Corporate Governance Statement

The Board confirms that during the year ended 30 March 2018, and as at the date of this report, the Company has fully complied, without exception, with the provisions of the UK Corporate Governance Code 2016 (the "Code"), and will continue to do so. A copy of the Code is available on the Financial Reporting Council's website at www.frc.org.uk.

This report, together with the other statutory disclosures and reports from the Audit, Nomination and Remuneration Committees, provides details of how the Company has applied the principles of good governance set out in the Code during the period under review.

The Company has also complied with the requirements under the Disclosure Guidance and Transparency Rules, the Listing Rules and the BIS Directors' Remuneration Reporting regulations and narrative reporting requirements.

Board Composition

As at the date of this report, the Board of Directors comprised of six members; the Non-Executive Chairman, three other Non-Executive Directors and two Executive Directors. The composition of the Board is as set out in the Directors' Report and the biographies of individual Directors, including any other business commitments, are available in the Board of Directors. The Board believes it has an appropriate balance of Executive and independent Non-Executive Directors having regard to the size and nature of the business.

During the year, on 1 February 2018, our Chairman was appointed as Senior Independent Director of Superdry plc.

Chairman 1

Executive Directors 2

Non-Executive Directors 3

Board Changes

In May 2017, Jill McDonald tendered her resignation as Chief Executive Officer in order to take up a senior position at Marks and Spencer plc. Jill was appointed in May 2015, and made a positive impact across the business. Jill left Halfords on 29 September 2017 with a strong team and clear strategy to drive future growth. On 13 September 2017, we completed our search for a new Chief Executive Officer and welcomed Graham Stapleton to the business on 15 January 2018. In the period between Jill McDonald leaving the Company and Graham Stapleton joining, Jonny Mason, Chief Financial Officer, acted as Interim Chief Executive Officer.

As announced on 27 March 2018, Jonny Mason resigned from the position of Chief Financial Officer to take up the position of Group Finance Director at Dixons Carphone plc. Jonny will remain as Chief Financial Officer until the end of his notice period in September 2018. The process is under way by the Nomination Committee to find his replacement.

On 22 May 2018, it was announced that Keith Williams will be joining Halfords as Chairman on 24 July 2018. As mentioned in last year's annual report, Dennis Millard will have been in office for nine years this year, and so in accordance with the Code and best practice, Dennis will stand down at the conclusion of the Annual General Meeting ("AGM") on 24 July 2018.

Board Independence

The Company recognises the importance of its Non-Executive Directors remaining independent and the Code recommends that, at least half of the Board of Directors, excluding the Chairman should comprise of Non-Executive Directors, determined by the board to be independent in character and judgement and free from relationships or circumstances which may affect or could appear to affect the Director's judgement. Following a rigorous review, the Board considers David Adams, Claudia Arney and Helen Jones to be independent in character and judgement in accordance with the Code. As a result, in compliance with the Code, at least half of the Board, excluding the Chairman, are deemed to be independent. In accordance with the Code, the Chairman, Dennis Millard, was considered independent upon his appointment

Director Tenure and Board Succession

Succession planning for the Board continues to be ongoing and will be considered in more detail during the annual evaluation of the Board performance. It is also expected that, following the appointment of the new Chairman and Chief Financial Officer, the new Chairman will review the composition, skills and experience of the Board. This is especially relevant given that both David Adams and Claudia Arney have already served several years and will both be due to stand down in the next two years.

Re-election

In compliance with the Code and the Company's Articles of Association, the majority of the Directors on the Board as at 22 May 2018, will seek re-election at the 2018 Annual General Meeting ("AGM"), these being, David Adams, Helen Jones, Claudia Arney and Jonny Mason. Graham Stapleton and Keith Williams will be elected for the first time at the 2018 AGM.

Board Responsibilities

The Board is committed to ensuring that it provides leadership to the business as a whole, having regard to the interests and views of its shareholders and other stakeholders. It is also responsible for setting the Group's strategy, values and standards. The following links give details of the Group's business model and strategy.

The roles of Chairman and Chief Executive Officer are separate and clearly defined, with the division of responsibilities set out in writing and agreed by the Board.

The Chairman is responsible for the effective leadership, operation and governance of the Board and its Committees. He ensures that all Directors contribute effectively in the development and implementation of the Company's strategy whilst ensuring that the nature and extent of the significant risks the Company is willing to embrace in the implementation of its strategy are determined and challenged.

The Chief Executive Officer is responsible for the management of the Group's business and for implementing the Group's strategy.

Further details and the definitions of the roles are available at www.halfordscompany.com/investors/governance/division-of-responsibilities-between-the-chairman-and-chief-executive-officer

The Directors, together, act in the best interests of the Company via the Board and its Committees, devoting sufficient time and consideration as necessary to fulfil their duties. Each Director brings different skills, experience and knowledge to the Company, with the Non-Executive Directors additionally bringing independent thought and judgement. This combination seeks to ensure that no individual or group unduly restricts or controls decision-making.

The Nomination, Audit and Remuneration Committees' full Terms of Reference are available on the Company's website at www.halfordscompany.com/investors/governance/our-committees or on request from the Company Secretary.

Board Responsibilities

The key responsibilities of Board members are set out in the chart in the Corporate Governance Report.

A formal schedule of matters reserved for the Board is in place and regularly reviewed.

This is available at www.halfordscompany.com/investors/governance/ matters-reserved-for-the-board

To discharge these responsibilities effectively, the Board has additionally implemented a system of delegated authorities, which is described in the Corporate Governance Report. This enables the effective day-to-day operation of the business and ensures that significant matters are brought to the attention of management and the Board as appropriate. It is through this system that the Board is able to provide oversight and direction to the Executive Directors, the Senior Management Team and the wider business.

Matters Reserved for the Board include: Authority; Strategy and Management; Structure and Capital; Investor Relations; Audit, Financial Reporting and Controls; Nominations to the Board; Executive Remuneration and material contracts.

Board Meetings and Attendance

1. Until Jill McDonald's resignation in September 2017, she was a member of the Nomination Committee. In November 2017, the Terms of Reference of the Nomination Committee were amended, in accordance with best practice, to reflect that no Executive Director be allowed to become a member of the Nomination Committee.
2. David Adams was unable to attend the Board meeting, the Audit Committee Meeting, the, Remuneration Committee meeting and the Nomination Committee meeting on 22 March 2018 due to an unexpected and pressing commitment in relation to another company.

The table above shows the attendance of Directors at the meetings of the Board and of the Audit, Remuneration and Nomination Committees during the year ended 30 March 2018. In addition to those scheduled meetings, three further unscheduled Board and Remuneration Committee meetings were convened to discuss and approve the exit remuneration arrangements for Jill McDonald and Jonny Mason, and to approve the appointment of Graham Stapleton as Chief Executive Officer and his associated remuneration package. Furthermore, two additional Board calls were held during the period to review and approve the 20 week and Q3 trading statements. These additional meetings were all quorate, and all directors received the relevant papers and provided the required approval.

Other members of the Senior Management Team and advisors attended Board meetings by invitation as appropriate throughout the year.

At each Board meeting, the Chief Executive Officer delivers a high level update on the business, and the Board considers specific reports, reviews business and financial performance, key initiatives, risks and governance. In addition, throughout the year the Senior Management Team and other colleagues deliver presentations to the Board on proposed initiatives and progress on projects.

Board Activity in FY18

Key Board discussions and actions during the period

Board Committees

The Board's principal Committees are the Audit Committee, the Nomination Committee and the Remuneration Committee, as detailed in the chart in the Above. A Corporate Social Responsibility ("CSR") Committee was established in December 2015, comprising of Directors and senior management and chaired by a Non-Executive Director. Each Committee has its Terms of Reference approved and regularly reviewed by the Board.

The Terms of Reference for the Committees are available at www.halfordscompany.com/investors/governance

In the following sections (Nomination Committee Report, Corporate Social Responsibility Committee Report, Audit Committee Report, Remuneration Committee Report) each Committee Chairman reports how the Committee he/she chairs discharged its responsibilities in FY18 and the material matters that were considered.

Following each meeting of a Committee, the Committee Chairman reports to the Board. Whilst not entitled to attend, other Directors, professional advisors and members of senior management attend when invited to do so. The Auditor attends Audit Committee meetings by invitation. No person is present at Nomination Committee meetings or Remuneration Committee meetings during discussions pertinent to them. The Company Secretary acts as the secretary to each Committee.

A Disclosure Committee, made up of a minimum of two Directors, approves the final wording of market announcements prior to release. There were six Disclosure Committee meetings during the period.

The day-to-day investment decisions of the Group are approved by an Investment Committee, chaired by the Chief Financial Officer. Similarly, the treasury needs of the Group are managed by the Treasury Committee, chaired by the Chief Financial Officer; the other members are senior members of the Finance and Treasury teams.

The Board may establish other ad hoc committees of the Board to consider specific issues from time to time. No such committees were formed during the year.

Concerns

The Chairman seeks to resolve any concerns raised by the Board, whether raised in a Board meeting or in another forum. Where raised and unresolved in a Board meeting, the unresolved business can be recorded on behalf of a Director in the minutes of the relevant meeting. A resigning Non-Executive Director would also be able to raise any concerns in a written letter to the Chairman, who would bring such concerns to the attention of the Board. No such concerns have been raised throughout the period.

Skills and Experience of the Board

Delivering the journey

The below graphic illustrates the number of Directors on the Board who have the relevant skills and experience.

Diversity

The Group recognises the importance of diversity, including gender diversity, at all levels of the organisation. The Group's Diversity Policy (the "Policy") is reviewed annually and sets out our commitment to eliminating unlawful discrimination and promoting equality of opportunity. The Policy is applied to the Group including the Board and it is considered that the background and experience brought to the Board by each individual demonstrates the Board's diversity and commitment to its Diversity Policy.

The Group does not apply a fixed quota on diversity to decisions regarding recruitment. The Nomination Committee considers the Policy and ensures we have a sufficiently diverse Board in terms of age, gender and educational and professional background. The Nomination Committee also keeps under review the structure, size and composition of the Board and considers capability and capacity to commit the necessary time to the role in its recommendations to the Board. The intention is to ensure the appointment of the most suitably qualified candidate to complement and balance the current skills, knowledge, experience and diversity on the Board. Those appointed are deemed to be the best able to help lead the Company in its long-term strategy. At Halfords a third of the Board is female, which is in line with the recommended target as published by the Hampton-Alexander Review ("Improving Gender Balance in FTSE Leadership") in November 2017. The charts below demonstrate the gender split at Board level, within senior management and across the workforce as a whole.

Board Level

Female

Male

33%

67%

Senior Management Level

Female

Male

26%

74%

All Colleagues

Female

Male

27%

73%

The Board is well placed by the mixture of skills, experience and knowledge of its Directors to act in the best interests of the Company and its shareholders.

Effectiveness

Directors' Induction

New Directors receive a full, formal and personally tailored induction on joining the Board. This includes meeting with the Directors, the executive team, and other key personnel, together with visiting the Group's stores, Autocentres and other operational and distribution sites. The induction also includes training on governance and the Group's corporate social responsibility strategy, which focuses on four key areas, these being colleagues, community, environmental management and responsible trading. The induction programme facilitates their understanding of the Group and the key drivers of the business' performance. Graham Stapleton, received a full tailored induction following his appointment in January 2018. The new Chairman, Keith Williams, and the new Chief Financial Officer will receive the same upon their appointment.

Directors' Training and Development

All Directors have various opportunities for ongoing development and support via:

• a programme of Support Centre, distribution centre, Halfords, Cycle Republic and Tredz and Wheelies retail stores and Autocentres outlet visits;
• reviews with the Chairman to identify any training and development needs;
• advice on governance, regulatory and legislative changes affecting the business or their duties as Directors from the Company Secretary;
• access to independent professional advice at the Company's expense; and
• membership of the Deloitte Academy, a training and guidance resource for boards and directors.

Board Evaluation

In accordance with the Code, the Board is responsible for undertaking a formal and rigorous annual evaluation of its own performance and that of its Committees and individual Directors. In FY18 the process was facilitated externally by the Board, with the assistance of Oliver Ziehn of Lintstock. Neither, Mr Ziehn nor Lintstock has any other connection with the Company. This external review satisfied the Code's recommendation that an external review should be undertaken externally at least every third year, the previous one was undertaken in 2015.

Progress on FY17 evaluation (internal review)

The outcomes of the internal Board evaluation for FY17 were reported in the 2017 Annual Report. Details of progress made on these areas are set out below:

FY18 Board Performance Evaluation (externally facilitated review)

The responses to the external evaluation surveys were submitted by the Directors and then collated by Lintstock. Many areas were positively or highly rated such as: Board Dynamics, Management of Meetings; Board Support; Focus of Meetings; Strategic Oversight; Risk Management and Internal Control. The responses also indicated various areas on which the Board should focus in the coming year. The priorities for the incoming Chairman in their first year included: supporting the new Chief Executive; addressing strategic issues; developing relationships with stakeholders; understanding the business and markets; and reviewing the Board composition. The priorities for the Board for the coming year included: supporting the Chief Executive (particularly in regard to strategy); focussing on strategy; completing recruitment; and addressing talent and succession. These matters will be considered, developed and monitored throughout the coming year.

Directors and their Other Interests

Details of the Directors' service contracts, emoluments, the interests of the Directors and their immediate families in the share capital of the Company and options to subscribe for shares in the Company are shown in the Directors' Remuneration Report.

In line with the requirement of the Companies Act 2006, each Director has notified the Company of any situation in which he or she has, or could have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the Company (a situational conflict), and a register of these is maintained by the Company Secretary.

During the period Claudia Arney notified the Company of her interest in Aviva plc, of which she is a director, following Aviva plc's appointment as underwriter for the Group's main liability insurance policies (property, motor, employee and product). Claudia did not take part in any discussions or negotiations relating to either the insurance renewal or the contract in particular.

All Directors are aware of the need to consult with the Company Secretary should any possible situational conflict arise, so that prior consideration can be given by the Board as to whether or not such conflict will be approved.

Internal Control and Risk Management

Overall responsibility for the system of internal control and reviewing its effectiveness rests with the Board. This involves ensuring that there is a process to identify, evaluate and manage any significant risks that may affect the achievement of the Group's strategic objectives.

The Board has conducted an annual review of the effectiveness of the systems of internal control during the year, under the auspices of the Audit Committee. The Audit Committee provides the Board with an independent assessment of the Group's financial position, accounting affairs and control systems. In addition, the Board receives regular reports on how specific risks that are assessed as material to the Group are being managed. For further information on the Company's compliance with the Code provisions relating to the Audit Committee and Auditor please refer to the Audit Committee Report.

The risk management and internal control system is designed to manage, rather than eliminate, the risk of failing to achieve business objectives and can provide only reasonable, and not absolute, assurance against material misstatement or loss. The Board's policy on internal control is implemented by management through a clearly defined operating structure with lines of responsibility and delegated authority.

An ongoing process for identifying, evaluating and managing the significant risks faced by the Group and assessing the effectiveness of related controls has been established by the Board to ensure an acceptable risk/reward profile across the Group. The Group's corporate risk register is maintained by the Internal Audit function. It records key risks, with impact and likelihood assessments, mitigations and ongoing developments. It is updated regularly, following structured interviews with managers and executives across the Group. The accuracy of the register is validated through a rolling programme of independent internal audits. The register is scrutinised in detail annually by the Audit Committee. Any material change in the register is flagged to the Audit Committee by the Internal Audit function within regular internal audit progress reports. The process has been in place throughout the period ended 30 March 2018, and up to the date of approving the Annual Report and Financial Statements.

Our process for identifying, evaluating and managing the significant risks faced by the Group and assessing the effectiveness of related controls routinely identifies areas for improvement, but the Board has neither identified nor been advised of any failings or weaknesses that it has determined to be material or significant. Among the routine areas for improvement, the Board has considered certain control enhancements in areas such as cash recording in stores, supplier master file amendments, and user access rights to IT systems.

The Board considered its appetite in relation to the Group's top risks, determining that the risks and mitigating actions were appropriate to the level of risk that was both acceptable to, and incumbent within, a listed business. More information on the Company's key risks and uncertainties, and its risk assessment methodology, is shown in Our Principal Risks and Uncertainties.

Shareholder Engagement

The Board is committed to effective communications with its shareholders and, accordingly, has a strong Investor Relations ("IR") programme that seeks to actively engage with shareholders.

This programme includes formal presentations of full year and interim results. These presentations, along with the Annual Report and Accounts, are the primary means of shareholder communication during the year. Additionally, the Chief Executive Officer, Chief Financial Officer and IR Director have met with analysts and institutional shareholders during the period to keep them informed of significant developments and help maintain a balanced understanding of their issues and concerns. The IR Director and Company Secretary bring to the attention of the Board any material matters of concern raised by the Company's shareholders, including private investors.