REG-Halfords Group PLC Halfords Group PLC: Annual Financial Report
29/07/2021 07:15
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Halfords Group PLC (HFD)
Halfords Group PLC: Annual Financial Report
29-Jul-2021 / 07:10 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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Halfords Group plc
Annual Report and Accounts for period ended 2 April 2021
including the Notice of Annual General Meeting ("AGM") - convened for 8
September 2021
The Company announces that the Annual Report and Accounts for the period
ended 2 April 2021 and Notice of Annual General meeting of the Company,
have been posted or otherwise made available to shareholders and published
on its website 1 www.halfordscompany.com.
The Company's 2021 AGM will be held at Halfords Group plc, Support Centre,
Icknield Street Drive, Washford West, Redditch, B98 0DE on Wednesday 8
September commencing at 3:00pm.
As detailed in the Notice of AGM, in light of the ongoing coronavirus
pandemic and current government guidance, it is expected that the 2021 AGM
will be held in a streamlined manner similar to last year. The health and
well-being of our colleagues, shareholders and the wider community in
which the Company operates is, and will continue to be, of paramount
importance to us. As the social distancing requirements have now been
lifted in England, the Board is optimistic that shareholders will be able
to attend the AGM in person. However due to the uncertainty with regards
to the coronavirus pandemic there is still a possibility that the UK
Government's restrictions and/or guidance on indoor public gatherings are
reinstated prior to the AGM, because of this the Board recommends to
shareholders that they cast their votes through the use of a proxy.
Details of how to do this can be found in the Notice of AGM.
The Board is committed to ensuring that shareholders can exercise their
right to ask questions. Shareholders will be able to submit questions to
the Directors in advance of the AGM via email to the Company Secretary
(tim.ogorman@halfords.co.uk). Written answers to all questions received
will be sent directly to shareholders by email and answers to frequently
asked questions will, to the fullest extent practicable, be published on
the Company's website ahead of the meeting or, to the extent that has not
been possible, will be addressed at the meeting itself.
In accordance with Listing Rule 9.6.1, a copy of the Annual Report and
Accounts and the Notice of Annual General Meeting of the Company have been
uploaded to the National Storage Mechanism and will be available for
viewing shortly at
2 https://data.fca.org.uk/#/nsm/nationalstoragemechanism
Tim O'Gorman
Company Secretary
Halfords Group plc
The Appendix to this announcement is a supplement to our preliminary
statement of Financial Results made on 17 June 2021 (the "Final Results
Announcement"). It contains the information required pursuant to
Disclosure Guidance and Transparency Rule 6.3.5 that is in addition to the
information communicated in the Final Results Announcement and should be
read together with the Final Results Announcement. This information is not
a substitute for reading the full Annual Report and Accounts for the year
ended 2 April 2021.
Appendix
The Chief Financial Officer's Report in the preliminary statement of the
Final Results Announcement issued on 17 June 2021 includes a commentary on
the principal commercial and financial risks and uncertainties to
achieving the Group's objectives.
Further details of other principal risks and uncertainties relating to the
Halfords Group are set out on pages 66 to 72 of the 2021 Annual Report and
Accounts. Specific financial risks (e.g. credit risk, foreign currency)
are detailed in note 22 to the Financial Statements on pages 181 to 185 of
the 2021 Annual Report and Accounts.
The following is extracted in full and unedited form from the 2021 Annual
Report and Accounts.
Our Principal Risks and Uncertainties
Capability and Capacity to Effect Change
If we do not have sufficient capacity and capability (in terms of our
people, processes, and systems) to successfully implement the changes
necessary across the business, we will not realise the expected benefits
of our strategy and the business will not be sustainable.
Current Mitigation Focus in 2022
* The appointment of a Transformation
Director and a strengthened team with
emphasis on project management enabled * Continue to align our
progress to be maintained during a Transformation Plan with the
challenging period for capital investment. key objectives of our
The successful acquisition of The Universal corporate strategy
Tyre Company (Deptford) Limited
("Universal") in March 2021 demonstrated our
intent and ability to grow our services
business. * Closely monitor progress on
individual programmes,
realigning resources where
necessary.
* The continued advancement of our change
programme is managed through a
Transformation Board, providing the
necessary governance for delivery of the * Specifically, within the
strategy. The Transformation Board ensures technology and digital teams,
there is a robust approval process for each address operating model
project, allocates resource and monitors shortcomings to enable faster
progress. Project managers are in place execution.
within the business
to whom projects can be assigned and this
has been supplemented by specialist resource * Complete organisational
to boost capability. In affecting change, design changes to align with
Halfords is requiring all contributing the strategic focus of the
colleagues to observe the principles of business.
Responsible, Accountable, Consulted, and
Informed ("RACI").
Stakeholder Support
If we fail to maintain stakeholder confidence in our strategy, they may
withdraw their support.
Current Mitigation Focus in 2022
* Throughout the year, we demonstrated progress * Maintain progress on the
in the execution of our strategy, building delivery of our strategic
confidence in external and internal objectives.
stakeholders. Our share price responded
positively, Customer NPS improved, and our
internal engagement scores remained high
despite the disruption caused by COVID-19 * Address colleague
engagement challenges
through a regular cycle of
survey and review
* Engagement continued throughout the year with
customers, investors, and colleagues, keeping
them informed of progress against our strategic
plans, changing customer propositions as well * Proactive investor
as the challenges presented by the pandemic relations programme of
events and communication.
Value Proposition
Customers are not persuaded by our value proposition and we lose market
share to online retailers and discounters. Purely competing on price leads
to a diminution of financial returns.
Current Mitigation Focus in 2022
* To differentiate ourselves in a competitive
retail market, our vision is to consolidate
Halfords as a super specialist in motoring and
cycling. Our strategy emphasises the * Launch of a Halfords
importance of creating value for the customer Motoring loyalty programme,
by delivering services alongside the sale of a designed to reward loyal
product. Progress continued through the customers and inspire a
development of new services and greater greater proportion to shop
accessibility through the growth of our across the Group.
Cycle-to-Work programme, financial products,
and Halfords Mobile Expert business.
* Further investment in
pricing of motoring
* Optimisation of our Group website with products to deliver greater
payment online functionality was further value for customers.
enhanced by investment in our fulfilment
proposition and enablement of cross-shop
opportunities, aligned with more targeted
promotions, designed to appeal to customers.
Brand Appeal and Market Share
If we continue to lose brand relevance, we will be unable to maintain and
grow our customer base and build market share.
Current Mitigation Focus in 2022
* Continued investment in
a Group services marketing
campaign.
* Building on a positive response to our status
as an essential retailer, we have grown * A greater focus on
awareness of our HME and garage services. E-bike and E-scooter
Customer loyalty and satisfaction has achieved product
record levels for Trust Pilot and Google scores sales, alongside a more
for the Group general electric vehicle
servicing strategy
* Improvement of our cycling proposition,
allied with better than market availability and * Investment in fair
support for the cycle voucher scheme, has pricing for motoring
strengthened market share. products.
* Improve climate change
credentials with ESG
targets defined.
Sustainable Business Model
Changes in the UK economy (including COVID-19, consumer confidence, tax
and duty rates and the value of the Pound) could materially impact our
revenue and/or costs, and therefore the profitability of the business.
Unless we can reduce our exposure to these economic variables (e.g. our
foreign exchange exposure), and improve our ability to take action quickly
on our margins and operating costs, we will not create a sustainable
business model.
Current Mitigation Focus in 2022
* Significant actions on cost and margin
taken in FY21 have collectively built
financial resilience, including a * Maintain focus on reducing
successful project to reduce our fixed underlying costs, e.g. rental
cost base. A refinancing secured our costs through property
funding for a three-year period. renegotiations.
* A strategic focus on the growth of
services will build more stable revenue
streams going forward, lessening the
Group's exposure to product lifecycles * Continuing to focus on margin
and trends improvement,
* The business has a hedging programme in eliminating unnecessary cost
place and is following a through targeted
working capital reduction programme, efficiencies and scale benefits.
targeted at reducing stock holding
and aligning trade creditor terms.
Service Quality
The service we provide to customers may fail to meet regulatory/safety
requirements resulting in harm to customer and/or legal/ financial
penalty.
Current Mitigation Focus in 2022
* All colleagues are provided with dedicated
training and adhere to established quality * Full roll-out of new
control and safety procedures, with compliance store operating model, with
audits by management. We also have a dedicated additional skills training
compliance team monitoring our regulated completed for all retail
activities. colleagues.
* In Autocentres, we have introduced PACE, our * Introduction of in-store
digital operating platform, enabling increased specialists, focused on
workflow, productivity, and quality assurance. delivering excellence in
A new store operating model is also now in our different service
place with multiskilled retail colleagues offerings.
operating across all departments.
* Ongoing programme of
* Store calls are now managed through a proactive store maintenance
centralised contact centre, improving response and safety checks.
times and convenience to customers.
Cyber Security
If we fail to sufficiently detect, monitor, or respond to cyber-attacks
against our systems they may result in disruption of service, compromise
of sensitive data, financial loss and reputational damage.
Current Mitigation Focus in 2022
* Our information security team working with
our security partner, TCS, provide valuable
support by managing vulnerability scans and
email and website security
* Launch of a fully managed
* A perpetual education and awareness campaign security operations centre,
is provided to all colleagues. Regular increasing visibility and
briefings promote an understanding of the decreasing response time to
risks to our data and the benefits of good incidents
security practices.
* The Audit Committee is regularly briefed by
senior IT management on the business' IT
security framework.
Colleague Engagement/Culture
Our employment model may not be sufficiently attractive to recruit and
retain the talent that we need.
Current Mitigation Focus in 2022
* Our status as an essential
retailer during the pandemic
provided a strong * Regular survey activity to identify areas
sense of purpose and enhanced important to
the culture and identity of colleagues in driving continued engagement
Halfords as a
services business
* Early in the year, we
launched our new colleague
values and behaviours
framework and appointed a
colleague experience manager
to focus on
engagement. An annual
engagement survey provides us
with reports at * Ongoing wellbeing programme, providing
team level. We have an ideas,
environment that encourages support and tips for a better work/life
colleagues to feed balance.
back to us about how we can
make Halfords an even better
place to
work. * Identification and development of top
* During the year, a hardship talent, allowing us to develop colleagues to
fund was founded for the fulfil their potential and, in turn,
benefit of our strengthen our succession pipeline.
colleagues to provide support
and assistance where needed.
Equally, a
bonus scheme was established
for those colleagues working
in a front
line role during the early
period of the pandemic.
Skills Shortage
We may be unable to recruit, retain and develop enough people to have the
different mix of skills that we need at all levels across the business, in
the near and longer term.
Current Mitigation Focus in 2022
* We have a strategy that relies on
attracting and retaining colleagues who
can inspire and support our customers and * Material investment programme
encourage them to build a lifetime in skills training to enhance
relationship with the brand colleague capability and, in
turn, improve the customer
experience across our touch
points.
* Our recruitment website highlights the
importance of the Halfords behaviours and
details the skills and experience
required of our colleagues. New starters * As the restrictions associated
are given a full induction and all with COVID-19 ease, develop a
colleagues receive a performance revised working model for our
development review. We develop colleagues Support Centre colleagues,
via the application of a talent matrix, balancing a desire for greater
which supports them in fulfilling their flexibility with the connection
potential and enabling succession and creativity that comes from
management being in the right office
environment
* Training and development are a
fundamental part of our business and a * Extend our eLearning programme
great attraction for new applicants. We for the benefit of all
apply a targeted approach to further colleagues.
enhance skill levels for centres as we do
with stores, by mapping against the
optimal skills mix
IT Infrastructure Failure
Failure in our IT system(s) may cause significant disruption to, or
prevention of, normal business-as-usual activities.
Current Mitigation Focus in 2022
* Extensive controls are in place to
maintain the integrity of our systems and * Continue progression towards a
to ensure that systems changes are fully cloud based hosting
implemented in a controlled manner. We structure with a transfer of
have resilient infrastructure in place risk to cloud-based service
for remote working colleagues to access providers who can maintain
Halfords hosted applications, such as higher levels of contracted
SAP. availability
* Halfords' key trading systems are
hosted securely within data centres
operated by a specialist company and in
specialist cloud services operated by * Deep-dive analysis into
Microsoft. These systems are supported by targeted areas of
disaster recovery arrangements, including infrastructure, managed through
comprehensive backup and patching the Risk Committee
strategies. IT recovery processes are
tested regularly.
Critical Physical Infrastructure Failure (including supply chain
disruption)
Severe damage or failure of physical infrastructure may disrupt our supply
chain and/or business as usual activities and prevent the fulfilment of
customer orders.
Current Mitigation Focus in 2022
* The need to respond to the pandemic in
FY21 has tested our business continuity * Programme of development for
plans and given us confidence in warehouse and duty management
alternative supply chain solutions and systems.
resilience.
* Enhanced flexibility across
* We maintain security and protection the supplier base, using a
measures at our distribution centres and wider range of suppliers, where
have business continuity plans to manage possible, and additional
any incidents that may occur. Our providers of freight and
logistics operations are overseen by a transport solutions.
dedicated warehouse and logistics team
with extensive experience.
* Revised programme of supplier
management for all key
* Extensive research is conducted into suppliers.
quality and ethics before the Group
procures products from any new country or
supplier. A strong management team in the
Far East, with an understanding of local * Ongoing dialogue with
culture, market regulations and risks, existing and new suppliers to
maintains close relationships with both build a joint programme of
our suppliers and logistics partners to environmental sustainability.
ensure that disruption to production and
supply are managed appropriately.
Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with international standards in
conformity with the requirements of the Companies Act 2006 and applicable
law and regulations.
Company law requires the Directors to prepare financial statements for
each financial year. Under that law the Directors are required to prepare
the Group financial statements in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006
and, have elected to prepare the Company financial statements in
accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable law). Under company
law the Directors must not approve the financial statements unless they
are satisfied that they give a true and fair view of the state of affairs
of the Group and Company and of the profit or loss for the Group for that
period. The Directors are also required to prepare financial statements in
accordance with international financial reporting standards adopted
pursuant to Regulation (EC) No. 1606/2002 as it applies in the European
Union.
In preparing these financial statements, the Directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgements and accounting estimates that are reasonable and
prudent;
* for the Group financial statements, state whether they have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and,
additionally for the Group, international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union;
* for the parent Company financial statements, state whether applicable UK
Accounting Standards comprising FRS 101 have been followed, subject to any
material departures disclosed and explained in the parent Company
financial statements;
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business; and
* prepare a Director's Report, a Strategic Report and Director's
Remuneration Report which comply with the requirements of the Companies
Act 2006.
The Directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the Company's transactions and disclose
with reasonable accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements comply with the
Companies Act 2006 and, as regards the Group financial statements, Article
4 of the IAS Regulation. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities. The Directors
are responsible for ensuring that the Annual Report and Accounts, taken as
a whole, are fair, balanced and understandable, and provides the
information necessary for shareholders to assess the Group's performance,
business model and strategy.
Website Publication
The Directors are responsible for ensuring the Annual Report and the
financial statements are made available on a website. Financial statements
are published on the Company's website in accordance with legislation in
the United Kingdom governing the preparation and dissemination of
financial statements, which may vary from legislation in other
jurisdictions. The maintenance and integrity of the Company's website is
the responsibility of the Directors. The Directors' responsibility also
extends to the ongoing integrity of the financial statements contained
therein
Directors' Responsibilities Pursuant to DTR4
The Directors confirm to the best of their knowledge:
* the financial statements have been prepared in accordance with the
applicable set of accounting standards and Article 4 of the IAS Regulation
and give a true and fair view of the assets, liabilities, financial
position and profit and loss of the Group; and
* the Annual Report includes a fair review of the development and
performance of the business and the financial position of the Group and
Company, together with a description of the principal risks and
uncertainties that they face.
Approved by order of the Board.
Keith Williams
Chair
16 June 2021
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ISIN: GB00B012TP20
Category Code: ACS
TIDM: HFD
LEI Code: 54930086FKBWWJIOBI79
OAM Categories: 1.1. Annual financial and audit reports
Sequence No.: 118690
EQS News ID: 1222467
End of Announcement EQS News Service
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