The following table outlines the components of the non-underlying items recognised in the 52 weeks ended 2 April 2021: 


                                              FY21  FY20 
 
                                              GBPm    GBPm 
Organisational restructure costs (a)          5.9   2.8 
Group-wide strategic review (b)               -     1.0 
Acquisition and investment-related fees (c)   0.6   1.9 
One-off claims (d)                            2.9   0.8 
Closure costs (e)                             27.9  25.6 
Net non-underlying items pre-IFRS 16          37.3  32.1 
Closure costs (e)                             (1.9) 1.2 
Impairment of right-of-use assets (f)         (0.4) 0.9 
Net non-underlying items post-IFRS 16         35.0  34.2  a. In the current and prior period, separate and unrelated organisational restructuring activities were undertaken.

Current period costs comprised: ? During the year a strategic redesign of the in-store operating model undertaken to better meet our customers'

expectations and deliver a consistent shopping experience across our estate. Redundancy costs of GBP5.9m were

incurred to transition to the new operating model. These costs have materially been spent during the year.

Prior period costs comprised: ? Redundancy and transition costs relating to roles which have been outsourced or otherwise will not be replaced

(FY20: GBP1.4m); and ? Asset write-offs, principally resulting from the strategic decision to re-platform the Retail and Autocentres

websites (FY20: GBP1.4m) b. In the prior period, costs were incurred in preparing and implementing the new Group strategy. This included GBP0.4m

of external consultant cost and GBP0.6m of store labour costs, point-of-sale equipment and other associated costs in

completing the cycling space re-lay across the store estate. c. In the current and prior periods, costs were incurred in relation to the investments in Universal, McConechy's and

Tyres on the Drive. ? In FY21, GBP0.6m relating to professional fees in respect of the acquisition of Universal; ? Tyres on the Drive acquisition costs comprised GBP1.0m (FY20) principally relating to the costs of dual running

Halfords Mobile Expert and Tyres on the Drive, as well as the write-off of the receivables balance due from Tyres

on the Drive related to Halfords Mobile Expert prior to acquisition; and ? GBP0.9m (FY20) relating to professional fees in respect of the acquisition of McConechy's. d. During the prior year, the Group incurred GBP0.2m in settling as court case. In addition, a provision of GBP0.6m was

recognised in relation to the HMRC audit relating to the national minimum wage. The Group has continued to work

with HMRC and external advisors during FY21 and a full data validation exercise is underway to determine the

required Notice of Underpayment. The exercise is in progress and based on information available to date and the

Group's assessment of a range of potential outcomes, management has increased the provision to GBP3.4m which

represents management's best estimate of the value of underpayments and the associated penalty charge. e. Of the closure costs GBP28.5m represents costs associated with the closure of a number of stores and garages

following a strategic review of the profitability of the physical estate. The costs mostly relate to the impairment

of right-of-use assets (GBP12.2m) and tangible assets and property costs as well as ongoing onerous commitments under

the lease agreements and other costs associated with the property exits.

In the prior period they related to costs associated with the closure of the operations of Cycle Republic and the Boardman Performance Centre ("Cycle Republic") following a strategic review of the Group's cycling businesses. The costs mostly relate to the impairment of right-of-use assets, as well as the impairment of intangible and tangible assets and inventories as well as ongoing onerous commitments under the lease agreements and other costs associated with the property exits. GBP2.5m of these costs have been reversed during the year as the Group continues to negotiate lease disposals and was able to release stock provisions previously in place (GBP1.8m). f. In light of the ongoing COVID-19 pandemic, the Group has revised future cash flow projections for stores and

garages. As a result, in the prior period, GBP0.9m incremental impairment was recognised in relation to garages where

the current and anticipated future performance did not support the carrying value of the right-of-use asset and

associated tangible assets. This charge is directly attributable to impairment due to COVID-19 and relates

primarily to the right-of-use asset value. During the year, GBP0.4m of this impairment has been reversed as the

stores and garages have returned to a profitable position.

Finance Expense

The net finance expense (before non-underlying items and IFRS 16) for the 52 weeks ended 2 April 2021 was GBP5.5m (FY20: GBP2.8m) reflecting the drawdown of the Rolling Credit Facility (RCF) early in the pandemic, alongside increased amortisation and commitment fees relating to the new RCF, which was re-negotiated in the period.

Taxation

The taxation charge on profit for the 52 weeks ended 2 April 2021 (before IFRS 16) was GBP10.3m (FY20: GBP2.8m), including a GBP5.8m credit (FY20: GBP4.7m credit) in respect of non-underlying items. The effective tax rate of 17.5% (FY20: 13.9%) differs from the UK corporation tax rate (19%) principally due to the impact of deferred tax on accounting for share options and adjustments in respect of provisions held in respect of prior periods.

Earnings Per Share ("EPS")

Underlying Basic EPS before IFRS 16 was 40.7 pence and after non-underlying items 24.7 pence (FY20: 22.9 pence and 8.9 pence after non-underlying items), a 77.7% and 177.5% increase on the prior year. Basic weighted-average shares in issue during the year were 197.1m (FY20: 197.0m).

Dividend ("DPS")

In light of the COVID-19 pandemic and the impact on short-term profitability, the Board has taken a series of measures to preserve cash, one of which was a suspension of the dividend. After the strong close in the final quarter of FY21, the Board has recommended to shareholders that final dividend of 5.0p per share should be paid (FY20: Nil per share).

IFRS 16 


                                      FY21         FY21 
                                      (52 weeks)   (52 weeks)    Movement 
 
                                      Pre-IFRS 16  Post-IFRS 16  GBPm 
                                      GBPm           GBPm 
Underlying EBIT                       101.8        114.5         12.7 
Net Finance Costs                     (5.5)        (15.0)        (9.5) 
Underlying Profit Before Tax          96.3         99.5          3.2 
Net Non-Underlying Items              (37.3)       (35.0)        2.3 
Profit Before Tax                     59.0         64.5          5.5 
Underlying Basic Earnings per Share   40.7p        41.7p

IFRS 16 has had the effect of increasing profit by GBP5.5m. The two main drivers for this being the increase in held over leases which have decreased the depreciation charge in comparison to the rental payments, and the increased aging of the lease portfolio which has led to a lower interest charge in comparison to the rental payments.

Capital Expenditure

Capital investment in the 52 weeks ended 2 April 2021 totalled GBP32.5m (FY20: GBP35.8m) comprising GBP23.2m in Retail and GBP9.3m in Autocentres. Within Retail, GBP6.0m (FY20: GBP15.9m) was invested in stores. Additional investments in Retail infrastructure included a GBP13.1m investment in IT systems, including the continued development of the new Group website.

The GBP9.3m (FY20: GBP4.8m) capital expenditure in Autocentres principally related to the replacement of garage equipment and replacement of fixtures and fittings, rebranding of McConechy's garages and further development of PACE, our Garage Workflow System.

Inventories

Group inventory held as at the year-end was GBP143.9m (FY20: GBP173.0m). Retail inventory decreased to GBP134.3m (FY20: GBP168.0m), reflecting reduced stock levels and working capital efficiencies. The stock levels within our cycling business were, however, sub-optimal for much of the year and as such the inventory reduction is flattered. Inventory levels are likely to revert to more normal levels in FY22.

Autocentres' inventory was GBP9.6m (FY20: GBP5.0m). The existing Autocentres business model is such that only modest levels of inventory are held, with most parts acquired on an as-needed basis. The increase in inventory related to the acquisition of tyre stock within Universal.

Cashflow and Borrowings

Adjusted Operating Cash Flow was GBP186.6m (FY20: GBP109.9m). After acquisitions, taxation, capital expenditure and net finance costs, Free Cash Flow of GBP145.3m (FY20: GBP54.6m) was generated in the year. Group Net Cash/(Debt) was GBP58.1m (FY20: (GBP73.2m)). All of these numbers are pre-IFRS 16.

Within the cash flow is a working capital inflow of approximately GBP42m. Within this was approximately GBP20m of planned and sustainable inventory reductions in Retail and GBP36m which we anticipate will reverse in FY22. The GBP36m is a result of Retail inventories at year end which were GBP14m lower than optimal due to the high cycling demand, and year end creditors worth GBP22m which saw our normal timing differences alongside a VAT creditor that was deferred from earlier in the year and paid early in FY22.

Group net debt after IFRS 16 was GBP277.3m (FY20: GBP479.8m)

Principal Risks and Uncertainties

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