DJ Halfords Group PLC: Annual Financial Report
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. =---------------------------------------------------------------------------------------------------------------------- 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 * Continue to align our Transformation Plan with the key objectives of our * The appointment of a Transformation Director and a strengthened team with corporate strategy 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. * 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 strategy. The Transformation Board ensures there is a robust approval process * Specifically, within the technology for each project, allocates resource and monitors progress. Project managers are and digital teams, address operating in place within the business model shortcomings to enable faster to whom projects can be assigned and this has been supplemented by specialist execution. resource to boost capability. In affecting change, Halfords is requiring all contributing colleagues to observe the principles of Responsible, Accountable, Consulted, and Informed ("RACI"). * 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 * Maintain progress on the delivery of our strategic * Throughout the year, we demonstrated progress in the execution of our strategy, objectives. 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 * 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 as the challenges presented by the pandemic * 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 * Launch of a Halfords Motoring loyalty delivering services alongside the sale of a product. Progress continued through programme, designed to reward loyal the development of new services and greater accessibility through the growth of customers and inspire a greater our Cycle-to-Work programme, financial products, and Halfords Mobile Expert proportion to shop across the Group. business. * Further investment in pricing of * Optimisation of our Group website with payment online functionality was motoring products to deliver greater further enhanced by investment in our fulfilment proposition and enablement of value for customers. cross-shop opportunities, aligned with more targeted promotions, designed to appeal to customers.
Brand Appeal and Market Share
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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. * A greater focus on E-bike * Building on a positive response to our status as an essential retailer, we have grown and E-scooter product awareness of our HME and garage services. Customer loyalty and satisfaction has achieved sales, alongside a more record levels for Trust Pilot and Google scores for the Group general electric vehicle servicing strategy * Improvement of our cycling proposition, allied with better than market availability and support for the cycle voucher scheme, has strengthened market share. * 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 * Maintain focus on reducing underlying financial resilience, including a successful project to reduce our fixed cost costs, e.g. rental costs through base. A refinancing secured our funding for a three-year period. property 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 and trends * Continuing to focus on margin improvement, * The business has a hedging programme in place and is following a eliminating unnecessary cost through working capital reduction programme, targeted at reducing stock holding targeted and aligning trade creditor terms. efficiencies and scale benefits.
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 * Full roll-out of new store operating model, with * All colleagues are provided with dedicated training and adhere to established quality additional skills training control and safety procedures, with compliance audits by management. We also have a completed for all retail dedicated compliance team monitoring our regulated activities. colleagues. * In Autocentres, we have introduced PACE, our digital operating platform, enabling * Introduction of in-store increased workflow, productivity, and quality assurance. A new store operating model is specialists, focused on also now in place with multiskilled retail colleagues operating across all departments. delivering excellence in our different service offerings. * Store calls are now managed through a centralised contact centre, improving response times and convenience to customers. * 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 * Launch of a fully managed security operations * A perpetual education and awareness campaign is provided to all centre, increasing visibility and decreasing colleagues. Regular briefings promote an understanding of the risks to response time to incidents 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.
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 important to sense of purpose and enhanced the colleagues in driving continued engagement culture and identity of 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 team level. We have an environment that * Ongoing wellbeing programme, providing ideas, encourages colleagues to feed support and tips for a better work/life balance. back to us about how we can make Halfords an even better place to work. * Identification and development of top talent, allowing us to develop * During the year, a hardship fund was colleagues to fulfil their potential and, in turn, strengthen our succession founded for the benefit of our 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 encourage * Material investment programme in skills training them to build a lifetime relationship with the brand to enhance 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 are given a full induction and all * As the restrictions associated with COVID-19 ease, colleagues receive a performance development review. We develop develop a revised working model for our Support colleagues via the application of a talent matrix, which supports Centre colleagues, balancing a desire for greater them in fulfilling their potential and enabling succession flexibility with the connection and creativity that management comes from being in the right office environment * Training and development are a fundamental part of our business * Extend our eLearning programme for the benefit of and a great attraction for new applicants. We apply a targeted all colleagues. approach to further enhance skill levels for centres as we do with stores, by mapping against the optimal skills mix
IT Infrastructure Failure
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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 * Continue progression towards a fully cloud systems and to ensure that systems changes are implemented in a based hosting structure with a transfer of risk controlled manner. We have resilient infrastructure in place for to cloud-based service providers who can maintain remote working colleagues to access Halfords hosted applications, higher levels of contracted availability such as SAP. * Halfords' key trading systems are hosted securely within data centres operated by a specialist company and in specialist cloud * Deep-dive analysis into targeted areas of services operated by Microsoft. These systems are supported by infrastructure, managed through the Risk disaster recovery arrangements, including comprehensive backup and Committee 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 * Programme of development for warehouse and continuity plans and given us confidence in alternative supply chain duty management systems. solutions and resilience. * Enhanced flexibility across the supplier * We maintain security and protection measures at our distribution centres base, using a wider range of suppliers, and have business continuity plans to manage any incidents that may occur. where possible, and additional providers of Our logistics operations are overseen by a dedicated warehouse and freight and transport solutions. logistics team with extensive experience. * Revised programme of supplier management * Extensive research is conducted into quality and ethics before the Group for all key suppliers. 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 * Ongoing dialogue with existing and new and supply are managed appropriately. 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 End of Announcement EQS News Service =------------------------------------------------------------------------------------ Image link: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=show_t_gif&application_id=1222467&application_name=news
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