Viability Statement

In accordance with the Corporate Governance Code, the Directors have assessed the viability of the Company over a three-year period to 29 March 2024. The Directors believe this period to be appropriate as the Company's strategic planning encompasses this period, and because it is a reasonable period over which the impact of key risks can be considered within a fast-moving retail business. This period is consistent with the approach last year, and with many other retailers' disclosures.

The Directors have assessed the prospects of the Group by reference to its current financial position, its recent and historical financial performance, its business model and strategy, and the principal risks and mitigating factors described in Our Principal Risks and Uncertainties. The Board regularly reviews financial headroom and cash flow projections to ensure that the business retains sufficient liquidity to meet its liabilities in full as they fall due.

The Group is, as results demonstrate, financially strong, historically generating cash and profit each year, which was true throughout the year ended 2 April 2021 and is expected to continue. Actions taken during the year have further strengthened the cash position of the business, resulting in a positive net debt position pre-IFRS 16 of £58.1m vs. net debt of £(73.2)m as at 3 April 2020. The business has materially outperformed the scenarios developed as part of the COVID-19 modelling during the year end close process last year. As an essential retailer and services provider, the Group was able to remain open throughout the lockdown periods starting in March 2020. The Group was, and will continue to be, uniquely positioned to keep the UK's cars and bikes on the road.

In making this viability statement, the Directors have reviewed the overall resilience of the Group and have specifically considered:

The likelihood and impact of the principal risks. At a recent review by the Audit Committee, Directors agreed that 'the risk register identifies no matters that may jeopardise a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due in the reasonably foreseeable future (i.e. three years)'. The Audit Committee's review included a robust assessment of the impact, likelihood and management of principal risks facing the Group, including those risks that could threaten its business model, future performance, solvency, liquidity or day-to-day operations and existence. Mitigating actions that would serve to protect the sustainability of the business model include the continued focus on reducing underlying costs (e.g. rental costs through property renegotiations) and margin improvement, eliminating unnecessary cost through targeted efficiencies and scale benefits.
Financial analysis and forecasts. The Board recently reviewed the five-year financial plan, including the current financial position and performance, cash flow projections, dividend strategy, funding requirements and funding facilities. Sensitivity and stress testing was subsequently applied to the financial plan to determine the extent to which sales and cash would need to deteriorate before breaching the financial covenants embedded within the Group's bank facilities. The testing indicated that the business could experience a sustained reduction in sales of (23%), amounting to an average of £350m revenue reduction per annum across the next five years, and still remain within existing facilities and covenants. The downside scenario makes an assumption on variable cost savings, assuming that costs equating to 15% of sales, or £54m per annum, are removed. The downside scenario also incorporates a further £55m of fixed and semi fixed costs which would be saved annually were this sales scenario to materialise, with savings across a number of business areas including performance related incentives, transformation programme investment and head office costs. Based on their assessment of the plan, the Directors believe a downside sales scenario of this magnitude and duration is unlikely to materialise. The Group's revolving credit facility was re-negotiated during the year, the new facility was set up from 4 December 2020 for three years, with two options to extend by a further year.

Based on this review, the Directors confirm that they have a reasonable expectation that the Group will continue to meet its liabilities as they fall due over the three-year period.