Chair’s
Statement

Our colleagues at Halfords provided over 480,000 services to key workers and over a million services during full lockdowns to those needing our support.

Keith Williams

Chair

Free Cash Flow

£145.3m

Net Cash

£58.1m

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We recognise the remarkable efforts of our colleagues during the challenges of COVID-19 and look forward to an exciting year ahead.

As I prepared last year's statement, the impacts of COVID-19 were still emerging, but it was already clear it would have a material effect on every aspect of our lives.

One year on, this statement coincides with UK restrictions lifting and our lives beginning to return to normal, albeit with a degree of uncertainty about the future.

Although I am keen to look to the future, we should remember the many admirable efforts across the UK over the last year.

The pandemic

We are proud to be key workers during the pandemic. Our colleagues at Halfords provided over 480,000 services to key workers during the year and over a million services during full lockdowns to those needing our support. We managed to keep most of our stores, garages and vans open, providing a safe environment for our staff and for customers to enable them to buy essential items to carry them through lockdown.

Last year, I referenced our colleagues as being the lifeblood of our business.

The response of every colleague throughout the business has been truly remarkable. In FY21 we launched a series of initiatives to help support them including Front Line bonus schemes, hardship funds, free flu vaccinations and support lines. I hope in some way, we have eased the distress of the last 12 months on some of our colleagues.

In order to safeguard the business, we took fast and decisive action to safeguard the immediate future, followed by an ongoing and agile response to the volatile and transforming environment we faced.

At times, traffic levels were more than 90% below pre-pandemic levels, impacting the motoring side of our business as the public stayed in and worked from the safety of their home, MOTs were not required for a period in our Autocentres and cycling needed to adapt to increased demand while many of our suppliers themselves were in lockdown.

Proposed final Dividend for FY21

5.0p

per share

Proposed Dividend in FY22

9.0p

per share

We had to take a series of very difficult decisions during the first few months: pausing dividend payments, furloughing 50% of colleagues, and running a reduced investment plan that ultimately limited our ability to transform the business. That said, I am pleased that despite some major investments being curtailed, the Group still made meaningful progress towards creating a more efficient and profitable business for the future.

I am particularly pleased with the resulting Group's performance during FY21 as the UK faced an almost continuous rhythm of restrictions and lockdowns. Group Profit Before Tax was £96.3m (£99.5m post-IFRS 16), over £40m ahead of last year, and we generated a Free Cash Flow of £145.3m, finishing with net cash of £58.1m.

Looking at the Year Ahead

Hoping for the best but preparing for the worst, we will continue to hold a strong balance sheet given the uncertainties ahead. But we are well placed to continue our plans to move the business forward.

I believe our existing strategy, that will see Halfords evolve into both a consumer and B2B services-focused business, generating higher and more sustainable financial returns, is still the right one, and we will continue our plans to accelerate the growth of our motoring services business. This requires greater capital expenditure, which we expect to be with the range of £50m–£60m.

We have many exciting plans that were momentarily paused, but I now look forward to seeing them emerge in FY22 and the positive effects they will have on the Group.

Dividend

Given the strength of our performance in the closing stages of FY21, the Board has proposed a final dividend of 5p per share. We also propose a dividend in FY22 of 9p per share with an intention for this to be progressive.

Should surplus cash remain in the business that we feel we cannot deploy with good rates of return, we will return this to shareholders in the most appropriate way.

Board of Directors

We have seen three changes to our Board this year. In September, we welcomed Tom Singer to the Board. I know Tom will bring invaluable experience to the Board and will contribute greatly to the ongoing success of Halfords. Also, in September David Adams stepped down as Senior Independent Director, and Helen Jones took on this role. In December, David Adams left Halfords, following which Tom Singer became Chair of the Audit Committee. We have benefitted greatly from David's considerable efforts since he joined the Board, initially as a Director and more recently in his additional roles as Chair of the Audit Committee and as Senior Independent Director. We are grateful to David for the work he has done in these roles.