DJ Halfords Group PLC: Annual Financial Report
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.
-----------------------------------------------------------------------------------------------------------------------
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 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 (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 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 Transformation
plan with the key objectives of our
corporate strategy.
. A dedicated Transformation and Change team led by the Chief Transformation . Closely monitor progress on individual
Officer and supported by experienced Programme and Project Managers has programmes, realigning requirements and
enabled progress to be made during a period of increased capital investment resources where relevant.
and focus on delivery of significant strategic initiatives.
. Embedding a new organisational design to
strengthen with even greater focus on best
practice change management and adoption,
. The continued advancement of our change programme is managed through a delivery of benefits and standardisation
Transformation Board, providing the necessary governance for delivery of the of process
strategy. The Transformation Board ensures 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
projects can be assigned and this has been supplemented by specialist . Delivery of a new operating model,
resource to boost capability. In affecting change, Halfords is requiring all specifically
contributing colleagues to
in technology and digital teams, will
observe the principles of Responsible, Accountable, Consulted, and Informed drive more agile, effective and efficient
("RACI") delivery of changes,
with a greater emphasis on the 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 both customer NPS and
colleague engagement
. Proactive investor relations 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
change in perception over
the medium to long term.
. 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
importance of creating value for the customer by delivering services alongside the sale of . Establishment of the
a product. Progress continued through a refreshed financial services campaign and ongoing motoring club help club
Cycle to Work proposition supporting greater accessibility for our customers, further
enhanced by the launch of our pre-pedalled bikes offering. customers enjoy greater
savings and benefits and
ensure we help customers
. Launch of the Halfords motoring club loyalty programme, designed to reward loyal motor for less across the
customers and inspire a greater proportion to shop across the Group. UK.
. 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 our status as an essential . Integration of National will support greater brand
retailer we have grown awareness of our Halfords Mobile Experts
and garage services. Customer NPS and satisfaction has achieved awareness of garages and mobile vans.
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
market availability and support for the cycle to work voucher premium plans.
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 . Continue to train and equip our colleagues to work
Transformation Board regularly. Challenges, performance and safely and confidently on hybrid and battery EVs and
successes are analysed, and strategy regularly adjusted as continue to meet all appropriate regulatory
appropriate. standards.
. Focus on growing the penetration of hybrid and
. Regular monitoring of legislative changes, climate-related due battery electric vehicles in our fleet.
diligence and reporting requirements as well as monitoring of the
regulatory environment for changes to policies around e.g., sale
of ICE vehicles,
. Further Board training on climate change and the
tax breaks for e-mobility or infrastructure evelopments
Board's due diligence requirements, including
. Regular landscape monitoring for electric vehicles ("EVs") both
from a manufacturing side and consumer uptake side so that we specialist training for those directly responsible
canappropriately respond to the rise of e-mobility. for
climate-related issues.
. Task Force on Climate-related Financial Disclosure ("TCFD")
roadmap developed and being actioned to support ongoing reporting
and risk management requirements. . Develop a process whereby climate-related risks and
opportunities can be updated on an annual basis.
. Integrate climate risk relating to weather (floods,
. Science-based carbon targets developed to tackle the immediate etc) into risk 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 to ensure we hit our longer-term
net zero target. . Begin collecting supply chain data on Scope
3 carbon emissions and climate management,
. Investment in systems approved that will enable the collection particularly for areas of supply that may be
of supply chain emissions, to measure, monitor and reduce our
Scope 3 emissions - which make up a significant proportion of our disrupted due to severe weather.
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 streams, lessening the Group's relative exposure to discretionary
expenditure. . Cross-shop sales opportunities
boosted by launch of the new Motoring
. Selling solutions and cross-shop initiatives will maximise the revenue from Loyalty Club programme.
existing transactions.
. Detailed price/elasticity analysis alongside price trials will optimise
consumer pricing decisions. . Customer referral encouraged from
Retail to
. Long-standing supplier relationships will be optimised to extract value from
supplier contributions/support. Autocentres/Halfords Mobile Experts
via new
. A new Cost Transformation framework programme has been established to target
cost reduction during FY23/FY24. services roles in Retail.
. US dollar hedging programme in place.
. Recent three-year refinancing extended for a fourth year. . Cost Transformation programme
established to focus on short-,
medium- and long-term cost reduction
opportunities.
. 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.
Focus in 2023
Current Mitigation . Continued monitoring of legal and
regulatory
. There is continual monitoring of legal and regulatory developments for all
regions where the Group operates. A suite of policies sets out the Group's developments for all regions where the
commitment to conduct its business with honesty and integrity. The senior Group
leadership team communicates tone from the top to provide guidance to colleagues
on all policy commitments. operates.
. Compliance training is provided to new colleagues as required with refresher . Increased headcount within the
courses thereafter. Regular horizon scanning is undertaken to capture new Health and Safety function to support
regulations and requirements. the growth of the Group.
. We have a code of conduct with our suppliers whom we monitor for compliance . Review and improvement of policies
across ethics: nvironmental management; labour practices; and human rights. supported
by training programmes for colleagues.
. Health and safety, data protection and Financial Conduct Authority compliance
are managed by experts reporting to dedicated committees with representatives
across the business to assess our regulatory rigour. . Regular training and information
provided through user-friendly
channels.
. An established whistleblowing process enables colleagues to report suspected
or actual wrongdoing in confidence
. Establishment of a new Finance Risk
Committee to focus on all aspects of
financial risk and compliance.
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 unchanged into FY23
. All colleagues are provided with dedicated training and adhere to to ensure we drive consistency across the estate
established quality control and safety procedures, with compliance
audits by management. We also have a dedicated compliance team and continue the focus on embedding the Retail
monitoring our regulated activities.
Operating Model.
. In Autocentres our digital operating platform PACE enables
increased workflow, productivity, and quality assurance. PACE . An annual skills plan ensures we are able to
drives service quality by requiring quality controls to be maintain our skill level as we drive down our
completed on all workshop labour turnover.
colleagues as determined by the Technician Quality Rating. All our
Quality Controllers follow an approved training pathway and receive
refresher training annually. . Integration of National garages to include the
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 choose.
. Our Operational Excellence 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
. Our security partner, TCS, provides first line Group, including acquisitions.
assurance security operations capabilities including
vulnerability management, email filtering, and website
security.
. Mature processes for internal control assessments to improve
identification and ongoing management of cyber risk. Conduct
gap analysis against the CIS Critical Security Controls for
. Within our Risk Management Framework our information critical systems. Remediate findings to ensure critical
Security team provides the second line assurance role systems are protected.
identifying and managing cyber-related risk, and
developing and implementing our internal control
framework.
. Mature cyber resilience of critical 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 awareness campaign is security of data focusing first on regulated personal data of
provided to all colleagues. Regular briefings promote an both customers and colleagues.
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 briefed by senior segmentation and firewall positioning, legacy and
Technology 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 People Strategy
A five-year People Strategy that develops the colleague journey with activities focused on delivering improvements
across the areas of 'Find me, Train me, Grow me, Keep me' and that to the colleague journey of 'Find me, Train me,
creates the opportunity for a career at Halfords with an employee Grow me, Keep me'.
brand 'Your Journey, Our Journey - make it your own'.
. Benchmark our pay and benefits to ensure we are
. The continued development of our colleague engagement programme competitive in the market.
and survey, and further focus on our colleague network groups.
. Move to an engagement model that inspires ongoing
. Through the provision of wellbeing facilities and regular updates engagement, listening and action.
using huddles and blogs we keep our colleagues informed and
supported. . Develop our colleague network groups to support
change in areas of diversity that develops our
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 . Develop and expand our apprenticeship strategy
our colleague strategy developed our internal pipeline for technical and the Halfords Academy to grow our own
and leadership capability. We have also further developed crossgroup technical skill base.
career pathways and succession planning as well as continued
investment in our training and development.
. Training and development are a fundamental part of our business and . Expand our 'Tyre fitter to Tech' programme and
a great attraction for new applicants. We apply a targeted approach change hiring approach to recruit on behaviour as
to
we will train the skill.
further enhance skill levels for centres as we do with stores, by
mapping
against the optimal skills mix. . Develop a cross-group approach 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 fully
cloud-based
. Extensive controls are in place to maintain the integrity of our systems
and to ensure that systems changes are implemented in a controlled manner. hosting structure with a transfer of risk
We have resilient infrastructure in place for remote working colleagues to to cloudbased service providers who can
access Halfords hosted applications, such as SAP. maintain higher levels of contracted
availability.
. Halfords' key trading systems are hosted securely within data centres
operated by a specialist company and in specialist cloud services operated
by Microsoft. These systems are supported by disaster recovery arrangements,
including comprehensive backup and patching strategies. IT recovery . Reduce dependencies on legacy and
processes are tested regularly. end-of-life
systems for key business-as-usual
activities.
. Deep-dive analysis into 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 relationships are delivered . Development of a replacement Warehouse Management
through dedicated UK, Asian and Near sourcing teams. These teams System.
maintain both strategic and upstream supplier relationships,
operate multiple sources, dual sourcing, product engineering and
are engaged in the ESG agenda.
. Development of an enhanced Customs and Duty
platform.
. Our in-house expertise delivers the high global trading
standards from Authorised Economic Operator accreditation, import/
export expertise
. Investment in a more senior dedicated Customs and
and dedicated security at each of our DC sites. Trade compliance team to reduce the risks associated
with international sourcing activity.
. Our 3PL relationships give expertise and options. We contract
with multiple shipping lines for flexibility and leverage, we have . Investment in additional storage space in a fifth
access to large organisational support from Yusen Logistics, DC to hold overstocks and protect availability
Wincanton and Clipper rather than cut intake too hard and damage both
customer availability and 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
-----------------------------------------------------------------------------------------------------------------------
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 =------------------------------------------------------------------------------------
Image link: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=show_t_gif&application_id=1407567&application_name=news
(END) Dow Jones Newswires
July 28, 2022 02:00 ET (06:00 GMT)
