Colleagues: finding, supporting and developing great people throughout their Halfords journey

Community: helping to keep families safer on their journeys and encouraging an active lifestyle

Environmental Management: managing our impact on the environment in a responsible and ethical manner

Responsible Trading: building and maintaining the highest standards amongst our suppliers

The CSR Policy is available at www.halfordscompany.com/investors/governance

10,000

Number of colleagues

85%

Colleague engagement score (2017: 80%)

33%

Halfords Retail Turnover

Awards

Sunday Times #9 Developing Potential Award

FTSE4GOOD Index

Colleagues

Developing, rewarding and retaining our colleagues, ensuring they are fully engaged to drive our long term sustainable growth ambitions

A great and improving place to work

Last year, we celebrated our position at number 13 in 'The Sunday Times 25 Best Big Companies To Work For'. This year, we were absolutely delighted to improve further and to take 9th place as one of three retailers in the Top 10.

In addition, we were delighted to win the Developing Potential award presented by Department for Work and Pensions for a second time. The award recognises the work Halfords provides to support Prisoner Rehabilitation, the Gears Apprenticeship programme, the Traineeship scheme and the Aspire programmes to accelerate career progression into management roles.

Finding, supporting and developing great people throughout their Halfords journey

As indicated last year, we aim to be an inclusive employer of choice, giving colleagues equal opportunities to prosper within rewarding and inspiring teams. We strive to ensure all colleagues enjoy their work and have opportunities to consistently amaze our customers through their friendly expertise. To achieve this, we continue to invest heavily in our 'Gears in Retail', apprenticeship and leadership development programmes and actively look for ways in which we can promote and increase the diversity of our workforce.

We aim to meet business objectives by motivating and encouraging all colleagues to be responsive to the needs of our customers and continually improve operational performance. This aim is delivered through a range of structured training and development programmes, such as 'Gears in Retail', where Retail colleagues progress through a structured series of e-learning, technical workshops, one-on-one coaching and shop floor experience modules and are then recognised for their success through certification, career progression and increased pay awards. Our Performance Cycling division, which trades as Tredz and Wheelies, is undertaking a series of colleague training and development programmes. These include; customer focused training for retail and call centre colleagues; offering apprenticeships for colleagues in business, administration, customer service, management and team leading. Those colleagues who complete these programmes achieve nationally recognised qualifications. In addition, those colleagues who work in our Cycle Republic stores also undertake store supplier training which is provided by various major cycling brands.

Halfords Autocentres runs, in conjunction with the Institute of Motor Industry ("IMI"), a number of Technical Training Courses that are designed to develop colleagues' skills. Similar to Retail, it has its own version of the 'Gears in Retail' programme which supports colleagues' development and rewards via a pay matrix. Autocentres has become the first organisation in 50 years to be authorised by the DVSA to train MOT Testers in-house. Autocentres has embarked on training its technicians in the latest Hybrid technology and has worked with the IMI to train 392 technicians in the IMI Hybrid Level 2 in Servicing.

We also run a series of Leadership Development programmes, called Aspire, to identify, nurture and develop colleagues across the Group. This continues our drive to develop and therefore promote, from within.

We continue to invest in our apprenticeship programme in both our Retail and Autocentres businesses. In our Retail business, this continued investment has meant that since June 2017 all new starters in our shops are enrolled onto our Retail Level 2 Gears Apprenticeship Programme. And at Halfords Autocentres we have one of the largest apprenticeship schemes in light vehicle maintenance in the UK. We currently have 193 apprentices at differing stages of our three-year programme, and expect a further 100 to join in 2018.

We are committed to providing equality of opportunity to colleagues and potential colleagues. This applies to recruitment, training, career development and promotion for all colleagues, regardless of physical ability, gender, sexual orientation or gender reassignment, pregnancy and maternity, race, religious beliefs, age, nationality or ethnic origin. Full and fair consideration is given to employment applications by people with disabilities wherever suitable opportunities exist, having regard to their particular aptitudes and abilities. There is a Group Diversity Policy which is reviewed annually by the Board and training and career development support is provided where appropriate. Should a colleague become disabled, efforts are made to ensure their continued employment with the Group, with retraining being provided if necessary.

We have an established framework of communications, which provides colleagues with information on matters of concern to them and on overall business performance. We seek to encourage the engagement of every colleague to ensure the delivery of the Board's commitment to high standards of customer care and service provision. This includes a programme of regular conferences to share progress, strategy and direction, a monthly magazine for all Group colleagues, team meetings known as 'huddles', a weekly blog from the Chief Executive Officer, as well as channels to share operational information.

A Whistleblowing Policy and supporting procedures enable colleagues to report concerns on matters affecting the Group or their employment, without fear of recrimination. In addition, we do not tolerate discrimination, harassment or bullying in any aspects of our business operations. Appropriate and robust policies and procedures are in place for reporting and dealing with such matters.

Friendly expertise

As a business, one of our central strategies is to offer great products that are delivered with great service. This is one of the five key strategic pillars of our business. We refer to it as 'Service in Our DNA'. To achieve the highest possible levels of service we invest heavily in training our colleagues. As part of this investment we have developed a qualification programme called 'Gears in Retail'. This plays a key role in enabling retail colleagues to achieve industry recognised qualifications. They are rewarded as they progress 'through the gears' by gaining experience and qualifications.

All colleagues complete Gear 1 within three months of starting. Gear 2 involves a nine-month programme leading to an expert level of knowledge with a specialism in either Auto & Leisure or Cycling. By the end of FY18, over 70% of the eligible headcount were trained to Gear 2 level. Colleagues can also complete Gear 3 if nominated which gives them 'technician' status in either Auto or Cycling and enables them to complete complex fits and repairs. So far, we have around 10% of eligible colleagues trained to Gear 3 level.

We continually enhance and update our training programmes. This year we delivered additional training following new car seat legislation and the colleagues who work in our in-store 'Bikehuts' benefited from specialist training on electric bikes (e-bikes).

In accordance with our aim to lead the way in the repair of electric and hybrid cars, we also began a programme to have a trained mechanic at each of our Autocentres in 2018. As mentioned above we were one of the first to deliver a new Institute of Motor Industry ("IMI") Level 2 Award and our aim is to train more than 300 colleagues to become MOT testers every year.

We have a policy of continuous improvement to support ongoing development. We use a blended learning approach which encourages colleagues to attain more skills and progress their career throughout their Halfords journey. In 2017, thousands of colleagues took advantage of our ongoing development programmes. We operate a programme named 'Aspire', which is a guided learning suite that offers individuals the opportunity to take their careers further and become leaders. Since it began, 420 colleagues have benefited from the Aspire programme to graduate to new roles as an Assistant Manager or a Store Manager. One of the additional benefits of Aspire is that over 80% of store manager vacancies are filled internally.

Right job, right person, right time

We recognise the value that diversity brings and we continue on our journey to address the balance in some inherently male-dominated areas. We understand that this will take time but in recent years we have made great progress on our gender strategy. As an example, 27% of our total population of employees are female (which is an increase from 23% in 2017). We have also introduced development resources aimed specifically at supporting women.

In our Retail business, we continue to invest in our apprenticeship programme and will be launching the new apprenticeship standards this academic year. In addition, our traineeship programme for NEETS (not in education, employment or training) has resulted in the placing of 159 trainees to date.

Our work at Onley Prison where we train inmates to build and repair bikes, with a view to offering future employment for those who successfully pass our qualifying criteria, has been a great success. We are very proud that this programme won Retail Week's 2017 'CSR Initiative of the Year'. We have built on this success and during the year opened a second Cycle Academy at Drake Hall Women's Prison. Upon release, one of the graduates of our Cycle Academy started as a bike technician at one of our stores and is now training to be an Assistant Manager.

A commitment to reducing our Gender Pay Gap

The Gender Pay Gap Report highlighted that across the Halfords Group of companies, our mean and median hourly pay gap is less than the national average, with a women's mean hourly rate being 6.12% lower than men's and the median hourly rate 2.83% lower than men's.

But our focus remains on two areas, firstly increasing the overall number of women at Halfords and secondly increasing the number of women appointed into and promoted into more senior roles, with the number of women in senior management roles continuing to grow.

This has seen us enhance our recruitment process to ensure more females are appointed, and managers have been retrained to support this.

Our internal progression programmes are reviewed and monitored to ensure increasing levels of female applicants and we have also enhanced our maternity pay package, whilst additionally providing flexible work patterns to match the needs of a broad range of colleagues.

Our Gender Pay Metrics can be found online at www.halfordscompany.com/media/388689/2017-Gender-Pay-Metrics.pdf

Diversity

Total Women

Female

Male

27% (2017: 23%)

73%

Women on the Board

Female

Male

33% (2017:50%)

67%

Women in Senior Management Team

Female

Male

26% (2017: 40%)

74%

Community

Using our knowledge and expertise to benefit the communities around us

Helping to keep families safer on their journeys and encouraging an active lifestyle

We continue to believe that we have a key role to play in encouraging people to cycle more as part of an active lifestyle. To this end, we have continued with our school bike workshops, focused on primary school children. We have increased our investment by 44% and added an additional 715 schools to our database to help drive attendance. Pleasingly, Customer feedback has improved +5% Year on Year.

In June, we supported Bike Week 2017 with Cycling UK and continue to grow our relationship with Bikeability. We are currently looking at how we can increase our focus in this area next year.

>30,000

People benefited from free workshops

Case Study

Journey of a Lifetime

Last year we created our 'Journey of a Lifetime' competition. This enables the winners to undertake an epic journey with their fellow colleagues. It not only provides a great experience for them but is also used to raise funds for the NSPCC which is our nominated charity as it was selected by a vote of our colleagues.

Following the success of the first trip in February 2017, when a team of colleagues raised funds, collected bikes, loaded a container and followed it over to Gambia, where they met with partners on the ground and delivered bike workshops to local children, we have repeated this competition this year. The 2018 winners trekked to Everest Base Camp where they built a bike and hung pennants which had been created specially by children who have benefited from holidays provided by NSPCC. The team raised £25,233.94 for NSPCC. It was a tough but hugely beneficial trip and the winning colleagues really did experience a 'Journey of Lifetime'.

Case Study

3-Gears training

In 2013 we launched '3-Gears', a qualification programme that trains and rewards colleagues for gaining expertise.

The programme is now well embedded and is absolutely core to our customer-centric, service-led proposition.

80% of our customers want some form of assistance with their purchases and so it is imperative that we have a team of engaged friendly experts.

The three Gears represent the different stages of qualification:

GEAR 1 – Gear 1 applies to all colleagues and is completed over their first three-month period with Halfords. We use structured e-learning modules that cover health & safety, processes & policies, retail skills and customer service. The outcome is that all store colleagues will be qualified to serve customers confidently and receive a pay award.

GEAR 2 – Gear 2 involves a nine-month training programme which leads to an expert level of product knowledge, with a specialism in either motoring or cycling. Learning is through e-learning, in-store practical and face-to-face training programmes. There are regular refresher courses for Gear 2 colleagues and a pay award for those who attain this level.

GEAR 3 – Gear 3 colleagues are our Technicians. They are product experts who are qualified to perform more advanced services. They keep their skills and knowledge current and market leading - through workshops, attending product and trade shows and by linking with and visiting suppliers. Our Technicians also receive industry recognised qualifications, continuous professional development and a pay award.

At the end of FY18, over 70% of our colleagues had qualified for Gear 2 and we had over 700 Gear 3 level colleagues. There are many benefits of this investment in training. We have more multi-skilled colleagues; an average of eight 'Gear 2' trained fitters per store, up from only a handful three years ago. The benefits of this training are demonstrated by our improved colleague engagement score and 9th placing in the Sunday Times Best Big Companies To Work For.

Environment

The environmental resources Halfords uses in its operations.

Managing our impact on the environment in a responsible and ethical manner

We know that our work has an impact on the environment and that we have a duty to manage that impact in a responsible and ethical manner. We do this through identifying all significant environmental impacts and putting processes into place to prevent, reduce and mitigate them. To meet our commitment of protecting the environment, we aim to:

• comply with all relevant environmental legislation;
• operate our business in a way that protects the environment;
• promote environmental awareness to colleagues and enlist their support in improving the Company's performance with training and instruction;
• minimise waste by making sure processes are as efficient as possible;
• look to reduce energy and water usage;
• promote recycling internally and with our suppliers and customers;
• minimise the environmental impact of our logistics activities; and
• continually develop our environmental management system.

Additionally, we already ensure that our suppliers give preference to the use of recycled materials in the manufacturing and packaging of our goods and to help achieve this we have a clause in our standard terms of business with the suppliers who provide the goods that are sold in our stores which requires them to: i) use reasonable endeavours to minimise the packaging use; and ii) conduct an annual review of their packaging to make sure they are using recycled or recyclable materials wherever possible.

Global Greenhouse Gas Emissions

Responsible Management

Building and maintaining the highest standards amongst our suppliers

Responsible Trading

We are committed to maintaining the highest standards amongst our suppliers. We are strongly opposed to the exploitation of workers and we will not tolerate forced labour, or labour which involves physical, verbal or psychological harassment, or intimidation of any kind.

We will not accept human trafficking or the exploitation of children and young people in our business and undertake all possible steps to ensure that these high standards are maintained. We regularly review related policies to ensure that they remain up-to-date and fit-for-purpose.

Our principles are based on International standards, including the International Labour Organisation (ILO) conventions and recommendations, which in turn are based on the United Nations (UN) Universal Declaration of Human Rights and Convention on Rights of the Child.

As required by applicable regulation we have set out our Modern Slavery Statement on our website and are conducting an audit of our supply chain. While this audit is not yet fully complete the data and response received so far has been extremely positive and no instances of unacceptable conduct have been reported.

Read more online at http://www.halfordscompany.com/investors/governance/modern-slavery-statement

41,965

Bikes recycled to date