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Halfords Group PLC (HFD)
Halfords Group PLC: Annual Financial Report
28-Jul-2022 / 07:00 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 1 April 2022
including the Notice of Annual General Meeting ("AGM") - convened for 7
September 2022
The Company announces that the Annual Report and Accounts for the period
ended 1 April 2022 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 2022 AGM will be held at Halfords Group plc, Support Centre,
Icknield Street Drive, Washford West, Redditch, B98 0DE on Wednesday 7
September 2022 commencing at 3:00pm.
As detailed in the Notice of AGM, we strongly encourage shareholders to
vote on all resolutions by casting their votes through the use of a proxy
(details of how to do this can be found in the Notice of AGM). This
remains important notwithstanding the removal of the UK Government’s
coronavirus restrictions.
The Board is committed to ensuring that shareholders can exercise their
right to ask questions, and as per last year, shareholders will be able to
submit questions to the Directors in advance of the AGM via email to the
Company Secretary ( 2 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
3 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 16 June 2022 (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 1 April 2022.
Appendix
The Chief Financial Officer’s Report in the preliminary statement of the
Final Results Announcement issued on 16 June 2022 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 72 to 77 of the 2022 Annual Report and
Accounts. Specific financial risks (e.g. credit risk, foreign currency)
are detailed in note 22 to the Financial Statements on pages 193 to 198 of
the 2022 Annual Report and Accounts.
The following is extracted in full and unedited form from the 2022 Annual
Report and Accounts.
Our Principal Risks and Uncertainties
Capability and Capacity to Effect Change
Failure to build sufficient capacity and capability (in terms of our
people, processes, and systems) to successfully implement the
transformation required across the business may result in the expected
benefits of our strategy not being delivered, thereby risking the future
sustainability of the business.
Current Mitigation Focus in 2023
• Continue to align our
• A dedicated Transformation and Change Transformation plan with the
team led by the Chief Transformation key objectives of our
Officer and supported by experienced corporate strategy.
Programme and Project Managers has enabled
progress to be made during a period of • Closely monitor progress on
increased capital investment and focus on individual programmes,
delivery of significant strategic realigning requirements and
initiatives. resources where relevant.
• Embedding a new
organisational design to
• The continued advancement of our change strengthen with even greater
programme is managed through a focus on best practice change
Transformation Board, providing the management and adoption,
necessary governance for delivery of the delivery of benefits and
strategy. The Transformation Board ensures standardisation of process
there is a robust approval process for each
project, allocates resource and monitors
progress. Programme and Project Managers
are in place within the business to whom • Delivery of a new operating
projects can be assigned and this has been model, specifically
supplemented by specialist resource to
boost capability. In affecting change, in technology and digital
Halfords is requiring all contributing teams, will drive more agile,
colleagues to effective and efficient
delivery of changes,
observe the principles of Responsible,
Accountable, Consulted, and Informed with a greater emphasis on the
(“RACI”) unlocking of value
to stakeholders
Stakeholder Support
Failure to secure and maintain our stakeholders’ (investors, suppliers,
colleagues) support for our strategy will mean they may lose confidence in
the business and withdraw their resources.
Current Mitigation Focus in 2023
• Maintain progress on the
delivery of our strategic
objectives.
• Throughout the year, we demonstrated
progress in the execution of our strategy,
building confidence in external and
internal stakeholders. • Address colleague engagement
challenges through a regular
cycle of survey and review.
• Our equity placing in FY22 received
exceptional support from our investors,
and we continue to see strong progress in • Proactive investor relations
both customer NPS and colleague engagement programme of events
and communication with a
planned Capital Markets day for
the second half of the year.
Value Proposition
If investment in our motoring product value proposition and Group value
perception is insufficient to retain existing customers and/or attract new
ones, and/or we continue to lose market share to online retailers and
discounters, the impact could be a loss of sale volume. Balancing price
investment will be important in the current environment and there is a
risk that investing in price without a corresponding increase in volume
leads to a diminution of financial returns, but equally, increasing prices
outside of market movements could create further damage to our value
perception.
Current Mitigation Focus in 2023
• Introduction of a new
halo message to support a
• To differentiate ourselves in a competitive change in perception over
retail market, our vision is to consolidate the medium to long term.
Halfords as a super-specialist in motoring and
cycling. Our strategy emphasises the importance
of creating value for the customer by delivering
services alongside the sale of a product. • Establishment of the
Progress continued through a refreshed financial motoring club help club
services campaign and ongoing Cycle to Work
proposition supporting greater accessibility for customers enjoy greater
our customers, further enhanced by the launch of savings and benefits and
our pre-pedalled bikes offering.
ensure we help customers
motor for less across the
UK.
• Launch of the Halfords motoring club loyalty
programme, designed to reward loyal customers
and inspire a greater proportion to shop across
the Group. • Further investment in
pricing motoring products
to deliver greater value
for customers.
Brand Appeal and Market Share
Investment in awareness of our brand and our services is insufficient to
increase our brand relevance, in which case we will be unable to maintain
and grow our customer base or improve our customer shopping frequency and
spend and correspondingly build market share.
Current Mitigation Focus in 2023
• Building on a positive response to • Integration of National will
our status as an essential retailer we support greater brand
have grown awareness of our Halfords
Mobile Experts and garage services. awareness of garages and mobile
Customer NPS and satisfaction has vans.
achieved record levels for Trust Pilot
and Google scores for the Group
. • Promotion of the motoring club
offering free and
• Improvement of our cycling
proposition, allied with better than premium plans.
market availability and support for the
cycle to work voucher scheme, has
strengthened market share
• Investment in the growth in
electric mobility to
strengthen our market-leading
proposition
Climate Change and Electrification
The climate crisis is already having a profound effect through extreme
weather events – floods, drought and rising sea levels – all of which have
the ability to disrupt our supply chains and impact our ability to operate
our business effectively. These risks have been assessed in detail and
whilst flooding is likely to impact select Halfords stores and garages
across the UK, our most material climaterelated risks and opportunities
are in response to the evolving regulatory landscape; in particular, the
ban on new internal combustion engine (“ICE”) vehicles being sold in the
UK from 2030 as part of the UK Government’s net zero ambitions. More
sustainable mobility options, including electric vehicles, E-bikes and
E-scooters are therefore going to be crucial over the next decade as the
country prepares for the shift away from conventional fuel sources and
transition to a lower-carbon economy. This transition will impact our
motoring and cycling business in the short, medium and long-term.
Failure to respond adequately to the demand for sustainable mobility
options through our products and servicing offers could lead to a loss in
confidence, market position and revenue.
Our service proposition does not match customer demand for electrification
solutions in motoring and cycling, leading to profound
disruption in our core markets.
Failure to deliver against our climate strategy and net zero targets,
leading to a loss in confidence from our stakeholders and potential
reputational damage.
Focus in 2023
• Continue to work with Government
to support the
path to legality for private
E-scooters.
Current Mitigation
• Robust Electrification strategy –
discussed at the Transformation Board • Continue to train and equip our
regularly. Challenges, performance and colleagues to work safely and
successes are analysed, and strategy confidently on hybrid and battery
regularly adjusted as appropriate. EVs and continue to meet all
appropriate regulatory standards.
• Focus on growing the penetration
• Regular monitoring of legislative of hybrid and
changes, climate-related due diligence
and reporting requirements as well as battery electric vehicles in our
monitoring of the regulatory fleet.
environment for changes to policies
around e.g., sale of ICE vehicles,
tax breaks for e-mobility or • Further Board training on
infrastructure evelopments climate change and the
• Regular landscape monitoring for Board’s due diligence
electric vehicles (“EVs”) both from a requirements, including
manufacturing side and consumer uptake
side so that we canappropriately specialist training for those
respond to the rise of e-mobility. directly responsible for
climate-related issues.
• Task Force on Climate-related
Financial Disclosure (“TCFD”) roadmap
developed and being actioned to support • Develop a process whereby
ongoing reporting and risk management climate-related risks and
requirements. opportunities can be updated on an
annual basis.
• Integrate climate risk relating
• Science-based carbon targets to weather (floods, etc) into risk
developed to tackle the immediate management process for our estate.
carbon emissions reductions required
across our business and supply chain.
These will form the foundations for our
net zero pathway and will be monitored • Begin collecting supply chain
to ensure we hit our longer-term net data on Scope
zero target.
3 carbon emissions and climate
management,
• Investment in systems approved that particularly for areas of supply
will enable the collection of supply that may be
chain emissions, to measure, monitor
and reduce our Scope 3 emissions – disrupted due to severe weather.
which make up a significant proportion
of our overall carbon footprint.
• Develop and report on Halfords
Net Zero plan;
headline information on how we
will transition to
a lower-carbon economy
Sustainable Business Model
Alongside pre-existing changes in customer habits and expectations, the
recent spike in UK supply chain and consumer inflation is creating
challenging economic conditions. Unless we can continue to mitigate the
significant levels of cost inflation (through cost mitigation and savings,
growth in new business areas, and increasing selling prices), we will be
unable to maintain a sustainable business model.
Current Mitigation Focus in 2023
• Strategic programme focused
on selling more
full solutions to customers,
supported by digital
technology.
• An ongoing strategic focus on the growth
of services will build more stable revenue • Cross-shop sales
streams, lessening the Group’s relative opportunities boosted by
exposure to discretionary expenditure. launch of the new Motoring
Loyalty Club programme.
• Selling solutions and cross-shop
initiatives will maximise the revenue from
existing transactions.
• Customer referral encouraged
• Detailed price/elasticity analysis from Retail to
alongside price trials will optimise
consumer pricing decisions. Autocentres/Halfords Mobile
Experts via new
• Long-standing supplier relationships will
be optimised to extract value from supplier services roles in Retail.
contributions/support.
• A new Cost Transformation framework
programme has been established to target • Cost Transformation
cost reduction during FY23/FY24. programme established to focus
on short-, medium- and
• US dollar hedging programme in place. long-term cost reduction
opportunities.
• Recent three-year refinancing extended
for a fourth year.
• Ongoing ‘goods for resale’
supplier discussions
targeting mutual value
opportunities.
• Fixed cost contracts entered
into for inflationary cost
categories – e.g. Freight and
Utilities.
• Rental costs reduced through
property renegotiations;
underperforming stores/garages
closed at lease renewal.
• Productivity analysis
ongoing through digital
technology.
• New Group Data Platform
identifying sales, cost and
productivity opportunities.
• FX hedging programme.
• Continuing to focus on
margin improvement,
eliminating unnecessary cost
through targeted
efficiencies and scale
benefits.
Regulatory and Compliance
A failure to adhere to our legal and/or regulatory obligations for some or
all of the Group’s activities leads to an inability to meet our
responsibilities to stakeholders and/or the imposition of financial
penalties, placing a strain on the business.
Current Mitigation
Focus in 2023
• There is continual monitoring of legal
and regulatory developments for all regions • Continued monitoring of
where the Group operates. A suite of legal and regulatory
policies sets out the Group’s commitment to
conduct its business with honesty and developments for all regions
integrity. The senior leadership team where the Group
communicates tone from the top to provide
guidance to colleagues on all policy operates.
commitments.
• Increased headcount within
• Compliance training is provided to new the Health and Safety function
colleagues as required with refresher to support the growth of the
courses thereafter. Regular horizon Group.
scanning is undertaken to capture new
regulations and requirements.
• Review and improvement of
policies supported
• We have a code of conduct with our
suppliers whom we monitor for compliance by training programmes for
across ethics: nvironmental management; colleagues.
labour practices; and human rights.
• Regular training and
• Health and safety, data protection and information provided through
Financial Conduct Authority compliance are user-friendly channels.
managed by experts reporting to dedicated
committees with representatives across the
business to assess our regulatory rigour.
• Establishment of a new
Finance Risk Committee to
focus on all aspects of
• An established whistleblowing process financial risk and compliance.
enables colleagues to report suspected or
actual wrongdoing in confidence
Service Quality
The services we provide fall below the quality standards to which we are
committed, placing customers at risk of harm.
Current Mitigation Focus in 2023
• Stores and Service calls to
be migrated to self service or
digital channels for ease and
optionality for customers to
access support in channel of
choice.
• Our Retail Plan will remain
• All colleagues are provided with unchanged into FY23
dedicated training and adhere to
established quality control and safety to ensure we drive consistency
procedures, with compliance audits by across the estate
management. We also have a dedicated
compliance team monitoring our regulated and continue the focus on
activities. embedding the Retail
Operating Model.
• In Autocentres our digital operating
platform PACE enables increased workflow,
productivity, and quality assurance. PACE • An annual skills plan ensures
drives service quality by requiring we are able to maintain our
quality controls to be completed on all skill level as we drive down
workshop our labour turnover.
colleagues as determined by the Technician
Quality Rating. All our Quality
Controllers follow an approved training • Integration of National
pathway and receive refresher training garages to include the
annually.
adoption of the Halfords
Quality procedures and roll out
of PACE.
• We have a Retail Contact Centre that
provides a level of call answer rates that
ensures we can provide a quality service
to our customers whatever channel they • Our Operational Excellence
choose. team will continue to
review our inventory of tools
to do the job.
• Fusion will be our focus on
our next ‘go to’ operating
model as we roll out Core and
Enhanced formats.
Cyber Security
If we fail to sufficiently prevent, detect, and respond to cyber incidents
and attacks they may result in disruption of service, compromise of
sensitive data, financial penalties from regulatory authorities, financial
loss, and reputational damage.
Current Mitigation Focus in 2023
• Consolidate technical cyber security
solutions across the Group, including
acquisitions.
• Our security partner, TCS,
provides first line assurance
security operations capabilities
including vulnerability management, • Mature processes for internal
email filtering, and website control assessments to improve
security. identification and ongoing management
of cyber risk. Conduct gap analysis
against the CIS Critical Security
Controls for critical systems.
• Within our Risk Management Remediate findings to ensure critical
Framework our information Security systems are protected.
team provides the second line
assurance role identifying and
managing cyber-related risk, and
developing and implementing our • Mature cyber resilience of critical
internal control framework. systems, including both proactive and
reactive incident response
capabilities.
• Third line assurance is provided
by Internal Audit.
• Mature processes and documentation
relating to
• A perpetual education and security of data focusing first on
awareness campaign is provided to regulated personal data of both
all colleagues. Regular briefings customers and colleagues.
promote an understanding of the
risks to our data and the benefits
of good security practices.
• Conduct a network security review
including
• The Audit Committee is regularly segmentation and firewall positioning,
briefed by senior Technology legacy and
management on the business’ cyber
security framework end-of-life devices, and regular
security testing
(vulnerability scanning and
penetration testing)
Colleague Engagement/Culture
Our employment model may not be sufficiently attractive to recruit and
retain the talent that we need. We do not maintain a sufficiently positive
culture, failing to support a diverse and inclusive community.
Current Mitigation Focus in 2023
• Implementation of Year 1 of our
A five-year People Strategy that People Strategy with activities
develops the colleague journey across focused on delivering improvements
the areas of ‘Find me, Train me, Grow to the colleague journey of ‘Find
me, Keep me’ and that creates the me, Train me, Grow me, Keep me’.
opportunity for a career at Halfords
with an employee brand ‘Your Journey, • Benchmark our pay and benefits
Our Journey – make it your own’. to ensure we are competitive in
the market.
• The continued development of our
colleague engagement programme and • Move to an engagement model that
survey, and further focus on our inspires ongoing engagement,
colleague network groups. listening and action.
• Through the provision of wellbeing • Develop our colleague network
facilities and regular updates using groups to support change in areas
huddles and blogs we keep our of diversity that develops our
colleagues informed and supported. attraction and engagement with our
colleagues.
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 2023
• Launch our employee brand and
integrate through our attraction
and recruitment materials.
Broaden our attraction resources
and develop simpler and quicker
recruitment processes.
• We have reduced our reliance on
external recruitment and as part of our • Develop and expand our
colleague strategy developed our internal apprenticeship strategy and the
pipeline for technical and leadership Halfords Academy to grow our own
capability. We have also further technical skill base.
developed crossgroup career pathways and
succession planning as well as continued
investment in our training and
development. • Expand our ‘Tyre fitter to
Tech’ programme and
• Training and development are a
fundamental part of our business and change hiring approach to
recruit on behaviour as
a great attraction for new applicants. We
apply a targeted approach to we will train the skill.
further enhance skill levels for centres
as we do with stores, by mapping
• Develop a cross-group approach
against the optimal skills mix. to talent and
succession.
• Investment in our selling
skills across Group
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 2023
• Continue progression towards a
• Extensive controls are in place to fully cloud-based
maintain the integrity of our systems and
to ensure that systems changes are hosting structure with a
implemented in a controlled manner. We transfer of risk to cloudbased
have resilient infrastructure in place service providers who can
for remote working colleagues to access maintain higher levels of
Halfords hosted applications, such as contracted availability.
SAP.
• Halfords’ key trading systems are
hosted securely within data centres • Reduce dependencies on legacy
operated by a specialist company and in and end-of-life
specialist cloud services operated by
Microsoft. These systems are supported by systems for key
disaster recovery arrangements, including business-as-usual activities.
comprehensive backup and patching
strategies. IT recovery processes are • Deep-dive analysis into
tested regularly. targeted areas of
infrastructure, managed through
the Risk Committee.
Disruption to end to end supply chain
The Halfords end to end (“E2E”) supply chain is an integration of the
process from sourcing of products (including the raw material procurement
and product design by our supply partners) through to scheduling and
delivery of goods to our customers (through our distribution centre (“DC”)
network and via stores or direct to consumer).
Disruption to the E2E process creates a major impact to customer
fulfilment and/or customer-facing price increases due to supply shortages,
increased demand for raw materials impacting availability and input price,
production delays that lead to an extension in supply lead times,
logistics delays in the form of shipping of goods, or the potential
closure of one of our distribution centres, all of which challenges our
ability to meet sales and profit projections.
Current Mitigation Focus in 2023
• The need to respond to the pandemic in
FY21 has tested our business continuity
plans and given us confidence in
alternative supply chain solutions and
resilience.
• Our Commercial and Financial processes
support continued active demand
forecasting through regular weekly
reviews, a transparent Open to Buy
process, a stock policy that increases
cover for important and
volatile lines and a currency hedge
policy that smooths out variability.
• Our sourcing capability and supplier • Development of a replacement
relationships are delivered through Warehouse Management System.
dedicated UK, Asian and Near sourcing
teams. These teams maintain both
strategic and upstream supplier
relationships, operate multiple sources, • Development of an enhanced
dual sourcing, product engineering and Customs and Duty
are engaged in the ESG agenda.
platform.
• Our in-house expertise delivers the
high global trading standards from • Investment in a more senior
Authorised Economic Operator dedicated Customs and Trade
accreditation, import/export expertise compliance team to reduce the
risks associated with
and dedicated security at each of our DC international sourcing activity.
sites.
• Investment in additional
• Our 3PL relationships give expertise storage space in a fifth DC to
and options. We contract with multiple hold overstocks and protect
shipping lines for flexibility and availability rather than cut
leverage, we have access to large intake too hard and damage both
organisational support from Yusen customer availability and
Logistics, Wincanton and Clipper supplier relationships.
logistics and PwC provide external
trading and compliance expertise.
• Our transformation plans reduce risk
through scheduled work on the replacement
of our warehouse Management System, a UK
distribution centre physical network
review, the replacement of our
Forecasting and replenishment tools and
our Customs and Duty platform.
• We have invested in a multi-sea freight
carrier solution to balance costs and
flexibility to move our direct import
cargo in an unprecedented inflationary
market.
Directors’ responsibilities
The directors are responsible for preparing the annual report and the
financial statements in accordance with UK adopted international
accounting standards 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 UK adopted international
accounting standards and have elected to prepare the company financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable laws). 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.
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;
• state whether they have been prepared in accordance with UK adopted
international accounting standards, subject to any material departures
disclosed and explained in the financial statements;
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the group and the company will continue in
business;
• prepare a directors’ report, a strategic report and directors’
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.
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 DTR
The directors confirm to the best of their knowledge:
• The financial statements have been prepared in accordance with the
applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit and loss of the group.
• 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
15 June 2022
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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.: 177576
EQS News ID: 1407567
End of Announcement EQS News Service
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