £1.7m (2022: £1m), in respect of the services
detailed below:

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

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 23)
Contributions to defined contribution plans (Note 25)

Staff costs recognised within intangible asset additions in the period totalled £5.4m (2022: £6.6m).

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

Staff cost allocation changed during FY23 following a business reorganisation, such that more staff were
allocated to the support centre than in previous years.

Key Management Compensation

For the period
Salaries and short-term benefits
Social security costs
Pensions
Share-based payment charge

52 weeks to
31 March
2023
£'000
65.0

52 weeks to
1 April
2022
£'000
55.0

1,398.0
235.0
1,698.0

849.0
115.0
1,019.0

52 weeks to
31 March
2023
£m

52 weeks to
1 April
2022
£m

324.5
1.9
25.6
2.4
10.1
364.5

288.2
0.3
23.1
7.8
6.7
326.1

Number

10,674
794
1,433
12,901

9,959
633
920
11,512

52 weeks to
31 March
2023
£m
3.2
0.6
0.2
2.4
6.4

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

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 audited tables in the Directors’ Remuneration Report on pages 128 to
152, which form part of these financial statements.

185

halfords.annualreport2023.comNotes 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)
Non-underlying items before tax
Tax on non-underlying items (e)
Non-underlying items after tax

52 weeks to
31 March
2023
£m

52 weeks to
1 April
2022
£m

6.3
1.9
–
(0.2)
8.0
(1.1)
6.9

1.1
2.8
(2.2)
(8.5)
(6.8)
1.7
(5.1)

a. In the current and prior period, separate and unrelated organisational restructuring activities were undertaken. In FY22, 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. In FY23, the group have undertaken a restructure of the support centre.

Costs in relation to the organisational restructuring activities are made up of: redundancy costs of £3.1m (PY: £0.3m), £1.6m (PY: £0.8m)
for the replacement of the WMS system, £0.4m (PY: £nil) relating to our master data management system and £1.2m for the new
system and financial dual running costs inccurred in the integration of National Tyre. These costs are not part of recurring business and
therefore, have been deemed non-underlying expenses.

b. In the current and prior periods, costs were incurred in relation to the investments in National Tyre, Iverson, HaveBike, and Universal.

– £1.9m costs incurred (PY: £2.5m) relating to professional fees in respect of acquisition of National Tyre and Lodge Tyre;

– In FY22 £0.2m related to the acquisition of trade and assets of both Iverson and HaveBike;

– In FY22 £0.1m related to the acquisition of Universal.

c. During the prior period the HMRC audit into National Minimum Wage was concluded and fully settled and paid, this led to a final release

of the provision of £2.2m.

d. In the current year, £3.6m of closure costs were recognised representing the costs associated with the closure of a number of garages

across Autocentres after a review of the garage portfolio post-acquisition of National Tyre. In FY22 closure costs were recognised relating
to the closure of a number of stores and garages following a strategic review of the profitability of the physical estate. The provision related
to the impairment of right-of-use assets and tangible assets and property costs as well as ongoing onerous commitments under the lease
agreements and other costs associated with the property exits. We continue to utilise the provision in the current year but have also had a
release of £3.8m (PY: £8.5m) as a result of a £2.3m impairment reversal and a £1.5m change in lease terms.

e. The tax charge of £1.1m represents a tax rate of 13.8% applied to non-underlying items. The prior period represents a tax credit at

13.6% applied to non-underlying items.

6. Finance Income and Costs

Recognised in profit or loss for the period
Finance costs:
Bank borrowings
Amortisation of issue costs on loans
Commitment and guarantee fees
Interest payable on lease liabilities
Finance costs

186

52 weeks to
31 March
2023
£m

52 weeks to
1 April
2022
£m

(1.4)
(0.8)
(1.1)
(8.8)
(12.1)

(0.1)
(0.7)
(1.5)
(9.0)
(11.3)

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALS7. Taxation
Amounts recognised through the 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 (credit)/charge to OCI for the period

Amounts recognised directly in Equity

For the period
Deferred taxation
Origination and reversal of temporary differences
Total tax recognised directly in Equity

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% (2022: 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
31 March
2023
£m

52 weeks to
1 April
2022
£m

8.3
1.0
9.3

1.2
0.3
(1.3)
0.2
9.5

15.9
(0.4)
15.5

3.4
(1.7)
1.7
3.4
18.9

52 weeks to
31 March
2023
£m

52 weeks to
1 April
2022
£m

(1.1)
–
(1.1)

1.2
0.1
1.3

52 weeks to
31 March
2023
£m

52 weeks to
1 April
2022
£m

0.9
0.9

(0.4)
(0.4)

52 weeks to
31 March
2023
£m
43.5
8.3

52 weeks to
1 April
2022
£m
96.6
18.4

0.6
(0.7)
0.8
0.8
(0.3)
(0.3)
0.3
9.5

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

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 deferred tax asset at 31 March 2023 has been calculated based on the rate of 25%
substantively enacted at the balance sheet date.

187

halfords.annualreport2023.comNotes to the
Financial Statements

7. Taxation continued
The effective tax rate of 21.9% (2022: 19.5%) is higher than the UK corporation tax rate principally due to the impact of current and
deferred tax on employee share options and non-deductible expenditure on business acquisitions.

The tax charge for the period was £9.5m (2022: £18.9m), including a £1.1m credit (2022: £1.7m charge) in respect of tax on non-
recurring items.

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

In this period, the Group’s contribution to the UK Exchequer from both taxes paid and collected exceeded £261m (2022: £232m) with
the main taxes including corporation tax £4.7m (2022: £12.3m), net VAT £114.8m (2022: £116.9m), employment taxes of £94.2m (2022:
£69.5m) and business rates £39.2m (2022: £25.3m).

At 31 March 2023, the Group has unused tax losses of £57.4m (2022: £62.6m) and fixed asset temporary differences of £36.7m (2022:
£36.7m) available for offset against future profits. A deferred tax asset has been recognised in respect of £23.7m (2022: £28.9m) of the
losses and £36.7m (2022: £36.7m) 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 £5.9m in relation to losses and £9.2m in
relation to fixed asset temporary differences.

No deferred tax asset has been recognised in respect of the remaining £35.3m (2022: £33.7m) which materially relates 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 £8.8m. These losses may be carried forward indefinitely.

8. Dividends

For the period
Equity – ordinary shares
Final for the 52 weeks to 1 April 2022 – paid 6.0p per share (52 weeks to 2 April 2021: 5.0p)
Interim for the 52 weeks to 31 March 2023 – paid 3.0p per share (52 weeks to 1 April 2022: 3.0p)

52 weeks to
31 March
2023
£m

52 weeks to
1 April
2022
£m

13.0
6.5
19.5

9.9
6.6
16.5

In addition, the Directors are proposing a final dividend in respect of the financial period ended 31 March 2023 of 7.0p per share (2022:
6.0p per share), which will absorb an estimated £15.3m (2022: £13.0m) of shareholders’ funds. It will be paid on 15 September 2023 to
shareholders who are on the register of members on 11 August 2023.

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 31 March 2023.

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

188

52 weeks to
31 March
2023
Number of
shares
m
218.9
(1.5)
217.4
10.0
227.4

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

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALS9. Earnings Per Share continued

For the period
Basic earnings attributable to equity shareholders
Non-underlying items (see Note 5):
Operating expenses
Finance costs
Tax on non-underlying items
Underlying earnings before non-underlying items

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
31 March
2023
£m
34.0

52 weeks to
1 April
2022
£m
77.7

8.0
–
(1.1)
40.9

(6.8)
–
1.7
72.6

52 weeks to
31 March
2023
15.6p
15.0p
18.8p
18.0p

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

10. Acquisition of Subsidiaries
Lodge Tyre Acquisition
On 4 October 2022, the Group acquired 100% of the issued share capital of LTC Trading Holdings Limited (“Lodge Tyre”) and its subsidiary
companies (see page 208) for a initial consideration of £33.5m (excluding transaction costs). Lodge Tyre comprises over 50 garages and a
fleet of vans, which provide support for retail and B2B customers, with centres across central England.

The principle reason for the acquisition was to build on the already successful Commercial Fleet Services business operated via our
McConechy’s and Universal operations and significantly increase our coverage across Britain.

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 LTC Trading Holdings 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
Borrowings
Other taxation and social security
Current tax liabilities
Provisions
Deferred tax liability
Total

–
3.8
–
9.0
19.0
0.3
(20.1)
–
(1.7)
(1.0)
(0.3)
(0.5)
(0.3)
8.2

13.9
–
–
–
–
–
–
–
–
–
–
–
(3.5)
10.4

–
–
6.3
–
–
–
–
(6.3)
–
–
–
–
–
–

13.9
3.8
6.3
9.0
19.0
0.3
(20.1)
(6.3)
(1.7)
(1.0)
(0.3)
(0.5)
(3.8)
18.6

189

halfords.annualreport2023.comNotes to the
Financial Statements

10. Acquisition of Subsidiaries continued
Goodwill
Goodwill was recognised as a result of the acquisition as follows:

Initial consideration (£33.5m net cash, £0.9m owing to sellers at year end)
FV of contingent consideration (payable March 2024)
Less fair value of identifiable (assets)/liabilities
Goodwill
Intangible assets:
Customer relationships
Brand names
Total

£m
33.5
3.2
(18.6)
18.1

12.1
1.8
13.9

None of the goodwill acquired is expected to be deductible for income tax purposes. The goodwill constitutes the acquisition of customer
relationships.

The Lodge businesses contributed £44.0m revenue, £3.6m of EBITDA and £2.0m of underlying profit before tax, for the period between
the date of acquisition and the balance sheet date.

If the acquisition of the Lodge business had been completed on the first day of the financial year, Group revenues for the period
would have been £48m higher and Group EBITDA would have been £3.3m higher (before amortisation of intangible assets arising on
consolidation).

Acquisition costs of £1.4m 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).

11. Intangible Assets

Cost
At 2 April 2021
Additions
Additions from acquisitions
Disposals
At 1 April 2022
Additions
Additions from acquisitions
Disposals
At 31 March 2023
Amortisation
At 2 April 2021
Charge for the period
Disposals
At 1 April 2022
Charge for the period
Disposals
At 31 March 2023
Net book value at 31 March 2023
Net book value at 1 April 2022

Brand
names and
trademarks
£m

Customer
relationships
£m

Supplier
relationships
£m

Computer
software
£m

Goodwill
£m

11.5
–
0.8
–
12.3
–
1.8
–
14.1

5.1
0.8
–
5.9
1.0

6.9
7.2
6.4

16.9
–
6.2
–
23.1
–
12.1
–
35.2

12.7
0.9
–
13.6
1.7

15.3
19.9
9.5

9.4
–
–
–
9.4
–
–
–
9.4

2.4
0.7
–
3.1
0.7

3.8
5.6
6.3

87.7
21.4
–
(0.8)
108.3
25.0
–
(0.5)
132.8

59.7
13.4
(0.7)
72.4
14.5
(0.3)
86.6
46.2
35.9

374.4
0.6
31.0
–
406.0
-
18.7
–
424.7

21.7
–
–
21.7
–
–
21.7
403.0
384.3

Total
£m

499.9
22.0
38.0
(0.8)
559.1
25.0
32.6
(0.5)
616.2

101.6
15.8
(0.7)
116.7
17.9
(0.3)
134.3
481.9
442.4

190

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALS11. Intangible Assets continued
1) Retail
The table below shows the split of goodwill in the retail CGU:

Company Goodwill related to

Halfords Holdings Limited
Tredz Limited and Wheelies Direct Limited
Boardman Bikes Limited and Boardman International Limited
Total for Retail CGU

Amount

Acquired

253.1
9.5
10.7
273.3

31st August 2022
23rd May 2016
4th June 2014

2) Car Servicing
In FY23 an additional £0.3m of goodwill has been recognised for the Axle Group as the balances initially disclosed as part of the acquired
net assets were reviewed under the terms of IFRS 3, Business Combinations. As part of this review, four areas were identified where
assets and liabilities, provisionally, recognised should have been adjusted based on information gathered by management within the initial
12-month period post acquisition.

The table below shows the split of goodwill in the Car Servicing CGU, which relates to a portfolio of garages and fleet vans across the
United Kingdom.

Company Goodwill related to
LTC Trading Holding
APT Tyre Distributors Limited
Axle Group
Iverson Tyres Limited
The Universal Tyre Company (Deptford) Limited
McConechy’s
Victor Holdings Limited (Tyres on the Drive)
Nationwide Autocentres
Total for Car Servicing CGU

Amount
18.1
0.3
31.3
0.6
2.1
6.9
0.7
69.7
129.7

Acquired
4th October 2022
11th May 2022
9th December 2021
1st December 2021
15th April 2021
5th November 2019
14th October 2019
17th February 2010

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 CGUs, being Retail and Car Servicing. This is the
lowest level within the Group to 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 prepared by management covering a five-year period, which are reviewed and approved
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 5-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 of 2.4%, 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 were 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 the retail and car
servicing groups of CGUs.

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 groups of CGUs. The growth
rates for both the retail and car servicing groups of 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 rate
Growth rate

Notes:

1 Pre-tax discount rate applied to the cash flow projections.

2 Growth rate used to extrapolate cash flows beyond the five-year budget period.

Notes
1
2

2023
10.9%
1.0%

2022
10.1%
1.0%

191

halfords.annualreport2023.comNotes to the
Financial Statements

11. Intangible assets continued
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. For Retail and Car Servicing, there is no reasonably possible
change in key assumptions, including those relating to future sales performance and future costs, that would lead to an impairment.
Modelling included looking at the effect of a 1% decrease in terminal growth rate and a 1% increase in discount rate. Both separately and
combined, these showed adequate headroom and, due to the maturity of the business, it is not deemed reasonable that these would move
further. Further stress testing also took place, which showed EBIT and, thus, sales would need to move by a significant percentage before
an impairment would be triggered. Management did not believe this percentage movement was likely. Results of this sensitivity analysis
are shown below:

Original headroom
Headroom using a discount rate increased by 1%
Headroom using a terminal growth rate decreased by 1%
Headroom using a combined 1% decrease in terminal growth rate and 1% increase in discount rate

Retail
2023
£m
225.3
138.6
105.3
47.7

Car Servicing
2023
£m
165.3
107.6
95.4
54.7

In addition to the sensitivity testing performed, management have performed a stress test, which shows EBIT year on year would need to
decrease by 32.9% within Retail and 27.9% within Autocentres before an impairment issue would be triggered. This is considered unlikely.

Based on the analysis summarised above, the Directors were satisfied that no reasonably possible change in key assumptions would lead
to an impairment; the Directors have concluded that the recoverable value of the Group’s CGUs exceeded their carrying amount.

12. Property, Plant and Equipment

Fixtures,
fittings
and
equipment
£m

Land and
buildings
£m

72.6
5.8
5.8
(0.5)
83.7
6.7
0.4
(2.8)
88.0

51.8
4.0
–
–
55.8
5.4
0.4
(2.3)
59.3
28.7
27.9

271.6
21.4
9.5
(3.8)
298.7
16.4
3.4
(8.1)
310.4

211.1
16.6
(0.3)
(2.5)
224.9
22.7
0.8
(7.1)
241.3
69.1
73.8

Total
£m

344.2
27.2
15.3
(4.3)
382.4
23.1
3.8
(10.9)
398.4

262.9
20.6
(0.3)
(2.5)
280.7
28.1
1.2
(9.4)
300.6
97.8
101.7

Cost
At 2 April 2021
Additions
Additions from acquisitions
Disposals
At 1 April 2022
Additions
Additions from acquisitions
Disposals
At 31 March 2023
Depreciation
At 2 April 2021
Depreciation for the period
Impairment reversal
Disposals
At 1 April 2022
Depreciation for the period
Impairment charge
Disposals
At 31 March 2023
Net book value at 31 March 2023
Net book value at 1 April 2022

No fixed assets are held as security for external borrowings.

192

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALS13. 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 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
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 31 March 2023

Land and
buildings
£m
279.9
82.0
44.6
(66.4)
6.8
(1.3)
–

345.6
5.8
23.6
(72.8)
1.0
(0.7)
2.3
304.8

Equipment
£m
2.9
–
5.0
(3.5)
0.4
(0.2)
–
4.6
0.5
7.4
(4.7)
–
–
–

7.8

The impairment reversal of £2.3m relates to previously impaired properties which have now been sub-let and therefore a partial

reinstatement to the ROU asset has been made. The total impairment charge is in non-underlying items.

Lease Liabilities

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
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 31 March 2023

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

Land and
buildings
£m
340.6
73.2
44.6
8.8
6.8
(81.7)
(7.0)
(0.2)
385.1
5.8
22.3
8.5
1.0
(84.6)
(1.1)
0.5
337.5

Equipment
£m
3.7
–
4.9
0.2
0.4
(3.3)

–
5.9
0.5
7.4
0.3
–
(4.7)
–
–

9.4

31 March
2023
£m
77.6
269.3

Total
£m
282.8
82.0
49.6
(69.9)
7.2
(1.5)
–

350.2
6.3
31.0
(77.5)
1.0
(0.7)
2.3
312.6

Total
£m
344.3
73.2
49.5
9.0
7.2
(85.0)
(7.0)
(0.2)
391.0
6.3
29.7
8.8
1.0
(89.3)
(1.1)
0.5
346.9

1 April
2022
£m
74.5
316.5

193

halfords.annualreport2023.com
Notes to the
Financial Statements

13. 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 31 March 2023
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 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

31 March
2023
£m

85.0
80.9
67.1
45.2
30.3
20.3
14.0
11.8
9.3
6.0
3.6
373.5

Land and
buildings
£m

Equipment
£m

72.8
8.5
4.8

–

66.4
8.8
6.8

–

4.7
0.3
–

2.0

3.5
0.2
–

1.6

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

Total
£m

77.5
8.8
4.8

2.0

69.9
9.0
6.8

1.6

iii) Amounts recognised in Consolidated Statement of Cash Flows
The total cash outflow for leases in the period ended 31 March 2023 was £89.3m (2022: £85.0m).

14. Inventories

Finished goods for resale

2023
£m
256.2

2022
£m
222.1

Finished goods inventories include £13.4m (2022: £17.2m) of provisions to carry inventories at net realisable value where such value is
lower than cost. During the period, £3.4m of inventory provisions were released (2022: £1.4m).

During the period, £4.7m was recognised as an expense in respect of the write down of inventories (2022: £7.5m) 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 £792.5m (2022: £655.0m).

Inventories at 31 March 2023 include a right to recover returned goods amounting to £1.9m (2022: £2.0m). These are measured by
reference to the former carrying amount of the sold inventories.

194

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALS15. Trade and Other Receivables

Falling due within one year:
Trade receivables
Less: provision for impairment of receivables

Trade receivables – net
Other receivables
Accrued income
Prepayments

*Prior period restated - See Note 29 for details.

2023
£m

64.1
(0.5)

63.6
31.1
33.2
16.7
144.6

2022*
£m

35.4
(0.8)

34.6
18.4
27.9
11.7
92.6

Information about the Group’s exposure to credit and market risks and impairment losses for trade and other receivables is included in
Note 21.

Accrued income at 31 March 2023 includes £29.7m (2022: 27.2m) relating to supplier income.

Included in Other receivables in FY23 is an amount of £0.8m relating to a supplier financing arrangement.

16. Cash and cash equivalents

Cash at bank and in hand

2023
£m
41.9

2022
£m
46.3

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. £3.1m (31 March: £4.5m) of the Group’s cash and cash equivalents included in the balance sheet and the
cash flow statement is held by the trustee of the Group’s employee benefit trust, in relation to the share scheme for employees (£2.4m) and
‘Here to Help’ fund (£0.7m). Therefore, these funds are restricted and are not available to circulate within the Group on demand.

17. Borrowings

Current
Unsecured bank overdraft
Lease liabilities

Non-current
Drawdown on RCF
Lease liabilities

2023
£m

9.7
77.6
87.3

34.0
269.3
303.3

2022
£m

0.2
74.5
74.7

–
316.5
316.5

The Group’s borrowing facility is a three-year £160m revolving credit facility, with a £20.0m overdraft, which began on 4 December 2020,
with two options to extend by a further year. During the period, this was extended with expiry date now 4 December 2025. The facility
carries an interest rate of SONIA plus a margin, which is variable based on the gearing measures as set out in the facility covenant
certificate and which is currently 200 basis points. Both utilisation and non-utilisation fees are also applicable, being charged when
utilisation rises above a set percentage with non-utilisation based on a set percentage of the applicable margin. These charges are based
on market rates as are the commitment fees.

Significant headroom exists on both financial covenants contained within the banking arrangement. The Group’s financial covenants are
calculated on a pre-IFRS 16 basis.

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

2023
2.2
0.1

2022
2.7
(0.3)

195

halfords.annualreport2023.comNotes to the
Financial Statements

17. Borrowings continued
The Group had the following committed borrowing facilities available at each balance sheet date in respect of which all conditions
precedent had been met:

Expiring within 1 year
Expiring between 1 and 2 years
Expiring between 2 and 5 years

2023
£m
–
–
180.0
180.0

2022
£m
20.0
–
160.0
180.0

The facility of £180.0m (2022: £180.0m) relates to the Group’s revolving credit facility. £20.0m of this balance is the overdraft on the
revolving credit facility . All these facilities incurred commitment fees at market rates.

18. 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

*Prior period restated - See Note 29 for details.

2023
£m

225.4
34.1
16.2
79.3
355.0

3.5
3.5

2022*
£m

177.6
33.3
16.8
71.9
299.6

4.9
4.9

Trade and other payables at 31 March 2023 includes £7.8m (2022: £7.2m) of deferred income in relation to product warranties, and service
and repair plans, of which £4.3m (2022: £3.6m) is in current liabilities and £3.5m (2022: £3.6m) is in non-current liabilities.

19. Provisions

At 1 April 2022
Additions from acquisitions
Charged during the period
Utilised during the period
Released during the period
At 31 March 2023
Analysed as:
Current liabilities
Non-current liabilities

Property
related
£m
20.5
0.5
4.3
(4.4)
(0.5)
20.4

6.3
14.1

Other
trading
£m
6.4
–
0.6
(0.9)
(0.4)
5.7

4.9
0.8

Non
trading
£m
–
–
–
–
–
–

–
–

Total
£m
26.9
0.5
4.9
(5.3)
(0.9)
26.1

11.2
14.9

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. Of the £4.3m charged to P&L
in FY23, £2.9m is within non-underlying items. The property-related provisions will be utilised over the average remaining lease term of
2.9 years.

Other trading provisions comprise a sales returns provision and an employer/product liability provision (of which £0.8m is expected to be

realised in >12 months).

196

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALS20. 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 2 April 2021
(Charge)/Credit to the income statement
Charge to other comprehensive income
Acquisition of subsidiary
Credit to Equity
At 1 April 2022
(Charge)/Credit to the income statement
Credit to other comprehensive income
Acquisition of subsidiary
Charge to Equity
At 31 March 2023

Property-
related items
£m
11.2
(3.6)
–
1.8
–
9.4
–
–
(0.3)
–
9.1

Short-term
temporary
differences
£m
1.7
0.5
(1.3)
(0.4)
–
0.5
0.4
1.1
–
–
2.0

Share-based
payments
£m
3.2
0.5
–
–
0.4
4.1
(0.7)
–
–
(0.9)
2.5

Intangible
assets

£m Tax Losses
–
(3.8)
–
(0.8)
–
–
6.9
(1.6)
–
–
6.9
(6.2)
(1.0)
1.1
–
–
–
(3.5)
–
–
5.9
(8.6)

Total
£m
12.3
(3.4)
(1.3)
6.7
0.4
14.7
(0.2)
1.1
(3.8)
(0.9)
10.9

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:

31 March
2023
£m
23.0
(12.1)
10.9

1 April
2022
£m
26.8
(12.1)
14.7

Deferred tax assets
Deferred tax liabilities

21. 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 17.

197

halfords.annualreport2023.comNotes to the
Financial Statements

21. Financial Instruments and Related Disclosures continued

b. Accounting Classifications and Fair Value

31 March 2023
Financial assets measured at fair value
Forward exchange contracts used for hedging

Note

Financial assets not measured at fair value
Trade and other receivables*
Cash and cash equivalents

Financial liabilities measured at fair value
Forward exchange contracts used for hedging

Financial liabilities not measured at fair
value
Borrowings
Lease liabilities
Trade and other payables**

15
16

17
17
18

Fair value
– hedging
instruments
£m

Mandatorily
at FVTPL –
others
£m

Carrying amount
FVOCI
– equity
instruments
£m

Amortised
cost
£m

Other
financial
liabilities
£m

Total
carrying
amount
£m

1.1
1.1

–
–
–

4.1
4.1

–
–
–
–

–
–

–
–
–

–
–

–
–
–
–

–
–

–
–
–

–
–

–
–
–
–

–
–

94.7
41.9
136.6

–
–

–
–
–
–

–
–

–
–
–

–
–

(43.7)
(346.9)
(225.4)
(616.0)

1.1
1.1

94.7
41.9
136.6

4.1
4.1

(43.7)
(346.9)
(225.4)
(616.0)

*Prepayments of £21.2m and accrued income of £29.7m are not included as a financial asset.

**Other taxation and social security payables of £34.1m, deferred income and accruals of £79.3m and other payables of £16.2m are not included as a financial liability.

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

Note

Financial assets not measured at fair value
Trade and other receivables*
Cash and cash equivalents

Financial liabilities measured at fair value
Forward exchange contracts used for hedging

Financial liabilities not measured at fair value
Borrowings
Lease liabilities
Trade and other payables**

15
16

17
17
18

Fair value
– hedging
instruments
£m

Mandatorily
at FVTPL –
others
£m

Carrying amount
FVOCI
– equity
instruments
£m

Amortised
cost
£m

Other
financial
liabilities
£m

Total
carrying
amount
£m

4.2
4.2

–
–
–

0.5
0.5

–
–
–
–

–
–

–
–
–

–
–

–
–
–
–

–
–

–
–
–

–
–

–
–
–
–

–
–

67.5
46.3
113.8

–
–

(0.2)
–
–
–

–
–

–
–
–

–
–

–
(391.0)
(242.7)
(633.7)

4.2
4.2

67.5
46.3
113.8

0.5
0.5

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

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

**Other taxation and social security payables of £33.3m, deferred income of £7.2m and other payables of £16.8m are not included as a financial liability.

198

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALS21. 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, 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 is responsible for establishing the Group’s risk management policies.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits
and controls and to monitor risks and adherence to limits. Risk management policies and systems are regularly reviewed to reflect changes
in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to
maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Group Audit Committee oversees how management monitors compliance with the Group’s risk management framework in relation to
the risks faced by the Group. The Group Audit Committee is assisted in its oversight role by internal audit. Internal audit undertakes both
regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

199

halfords.annualreport2023.comNotes to the
Financial Statements

21. Financial Instruments and Related Disclosures continued

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 £158.7m (2022: £118.0m).

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

£m
Impairment loss on trade and other receivables
Impairment loss on cash and cash equivalents

52 weeks to
31 March
2023
(0.3)
–
(0.3)

52 weeks to
1 April
2022
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. There are no material trade receivable balances with customers outside of the UK.

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 £0.3m decrease.

Cash and cash equivalents
The Group held cash and cash equivalents of £41.9m at 31 March 2023 (2022: £46.3m). 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 (2022: £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. 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 31 March 2023, 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.

200

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALS21. Financial Instruments and Related Disclosures continued

At 31 March 2023, 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
40.0
1.2310

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

The amounts at the reporting date relating to items designated as hedged items were as follows:

1–6
months
76.8
1.3578

Maturity

6–12
months
33.5
1.1962

Maturity

6–12
months
31.4
1.3423

More than
one year
12.4
1.1932

More than
one year
4.5
1.3389

Forward currency risk
At 31 March 2023
Inventory purchases
At 1 April 2022
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

(2.1)

2.2

–

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
Total

31 March 2023

USD
£m
2.3
(23.3)
(21.0)

Other
£m
1.8
(1.2)
0.6

1 April 2022
USD
£m
1.1
(24.3)
(23.2)

Other
£m
5.2
(0.7)
4.5

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 Sterling against the US dollar
10% depreciation of Sterling against the US dollar

2023
Increase/
(decrease) in
equity
£m
13.0
(10.7)

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

A strengthening/weakening of Sterling, as indicated, against the USD at 1 April 2023 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.

201

halfords.annualreport2023.comNotes to the
Financial Statements

21. Financial Instruments and Related Disclosures continued

Interest rate risk
The Group’s policy aims to manage the interest cost of the Group within the constraints of the Business Plan and its financial covenants.
The Group’s borrowings are currently subject to floating rate interest rates and the Group will continue to monitor movements in the swap
market.

If interest rates on floating rate borrowings (i.e. cash and cash equivalents and bank borrowings which attract interest at floating rates)
were to change by + or – 1%, the impact on the results in the Income Statement and equity would be a decrease/increase of £0.2m
(2022: £nil).

Interest rate movements on deposits, obligations under finance leases, trade payables, trade receivables, and other financial instruments
do not present a material exposure to the Group’s statement of financial position.

Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt.

The Group manages capital by operating within a debt ratio, which is calculated as the ratio of net debt to underlying EBITDA. The Group
was in a net debt position as at 31 March 2023 (2022: net cash).

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 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 lease liabilities are disclosed in Note 13. 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 31 March 2023 (prior year: 1 April 2022).

Due less than one year
Due between 1 and 2 years
Contractual cash flows
Fair value of derivatives

2023
Receivables
£m
29.0
–
29.0
1.1

Payables
£m
85.8
12.3
98.1
(4.1)

2022
Receivables
£m
130.6
12.2
142.8
4.2

Payables
£m
13.0
3.8
16.8
(0.5)

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

202

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALS22. Capital and Reserves

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

2023
Number of
shares
218,928,736

2022
Number of
shares
218,928,736

2023
£'000
2,189

2022
£'000
2,189

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.

In the prior period, the parent company issued 19,812,104 new Ordinary Shares with a par value of 1p per share on 6 December 2021.

Proceeds from the share issue net of transaction costs totalling £nil were recognised within Share Premium in the current period (2022:
£61.4m net of transaction costs of £1.8m), with total Share Premium at 31 March 2023 of £212.4m (2022: £212.4m).

In total, the Company received proceeds of £0.4m (2022: £1.4m) from the exercise of share options. During the year, the Company
purchased £1.5m (2022: £3.0m) of its own shares.

Investment in Own Shares
At 31 March 2023, the Company held in Trust 973,212 (2022: 1,460,702) of its own shares with a nominal value of £9,732 (2022: £14,607).
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 31 March 2023 was £1.7m (2022: £3.8m). In the current period, 1,000,000 (2022: 1,036,147) were repurchased and
transferred into the Trust, with 1,478,490 (2022: 1,208,087) reissued on exercise of share options.

Other Reserves
Capital Redemption Reserve
The capital redemption reserve has arisen following the purchase by the Company of its own shares and comprises the amount by which
the distributable profits were reduced on these transactions in accordance with the Companies Act 2006.

Hedging Reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related
to hedged transactions that have not yet occurred.

23. Share-based Payments
The Group has five 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 £2.4m (2022: £7.8m).

1. Halfords Company Share Option Scheme
The CSOS was introduced in June 2004 and the Company has made annual grants up to, and including, 2016. Options were granted
with a fixed exercise price equal to the market price of the shares under option at the date of grant. The contractual life of an option is
ten years.

Options granted before August 2013 will become 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.

203

halfords.annualreport2023.comNotes to the
Financial Statements

23. Share-based Payments continued
3. Halfords Sharesave Scheme
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 that employs the option holder
is transferred out of the Group, or in the event of a change in control, reconstruction or winding up of the Company.

Options were valued using the Black–Scholes option-pricing models.

4. Performance Share Plan
The introduction of a Performance Share Plan (“PSP”) was approved at the Annual General Meeting in August 2005 awarding the Executive
Directors and certain senior management conditional rights to receive shares. Annual schemes have been approved for each year
from 2005.

For 2009 awards onwards, the Committee has recommended the reinvestment of dividends earned on award shares, as such dividend
shares are awarded in proportion to the vesting of the original award shares. The shares awarded under the Performance Share Plan
(“PSP”) in 2016 and 2017 earned final dividends of 6.0p per share and were reinvested in shares at a cost of £1.55 per share. Shares
awarded in 2016, 2017 and 2018 under the PSP-earned interim dividends of 3.0p per share and were reinvested in shares at a cost of
£1.81 per share.

For the 2018 & 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. 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 and 2022 scheme performance criteria are weighted 50% towards Group EPS growth, 20% towards Group
services-related sales, and 30% towards total shareholder return.

For the 2018 & 2019 schemes, other senior participants’ conditions are based on the performance of the individual business units. The
awards are weighted 37.5% towards Group EPS growth targets, 12.5% weighted towards Group revenue growth targets and 50%
weighted toward EBIT of the individual business unit.

Options were valued using the Black–Scholes option-pricing models. For the 2020 scheme, onwards, options relating to the total
shareholder return tranche were valued using the Monte Carlo option-pricing model.

5. Deferred Bonus Plan (“DBP”)
Under the Deferred Bonus Plan (“DBP”), one-third of the Executives’ annual bonus is deferred as shares for three years.

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
31 March 2023
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
Number
(‘000)
382
–
–

(3)
(139)
240
–
–

MSP
Number
(‘000)
1,747
1,054
–

(312)
(192)
2,297
–
–

WAEP
(£)
3.71
–
–

3.71
3.71
3.71
–
3.71

SAYE
Number
(‘000)
6,479
3,515
–

WAEP
(£)
1.44
1.16
–

1.56
(247)
1.65
(1,480)
1.28
8,267
–
–
– 1.16-1.79

PSP
Number
(‘000)
6,306
2,548
284
(580)
(398)
–
8,160
–
–

WAEP
(£)
2.28
1.67
–

1.35
2.36
2.05
–
–

WAEP
(£)
–
–
–
–
–
–
–
–
–

–

0.3

–

8.4

–

1.7

–

7.9

204

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALS
23. Share based Payments continued

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)

CSOS
Number
(‘000)
690
–
–

(156)
(152)
382
–

–

WAEP
(£)
3.71
–
–

3.71
3.71
3.71
–

3.71

1.3

MSP
Number
(‘000)
1,677
596
–

(227)
(299)
1,747
–

–

WAEP
(£)
1.95
2.92
–

2.66
1.96
2.28
–

–

8.3

SAYE
Number
(‘000)
7,247
630
–
(288)
(320)
(790)
6,479
–

WAEP
(£)
1.45
1.79
–
1.51
2.10
1.50
1.44
–

PSP
Number
(‘000)
5,248
1,644
112
(193)
(505)
–
6,306
–

1.77–2.78

–

1.8

–

WAEP
(£)
–
–
–
–
–
–
–
–

–

8.2

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 31 March 2023
MSP
1.67
–
67.61%
10
2.75
–
0.00%
33%
1.41

SAYE
1.71
1.16
62.69%
3
3.5
0.20%
5.28%
44%
0.73

PSP
1.67
–
55.03%
3
3
–
5.65%
0%
1.67

52 weeks to 1 April 2022

MSP
2.92
–
61.84%
10
2.8
–
0.00%
33%
2.92

SAYE
2.99
2.99
61.19%
3
3
0.20%
0.00%
44%
1.79

PSP
2.92
–
65.12%
3
3
–
–
–
1.72

As the MSP and PSP 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.

24. Commitments

Capital expenditure: Contracted but not provided

2023
£m
0.3

2022
£m
0.5

25. 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 £10.1m (2022: £6.7m).

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.

26. 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 31 March 2023 amounted to £0.36m (2022: £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.

205

halfords.annualreport2023.comNotes to the
Financial Statements

27. 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 207 to 213.

Transactions with Key Management Personnel
The key management personnel of the Group comprise the Executive and Non-Executive Directors and the Halfords Limited and Halfords
Autocentres management boards. The details of the remuneration, long-term incentive plans, shareholdings and share option entitlements
of individual Directors are included in the Directors’ Remuneration Report on pages 144 to 152. Key management compensation is
disclosed in Note 4.

Directors of the Company control 0.40% of the ordinary shares of the Company.

28. Off Balance Sheet Arrangements
The Group has no off balance sheet arrangements to disclose as required by S410A of the Companies Act 2006.

29. Prior Period Adjustment
Axle Group Intercompany Sales
During the preparation of the financial statements for the period ended 31 March 2023 a consolidation error was identified relating to
Axle group intercompany transactions. In the previous year elimination of intercompany sales had taken place in both the Axle group and
Halfords group consolidations. As a result £12.8m was incorrectly eliminated from Revenue and Cost of Sales within the Consolidated
Income Statement for the 52 week period ended 1 April 2022.

To correct for this error in the Consolidated Income Statement, Revenue for the 52 week period ended 1 April 2022 has been increased
by £12.8m with a corresponding adjustment to Cost of Sales. In correcting this error there has been no impact to overall Gross Profit or
Profit for the Financial Period within the Consolidated Income Statement and there has been no impact on Net Assets or other headline
accounts.

Mapping Error within Trade and Other Payables
During the preparation of the financial statements for the period ended 31 March 2023 a mapping error was identified relating to the
elimination of intercompany amounts included within Trade and Other Payables, that had incorrectly been eliminated from Accruals
& Deferred Income. A £4.5m decrease was therefore incorrectly included in Accruals & Deferred Income as at the prior year end of 1
April 2022.

To correct for this error in the notes to the Financial Statements Other Payables have been decreased by £4.5m with a corresponding
increase to Accruals and Deferred Income. In correcting this error there is no impact on the Consolidated Income Statement, Consolidated
Statement of Financial Position, or Consolidated Statement of Cashflows.

Classification of Supplier income receivable
During the preparation of the financial statements for the period ended 31 March 2023 it was identified that Accrued income should have
been disclosed separately within the notes to the Financial statements in the prior period as these amounts are different in nature to other
balances included within Trade and other receivables.

To correct for this error in the notes to the Financial Statements, Accrued income of £27.9m has been separately presented as a line item
in the note, Other receivables have been decreased by £14.5m, and Prepayments have been decreased by £13.4m. In correcting this error
there is no impact on the Consolidated Income Statement, Consolidated Statement of Financial Position, or Consolidated Statement of
Cashflows.

206

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALSCompany
Balance Sheet

Fixed assets
Investments
Current assets
Debtors falling due after more than one year
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

31 March
2023
£m

1 April
2022
£m

Notes

9
9
9
9
9

813.8

811.4

127.2
4.8
2.6
134.6
(405.4)
(270.8)
(33.8)
509.2

2.2
212.4
(12.7)
0.3
307.0
509.2

67.0
1.5
3.6
72.1
(354.9)
(282.8)
–
528.6

2.2
212.4
(11.6)
0.3
325.3
528.6

The notes on pages 209 to 213 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 209.

The Company made a loss before dividends paid for the period of £1.2m (52 week period to 1 April 2022: £273.2m profit). The directors
have taken advantage of the exemption available under section 408 of the Companies Act 2006 and have not presented a profit and loss
account for the Company alone.

The financial statements on pages 207 to 213 were approved by the Board of Directors on 21 June 2023 and were signed on its behalf by:

Jo Hartley
Chief Financial Officer

Company Number: 04457314

207

halfords.annualreport2023.comCompany Statement of Changes
in Shareholders’ Equity

At 2 April 2021
Profit for the period
Issue of new shares
Acquisition of Treasury Shares
Share options exercised
Share-based payments
Dividends paid
At 1 April 2022
Loss for the period
Acquisition of Treasury Shares
Share options exercised
Share-based payments
Dividends paid
At 31 March 2023

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

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

Investment
in own
shares
£m
(10.0)
–
–
(3.0)
1.4
–
–
(11.6)
–
(1.5)
0.4

–
–
(12.7)

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

Retained
Earnings
£m
60.8
273.2
–
–
–
7.8
(16.5)
325.3
(1.2)
–
–
2.4
(19.5)
307.0

Total
£m
204.1
273.2
61.6
(3.0)
1.4
7.8
(16.5)
528.6
(1.2)
(1.5)
0.4
2.4
(19.5)
509.2

208

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR 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 31 March 2023, whilst the comparative period covered the 52 weeks to 1 April
2022. The accounts are prepared under the historical cost convention, except where Financial Reporting Standards require 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 94, 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 international accounting 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.

The investments have been tested for impairment using the present value of the expected future cash flows and the carrying value of the
investments, with no impairments required.

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.

209

halfords.annualreport2023.comNotes to the
Financial Statements

1. Profit and Loss Account
The Company made a loss before dividends paid for the 52-week period to 31 March 2023 of £1.2m (52-week period to 1 April 2022:
£273.2m profit). 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 144 to 152, which forms part of the audited information.

4. Investments

Shares in Group undertaking
Cost
As at 1 April 2022
Additions – share-based payments
At 31 March 2023

£m

811.4
2.4
813.8

The investments represent shares in the following subsidiary undertakings as at 31 March 2023 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 CGU groups and
this has been used in the impairment test for the Company’s investments in these underlying businesses. Management have concluded
that under IAS36, no impairment has been identified with regard to the Company’s investments in subsidiaries

In the opinion of the Directors the value of the investments in the subsidiary undertakings is not less than the amount shown above.

The related undertakings of the Company at 31 March 2023 are as follows:

Incorporated in

Ordinary shares
percentage owned %

Halfords Group Holdings Limited

Great Britain*

100

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

Principal activities
Intermediate
holding
company

% Ownership
of ordinary
Subsidiary undertaking
equity shares
Subsidiaries registered in England & Wales, with a registered address of: Icknield Street Drive, Redditch, Worcestershire B98 0DE

Principal activity

Halfords Limited*
Halfords Autocentres Limited*
NW Autocentres Limited*
Halfords Autocentres Developments Limited*
Stop N’ Steer Limited*
Halfords Vehicle Management Limited*
The Universal Tyre Company (Deptford) Limited*
G W Autoserve (Ipswich) Limited*
G W Commercial Tyres Limited*
Boardman Bikes Limited*
Boardman International Limited*
Halfords IP Management Limited*
Performance Cycling Holdings Limited*
Performance Cycling Limited*
Wheelies Direct Limited*
Tredz Limited*
Giant (Wales) Limited*
National Tyre and Autofit Limited*
Tyre and Autofit Limited*

210

Retailing of auto parts, accessories, cycles and
cycle accessories
Car servicing
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

100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALS4. Investments continued

% Ownership
of ordinary
equity shares
100
100
100
100
100
100
100
100
100
100

Principal activity
Car servicing
Dormant
Dormant
Software as a Service Provider
Intermediate holding company
Car servicing
Intermediate holding company
Car servicing
Car servicing
Intermediate holding company

Subsidiary undertaking
National Tyre Service Limited*
The Marsham Tyre Company Limited*
W. Briggs & Co Limited*
Avayler Trading Limited*
LTC Trading Holdings Limited*
Lodge Tyre Company Limited*
Fit4Fleet Holdings Limited*
Fit4Fleet Limited*
APT Tyre Distributors Limited*
Axle Group Limited*
Subsidiary 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*
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: Unit 2, The Park Glenamuck Road, Carrickmines, Dublin
18, 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
Avayler Trading Limited LLC
Subsidiary registered in England & Wales, with a registered address of: The Ca’D’Oro, 45 Gordon Street, Glasgow, Scotland G1
3PE
ULM Services Limited*
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
Dormant
Car servicing
Dormant
Car servicing
Car servicing
Dormant

100
100
100
100
100
100
100
100
100
100

Software as a Service Provider

E-Commerce

Car servicing

Dormant

0.06

100

*Shares held indirectly through subsidiary undertakings

The only subsidiaries to trade during the year were Halfords Limited, Halfords Autocentres Limited, Performance Cycling Limited,
McConnechy’s Tyre Services Limited, The Universal Tyre Company (Deptford) Limited, National Tyre Service Limited, Stepgrade Motor
Accessories Limited, Avayler Trading Limited, Avayler Trading Limited LLC, Constant Price Monitor Limited, Birkenshaw Distributors
Limited, ULM Services Limited, Lodge Tyre Company Limited, Fit4Fleet Limited and APT Tyre Distributors Limited.

5. Debtors

Falling due within one year:
Other Debtors
Falling due after more than one year:
Amounts owed by Group undertakings

2023
£m

4.8

127.2
132.0

2022
£m

1.5

67.0
68.5

Amounts owed by Group undertakings are subject to interest. At 31 March 2023, the amounts bear interest at a rate of 2.48% (2022: 2.48%).

Amounts owed by Group undertakings are repayable according to the terms of an intercompany loan agreement. The loans mature on 4
December 2025 and bear interest at market rates based on SONIA plus a margin. Amounts owed by Group undertakings have been assessed
in line with IFRS9 and as 31 March 2023 and 2 April 2022 the impact of expected credit losses on these balances was assessed to be
immaterial and as such no provision has been made.

211

halfords.annualreport2023.comNotes to the
Financial Statements

6. Cash and Cash Equivalents

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

2023
£m

2.6
2.6

2022
£m

3.6
3.6

£2.4m (2021: £3.5m) 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:
Amounts owed to Group undertakings
Accruals and deferred income
Falling due after more than one year:
RCF Drawdown(Note 8)

2023
£m

405.3
0.1

33.8
439.2

2022
£m

354.9
–

–
354.9

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

Drawdown on RCF

The above borrowings are stated net of unamortised issue costs of £1.2m (FY22: £1.5).

Details of the Company’s borrowing facilities are in Note 17 of the Group’s financial statements.

2023
£m
33.8
33.8

2022
£m
–
–

212

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023OUR FINANCIALS9. Equity Share Capital

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

2023
Number of
shares
218,928,736

2022
Number of
shares
218,928,736

2023
£000
2,189

2022
£000
2,189

In the prior period, the Company issued 19,812,104 new Ordinary Shares with a par value of 1p per share on 6 December 2021.

Proceeds from the share issue net of transaction costs of £nil were recognised within Share Premium in the current period (2022 £61.4m
net of transaction costs of £1.8m), with total Share Premium at 31 March 2023 of £212.4m (2022: £212.4m).

In total, the Company received proceeds of £0.4m (2022: £1.4m) from the exercise of share options. During the year, the Company
purchased £1.5m (2022: £3.0m) of its own shares.

Potential Issue of Ordinary Shares
The Company has a number of employee share option schemes. Further information regarding these schemes can be found in Note 23 of
the Group’s financial statements.

10. Share-based payments
Share-based payments during the period were £2.4m (2022: £7.8m) bringing the balance at 31 March 2023 to £38.9m (2022: £36.5m).

11. Profits available for distribution
Distributable reserves in the company balance sheet total £268.8m at 31 March 2023.

12. Reserves
The Company settled dividends of £19.5m (2022: £16.5m) 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 31 March 2023 amounted to £0.36m (2022: £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.

213

halfords.annualreport2023.com4

Shareholder
Information

Contents

Five-Year Record
Glossary of Alternative
Performance Measures
Company Information

216

217
218

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
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

1 FY19 financials are stated on a pre-IFRS-16 basis

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
(unaudited)
£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
1,382.4
(660.7)
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

52 weeks to
31 March
2023
(audited)
£m

1,593.5
(808.2)
785.3
(721.7)
63.6
(8.0)
55.6
(12.1)
51.5
(8.0)
43.5
(10.6)
1.1
34.0
15.6p
18.8p
217.4m

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 tables include the unaudited pro forma 52 weeks to 27 March 2020.

216

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023SHAREHOLDER 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 168.
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, including lease debt, 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)*

FY23
£m
32.2
(77.6)
(303.3)
(348.7)

FY22
£m
46.1
(74.5)
(316.5)
(344.9)

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*

FY23
£m
63.6
124.7
188.3
(8.0)
180.3
2.4
1.3
(12.9)
(1.3)
169.8

FY22
£m
101.1
106.0
207.1
6.8
213.9
7.8
(5.2)
(70.0)
(14.7)
131.8

FY20
(53 weeks)
£m
67.2
118.7
185.9
(34.2)
151.7
1.0
2.8
52.0
(3.1)
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 movement, lease payments, and arrangement fees on loans; as reconciled below.

Adjusted Operating Cash Flow
Capital expenditure
Net finance costs
Taxation
Supplier financing
Sales and Leaseback
Exchange movements
Lease payments
Free Cash Flow*

FY23
£m
169.8
(54.4)
(11.1)
(4.7)
0.8
–
(8.0)
(89.3)
3.1

FY22
£m
131.8
(47.3)
(10.6)
(12.2)
–
7.5
0.9
(85.0)
(14.9)

*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.

FY20
£m
204.4
(33.6)
(13.2)
(16.3)

–
–
(2.0)
(87.7)
51.6

217

halfords.annualreport2023.comCompany
information

Financial Calendar

Friday 11 August 2023
Wednesday 6 September 2023
Wednesday 6 September 2023
Friday 15 September 2023
Wednesday 22 November 2023
Thursday 18 January 2024

Final Dividend Record Date
20 Week Trading Update
Annual General Meeting
Final Dividend Payment Date
Interim Results
Q3 Trading Statement

Registered Office

Registrars

Halfords Group plc
Icknield Street Drive
Redditch
Worcestershire
B98 0DE

Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL

Auditor

BDO LLP
55 Baker Street
London

W1U 7EU

Joint Brokers

Investec plc
30 Gresham Street
London
EC2V 7QP

Peel Hunt LLP
100 Liverpool Street
London
EC2M 2AT

Solicitors

Clifford Chance LLP
10 Upper Bank Street
London
E14 5JJ

218

Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023SHAREHOLDER INFORMATION

CBP013018

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