Growth in services is a critical part of our strategy and our ability to provide these from approximately 900 fixed and mobile locations across the UK provides customers with a convenience unmatched by any other UK business.

Graham Stapleton

Chief Executive Officer

Autocentres

Full-year Autocentres revenue was £191.8m, growing 18.8% year-on-year and +1.4% on a LFL basis. Autocentres was also subject to a material COVID-19 impact with sales up to week 51 stronger, at +2.2% LFL. The acquisitions of McConechy's and Tyres on the Drive during H2 provide a significant opportunity in the medium-term as we successfully integrate these businesses into the Group. The underlying business, excluding the acquisitions, increased EBIT by over 40% to £7.8m, the third consecutive year of strong profit growth. This reflects the development of an enhanced operating model which also led to a significant improvement in customer service scores.

Group Services

Group Services revenue, which comprises fitting and repair services and the associated product, grew +8.9%, representing 26% of Group sales in FY20. We continued to expand our range of services, adding weCheck and new cycle care services in Retail, trialling on-demand fitting in Autocentres, and expanding our Mobile Expert vans from 3 to 75. Growth in Services is a critical part of our strategy and our ability to provide these from approximately 900 fixed and mobile locations across the UK provides customers with a convenience unmatched by any other UK business.

Online

Group online sales had another very strong year, with revenue growth of +17%, now accounting for 24% of Group sales in FY20. Growth was strong before and after the launch of our new Group web platform in February 2020, which provides customers with a vastly improved digital experience and, for the first time, gives them access to an integrated services offer across mobile, stores and garages through one website. The new web platform coped well with an unprecedented shift to online ordering during the COVID-19 lockdown, when physical store operations were severely curtailed. The importance of our store network, colleague expertise and services proposition continued to be evidenced by the strength of Click & Collect, with over 80% of orders placed on www.halfords.com picked up in stores.

B2B

Group B2B sales grew 25% year-on-year and represented 15% of Group sales in FY20. In the past year we have focussed on developing deeper relationships with key strategic partners to support growth within our key markets. This has been supported by investment in our technology infrastructure to streamline key customer and client processes. We have also broadened our proposition range to expand our B2B offering within motoring services.

FY21 Strategy Focus

In November 2019 we announced an acceleration of our strategy, emphasising the importance of growing our motoring services and B2B businesses. The strategy remains absolutely the right direction for Halfords but, given the unprecedented impact of the COVID-19 pandemic, we are moderating our near-term plan. COVID-19 has materially changed the retail outlook for the coming months and has overshadowed Brexit as the emerging risk. We have therefore adjusted our short-term focus to reducing cost and working capital, ensuring our colleagues are engaged in the success of the business and, of particular importance, adapting quickly to new customer trends. We will continue to transform the business and develop our customer strategy in FY21, but we will put greater emphasis on responding to emerging trends and laying solid foundations for FY22. Our areas of focus in FY21 are:

• A stronger emphasis on reducing the operating costs of the Group, including but not limited to:

• the closure of up to 10% of the Group's physical estate, having already exited 22 Cycle Republic stores and 5 Halfords stores and garages so far this year
• targeted rent reductions reflecting the current market dynamics

• a review of all GNFR contracts and the tendering of several key agreements
• revisiting the costs of our logistics network
• Continuing to grow the profitability and returns of our core categories, particularly Cycling, through buying efficiencies, more targeted promotional campaigns and working capital reductions.
• Developing our Halfords-branded customer proposition by continuing to transform our Group web platform and digital customer experience. In addition, we will invest in expanding our Services business, leveraging our financial services offer and growing our B2B channels.
• Swiftly integrating the acquisitions of McConechy's and Tyres on the Drive, using our best-in-class technology across the Services offer.
• Continuing to develop PACE, our digital operating platform in Autocentres, with a view to transferring best practice to services delivery in Retail and mobile vans.
• Expanding our Mobile Expert vans to under-served parts of the UK, increasing our original target of 100 vans to a revised target of 120 vans by the end of FY21.
• Upweighting investment in the engagement and development of our colleagues, ensuring they are strongly engaged in our transformation journey.

In FY21, we will be more focussed on delivering the most important initiatives that provide the quickest and most attractive returns, whilst building the underlying strength of the business for FY22 and beyond. As a consequence, we are planning for lower capital expenditure in FY21, which we now expect to be in the range of £20-30m. As trading conditions improve, however, we will seek to continue our transformation journey at pace, in line with the current strategy but adjusted for a new post-COVID-19 world.