Chairman's Statement

I am pleased to report that Halfords has delivered a strong set of results as we continue to build on our consistent and well-executed strategy.

During the financial year we achieved sales growth in all of our product categories. Total sales growth was 7.2%, which generated profit before tax of £90.2m, representing earnings per share of 29.3 pence, up 13.6%.

These results, together with the Board’s confidence in the strategy, enable the Board to recommend to shareholders a final dividend of 10.35 pence, which, with the interim dividend of 4.75 pence, takes the total dividend for the year to 15.10 pence, representing growth of 9.0% on last year’s dividend of 13.85 pence.

Our successful business model offers customers a wide range of competitively priced products in each of our areas of focus that we further differentiate from our competitors by service excellence. We have the UK’s largest range of car parts, we are the leading player in
the UK cycle market, and we are the UK’s leading provider of in-car technology solutions.

Richard Pym

Chairman

Halfords employs around 10,500 people and the entire Halfords team, from colleagues based in stores throughout the UK, Republic of Ireland and Czech Republic to those in our offices and distribution
centres, share a common goal to deliver market leading knowledge of a wide choice of products, and great service to our customers. It is the hard work and dedication of all our colleagues that has generated
these strong results.

We have continued to develop our store portfolio. At the financial year end we had a total of 450 stores, including 390 superstores, with the significant majority located in popular retail parks. We are developing our smaller, neighbourhood store format in smaller communities, and we have five stand-alone specialist cycle shops under the Bikehut brand. Internationally, we have 17 stores in the Republic of Ireland, and we are growing our presence in Central Europe, with three stores now trading in the Czech Republic and we have
plans to open in southern Poland.

The financial year also saw us successfully introduce replacement IT systems into our stores. This completes a five-year programme during which all of our key business systems have been upgraded from a vintage set of bespoke platforms to a modern, integrated set of leading software packages.

We have incorporated into the Annual Report a more comprehensive Corporate Social Responsibility report than in previous years, and this includes extensive details of our activities to improve our environmental impact at every stage in the supply chain. We have also introduced new products that allow our customers to purchase with environmental consideration in mind. As an example during the year we have introduced a range of car cleaning products under the Naturals brand, that are water based and biodegradable,
ensuring minimal environmental impact.

During the year, the business partnered its first ever Charity of the Year, the Meningitis Trust. Through a series of charitable events across our stores, awareness of the causes and symptoms of meningitis has been increased for both colleagues and customers, and we have been successful in raising over £100,000. We are also proud to have formed a unique partnership with the Great Britain Cycling Team in this important Olympic year, as the first ever
commercial sponsor of the entire team.

Our former Chief Executive Ian McLeod resigned earlier in the year to take up a senior retail position in Australia and he left Halfords on 29 February 2008. On behalf of the Board I would like to thank Ian for his contribution to Halfords, and we wish him well in his future career.

Paul McClenaghan, Director of Trading, and Nick Wharton, Finance Director, are acting joint Managing Directors in the interim period, reporting to me. With their senior team they have continued to manage the business very effectively since Ian left and I would like to thank them for their efforts. As regards filling the Chief Executive vacancy, we are making good progress and we will update shareholders when the process is complete. 

We are supported by a very capable non-executive team of Nigel Wilson, Keith Harris and Bill Ronald who bring to the business a wide range of experience and who are very committed to the success of Halfords. We have undertaken an annual assessment of the Board’s effectiveness and there were no material issues requiring rectification, and some interesting ideas were generated for further improving the performance of individuals and the Board.

Through share ownership and share incentive schemes, over 2,400 of our colleagues have a personal stake in Halfords. In June 2007 we awarded approximately 3.9 million shares to 2,961 colleagues under our Company Share Option Scheme and over 2,000 colleagues now participate in our annual Sharesave schemes.

The wider economy in the UK is currently undergoing a period of adjustment which is affecting many households and as a result the retail sector of the economy is likely to experience subdued demand. Halfords has many defensive characteristics and the Board is confident in the strength of the Halfords customer proposition and business model.  However, we must be cautious on the effects of the wider economic changes now occurring, which the stock market has already reflected in the valuation of retail companies. This period of slower growth in the UK economy is a cyclical event, one of many Halfords has endured over its 100 years, and we look forward with confidence to the next period in our development.­

Richard Pym
Chairman

4 June 2008