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Halfords Group plc

Annual Report and Accounts

for the period ended 31 March 2023

To Inspire

and Sup port

a Lifetime of

motoring and

cycling.

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

Contents

Group Overview

Group Highlights 01

Our Year in Review 01

Our Purpose Framework 02

Our Culture 03

Group at a Glance 04

Our Business Today 06

Our Journey 08

Strategic Report

Chair’s Statement 20

Chief Executive Officer’s Statement 22

Our Marketplace 26

Our Business Model 30

Our Engagement with Stakeholders 32

Key Performance Indicators 36

Our Strategy 40

ESG Performance Overview 48

ESG Progress in FY23 50

Task Force on Climate-related

Financial Disclosures (“TCFD”) 62

Chief Financial Officer’s Statement 68

Risk Management 74

Our Principal Risks and Uncertainties 76

Going Concern and Viability Statement 82

Our Governance

Governance at a glance 86

Board of Directors 90

– Executive Team 92

Directors’ Report 94

Corporate Governance Report 100

Nomination Committee Report 118

ESG Committee Report 120

Audit Committee Report 122

Remuneration Committee Report 128

– Directors’ Remuneration Policy 133

– Directors’ Remuneration Report 144

Directors’ Responsibilities 153

Financial Statements

Independent Auditor’s Report 156

Consolidated Income Statement 166

Consolidated Statement of

Comprehensive Income 167

Consolidated Statement of

Financial Position 168

Consolidated Statement of Changes

in Shareholders’ Equity 169

Consolidated Statement of

Cash Flows 170

Notes to Consolidated Statement

of Cash Flows 171

Accounting Policies 172

Notes to the Financial Statements 183

Company Balance Sheet 207

Company Statement of Changes in

Shareholders’ Equity 208

Accounting Policies 209

Notes to the Financial Statements 210

Shareholder Information

Five-year Record 216

Glossary of Alternative Performance

Measures 217

Company Information 218

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.

Welcome to our

2023 Annual Report

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.

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

Financial

Revenue

+15.3%

Underlying profit

before tax

-42.7%

Profit before tax

-55.0%

Dividend per

ordinary share

+11.1%

Underlying basic

earnings per share

-49.3%

Basic earnings

per share

-58.8%

FY23

FY22

FY21

FY20

FY19

£1,593.5m

£1,382.4m

£1,292.3m

£1,142.4m

£1,138.6m

FY23

FY22

FY21

FY20

FY19

£51.5m

£89.8m

£99.5m

£56.9m

£58.8m

FY23

FY22

FY21

FY20

FY19

£43.5m

£96.6m

£64.5m

£22.7m

£51.0m

FY23

FY22

FY21

FY20

FY19

10.0p

9.0p

5.0p

6.3p

18.6p

FY23

FY22

FY21

FY20

FY19

18.8p

35.5p

41.7p

54.4p

24.5p

FY23

FY22

FY21

FY20

FY19

15.6p

37.9p

27.1p

10.6p

21.2p

Strategic

• 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.

Operational

• 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.

Sustainability

• 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 01

Group

Highlights

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

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 Strategic Priorities

Inspire

Inspire our customers

with a differentiated and

super-specialist offer.

Support

Support our customers through

an integrated, unique and more

convenient services offer.

Lifetime

Enable a Lifetime of motoring

and cycling.

Read more on pages 42 - 43. Read more on pages 44 - 45. Read more on pages 46 - 47.

Our Culture

A team inspired and motivated to drive towards delivering our Goals, Mission, Vision and Purpose who live and breathe

our brand values and represent the very best of what we offer as a business to our customers.

Our Values

one halfords

family

wow our

customers

be better

every day

pride in

expertise

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

GROUP OVERVIEW

Our Purpose

Framework

halfords.annualreport2023.com 03

Ethical foundation enabling

better decisions every day

We are reliant on the culture of our business

and the engagement of our colleagues

to achieve our ambition. Last year, we

introduced our new values relevant to our

strategy across the Group. These new

values are the fundamental beliefs that

underpin everything we do and have been

incorporated into Group training, review and

reward mechanisms.

Living our Values

Following the introduction of the values,

all colleagues across the Group attended

leader-led workshops. These workshops

were followed by the launch of a series of

initiatives designed to both fully embed

our values and to recognise and reward

our values in action. A refreshed Group

induction programme was launched in

April 2022. This was designed to ensure

all colleagues have a warm welcome to

Halfords and can immediately see our

values living and breathing in the culture

across the business.

All new colleagues are introduced to our

values as part of their induction, we also

now review annual performance against

the values, and colleagues are assessed

against the behaviours that underpin

each value. We also have a recognition

programme, which recognises our

“Colleague of the Quarter”. We received

nearly 700 nominations throughout the

year, 46 colleagues were recognised as a

“Colleague of the Quarter” and at the end

of FY23, three colleagues were awarded

“Colleague of the Year”.

The importance of our people

Our colleagues are vital to our success

and as such, we do everything we can

to ensure their wellbeing – both physical

and mental – remains healthy. Our “One

Halfords Family” value is lived through all

our colleagues and we all go the extra mile

to help those around us. From financial

help through our Wagestream app and

’Here to Help’ fund to having over 100

fully-trained Mental Health First aiders

across the Group, we offer colleagues a

variety of ways to access help, should they

need it. We let colleagues have the option

to feedback about how they feel through

regular listening groups and anonymously

through the annual engagement survey. We

also remain committed to providing best-in-

class training to our colleagues to promote

career progression. This includes field-

based training, such as electric servicing,

all the way to online training courses via our

intranet to upskill colleagues who wish to

progress their career.