Company Announcements

Halfords Group PLC: Annual Financial Report

Source: EQS

Halfords Group PLC (HFD)
Halfords Group PLC: Annual Financial Report

29-Jul-2021 / 07:10 GMT/BST
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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 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  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 progress to be maintained during a challenging period for capital investment. The successful acquisition of The Universal Tyre Company (Deptford) Limited ("Universal") in March 2021 demonstrated our intent and ability to grow our services business.

 

* The continued advancement of our change programme is managed through a Transformation Board, providing the necessary governance for delivery of the strategy. The Transformation Board ensures there is a robust approval process for each project, allocates resource and monitors progress. Project managers are in place within the business
to whom projects can be assigned and this has been supplemented by specialist resource to boost capability. In affecting change, Halfords is requiring all contributing colleagues to observe the principles of
Responsible, Accountable, Consulted, and Informed ("RACI").

* Continue to align our Transformation Plan with the key objectives of our corporate strategy

 

* Closely monitor progress on individual programmes, realigning resources where necessary.

 

* Specifically, within the technology and digital teams, address operating model shortcomings to enable faster execution.

 
* Complete organisational design changes to align with the strategic focus of the business.

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 in the execution of our strategy, building confidence in external and internal stakeholders. Our share price responded positively, Customer NPS improved, and our internal engagement scores remained high despite the disruption caused by COVID-19

 

* Engagement continued throughout the year with customers, investors, and colleagues, keeping them informed of progress against our strategic plans, changing customer propositions as well as the challenges presented by the pandemic

* Maintain progress on the delivery of our strategic
objectives.

 

* Address colleague engagement challenges through a regular cycle of survey and review

 

* Proactive investor 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 importance of creating value for the customer by delivering services alongside the sale of a product. Progress continued through the development of new services and greater accessibility through the growth of our Cycle-to-Work programme, financial products, and Halfords Mobile Expert business.

 

* Optimisation of our Group website with payment online functionality was further enhanced by investment in our fulfilment proposition and enablement of cross-shop opportunities, aligned with more targeted promotions, designed to appeal to customers.

* Launch of a Halfords Motoring loyalty programme, designed to reward loyal customers and inspire a greater proportion to shop across the Group.

 

* Further investment in pricing of motoring products to deliver greater value for 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

* Building on a positive response to our status as an essential retailer, we have grown awareness of our HME and garage services. Customer loyalty and satisfaction has achieved record levels for Trust Pilot and Google scores for the Group

 

* Improvement of our cycling proposition, allied with better than market availability and support for the cycle voucher scheme, has strengthened market share.

* Continued investment in a Group services marketing campaign.

 

* A greater focus on E-bike and E-scooter product
sales, alongside a more general electric vehicle
servicing strategy

 

* Investment in fair pricing for motoring 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 successful project to reduce our fixed cost base. A refinancing secured our funding for a three-year period.

* Maintain focus on reducing underlying costs, e.g. rental costs through property renegotiations.

 

 * Continuing to focus on margin improvement,
eliminating unnecessary cost through targeted
efficiencies and scale benefits.

* A strategic focus on the growth of services will build more stable revenue streams going forward, lessening the Group's exposure to product lifecycles and trends

* The business has a hedging programme in place and is following a
working capital reduction programme, 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 control and safety procedures, with compliance audits by management. We also have a dedicated compliance team monitoring our regulated activities.

 

* In Autocentres, we have introduced PACE, our digital operating platform, enabling increased workflow, productivity, and quality assurance. A new store operating model is also now in place with multiskilled retail colleagues operating across all departments.

 

* Store calls are now managed through a centralised contact centre, improving response times and convenience to customers.

* Full roll-out of new store operating model, with
additional skills training completed for all retail
colleagues.

 

* Introduction of in-store specialists, focused on
delivering excellence in our different service offerings.

 

* Ongoing programme of proactive store maintenance and safety checks.

 

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

 

* A perpetual education and awareness campaign is provided to all colleagues. Regular briefings promote an understanding of the risks to our data and the benefits of good security practices.

 

* The Audit Committee is regularly briefed by senior IT management on the business' IT security framework.

* Launch of a fully managed security operations centre, increasing visibility and decreasing response time to incidents

 

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
sense of purpose and enhanced the culture and identity of Halfords as a
services business

* Regular survey activity to identify areas important to
colleagues in driving continued engagement

* 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
team level. We have an environment that encourages colleagues to feed
back to us about how we can make Halfords an even better place to
work.

* Ongoing wellbeing programme, providing ideas,
support and tips for a better work/life balance.

 

* Identification and development of top talent, allowing us to develop colleagues to fulfil their potential and, in turn, strengthen our succession pipeline.

* During the year, a hardship fund was founded for the benefit of our
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 encourage them to build a lifetime relationship with the brand

 

* Our recruitment website highlights the importance of the Halfords behaviours and details the skills and experience required of our colleagues. New starters are given a full induction and all colleagues receive a performance development review. We develop colleagues via the application of a talent matrix, which supports them in fulfilling their potential and enabling succession management

 

* Training and development are a fundamental part of our business and a great attraction for new applicants. We apply a targeted approach to further enhance skill levels for centres as we do with stores, by mapping against the optimal skills mix

* Material investment programme in skills training to enhance colleague capability and, in turn, improve the customer experience across our touch points.

 

* As the restrictions associated with COVID-19 ease, develop a revised working model for our Support Centre colleagues, balancing a desire for greater flexibility with the connection and creativity that comes from being in the right office environment

 

* Extend our eLearning programme for the benefit of all colleagues.

 

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 to ensure that systems changes are implemented in a controlled manner. We have resilient infrastructure in place for remote working colleagues to access Halfords hosted applications, such as SAP.

* Continue progression towards a fully cloud based hosting structure with a transfer of risk to cloud-based service providers who can maintain higher levels of contracted availability

 

* Deep-dive analysis into targeted areas of infrastructure, managed through the Risk Committee

* 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 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 plans and given us confidence in alternative supply chain solutions and resilience.

 

* We maintain security and protection measures at our distribution centres and have business continuity plans to manage any incidents that may occur. Our logistics operations are overseen by a dedicated warehouse and logistics team with extensive experience.

 

* Extensive research is conducted into 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 culture, market regulations and risks, maintains close relationships with both our suppliers and logistics partners to ensure that disruption to production and supply are managed appropriately.

* Programme of development for warehouse and duty management systems.

 

* Enhanced flexibility across the supplier base, using a wider range of suppliers, where possible, and additional providers of freight and transport solutions.

 

* Revised programme of supplier management for all key suppliers.

 

* Ongoing dialogue with existing and new suppliers to build a joint programme of environmental sustainability.

 

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



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

 
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