There are, however, external factors that add uncertainty to our outlook. Supply challenges for Cycling products remain acute, and a return to normal trading patterns remains highly uncertain, particularly in H2, as the hospitality industry and international travel potentially reopen to a greater extent. The general economic outlook remains challenging, with consumers likely to be more cautious and expecting greater value from their purchases. We will address this by making a significant investment in pricing in our Retail Motoring business. Although this may impact FY22 gross margins, we are confident it will strengthen the business in the medium and long term. After the strong start to the year, and in consideration of these factors, we are targeting FY22 profit before tax, including IFRS 16 adjustments, of above GBP75m.

In the longer term, we are confident in the outlook for the motoring and cycling markets and our ability to compete strongly in both. We have demonstrated the resilience and growth opportunity in our Services and B2B businesses by gaining market share through increasing scale and convenience alongside enhancing the overall customer experience. We also believe that the increased adoption of Cycling will continue, supported by Government investment and a societal need to tackle climate change. As a business, we will continue to drive our markets by launching more new and exclusive products, becoming the market leader in electric mobility as the UK switches to a sustainable future, and continuing to engage our customers by creating a seamless digital and physical experience. Building on the strong foundations we have created in FY21, Halfords is well-positioned to accelerate its transformation journey.

Capital structure and dividend

We have finished the financial year with a strong balance sheet, ending with net cash of GBP58.1m, although some of this is non-recurring, and will unwind as inventory levels return to optimal levels and the timing of creditor payments normalises. This financial strength gives us the ability to invest in our transformation plan, positioning the business for long-term success. Considering this opportunity, we have updated our capital allocation priorities as follows: 1. Maintaining a prudent balance sheet 2. Investment for growth 3. M&A, focused on Autocentres 4. Progressive dividend policy 5. Surplus cash returned to shareholders

Our maximum Net Debt: EBITDA ratio, on a pre-IFRS 16 basis, remains at 1.0x, or up to 1.5x on a short-term basis to fund M&A activity. However, given the current strength of our balance sheet and the uncertain economic environment, we will operate with more prudent debt levels in the near-term.

With a robust and proven strategy, it is imperative we invest in our transformation plan, which we believe will require between GBP50m and GBP60m per year of capital expenditure in the medium-term. Our growth plan will be complemented by acquisitions if we are able to find attractive businesses, with the right strategic fit and for a fair price. Our acquisition strategy will be focussed on scaling our motoring services business, propelling us to market leadership in aftermarket service, maintenance and repair.

We understand the importance of the ordinary dividend to many of our investors. Recognising this, and the strength of the current balance sheet, we are proposing an FY21 final dividend of 5p per share and a reinstatement of the ordinary dividend from FY22 at 9p per share, intending this to be progressive. Should surplus cash remain in the business that we feel we cannot deploy with good rates of return, we will return this to shareholders in the most appropriate way.

Enquiries

Investors & Analysts (Halfords)

Loraine Woodhouse, Chief Financial Officer

Neil Ferris, Corporate Finance Director +44 (0) 7483 360 675

Andy Lynch, Head of Investor Relations +44 (0) 1527 513 189

Media (Powerscourt) +44 (0) 20 7250 1446

Rob Greening halfords@powerscourt-group.com

Lisa Kavanagh

Jack Shelley

Results presentation

A conference call for analysts and investors will be held today, starting at 09:00am UK time. Attendance is by invitation only. A copy of the presentation and a transcript of the call will be available at www.halfordscompany.com in due course. For further details please contact Powerscourt on the details above.

Next trading statement

On 8 September 2021 we will report our trading update for the 20 weeks ending 20 August 2021.

Notes to Editors

www.halfords.com www.tredz.co.uk www.halfordscompany.com

Halfords is the UK's leading provider of motoring and cycling services and products. Customers shop at 404 Halfords stores, 3 Performance Cycling stores (trading as Tredz and Giant), 374 garages (trading as Halfords Autocentres, McConechy's and Universal) and have access to 143 mobile service vans (trading as Halfords Mobile Expert and Tyres on the Drive) and 192 Commercial vans. Customers can also shop at halfords.com and tredz.co.uk for pick up at their local store or direct home delivery, as well as booking garage services online at halfords.com.

Cautionary statement

This report contains certain forward-looking statements with respect to the financial condition, results of operations, and businesses of Halfords Group plc. These statements and forecasts involve risk, uncertainty and assumptions because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are made only as at the date of this announcement. Nothing in this announcement should be construed as a profit forecast. Except as required by law, Halfords Group plc has no obligation to update the forward-looking statements or to correct any inaccuracies therein.

Chief Executive's Statement

Operational review

I am very pleased with our performance in FY21, shown not only in the financial results but also in the operational agility demonstrated throughout the business to overcome the many challenges presented last year. COVID-19 was clearly the most significant challenge faced by any retailer, but we have also faced Brexit, container shortages, port congestion and more recently, the blockage of the Suez Canal. Our performance not only showcases the resilience of our core business and the relevance of our strategy, but also the importance of our progress in creating a more efficient and profitable business to provide strong foundations for future growth.

Retail

Retail revenue of GBP1,039.8m was +9.4% above last year and +14.6% on a LFL basis. We saw a volatile and unpredictable year of trading, with large swings in LFL performances from week to week, and across our categories. Overall, we saw strong demand for our Cycling products, +54.1% above last year, with our performance cycling business Tredz performing even better at +66.3%. Motoring was -12.1% LFL, better than traffic levels but inevitably impacted by the lockdowns.

Retail Motoring

Retail motoring sales were down -12.1% LFL against the backdrop of -25% fewer car journeys and low consumer confidence. As an essential retailer we played our part in the COVID-19 response by carrying out over 60k Services for NHS and key workers during the height of the pandemic and over 1m essential services during full lockdowns. We also kept innovating our products and services, including the launch of our WeCheck app, which enables colleagues to digitally record vehicle checks undertaken and the recommended actions for a customer to keep their car safe. We performed well in product categories related to staycation or car maintenance - Touring was up +1.7%, whilst Car Cleaning (+7.4%), Body Repair (+5.4%) and Workshop (+6.4%) all grew strongly. We launched new products in Blades, Bulbs and Car Seats, enabling these categories to perform stronger than the lower traffic levels would suggest, and helping to mitigate the challenging conditions we faced in discretionary categories, such as Dash Cams and Audio.

Retail Cycling

Cycling performed very well, +54.1% above last year, but presented its own challenges in securing supply and predicting demand. All mainstream product categories saw strong growth, with Adult Mechanical bikes +113% and E-bikes +76%, while our Performance Cycling business Tredz also saw strong revenue and profit growth, capitalising on customer transfer from our closed Cycle Republic business. We identified very early in the pandemic the unprecedented levels of demand for cycling, enabling us to use our scale and relationships to secure stock from new and existing suppliers. We also launched a series of customer journey enhancements, beginning online, to optimise the customer experience at a time of high demand.

In this competitive market we continued to innovate and refresh our exclusive ranges of own brand Carrera, Boardman and Apollo bikes. Our bikes secured multiple awards from specialist press and magazines throughout the year for their design, specification, and value. Over 50% of our adult bikes were updated last year, adding new features such as comfort saddles and puncture resistant tyres, all following customer feedback. Supply was, and remains, a challenge, but where necessary, we quickly adapted specifications and componentry to mitigate bottlenecks in production and worked with new suppliers to achieve a steady intake of bikes throughout the year. Keeping customers updated and engaged was a key priority and we launched a series of digital developments designed to enhance and assist customers finding their new bike. One example was 'Email me when in stock' or the ability to register interest in new launches. We also introduced bookable collection slots, next day delivery and tripled our central bike build capacity, all of which have led to improved NPS scores and customer feedback.

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