Promoting Long-Term Sustainable Success of the Company

Our purpose is to Inspire and Support a Lifetime of motoring and cycling

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

How we are working towards our vision: being a super-specialist in motoring and cycling, trusted by the nation

How the Board Operates

The Board and its Committees have a scheduled forward programme of meetings. This ensures that sufficient time is allocated to each relevant discussion and activity and the Board's time is used effectively.

The table below shows the attendance of Directors at the Board and Committee meetings held during the year. In addition to those scheduled meetings, unscheduled Board and Committee meetings were convened throughout the year as and when the need arose, meeting particularly regularly through the initial stages of the COVID-19 pandemic. Two additional Board calls were held during the period to discuss the release of the hedging strategy approval and a trading update. The Board had regular dialogue with management during the early phase of the COVID-19 pandemic and held additional Board calls at this time. The additional Board meetings and Board calls were all quorate, and all Directors received the relevant papers and provided the required approval. During the year, the Board also held strategy sessions during the Board meetings to review and refresh the Company's strategic direction.

Meetings attended

Possible meetings

*Upon the recommendation of the Nomination Committee that the Remuneration Committee should only comprise of Non-Executive Directors and not the Chair of the Company, Keith Williams stepped down as a member on 22 March 2021.

Other members of the Executive Team and professional advisors attended Board meetings by invitation as appropriate throughout the year.

At each Board meeting, the Chief Executive Officer delivers a high-level update on the business, and the Board considers specific reports, reviews business and financial performance, as well as key initiatives, risks and governance. In addition, throughout the year the Executive Team and other colleagues deliver presentations to the Board on proposed initiatives and progress on projects.

Board in Action

Case study Improvements to the Customer Experience through FY21 during the COVID-19 pandemic

As FY21 began and the UK went into lockdown, like many businesses we faced some serious operational challenges. A swift and significant shift in customer behaviour to online shopping exposed shortfalls in our end-to-end customer journeys. Over H1, almost 50% of customer journeys began online, with customers wanting to shop our products and services from the safety of their home. A surge in demand for cycling through lockdown, combined with very high levels of customer contact, made it clear that we needed to adapt at pace and transform our customer experience. With the support of the Board, we made the decision to accelerate elements of our strategic plan, including end-to-end customer journey improvements, improvements to the digital Bike journey, and the integration of Halfords Mobile Expert services into our Group website. Alongside this, the Board approved accelerated investment to improve our contact answer rate by centralising the Group Customer Contact Experience, reducing weekly customer contact by 288,000 contacts a month across the Group.

Combined, the changes to the digital customer journey and improved levels of contact have resulted in the best Net Promoter Scores (NPS) we have seen across the Group since the programme was launched in 2017.

Board Activities in FY21

Main Areas:

Strategy

Key activities and discussions:

• Reviewed the progress and delivery of the Group Strategy, the Transformation Plan and the Annual Budget.
• Approved the refreshed and relaunched Company Investment Case.
• Reviewed and approved repayment of government support, including furlough.
• Reviewed updates on the acquisition strategy and M&A activities.
• Reviewed updates on the ESG Strategy.

Link to Stakeholder

Governance

Key activities and discussions:

• Received regular updates from the Chairs of the Remuneration, Audit, Nomination and ESG Committees.
• Reviewed and approved the FY20 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.

Link to Stakeholder

Board Matters

Key activities and discussions:

• Reviewed the succession plans for the Board and the restructure of the senior management team.
• Reviewed the Board and Committees' programme and forthcoming meeting schedule.
• Received updates from the Nomination Committee on the progress of the search for a new Non-Executive Director, and new Chief People Officer.
• Reviewed the post appointment induction for the new Non-Executive Director, Tom Singer.
• Discussed and agreed the scope of the internal FY21 Board evaluation and reviewed its outcome.

Link to Stakeholder

Financial Risk and Management

Key activities and discussions:

• Reviewed monthly business reviews and trading performance.
• Reviewed and approved the prelim, interim and trading update approaches and announcements.
• Reviewed updates on banking arrangements, liquidity, cash control, treasury matters and currency hedging.
• Reviewed and approved the FY20 Group Viability Statement.
• Received an update on the Group refinancing project.
• Reviewed and approved the FY21 budget and forecast.
• Reviewed and approved the appointment of a new joint broker.

Link to Stakeholder

Commercial Matters

Key activities and discussions:

• Reviewed and discussed plans to re-open stores, garages and Support Centre in line with COVID-19 guidance.
• Received and approved the permanent closure of 58 stores and garages.
• Received and reviewed updates on the impact of COVID-19 lockdowns and restrictions on trading and customer contact rates.
• Received updates on the process for, and approval of, the annual renewal of the Group's insurance policies.
• Reviewed and approved a number of large commercial contracts and spend.
• Reviewed the impact of Brexit on trading.
• Discussed, managed and mitigated the risks presented by the COVID-19 pandemic.

Link to Stakeholder

Shareholder and Stakeholder Relations

Key activities and discussions:

• Reviewed results of colleague engagement surveys and the launch of the new Company Values.
• Discussed the work undertaken on the Group's colleague engagement initiatives (e.g. One Team Strategy, Huddles, Listening Groups and SLT meetings).
• Discussed and approved colleague health and wellbeing programmes.
• Reminder to Directors of their obligations under Section 172 of the Companies Act 2006.
• Reviewed monthly investor relations reports and annual shareholder body reports.
• Reviewed and approved the 2020 Notice of the Annual General Meeting and the arrangements for the 2020 Annual General Meeting in a COVID-19 secure environment.
• Received an update on the development of the new ESG Strategy.

Link to Stakeholder

Board Priorities for the Following Year

Main Areas:

Strategy

Key activities:

• Review the progress and delivery of the Group Strategy, particularly any changes required in response to COVID-19.
• Review any potential M&A opportunities.

Link to Stakeholder

Governance

Key activities:

• Receive regular updates from the Chairs of the Remuneration, Audit, Nomination and ESG Committees.
• Review and approve the FY21 Annual Report.
• Review and approve the Directors' Conflicts of Interests Register, Group policies, the Group Risk Register and the roles of the Chair, CEO and SID.
• Commence the process of ensuring that the composition of the Board is compliant with the Parker Review.

Link to Stakeholder

Board Matters

Key activities:

• Review succession plans for the Board and the Senior Management Team.
• Review the Board and Committees' programme and forthcoming meeting schedule.
• Discuss and agree the scope of the FY22 Board evaluation and its outcome.
• Review the Board programme of visits.

Link to Stakeholder

Financial Risk and Management

Key activities:

• Review monthly business reviews and trading performance.
• Review and approve trading update approaches and announcements.
• Review and approve the dividend policy and any dividend payments.
• Review and approve the FY22 updated forecast, the FY23 budget, banking arrangements and the debt /hedging strategy.

Link to Stakeholder

Commercial Matters

Key activities:

• Review commercial matters brought to the Board for attention and potential approval.

Link to Stakeholder

Shareholder and Stakeholder Relations

Key activities:

• Review colleague engagement survey results and the progress on the health and wellbeing programme.
• Reminder to Directors of their obligations under Section 172 of the Companies Act 2006.
• Review monthly investor relations reports and annual shareholder body reports.
• Review and approve the 2021 Notice of the Annual General Meeting.

Link to Stakeholder

Our Board has made progress against monitoring culture in the past year

Our Culture Journey

The Board recognises the importance of its role in ensuring the culture of the organisation is aligned to its business strategy and ambition to become a customer led, market-leading services business. In support of this, a full cultural review was completed in FY20. This review resulted in the refresh of colleague values and behavioural frameworks which built on the strength of prior leadership and 'Hands On' colleague behaviours. The aim was to create a One Halfords team approach and unite all parts of the business, old and new. The launch of the new colleague values and behaviours which underpin our strategy took place in the first quarter of FY21.

We know that we will only be successful in wowing our customers through engaging the hearts and minds of our colleagues, compelling them to work together, as One Halfords Family, to continuously develop and deliver expertise to meet the customers' needs. The values and behaviour framework defines how we expect colleagues across the business to role model our values as they progress their careers with us – from joining as a colleague, to leading others, leading teams, and ultimately leading the business.

Well established technical skills training complements this framework by providing the technical knowledge to support the delivery of our market leading services.

Our values roll-out followed the activity undertaken in FY20 in which 1,300 colleagues from across the group, were involved in developing the framework. The roll-out saw all colleagues across the group attend leader-led workshops. These workshops were followed by the launch of a series of initiatives designed to both fully embed our values and to recognise and reward our values in action, as referenced in the plan that we shared with you last year.

Initiatives to embed the values included integrating our values and behaviours into our performance review framework, so ensuring a link to pay and reward; as well as the introduction of a values recognition scheme which recognises and rewards colleagues that role model our values. Under the scheme, 243 nominations were received in Q4 of FY21 alone. The success of the roll-out can be measured through data collected in our most recent engagement survey, in which 91% of colleagues confirmed they "know what Halfords values are".

This activity was undertaken as part of a broader programme of engagement initiatives, which are referenced in the section below.

Culture and Values

Goals

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.

Key Achievements

Work with colleagues across all areas of the business, to define the appropriate values and behaviours for our Group as a whole, that will underpin our forward strategy and build on the language of our purpose and create beliefs that are active and give all our colleagues clear direction.

Create a leader-led roll-out plan that will introduce all colleagues across the Group to the refreshed values which will shape our culture and offer all colleagues clarity and a sense of belonging as part of the One Halfords Family.

Integrate our newly defined values into the performance management framework and appropriate elements of the colleague lifecycle.

Outcomes

Customers

• Will have a joined-up experience wherever they shop across the Group

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

Workforce Engagement

Halfords has long established practices of inviting feedback from colleagues across all areas of the business, including holding regular listening groups, appointing and meeting with local colleague engagement ("people") champions, and conducting regular colleague surveys.

This year the disruption arising from the COVID-19 pandemic, which saw the temporary closure of a number of our stores, resulted in a different approach to engagement in the first half of the year, in which we focused on remote engagement and colleague wellbeing. "Supporting colleagues to feel safe and engaged, putting One Halfords Family at the heart of everything we do" was positioned as one of our top three business priorities and discussed weekly in colleague huddles across all areas of the business. Additional two-way communication channels were also established, alongside newsletters and videos to facilitate remote engagement. Two full colleague surveys were conducted to invite colleague feedback – with one of these specifically focused on the impact of the pandemic. In H2 a total of 36 listening groups were held across the Group as a whole.

The role of the People Champions, which represent the views of colleagues across the business, has never been more important than during the first half of the year, with meetings used to gauge how colleagues were feeling; inform the programme of engagement and wellbeing activities; and to shape ways of working for colleagues required to work remotely. During the course of the year People Champions were invited to input to broader business initiatives including ESG and reward practice, so gaining an understanding of corporate governance and Executive remuneration.

In addition to the above, the Group has long established grievance and whistleblowing policies that facilitate colleagues' ability to raise any matters of concern more formally, and in total confidence, should the need arise. The Board reviews reports relating to whistleblowing cases and the process is outlined in the Audit Committee Report. We know from the calls received and the data obtained that a large proportion of the whistleblowing calls received via the helpline are from store colleagues seeking clarification on HR or safety issues, this shows that the process works well as an adjunct to our normal HR processes and ensures we provide the best support we can to our colleagues.

The table below outlines the key culture, values and engagement activities undertaken this year:

Monitoring Culture

The Board monitors culture on an ongoing basis both formally, and informally, through the outputs of colleague engagement surveys, and through regular listening groups that are held across all areas of the business.

Helen Jones, the Senior Independent Director, with accountability for representing the voice of our colleagues in Board meetings, personally attends many of the listening groups held, alongside other Board and Executive colleagues.

Survey and listening group outputs and associated actions are regularly reviewed by the Board and are incorporated into Executive Directors' and Executive Committee functional engagement plans. As in prior years colleague engagement remains a bonusable objective for this population.

Changes were made to our most recent colleague survey to support us in measuring the success of our values roll-out programme, as referenced earlier, as well as to enable us to collate and analyse engagement scheme outputs through a more detailed and diversity inclusion lens, so informing our broader ESG action plan. Further changes will be made to the survey from FY21 to ensure greater alignment with our new values, beyond the initial launch. We look forward to sharing these changes with you following implementation.

Our more holistic review of the culture of the business in FY20 told us that Halfords is a great, collaborative place to work, is engaging and is values led with knowledgeable friendly colleagues that go the extra mile to serve our customers. Our most recent survey confirmed that this remains the case today. Whilst, unsurprisingly, our colleague engagement index dipped slightly to 75% against the backdrop of our implementation of significant in-store changes that enabled us to both safely and successfully trade through the pandemic, our engagement index remains in the upper quartile when compared with external benchmarks.

This review also identified opportunities for us to improve our rituals and routines, control systems and structures to improve our customer centricity through a One Halfords team approach. The development and roll-out of the colleague values and behaviour framework in FY21 provided the foundation on which to build broader structural changes in support of this aim. Q4 of the year saw the implementation of changes to our store structures to better support our strategy, with further alignment across the broader organisation planned for Q1 of FY22. We look forward to sharing a further update with you in our next report.

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.

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.

The full Section 172(1) Statement can be found here.

Stakeholder Management

The Board understands the importance of strong relationships with all stakeholders and strongly values their input into its decision making and planning processes. The Board seeks to ensure that engagement with our stakeholders is effective, either by engaging directly or through oversight of the management team. This includes the monitoring of KPIs, such as Customer Net Promoter Score and Colleague Engagement Index. Further, the Board ensured that stakeholder interests were carefully considered in the Company's recent sustainability strategy review, playing a key role in determining our key focus areas for the years ahead.

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.

In line with the requirement of the Companies Act 2006, each Director has notified the Company of any situation in which he or she has, or could have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the Company (a situational conflict), and a register of these is maintained by the Company Secretary.

All Directors are aware of the need to consult with the Company Secretary should any possible situational conflict arise, so that prior consideration can be given by the Board as to whether or not such conflict will be approved.

Concerns

The Chair seeks to resolve any concerns raised by the Board, whether these arise in a Board meeting or in another forum. Where raised and unresolved in a Board meeting, the unresolved business can be recorded on behalf of a Director in the minutes of the relevant meeting. A resigning Non-Executive Director would also be able to raise any concerns in a written letter to the Chair, who would bring such concerns to the attention of the Board.

No such concerns have been raised throughout the period.

Shareholder Engagement