Annual Report 
and Accounts
2005
Halfords Group plc Report and Accounts 2005 Contents
01 Financial Highlights
02 Halfords at a glance
03 Chairman’s Statement
05 Chief Executive’s Report
12 Finance Director’s Report
16 Board of Directors
19 Corporate Social Responsibility
20 Directors’ Report
23 Corporate Governance
30 Directors’ Remuneration Report
36 Statement of Directors’ Responsibilities
37 Independent Auditors’ Report 
38 Group Profit and Loss Account
40 Balance Sheets
41 Group Cash Flow Statement
42 Notes to Group Cash Flow Statement
43 Accounting Policies
45 Notes to the Financial Statements
61 Four Year Record
62 Shareholder Information
63 Company Information
64 Retail Store Locations
Halfords Annual Report and Accounts 2005 Halfords Annual Report and Accounts 2005 1
Financial Highlights
£m % Change
Turnover
628.4
+
8.6
Operating profit before goodwill amortisation
and exceptional operating items
92.2
+
16.4
Operating profit
78.3
+
19.5
Pre-tax profit
64.1
+
130.6
Net debt
169.7
-
51.4
pence
Basic earnings per share before goodwill 
amortisation and exceptional items
24.4
+
37.9
Basic earnings per share
18.5
+
122.9
Dividend per ordinary share
12.0 n/a 2 Halfords Annual Report and Accounts 2005
We operate from nearly 400 stores
throughout the UK, with 3.2m sq.ft. 
of selling space and employ almost
10,000 people.
Halfords has leading market 
positions in auto, leisure and 
cycling products, selling over
11,000 different product lines.
Strong earnings growth and 
cash generation.
A highly trusted brand name, 
with national recognition and 
broad appeal.
Store of first choice with dedicated,
knowledgeable sales employees.
A balanced mix of defensive and 
growth markets.
Halfords at a glance Halfords Annual Report and Accounts 2005 3
This first set of full year results as a
publicly listed company demonstrates
the strength and growth potential of
our business, which has a unique
position as the UK’s leading auto,
leisure and cycling products retailer.
Halfords continued to improve
performance and grow market share
by building on its unique advantages
of greater scale than its competitors,
a differentiated customer service
proposition through the “We’ll Fit It”
initiative and from the continued
development programme of new and
exciting products.
In the 52 weeks to 1 April 2005,
and against a backdrop of a more
challenging retail market, we
achieved sales growth across all
four of our key product categories
of car maintenance, car
enhancement, cycling and travel
solutions, whilst continuing to keep
firm control of costs.
By the end of the financial year, the
Group was operating from 398
stores across the UK and the
Republic of Ireland as we continued
to roll out our store development
programme of introducing mezzanine
floors, improving store layouts and
opening in new locations.
Our success would not have been
possible without the huge
contribution from our 9,940
employees, whose passion,
knowledge and enthusiasm are
crucial in giving Halfords competitive
advantage in the retail marketplace.
The Board would also like to place on
record its appreciation for the
valuable contribution made by David
Hamid, our former Chief Executive,
who announced his retirement from
the Group in March this year because
of ill health.
We were fortunate in being able to
appoint Ian McLeod as Chief
Executive. Ian has outstanding
credentials for the job. He has been
with the Group since September
2003 and as Chief Operating Officer
played an important role in running
the business alongside David and the
senior management team.
The Board is committed to the
highest standards of corporate
governance and corporate social
responsibility, as explained in more
detail later in this report.
The Board is recommending a 
final dividend of 8.3p per share in
addition to the 3.7p per share interim
dividend already paid, bringing the
total dividend for the year to 12.0p
per share.
Although the UK retail climate has
become more subdued, we have a
strong and differentiated business
with a proven strategy for growth,
which provides a solid platform from
which to build and gives us
confidence about the growth
prospects for the future.
Rob Templeman, Chairman
8 June 2005
Chairman’s Statement
Rob Templeman
“We have a strong and 
differentiated business
with a proven strategy
for growth, which
provides a solid platform
from which to build and
give us confidence about
the growth prospects for
the future.” Former British Cycle Champion, Isla, and
Halfords Development Squad road rider,
Andy, have turned their passion into their
profession, and are dedicated to designing
and sourcing cycles and cycle accessories for
Bikehut. Isla is pictured putting Halfords’ own
brand Carrera bike through its paces.
mud
Glorious
Employee focus
Isla Rowntree
Halfords Head of Bike 
Design & Sourcing
Andy Smallwood 
Halfords Cycle Accessories
Assistant Product Manager
4 Halfords Annual Report and Accounts 2005 Halfords Annual Report and Accounts 2005 5
Halfords has a very strong brand
name, synonymous with quality,
reliability and trust and has delivered
17 consecutive years of sales growth.
The financial year ended 1 April 
2005 has been notable for
continuing the pace of change in 
the business and the substantial
improvement in store performance
and company profitability.
Sales increased by 8.6% to £628.4m
compared with the previous year,
while pre-tax profits have risen by
130.6% to £64.1m over the
same period.
We aggressively pursued the store
opening, refurbishment and product
development programmes outlined 
to investors at the time of the
Company’s successful listing on 
the London Stock Exchange in 
June 2004.
Halfords has a unique retailing
proposition. We are about 12 times
the size of our nearest competitor
and are market leaders in all of our
key product categories. We are a
store of first choice for cycling and
automotive requirements and have
successfully widened our product
offer into new areas including
camping equipment and a broader
range of leisure products. 
A key competitive advantage is the
Halfords “We’ll Fit It” programme; we
have fitted close to one million
products, ranging from car parts, 
to child seats, CD players, DVD’s 
and the latest satellite navigation
equipment. The Company’s staff are
passionate about our products and
are trusted by our customers. 
“We’ll Check It” and “We’ll Repair It”
underpin our Bikehut sub-brand,
which sells more than one in every
four cycles in the UK.
Our key objectives following last
year’s listing are to maintain and
develop Halfords’ core strengths by:
 Expanding the store portfolio
 Broadening the product offer
 Supply chain and active trading
 Marketing the Halfords’ service
proposition
The financial results for the year
clearly demonstrate that these
actions are being translated into
improved profitability and
shareholder value.
Expanding the store portfolio
Supermezzanine Format
The roll out of “supermezzanine”
stores continued with the number of
supermezzanines increasing from
1 1 at the beginning of the financial
year to 57 stores by the end of March
2005. Typically a supermezzanine
store will add a further 40% of selling
space to a standard superstore.
These stores allow us to design an 
in-store environment, which includes
much better sight lines and clearer
product segmentation creating an
automotive ground floor and a leisure
mezzanine. It also creates space for
product range enhancement and for
new product categories such as
Active Leisure and Kidszone.
Supermezzanine conversions have
generated significant uplifts in like-for-
like sales and 35 further conversions
are planned for the new financial year. 
Chief Executive’s Report
Ian McLeod
“During the last 12 months
we have worked hard to
further consolidate our
leading market position
within our core categories,
extend sales potential
through leveraging our
brand equity into new
markets and accelerate
Halfords’ new store and
portfolio improvement
programmes.” 6 Halfords Annual Report and Accounts 2005
This will add over 100,000 square
feet of retailing space without
increasing our rent levels and will
enable Halfords to broaden its
product offer to the consumer.
New Stores
Halfords trades from 398 stores in
the UK and the Republic of Ireland.
During the year Halfords opened 18
new stores and closed seven. In
addition, supermezzanine conversions
were added to a total of 38 stores. 
We have also developed a smaller
store footprint and been encouraged
by the results generated by this type
of store format.
The decision to expand beyond the
UK into the Republic of Ireland has
also proved to be a success. Halfords
now trades from three stores in the
Republic of Ireland and eight in
Northern Ireland and is continuing 
to seek further sites, following 
the encouraging results from 
these developments.
Over the next 12 months we plan to
open 16 new stores including four
site relocations. 
Our property team is actively
continuing to progress our
expansion plans through seeking
suitable new locations for both 
our supermezzanine and small 
store formats.
Broadening the product offer
During the year Halfords has
succeeded in growing like-for-like
sales in all four key categories of 
Car Maintenance, Car Enhancement,
Cycling and Travel Solutions.
Car Maintenance
Halfords is the largest supplier of car
parts in the UK, in a market worth
almost £1 billion annually despite
longer service intervals and increased
complexity of vehicle engines.
We have increased sales and grown
market share through a combination
of good availability on specialist car
parts (either held at branch or
through special order) and by driving
up average transaction value on
consumable servicing products. We
offer special deals on added value
products, as well as offering a
comprehensive “We’ll Fit It” service
on items such as wiper blades 
and bulbs.
“ By the end of the financial year
Halfords was trading from 398
stores in the UK and the
Republic of Ireland.”
Store Development
Halfords is developing its property
portfolio by converting existing
stores and opening new stores.
Pictured is a smaller format
“Metro” store, located on high
streets and a supermezzanine 
out of town store. Halfords Annual Report and Accounts 2005 7
We have also made good progress
through our business-to-business
initiatives. We have reached
agreement to supply a range of
Halfords branded merchandise to
over 300 BP forecourt sites. Products
are purchased, merchandised and
managed by BP, with range
recommendations provided by the
Halfords category team.
We have also introduced a Halfords
trade card into virtually all stores to
encourage more committed home 
car mechanics and smaller garage
proprietors to purchase an increasing
amount of their parts requirements
from our stores. Early results from
both initiatives are encouraging.
Car Enhancement
The £850m car enhancement market
is growing at more than 7% a year
and as market leader Halfords has
seen significant growth in its sales
and market share.
The largest growth area has been in
in-car entertainment and technology.
Eighteen months ago, satellite
navigation units were a difficult
aftermarket installation with few units
available below £1,000. In recent
months, as technology has advanced,
we have reduced the entry price point
to as little as £300 and demand has
grown substantially. We have a wide
range of products and have invested
heavily in training our store teams to
advise the customer of the products’
capability and fit products into
customers’ cars. We are now satellite
navigation specialists and are
successfully marketing this together
with our expertise in fitting in-car DVD
and safety camera detectors.
The Halfords’ “We’ll Fit It” programme
provides sustainable competitive
advantage across our product
categories and combined with our
strong sales performance, gives us
real confidence for the future.
We continue to enjoy a healthy
business selling and fitting CD
players to cars already on the road.
About 50% of the cars on the UK
roads are over six years old, which
presents us with a continued growth
opportunity. Younger drivers, in
particular, create a strong market for
trading up to an audio unit which is
MP3 compatible.
Ripspeed
Ripspeed is an exclusive brand to
Halfords, and is firmly established as
one of the country’s leading brands in
the growing market of 
car enhancement and modification.
Whilst all of our stores have 
Ripspeed branded merchandise, 
we have seen strong sales growth
from the introduction of a dedicated
Ripspeed sub-shop into our
supermezzanine stores.
As we introduce more super-
mezzanine formats into our stores 
we are able to allocate extra space to
create more dedicated Ripspeed 
sub-shops and to widen the product
offer through the introduction of new
and exciting ranges such as the latest
alloy wheels and LED lights.
We continue to develop and raise
awareness of the Ripspeed brand by
sponsoring events targeting car
enthusiasts and marketing the brand
through specialist publications that
appeal to the target consumer for this
large and growing market.
We are developing the Ripspeed
brand by sponsoring events,
targeting young enthusiasts and
marketing the brand in specialist
publications that appeal to the
young modifier. The Halfords Bikehut brand has
gone from strength to strength
since 1998. It is now being
successfully extended to include
own label cycle accessories, and
in-store specialists have helped to
broaden Bikehut's appeal to both
families and enthusiasts.
8 Halfords Annual Report and Accounts 2005
Bikehut
Halfords, with its successful Bikehut
brand, continues to consolidate and
grow its position as the market leader
within the UK cycling market.
Our exclusive Apollo brand is firmly
established as the number two cycle
brand within the UK and with the
recent launch of our new Apollo
range we are confident that we can
further improve its sales performance
and market share.
We are also successfully growing our
sales in the premium and specialist
sectors of the cycle market. As well
as offering recognised premium
brand products such as Kona, GT
and Saracen, we have also been 
able to establish our Carrera 
brand as a credible alternative 
within this market, particularly 
within the emerging Town and Trail
category. Our specialist buying team
have secured a cycle range with 
the right quality and design at 
highly competitive prices through
sourcing product directly from Far
East suppliers.
Bikehut is one of the main 
areas of the store where we
experience strong sales uplifts
following store conversion to
supermezzanine format.
We have improved the in-store
marketing of Bikehut as our cycling
sub-brand in mezzanine stores in
order to broaden general appeal 
and add credibility with enthusiasts.
Employees who work in Bikehut 
are frequently enthusiasts
themselves which further helps in
building customer confidence. 
Our Bikehut colleagues’ expertise
enables us to also provide additional
fitting, maintenance and repair
services to our customers, which
differentiate us from other
mainstream multiples.
Bikehut also sponsors teams of
employee and professional cyclists
to heighten brand awareness and
encourage independent product
reviews or recommendations.
Specialist press is also used to
advertise Bikehut and Carrera
branded merchandise to leverage
credibility amongst enthusiasts.
The Bikehut brand has been
extended to include own label 
cycle accessories to complement 
the highly successful Carrera and
Apollo cycle brands.
Travel Solutions
This market is worth around £700m
a year nationally and Halfords is
market leader in this highly
fragmented sector which includes
travel equipment and travel
accessory products such as roof
boxes, roof bars and cycle carriers. 
We have updated certain key areas
and this, together with a strong
promotion programme brought 
about good year-on-year growth 
with Halfords continuing to grow
market share.
New Category Development
Active Leisure has been rolled out
across all stores nationally, providing
camping solutions to satisfy all
needs, including developing a 
multi-purchase offer for families
embarking on their first camping 
trip. Our new combined tent and
sleeping equipment packs at very
competitive prices have proved
extremely popular.  Halfords Annual Report and Accounts 2005 9
A range of Halfords branded tents
and sleeping bags has also been
introduced for the 2005 season.
Kidszone has been developed for
supermezzanine stores and includes
a broader range of child safety seats,
an extended range of wheeled
products (both pedal driven and
electric) and a range of larger
outdoor activity products. Sales of
child seats, underpinned by an
aggressive marketing and pricing
campaign (including fitting advice in
store), have increased significantly.
The widening of the product offer,
particularly wheeled toys over the
Christmas period, was also very
successful and will provide a good
base to build on next year.
Supply chain and active trading
A number of stores benefited from a
low cost store renewal programme
ahead of last year’s listing, providing
better linear merchandising and
improved sales intensity. 
As well as delivering range extension
benefits, these store layout changes
have also freed space at the front of
the store which allows us to
accommodate bulk displays of
product, creating greater impact.
The benefits are an increase in
incremental sales from impulse
purchases, the development of a “test
bed” for the trial of new product ideas
and giving consumers more reasons
to shop at our stores.
The organisation has responded
extremely well to the active trading
philosophy and we are reaping the
benefits from it. 
The roll-out of the Active Leisure
range and the speed of development
of the special purchase programme
are good examples of the successful
change in approach, with a focused
trial period and scale roll-out 
following rapidly.
The development of Halfords Asia
has proved invaluable in supporting
the special purchase programme,
facilitating bulk purchase of product
at source, specifically for promotion
activity within the recently created
bulk display space created in-store.
There has also been a sustained
effort to increase the number of
product ranges we source directly
from the Far East. This strategy has
proved highly successful through 
the creation of a dedicated Far
East sourcing team based in 
Hong Kong. The growth of directly
sourced products enables us to
reduce cost and utilise the benefit 
to either grow margin or reduce
prices to grow market share. The
penetration of product sourced
directly from the Far East has grown
significantly in the last year and is
targeted to rise further.
Marketing the Halfords 
service proposition
Halfords has traditionally had a
reputation for providing good 
service through knowledgeable
employees. This, together with our
enhanced product fitting capability,
gives us a strong and unique
competitive advantage.
The Halfords’ “We’ll Fit It” programme
is now an integral element of all our
marketing communications and
central to the service message
inherent within our latest TV
advertising campaign. 
Improving Product 
Sourcing Channels
Increasing our direct
product sourcing from
the Far East has meant
that Halfords has been
able to further improve
sales, margin and
profitability. Most of
Halfords’ cycle and 
cycle accessory ranges
are manufactured in the
Far East. 10 Halfords Annual Report and Accounts 2005
We have underpinned the marketing
communication message with a
series of in-store training
programmes to ensure that the
service communicated can be
comprehensively provided.
At a local level, colleagues are trained
to deliver fitting services on servicing
consumables such as wiper blades
and car bulbs. They are also trained to
build bikes and perform safety
checks prior to customers receiving
their bike and also service them with
a free six week post purchase check.
Halfords always endeavours to
employ colleagues in areas where
they have a natural affinity or
preference. Cycling and car
enthusiasts will be available in most
stores to advise customers. Halfords
has been awarded official status as
an Approved Assessment Centre for
the Institute of the Motor Industry and
over 500 colleagues have been
trained and accredited to deliver
hardwire electronic equipment
installation, extending our fitting
capabilities from in-car audio, to
include satellite navigation, safety
camera detectors and in-car DVD.
Frequently the individual who 
sells an electronic device will be 
the same individual who fits it in 
the customer’s car. This provides
additional customer reassurance and
is a strong competitive advantage.
None of our competitors provide such
a comprehensive service nationally.
During the year, we also relaunched
our Child Seat Fitting service.
Approximately 1,000 employees have
been trained and certified in child
seat fitting during the year, which
combined with strong deals has
supported a substantial growth in
sales volume. 
80% of child seats in cars are 
fitted incorrectly so the advice that
Halfords provides in child seat fitting
is significant in providing reassurance
to parents and guardians.
Outlook
Following what we regard as a very
successful first year since our Stock
Exchange Listing, Halfords has
reported its seventeenth year of
consistent sales growth. This strong
track record demonstrates Halfords’
ability to defend itself against cyclical
economic change.
During the last 12 months we have
worked hard to further consolidate
our leading market position within our
core categories, extend sales
potential through leveraging our
brand equity into new markets and
accelerate Halfords’ new store and
portfolio improvement programmes.
We are encouraged by these results
and are confident that the continued
diligent application of our strategy
provides the opportunity to deliver
further positive results in the future.
Ian McLeod
Chief Executive 
8 June 2005
Travel Solutions
A new range of tents and sleeping
bags have been introduced in
2005 to further strengthen our
Active Leisure offer. We are also
selling a greater range of child
seats which combined with 
strong deals and trained fitters
has supported a substantial
growth in sales. Bryan has worked for Halfords Ripspeed for
four years including working at Ripspeed shows
and on special projects. He is a car modifying
specialist and spends his free time working on
his own Nissan Skyline.
profile
High
Employee focus
Bryan Wilson
Ripspeed specialist
Halfords Report and Accounts 2005     11 12 Halfords Annual Report and Accounts 2005
Finance Director’s Report
Nick Carter
“ Like-for-like sales growth
including the contribution
from new mezzanines,
was 8.9%.”
“The Group’s operating
profit before goodwill
amortisation and
exceptional operating
items increased by
£13.0m to £92.2m,
with the corresponding
operating margin
improving to 14.7%
from 13.7%.”
The 52 week period ended 1 April
2005 saw a successful maiden 
year as a public company. A good
sales and profit performance with
continued strong cash generation
enabled the company to deliver the
plan outlined at the time of the Initial
Public Offering (“IPO”).
Operating result
Group sales increased 8.6% to
£628.4m, 10.5% adjusting for
the 53rd week in the previous 
year. Like-for-like sales growth
including the contribution from new
mezzanines was 8.9%. The Group
experienced growth in each of the
four categories in which it operates.
At the gross profit level there has
been a 23 percentage points
improvement from 53.5% to 
53.7% and reflects good margin
management. The growth in the
number of “special purchase” offers
and ranged products sourced directly
from the Far East provides the Group
with a degree of price flexibility as it
can either improve margin or pass on
the benefit to customers through
price reductions. 
As noted in the Interim Report 
the continued growth of the Car
Enhancement category has had 
a small dilutive impact upon the
margin percentage. 
The Group’s operating profit before
goodwill amortisation and exceptional
operating items increased by £13.0m
to £92.2m, with the corresponding
operating margin improving to 14.7%
from 13.7%. Total operating
expenses, excluding goodwill
amortisation and exceptional items,
as a percentage of net sales fell by
70 percentage points to 39.1%. 
Operating exceptional items in the 
52 weeks to 1 April 2005, relate 
to a non-cash charge of £4.2m in
respect of employee share options
that were exercised at the time of 
the Group’s IPO and income of
£4.0m in respect of a premium
received in relation to the sub-lease
of garage premises by the Group 
to the Automobile Association
Limited. Further details are included 
in note 3 to the Financial Statements.
A full explanation of the trading
performance of the Group is given in
the Chief Executive’s Report on
pages 5 to10. Halfords Annual Report and Accounts 2005 13
Net interest payable
Net interest payable before
exceptional items was £14.7m
compared with £35.4m last year. 
A net exceptional interest credit of
£0.5m was taken to the profit and
loss account and the details of these
transactions are noted below.
Halfords Group floated on 8 June
2004 and the Company used the net
proceeds of the Global Offer together
with borrowings under new banking
facilities to repay its indebtedness
under its existing senior credit
agreement, deep discount bonds,
shareholder loan notes and to pay
fees and expenses associated with
the new bank facilities. As a
consequence, an exceptional charge
of £1.7m (53 weeks to 2 April 2004:
£6.3m) was made in respect of
accelerated amortisation of the issue
costs associated with these
borrowings.
On repayment of the Group’s
borrowings at the time of the IPO, the
Group hedged its new borrowing
facilities using new interest rate swaps
and received £2.2m of exceptional
income on the termination of its
former interest rate swaps.
Profit on ordinary activities 
before taxation
Profit on ordinary activities before
taxation was £64.1m compared with
£27.8m in the prior year, an increase
of 130.6%.
Taxation
The taxation charge on profit before
exceptional items for the financial
year was £24.8m (2004: £15.0m)
resulting in a full year effective tax
rate of 32.0% (2004: 34.2%) 
applied to profit before taxation
excluding exceptional items and
goodwill amortisation. 
The tax charge exceeds the charge
based on the statutory rate of UK
corporation tax rate of 30%
principally due to the non-deductibility
of depreciation charged on capital
expenditure in respect of mezzanine
floors and other store infrastructure.
Cash flow and net debt
The Group continues to be a strong
generator of cash and during the 
year generated an operating cash
inflow of £1 16.2m. Included within 
the working capital movement of
£1.6m there is an £8.2m benefit
arising from the timing of the 
Group’s VAT payment.
Underlying net debt at 1 April 
2005 was £169.7m, a reduction 
of £179.8m on the prior year
comparative, which also reflects the
debt repayment and restructuring
following the IPO.
Capital expenditure
As outlined at the time of the IPO,
the Group is planning an investment
programme that will amount to
approximately £80m over a three
year period. The majority will be 
spent on improving the store
environment via the supermezzanine
programme and new stores. Capital
investment in the period totalled
£27.7m, an increase of £7.5m on 
last year. This included spend of
£7.1m on new store and relocation
investment, and £1 1.1m on the 
store conversion programme.
Other capital expenditure included 
the investment in head office IT
systems, which is now close 
to completion. 
During the last four financial years
turnover and operating profit
before goodwill amortisation and
exceptional operating items have
increased by 20.9% and 79.0%
respectively.
Turnover (£m)
20.9% increase
02 03 04 05
Operating profit before goodwill
amortisation and exceptional
operating items (£m)
79.0% increase
£51.5m
£50.8m
£79.2m
£92.2m £628.4m
£578.6m
£528.8m
£519.8m
02 03 04 05 14 Halfords Annual Report and Accounts 2005
Operating leases
All the Group’s stores are held under
operating leases, the majority of
which are on standard lease terms,
typically with a 15 year term at
inception. The Group has an annual
commitment under non-cancellable
operating leases of £66.6m.
Earnings per share
Earnings per share before exceptional
items and goodwill amortisation at
24.4p (2004: 17.7p) is an excellent
maiden performance and reflects 
the increase in operating profit
combined with a lower interest
charge. Basic earnings per share 
was 18.5p (2004: 8.3p).
Dividend
The Board is recommending a final
dividend of 8.3p per share in addition
to the 3.7p per share interim dividend
already paid, bringing the total
dividend for the year to 12.0p 
per share.
Subject to shareholder approval at
the Annual General Meeting on 13
July 2005, the final dividend will be
paid on 1 August 2005 to
shareholders on the register at the
close of business on 17 June 2005.
Shares will be quoted ex-dividend
from 15 June 2005.
Accounting policies
These financial statements comply
with all accounting standards issued
by the Accounting Standards Board
applicable to financial statements for
the year ended 1 April 2005. The
Group’s Accounting Policies are set
out on pages 43 and 44, and are
consistent with the prior year, except
for the adoption of UITF 38
‘Accounting for ESOPTrusts’ and 
UITF 1 7 (revised 2003) ‘Employee
share schemes’. 
Retirement benefits
All employees following three months
service are offered membership of
Halfords Pension Plan, a defined
contribution pension arrangement. 
International Financial 
Reporting Standards (‘IFRS’)
As required by European Union
legislation, the Group will first publish
a report under IFRS for the 26 weeks
ending 30 September 2005 and
financial statements for the 52 weeks
ending 31 March 2006. 
IFRS implementation will have an
impact on the presentation of the
Group’s results although it should be
noted that it will have no impact upon
the Company’s trading or its cash
flow. The principal differences are
expected to arise in goodwill
amortisation, share based payments,
accounting for derivatives (the Group
hedges against foreign exchange and
interest rate movements), property
leases, and deferred taxation.
Treasury policies and financial 
risk management
The Group’s treasury function is
principally responsible for managing
the Group’s funding, as well as certain
financial risks described below.
Treasury manages these risks using
policies approved by the Board.
Liquidity risk
The Group has committed bank
facilities comprising an amortising
five year term loan of £140m and a
revolving credit facility of £120m,
which, together with a series of
uncommitted bank facilities and
occasional cash surpluses, provide
sufficient funding for the Group’s
operations. The Treasury Committee
reviews liquidity on a monthly basis.
We’ll Fit It
The award winning “We’ll Fit It”
programme has fitted close to
one million products in the past
year ranging from wiper blades
and bulbs to roof boxes and
satellite navigation systems. Halfords Annual Report and Accounts 2005 15
In accordance with the committed
facility dated 17 May 2004, the Group
repaid £10m of term debt on 31
March 2005, and will repay £10m six
monthly for the remaining term of the
facility. At 1 April 2005, the Group
had undrawn committed bank
facilities totalling £1 19m.
Interest rate risk
The Group’s bank term debt carries a
variable rate of interest linked to
prevailing interest rates. In order to
mitigate the risk of a rise in UK
interest rates, the Group has entered
into a single interest rate swap until 
8 June 2009, such that 90% of the
net bank loans and 8 1% of total bank
borrowings at 1 April 2005 carry a 
fixed rate of interest.
The position is reviewed regularly 
and the Group’s policy of hedging at
least 75% of the following financial
year’s forecast interest rate exposure
is satisfied for the period ending
31 March 2006.
At 1 April 2005, £32.8m of net debt
was floating rate. The weighted
average pre-tax cost of debt as at 
1 April 2005 was 6.4%.
During the year the Group cancelled
its interest rate contracts that did 
not match the new, post-IPO debt
structure, and entered into a new
single interest rate swap. 
The Group received £2.2m to close
out these contracts, although this will
be offset by pro-rata higher interest
payments under the new contract. 
Counterparty risk
Treasury occasionally deposits 
cash and transacts foreign exchange
and derivative contracts according 
to the counterparty’s credit rating.
The Group ensures that such
counterparties hold at least an
AA credit rating.
Foreign exchange risk
The Group uses a combination of
forward foreign exchange contracts
and zero-cost options to hedge the
foreign exchange risk of imports
(paid in US dollars) from the Far East. 
Nick Carter
Finance Director
8 June 2005
A supermezzanine store will
typically add a further 40% of
selling space to a standard
superstore and create space for
product range enhancement and
new product categories such as
Active Leisure and Kidszone. 16 Halfords Annual Report and Accounts 2005
Board of Directors
Nick Wharton
Business Development 
and HR Director
Nick Carter
Finance Director
Andy Torrance
Retail Operations Director
Ian McLeod
Chief Executive
Steve Whyman
Supply Chain and 
Business Systems Director
Phil Parker
Company Secretary
Paul McClenaghan
Trading Director
Halfords Limited Management Board (left to right)
Group Board
Rob Templeman
Keith Harris
Ian McLeod
Bill Ronald
Nick Carter
Nigel Wilson
Richard Pym
Jonathan Feuer
8
4
7
3
6
2
5
1 Halfords Annual Report and Accounts 2005 17
Rob Templeman (47) 
Non-executive Chairman
Rob was appointed to the Board as
Chairman in March 2003, following
Halfords’ acquisition by CVC in
August 2002. Previously, he 
was Chief Executive of Homebase 
Group Limited, where he managed a
leveraged buy-out with Permira from
Sainsburys. Prior to this Rob held
several retail executive positions,
including Chief Executive of Harveys
Furnishing plc. Rob has over 20 
years experience in the retail sector.
Currently Rob is Chief Executive 
of Debenhams.
Ian McLeod (46) 
Chief Executive
Ian joined Halfords in September
2003, and was appointed to the
Board in May 2004. He became Chief
Executive in March 2005. Previously,
he was Chief Executive of Celtic plc
for two years. Prior to this, Ian was on
the Executive Board of WalMart,
Germany, and held several positions
within Asda over the course of 20
years and was Director of Asda
Stores Limited between 1997
and 2001. Ian is a Non-executive
Director of Fulham Football Club
(1987) Limited.
Nick Carter (38) 
Finance Director
Nick was appointed Finance Director
in August 2003. Prior to this, he was
Finance Director at Birthdays Group
Limited and held a number of finance
and commercial roles at Superdrug
Stores plc and Kingfisher plc. Nick
qualified as a Chartered Accountant 
at KPMG. 
Richard Pym (55) 
Senior Independent Director
Richard joined the Board as the
Senior Independent Director in May
2004. He is Group Chief Executive of
Alliance & Leicester plc. He has also
been a Non-executive Director of
Selfridges plc and has held various
roles at Thompson McLintock & Co,
British Gas plc, BAT Industries plc
and The Burton Group plc.
Keith Harris (52) 
Non-executive Director
Keith was appointed a Non-executive
Director in May 2004. He has been
Executive Chairman of Seymour
Pierce Limited since its acquisition
from Investment Management
Holdings plc. Prior to this, Keith 
was Chairman of the Football 
League and Chief Executive of 
HSBC Investment Bank plc. Keith is
currently on the Board of Wembley
National Stadium Limited.
Bill Ronald (49) 
Non-executive Director
Bill joined the Board as a Non-
executive Director in May 2004. He is
Deputy President of the Food and
Drink Federation. Previously, Bill was
Chief Executive of Uniq plc. Prior to
this, he was Managing Director of the
UK confectionery operation of Mars
Incorporated and a Vice-President of
Masterfoods Europe. Bill has also
held various director roles at the
BCCCA (The Biscuit, Cake, Chocolate
and Confectionery Association), ISBA
(Incorporated Society of British
Advertisers) and the IGD (Institute of
Grocery Distribution).
Nigel Wilson (48) 
Non-executive Director
Nigel joined the Board as a Non-
executive Director in May 2004.
Currently, he is Chief Financial Officer
of United Business Media plc. Prior to
this he was Group Finance Director of
Viridian Group plc from 1996 to
2000, and became Managing
Director of Viridian Capital in 2000.
Previous appointments include Group
Finance Director at Waste
Management International plc, Head
of Corporate Finance and Group
Commercial Director of Dixons Group
plc, Managing Director of Stanhope
Properties plc and a consultant at
McKinsey and Company.
Jonathan Feuer (42) 
Non-executive Director
Jonathan joined Halfords in July
2002. He is also a partner of CVC
Capital Partners and a Director of
Debenhams Retail Holdings Limited.
Jonathan joined CVC Capital Partners
in 1988, having previously worked in
the Corporate Finance Department of
Baring Brothers & Co. Ltd and for
Ernst & Whinney, where he qualified 
as a Chartered Accountant. Becky has worked for Halfords for five years and 
is a trained child seat fitting specialist. She has
advised on and fitted over 1,000 child car seats into
her customers’ cars. “Safety is paramount and my
job is to make sure the customer gets the right seat
for their child. More than eight out of ten seats are
incorrectly fitted, which is a frightening statistic”
in safety
Travel
18 Halfords Annual Report and Accounts 2005
Employee focus
Becky Wiberg
Child Seat Fitter Halfords Annual Report and Accounts 2005 19
Corporate Social Responsibility
Halfords has an ongoing corporate
social responsibility programme,
which is designed to promote
understanding amongst our
stakeholders of the important
issues for our business and to
facilitate appropriate management
approaches. It is our aim to
continually improve our management
of social, environmental and
economic issues throughout the
business and our global supply
network. In doing this, we will develop
shared business objectives with our
business partners. 
A summary of our challenges and
achievements over the past year is
given below. A full copy of our
Corporate Social Responsibility 
report for 2005 can be found 
on the Company’s website,
www.halfordscompany.com
1. In the Marketplace
Our policy is to meet or exceed the
requirements of legislation, industry
standards, international conventions
and codes of practice. We oppose 
the exploitation of children and 
young people, and the exploitation 
of workers generally, and we support 
fair and reasonable rewards and
conditions for workers. To this end,
we conduct factory, warehouse and
tied accommodation inspections and
audits to ensure that our standards
are being implemented.
The health and safety of our workers
is paramount. We require all activities
to be carried out under conditions
that have proper and adequate 
regard for the health and safety 
of those involved.
2. In the Workplace
Engaging with our employees has
been one of our main objectives. 
One of our greatest achievements
regarding employee engagement has
been our ability to reward our people
following flotation and let them share
in our future success as a listed
company. To do this we successfully
launched a Company share option
scheme that invited employees to
accept a grant of options through the
scheme. The most innovative aspect
of this scheme was the decision to
include all of our people, subject to
eligibility criteria, irrespective of their
seniority. We are particularly proud of
this achievement, as similar schemes
are usually designed for the executive
or senior management population.
Employee engagement and support
are vitally important to the Company
and several initiatives are in place 
to achieve this. In addition, training 
and development programmes are 
in place throughout the business 
to maximise people’s skills and
advancement.
3. In the Community
The Company is the technical
sponsor of the BHF (“British Heart
Foundation”), London to Brighton
cycle ride, providing 100 cycle
specialists from our stores to keep
the fund-raisers on the road. Our
cycle mechanics provide help and
service to the estimated 50,000
riders who take part. The BHF is the
UK’s leading charity on heart disease
and its prevention and this is the
second year of sponsorship for
Halfords, as part of a three year
partnership with the BHF.
In areas of family safety Halfords is
the major sponsor of the Mother and
Baby campaign, which raises
awareness of child seat fitting in 
cars, run by the leading parenting
magazine, Mother and Baby. Around
eight out of ten child seats in the UK
are wrongly fitted in cars, sometimes
leading to injury or death of young
babies and toddlers. As one of the
UK’s leading retailers of child seats,
Halfords has invested in training
around 1,000 store staff in their
demonstration and fitting. We also 
run roadshows at Halfords’ stores,
working with road safety officers to
give free advice and fitting services 
to parents and guardians. We also run
our own national child seat fitting
week at all superstores, to raise
awareness of the issue.
4. In the Environment
Our commitment is to understand 
and improve the performance and
management of our environmental
impact throughout the Halfords
supply chain. We aim to achieve a
high standard of responsible care for
people and the environment, whilst
maximising business efficiency and
growth. To this end, we will review our
policy regularly and update 
it accordingly.
Our key areas of concern cover
ethical sourcing, our use of natural
resources, pollution prevention, waste
management, supplier and contractor
relationships and the impact of our
products and services. Our policy
commitments will be translated
into actions, using quantifiable
objectives, targets and key
performance indicators, which will 
be reviewed and updated annually. 20 Halfords Annual Report and Accounts 2005
The Directors of Halfords Group plc (the “Company”)
present their annual report to shareholders, together
with the audited consolidated financial statements of the
Company and its subsidiaries for the financial year ended
1 April 2005.
Principal Activities
The principal activity of the Group is the retailing of auto,
leisure and cycling products. As at 1 April 2005 the 
Group traded from 395 outlets in the UK and 3 in the
Republic of Ireland.
Review of Activities
A review of the Group’s activities and of its future
development is contained within the Chairman’s Statement,
the Chief Executive’s Report, and the Finance Director’s
Report on pages 3 to 15.
Results and Dividend
The Group’s results for the year, together with the
appropriations made and proposed, are set out in the
Group Profit and Loss Account on page 38.
The profit on ordinary activities of the Group before
taxation amounted to £64.1m (53 weeks ended 2 April
2004: £27.8m) and the profit on ordinary activities after
taxation amounted to £39.9m (53 weeks ended 2 April
2004: £13.5m).
Subject to approval by shareholders at the Annual General
Meeting to be held on 13 July 2005, a final dividend of
8.3p per ordinary share will be paid on 1 August 2005 to
shareholders whose names are on the register of members
at the close of business on 17 June 2005. This payment,
together with the interim dividend of 3.7p per ordinary
share paid on 10 January 2005, makes a total for the year
of 12.0p per ordinary share. The total dividend payable to
shareholders charged to the profit and loss account is
£27.4m (53 weeks ended 2 April 2004: nil). The Directors
propose to transfer the retained profit of £12.5m
(53 weeks ended 2 April 2004: £13.5m) to reserves.
Arrangements are in place for Hill Samuel Offshore Trust
Limited, as trustee of the Halfords Employees Share Trust,
to waive entitlements to dividends.
Directors
Profiles of the Directors are given on page 17.
The following have served as Directors during the financial
year ended 1 April 2005: 
Rob T empleman appointed 4 March 2003
David Hamid appointed 27 June 2003
resigned 29 March 2005
Ian McLeod appointed 1 7 May 2004
Nick Carter appointed 19 September 2003
Richard Pym appointed 1 7 May 2004
Keith Harris appointed 1 7 May 2004
Nigel Wilson appointed 1 7 May 2004
Bill Ronald appointed 1 7 May 2004
Jonathan Feuer appointed 24 July 2002
ChristopherWoodhouse appointed 4March 2003
resigned 30 May 2004
Soren Vestergaard-Poulsen appointed 28 July 2002
resigned 30 May 2004
David Hamid resigned on 29 March 2005, due to ill health.
In his place, Ian McLeod was, on the same date, appointed
as Chief Executive. 
In accordance with the Company’s Articles of Association,
Rob Templeman is retiring by rotation at the forthcoming
Annual General Meeting and, being eligible, has indicated
that he will offer himself for re-election at that meeting.
Jonathan Feuer was appointed to the Board to represent
the “CVC Shareholders” (as defined in the Company’s
Articles of Association, in essence, being the investment
funds advised, directly or indirectly, by CVC Capital
Partners Limited). In accordance with the Company’s
Articles of Association, he also retires at the forthcoming
Annual General Meeting and, being eligible, has indicated
that he will offer himself for re-election at that meeting. In
addition, Ian McLeod, Richard Pym, Bill Ronald, Keith Harris
and Nigel Wilson were all appointed as Directors by the
Board in May 2004 (shortly before the flotation in June
2004) and, under the Articles of Association, each retires
at the forthcoming Annual General Meeting and each has
indicated that he will offer himself for election at that
meeting. Each of the Directors standing for election 
or re-election are recommended by the Board for
appointment at the Annual General Meeting.
Directors’ Report Halfords Annual Report and Accounts 2005 21
Directors’ Interests
The Directors’ interests in shares and options over shares
in the Company are shown in the Directors’ Remuneration
Report on pages 34 to 35. No Director has any other
interest in any shares or loan stock of any Group company.
No Director was or is materially interested in any 
contract, other than his service contract, subsisting 
during or existing at the end of the financial year, which
was significant in relation to the Group’s business.
To ensure that the Company could act independently 
of the CVC Shareholders following the IPO, on 3 June
2004, the Company entered into a relationship
agreement with each of the CVC Shareholders. The
agreement provides, among other things, that whilst 
they hold at least 15% of the Company’s ordinary
shares, the CVC Shareholders are entitled to appoint
one Director to the Board. The CVC Shareholders can
require that such Director be appointed to any
committee of the Board or be invited to attend such
meetings of such a committee. Where the CVC
appointed Director receives information in a capacity
other than as a Director of the Company which imposes
on him a duty of confidentiality, the Director is not
obliged to disclose that information to the Company. 
The agreement also provides that, excluding the
Chairman, at least half of the Board must comprise
Directors who are independent.
During the year the Company maintained liability insurance
for its Directors and officers.
Charitable Donations and Political Contributions
During the year, the Group contributed £36,000 (2004:
£44,000) to charities in the UK. The Group’s policy is not
to make any donations for political purposes. However, 
the Political Parties, Elections and Referendums Act 2000
has redefined the term “donations” very widely and, as a
result, certain expenses legitimately incurred as part of 
the process of talking to Government at all levels and 
making the Group’s position known, are now reportable.
Although during the year no such expenditure or political
donations were made, resolutions will be proposed at the
forthcoming Annual General Meeting to provide limited
authority for such expenditure.
Employees
The Board seeks to instill high standards of customer
care and service in the Group and the commitment 
of every employee to this business requirement is
considered to be critical. The Company has established 
a communication framework for employees concerning
business performance (including financial and economic
factors affecting performance), company benefits
(including share options) and innovation. Group-wide
training reinforces the Group’s commitment to employee
involvement and development.
The Group is committed to the principle of equal
opportunity in employment and to ensuring that no
applicant or employee receives less favourable treatment
on the grounds of gender, marital status, race, ethnic
origin, religion, disability, sexuality, age, or is disadvantaged
by conditions or requirements which cannot be shown 
to be justified. The Group applies employment policies
which are fair and equitable and which ensure entry into
and progression within the Group. Appointments are
determined solely by application of job criteria, personal
ability and competency.
The Group gives full and fair consideration to applications
for employment made by disabled persons, having regard
to their particular aptitudes and abilities, wherever suitable
opportunities exist and training and career development
support are provided, where appropriate. Should an
employee become disabled when working for the Group,
efforts are made to continue their employment and
retraining is provided, if necessary.
A “whistle-blowing” policy and procedure is in place and
has been notified to staff. The policy enables them to
report any concerns on matters affecting the Group or their
employment, without fear of recrimination, and includes the
risk of things going wrong or of malpractice taking place
such as fraud, risks to health and safety, etc. In addition,
the Group takes a zero-tolerance approach to matters of
discrimination, harassment and bullying in all aspects of
its business operations, whether they relate to sex, race,
national origin, disability, age, religion or sexual orientation,
and policies and procedures are also in place for reporting
and dealing with these matters.
The Company’s pension arrangements for the UK-based
employees of the Group are summarized in note 26 
on page 60. 22 Halfords Annual Report and Accounts 2005
Owning shares in the Company is an important way of
strengthening employees’ involvement in the development
of the Group’s business and bringing together their and
shareholders’ interests. The Company therefore
encourages and helps the Group’s employees to
participate in its Sharesave Scheme.
Corporate Social Responsibility
The Group takes its obligations to employees, customers,
suppliers, and to the environment and society generally,
very seriously. To this end, a detailed statement of
corporate social responsibility has been developed and can
be found on the Group’s website. The statement includes
the Group’s environmental policy, including waste
management and recycling, prevention of pollution and
damage to the environment, compliance with applicable
industry standards and legislation; and its social
responsibility policy which, amongst other matters, sets out
the Group’s commitment to fair employment practices,
working arrangements and pay and working hours, health
and safety matters, and a prohibition on the exploitation 
of the labour of children and young people. Further details
of our approach to Corporate Social Responsibility is 
on page 19.
Supplier Payment Policy
The Group does not follow any formal code or standard on
payment practice, but agrees terms and conditions for its
business transactions when orders for goods and services
are placed, and includes the relevant terms in contracts,
where appropriate. These arrangements are adhered to
when making payments, subject to the terms and
conditions being met by suppliers. The number of trade
creditor days outstanding at the period end for the Group
was 53 days (2004: 58 days). The Company is a holding
company and had no trade creditors at the end of the
financial year.
Major Shareholders
At 31 May 2005, the Company’s share register of
substantial shareholdings showed the following interests 
in three per cent. or more of the Company’s issued
ordinary shares:
Holder Number % of issued
of shares shares
CVC Capital Partners
(1 )
45,198,433 19.8
F&C Asset Management 12,530,222 5.5
Fidelity 12,440,708 5.5
Barclays Global Investors 10,847,360 4.8
Britannic Asset Management 9,951,004 4.4
Legal & General Investment 
Management 8,160,297 3.6
Note
(1) Funds managed or advised by CVC Capital Partners Advisory
Company Limited, or an affiliate thereof, hold a total of 45,198,433
shares; included within that total the following funds have substantial
holdings:
– CVC European Equity Partners III LP: 18,868,089 shares (8.3%)
– CVC European Equity Partners II LP: 12,81 1,705 shares (5.6%)
Auditors
PricewaterhouseCoopers LLP have indicated their
willingness to accept reappointment as the Auditor of the
Company and a resolution proposing their reappointment is
contained in the notice of the Annual General Meeting and
will be put to shareholders at the Annual General Meeting.
Annual General Meeting
The Annual General Meeting will be held at the Stratford
Moat House Hotel, Bridgefoot, Stratford on Avon,
Warwickshire, CV37 6YR, on Wednesday 13 July 2005
at 1 1.30 a.m. The notice of the Annual General Meeting 
and explanatory notes regarding the special business to 
be put to the meeting are set out in a separate circular
to shareholders accompanying this Annual Report 
and Accounts.
By Order of the Board
Philip Parker
Company Secretary
8 June 2005
Directors’ Report Halfords Annual Report and Accounts 2005 23
The Board is responsible for the governance of the
Company, governance being the systems and procedures
by which the Company is directed and controlled. A
prescribed set of rules does not of itself determine good
governance or stewardship of a company and, in fulfilling
their responsibilities, the Directors believe that they govern
the Company in the best interests of shareholders, whilst
having due regard to the interests of other “stakeholders”
in the Group including, in particular, customers, employees
and creditors. For the period from flotation to 1 April 2005,
the policy of the Board has been to manage the affairs of
the Company in accordance with the principles of good
governance and the code provisions set out in Section 1 of
the Combined Code on Corporate Governance (“the
Combined Code”). 
Compliance with the Combined Code
The Directors consider that the Company has fully
complied with the requirements of the Combined Code 
for the period since flotation, with the exception that the
Chairman, Rob Templeman, is deemed by the Board not to
have been independent for the purposes of paragraph
A.2.2 of the Combined Code, due to him having been an
executive chairman of the Company prior to the flotation.
The Directors
The Board’s role is to determine the long-term direction
and strategy of the Group, create value for shareholders,
monitor the achievement of business objectives, ensure
that good corporate governance is practiced and that the
Group meets its other responsibilities to shareholders,
customers and other stakeholders. The Board is also
responsible for ensuring that appropriate processes are in
place in respect of succession planning for appointments
to the Board and to senior management positions.
Currently, the Board is composed of eight members,
consisting of two Executive Directors, a Non-executive
Chairman and five Non-executive Directors. Four of the
Non-executive Directors are considered by the Board to be
independent, namely Richard Pym, Nigel Wilson, Keith
Harris and Bill Ronald. Accordingly, no individual or group
of individuals dominates the Board’s decision-making and
the requirement of the Combined Code that at least half
the Board (excluding the Chairman) should comprise
independent Non-executive Directors is satisfied. 
The Chairman, Rob Templeman, was Executive Chairman
prior to the flotation of the Company in June 2004, but on
flotation relinquished his executive role and became 
Non-executive Chairman. Jonathan Feuer is deemed 
by the Board not to be independent due to him being 
an employee of CVC Capital Partners Limited, which
provides advice, whether directly or indirectly, to the CVC
Shareholders who, collectively, held 19.8 per cent. of the
Company’s issued shares at 1 April 2005. Jonathan Feuer
is also the appointee of the CVC Shareholders under
Article 73 of the Company’s Articles of Association. 
It is the policy of the Nomination Committee and the Board
to maintain an appropriate balance between Executive and
Non-executive Directors in line with the provisions of 
the Combined Code. As reflected in the profiles of the
Directors on page 17, the Directors have wide experience
which enables them to contribute fully to the Board and 
to the Group’s business and ensures that independent
judgement is exercised on issues such as strategy and
performance and that a proper balance of power is
maintained for full and effective control. The Non-executive
Directors devote sufficient time and attention as necessary
in order to perform their duties.
The Company recognises that its Executive Directors 
may be invited to become Non-executive Directors of
companies outside the Group and exposure to such duties
can broaden experience and knowledge, which will be to
the benefit of the Company. Subject to Board approval
(which will not be given if the proposed appointment is with
a competing company, would otherwise lead to a conflict of
interest or could have a detrimental effect on a Director’s
performance), the Board’s policy is that an Executive
Director can accept no more than one Non-executive
Directorship and may retain the fees. Ian McLeod is
currently a Non-executive Director of Fulham Football 
Club (1987) Limited.
The Board has appointed Richard Pym as the Senior
Independent Director. The Senior Independent Director is
available to meet shareholders upon request if they have
concerns which contact through the normal channels of
the Chairman or Executive Directors has either failed to
resolve, or for which such contact is inappropriate.
Corporate Governance 24 Halfords Annual Report and Accounts 2005
The Board initially appoints all new Directors having first
considered recommendations made to it by the
Nomination Committee. Following such appointment, the
Director is required to retire and seek re-appointment at
the next Annual General Meeting. Under the Company’s
Articles of Association there is also a process of rotation,
which ensures that approximately one third of all Directors
are required to retire and seek re-appointment at each
Annual General Meeting and that no Director serves for
more than three years without being proposed for
re-appointment at an Annual General Meeting. 
Non-executive Directors are appointed for specified terms
(normally three years) subject to re-appointment under
the Company’s Articles of Association and subject to
Companies Act provisions relating to the removal of 
a Director. The Chairman will confirm to shareholders 
when proposing an appointment or re-appointment that,
following formal performance evaluation, the individual’s
performance continues to be effective and to demonstrate
commitment to the role. Any term beyond six years for a
Non-executive Director would be subject to particularly
rigorous review and will take into account the need for
progressive refreshing of the Board. Any Non-executive
Director serving longer than eight years would be subject
to annual re-appointment.
Profiles of the Directors are set out on page 17.
The Chairman is primarily responsible for the workings of
the Board and he is not involved in day-to-day operational
issues. Save for matters reserved for decision by the
Board, the Chief Executive, with the support of the
Executive Directors, is responsible for the running of the
Group’s business, carrying out the agreed strategy adopted
by the Board and implementing specific Board decisions
relating to the operation of the Group.
The Board meets on a regular basis. During the financial
year ended 1 April 2005, the Board met formally nine
times. In addition to the scheduled Board meetings, the
Board held an additional meeting to review corporate
strategy. Appropriate documentation and financial
information is provided on a monthly basis and also in
advance of each Board meeting. These normally include
monthly management accounts, reports on current trading
and papers on matters in respect of which the Board
makes decisions or is invited to give its approval. 
Specific presentations are made on business or strategic
issues, when appropriate. The Board also receives
information from management on current trading and
prospects and the market position of the Group, together
with key issues being addressed by the management team.
Minutes of committee meetings are circulated to all Board
members, unless a conflict of interest has arisen. These
procedures are intended to ensure that the Board is
supplied in a timely manner with information appropriate to
enable the Board to discharge its duties.
The number of meetings of the Board and of each of the
Audit, Remuneration and Nomination Committees held
during the financial year ended 1 April 2005, together with
a record of the attendance of the current Directors who are
their respective members, is set out below:
Number of meetings attended
Board Audit Remuneration Nomination
Meetings Committee Committee Committee
Rob Templeman 9 – – –
Ian McLeod 8 – – –
Nick Carter 9 – – –
Richard Pym 7 2 2 3
Nigel Wilson 8 2 2 –
Bill Ronald 9 2 – 3
Keith Harris 7 – 2 3
Jonathan Feuer 8 – – –
Total meetings 
in year 9 2 2 3
Note: - denotes that a Director is not a member of the relevant Committee 
The Board has a formal schedule of reserved powers,
which it retains for Board decision-making on a range of
key issues, including the formulation of strategy, financial
reporting and controls, corporate governance matters, and
treasury and risk management. A procedure has been
adopted for Directors to obtain independent professional
advice, where appropriate, at the cost of the Company 
and all Directors have unrestricted access to the 
Company Secretary. In relation to non-reserved matters,
the Board is assisted by a number of committees with
delegated authority. 
Corporate Governance Halfords Annual Report and Accounts 2005 25
The make up and roles of the three key committees – the
Audit, Remuneration and Nomination Committees – are
described below and (in relation to the Remuneration
Committee) in the Directors’ Remuneration Report on
pages 30 to 35.
The Board has formally adopted an induction programme
for new Directors, which will be tailored to each new
Director who joins the Board and includes briefings
regarding the activities of the Group and visits to stores.
Documentation and training on their duties as Directors are
also available to all Directors. In addition, Directors are also
informed regularly on relevant material changes to laws
and regulations affecting the Group’s businesses.
The Board has established a formal process for the annual
evaluation of the performance of the Board, its principal
committees and individual Directors. Questionnaires are
drawn up, which provide the framework for the evaluation
process. Each member of the Board submits replies to 
the questionnaires, which are collated into a report for
the Board. Following a review of the report by the Board,
any appropriate action will be taken to ensure that the
performance of the Board as a whole, its principal
committees and individual Directors is such that each 
can perform at the optimum level for the benefit of the
Company. The Senior Independent Director and the other
independent Non-executive Directors conduct the annual
performance evaluation of the Chairman.
The Company maintains an appropriate level of Directors’
and Officers’ liability insurance to provide cover for its
Directors and Officers for claims and liabilities or legal
actions arising out of the performance of their duties 
or roles.
Board Committees
The Board has established Nomination, Remuneration and
Audit Committees, with formally delegated duties and
responsibilities and written terms of reference. The
Company Secretary acts as secretary to all three
committees. Only the members of each committee are
entitled to attend its meetings, although other Directors,
professional advisers and members of the senior
management team attend when invited to do so. The 
Audit Committee will normally invite the external Auditor
to its meetings. In the cases of the Nomination and
Remuneration Committees, no member is present 
when business pertinent to him is under discussion. 
A Treasury Committee, chaired by Nick Carter, has also
been established to manage the day-to-day treasury needs
of the Group. The Treasury Committee’s membership is
drawn from senior members of the Group’s finance and
treasury teams. From time to time, separate ad hoc
Committees may be set up by the Board to consider
specific issues when the need arises.
Audit Committee
The Audit Committee comprises Nigel Wilson, Richard Pym
and Bill Ronald, all of whom are independent Non-executive
Directors. The Committee Chairman is Nigel Wilson, who,
being also Chief Financial Officer of United Business Media
plc, is considered by the Board to have recent and relevant
financial experience. Each of the other independent 
Non-executive Directors on the Committee has, through
their other business activities, significant experience in
financial matters. Richard Pym, a Chartered Accountant
and Group Chief Executive of Alliance & Leicester plc, and
Bill Ronald, formerly Chief Executive of Uniq plc, both have
significant, recent and relevant experience of financial and
accounting issues.
The Committee has formal terms of reference and meets
at least two times a year, according to the requirements of
the Company’s financial calendar. The meetings of the
Audit Committee also provide the opportunity for the
independent Non-executive Directors to meet without the
Executive Directors present to discuss the performance of
the Group, its management and their ongoing stewardship
of the Group. The independent Non-executive Directors
also have the opportunity at this time to raise any issues of
concern with the Auditor.
In addition to monitoring the internal and external audit
functions and ensuring the integrity of the Group’s interim
and full-year financial statements before publication, the
Committee also has responsibility for monitoring a number
of other areas of activity including:
 the integrity, performance, and independence of 
the Group’s relationship with the external auditors;
 reviewing the nature and extent of non-audit services
by the auditors (in order to seek to balance the
maintenance of objectivity and independence, and value
for money). In this context, the Committee requires any
proposal for expenditure of over £25,000 on non-audit
services to be referred to it for scrutiny and approval; 26 Halfords Annual Report and Accounts 2005
 the effectiveness of the Group’s internal controls and the
Group’s risk management policies and systems, and
objective assurance on the control environment 
across the Group;
 making recommendations to the Board on the
appointment of auditors and the level of audit fees; and
 keeping under review the scope and results of the 
audit and its cost effectiveness.
Nomination Committee
The Nomination Committee comprises Richard Pym
(Chairman), Keith Harris and Bill Ronald, all of whom are
independent Non-executive Directors and Ian McLeod (who
joined the Committee in April 2005). David Hamid was
also a member of the Committee until his resignation as
Chief Executive on 29 March 2005. 
The Nomination Committee has formal terms of reference
and meetings are held as and when required, although the
Committee is required to meet at least twice each year.
During the period under review, it met to consider
succession planning for the Board and senior
management generally and to agree the appointment 
of a new Chief Executive. 
In addition, its remit includes:
 nominating for appointment to the Board candidates
(both Executive and Non-executive) to fill vacancies 
or appoint additional persons to the Board;
 monitoring the size, structure, balance and 
composition of the Board;
 evaluating the balance of skills, knowledge 
and experience of the Board’s members;
 making recommendations in respect of the 
membership of the Audit and Remuneration 
Committees; and
 making recommendations in respect of the
re-appointment (or not) of Non-executive Directors 
and of the continuance in service (or not) of 
Executive Directors.
In discharging its duties, the Committee considers the
challenges and opportunities facing the Group and the
skills and expertise required for the future. In relation to
any new appointments, the Committee evaluates the
balance of skills, knowledge and experience on the 
Board and, in the light of this evaluation, prepares a
description of the role and capabilities required for a
particular appointment. 
During the year, the Committee nominated Ian McLeod for
appointment as Chief Executive. In making its nomination,
the Committee took account of his contribution to the
success of the Group and the breadth of his experience in
the retail sector. The Board subsequently approved the
nomination and Mr McLeod was appointed as Chief
Executive on 29 March 2005.
Remuneration Committee
The Remuneration Committee comprises Keith Harris
(Chairman), Richard Pym and Nigel Wilson, all of whom 
are independent Non-executive Directors.
The Committee has formal terms of reference and
meetings are held as and when required, although the
Committee is required to meet at least twice each year.
The Committee, on behalf of the Board, determines all
elements of the remuneration packages of the Executive
Directors and certain senior executives of the Group. It
approves the terms of service contracts with Executive
Directors and would also approve any compensation
arrangements resulting from the termination by the
Company of a Director’s service contract. The Committee
also approves the grant of share options. The terms of
reference of the Committee include the following:
 to make recommendations to the Board on the
Company’s framework of executive remuneration and
its cost;
 to review and determine, on behalf of the Board, the
remuneration and incentive packages of the Company’s
Executive Directors and certain senior executives of the
Group to ensure that they are fairly rewarded for their
individual contributions to the Group’s overall
performance;
 to determine the basis on which the employment of 
the Company’s Executive Directors and certain senior
executives of the Group is terminated; and
 to supervise the operation and administration of the
Company’s share option schemes and employee 
benefit trust.
To assist the Committee in its work, the services of
remuneration consultants, Watson Wyatt LLP, were retained
to provide advice on appropriate levels of remuneration
for Executive Directors and for other senior executives in
the Group and from Clifford Chance LLP in respect of
share schemes.
Corporate Governance Halfords Annual Report and Accounts 2005 27
The Committee also assists the Board in preparing the
annual report on Directors’ remuneration. The Directors’
Remuneration Report for the year ended 1 April 2005 is
set out on pages 30 to 35 of this report.
Accountability and audit
The respective responsibilities of the Directors and the
Auditor in connection with the Company’s financial
statements are explained below under the headings
“Statement of Directors’ Responsibilities” on page 36 and
“Respective Responsibilities of Directors and Auditors” on
page 37. The Directors are responsible for presenting a
clear and balanced assessment of the financial situation
and prospects of the Group and, as part of this
assessment, the Chief Executive’s Report is set out on
pages 5 to 10 and the Finance Director’s Report is set out
on pages 12 to 15. 
The Board has overall responsibility for the Group’s system
of internal control and for reviewing its effectiveness
throughout the Group. However, such a system is designed
to manage rather than eliminate the risk of failure to
achieve business objectives and can provide only
reasonable and not absolute assurance against material
misstatement or loss. It is also recognised that it is the
nature of any business that commercial risk must be taken
and, for a business to succeed, enterprise, initiative and
motivation are key elements to success which should not
be unduly stifled. The effectiveness of the Group’s system
of internal control is reviewed by the Audit Committee on
behalf of the Board. 
The Board considers risk assessment and control to be
fundamental to achieving its corporate objectives within an
acceptable risk/reward profile, and there is an ongoing
process for identifying and evaluating the significant risks
faced by the Group and the effectiveness of related
controls. The key procedures in place to enable this
responsibility to be discharged are as follows:
 reviews of Group risk assessment reports by the Audit
Committee and the Board;
 production and regular updating of summaries of key
controls;
 reviews of reports prepared throughout the year by
management;
 the Chairman of the Audit Committee reports the
outcome of the Audit Committee meetings to the Board
and the  Board receives minutes of those meetings; and
 regular review of the role of insurance in transferring risk
from the Group.
The Board’s internal control system focuses on a wide
range of business and financial risks as follows:
Business risks: There is an ongoing process for identifying,
evaluating and managing the business risks faced by the
Group and this process was in place for the year under
review and up to the date of this Report. Business risks are
identified and evaluated through senior management’s
ongoing review of progress against strategic objectives
agreed with the Board and a system of formal risk
assessments within each part of the Group. The risks
which are reviewed through the formal risk assessment
system include:
 external business risks including regulatory and
compliance obligations;
 operational risks arising from, for example supplier
dependency, fire and explosion;
 financial risks, such as the management of 
payroll controls;
 legal risks, for example, the risks arising under
leases of retail units and under contracts with suppliers; 
 informational risks, including the integrity of IT systems
and the security of information; and
 the risks to members of staff from crime.
The risk assessment system is supported by internal risk
reviews carried out by functional managers. The results 
of this work are reported to the Audit Committee which
reviews the effectiveness of these controls on behalf 
of the Board and may lead to risk improvement
recommendations being agreed for implementation 
by the relevant operating unit.
Financial risks: The key internal financial control
procedures which operated in the Group throughout the
period covered by the financial statements are as follows:
 Control environment: There is a clear organisational
structure in which levels of authority and accountability
are well defined. The Group’s business operates within a
framework of procedures laid down in written policy
documents and the Group’s personnel are required to
comply with these procedures as relevant to their
functions and responsibilities. Financial reporting follows
generally accepted accounting practice in all areas.
 Identification and evaluation of risks and control
objectives: The process of risk assessment and the
evaluation of its related financial impact is an ongoing
process reflected in decision-making at Group and
operating levels.  28 Halfords Annual Report and Accounts 2005
 Monitoring and management of risk: Central review and
approval procedures are in place in respect of the major
areas of risk such as acquisitions and disposals, major
contracts, capital expenditure, litigation, treasury
management, taxation and environmental issues.
Wherever practical, duties are segregated and a high
degree of management control is also exercised
through review by executives of historical and forecast
financial information. Conformity with procedures is
monitored on an ongoing basis. In addition, the Group
has reporting systems which identify major financial and
other business risks within the Group. Policies and
procedures have been laid down for the regular review
and management of these risks, underpinned where
appropriate by insurance.
 Information and communication: Comprehensive
information systems are maintained at Group and
operating unit levels and are subject to scrutiny by the
Board as follows:
– detailed budgeting procedures with an annual 
budget approval;
– monthly consideration of actual results compared
with budgets and forecasts;
– regular reviews of rolling profit and cash 
flow forecasts;
– regular reviews of the Group’s capital expenditure
plan; and
– reporting of legal and accounting developments.
Regular executive and Board meetings and operational
reviews are held with a view to ensuring variances and
discrepancies are identified and investigated in a timely
way. The Company also reports to shareholders half-yearly.
 Control procedures: Extensive systems of internal
financial control (including systems control) are
operated throughout the Group with authority levels
established which limit exposure. There is recognition of
personal responsibility and accountability by the
members of the management team.
 Corrective action: Reviews of the comprehensive
management information or issues arising under the
annual audit are brought to the attention of the Audit
Committee and the Board and corrective action agreed
and implemented. The Auditor reports directly to the
Audit Committee.
The Audit Committee has reviewed the status of internal
controls within the Group post-flotation and, in particular
whether it is appropriate for the Group to establish an
internal audit function. 
It concluded that, whilst as a private company it was not
necessary to have an established internal audit function,
the requirements of a listed company are different and the
Committee therefore recommended to the Board that an
internal audit function be established and that the
Company undertake a review of the effectiveness of the
assurance framework. This assurance framework had
previously centred largely on a store focused internal audit
resource, a framework considered inappropriate for the
requirements of a public company. Deloitte & Touche LLP,
as independent advisers, are currently engaged on a
project, based on a systematic risk assessment of the
business, to evaluate appropriate lines of assurance and
recommend options for resourcing in these areas.
The Directors have determined that the Company is a
going concern and will continue in business for the
foreseeable future, and have therefore prepared accounts
on this basis. They have formed this opinion on the basis of
the Group’s annual budget for the year ending 31 March
2006 and capital expenditure and cashflow forecasts for
the subsequent two years. 
Relationship with shareholders
The Board recognises the importance of establishing and
maintaining good relationships with all of the Company’s
investors. The Chief Executive, Finance Director and the
Chairman meet regularly with analysts and institutional
shareholders to keep them informed of significant
developments and report to the Board accordingly on the
views of the major shareholders. The Senior Independent
Director is also available to attend such meetings, if
required. Each of the other Non-executive Directors are
also offered the opportunity to attend meetings with 
major shareholders and would do so if requested by 
any major shareholder. 
Corporate Governance Halfords Annual Report and Accounts 2005 29
The investor relations programme includes formal
presentations of full year and interim results. Feedback
from these meetings is provided to the Board. The
Company Secretary is also charged with bringing to the
attention of the Board any material matters of concern
raised by the Company’s shareholders, including private
investors. The Interim Report and the Annual Report and
Accounts are the primary means the Board has of
communicating during the year with all of the Company’s
shareholders. However, the Board recognises the
importance of the internet as a means of communicating
widely, quickly and cost effectively. Accordingly, since
flotation in June 2004, an extensive investor relations
website (at www.halfordscompany.com) has been
developed to facilitate communications to shareholders.
Information available online includes copies of press
releases and Group news, the terms of reference for the
Audit, Nomination and Remuneration Committees,
corporate governance information and statements, the
schedule of matters reserved to the Board and the Listing
Particulars relating to the flotation and other information
relevant to shareholders. Copies of the full and interim
financial statements will also be made available
electronically following their publication.
The Board is committed to constructive use of the Annual
General Meeting as a forum to meet with investors and to
hear their views and answer their questions about the
Group and its business. The Company will dispatch the
notice of the Annual General Meeting, with an explanatory
circular describing items of special business, at least 20
working days before the meeting. All shareholders have 
the opportunity formally and informally to put questions 
at the Company’s Annual General Meeting. It is the
Company’s practice to propose separate resolutions 
on each substantially separate issue at the Annual 
General Meeting. 
The Chairmen of the Remuneration, Nomination and Audit
Committees expect to attend the Annual General Meeting
and will answer questions which may be relevant to the
work of those Committees. If they are unable to attend,
they will appoint a deputy to attend in their place. The
Chairman will advise shareholders on the proxy voting
details for each of the resolutions after the resolution is 
put to the meeting.
The Company’s financial calendar is set out on page 62.
Directors’ Remuneration
Details of Directors’ remuneration and emoluments
(required to be disclosed by the Combined Code’s
requirements regarding remuneration matters and by
schedule 7A of the Companies Act 1985) are set out in
the Directors’ Remuneration Report on pages 30 to 35.
The Directors’ Remuneration Report will be submitted for
approval of shareholders at the forthcoming Annual
General Meeting.
By Order of the Board
Philip Parker
Company Secretary
8 June 2005 30 Halfords Annual Report and Accounts 2005
The following Report outlines the Company’s policy on the
remuneration of Executive Directors and gives details of
the remuneration packages of Executive Directors and of
the fees paid to Non-executive Directors for the year ended
1 April 2005. The Report has been prepared in accordance
with the requirements of Schedule 7A to the Companies
Act 1985. Part 3 of Schedule 7A requires designated parts
of the Remuneration Report to be audited, whilst other
parts are not. In preparing this Report, consideration has
been given to the Listing Rules of the UK Listing Authority
and to the Combined Code and the Report has been
approved by both the Remuneration Committee and by the
Board. A resolution to approve the Report will be proposed
at the Annual General Meeting of the Company. 
Part A of the report, which is not subject to audit, sets out
the Company’s remuneration policy. Part B, which has been
audited, provides details of the remuneration, pensions and
share incentives and interests of the Directors for the year
ended 1 April 2005.
Part A – Unaudited Information
Remuneration Committee
The Remuneration Committee, which met twice during 
the year, comprises three independent Non-executive
Directors, Keith Harris (Chairman), Richard Pym and Nigel
Wilson. The Committee’s terms of reference, which are
available from the Company’s website, set out the
responsibilities of the Committee and are described in
more detail on pages 26 and 27. 
During the year, the Committee received advice from
Watson Wyatt LLP, who were appointed by the Committee
to provide external independent advice. 
Remuneration policy
The remuneration policy of the Committee and of the
Board is to provide remuneration packages for the
Executive Directors and other senior executives in the
Group which are appropriate to the size and nature of the
Group’s business and which will attract and retain high
calibre executives. It is the Company’s policy that a
substantial proportion of the Executive Directors’
remuneration should be performance related in order to
encourage and reward superior business performance and
shareholder return and that remuneration should be linked
to both individual and Company performance. 
Accordingly, Executive Directors may earn up to an
additional 80% of their basic salaries as a performance
bonus and have benefited from participation in the
Company’s share option scheme as set out below. If the
Halfords 2005 Performance Share Plan (“the New Plan”) is
approved by shareholders at the forthcoming Annual
General Meeting, no further grants of options will be made
under the share option scheme to the Executive Directors
but they will be able in future to participate in the New Plan.
This plan is described in the accompanying circular to
shareholders and a summary of its principal features is set
out in the Appendix to the circular. The Executive Directors
are also able to participate in an all-employee SAYE
scheme (“the Halfords Sharesave Scheme”) referred to on
page 34.
It is the policy of the Committee and the Board to 
maintain the above approach to remuneration packages 
for Executive Directors and other senior executives of the
Group for the current financial year and future financial
years, subject to review in the light of any changes in
relevant legislation, regulations or market practice. The
Committee will continue to review base salaries and
performance targets to ensure that they align with the
remuneration policy of the Committee and the Board 
and with the Company’s strategic objectives. The individual
salary, bonus and benefit levels of the Executive Directors
are, and will continue to be, reviewed annually by the
Committee. This year the Committee has also undertaken 
a review of the longer term arrangements for the Executive
Directors’ remuneration, with particular emphasis on
selecting longer term incentives. Accordingly, the
Committee has recommended the adoption of the 
New Plan. 
It is the Company’s policy to employ Executive Directors
under contracts with an indefinite term subject to
termination by notice given by either party of 12 months.
Any compensation payable by the Company would be
subject to the normal legal principles of mitigation of loss.
No compensation would be payable if the service contracts
were to be terminated by notice from the Executive
Director or for lawful termination by the Company. There
would be no provisions for payment of pre-determined
compensation under the service contracts. 
In relation to future appointments of Executive Directors,
the Committees and Board’s policy will remain one of
restricting notice periods to 12 months. 
Directors’ Remuneration Report Halfords Annual Report and Accounts 2005 31
Details of individual Directors’ remuneration and share
options are set out on pages 33 and 34 of this Report. 
The main components of the remuneration package for
Executive Directors are:
Basic salary
The Company’s policy is that basic salaries for Executive
Directors should take into account the individual’s role 
and responsibilities, performance and experience. For an
Executive Director who is experienced and fully effective in
his role, basic salary is targeted at the retail market median
for comparable roles. 
Annual bonus
Executive Directors are eligible to receive an annual
performance bonus up to a maximum of 80% of their
annual basic salaries at the time the bonus scheme is
announced. The amount of bonus is based on the
achievement of profit targets specified and agreed at the
beginning of the year. Bonus payments do not form part of
the Directors’ pensionable earnings. The performance
targets for bonus entitlements are intended by the
Remuneration Committee to create keen incentives to
perform at the highest levels.
Share option schemes
In May 2004, the Company adopted the Halfords 
Company Share Option Scheme and the Halfords
Sharesave Scheme under which schemes employees
(including Executive Directors) are eligible for the grant of
options to acquire ordinary shares in the Company.
Halfords Company Share Option Scheme
Options are granted at an exercise price not less than
market value at the date of grant and may normally only be
exercised if the performance conditions set at the time of
grant have been achieved. Full details of the scheme are
set out on page 59. As indicated above, if the 2005 LTIP is
approved by shareholders at the forthcoming Annual
General Meeting no further grants of options will be made
to Executive Directors under this scheme.
Halfords Sharesave Scheme
Options are granted at an exercise price not less than 80%
of market value at the date of grant. Options may not
normally be exercised until the option holder has
completed his or her savings contract (which will normally
be three or five years) from the date of commencement of
the savings contract.
Details of options granted to Executive Directors which are
outstanding and further details of the share option
schemes are set out on pages 34 and 59.
Halfords 2005 Performance Share Plan (“the New Plan”)
At the forthcoming Annual General Meeting, shareholders
will be asked to approve the introduction of the New Plan,
details of which are set out in the accompanying circular. If
the New Plan is adopted, conditional rights to receive
shares will be awarded to participants. The extent to which
such rights vest will depend upon the Company’s
performance over the three-year period following the award
date. The vesting of 50 per cent. of the awards will be
determined by the Company’s relative total shareholder
return (“TSR”) performance and the vesting of the other 50
per cent. by the Company’s EPS performance against RPI.
The Company’s TSR performance will be measured against
the FTSE 350 general retailers as a comparator group. No
retesting of the performance conditions will be permitted.
Pensions
The Halfords Pension Plan is a defined contribution
scheme, which is open to the Executive Directors. The
Company’s contributions in respect of the Executive
Directors during the year are shown in the table on 
page 34.
Other benefits
Executive Directors are entitled to be provided with a
company car or an equivalent allowance, contribution to a
personal pension scheme, permanent health insurance, life
assurance cover and membership of a private medical
insurance scheme. Executive Directors may also
participate in the Halfords Sharesave Scheme.
Non-executive Directors
The fees of the Non-executive Directors are 
determined by a special committee constituted by 
the Board, the members of which do not include the 
Non-executive Directors.  32 Halfords Annual Report and Accounts 2005
The Company’s practice is to appoint Non-executive
Directors under letters of engagement rather than under
service contracts. Those letters of engagement set out
fixed terms of appointment (normally three years) which
may be extended with the agreement of the Board.
Performance graph
Schedule 7A of the Companies Act 1985 requires listed
companies to provide, by graph, an analysis of the
performance of the Company (being total shareholder
return) over time as compared with an appropriate and
broad equity market index. The FTSE 250 Total Return
Index has been selected because it is a broad equity
market index which includes the Company’s shares.
The graph below shows the total shareholder return (with
dividends reinvested) in terms of the change in value for
the period following flotation of an initial investment in the
Company’s shares against a corresponding investment in a
hypothetical holding of shares in the companies
represented in FTSE 250 Total Return Index.
Executive Directors’ Service Contracts
Details of the Executive Directors’ service contracts are 
as follows:
Date of service Notice
agreement period
Ian McLeod 29 March 2005 12 months
Nick Carter 17 May 2004 12 months
The Company may terminate either of the above service
contracts by giving not less than 12 months’ notice. Any
compensation payable by the Company for early
termination would be subject to the normal legal principles
of mitigation of loss. No compensation would be payable if
a service contract were to be terminated by notice from
either Ian McLeod or Nick Carter or for lawful early
termination by the Company. 
In concluding these service contracts for Ian McLeod and
Nick Carter, the Company took into account the provisions
of the Combined Code regarding notice periods for service
contracts. In relation to future appointments of Executive
Directors, the Committee’s and Board’s policy will remain
one of restricting notice periods for terminating service
contracts to twelve months, although the Committee and
the Board may, in appropriate circumstances, offer longer
initial notice periods which would reduce to twelve months.
Non-executive Directors: Letters of Engagement
The Company’s practice for the appointment of Non-
executive Directors is consistent with the provisions of the
Combined Code. Non-executive Directors are appointed
under letters of engagement (rather than under service
contracts) which set out fixed terms of appointment
(normally three years) which may be extended with the
agreement of the Board.
Details of the Non-executive Directors’ letters of
engagement are as follows:
Date of Unexpired term
letter of at the date
engagement of this report
Robert Templeman 2 June 2004 9 mths
Richard Pym 2 June 2004 23 mths
Keith Harris 2 June 2004 23 mths
Nigel Wilson 2 June 2004 23 mths
Bill Ronald 2 June 2004 23 mths
Jonathan Feuer 2 June 2004 2 mths
Each letter of engagement is terminable by either party 
by giving not less than three months notice or by the
Company on payment of fees in lieu of notice. No
compensation would be payable to a Non-executive
Director if his engagement were terminated as a result of
him retiring by rotation at an annual general meeting, not
being elected or re-elected at an annual general meeting or
otherwise ceasing to hold office under the provisions of the
Articles of Association of the Company.
90
100
Halfords Group plc
FTSE 250
11 0
120
130
Cumulative TSR based to 100
IPO Jun
04
Jul
04
Aug
04
Sep
04
Oct
04
Nov
04
Dec
04
Jan
05
Feb
05
Mar
05
Directors’ Remuneration Report Halfords Annual Report and Accounts 2005 33
Part B – Audited Information
Directors’ Emoluments
The remuneration and taxable benefits provided by the Company for each Director during the 52 weeks ended 1 April
2005 are set out in the table below. The table excludes contributions to pension schemes (see page 34):
52 weeks 53 weeks
ended ended
1 April 2005 2 April 2004
Salaries/Fees Bonuses (Cash) Benefits
(5)
Total Total
Executive Directors £’000 £’000 £’000 £’000 £’000
Ian McLeod 200 70 13 283 166
Nick Carter 155 54 1 1 220 138
David Hamid
(1 )
310 108 27 445 375
665 232 51 948 679
Non-executive Directors
(4)
Rob Templeman
(6)
70–1 71 761
Richard Pym 52 – – 52 – 
Keith Harris 35 – – 35 – 
Bill Ronald 31 – – 31 – 
Nigel Wilson 35 – – 35 – 
Jonathan Feuer 38 – – 38 25
Christopher Woodhouse
(2)
5– – 5 751
Soren Vestergaard-Poulsen
(3)
5– – 5 25
271 – 1 272 1,562
Notes:
(1) David Hamid resigned as a Director 29 March 2005.
(2)Christopher Woodhouse resigned as a Director 30 May 2004.
(3)Soren Vestergaard-Poulsen resigned as a Director 30 May 2004.
(4) All Non-Executive Directors were appointed on 17 May 2004, except Jonathan Feuer who was appointed on 24 July 2002 and Soren Vestergaard-
Poulsen, who was appointed on 28 July 2002 . The remuneration of the Chairman and the other Non-executive Directors consists only of annual fees
for their services, both as members of the Board and of the Committees on which they serve.
(5)Benefits include all taxable benefits arising from employment by the Company, being the provision of a company car, permanent health insurance, life
assurance cover and membership of a private medical insurance scheme.
(6)Rob Templeman was an Executive Director for the part of the year prior to flotation. 34 Halfords Annual Report and Accounts 2005
Directors’ Remuneration Report
Directors’ Pensions
Pension contributions to defined contribution (money purchase) schemes made by the Company during the year ended
1 April 2005 in respect of Executive Directors are as follows:
52 weeks 53 weeks
ended ended
1 April 2 April
2005 2004
£’000 £’000
Ian McLeod 30 6
Nick Carter 23 5
David Hamid
(1 )
46 36
99 47
Note
(1) David Hamid resigned as a Director 29 March 2005.
Details of the options over ordinary shares in the Company held by Executive Directors who served during the year are set
out in the table below:
Granted Exercised Lapsed
As at in the during in the As at Exercise Exercisable Exercisable
Note 02.04.04 period the period period 01.04.05 Price (£) From To
Current Directors
Ian McLeod
Share Option Scheme (1) – 192,308 – – 192,308 2.60 02.06.07 02.06.14
Nick Carter
Share Option Scheme – 149,038 – – 149,308 2.60 02.06.07 02.06.14
Sharesave Scheme (2) – 3,563 – – 3,563 2.64 01.08.07 01.02.08
152,601 – – 152,601
Rob Templeman (3)
Share Option Scheme – 259,426 (259,426) – – 0.01
Former Directors
David Hamid (4) 
Share Option Scheme – 298,077 – (298,077) –
Sharesave Scheme – 3,563 – – 3,563 2.64 01.08.07 01.02.08
301,640 – (298,077) 3,563
Notes:
(1) Options granted under the Halfords Share Option Scheme were subject to the achievement of a three year performance condition. For grants up to
150% of basic salary the options can only be exercised if the increase in the defined EPS over the period is not less than the increase in the Retail
Price Index (“RPI”) plus 5% per year. In the case of grants in excess of 150% of basic salary, the excess can only be exercised in full if the increase is
not less than RPI plus 10% per year. For increases in excess of 5% but less than 10%, a proportion of the option in excess of 150% of salary can be
exercised.
(2) The Halfords Sharesave Scheme is a Save-As-You-Earn scheme and is open to all full time directors and employees with eligible employment service.
Options may be exercised under the scheme at  £2.64 per share if the option holder completes his saving contract for a period of three years and
then not more than six months thereafter. 
(3) Options granted under a share option scheme approved on 19 November 2003 (see Note 3 on page 45). Options were exercised on flotation. The
amount of gain made by Rob Templeman on the exercise of share options during the year was £672,955.
(4) Resigned 29 March 2005.
For details of the grant dates of options see note 22 on pages 58 and 59.
The closing share price on 1 April 2005 was £3.00 and the price range during the period from flotation to 1 April 2005 was £2.60 - £3.34. Halfords Annual Report and Accounts 2005 35
The beneficial interests of the Directors and their immediate families in the ordinary shares of the Company (including
share options as above), according to the register required to be maintained pursuant to the Companies Act 1985 were as
shown in the table below:
Directors’ interests in shares
Ordinary Shares Options over Ordinary Shares
Shareholdings Shareholdings Options as Options as
as at1 April as at 2 April at1 April at 2 April
2005 2004 2005 2004
Rob Templeman
(1 )
966,672 836,856 – 259,426
Ian McLeod
(1 )
1,129,757 1,506,342 192,308 –
Nick Carter 1,338,972 1,673,713 152,601 –
Richard Pym 1 1,358 – – –
Keith Harris 3,846 – – –
Bill Ronald 1 1,358 – – –
Nigel Wilson 10,000 – – –
Jonathan Feuer 336,528 679,025 – –
Christopher Woodhouse 480,077 679,025 – –
Note:
(1) For all other Directors appointed during the year their shareholding on appointment was nil.
From 1 April 2005 to 8 June 2005 there were no changes in the above interests.  All the above interests were beneficial at each of the above dates.  Ian
McLeod and Nick Carter were, at 1 April 2005 and at 8 June 2005 deemed to be interested as discretionary beneficiaries of the Halfords Employees’
Share Trust, in so far as it relates to the share options noted on page 34. 887,068 ordinary shares in the Company were held by the trustees of that Trust
on those dates.  Save as mentioned above, no Director had any interest in any share capital of the Company or of any subsidiary.
Approved by the Board and signed on its behalf by
Keith Harris
Chairman of the Remuneration Committee
8 June 2005 36 Halfords Annual Report and Accounts 2005
Company law requires the Directors to prepare financial
statements for each financial period which provide a true
and fair view of the state of affairs of the Company and the
Group and of the profit or loss of the Group in that period.
In preparing those statements the Directors are required
to:
 select suitable accounting policies and apply them
consistently;
 make judgments and estimates which are prudent and
reasonable; and
 state whether applicable accounting standards have
been followed, and to disclose and explain and any
material departures from those standards.
The Directors confirm that the financial statements on
pages 38 to 60 comply with all of the above requirements.
The maintenance and integrity of the Halfords Group plc
website is the responsibility of the Directors; the work
carried out by the Auditors does not involve consideration
of these matters and, accordingly, the Auditors accept no
responsibility for any changes that may have occurred to
the financial statements since they were initially presented
on the website.
The Directors are also responsible for maintaining
adequate accounting records which disclose with
reasonable accuracy at any time the financial position of
the Group and which allow them to ensure that the
financial statements comply with the requirements of the
Companies Act 1985. They also have a general
responsibility at law for taking such suitable measures as
are available to them to safeguard the assets of the Group
and to prevent and detect fraud and other irregularities.
By Order of the Board
Philip Parker
Company Secretary
8 June 2005
Statement of Directors’
Responsibilities Halfords Annual Report and Accounts 2005 37
We have audited the financial statements which comprise
the Group Profit and Loss Account, the Balance Sheets,
the Group Cash Flow Statement, the Reconciliation of
Movements in Group Shareholders’ Funds and the related
notes. We have also audited the disclosures required by
Part 3 of Schedule 7A to the Companies Act 1985
contained in the Directors’ Remuneration Report (‘the
auditable part’).
Respective Responsibilities of Directors and Auditors
The Directors’ responsibilities for preparing the Annual
Report and the financial statements in accordance with
applicable United Kingdom law and accounting standards
are set out in the Statement of Directors’ responsibilities.
The Directors are also responsible for preparing the
Directors’ Remuneration Report.
Our responsibility is to audit the financial statements and
the auditable part of the Directors’ Remuneration Report in
accordance with relevant legal and regulatory requirements
and United Kingdom Auditing Standards issued by the
Auditing Practices Board. This report, including the opinion,
has been prepared for and only for the Company’s
members as a body in accordance with Section 235 of the
Companies Act 1985 and for no other purpose. We do not,
in giving this opinion, accept or assume responsibility for
any other purpose or to any other person to whom this
report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
We report to you our opinion as to whether the financial
statements give a true and fair view and whether the
financial statements and the auditable part of the Directors’
Remuneration Report have been properly prepared in
accordance with the Companies Act 1985. We also report
to you if, in our opinion, the Directors’ Report is not
consistent with the financial statements, if the Company
has not kept proper accounting records, if we have not
received all the information and explanations we require for
our audit, or if information specified by law regarding
Directors’ remuneration and transactions is not disclosed.
We read the other information contained in the Annual
Report and consider the implications for our report if we
become aware of any apparent misstatements or material
inconsistencies with the financial statements. The other
information comprises only the Directors’ Report, the
unaudited part of the Directors’ Remuneration Report, the
Chairman’s Statement, the Chief Executive’s Report, the
Finance Director’s Report and the Corporate Governance
Statement.
We review whether the Corporate Governance Statement
reflects the Company’s compliance with the nine provisions
of the 2003 FRC Combined Code specified for our review
by the Listing Rules of the Financial Services Authority, and
we report if it does not. We are not required to consider
whether the Board’s statements on internal control cover
all risks and controls, or to form an opinion on the
effectiveness of the Group’s corporate governance
procedures or its risk and control procedures.
Basis of Audit Opinion
We conducted our audit in accordance with auditing
standards issued by the Auditing Practices Board. An audit
includes examination, on a test basis, of evidence relevant
to the amounts and disclosures in the financial statements
and the auditable part of the Directors’ Remuneration
Report. It also includes an assessment of the significant
estimates and judgements made by the Directors in the
preparation of the financial statements, and of whether the
accounting policies are appropriate to the Company’s and
Group’s circumstances, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all
the information and explanations which we considered
necessary in order to provide us with sufficient evidence
to give reasonable assurance that the financial
statements and the auditable part of the Directors’
Remuneration Report are free from material
misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also
evaluated the overall adequacy of the presentation of
information in the financial statements.
Opinion
In our opinion:
 the financial statements give a true and fair view of the
state of affairs of the Company and of the Group as at
1 April 2005 and of the profit and cash flows of the
Group for the period then ended;
 the financial statements have been properly prepared in
accordance with the Companies Act 1985; and
 those parts of the Directors’ Remuneration Report
required by Part 3 of Schedule 7A to the Companies Act
1985 have been properly prepared in accordance with
the Companies Act 1985.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
Birmingham, 8 June 2005
Independent Auditors’ Report to the
Members of Halfords Group plc Group Profit and Loss Account
38 Halfords Annual Report and Accounts 2005
For the period 52 weeks to 53 weeks to
1 April 2005 2 April 2004
Notes £m £m
Turnover 1 628.4 578.6
Cost of sales (290.7) (269.0)
Gross profit 337.7 309.6
Net operating expenses 2 (259.4) (244.1)
Operating profit before goodwill amortisation and exceptional operating items 92.2 79.2
Goodwill amortisation (13.7) (13.7)
Exceptional operating items 3 (0.2) –
Operating profit 4 78.3 65.5
Profit on disposal of fixed assets 5 – 6.4
Net interest payable, before net exceptional interest income/(charges) (14.7) (35.4)
Net exceptional interest income/(charges) 0.5 (8.7)
Net interest payable 7 (14.2) (44.1)
Profit on ordinary activities before taxation 64.1 27 .8
Taxation on profit on ordinary activities 8 (24.2) (14.3)
Profit on ordinary activities after taxation 39.9 13.5
Equity dividends 9 (27.4) –
Retained profit for the financial period 12.5 13.5
Earnings per 1p share
Basic 11 18.5p 8.3p
Diluted 11 18.5p 8.0p
Earnings per 1p share before goodwill amortisation and exceptional items
Basic 11 24.4p 1 7.7p
Diluted 11 24.4p 16.9p
i) All results relate to continuing operations of the Group.
ii) There is no material difference between the results as stated above and their historical cost equivalents.
iii) The Group has no recognised gains and losses other than the profits above and therefore no separate Statement of Total Recognised
Gains and Losses has been presented  Halfords Annual Report and Accounts 2005 39
For the period 52 weeks to 53 weeks to
1 April 2005 2 April 2004
£m £m
Profit on ordinary activities after taxation 39.9 13.5
Dividends (27.4) –
12.5 13.5
Movements arising from the exercise of share options (see note 3) 4.2 –
Proceeds from the issue of ordinary shares 140.0 –
Finance costs of share issue written off to share premium (4.9) –
Net increase in equity shareholders’ funds 151.8 13.5
Opening shareholders’ funds 4.5 (9.0)
Closing shareholders’ funds 156.3 4.5
Reconciliation of Movements in Group
Shareholders’ Funds Balance Sheets
40 Halfords Annual Report and Accounts 2005
As at 1 April 2005 2 April 2004 1 April 2005 2 April 2004
Group Group Company Company
Notes £m £m £m £m
Fixed assets
Intangible assets 12 239.4 253.1 – –
Tangible assets 13 91.8 82.5 – –
Investments 14 – – 0.1 0.1
331.2 335.6 0.1 0.1
Current assets
Stocks 15 1 12.2 107 . 1 – –
Debtors falling due within one year 16 23.6 23.5 36.1 3.4
Debtors falling due after one year 16 – – 141 .6 –
Cash at bank and in hand 1. 1 25.6 6.7 16.0
136.9 156.2 184.4 19.4
Creditors: amounts falling due within one year 17 (183.1) (293.8) (20.0) –
Net current (liabilities)/assets (46.2) (137.6) 164.4 19.4
Total assets less current liabilities 285.0 198.0 164.5 19.5
Creditors: amounts falling due after more than one year 18 (123.9) (190.2) – (3.1)
Provisions for liabilities and charges 19 (4.8) (3.3) – –
Net assets 156.3 4.5 164.5 16.4
Capital and reserves
Called up share capital 22 2.3 – 2.3 –
Share premium account 23/24 132.9 0.1 132.9 0.1
Profit and loss account 23/24 21. 1 4.4 29.3 16.3
Equity shareholders’ funds 156.3 4.5 164.5 16.4
The financial statements on pages 38 to 60 were approved by the Board of Directors on 8 June 2005 and were signed on its behalf by:
Ian McLeod Nick Carter
Chief Executive Finance Director Group Cash Flow Statement
Halfords Annual Report and Accounts 2005 41
52 weeks to 53 weeks to
1 April 2005 2 April 2004
Notes £m £m
Net cash inflow from operating activities I 1 16.2 1 14.8
Returns on investments and servicing of finance
Interest received 0.4 2.8
Interest paid (13.9) (26.8)
Exceptional interest received 2.2 –
Issue costs incurred in connection with the raising of new bank loans (3.1) (2.5)
Net cash outflow from returns on investments and servicing of finance (14.4) (26.5)
Taxation (20.1) (8.1)
Capital expenditure and financial investment
Purchase of tangible fixed assets (27.6) (19.3)
Sale of tangible fixed assets – 6.9
Net cash outflow for capital expenditure and financial investment (27.6) (12.4)
Equity dividends paid (8.5) –
Net cash inflow before use of liquid resources and financing 45.6 67 .8
Management of liquid resources
Reduction in short term deposits with banks – 20.0
Financing
Issue of ordinary share capital 140.0 –
Costs in respect of share issue (4.9) –
Capital element of finance lease obligations (0.2) 0.8
Repayment of borrowings (370.5) (146.9)
New borrowings 156.0 65.0
Net cash outflow from financing (79.6) (81.1)
(Decrease)/increase in net cash (34.0) 6.7
Reconciliation of net cash flow to movement in net debt
Net debt at the beginning of the period (349.5) (395.9)
(Decrease)/increase in net cash (34.0) 6.7
Movement in deposits – (20.0)
Movement in borrowings II 21 7 .8 83.6
Other non cash changes (4.0) (23.9)
Net debt at end of the period II (169.7) (349.5) Notes to Group Cash Flow Statement
42 Halfords Annual Report and Accounts 2005
I. Reconciliation of operating profit to net cash inflow from operating activities
For the period 52 weeks to 53 weeks to
1 April 2005 2 April 2004
£m £m
Operating profit 78.3 65.5
Depreciation charge (including loss on disposal of assets) 18.4 16.0
Goodwill amortisation 13.7 13.7
Non-cash movement arising from the exercise of employee share options (see note 3) 4.2 –
Increase in stocks (5.1) (16.8)
Increase in debtors (0.1) (0.3)
Increase in creditors 6.2 36.5
Increase in provisions 0.6 0.2
Net cash inflow from operating activities 1 16.2 1 14.8
II. Analysis of movements in the Group’s net debt in the period
At Other non At
2 April 2004 Cash flow cash changes 1 April 2005
£m £m £m £m
Cash in hand and at bank 25.6 (24.5) – 1. 1
Bank overdraft (7.1) (9.5) – (16.6)
18.5 (34.0) – (15.5)
Debt due within one year (182.2) 185.5 (38.6) (35.3)
Debt due after one year (185.0) 32.1 34.6 (1 18.3)
Finance leases due within one year (0.2) 0.2 (0.2) (0.2)
Finance lease due after one year (0.6) – 0.2 (0.4)
Total net debt (349.5) 183.8 (4.0) (169.7)
The total debt cash outflow consists of £214.5m net repayment of borrowings, £3.1m issue costs of new loans and £0.2m repayment of
finance lease obligations.
Non-cash changes relate to interest charges of £2.5m for the amortisation of capitalised issue costs and £1.5m in respect of interest
rolled into the principal of the deep discount bonds.
2005
Movement in borrowings £m
Debt due within one year:
Secured bank loan 94.7
Deep discount bond and other loans 90.8
Capital element of finance lease borrowings 0.2
185.7
Debt due after more than one year:
Secured bank loans 32.1
Cash outflow 21 7 .8
III. Cash flows relating to exceptional items
Operating cash flows for the period to 1 April 2005 include an inflow of £4.0m, which relates to the receipt of a premium in relation to
the sublet of garage premises to the Automobile Association Limited (see note 3). Accounting Policies
Halfords Annual Report and Accounts 2005 43
Basis of preparation
The consolidated accounts of the Company and its subsidiaries are prepared for the period up to the Friday closest to 31
March each year. Consequently, the financial statements for the current period cover the 52 weeks ended 1 April 2005,
whilst the comparative period covered the 53 weeks ended 2 April 2004. The consolidated accounts are prepared under
the historical cost convention, in accordance with the Companies Act 1985, applicable accounting standards and
specifically in accordance with the Accounting Policies set out below.
Basis of consolidation
The consolidated accounts include the accounts of the Company and its subsidiary undertakings.
The acquisition method of accounting has been adopted. Under this method the results of subsidiary undertakings acquired
in the period are included in the consolidated profit and loss account from the date of acquisition. The assets and liabilities
of subsidiary undertakings are incorporated at their fair value at the date of acquisition.
Goodwill arising on acquisitions is capitalised and amortised over its useful economic life, up to a maximum of 20 years.
Change of Accounting Policies
The Accounting Policies set out below are consistent with the previous year, except for the adoption of UITF 17 (revised
2003) ‘Employee share schemes’. The impact on the results arising from this adoption are shown in note 3.
In addition, UITF 38 ‘Accounting for ESOPTrusts’ has also been adopted during the period with no material impact on the
results of the Group.
Turnover
Turnover is stated as amounts receivable for goods and services supplied to customers net of VAT, and discounts and
promotions. In accordance with FRS 5 Application Note G: ‘Revenue Recognition’, turnover is stated net of a provision for
the estimated level of returns.
Intangible assets
The cost of intangible assets acquired, which are capitalised only if separately identifiable, is amortised over estimated
useful lives up to a maximum of 20 years. Similar assets created within the business are not capitalised and expenditure is
charged against profits in the year in which it is incurred. The carrying value of intangible assets is reviewed on a regular
basis. Any impairment in value is charged to the profit and loss account as it arises.
Depreciation
Tangible fixed assets are written off in equal instalments over their expected useful lives. This policy is reviewed on a regular
basis to ensure that the estimated useful economic lives are appropriate. The periods over which the assets are being
depreciated are as follows:
Short leasehold land and buildings over the period of the lease
Motor vehicles 33% per annum
Store fixtures over the period of the lease to a maximum of 25 years
Fixtures, fittings and equipment 10 to 25% per annum
Computer equipment 33% per annum
Any impairment in the value of such fixed assets is charged to the profit and loss account as it arises.
Stocks
Stocks are valued at the lower of cost and net realisable value. Cost comprises the purchase cost of goods and cost
related to distribution.
Pensions
Employees are offered membership of Halfords Pension Plan, a defined contribution pension arrangement. The costs of
contributions to the scheme are charged to the profit and loss account in the period that they arise. Accounting Policies
44 Halfords Annual Report and Accounts 2005
Options
The Group takes advantage of the dispensation in UITF 17 (revised 2003) ‘Employee Share Schemes’ so not to apply that
abstract to the Group’s Inland Revenue approved Save-As-You-Earn Scheme.
Leases
The rentals payable under operating leases are charged directly to the profit and loss account on a straight-line basis over
the life of the lease.
Benefits received as an incentive to sign a lease, whatever form they may take, are credited to the profit and loss account
on a straight line basis over the shorter of the period of the lease or the period until rentals are expected to be revised to
prevailing market rates. Any premiums received in respect of an exit from a property are credited to the profit and loss
account at the date of surrender of the lease.
The costs of assets held under finance leases are included under tangible fixed assets and depreciation is provided in
accordance with the policy for the class of asset concerned. The corresponding obligations under these leases are shown
as creditors. The finance charge element of rentals is charged to the profit and loss account to produce, or approximate to,
a constant periodic rate of charge on the remaining balance of the outstanding obligations.
Deferred taxation
Deferred tax is provided in respect of timing differences that have originated, but not reversed, by the balance sheet date.
Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in which
timing differences reverse, based on tax rates and laws substantively enacted at the balance sheet date.
Financial Instruments
Debt is recognised in the balance sheet as the cash proceeds received less costs incurred directly in connection with the
issue of the instrument. Finance costs in respect of the instruments, including discounts on issue, are charged to the profit
and loss account over the term of the instrument.
The principal derivative instruments used by the Group are interest rate swaps and forward rate agreements. These
instruments are used for hedging purposes in line with the Group risk management policy and no trading of instruments is
undertaken. Interest differentials are taken to the net interest payable in the profit and loss account, and premiums and
fees are amortised at a contract rate over the life of the underlying instruments.
Foreign Currencies
Transactions denominated in foreign currencies are translated at the rate prevailing at the time of the transaction. Monetary
assets and liabilities denominated in foreign currencies held at the year-end are translated at the rates of exchange
prevailing at the balance sheet date. Where covered by forward exchange contracts liabilities are translated at the future
contract rates. Any exchange gain or loss is dealt with in the profit and loss account. Notes to the Financial Statements
Halfords Annual Report and Accounts 2005 45
1. Turnover
Turnover comprises retail sales wholly in the UK and the Republic of Ireland to external customers.
Due to the related nature of the Group’s products, the common distribution channel and the manner in which the Group’s
activities are organised, the Directors do not believe that the Group’s different product categories represent different
classes of businesses as defined in SSAP 25 ‘Segmental Reporting’. Accordingly the additional disclosures set out in SSAP
25 are not considered to be required.
2. Net operating expenses
For the period 52 weeks to 53 weeks to
1 April 2005 2 April 2004
£m £m
Selling and distribution costs 209.4 195.2
Administrative expenses 54.0 48.9
Other operating income (4.0) –
259.4 244. 1
3. Exceptional items
Exceptional operating items in the 52 weeks to 1 April 2005, relate to a non-cash charge of £4.2m in respect of employee
share options that were exercised at the time of the Group’s IPO and income of £4.0m in respect of a premium received in
relation to the sub-let of garage premises by the Group to the Automobile Association Limited (“AA”).
Certain senior employees held options to subscribe for shares in the Company under a share option scheme, approved by
shareholders on 19 November 2003. The share options were exercisable only in the event of a Takeover, Sale or Admission
of the Company to a Relevant EEA market. Under the scheme, share options were granted to senior employees on 12
December 2003 and 20 May 2004. The shares required to meet the Company’s obligations under the scheme were held in
trust. On 8 June 2004, senior employees exercised their rights over 2,527,307 shares.
In accordance with UITF 17 (revised 2003) ‘Employee share schemes’, the Group has charged £4.2m to the profit and loss
account, being the difference between the fair value of the shares at the date of their grant and the amounts paid by the
employees to exercise the share options. A corresponding credit has been taken to the Group’s profit and loss reserves.
In August 2001, Halfords Limited sold its garaging servicing business to the AA. Under the terms of the sale 124 garage
premises were sublet to GB Gas Holdings Limited by way of an underlease agreement from Halfords Limited.
On 16 November 2004, the Group entered into an agreement with GB Gas Holdings Limited and the AA. Under the
agreement the Group received a £4.0m premium in consideration for providing consent to the assignment of the above
underlease from GB Gas Holdings Limited to the AA and the subsequent subletting by the AA of 49 premises to
Nationwide Autocentres Limited.
The Group’s tax charge for the period to 1 April 2005 includes a £0.8m credit in respect of the above exceptional items. Notes to the Financial Statements
46 Halfords Annual Report and Accounts 2005
4. Operating profit
For the period 52 weeks to 53 weeks to
1 April 2005 2 April 2004
£m £m
Operating profit is arrived at after charging/(crediting):
Operating lease rentals:
– plant and machinery 0.9 0.7
– property rents 61. 1 56.4
Rentals receivable under operating leases (10. 1 ) (9.5)
Loss on disposal of fixed assets 0.4 0.2
Depreciation of fixed assets 18.0 15.8
Amortisation of goodwill 13.7 13.7
Auditors’ remuneration:
– Audit fees 0.2 0.1
– Other fees payable to the auditors or their associates 0.3 0.3
The total fees payable by the Group to PricewaterhouseCoopers LLP and their associates during the period was £1.6m (53
week period ended 2 April 2004: £0.7m) of which £1.1m (53 week period ended 2 April 2004: £0.3m) relates to charges
incurred in respect of the flotation and the issue of new finance that has been offset against the cash proceeds received
from the finance. The Company expensed £0.1m (53 week period ended 2 April 2004: nil) of fees during the period.
Non - audit services
For the period 52 weeks to 53 weeks to
1 April 2005 2 April 2004
£m £m
Assurance related services (principally relating to IPO and refinancing) 0.9 0.4
Taxation services 0.4 0.1
Other services 0.1 0.1
1.4 0.6
5. Profit on disposal of fixed assets
The profit on disposal of £6.4m in the 53 week period ended 2 April 2004 principally relates to the sale of the head office
building of Halfords Limited. The building was acquired in the period and then immediately sold and leased back. £3.8m of
the proceeds have been deferred and are being amortised over the term of the lease in accordance with UITF 28
‘Operating lease incentives’.
6. Employee costs
For the period 52 weeks to 53 weeks to
1 April 2005 2 April 2004
£m £m
The aggregated remuneration of all employees including directors comprised :
Wages and salaries 89.8 86.6
Social security costs 6.4 6.4
Other pension costs (note 26) 3.0 3.5
99.2 96.5
Number Number
Average number of persons employed by the group during the period
Stores 9,245 8,529
Central warehousing 231 231
Head office 464 449
9,940 9,209
Full details of Directors’ remuneration and interests are set out in the Remuneration Report on pages 30 to 35. Halfords Annual Report and Accounts 2005 47
7. Net interest payable
For the period 52 weeks to 53 weeks to
1 April 2005 2 April 2004
£m £m
Interest receivable and similar income:
Bank and similar interest (0.4) (2.7)
Interest payable and similar charges:
Bank overdraft interest 0.1 0.4
Bank and other loans 12.3 23.5
Premium on deep discount bond 1.5 12. 1
Interest on fixed rate subordinated unsecured loan notes – 0.1
Amortisation of issue costs on loans and deep discount bonds 0.8 1.3
Commitment and guarantee fees 0.4 0.7
15. 1 38.1
Exceptional amortisation of issue costs on loans and deep discount bonds 1.7 8.7
Exceptional gain on close out of interest rate swap (2.2) –
14.6 46.8
Net interest payable 14.2 44.1
On flotation (8 June 2004), the Group redeemed and replaced all of its existing borrowings. As a consequence, a charge of
£1.7m (53 weeks to 2 April 2004: £6.3m) was made in respect of accelerated amortisation of the issue costs associated
with these borrowings.
On repayment of the Group’s existing borrowings, the Group hedged its new borrowing facilities using new interest rate
swaps and received £2.2m of exceptional income on the termination of its existing interest rate swaps.
During the 53 week period to 2 April 2004 the Group repaid all of the borrowings under its mezzanine facility and repaid
£68.2m of its deep discount bonds. As a result £2.4m of unamortised issue costs associated with these borrowings was
written off. Notes to the Financial Statements
48 Halfords Annual Report and Accounts 2005
8. Taxation on profit on ordinary activities
For the period 52 weeks to 53 weeks to
1 April 2005 2 April 2004
£m £m
Current taxation
UK corporation tax charge for the period 23.6 15.2
Adjustment in respect of prior periods (0.3) 0.1
Total current tax 23.3 15.3
Deferred taxation
Origination and reversal of timing differences 0.9 (1.0)
Taxation on profit on ordinary activities 24.2 14.3
The current tax charge is reconciled with the standard rate of UK corporation tax as follows:
For the period 52 weeks to 53 weeks to
1 April 2005 2 April 2004
£m £m
Profit on ordinary activities before taxation 64.1 27 .8
UK corporation tax at standard rate of 30.0% 19.2 8.3
Factors affecting the charge for the period:
Disallowable goodwill amortisation 4.1 4.1
Capital allowances for the period less than depreciation 1.0 0.7
Timing difference on premium received on property transaction – 1. 1
Deduction for employee share options (0.7) –
Other timing differences (0.5) 0.3
Other disallowable expenses 0.5 0.7
Adjustment in respect of prior periods (0.3) 0.1
Total current tax charge for the period 23.3 15.3
The Group’s tax charge for the period includes a credit of £0.6m (53 weeks to 2 April 2004: £0.7m) in respect of
operating exceptional items and exceptional interest income/(charges).
9. Dividends
For the period 52 weeks to 53 weeks to
1 April 2005 2 April 2004
£m £m
Equity – Ordinary 1p shares
Interim – paid 3.7p 8.5 –
Final – proposed 8.3p 18.9 –
27 .4 –
10. Profit of holding company
Of the profit for the financial period a retained profit of £13.0m (53 week period ended 2 April 2004: £16.3m) is dealt with
in the accounts of Halfords Group plc. The directors have taken advantage of the exemption available under section 230 of
the Companies Act 1985 and not presented a profit and loss account for the Company alone. Halfords Annual Report and Accounts 2005 49
1 1. Earnings per share
Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders by the weighted
average number of ordinary shares in issue during the period. The weighted average number of shares excludes shares
held by an Employee Benefit Trust and has been adjusted for the issue of shares during the year. In accordance with FRS
14, the weighted average number of shares for the 53 weeks to 2 April 2004 has been adjusted to reflect the bonus issues
made at the time of the IPO.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion
of all dilutive potential ordinary shares. These represent share options granted to employees where the exercise price is
less than the average market price of the Company’s ordinary shares during the 52 weeks to 1 April 2005. In the period to
2 April 2004 the dilutive potential ordinary shares were in respect of warrants issued on 30 August 2002 that were
exercised on 8 June 2004.
For the period 52 weeks to 53 weeks to
1 April 2005 2 April 2004
m m
Weighted average number of shares in issue 215.6 162.9
Weighted average number of dilutive shares options/warrants 0.1 6.6
Total number of shares for calculating diluted earnings per share 215.7 169.5
The alternative measure of earnings per share is provided because it reflects the Halfords Group’s underlying trading
performance by excluding the effect of exceptional items and amortisation of goodwill.
For the period 52 weeks to 53 weeks to
1 April 2005 2 April 2004
£m £m
Basic earnings 39.9 13.5
Exceptional items net of tax:
Operating profit (0.6) –
Profit on disposal of fixed assets – (4.5)
Interest (0.3) 6.1
Amortisation of goodwill 13.7 13.7
Underlying earnings before exceptional items and amortisation of goodwill 52.7 28.8
Diluted earnings 39.9 13.5
Underlying diluted earnings before exceptional items and amortisation of goodwill 52.7 28.8
Earnings per share is calculated as follows:
For the period 52 weeks to 53 weeks to
1 April 2005 2 April 2004
pence pence
Basic earnings per ordinary share 18.5p 8.3p
Diluted basic earnings per ordinary share 18.5p 8.0p
Basic earnings per ordinary share before goodwill amortisation and exceptional items 24.4p 1 7.7p
Diluted basic earnings per ordinary share before goodwill amortisation and exceptional items 24.4p 16.9p Notes to the Financial Statements
50 Halfords Annual Report and Accounts 2005
12. Intangible fixed assets - Group
Product
rights Goodwill Total
£m £m £m
Cost
At 2 April 2004 and 1 April 2005 0.2 274.8 275.0
Amortisation
At 2 April 2004 0.2 21.7 21.9
Charge for the period – 13.7 13.7
At 1 April 2005 0.2 35.4 35.6
Net book value at 1 April 2005 – 239.4 239.4
Net book value at 2 April 2004 – 253.1 253.1
13. Tangible fixed assets - Group
Payments on
Fixtures, account and
fittings assets in
Land and Motor and course of
buildings Vehicles equipment construction Total
£m £m £m £m £m
Cost
At 2 April 2004 27.0 0.1 192.6 1.9 221.6
Additions 1.9 – 25.4 0.4 27.7
Disposals (0.7) (0.1) (1.4) – (2.2)
Reclassifications 0.1 – 1.8 (1.9) –
At 1 April 2005 28.3 – 218.4 0.4 247.1
Depreciation
At 2 April 2004 1 1.2 0.1 127.8 – 139.1
Depreciation for the period 1.3 – 16.7 – 18.0
Disposals (0.5) (0.1) (1.2) – (1.8)
At 1 April 2005 12.0 – 143.3 – 155.3
Net book value at 1 April 2005 16.3 – 75.1 0.4 91.8
Net book value at 2 April 2004 15.8 – 64.8 1.9 82.5
2005 2004
£m £m
Net book value of land and buildings comprises:
Short leasehold 16.3 15.8
During the period the Group held equipment at a cost of £0.8m (2004: £0.8m) under a finance lease. The net book value
of these assets at 1 April 2005 is £0.6m (2004: £0.8m). Halfords Annual Report and Accounts 2005 51
14. Investments - Company
Company
2005
£m
Shares in group undertaking
Cost
At 2 April 2004 and 1 April 2005 0.1
Total fixed asset investments 0.1
The investment in the subsidiary undertaking as at 1 April 2005 is as follows:
Ordinary
shares
Incorporated percentage Principal
in owned activity
Halfords Holdings Limited Great Britain* 100 Intermediate
Holding
company
* Registered in England and Wales.
In the opinion of the directors the value of the investment in the subsidiary undertaking is not less than the amount shown
above.
Principal subsidiaries
The principal subsidiary undertakings of the Company at 1 April 2005 are as follows:
Principal activity % Ownership
Halfords Holdings Limited Intermediate Holding company 100
Halfords Finance Limited Intermediate Holding company 100
Halfords Limited Retailing of auto parts, accessories, cycles and cycle accessories 100
Halfords Payment Services Limited Financial services 100
All the above subsidiaries are consolidated and incorporated in Great Britain and registered in England and Wales. All other
subsidiary undertakings are dormant and did not trade during the year.
15. Stocks
2005 2004 2005 2004
Group Group Company Company
£m £m £m £m
Finished goods for resale 1 12.2 107 . 1 – – Notes to the Financial Statements
52 Halfords Annual Report and Accounts 2005
16. Debtors
2005 2004 2005 2004
Group Group Company Company
£m £m £m £m
Falling due within one year:
Trade debtors 3.6 6.3 – –
Other debtors 0.2 0.5 – –
Prepayments and accrued income 19.8 16.7 0.1 –
Amounts owed by group undertakings – – 36.0 3.4
23.6 23.5 36.1 3.4
Falling due after one year:
Amounts owed by group undertakings – – 141 .6 –
– – 141 .6 –
17. Creditors: amounts falling due within one year
2005 2004 2005 2004
Group Group Company Company
£m £m £m £m
Bank overdraft (note 20) 16.6 7.1 – –
Bank loans (note 20) 35.3 93.0 – –
Debentures and other loans (note 20) – 89.2 – –
Finance lease (note 20) 0.2 0.2 – –
Trade creditors and accruals 60.8 60.6 – –
Corporation tax 13.3 10. 1 – –
Other taxation and social security 15.4 7.5 – –
Other creditors 0.7 1.5 – –
Accruals and deferred income 21.9 24.6 – –
Dividends payable 18.9 – 18.9 –
Amounts owed to group undertakings – – 1. 1 –
183.1 293.8 20.0 –
The Group’s banking arrangements are subject to a netting facility whereby credit balances may be offset against the
indebtedness of other group companies.
18. Creditors: amounts falling due after more than one year
2005 2004 2005 2004
Group Group Company Company
£m £m £m £m
Bank loans (note 20) 1 18.3 185.0 – –
Finance lease (note 20) 0.4 0.6 – –
Amounts owed to group undertakings – – – 3.1
Accruals and deferred income 5.2 4.6 – –
123.9 190.2 – 3.1 Halfords Annual Report and Accounts 2005 53
19. Provisions for liabilities and charges
Deferred Other
taxation provisions Total
Group £m £m £m
At 2 April 2004 2.3 1.0 3.3
Profit and loss - provided 0.9 1.2 2.1
Utilised during the period – (0.6) (0.6)
At 1 April 2005 3.2 1.6 4.8
Other provisions comprise store vacant property provisions of £1.1m (2004: £0.6m) and a provision of £0.5m (2004:
£0.4m) in respect of estimated sales returns. The vacant property provision represents recognition of the net costs arising
from vacant properties and sub-let properties.
Vacant
property Returns
Maturity profile of provisions £m £m
Within 1 year 1.1 0.5
2005 2004
Group Group
£m £m
Analysis of deferred taxation provision:
Accelerated capital allowances 4.6 4.2
Other timing differences (1.4) (1.9)
3.2 2.3
The company did not have any provisions at either 1 April 2005 or 2 April 2004.
20. Group bank and other borrowings
2005 2004
Group Group
£m £m
Due within one year
Bank overdraft 16.6 7.1
Unsecured bank loans 35.3 –
Secured bank loan – 93.0
Debentures and other loans:
Deep discount bonds – 88.8
Fixed rate subordinated unsecured loan notes – 0.4
Finance lease 0.2 0.2
Total due within one year 52.1 189.5
Due after more than one year
Unsecured bank loans 1 18.3 –
Secured bank loan – 185.0
Finance lease 0.4 0.6
Total due after more than one year 1 18.7 185.6
Total borrowings 1 70.8 375. 1
Bank loans are stated net of unamortised issue costs of £2.4m (2004: £1.7m). In the period the Group incurred issue
costs of £3.1m in respect of the arrangement of a term loan of £150.0m and a £120.0m revolving credit facility. Notes to the Financial Statements
54 Halfords Annual Report and Accounts 2005
20. Group bank and other borrowings (continued)
The term loan is repayable in six monthly instalments of £10m until 31 March 2009, with the remaining balance being
repayable on 17 May 2009. The loan carries interest of LIBOR (“London Interbank Offered Rate”) plus a variable margin of
between 0.5% and 0.8% depending on covenant fulfilment. The revolving credit facility permits borrowings from time to
time up to a maximum of £120.0m. The facility expires on 8 June 2009 and drawings under the facility attract interest at
LIBOR plus 0.5% to 0.8%.
Included within bank loans is £16.0m of short-term loans drawn from uncommitted facilities. The loans attract interest at
5.2% and were used to cover short-term working capital requirements.
On the Company’s flotation on 8 June 2004, the Group utilised the net proceeds, together with its own cash balances and
its new banking facilities to redeem all of its existing borrowings consisting of £90.4m of deep discount bonds, £0.4m of
loan notes and £279.7m of secured bank loans. As a consequence, a charge of £1.7m (see note 7) was made in respect
of accelerated amortisation of the issue costs associated with these borrowings.
21. Financial Instruments
Treasury Policy
The Group’s objective in using financial instruments is to minimise its exposure to financial risk. The Group’s treasury
department’s main responsibilities are to:
 Ensure adequate funding and liquidity for the Group;
 Manage the interest risk of the Group’s debt;
 Invest surplus cash;
 Manage the clearing bank operations of the Group; and
 Manage the foreign exchange risk on its non-sterling cash flows.
The main risk arising from the Group’s financial instruments is interest rate risk. Policies for managing financial risks are
governed by board approved policies and procedures, which are reviewed on an annual basis. The latest policy review was
performed in January 2005.
The Group’s debt management policy is to provide an appropriate level of funding to finance the Business Plan over the
next three to five years at a reasonable cost and ensure adequate flexibility to meet the changing needs of the enterprise.
Financial Risk
The Business Plan and cash flow forecasts are subject to key assumptions such as interest rates and the significance of
these risks is dependent upon the level of the trading profit and the strength of the balance sheet.
Interest Rate Risk
The Group maintains its policy to minimise interest rate risk on its borrowings and deposits by using interest rate
derivatives where appropriate. The Group’s policy aims to manage the interest cost of the Group within the constraints of
the Business Plan and its financial covenants. The aim is to reduce exposure to the effect of interest rate movements by
hedging at least 75% of the following period’s net interest rate exposure, whilst maintaining the flexibility to minimise early
termination costs.
Foreign Currency Risk
The Group has a significant transaction exposure with increasing direct source purchases of its supplies from the Far East,
with most of the trade being specifically US Dollar denominated. The Group’s policy is to manage the foreign exchange
transaction exposures of the business for a minimum period of twelve months forward to ensure the actual costs do not
exceed the budget costs by 10% (excluding increases in the base cost of the product). The Group does not hedge either
economic exposure or the translation exposure arising from the profits, assets and liabilities of non-sterling business whilst
they remain immaterial.
Credit Risk
The Group’s policy is to minimise the risk that foreign exchange and interest rate derivative counterparties, the holders of
surplus cash and the providers of debt will be unable to fulfil their obligations and also, in the case of lenders, unwilling to
renegotiate the terms of the borrowings. The Group ensures that such counterparties used for credit transactions hold at
least a double AA credit rating. Halfords Annual Report and Accounts 2005 55
21. Financial Instruments (continued)
Liquidity Risk
The Group ensures that it has sufficient cash or loan facilities to meet all its commitments when required. The Group
ensures that it has sufficient funding to meet its business plan requirements so that it is not reliant on there being sufficient
liquidity in the market when it needs the funding.
Short-term debtors and creditors
The Group’s creditors and debtors falling due within one year (other than bank and other borrowings) are excluded from the
disclosures below, except for the currency risk disclosures, due to the exclusion of short-term items or because they do not
meet the definition of financial assets or liabilities, such as tax balances.
The disclosures below have been made after taking account of interest rate swaps, currency swaps and forward contracts.
Interest rate risk profile of financial liabilities
Financial
Floating Fixed liabilities
rate rate on which
financial financial no interest
Total liabilities liabilities is paid
Currency - sterling £m £m £m £m
Financial liabilities at 1 April 2005 170.8 32.8 138.0 –
Financial liabilities at 2 April 2004 375.1 214.3 160.8 –
The effect of the Group’s interest rate swap at 1 April 2005 was to classify £138.0m (2004: £71.8m) of sterling
borrowings in the above table as fixed rate. The Group has a sterling interest rate cap, which matures in June 2009.
In addition to the above, the Group’s provisions of £1.6m (2004: £1.0m), for vacant leasehold properties and returns
(see note 19) met the definition of financial liabilities. These financial liabilities are considered to be floating rate financial
liabilities. This is because, in establishing the provisions, the cash flows are discounted and the discount rate re-appraised
at each half yearly reporting date to ensure that it reflects the current market assessment of the time value of money and
the risks specific to the liability.
Fixed rate
financial
liabilities
weighted
average
Weighted period for
average which rate
interest rate is fixed
Currency - sterling % Years
Financial liabilities at 1 April 2005 6.4 4.0
Financial liabilities at 2 April 2004 6.6 9.5
Floating rate financial liabilities bear interest at rates, based on relevant national LIBOR equivalents, which are fixed in
advance for periods of between one day and three months. The above calculations take account of the adjustment effect of
interest rate hedges. Notes to the Financial Statements
56 Halfords Annual Report and Accounts 2005
21. Financial Instruments (continued)
Interest rate risk of financial assets
2005 2004
Group Group
Cash at Cash at
bank and bank and
in hand in hand
Currency £m £m
Sterling 1. 1 25.0
US dollars – 0.6
At end of the period 1. 1 25.6
Floating rate 1. 1 25.6
Fixed rate – –
At end of the period 1. 1 25.6
Floating rate cash earns interest based on relevant national LIBID (“London Interbank Bid Rate”) equivalents or government
bond rates.
Maturity of financial liabilities
2005 2005 2005 2005 2004 2004 2004 2004
Group Group Group Group Group Group Group Group
Finance Finance
Debt leases Other Total Debt leases Other Total
£m £m £m £m £m £m £m £m
Within 1 year or on demand 51.9 0.2 1.6 53.7 189.3 0.2 1.0 190.5
Between 1 and 2 years 9.4 0.2 – 9.6 20.0 0.2 – 20.2
Between 2 and 5 years 108.9 0.2 – 109.1 60.0 0.4 – 60.4
Over 5 years –– – – 105.0 – – 105.0
1 70.2 0.6 1.6 1 72.4 374.3 0.8 1.0 376.1
Other financial liabilities includes the provisions for vacant leasehold properties and returns of £1.6m (2004: £1.0m).
Borrowing facilities
The Group has the following undrawn committed borrowing facilities available during the period in respect of which all
conditions precedent had been met at that date:
2005 2004
Group Group
£m £m
Expiring within 1 year 1.0 1.0
Expiring between 1 and 2 years – –
Expiring between 2 and 5 years 1 18.0 –
Expiring over five years – 42.9
1 19.0 43.9
The facilities expiring within one year were annual facilities subject to review at various dates during the period. The other
facilities were arranged to help finance the proposed expansion of the Group’s activities. All these facilities incurred
commitment fees at market rates. Halfords Annual Report and Accounts 2005 57
21. Financial Instruments (continued)
Currency exposures
The Group has the following monetary assets and liabilities in currencies other than the Group’s functional currency which
is sterling:
– financial assets in US dollars as shown in the “Interest rate risk of financial assets” table above
– $10.7m (2004: $9.7m) of US dollar liabilities for purchases; these were fully hedged into sterling as at 1 April 2005 and 
2 April 2004
Fair values of financial assets and financial liabilities
The following table is a comparison by category of the carrying amounts and the fair values of the Group’s financial assets
and financial liabilities at 1 April 2005 and 2 April 2004.
2005 2005 2004 2004
Group Group Group Group
Book Value Fair Value Book Value Fair Value
£m £m £m £m
Short term borrowings (51.9) (51.9) (189.3) (189.3)
Long term borrowings (1 18.3) (1 18.3) (185.0) (185.0)
Other financial liabilities (1.6) (1.6) (1.0) (1.0)
Finance lease (0.6) (0.6) (0.8) (0.8)
Cash at bank and in hand 1. 1 1. 1 25.6 25.6
Derivative financial instruments held to manage the
interest rate and currency profit:
Interest rate swaps – (2.2) – 0.8
Forward currency contracts –(1.0) –0.1
Total (17 1.3) (1 7 4.5) (350.5) (349.6)
Under the Group’s accounting policy, foreign currency assets and liabilities that are hedged using currency swaps are
translated initially at the swap rates. Any gains or losses arising from changes in exchange rates are included in the book
value of the relevant asset or liability. Changes in the value of the swap as a result of changes in interest rates are not
included in the book value of the relevant asset or liability. (For purpose of the above table, the book value of the relevant
asset or liability is shown separately from the effect of the currency leg of the cross-currency swap.)
Fair value assumptions
In the case of bank loans and other loans, the fair value
approximates to the carrying value reported in the balance sheet 
as the payments are reset to market rates at intervals of less than
one year.
Long-term borrowings
The fair value of short-term deposits, loans and overdrafts
approximates to the carrying amount because of the short maturity
of these instruments.
Short-term deposits and borrowings
Fair value is based on market price of comparable instruments at the
balance sheet date.
Interest rate swap, currency swaps and 
forward foreign currency contracts Notes to the Financial Statements
58 Halfords Annual Report and Accounts 2005
21. Financial Instruments (continued)
Hedges
The Halfords Group’s policy is to hedge the following exposures:
• Interest rate risk - using interest swaps and a cap.
• Forward foreign currency contracts are also used for currency exposures on next year’s expected sales.
All the gains and losses on the hedging instruments are expected to be matched by losses and gains on the hedged
transactions or positions. Under the Group’s accounting policy, foreign currency transactions, which are hedged using
forward foreign currency contracts are translated at the contracted rates. Consequently, the carrying value of the relevant
asset or borrowings effectively includes the gain or loss on the hedging instrument.
2005 2004
Group Group
£m £m
Unrecognised (losses)/gains on hedges (2.2) 0.8
As at 1 April 2005 £0.8m of unrecognised losses (2004: £0.8m of gains) are expected to be included within income of
the following financial year, and £1.4m (2004: nil) is expected to be recognised thereafter.
22. Equity share capital
2005 2005 2004 2004
Number of Number of
Ordinary shares of 1p each: shares £ shares £
Authorised 295,000,000 2,950,000 1,050,000 10,500
Allotted, called up and fully paid 227,936,743 2,279,367 1,000,000 10,000
On 12 May 2004 the authorised share capital of the Company was increased by £44,500 to £55,000 by the creation of
4,450,000 Ordinary Shares. On 12 May and 2 June 2004, by way of a bonus issue, 4,000,000 Ordinary Shares were
unconditionally issued and credited as fully paid to the existing holders of Ordinary Shares on the register in the proportion
of 4 new Ordinary Shares for each Ordinary Share held by them; and 160,184 new Ordinary Shares were allotted, credited
as fully paid, conditional on exercise of warrants to subscribe for Ordinary Shares under a Warrant Instrument to the
Warrantholders who were on the register of Warrantholders on 12 May 2004, in the proportion of 4 new Ordinary Shares
for each Ordinary Share held by such holder on exercise of the Warrants.
On 2 June 2004, the authorised share capital of the Company was increased from £55,000 to £2,950,000 by the creation
of 289,500,000 Ordinary Shares.
On 8 June 2004, the Company issued 200,230 Ordinary Shares (including those Ordinary Shares allotted as part of the
above bonus issue) to the Warrantholders at 1p per share, except for the Shares allotted as part of the above bonus issue,
in satisfaction of the Warrants.
On 8 June 2004, by way of a bonus issue 168,873,609 Ordinary Shares were unconditionally issued, credited as fully paid
to the existing holders of Ordinary Shares in the proportion of 32.474 new Ordinary Shares for each Ordinary Share held by
them on such date.
On 8 June 2004, the Company issued 53,846,154 new Ordinary Shares at £2.60 per share raising £140.0m of proceeds,
before expenses.
On 15 and 25 February 2005, the Company issued 8,750 and 8,000 Ordinary Shares respectively at £2.60 per share to
satisfy its obligation under its share option schemes that were created during the year (see below).
During the period the share premium account has been debited with £1.8m in respect of the allotment of the above bonus
issues and credited with proceeds of £139.5m from the primary offer, less costs of £4.9m incurred in respect of the issue. Halfords Annual Report and Accounts 2005 59
22. Equity share capital (continued)
Potential Issue of Ordinary Shares
The Company has two employee share option schemes, which were set up following the Company’s IPO.
The Halfords Company Share Option Scheme is a discretionary option scheme under which the Renumeration Committee
may select full time Directors and employees to be granted options. Options were granted to employees on 2 June 2004,
and as at 1 April 2005 options on 6,050,203 Ordinary Shares were outstanding under the scheme. Options granted under
the scheme can be exercisable at £2.60 per share provided performance conditions are met. The scheme has set a three
year performance condition of an earnings per share growth target. For grants up to 150% of basic salary the options can
only be exercised if the increase in the defined EPS over the period is not less than the increase in the Retail Price Index
(“RPI”) plus 6% per year. In the case of grants in excess of 150% of basic salary, the part of the options in excess of 150%
of basic salary can only be exercised in full if the increase over the period is not less than RPI plus 10% per year. For
increases in excess of 6%, but less than 10%, a proportion of the option in excess of 150% of salary can be exercised.
Options may be exercised within 7 years of the performance conditions being satisfied.
Early exercise of the options is allowed if an optionholder ceases to be employed by reason of death, injury, disability,
redundancy, retirement or on the sale of his employing company or business. Options on 16,750 Ordinary Shares were
exercised in the period and options on 490,000 Ordinary Shares lapsed.
The Halfords Sharesave Scheme is a Save-As-You-Earn scheme and is open to all full time directors and employees with
eligible employment service. Options were granted to employees on 7 June 2004, and as at 1 April 2005 1,364,861
options were outstanding under the scheme. Options may be exercised under the scheme at £2.64 per share if the option
holder completes his saving contract for a period of three years for a period of six months thereafter. Special provisions
allow early exercise in the case of death, injury, disability, redundancy, retirement or because the company or business
which employs the optionholder is transferred out of the Group, or in the event of a change of control, reconstruction or
winding up of the Company.
On 15 February 2005 and 27 April 2005 the Company applied for blocklisting of a total of 1,000,000 Ordinary Shares of
1p each to to be admitted on issuance to the Official List of the UK Listing Authority and to trading on the London Stock
Exchange market for listed securities. The Shares will be issued under the Company’s share schemes and when issued, will
rank pari passu with the existing Ordinary Shares of the Company.
23. Group reserves
Share Profit and
premium loss Total
£m £m £m
At 2 April 2004 0.1 4.4 4.5
Profit for the financial period – 12.5 12.5
Movements arising from the exercise of share options (see note 3) – 4.2 4.2
Proceeds from the issue of Ordinary Shares 139.5 – 139.5
Finance costs of share issue written off to share premium (4.9) – (4.9)
Bonus issue in respect of Ordinary Shares (1.8) – (1.8)
At 1 April 2005 132.9 21.1 154.0
Interest in own shares
At 1 April 2005 the Company held in Trust 887,068 (2004: 20,400) own shares with a nominal value of £8,871
(2004: £204). The Trust has waived any entitlement to the receipt of dividends in respect of its holding of the 
Company’s Ordinary Shares. Notes to the Financial Statements
60 Halfords Annual Report and Accounts 2005
24. Company reserves
Share Profit and
premium loss Total
£m £m £m
At 2 April 2004 0.1 16.3 16.4
Profit for the financial period – 13.0 13.0
Proceeds from the issue of Ordinary Shares 139.5 – 139.5
Finance costs of share issue written off to share premium (4.9) – (4.9)
Bonus issue in respect of Ordinary Shares (1.8) – (1.8)
At 1 April 2005 132.9 29.3 162.2
25. Group commitments
2005 2004
£m £m
Capital expenditure contracted but not provided 1.2 1.9
Land and Other Land and Other
buildings assets buildings assets
2005 2005 2004 2004
Annual commitments under operating leases: £m £m £m £m
Expiring within one year 0.5 0.1 0.5 0.2
Expiring between two and five years inclusive 2.6 0.6 2.4 0.4
Expiring in over five years 62.8 – 59.0 –
65.9 0.7 61.9 0.6
The operating lease commitments are shown before receipts of sub-let income.
26. Pensions
From 1 December 2002 employees have been offered membership of Halfords Pension Plan, a defined contribution
pension arrangement. The costs of contributions to the scheme are charged to the profit and loss account in the period
that they arise. The contributions to the scheme for the period amounted to £3.0m (53 week period ended 2 April 2004:
£3.5m) representing 3% of pensionable salaries for new employees and 5% to 12% of pensionable salaries for employees
who transferred from the Boots Group pension scheme, plus a further 2% to 7% for employees whose earnings are above
the upper earnings threshold.
27. Contingent liabilities and assets
The Group’s banking arrangements include the facility for the bank to provide a number of guarantees in respect of
liabilities owed by the Group during the course of its trading. In the event of any amount being immediately payable under
the guarantee, the bank has the right to recover the sum in full from the Group. The total amount of guarantees in place at 1
April 2005 amounted to £2.0m (2004: £7.1m).
The Group’s banking arrangements are subject to a netting facility whereby credit balances may be offset against the
indebtedness of other Group companies. At 1 April 2005 the amount of Group borrowings available for offset against the
Company was £6.1m (2004: £16.0m).
Halfords Payment Services Limited operates payment processing services for Halfords Limited. Similar arrangements are in
operation by other major retailers, some of which are currently being challenged by Customs & Excise. In line with other
retailers, no profit has been recognised from these arrangements. The Group currently holds an unrecognised contingent
asset of £3.6m (2004: £2.0m) dependent on the successful defence of the arrangements. Four Year Record
52 weeks 52 weeks 53 weeks 52 weeks
ended ended ended ended
29 March 28 March 2 April 1 April
2002 2003 2004 2005
£m £m £m £m
Turnover 519.8 525.8 578.6 628.4
Cost of sales (243.3) (244.4) (269.0) (290.7)
Gross profit 276.5 281.4 309.6 337.7
Operating profit before exceptional operating items and 
goodwill amortisation 51.5 50.8 79.2 92.2
Goodwill amortisation – (8.0) (13.7) (13.7)
Exceptional operating items – (9.3) – (0.2)
Operating profit 51.5 33.5 65.5 78.3
Loss on sale of business (2.3) – – –
Profit on disposal of fixed assets – – 6.4 –
Net interest payable (0.5) (21.9) (44.1) (14.2)
Profit on ordinary activities before taxation 48.7 1 1.6 27.8 64.1
Taxation on profit on ordinary activities (16.7) (6.5) (14.3) (24.2)
Profit on ordinary activities after taxation 32.0 5.1 13.5 39.9
Basic earnings per share n/a n/a 8.3p 18.5p
Basic earnings per share before goodwill amortisation and exceptional items n/a n/a 17.7p 24.4p
Halfords Group plc acquired Halfords Limited on 30 August 2002. Prior to this date Halfords Limited was a wholly owned
subsidiary of Boots Group plc. Prior to 30 August 2002 the financial information is based on the financial statements of
Halfords Limited. Consequently, the results across the periods reflect the differences in the capital and financing structure
under the different ownerships.
Halfords Annual Report and Accounts 2005 61 Shareholder Information
62 Halfords Annual Report and Accounts 2005
Analysis of Shareholders
As at 1 April 2005, the number of registered shareholders was 1,196 and the number of Ordinary Shares in issue was
227,936,743.
Number of Percentage of Number of Percentage of
holdings total shareholders shares share capital
Range of holdings
1-5,000 775 64.8 1,167,783 0.5
5,001-10,000 73 6.1 551,603 0.2
10,001-50,000 142 1 1.9 3,136,188 1.4
50,001-100,000 40 3.3 2,906,386 1.3
100,001-500,000 87 7.3 20,971,809 9.1
500,00 1 and above 79 6.6 199,202,974 87.5
Total 1,196 100.0 227,936,743 100.0
Held by:
Individuals 419 35.0 2,741,505 1.2
Institutions 777 65.0 225,195,238 98.8
Total 1,196 100.0 227,936,743 100.0
Results and Financial Calendar
Annual General Meeting 13 July 2005
Final dividend payable 1 August 2005
Trading Update 6 October 2005
Interim Results 24 November 2005
Annual General Meeting
To be held at 1 1.30am on Wednesday 13 July 2005 at the Stratford Moat House Hotel, Bridgefoot, Stratford on Avon,
Warwickshire, CV37 6YR. Each shareholder is entitled to attend and vote at the meeting. A separate circular relating to the
2005 Annual General Meeting and a Form of Proxy for use at that meeting accompanies this Annual Report and Accounts.
Dividend Payments
The recommended final dividend (if approved at the 2005 Annual General Meeting) will be paid on 1 August 2005 to
shareholders on the register on 17 June 2005.
Payment of Dividends by BACS
Many shareholders have already arranged for dividends to be paid by mandate directly to their bank or building society
account. The Company mandates dividends through the BACS (‘Bankers’ Automated Clearing Services’) system. The
benefit to shareholders of the BACS payment method is that the Registrar posts the tax vouchers directly to them, whilst
the dividend is credited on the payment date to the shareholder’s bank or building society account. Shareholders who have
not yet arranged for their dividends to be paid direct to their bank or building society account and wish to benefit from this
service should request the Company’s Registrar (address below) to send them a Dividend/Interest mandate form or
alternatively complete the mandate form attached to their dividend tax voucher.
Shareholder Information on the Internet
The Company maintains an investor relations zone on its website (www.halfordscompany.com) which allows access to
share price information, management biographies, copies of company reports and other useful investor information.
Halfords Group plc is registered in England and Wales (Number 4457314). Company Information
Halfords Annual Report and Accounts 2005 63
Registrars
Capita IRG Plc
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
www.capitaregistrars.com
Registered and Head Office
Halfords Group plc
Icknield Street Drive
Washford West
Redditch
Worcestershire
B98 0DE
www.halfordscompany.com
A copy of this Annual Report is 
being sent to all shareholders.
Copies are also available from 
the registered office shown above. 
The Report is also placed on the 
investor relations section of 
the Company’s website,
www.halfordscompany.com.
Auditors
PricewaterhouseCoopers LLP
Cornwall Court
19 Cornwall Street
Birmingham
B3 2DT
Joint Brokers
Merrill Lynch
2 King Edward Street
London 
EC1A 1HQ
Citigroup
33 Canada Square
London 
E14 5LB
Solicitors
Clifford Chance LLP
10 Upper Bank Street
London
E14 5JJ 64 Halfords Annual Report and Accounts 2005
England
Abingdon
Alperton
Altrincham
Amersham
Andover
Ashford
Ashton U Lyme
Aylesbury
Balham
Banbury
Barking
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Barnstaple
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Basingstoke
Bath
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Frome
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Godalming
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Grantham
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Halifax
Hanley
Harlow
Harrogate
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Isle Of Wight
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Kingston On Thames
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Loughborough
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Manchester
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Melton Mowbray
Middlesbrough
Mile End Road
Milton Keynes
Mitcham
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Newark
Newbury
Newcastle (2)
Newcastle/Lyme
Newhaven
Newton Abbott
North Shields
Northampton (2)
Northwich
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Nottingham (3)
Nuneaton
Old Kent Road
Oldham
Orpington
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Penrith
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Portsmouth
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Putney
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Reading (3)
Redditch
Redhill
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Romford
Rotherham
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Ruislip
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Salisbury
Scarborough
Scunthorpe
Selby
Sevenoaks
Sheffield (3)
Sheldon
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Shoreham
Shrewsbury
Sittingbourne
Skegness
Slough
South Shields
Southampton (3)
Southend
Southport
Spalding
Speke
St Albans
St Austell
St Helens
Stafford
Staines
Stamford
Stevenage
Stockport
Stockton On Tees
Stoke On Trent
Stratford On Avon
Stroud
Sudbury
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Sutton In Ashfield
Swindon
Tamworth
Taunton
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Thetford
Tonbridge
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Twickenham
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Waterlooville
Watford
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Wells
Welwyn G City
West Wickham
Weston S Mare
Weymouth
Wigan
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Wisbech
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Workington
Worksop
Worthing
Yate
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York (2)
Scotland
Aberdeen (2)
Airdrie
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Dumbarton
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East Kilbride
Edinburgh (3)
Elgin
Falkirk
Galashiels
Glasgow (3)
Greenock
Hamilton
Inverness
Kilmarnock
Kirkaldy
Livingston
Paisley
Perth
Peterhead
Stirling
Wales
Abergaveny
Aberystywith
Bangor
Barry Dock
Cardiff (3)
Carlisle
Carmarthen
Cwmbran
Haverfordwest
Llandudno
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Neath
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Rhyl
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Ireland
Blanchardstown
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Liffey Valley
Northern Ireland
Ballymena
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Belfast
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Craigavon
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Londonderry
Newtown Abbey
Retail Store Locations Designed and produced by
Mediasterling 020 7749 2000.
Printed by Sterling Financial Print.
Printed on Zanders Mega Matt using
50% recycled de-inked fibre and 50%
totally chlorine free pulp. Halfords Group plc
Icknield Street Drive
Washford West
Redditch
Worcestershire
B98 0DE
www.halfordscompany.com