6004 Finance and Accounting for business

Assignment:

This assignment is in two parts.

Task-1 (individual) Calculations (20%)

Task-2 (Individual) Report writing (80%)

In the calculations task (20%) you will demonstrate how to calculate and prepare basic management accounting information using budgeting, ratio analysis and investment appraisal techniques

In the report-writing task, (80%) you will demonstrate how to interpret the numbers to make the information useful for managers and investors.

Both tasks encourage research and financial analysis.

Report writing task length

The maximum length of the individual assignment is2000 wordsexcluding the list of references, appendices, table of contents, cover sheet, front cover and title page.

Submission date

By 5 December 2023.

ACFI6004
Finance and Accounting for Business
Assignment:
This assignment is in two parts.
Task-1 (individual) Calculations (20%)
Task-2 (Individual) Report writing (80%)
Learning Outcomes assessed
1. Use basic accounting terminology and techniques to prepare and analyse published
financial accounting information
2. Demonstrate an ability to prepare basic management accounting information
3. Critically assess the techniques and processes used in accounting
4. Communicate financial information both orally and in the written form
Objectives
Together the tasks account for 100% of the marks for this module.
In the calculations task (20%) you will demonstrate how to calculate and prepare basic management
accounting information using budgeting, ratio analysis and investment appraisal techniques
In the report-writing task, (80%) you will demonstrate how to interpret the numbers to make the
information useful for managers and investors.
Both tasks encourage research and financial analysis. They also develop and demonstrate an
understanding of the decisions based on budgeting, investment appraisal techniques and ratio
analysis.
Calculations Task (20%).
Required:
a) Using the provided financial statements of Halfords Group Plc for the year ended 31st March
2023, you are required to select and calculate an appropriate set of ratios to assess the
business.
6 marks
You should clearly show all the formulae and calculations. The figures should be rounded to two
decimal places.
b) Summerlea Council wishes to generate income through recycling and diverting waste. The
Council believes that recycling waste unlocks the value of refuse, creates jobs and boosts
the local economy. The feasibility committee of the council has called a meeting to
evaluate an investment in the machinery needed for recycling. The machinery would also
enable the council to satisfy the increasing demand for recycled products. It needs to
choose from 3 different machines. The details of life of the machines and the initial
investments are as follows.
Machine A
Machine B
Machine C
Initial investment
(£)
440,000
525,600
884,600
Life of the
machine
4 years
5 years
3 years
In each case the initial investment represents the purchase of plant and equipment whose
residual value will be 20% of initial cost, receivable in addition to the net cash flow, at the
end of the life of the project. Forecast sales volume, selling price and other costs are as
follows;
Sales volume
Selling price per
Variable cost per Fixed cost per
(units/year)
unit (£)
unit (£)
annum (£)
Machine A
1000
600
360
80,000
Machine B
900
600
325
80,000
Machine C
1300
600
285
130,000
The machine B and C have recently been introduced to the market and have not been fully
tested in operating conditions. Because of the higher risk involved, the appropriate discount
factor for machines B and C is believed to 11% per year, 2% higher than the discount rate for
Machine A.
Requirement
For each of the three projects:
I.
Calculate the accounting rate of return (based on the average investment method).
3 marks
II.
Calculate the payback period.
1.5 marks
III.
Calculate the net present value.
3 marks
c) Summerlea is an enterprising council with different trading arms. The Council strongly
believes that the profits and surpluses generated through trading activities can be used
to help hold down the council tax and support other frontline services. Prepare a cash
budget for one of Summerlea’s trading activities from January 2024 to April 2024 from
the following budgeted data.
Budgeted data
January
February
March
April
£
£
£
£
Sales
14,000
15,400
15,800
16,600
Purchases
13,000
12,600
12,800
13,400
Wages
600
680
740
800
1,100
1,080
1,150
1,180
Other overheads
Capital expenditure
6,500
The following additional information is available:
1- 35% of the customers pay cash and the remainder take 1 month to pay.
2- Rent is paid in advance for 6 months on 1st of May and 1st of November each year.
3- 45% of the purchases are paid for after 1 month and the remainder in 2 months’ time.
4- Wages are paid in the current month.
5- Other overheads are paid after 2 months.
6- Capital expenditure is paid in the following month.
7- Opening cash balance for January is £2,800 overdraft.
6.5 marks
Additional Guidance
1- Clearly, show all the calculations and the formulae used in your calculations and it should be
by you rather than copying figures from websites.
2- You must not depend on the disclosed ratios in the annual reports. You are required to
prepare these ratios on your own.
Report writing Task (80%);
Required
a) Using a selection of the ratios calculated in the calculation task, comment on the profitability
and liquidity of Halfords Group Plc and discuss how the cash operating cycle be improved to
increase the profitability of Halford?
38 marks
(1-4 marks per valid
point/ratio identified and
properly discussed)
b) Summerlea is a thriving and diverse town, an important commercial and cultural centre and
home to over 100,000 people living in more than 35,000 households. The population has
grown by 12% over the last 11 years and is expected to continue to grow. Summerlea
Council provides a wide variety of services including public health, traffic, parking, schools,
parks and animal management. 2022/23 was a challenging year for Summerlea Council.
National reductions in government grant funding, coupled with in-year service demands,
led to a £2.2m budget deficit. Panels have been established to decide on the type of budget
council should use that can provide more accurate and up to date financial information to
assist decision-making. Your role is to write a report to the panel briefly explaining
different types of budgets, which type of the budget you think is most suitable for the
council and why?
38 marks
(3-6 marks per valid point
identified and properly
discussed with context to
the scenario)
Presentation – 4 marks
Submission date
By 5 December 2023.
Use any appropriate title for the task but the file name of your work should include your
student number.
Report writing task length
The maximum length of the individual assignment is 2000 words excluding the list of references,
appendices, table of contents, cover sheet, front cover and title page.
Referencing
It is expected at this level that referencing will be complete and accurate, using the Harvard method.
Use of Turnitin
This assignment will be submitted through Turnitin. Turnitin is a web-based tool that supports the
development of good academic practice when preparing written work for assessment. This textmatching tool allows academic staff to check assignments for improper use of sources or potential
plagiarism by comparing it against continuously up-dated databases (including web-pages and other
student work).
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
01
01
02
03
04
06
08
Welcome to our
2023 Annual Report
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
20
22
26
30
32
36
40
48
50
62
68
74
76
82
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
86
90
92
94
100
118
120
122
128
133
144
153
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
156
166
167
168
169
170
171
172
183
207
208
209
210
Shareholder Information
Five-year Record
Glossary of Alternative Performance
Measures
Company Information
C
216
217
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.
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
Profit before tax
Dividend per
ordinary share
Underlying basic
Basic earnings
earnings per share per share
+15.3% -42.7%
-55.0%
+11.1%
-49.3%
37.9p
FY23
15.6p
27.1p
FY21
FY22
10.6p
FY20
FY19
FY23
FY21
FY22
18.8p
21.2p
35.5p
41.7p
24.5p
FY20
FY19
9.0p
10.0p
FY23
6.3p
5.0p
FY21
FY22
FY20
FY19
-58.8%
54.4p
18.6p
£43.5m
FY23
£64.5m
FY21
FY22
£51.0m
FY20 £22.7m
FY19
FY23
£51.5m
£89.8m
£99.5m
FY20
FY21
FY22
£58.8m
£56.9m
FY19
£1,382.4m
£1,593.5m
FY23
£1,292.3m
£1,142.4m
FY20
FY21
FY22
£1,138.6m
FY19
£96.6m
Underlying profit
before tax
Revenue
Strategic
Operational
Sustainability
• 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.
• 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.
• 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.
• 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.
• 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.
• 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 secondhand 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 OVERVIEW
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
Our Strategic Priorities
Inspire
Support
Lifetime
Inspire our customers
with a differentiated and
super-specialist offer.
Support our customers through
an integrated, unique and more
convenient services offer.
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
02
wow our
customers
be better
every day
Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023
pride in
expertise
Our Culture
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”.
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-inclass training to our colleagues to promote
career progression. This includes fieldbased training, such as electric servicing,
all the way to online training courses via our
intranet to upskill colleagues who wish to
progress their career.
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
 Read more about how the Board
monitors culture on pages 106 – 107.
halfords.annualreport2023.com
03
GROUP OVERVIEW
Group at
a Glance
We are a market-leading business, with unique
and differentiated products and services.
Our unique mix of stores, garages, mobile vans and home delivery
means we can offer customers unparalleled convenience in the
motoring and cycling markets.
We know that our customers want us to be there for them, when
they need us. That means our stores and garages are open early
and late, we offer a services proposition which is mobile and comes
to them wherever they are and we offer convenient product delivery
options to meet their needs. This year we have made strong progress
in further enhancing the journey our commercial customers go on
with us with an even more convenient proposition with more garages
– giving commercial customers less distance to drive to drop their
vehicles off – and significantly more mobile vans (both customer and
commercial). This means that more customers than ever can access
our services without disrupting their busy lifestyles.
Our Market-leading
Proposition
Recognising that convenience is important to our customers, our combination of assets means customers can access our wide
range of products and services in a way that suits their needs, be that in a store, garage, at home via a mobile van or online via our
integrated web platform. Our B2B platform means business customers can also take advantage of our unique combination of assets.
B2B
Stores
Offering products and services,
across both motoring and cycling,
to businesses around the UK and
ROI, including our market-leading
Cycle2Work scheme.
393 Halfords Retail and 2
Performance Cycling stores
offering a wide range of motoring
and cycling products and on
demand services.
Avayler
Garages
Avayler empowers Halfords
service technicians to
deliver an unrivalled
experience. Our platform
is so robust we have made
it available to other service
businesses.
643 garages offering MOT,
service, maintenance and
repair services.
Mobile Vans
264 mobile service vans,
479 Commercial vans
and 5 Cycling vans,
bringing services direct to
customers.
Integrated Web
Platform
Bringing together Halfords
products and services under
one website.
04
Click and Collect
Customer Contact Centre
Enabling customers to pick up
products at their local store.
Offering expert advice, knowledge
and help from a centralised, virtual
location.
Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023
Over 12,000 colleagues
work in our shops,
autocentres and
mobile expert hubs,
at over 1,750 fixed and
mobile locations.
halfords.annualreport2023.com
05
GROUP OVERVIEW
Our Business Today
We are a consumer and B2B services-focused business, with a greater emphasis
on motoring, generating higher and more sustainable financial returns.
Group Overview
• Our ambition is for our customers, both consumer and commercial, to access
any service or product they need or want for their motoring and cycling
journey from one provider, whenever they want it.
2018 Revenue
2023 Revenue
• Our strong heritage has meant we have a well-established product business
and have focused in recent years on growing our services business to match.
• Services businesses are inherently more resilient to external factors and now
that nearly half of our revenue is service-related, Halfords is more capable
than ever to thrive in a potentially uncertain economic climate. This also
means our business has higher customer retention and a lower risk profile.
• Alongside this resilience, the evolution into a services-focused business is
putting us on a journey towards generating higher and more sustainable
financial returns.
Motoring
Lower working
capital
Retail 86%
Retail 61%
Autocentres 14%
Autocentres 39%
Less FX
exposure
Higher operating
margins
B2B
Revenue 75%
• Overview: The core of our business,
offering customers services and
solutions for their motoring journeys.
Our ambition is to offer customers
a “one-stop-shop” where they can
access everything they need during the
ownership of their vehicle.
We’ve significantly
grown revenue through
B2B channels.
Highly predictable
recurring revenue
High value
relationships
Cycling
• Overview: Market
leaders with strong
customer affiliation
and heritage,
highlighting our
strong environmental
focus by promoting
low-carbon forms of
transport.
2018
2023
B2B Revenue: 10%
B2B Revenue: 24%
B2C Revenue: 90%
B2C Revenue: 76%
Revenue 25%
06
Opportunity
to enter adjacent
markets
Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023
Services
Products
• Overview: Giving Halfords a
unique advantage over online rivals
and helping us develop long-term
relationships with our customers –
our focus is helping to keep our
customers (including commercial
businesses) moving on their journeys.
• Motoring: Highly needs-based, with
a fragmented market – from MOTs
and services to fitting a car bulb in a
car park.
Revenue 48%
Revenue 52%
• Overview: An integral part of our business
and what many customers still know us for –
we are the super-specialists in motoring and
cycling, giving customers all the motoring and
cycling products they want and need.
• Cycling: From puncture repairs on an
E-scooter to bicycle service care plans,
we help to increase the longevity of the
products we sell.
Unique advantage
over online rivals
• Motoring: Offering customers every product
they might need for their vehicle from a bulb or
wiper blade to a roof box or a tow bar.
Deeper long-term
relationships with
customers
More needs
based, less
discretionary
• Cycling: High-end performance bikes and
accessories in Tredz and mainstream bikes
and accessories in Halfords Retail where
we own two of the biggest brands in the UK,
Carrera and Apollo, appealing to all cyclists
from kids and families to fitness enthusiasts.
Opportunity
to consolidate
fragmented market
Trade
Card
Fleet Services
Avayler – Software as a Service
Bulk
Purchases
for Business
Gift
Cards
Cycle
2 Work
halfords.annualreport2023.com
07
GROUP OVERVIEW
Our Journey
Our Progress
• Our 2018 strategy – to Inspire and Support a Lifetime of
motoring and cycling – is still just as relevant today and remains
our focus. We have invested consistently in this strategy and have
built a platform which provides the opportunity for further growth.
• We are continuing to make strong progress in enhancing the
journey our customers go on with us and have worked hard to
offer an even greater level of convenience, something we know
our customers highly value. This year, we continued our growth
strategy adding Lodge Tyre Company (“Lodge Tyre”) to the One
Halfords Family. This acquisition, in addition to the acquisitions
over the last few years, means that we have more than doubled
the number of centres our consumer and commercial customers
can access the Halfords proposition from. We are now working
hard to integrate these acquisitions into the Group.
• In addition to increasing the number of fixed locations, we have
grown our fleet of mobile vans (both consumer and commercial)
bringing our services to customers’ homes or places of work.
• Customers love what we’re doing and are responding well
with Net Promoter Scores showing that we are exceeding their
expectations.
Market Opportunity
Autocentres
Retail motoring
services
Mainstream
cycling products
Motoring
products
Retail cycling
services
B2B
Performance
cycling
ROIC
(As at 2019. Indicative only.)
We have doubled the number of service locations
2018
2023
796 service locations
30-minute drivetime
1,786 service locations
Under 20-minute drivetime
Mobile Vans
748 vans
Mobile Vans
3 vans
Retail
Stores
Retail
Stores
395 stores
476 stores
Garages
317 garages
Garages
643 garages
08
Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023
Our Expansive Revenue Model
Our transformation has delivered growth in our areas of strategic importance,
creating a super-specialist services business with more resilient, recurring revenue streams.
Key
Product
Revenue
Services
Revenue
Recurring
Revenue
Any discretionary spend
£1.6bn
Revenue basket
FY18
Revenue basket
Now
Recurring
Revenue
Services
Products
Recurring
Revenue
Services
Products
Services
Recurring
Revenue
Products
£1.1bn
Revenue basket
Future
Achieved consistent inorganic growth through well-positioned acquisitions:
We have a clear vision on how we believe our recent acquisitions will create value.
Grow scale
Increasing our scale is
expected to create buying
and cost synergies.
NOV 2019
60 Centres
100 Vans
National coveragereduced drive time
Creating more convenience
through more locations
is expected to increase
our share.
DEC 2021
30 Centres
190 Vans
DEC 2021
4
Centres
Leverage core
Autocentres
platform
Expand capabilities
Implementing our operating
model and Avayler is
expected to transform the
performance of garage
services.
MAR 2022
239 Centres
68 Vans
8 Warehouses
Expanding our capabilities
is expected to give us
an improved offer and a
bigger market to exploit
our platform.
OCT 2022
50 Centres
248 Vans
1 Warehouse
halfords.annualreport2023.com
09
GROUP OVERVIEW
Our Attractive Investment Case Over
the Short, Mid and Long Term
The platform we have created and will leverage going forwards:
Since the introduction of our corporate strategy in 2018, we have
worked hard to establish a business that can maintain the strong
retail heritage Halfords has gained over the last 130 years, whilst
developing a business which is relevant today and in the future.
From creating a huge customer database to establishing a trusted
B2B proposition, we’ve always been thinking about how best
we can serve our customers in the short, mid and long term and
how we can continue to attract customers into the One Halfords
Family. Significant investment and strategic planning has meant we
are now the largest motoring and cycling services business in the
UK and has given us a strong platform on which to build, offering
customers even greater convenience, a wider range of services and
solutions and even entry into the Software as a Service market with
global clients.
Opportunities Over the Short/Mid Term
Market leading business
with strong fundamentals
Well placed to capitalise on
attractive markets rebounding
from historic lows.
Data driving
growth in revenue
A trusted brand
With access to data from almost
half of the UK’s ageing car parc and
a growing Motoring Loyalty Club,
data is driving growth in revenue.
A brand with good awareness,
consideration, and significant
heritage.
Read more on pages 12 – 13.
Well invested
platform to leverage
The major investment has been
made. Halfords is now the UK’s
largest motoring and cycling
services business. Significant
digital and data
capability.
10
Differentiated
operating model
Resilient services
and commercial business
Unique combination of stores, garages,
vans and expert colleagues offering an
unrivalled breadth of offer and channel
mix/convenience.
Resilient and recurring revenue
streams from services and commercial
propositions, driving higher, more
sustainable operating margins.
Read more on pages 6 – 7.
Read more on pages 14 – 15.
Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023
Read about our
Capital Markets Day at:
www.halfordscompany.com
Additional Opportunities Over the Mid/Long Term
The UK’s one-stop-shop for
motoring ownership
Giving customers the ability to access
all motoring products and services they
need from one provider.
The UK’s servicing
destination for electric
transport
Avayler, a growing SaaS business
A growing Software as a Service business
attracting compelling Revenue based multiples.
Read more on pages 16 – 17.
A unique local motoring
and cycling offer
Read more on pages 6 – 7.
Read more on page 50.
halfords.annualreport2023.com
11
GROUP OVERVIEW
We’ve built an omnichannel
business that connects with
customers over their lifetime…
Investment in our data capabilities means we know our customers better
than ever and are more able to predict future customer needs.
Overview
Halfords has built a unique data platform
which enables us to know more about our
customers and their vehicles whilst also
helping us to predict future customer needs.
Across our channels, we capture a
significant amount of data, which is
collected through our investment in smart
technology and our own “in-house”
technology, Avayler.
Knowing our customers better enables us
to improve our customer proposition.
We have high ambitions for future growth
Driving lifetime value remains in focus for our business in the future. Our successful
Motoring Loyalty Club is just one way that will support us to continue to achieve this.
NOW
MID-TERM
1.7m
4 – 6m
7.4%
8 –10%
Highly engaged members
Premium subscription
Members
Premium subscription
Case Study
MOTORING CLUB
In its first year, Motoring club is delivering strong results.
Members new to
Halfords Group
12
Members new to
Garage Services
Existing customers 73%
Existing customers 20%
New customers 27%
New customers 80%
1.7m
7.4%
Highly engaged members
Paid subscription mix
+4pts
New
Record NPS scores
and younger customers
Cross shop
15%
vs. c.4% non-members
Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023
…which is being enhanced via
sophisticated data collection from
our customers and their vehicles.
How we collect our data is diverse and unique.
35m
131m
Vehicle Records
Checked
£317m
Annual Web Visits
CRM Sales
(vs. £60m in FY19,
pre-CRM investment)
ANALYSING DATA
DATA COLLECTION
Cross channel data collection
from customers and vehicles:
CUSTOMER OUTPUTS
Via our Single Customer view,
CRM and Group Data Platform
• Personalised emails
• Personalised web pages
• In a garage
• Personalised social posts
• Online
• In a car park
Key activities:
• Customer segmentation
• In store
• Propensity modelling
• On a van
• Demand forecasting
• Frequently bought
together modelling
Powering intelligence and personalisation
across our customer touch points.
Resulting in new monetisation from
leveraging our unique data platform.
sation • Platfo
neti
rm
Supplier
insights and
measurement
•
orm
atf
Pl
rm
mo
Halfords mobile
expert email
ne
tis
a
m moneti
latfor
sat
ion
Cycling product
recommender
n • Platform mo
•P
MOT reminder
email
ne
atio
tis
n
tio
m
o
Partnerships
monetisation •
Pla
tfo
Supplier
customer
activation
Tyre web
personalisation
Weather
personalisation email
halfords.annualreport2023.com
13
GROUP OVERVIEW
We have established
B2B partnerships…
We’ve ensured our revenue is increasingly resilient through growing our
presence in the more predictable and recurring B2B markets.
Overview
Our strategic ambition to evolve into a B2Bfocused business is paying off with recent
acquisitions and a strong focus on growing
our commercial services proposition
significantly increasing the percentage of
Group revenue coming from B2B channels.
Avayler Software as a Service
Cycle
2 Work
Gift
Cards
Fleet Services
Trade
Card
Bulk
Purchases
for Business
This increased revenue is more resilient to
external pressures and is helping to create
the groundwork for stronger and more
sustainable long-term financial returns for
our business.
B2B
Key Highlights
+£266m
B2B Revenue Growth
(FY18-FY23)
24%
Group B2B Revenue
£384m
£300m
% of Group Revenue
+27%
B2B Revenue Compound Annual
Growth Rate (FY18-FY23)
£231m
£118m
10%
FY18
14
FY19
FY20
FY21
Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023
FY22
FY23
…that provide stability
and growth opportunities…
Case Study
LODGE TYRE COMPANY
(“LODGE TYRE”)
The acquisition in October 2022
was perfectly aligned to our
strategic growth areas.
100%
Lodge Tyre is a highly respected
business in the commercial tyre
market, with over 90% of its revenue
coming from B2B customers.
100%
Employing over 400 highly skilled
colleagues, it operates from 50
garages and 248 mobile tyre fitting
vans, providing on-demand and
emergency coverage across the
Midlands, East Anglia, North Wales
and the North West. These locations
are highly complementary of Halfords’
existing commercial tyre operations.
Motoring
Services
>90%
B2B
The combination of Lodge Tyre, Universal and McConechy’s has
made us the UK’s largest commercial tyre service provider.
• Lodge Tyre has led to Halfords having
a scaled UK coverage of commercial
vehicle tyre and service market.
• Adds 248 Commercial Vans, taking
Halfords total to 479.
• Adds 50 garages, taking Halfords
total to 643.
• Significant synergies through
consolidated procurement, and the
ability to win National contracts.
The current trading environment
reinforces the rationale for building evermore resilient, needs-based revenue
streams. The nature of the commercial
tyre market means that it is nondiscretionary and therefore extremely
well insulated against macroeconomic
uncertainty.
Our recent acquisitions help us deliver
our objective of further evolving into a
business more heavily weighted towards
motoring services giving us more resilient
revenue streams.
Halfords is already the UK’s market
leading Motoring Service provider to
consumers, and this latest acquisition
of Lodge Tyre means Halfords will also
be the UK’s largest commercial tyre
service provider by revenue and national
coverage.
halfords.annualreport2023.com
15
GROUP OVERVIEW
…and built systems and
technologies that will propel
us further forwards…
Avayler – Halfords’ proprietary SaaS business – offers customers a true
omnichannel solution empowering Halfords value proposition.
What it delivers for our customers
Avayler offers Halfords’ proprietary software
to streamline service delivery for companies
that operate in multiple locations; software
that we continue to use to significantly
improve our own productivity.
Deliver fully
digital
customer
journey
Increase
transparency
and visibility
across business
Streamline
process related
to service
delivery
Increase
service margin
and offset
ops costs
Be an
industry leader
with greater
market share
Its value drivers for our business
• Resilient, contracted B2B revenue.
Avayler’s unique selling points make the solution highly attractive
to large automotive service businesses.
• Higher operating margin through
leveraging existing investments.
Omnichannel
Built by Operators
• Large market opportunity.
The only solution on the market that
manages and optimises automotive
services at any location – mobile,
garages, retail store and fleet locations.
Avayler was built by a garage and
automotive service business to directly
solve their pain points.
• Strengthens relationships with strategic
customers.
Over 500,000 automotive repairers in EU, US and UK alone
provide significant market opportunity for Avayler.
Further expansion opportunities in other automotive territories
United States
Total Automotive Repairs
278,532
United Kingdom
Total Automotive Repairs
33,335
Total
Total Automotive Repairs
>500,000
. . . and even more
opportunity in
mobile and Retail
16
Europe
Total Automotive Repairs
206,722
37,817 – France
49,626 – Germany
47,345 – Italy
Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023
22,123 – Poland
9,629 – Portugal
40,182 – Spain
…and help drive utilisation
across our business.
We are focused on local utilisation as a core driver of profit
growth in both our acquired and existing garages.
Our aim is to drive utilisation in both acquired and existing garages, underpinning profitable
market share and growth by growing our local demand and capacity to increase profit.
Converted
demand
Amount of time
Spent on jobs completed
in garages
+
Supply of
labour
Technicians
Total hours available
Utilisation
=
Increasing utilisation
Drives revenue through
same cost base increasing
profit £’s and %
Our new localised model gives us a unique ability to execute
capacity and demand growth at a local level.
Creating Local Demand
Creating Local Capacity
• Local referrals from store to garage.
• Local sharing of Group colleagues across stores, garages and vans.
• Local dynamic price promotion.
• Local targeted fleet client growth.
• Local forecasting of demand using data science enabling local
matching to capacity.
• Predictable recurring Motoring Club customers.
• Digitised consistent operational processes.
• Live capacity and utilisation tracking.
halfords.annualreport2023.com
17
Strategic
Report
Contents
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
20
22
26
30
32
36
40
48
50
Risk Management
Our Principal Risks and Uncertainties
Going Concern and Viability Statement
74
76
82
62
68
STRATEGIC REPORT
Chair’s
Statement
Keith
Williams
“The Group delivered
another year of strong
strategic progress, with a
robust financial performance
against a challenging
economic and consumer
backdrop. As highlighted
at the April 2023 Capital
Markets Day, we believe
the platform is now in
place to deliver increasing
shareholder returns in
the mid-term.”
Keith Williams
Chair
Profit Before Tax
£51.5m
Dividend Per Share (Full-Year)
10.00p
20
During FY23, we have seen record inflation,
decade-high interest rates and historically
low consumer confidence, a difficult
period for any business to operate through
with many reducing capital expenditure
and investment. Despite the emerging
economic environment, we have continued
to strategically invest in areas that we
believe will make a meaningful difference
to business performance. As a result, we
continued to integrate National Tyres,
with our garage software Avayler rolling
out across the estate, we have seen our
Avayler Software as a Service platform
launch in Europe through ATU, part of the
Mobivia Group, the acquisition of Lodge
Tyre complementing our existing commercial
fleet service businesses of McConechy’s
Tyres and Universal Tyres, and the launch
of our Motoring Loyalty Club to over 1.7m
members giving loyal customers access to
the UK’s first dedicated Motoring Loyalty
programme.
It has therefore been a year of significant
change and transformation, with total
capital spend including the consideration
for Lodge Tyre of £90m. Group revenues
grew +16.3% year-on-year to £1.6bn,
service-related sales reached 48% of
revenues and are expected to exceed 50%
on a proforma basis with Lodge Tyre, and
Underlying Profit before Tax was £51.5m.
Although this has declined year-on-year,
it was broadly flat with FY20, despite two
of our four markets being significantly
suppressed as a result of the cost of living
crisis that emerged in the post-COVID era.
Looking ahead
We take confidence from external forecasts
that the market conditions that have
persisted through FY23, and look likely
to impact much of FY24, will eventually
subside. What is also probable, is that only
the strongest and most relevant businesses
will survive these periods of economic
turbulence and we have great confidence in
our own plans, and ability to trade through
this difficult period. This is why I look
forward with great optimism that Halfords
has the strength and relevance to thrive.
As we set out in our Capital Markets Day in
April 2023, we now have a more resilient,
differentiated, customer and data-centric
business, that is well positioned to deliver
significant shareholder value over the
mid-term driving improved return on capital
employed.
Colleagues
Our colleagues have always been at
the heart of our business and this has
never been more apparent as the Group
transitions to become a predominantly
services business. It is their skill and
passion that makes Halfords the first
choice for the products and services we
offer, keeping customers safe and moving
on their journeys. The Group now employs
over 12,000 colleagues across Retail
stores, garages and our mobile fleet, and
they are supported by dedicated central
support teams, distribution centres and field
colleagues; I would like to thank them all for
their contribution in FY23.
Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023
Dividend
Last year we paid a full year dividend of
9.00p per share and communicated an
intention for this dividend to be progressive
as we looked forward. Having paid an
interim dividend of 3.00p per share earlier
in FY23, I am pleased that the Board is
proposing increasing the final dividend to
7.00p per share, payable in September
2023. This means the FY23 full year
dividend will be 10.00p per share, an
increase of +11% on the prior year. The
Board is increasing this dividend due to the
continued strength of the Group’s balance
sheet, its strong cash generation and the
confidence in the mid-term plans laid out at
the Capital Markets Day.
Looking forward, we intend to target
dividend cover in the range of 1.5x–2.5x of
Underlying Profit after Tax.
Keith Williams
Chair
21 June 2023
halfords.annualreport2023.com
21
STRATEGIC REPORT
Chief Executive
Officer’s Statement
Graham
Stapleton
“As we laid out our plans
for the year ahead in June
last year, we stated the
importance of maintaining
our investment in key
strategic initiatives despite
the emerging economic and
cost of living crisis. One
year on, I am proud of the
strategic progress we have
made during FY23.”
Graham Stapleton
Chief Executive Officer
Total Group Revenue
£1,593.5m
Group Revenue from Services
£759.0m
22
As we laid out our plans for the year ahead
in June last year, we stated the importance
of maintaining our investment in key
strategic initiatives despite the emerging
economic challenges and cost of living
crisis. One year on, I am proud of the
strategic progress we have made during
FY23. As detailed at our Capital Markets
Day in April 2023, we have created a more
resilient, differentiated, customer-focused
and data-centric business – one which I
believe will go on to deliver significantly
higher shareholder returns over the mid-term
as we leverage our unique platform.
Some of the key strategic highlights in
the year included acquiring Lodge Tyre
in October 2022, signing our third client
onto our Avayler SaaS platform, the
continued integration of National Tyres by
implementing the same Avayler software
across the estate, and the launch of
our Motoring Loyalty Club to over 1.7m
customers in its first year.
Alongside a very busy year of strategic
change, we have seen the underlying
strength of the Group demonstrated through
a solid financial performance, which has
been delivered against a backdrop of the
most challenging operating conditions I have
seen during my career in Retail. Total Group
revenue reached £1.6bn, growing +39.5%
vs FY20 (+15.3% vs FY22), with Servicerelated sales accounting for almost half of
the Group’s total revenue at 48%, and B2B
revenue reaching 24%.
Underlying profit before tax was £51.5m,
down -£38.3m vs FY22 and -£5.4m vs.
FY20, despite £95m of year-on-year cost
and market headwinds, investment in
price to support customers, and continued
investment in our transformation. It is this
operational and financial strength that has
enabled investment for future growth, as well
as allowing us to increase our FY23 dividend
by +11% to 10p for the full year – evidence
of the confidence we have in the plan.
Group Revenue
Group revenues of £1.6bn were underpinned
by LFL performance of +13.4% vs FY20 and
+2.4% vs FY22. This is a particularly strong
result considering the uncertain environment
businesses and consumers have faced,
and it demonstrates the relevance
and resilience of our offer. As we have
highlighted throughout this year, two of our
core markets (Consumer Tyres and Cycling)
are facing a very significant downturn, and
in our Capital Markets Day we noted that
the Consumer Tyre market remains -14%
below FY20 and the cycling market -24%
below the same period. To deliver sales
growth despite these headwinds clearly
demonstrates the underlying strength of
the business and our ability to grow market
share. As we look forward, the recovery
of these markets, coupled with continued
market share growth, will see us improve
performance further.
Autocentres Revenue
Autocentres revenues continue to grow
rapidly as we scale the business. Total
revenues reached £614m growing +31.6%
LFL vs FY20 and +15.4% vs FY22, and
now representing 38% of Group revenues.
Given the tyre market performance, this
is a very strong result and is driven by our
growing share within the tyre market which
increased +0.4ppts year-on-year and the
benefits of our Motoring Loyalty Club, which
has introduced more new customers to our
business. Indeed, the Motoring Club drove
roughly a third of MOTs booked in the period.
Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023
During the year we have also seen growth in
our non-LFL business, with National Tyres
present in H1 for the first time and the newly
acquired Lodge Tyre from October 2022.
Lodge Tyre, which is centred around B2B
commercial fleet tyre services, has shown a
very resilient trading performance – one of
the key principles in our strategic decision
to grow our B2B business. National Tyres
revenues have inevitably been impacted by
the consumer tyre market depression. The
combination of lower-than-average miles
driven vs pre-COVID and the subsequent
cost of living crisis has temporarily extended
the life of tyres and forced consumers to
delay replacing until critical. Neither factor
will be permanent, and as the market
recovers we anticipate continued revenue
growth across the Autocentres Group.
Retail Motoring
Retail Motoring has enjoyed a strong
year, as markets normalised post-Covid,
and the less discretionary nature of the
product and service offering has been
demonstrated. There have inevitably
been some more discretionary markets
within the offer (e.g. Technology) that have
suffered as consumers look to lower their
outgoings, but we have worked hard to
grow market share across our entire offer.
The overall result therefore masks what
we consider a very strong performance in
more needs-based products. We have also
improved the value of our offer, as well as
the overall customer proposition. During
H2, we entered the £1bn wider car parts
market, providing customers with access
to thousands of car parts, with next day
delivery to home or store.
Retail Cycling
Whilst Cycling saw a fairly resilient
performance during H1, the latter part
of Q3 and Q4 saw a pronounced market
deterioration due to the more discretionary
nature of this category. Whilst we have
grown our share of the market, it was
not enough to offset the tough market
conditions. As market leaders, Cycling
continues to be an important part of the
business, giving consumers a method
of transport that is both environmentally
friendly as well as beneficial for their fitness.
“It has been more critical
than ever that we have
continued to support
colleagues and customers
during the cost of
living crisis, improving
efficiency across the
Group, and identifying
cost reductions where
possible.”
Graham Stapleton
Chief Executive Officer
Whilst the more mainstream cyclist has
generally reduced their spending, our
market leading Cycle2Work scheme has
enjoyed success, growing +16.7% year-onyear. We continue to develop our platform,
making it easier for customers to gain
access to exclusive and market leading
own brand bikes through this government
supported tax free cycling scheme.
CASE STUDY
MOTORING LOYALTY CLUB
Last year, we launched our brandnew Motoring Loyalty Club, a loyalty
scheme offering customers great
benefits, such as free MOTs, free next
day delivery and discounts across
the Group, to help with their motoring
journeys.
The Motoring Club gives us an
even better way to get to know our
customers and communicate with
them. We have built new technology
to provide real-time, personalised
expertise and rewards for members
who access our services through any
channel – whether a store, garage,
van or online – and the response from
our customers has been great.
Since launch we have seen 1.7 million
members sign up and have attracted
new customers to the Group,
particularly in our Garage Services
business with 80% of our Motoring
Loyalty Club members being new to
this part of the business.
The Motoring Loyalty Club has also
driven an increase in cross-shop
behaviours along with an increase in
customer Net Promoter Score (“NPS”)
(vs. non-members).
halfords.annualreport2023.com
23
STRATEGIC REPORT
Chief Executive
Officer’s Statement
Strategic Progress
Acquisition of Lodge Tyre
As noted at our interim results, Lodge Tyre
was acquired shortly after the close of H1,
in October 2022. Lodge is a commercial
vehicle tyre and service specialist and
complements our existing commercial fleet
businesses of McConechy’s and Universal
Tyres. It significantly expands our UK
coverage and makes Halfords the UK’s
commercial tyre services market leader. We
now have a commercial fleet of 479 vans
and 90 centres operating across the UK,
allowing businesses to work with a single
partner to support their fleets.
Lodge is perfectly aligned to our areas of
strategic priority, operating wholly within
the motoring services sector, and with over
90% of its revenues in B2B markets.
Whilst the integration of Lodge is not
yet complete, it has joined the Group
seamlessly and performed very well, with
business performance in line with our
business case expectations.
Avayler
Our Avayler platform is the software that
underpins the Halfords motoring services
operating model. At our Capital Markets
Day in April, we detailed how this platform
is central to the success of our business.
The SaaS version of our Avayler platform
is already helping three of the biggest
automotive businesses, (American Tire
Distributors and TireBuyer in the US, and
Mobivia in Europe) provide a truly customer
centric service offering whilst streamlining
their operations, increasing efficiencies, and
reducing costs.
Motoring Loyalty Club
The launch of our Motoring Loyalty Club in
March 2022 was a significant milestone for
the Group. In June 2022 we set our year
one targets for the club, which we have
comfortably exceeded. This is a clear sign of
the relevance and potential of the club, even
at this early stage. With over 1.7m members
against a target of 500k to 1m, and over
125k subscription members vs. a target of
50-100k, customers are already enjoying the
benefits of the club. Equally as important
for Halfords, it brings a rich dataset to the
Group which allows us to understand our
customer’s needs better, and form more
valuable lifetime customer relationships.
24
The club also offers more tangible benefits
to the Group. In a year of very high inflation
and low consumer confidence, the club has
enabled the acquisition of customers to our
Autocentres business from within the Group,
leveraging our multi-million Retail and Digital
customer bases. This has allowed us to
reduce our marketing acquisition costs in
channels like radio, outdoor advertising, and
Google.
As a result of the club, roughly a third of
Autocentres MOTs in FY23 were members
of the club, with members cross-shopping
more than 4x the rate of non-members.
Most importantly however, is that NPS
scores from members were +4 points higher
than non-members.
National Tyres
As noted above, National Tyres is most
exposed to the current downturn in the
consumer tyre market. Despite this we
have seen some excellent progress in
the integration which, as the tyre market
recovers, will ensure delivery of the
acquisition business case. Synergies from
the acquisition have delivered over £6.0m
of profit in FY23, in line with the original
business case.
A key activity in the year has been the
implementation of our Avayler software
across the estate, centralising and
coordinating our buying approach. This
has been achieved by leveraging our single
integrated Group website, which means
National garage slots are now available to
book via the Halfords Group website. This
provides the National garages with a bigger
market, growing demand, capacity and
efficiency, and supported the growth of our
service, maintenance and repair business.
Fusion
Our Fusion programme is the
transformation of the Halfords customer
experience within a town. During FY23
our focus was to rollout the most capital
efficient elements from the Halifax and
Colchester trials.
As a result, we have upgraded the retail
car park service provision in 50 towns
alongside training nearly all our colleagues
across Retail and managers in Autocentres
in selling “solutions”, empowering more
colleagues with the tools to sell the full
solution to every customer, every time.
Operating Review
FY23 proved to be another challenging
operating environment. The Ukraine war
acted as a catalyst to already increasing
inflation, but our trading through H1 proved
relatively resilient with the exception of the
consumer tyre market which continued to
suffer the after-effects of lower mileage
driven post COVID-19 and the cost-ofliving crisis. H2 trading began with a similar
tone, but it was the volatile political and
economic environment in the Autumn that
brought about a rapid change in trading
patterns in more discretionary, and typically
high-ticket, products.
As a business we continued through H2
as we began in H1; a focus on cost and
efficiency, delivering our most critical
strategic investments, and trading with
agility against difficult market conditions.
Our cost and efficiency programme
delivered over £20m of savings, beating
the targets set out in June 2022. Highlights
included lease negotiations in Retail,
warehousing and distribution efficiencies,
and negotiations of key freight contracts
to ensure the Group rates were at or below
spot rates. The Group also successfully
hedged the US dollar and energy markets
to deliver an average dollar exchange rate
in cost of goods above $1.30 and mitigated
the potential increase in energy rates
in FY23.
This monumental effort was necessary
to tackle the inflation in costs across the
business. Although the cost of freight
was successfully managed, it was still
a significant headwind in FY23, as was
inflation in cost of goods generally. Many of
our international supply partners continued
to operate below capacity and input prices
remained significantly above pre-Covid
levels. A 6.6% National Living Wage
increase from April 2022 also drove inflation
into labour costs, as did the significant
skills shortage across the UK – particularly
noticeable in Autocentre Technician
markets.
We therefore consider the FY23 underlying
profit before tax of £51.5m to be a solid
result against such a difficult environment.
Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023
Capital Structure and Dividend
We understand the importance of the
ordinary dividend to many of our investors
and we have proposed a FY23 final
dividend of 7p per share (FY22 6p) to
be paid on 15 September 2023 with the
corresponding ex-dividend date of 10
August 2023 and the record date of 11
August 2023. This represents a full year
dividend of 10p per share, an increase of
+11% on FY22, in line with our aspirations
to make the dividend progressive.
At our Capital Markets Day in April 2023, we
reconfirmed our capital allocation priorities,
highlighting our dividend cover targets:
1. Maintaining a prudent balance sheet
2. Investment for growth
3. M&A, focused on Autocentres
4. Dividend covered by 1.5x – 2.5x
underlying profit after tax
5. Surplus cash returned to shareholders
During the year the Group extended its
£180m debt facility until December 2025.
Average capital expenditure is expected to
be in the range of £50-60m p.a. in the midterm, assuming no material acquisitions,
which represents approximately 3% of
revenues. We expect FY24 Capex to be at
the lower end of this range.
Graham Stapleton
Chief Executive Officer, Halfords Group plc
21 June 2023
halfords.annualreport2023.com
25
STRATEGIC REPORT
Our
Marketplace
Our Motoring and Cycling products segments remain core, but we have a
greater market opportunity in growing our existing motoring services business.
Market size, Share and Growth Dynamics
Retail Motoring
Size
Volume Share
c.£4.0bn c.42%
Cycling
Growth
projection:
FLAT
Consumer Tyres
Size
Volume Share
c.£2.2bn c.10%
26
Size
Volume Share
c.£1.2bn c.37%
Growth
projection:
MODERATE
Motoring Servicing
Growth
projection:
MODERATE
Size
Volume Share
c.£9.0bn c.4%
Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023
Growth
projection:
MODERATE
Our Key Macro Trends
1. Cost of Living
2. Transition to Electric
Description
Description
• The whole country has felt the pressure on their finances
over the course of the past year, with high levels of inflation,
low wage growth, gas supply and demand issues, increasing
interest rates and high fuel prices resulting in increasing cost of
living for consumers.
Impact
• With household budgets increasingly squeezed, consumers
have lower-than-normal disposable incomes to spend on
discretionary products and services.
Our Response
• Our longer-term plan for the business is as relevant as ever
– a transition away from the traditional retail model into a
services-focused business resulting in recurring revenue
streams that are non-discretionary by nature.
• We have supported customers through price investment,
consumer financing options, our Bike Xchange programme
and our competitive pricing on fitted tyres.
• We continue to monitor the wellbeing of our colleagues with
financial help available to all via Wagestream and regular pay
reviews are held throughout the year.
Link to Principal Risks
• Colleague Engagement/Culture
• Value Proposition
• Brand Appeal and Market Share
• The UK is transitioning towards lower-carbon forms of
transportation driven by the increasing pressures to stop using
fossil fuels and growing awareness of our individual impacts
on the planet.
• As a result, all forms of electric mobility are becoming
increasingly popular with many customers choosing to make
the switch to electric vehicles (“EVs”), E-bikes or E-scooters.
Impact
• Significant growth in customer queries relating to electric
forms of transport.
• Greater demand for servicing of EVs, E-bikes and E-scooters.
• Second-hand markets for electric products.
Our Response
• Colleague training is an essential part of our ESG strategy and
now this is even more important as customers are increasingly
seeking help from our expert colleagues, whether just asking
for advice or they need help with their E-bike, E-scooter or EV.
We have invested heavily in this training.
• We also continue to explore ways to enhance our electric
propositions, e.g. electric services, and, this year, we even
introduced selling refurbished E-bikes online, lowering the
entry price point for customers into the E-bike market.
Link to Principal Risks
• Climate Change and Electrification
• Skills Shortage
3. “Do It Yourself” to “Do It For Me”
4. Convenience
Description
Description
• Increasing complexity of vehicles, e.g. technological
advancements including EVs, and ‘Time Poor’ customers
mean that many consumers do not have the time, desire or
knowledge to carry out repairs and maintenance on their cars
and bikes. Instead they are searching for convenient solutions
rather than spending time on DIY solutions to their problems.
Impact
• Over time, the shift from ”Do it Yourself” to “Do it For Me”
(“DIFM”) is continuing with an expectation for DIY solutions to
be very minimal over the medium-term.
Our Response
• Focusing on growing the number of colleagues we have
available for customers, particularly during busy periods.
• Investing in colleague training and equipment to ensure we can
maintain pace with customer demand.
• Giving customers the ability to book times and locations for
their service to be carried out in-store, in a garage or even on
their driveway via our fleet of mobile vans.
Link to Principal Risks
• Service Quality
• Consumers’ lifestyles are getting busier, free time is becoming
more valuable, and consumers expect retailers and serviceproviders to fit around their routines with on-demand services
and friction-free interactions as standard.
• Convenience to them is not just about speed but about making
their lives easier, even if this comes at an increased price.
Impact
• Customers want their product purchased or their problem fixed
as quickly as possible, at a time and place that suits them.
• Ensuring convenient and quick delivery options to suit all
customers’ wants and needs is also essential for retailers.
Our Response
• Over the last few years, we have more than doubled the
number of service locations, reducing the drive time from 30
minutes to 20 minutes.
• Our mobile van fleet has grown substantially over the past
12 months giving customers an unprecedented level of
convenience, bringing services to their driveway with sameday service options in some instances.
Link to Principal Risks
• Stakeholder Support and Confidence in Strategy
• Service Quality
• Sustainable Business Model
• Stakeholder Support and Confidence in Strategy
• Sustainable Business Model
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27
STRATEGIC REPORT
Our
Marketplace
Our Market Drivers and Growth Opportunities
The markets we operate in are constantly evolving but there are strong growth opportunities in all areas. Despite a challenging few years,
the outlook is encouraging and we are well placed to capitalise on this.
Motoring
Market Drivers
• The ageing UK car parc means cars are requiring more visits to
garages on an annual basis.
Market Opportunity
• Provide customers with a ‘one-stop-shop’ in which they can
access all products and services they need in one location.
• Increasing number of customers wanting Do It For Me solutions.
• No market-leader in a highly-fragmented marketplace.
• Increase in demand for electric servicing and electric products
such as EV charging cables or home charging solutions.
• Very few competitors outside of dealerships able to offer EV
servicing.
• Mobile services are a growing market segment, particularly the
tyre fitting industry.
Cycling
Market Drivers
• Government investment in cycling infrastructure is a key part of
getting more people into cycling, particularly in urban locations
where safety is a serious concern.
• The Government subsidy of bikes through Cycle-to-Work
schemes enable discounted purchasing of bikes through salary
sacrifice, giving consumers cheaper ways to get into cycling.
• The increase in ultra-low-emission zones in cities are meaning
people want to avoid fees for driving their car in urban locations,
opting for cycling as an alternative.
• The cost of living crisis has meant that many people are
searching for cheaper (and low-carbon) alternatives to the car or
public transport for commuting.
28
Market Opportunity
• E-mobility is rapidly growing in importance to customers and to
the planet, offering a lower carbon mode of transport. Customer
demand for E-bikes is continuing to grow with E-bikes now
accounting for one in every five bikes sold. Sales of E-scooters
remain strong showing continued demand for new innovative
vehicles is at record levels and we expect both of these
segments of the market to continue growing.
• The majority of customer journeys begin online and the selling of
cycling equipment online continues to be a growing area in the
market. However, the need to see a bike in a physical location,
to get the correct size and fit, is still an essential part of the
customer journey.
Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023
B2B
Our Response
• Look to provide customers with a “onestop-shop” offering, something we know
they want.
• Our Halfords Mobile Expert vans deliver
elements of car fitting and servicing,
such as battery replacement, tyres and
diagnostic checks, direct to the customer
at their home or workplace.
Outlook
• The car parc is expected to continue
ageing leading to more cars within the
aftermarket segment and an expanding
market for motoring products.
• The more-resilient motoring services
market is expected to stay broadly
flat as it has not seen a dip like other
markets during the COVID-19 pandemic
and cost of living crisis.
Market Opportunities
• Businesses are continually looking for
help with their company fleets and
with the pressures of an increase in the
cost of living, they are looking for more
affordable ways to keep their vehicles
running for longer.
Our Response
• We pride ourselves on our B2B
proposition in this market. We have
developed a strong Fleet business
over a number of years and recent
acquisitions mean we have an evergrowing presence in the commercial
tyre market.
B2B
Our Response
• Our strong heritage and over 130 years
of experience selling bikes mean we are
a market-leader in cycling products and
services.
• Halfords Group boasts the biggest
and most popular cycle brands in
the UK – Carrera and Apollo. In total,
approximately 80% of our bikes are ownbrand, covering both children and adults
at a wide range of price points.
• Our stores are conveniently located, and
our online platform provides support and
information to help customers choose
the products and services they want.
Many customers take advantage of
our Click & Collect offer, placing orders
online via our website and picking up
from a designated store at a time that is
convenient to them.
Outlook
• Despite demand dropping postCOVID-19 and the market feeling the
pressures of the cost of living crisis, we
expect things to pick up in the shortmedium term as prices decrease and
freight normalises driving recovery of
demand volumes.
Market opportunities
• Electric mobility is driving the market
with many businesses searching for
lower-carbon means of transport
and accessories to help run their
businesses, particularly in urban
locations, e.g. E-cargo bikes as a “last
mile” solution in ultra-low-emissions
zones such as Central London.
Our response
• We are the market leader in the UK’s
Cycle-to-Work scheme, supporting
sales and introducing new customers
to our brand.
• We also are proud to have working
relationships with large brands across
the UK such as Haven Holiday Parks
and Deliveroo to which we supply
cycling accessories.
halfords.annualreport2023.com
29
STRATEGIC REPORT
Our
Business Model
How We Create Value
Fulfilling our vision to be the super-specialists in motoring
and cycling, trusted by the nation.
Our evolving Business Model
Recognising the market opportunities,
we have transitioned away from being
just a retail business. Our services, our
colleagues, our infrastructure and our
culture have all evolved in line with what our
customers are demanding. Our business
model has also changed to reflect this
customer demand and this evolution
has meant we are in a strong position to
capitalise on the opportunities in front of us
but without compromising the foundations
of our core business.
Our Resources
and Key Strengths
Colleagues
Training and accreditation, such as our
3-Gears training programme in Retail or our
electric/hybrid vehicle maintenance training
in Autocentres, ensure that consistent
product knowledge and services capability
reaches our customers across all locations.
Partners
Halfords is proud to work with suppliers,
distributors and other industry partners
to drive our business forward, supporting
the sale of our products and services and
enabling us to work with communities
across the UK.
Brand Strength
Halfords is the Nation’s trusted retailer
for motorists and cyclists and a leading
provider of motoring services. We have
a range of exclusive and highly-regarded
brands, including Apollo, Carrera and
Boardman in Cycling, as well as our
Halfords Advanced ranges in Motoring.
Our Infrastructure/Assets
Our physical estate of Retail stores,
garages and Mobile Expert vans, combined
with a best-in-class digital platform
and an efficient distribution network,
provide customers with a convenient
omnichannel offer.
Financial Rigour
With a strong balance sheet and strong
cash generation, we have continued to
invest in appropriate systems, capabilities
and people to help support and grow our
business for the long term.
Our Sustainable Mindset
We have an established sustainability
strategy with proven results, and have
embedded this within all areas of the
organisation, ensuring we are collectively
focused on minimising the impact our
operations have on the planet and people
we work with.
 Read more on our strategy
on pages 40 – 47.
What we do
Products
Products are at the core of our
business and have been for over 130
years, defining us as the UK’s leading
provider of motoring and cycling
products. Whether in one of our
physical locations or online, customers
are able to find parts or products they
want for their motoring or cycling
needs from E-bikes to socket sets,
power washers to bicycle helmets.
Our colleagues are true experts and
can suggest suitable products for
each customer situation.
Our Offering
Motoring
Products
Mainstream Performance
Cycling
Cycling
Products
Products
Services
Our services proposition complements
our strong product business; helping
to keep the UK moving whilst
delivering unrivalled customer service.
Operating from over 1,750 fixed and
mobile locations, Halfords has the
national scale to offer services for our
customers’ cars or bicycles in a way
and at a location which is convenient
to them. Whether a customer wants
their bike serviced, a new wiper blade
fitted, a new set of tyres fitted or a full
car service we are able to help them
find the ideal solution to fit their busy
lifestyle.
Our Offering
Retail
Motoring
Services
30
Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023
Retail
Cycling
Services
Autocentres/
Mobile
Expert
How We Do It Differently
Market Positioning
Halfords’ unique position in the market
makes us well-placed to provide customers
with a “one-stop-shop” for their motoring
needs, whereby they can access all the
services and solutions they need in one
place. The scaled, omnichannel platform we
have created combined with our highlyskilled colleagues means that there are high
barriers to entry for any competitors wishing
to offer customers a similar service.
Our Unique Offering
Through our integrated Group website and
our wide range of physical assets with over
1,750 service locations, we are able to offer
customers a unique proposition. Our expert
colleagues are always on hand to provide
advice and knowledge for any motoring or
cycling situation and this alone puts us at a
significant advantage over our competition.
Our mid-to-long term plan is to offer
customers an even more holistic shopping
experience, a “one-stop-shop”, where they
can access any service or product they might
need for their motoring or cycling journey. Our
Avayler platform has led to Halfords entering
the Software as a Service market and our
bespoke software has meant that we are able
to offer other businesses a completely unique
opportunity to incorporate our in-house
software into their own operations to greatly
improve their own customers’ experiences
and their productivity.
Omnichannel Customer Proposition
Our customers can shop in-store or online,
choose whether they want their products
fitted at a store or on their driveway at a
time of their choosing and access a whole
The Value We Create
suite of services, all without leaving the
Halfords brand. Our new Fusion stores
mean the physical environment is also
linked, giving customers an even more
seamless shopping experience.
Data Capabilities
One of our main priority areas has been
getting to know our customers better than
ever before. This has meant creating an
integrated and unique database where all
of our systems can work together, building
a digital picture of our customers today,
but also predicting future customer needs.
We have been using our growing data
science and modelling capability to drive
highly personalised, timely and helpful
communications that both engage and
support our customers, which, in turn,
increases lifetime value for Halfords.
Varied Customer Base (B2B & B2C)
Traditional shopping is at the core of our
business and we remain committed to our
loyal customer base. In addition, however,
our growing commercial business means
that we are able to offer to businesses,
what we offer to consumers; a convenient
solution where they can have their fleet
vehicles serviced, take advantage of our
market-leading Cycle2Work scheme or
simply access our B2B portal to purchase
products for their employees. Our new
Avayler platform has also enabled us to
attract global customers as we license
software developed in-house to businesses
around the world, opening up a new and
exciting opportunity for our business.
Customers
Access to a market-leading shopping
experience, both online and in stores,
helping meet all of their motoring and
cycling needs in a way convenient to
them, with access to technical and
expert advice through our colleagues.
Colleagues
Developing, rewarding and retaining
our colleagues so that they are
engaged to drive our growth
ambitions.
Investors
Generating returns for our
shareholders through effective
management of our financial
resources.
Community
Building relationships with suppliers,
customers and the communities
around us.
 Read more in the Charity and
Communities section on pages
58 – 60.
Environmental
Ensuring the resources our business
utilise have a positive impact on the
environment, both today and in the
future.
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31
STRATEGIC REPORT
Our Engagement
with Stakeholders
Effective utilisation of our resources and relationships are an
integral part of our plan to drive long-term sustainable growth.
The views of all of our stakeholders are considered by the Board and Executive team on a regular basis.
Stakeholders that benefit
from the value we create
Colleagues
Suppliers
Communities
Why It’s Important to Engage
Why It’s Important to Engage
Why It’s Important to Engage
Our colleagues are fundamental to the
achievement of our customer experience
ambitions and are the cornerstone of our
services proposition.
Engaging with our supply chain effectively
ensures the security of supply and speed
to market. Our brand relies heavily on the
high standards of our carefully selected
suppliers in order for us to deliver
market-leading products and services.
Engaging with the communities is the right
thing to do and ensures continued viability
of the business in the long-term. We aim to
contribute positively to the communities in
which we operate.
What Matters to Them?
• Environmentally friendly practices.
What Matters to Them?
• Support and development.
• Career opportunities.
• Fair remuneration.
• An appropriate sustainability strategy.
How We Engage
• A trusted distributor in the UK and ROI.
• Fair payment terms and pricing.
• Responsible sourcing practices.
What Matters to Them?
• Charitable giving.
How We Engage
• Charity and community initiatives.
How We Engage
• Media channels.
• Far East trading office developing
mutually beneficial relationships.
• Recycling initiatives.
• “Aspire” store management development
courses.
• Organising logistics, driving efficiencies
and improving environmental
management.
Outcomes of Engagement
• Recognition and reward.
• Supplier conferences.
Outcomes of Engagement
Outcomes of Engagement
• Promotion of the Group values.
• Listening: surveys and colleague groups.
• “3-Gears” training programme.
• Conducted our annual Colleague
Engagement Survey to ensure every
colleague has the chance to have their
voice heard.
• Launched four Colleague Network
Groups giving colleagues the chance to
discuss diversity and inclusivity in the
workplace.
• We run weekly communications through
team Huddles, a CEO blog and our
intranet.
• Colleague awards take place regularly
with the ability for any colleague to be
nominated for living the Halfords values
and role modelling behaviours that
positively impact colleagues and our
customers.
Link to Our Risks
• Relaxation of COVID-19 rules meant that
our buying teams were able to travel to
specific supplier sites in the Far East to
work closer with our suppliers.
• Meetings with our top strategic suppliers
to understand their sustainability journey.
• Increased narrative with top 100
suppliers via the Ecovadis platform
resulting in obtaining better data to
support our ESG strategy, e.g. primary
carbon data.
Link to Our Risks
• Stakeholder Support
• Net zero commitment.
• We continue to support Mind along with
their sister charities SAMH (Scotland)
and Inspire (Ireland) as our Group charity
partner, highlighting the importance of
mental wellbeing to our colleagues.
• Continued partnership with Drake Hall
prison, where we run a cycle training
academy for women prisoners.
• Raised awareness amongst female
students at technical colleges in the UK
by showcasing the diverse and engaging
work that our female colleagues perform
in their roles.
Link to Our Risks
• Stakeholder Support
• Brand Appeal and Market Share
• Sustainable Business Model
• Critical physical infrastructure failure
(including supply chain disruption)
• Climate Change and Electrification
• Stakeholder Support
• Regulatory and Compliance
• Service Quality
• Colleague engagement/Culture
32
Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023
Stakeholders that
influence what we do
Investors
Customers
Government
Why It’s Important to Engage
Why It’s Important to Engage
Why It’s Important to Engage
As a publicly listed company, we need to
provide fair, balanced and understandable
information to instil trust and confidence
and allow informed investment decisions to
be made.
Understanding our customers’ needs and
behaviours allows us to deliver relevant
products and services, retain customers
and attract new ones. It also identifies
opportunities for business growth.
Policies and regulatory changes may
provide opportunities and pose risk to
our operations. Working closely with the
Government ensures that our products and
services evolve appropriately.
What Matters to Them?
What Matters to Them?
Link to Our Risks
• Value creation opportunities and longterm sustainable growth.
• A great product or service, for a fair price.
• Regulatory and Compliance
• Appropriate sustainability practices.
• Satisfaction surveys.
How We Engage
How We Engage
• Rewards.
• Annual Report.
• Loyalty Programmes.
• RNS announcements.
• Commercial website.
• Annual General Meeting.
• Social media engagement.
Why It’s Important to Engage
Outcomes of Engagement
We need strong multi-channel exposure
to connect with customers and our wider
stakeholder audience. Engaging with the
media ensures transparency and accuracy
of information on the business.
• Investor presentations.
• Corporate website.
• One-on-one meetings.
• Capital Markets Day.
Outcomes of Engagement
• Full- and half-year results and strategy
presentations to shareholders.
• Regular meetings with brokers, analysts
and shareholders throughout the year
via the Chair, CEO, CFO and Investor
Relations team.
• Corporate website kept up to date with
annual refresh of all information and more
regular minor amendments.
• Regular communications through digital
channels (e.g. email, social media) to talk
to our customers.
• Regular customer “listening groups”
allowing more detailed feedback.
• Net Promoter Score surveys daily in
stores and garages giving quantifiable
feedback.
• Held a Capital Markets Day in April 2023.
Link to Our Risks
Link to Our Risks
• Stakeholder Support
Link to Our Risks
• Stakeholder Support
• Brand Appeal and Market Share
• Regulatory and Compliance
• Commercial website updated every
week, enhancing the customer journey,
providing the latest information, advice
and guidance from our expert colleagues.
• The Halfords Blog gives customers
more in-depth reports on topics such as
electric mobility, ways to save money,
competitions and essential information
for motorists and cyclists.
• Ensuring transparent reporting on ESGrelated performance.
Media
 Read more about how the
Board considers stakeholders
on pages 34 and 35.
• Stakeholder Support
• Brand Appeal and Market Share
• Value Proposition
• Sustainable Business Model
• Brand Appeal and Market Share
• Regulatory and Compliance
• Service Quality
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33
STRATEGIC REPORT
Our Engagement
with Stakeholders Section 172(1) Statement
Engaging with stakeholders delivers better outcomes for
our business, fundamental to our long-term success.
Our Approach
As referenced in the Corporate Governance
Report on page 100, this section describes
how the Directors consider the matters
set out in Section 172(1)(a) to (f) of the
Companies Act 2016 (the “Act”).
In July 2019, the UK Corporate Governance
Code reinforced the importance of Section
172 of the Act which requires the Directors
to consider (amongst other matters) the
interests of all stakeholders, including:
• The likely consequences of decisions
in the long term.
• The interests of the Company’s
workforce.
• The need to foster relationships with
suppliers, customers and others.
• The impact of operations on the
community.
• The high standards of business conduct.
• The need to act fairly between
members of the Company.
34
Board Information
Keeping the Board Informed
• Leadership and management receive training on Directors’ duties to
ensure awareness of the Board’s responsibilities.
• Board minutes include an explanation of Section 172 factors and relevant
information relating to them.
• Our Board continually engages with stakeholders.
Read more on pages 94 and 100.
Strategic Considerations
s.172 and the Company’s Strategy
• s.172 factors considered in the Board’s discussions on strategy.
• Chair ensures decision making is sufficiently informed by Section 172 factors.
Read more on pages 94 and 100.
Board Decision Making
Outcomes of Considering Section 172
• Outcomes of decisions assessed and further engagement and dialogue.
• Actions taken as a result of Board engagement.
• Actions align with our culture.
Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023
Automotive Sales
Managers (“ASMs”)
Colleague
Engagement
Future Automotive
Skills Training (“FAST”)
FY23 saw the introduction of a
new Group role launch across 50
locations across the country. This was
completed following the successful
trial of the role within the Fusion towns
of Colchester and Halifax.
As part of our listening and engagement
strategy, every year we invite all of our
colleagues across the Halfords Group
to complete a survey.
It is challenging to recruit talent and,
therefore, over the last 12 months,
we have widened our approach to
developing future skills in our garages.
Section 172 Consideration
Colleagues
The survey gives our colleagues the
opportunity to share how they are
feeling about working at Halfords and
gives us a measure of how engaged
our colleagues are in all areas of the
business.
Section 172 Consideration
Community
We have been working with two
automotive charities, First Step Trust
(“FST”) and more recently with the
Palmer Foundation. Both charities
specialise in supporting people through
various personal difficulties, who
may not have had the opportunity to
gain employment. In June 2022, our
relationship with FST benefited one of
their learners who went on to become
a full-time fitter at our Woolwich
Autocentre. The Palmer Foundation,
led by former Aston Martin CEO and
Nissan COO, Dr Andy Palmer, aims to
offer apprenticeships to young people
from disadvantaged backgrounds, by
working with employers to ensure they
get the support they need throughout
their career.
The role supports the ambition to
continuously build our services and
is designed to introduce our Retail
customers to the services offered by
our garages and mobile fitting vans.
Section 172 Consideration
Colleagues
This is an exciting role for colleagues,
who are given the opportunity to
work both within the Retail store and
their local garages, supporting our
customers with the ability to book
garage and mobile services from within
the Retail store. With the significant
volume of fits performed in stores,
there is a huge opportunity to identify
additional services which the customer
may need, such as new tyres or an
MOT/Service and secure the booking
and deposit, giving the customer an
improved and simpler journey for all
their services needs.
The role is also designed to drive our
ambition to work more collaboratively,
linked to our “One Halfords Team”
value and brings together our
colleagues within each of the towns, to
ensure our customers get the very best
level of service.
Customers
In the last few months of FY23, our
ASMs have introduced around 10,000
Retail customers to our garages and
mobile fitting service.
There are plans to deliver another
50 locations in FY24, creating more
opportunities for our colleagues, and
opening up career pathways to enable
them to develop and learn across all
Group assets.
The questions cover all aspects of
life at Halfords including leadership,
development, communication, benefits,
collaboration, advocacy, wellbeing, and
motivation. We also ask colleagues to tell
us in their own words what would make
Halfords a better place to work.
In the past few years, over 90%
of colleagues have completed the
survey enabling us to understand how
colleagues are feeling and identify
opportunities and focus areas for
improvement across the Group.
Managers are able to see the results
and comments for their teams and take
ownership for holding action planning
sessions, locally, to address specific
areas to improve engagement. Regular
communication of action taken, and
progress made is shared on our online
communication platforms and in Teams
huddle events hosted by our Senior
Leadership Team.
In creating the FAST programme,
we have brought these two charities
together, along with London South
East College group and the Institute
of the Motor Industry, to provide a
pathway to those who, ordinarily,
would have been left out of worthwhile
employment, and certainly with no
hope of a meaningful career. Using
cutting-edge learning platforms such
as Virtual Reality, we are developing
innovative new ways for people to
engage in learning, who otherwise
could not. The project aims to place
between 10 and 20 young people in
our Autocentres this year, with the aim
of them becoming full-time Halfords
colleagues. By developing this
innovative way of recruiting new talent,
we are creating opportunity for people
from more diverse backgrounds,
helping to develop more inclusive
teams and ensuring that our garages
represent the communities that
they serve.
halfords.annualreport2023.com
35
STRATEGIC REPORT
Key Performance
Indicators
Shareholder KPIs
Note: Our key comparator is FY22. FY20 has been restated on a 52-week basis for better comparability.
Underlying Earnings Per Share
41.7p
Commitment
EPS is a measure of our investment thesis and
as such we aim to manage revenues, margins
and invest in long-term growth.
FY23
18.8p
25.4p
FY20
FY23 Performance
FY23 underlying profit before tax was £51.5m, -£38.3m below FY22
driven by significant inflationary headwinds and low consumer
confidence. Whilst the Group has mitigated a large portion of
the inflationary headwinds, the subdued markets, particularly for
discretionary products resulted in the profit decline.
FY21
FY22
£51.5m
FY23
Commitment
The Board considers that this measurement
of profitability provides stakeholders with
information on trends and performance before
the effect of non-underlying items.
Definition
Profit after income tax and before nonunderlying items as shown in the Group
Income Statement, divided by the number of
shares in issue.
35.5p
Definition
Profit before income tax and non-underlying
items as shown in the Group Income Statement.
£89.8m
FY21
FY22
FY20
£56.9m
£99.5m
Underlying Profit Before Tax
FY23 Performance
Underlying EPS of 18.8p was -47% below FY22 reflecting the lower
year-on-year profit.
Link to Remuneration
Performance Share Plan
Link to Remuneration
Bonus
10.00p
9.00p
FY23
6.18p
Definition
Cash returned to shareholders as a return on
their investment in the Company.
Commitment
At the April 2023 Capital Markets Day we
declared an intention for the dividend going
forward, covered by 1.5x to 2.5x Underlying
Profit after Tax. 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.
5.00p
FY21
FY22
FY20
£186.0m
Commitment
The Board considers that these measurements
of profitability are a viable alternative to
underlying profit.
FY23 Performance
EBITDA of £186.0m was -10.2% below FY22 having declined
less than underlying PBT. This reflects the strong cash generation
of the business and the relatively higher deprecation charge to
underlying PBT.
36
Dividend per Share
Definition
Underlying EBITDA adds back Depreciation and
Amortisation to EBIT.
FY23
£207.1m
£233.0m
FY21
FY22
FY20
£188.6m
Underlying EBITDA
FY23 Performance
In line with the Group’s previous intention for the dividend to be
progressive, the final dividend for FY23 is proposed at 7p taking
the full year to 10p, an +11% increase on FY22. This reflects the
Board’s confidence in the business going forward.
Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023
Shareholder KPIs
FY23 Performance
The Group generated Free Cash Flow of £3.1m for FY23 against an
outflow of -£14.9m in FY22.
Like-for-Like Sales
Definition
Group revenue from operations that have been trading as part
of the Group for at least a year (but excluding prior year sales of
stores and Autocentres closed during the year) at constant foreign
exchange rates.
Commitment
Like-for-like sales is a widely used indicator of a retailer’s trading
performance, and is a comparable measure of our year-on-year
sales performance.
Definition
Represented by the ratio of Net Debt to
Underlying EBITDA (including lease debt).
1.7
1.87
FY21
FY22
FY23
1.2
£3.1m
FY23
Commitment
Our medium-term target remains to achieve
strong levels of Free Cash Flow each year, but
we recognise that external factors may impact
our ability to do so.
FY20
(£14.9m)
FY21
FY22
FY20
£51.6m
£133.2m
Definition
Adjusted Operating Cash Flow less capital
expenditure, net finance costs, taxation,
exchange movement, arrangement fees on
loans, and lease payments.
Net Debt to Underlying EBITDA Ratio
2.5
Free Cash Flow
Commitment
We are expecting to operate within a range
of 1.8x to 2.3x, with the latter allowing for
appropriate M&A. This ratio helps to compare
the financial result for the year to debt levels.
FY23 Performance
Net Debt including lease debt stayed broadly flat year on year, with
the movement in short-term debt broadly offset by reduced lease
debt. Leverage increased given the movement in EBITDA year
on year.
Glossary 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 215. 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.
FY23 Like-for-Like Sales Movement (1-year and 3-year
comparisons)
FY20
FY22
Halfords Group
13.4%
2.4%
Retail
9.9%
-1.8%
Motoring
14.5%
4.0%
Cycling
1.3%
-10.9%
Autocentres
31.6%
15.4%
FY23 Performance
Like-for-Like Sales were +13.4% vs. FY20 and +2.4% vs. FY22,
a strong performance indicating the strength and relevance of the
Groups offer, but also the growing brand awareness of the Service
business.
halfords.annualreport2023.com
37
STRATEGIC REPORT
Key Performance
Indicators
Operational KPIs
82%
81%
75%
Definition
Service-related Group sales is the income
derived from the fitting or repair services
themselves along with the associated product
sold within the same transaction.
73%
Group Colleague Engagement
FY23
FY21
FY22
FY20
FY23
Definition
The proportion of Group colleagues who
respond positively to the questions in the
Colleague Engagement Survey.
Commitment
We aim to improve colleague engagement
across the Group with specific focus on
required areas identified by colleagues.
Commitment
To grow service-related Group sales faster than
total Group sales growth.
£370m
FY21
FY22
FY20
£301m
£531m
£748m
Service-related Group Sales Growth
FY23 Performance
Service-related sales reached 48% of Group revenue, up from
42% in FY22 aided by both LFL Services revenue growth and the
acquisitions of National Tyres and Lodge Tyre. This reflects the
Group’s strategy of becoming a services-focused business creating
more sustainable financial returns.
FY23 Performance
This year’s survey, conducted in April 2023 had a response rate of
90% and an engagement index score of 82%, a slight increase from
the previous year despite the challenging year and the disruption
caused by the cost of living crisis and the challenging conditions the
Retail industry is facing.
Link to Remuneration
Bonus and Performance Share Plan
Link to Remuneration
Bonus
Customer Net Promoter Score (“NPS”)
Definition
Measure the changes in NPS of our Retail stores and Autocentres.
Retail
Autocentres
FY23
69.2
67.0
FY22
66.5
76.1
FY21
59.7
72.6
 ESG Performance Metrics can
be found on page 61.
FY20
57.9
68.8
Commitment
We are committed to improving the score with our customers
across the Group.
FY23 Performance
Our Retail NPS has been strong this year with a third successive year
of significant improvements driven by investments in store experiences
through Project Fusion and our continued focus on training colleagues
to better serve our customers. FY23 Autocentres NPS has dropped
compared to FY22 due to integration of National Tyres and capacity
challenges faced by our Autocentres business.
Link to Remuneration
Bonus
38
Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023
halfords.annualreport2023.com
39
STRATEGIC REPORT
Our
Strategy
Inspire
We inspire our customers with a
differentiated and super-specialist offer.
Objectives for FY23
• Roll out capital-efficient Fusion investments across the
estate including Parts Hubs, Fitting stations and Fusion
selling practices and technology.
• Further our super-specialism by deepening our ranges
within our core markets, such as on-demand tyre fittings
as well as access to a broader range of car parts.
“Despite challenging economic
conditions, I am proud of the significant
progress we have made during FY23
and am excited about FY24.”
Graham Stapleton
Chief Executive Officer
Progress Made
• Rolled out capital-efficient Fusion investment across
50 towns in our estate.
• Launched a new ‘digital first’ car parts proposition,
providing our customers with access to over 100,000
products.
• Improved our digital platform, enabling customers to book
same-day appointments.
Outlook for FY24
• Roll out capital-efficient Fusion investment to a further
50 towns.
• Investment in value through targeted incentives for
Halfords Motoring Club, up-weighted promotions and our
price promise.
• Drive market share growth in tyres, with targeted plans
across key segments and channels.
Related Principal Risks
• Value Proposition
• Skills Shortage
• Brand Appeal and Market Share
• Climate Change and Electrification
40
Halfords Group plc Annual Report and Accounts for the period ended 31 March 2023
Support
Lifetime
Support our customers through an integrated,
unique and more convenient services offer.
Enable a Lifetime of motoring
and cycling.
Objectives for FY23
• Integrate National Tyre to crystallise the next phase of
performance synergies including re-branding sites, installing
MOT equipment and implementing Avayler across the estate.
Objectives for FY23
• Focus on driving Motoring Loyalty Club memberships and
Vehicle Registration Number (“VRN”) data capture, targeting
more than one million customers by the end of FY23.
• Continue to make progress towards our medium-term target
of 800+ garages, 300 Halfords Mobile Expert vans and …