Halfords Group plc

ï¿½

Annual Report and Accounts for period ended 30 March 2018

including the Notice of Annual General Meeting ("AGM") - convened for 24 July 2018

ï¿½

The Company announces that the Annual Report and Accounts for the period ended 30 March 2018 have been posted or otherwise made available to shareholders and published on its website, www.halfordscompany.com .

ï¿½

In accordance with Listing Rule 9.6.1 a copy of the Annual Report and Accounts together with a Form of Proxy for the 2018 Annual General Meeting have been uploaded to the National Storage Mechanism and will be available for viewing shortly at http://www.morningstar.co.uk/uk/NSM

ï¿½

The Company's 2018 Annual General Meeting will be held at the Hilton Garden Inn, 1 Brunswick Square, Brindleyplace, Birmingham, B1 2HW on Tuesday 24 July 2018, commencing at 11:30 am.

ï¿½

Tim O'Gorman

Company Secretary

Halfords Group plc

ï¿½ï¿½

The Appendix to this announcement is a supplement to our preliminary statement of Financial Results made on 22 May 2018 (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.

ï¿½

Appendix

ï¿½

The Chief Financial Officer's Report in the preliminary statement of the Final Results Announcement issued on 22 May 2018 includes a commentary on the principal commercial and financial risks and uncertainties to achieving the Group's objectives.

ï¿½

Further details of other principal risks and uncertainties relating to the Halfords group are set out on pages 40 to 44 of the 2018 Annual Report and Accounts. The following is extracted in full and unedited form from the 2018 Annual Report and Accounts and Accounts.

ï¿½

Specific financial risks (e.g. liquidity, foreign currency) are detailed in note 21 to the Financial Statements on page 129.

ï¿½

Key Risk and Uncertainty	Mitigation	Risk Movement
1. Economic, Environmental and Political
The economy is a major influence on consumer spending. Trends in employment, inflation, taxation, consumer debt levels, weather and interest rates impact consumer expenditure in discretionary areas. Changes in Government policies (e.g. Cycle to Work) may also affect our customers' ability to benefit from our products and services. Withdrawal from the EU may have an impact on consumer spending, please refer to page 39 for further information.	The Group mitigates these risks by maintaining a focus on the 'defensive' characteristics of its 'needs driven' product groups. A firm focus is maintained on cost control. Targeted promotions and excellent service are designed to attract and retain customers. Advanced econometric modelling is used to understand the effect of weather conditions on our business and we ensure that marketing and merchandising can be revised quickly. ï¿½ We also ensure that we have representation with Governmental decision-makers in the areas supporting our core categories, both directly and through membership of trade bodies.	No risk movement
2. Business Strategy
The aim of the Group's business strategy is to deliver long-term value to our shareholders. The Board understands that if the strategy and vision are inappropriately formulated, communicated or executed then the business will suffer. Key investments and acquisitions could fail to deliver sufficient returns. The Autocentres, Cycle Republic and Tredz & Wheelies businesses could fail to meet growth expectations.	The Group set out the 'Moving Up A Gear' strategy in November 2015. Strategic issues are regularly reviewed at Board meetings. Regular assessment is made to ensure that strategy remains appropriate, and that the business is making progress in meeting its strategic objectives. KPIs relating to strategy have been communicated clearly, both within the business and to the market. These KPIs are regularly discussed by the Board. Our budget process recognises the importance of strategic initiatives. ï¿½ In January 2018 we welcomed our new CEO, Graham Stapleton, who is reviewing the strategy in close liaison with the Board with a view to communicating this externally later in the year. ï¿½ The Group has delegated authorities processes to approve significant investments, including review by an Investment Committee and the Board. Our Business Transformation Director, an executive level role with a Group-wide remit, oversees strategic project management. ï¿½ Autocentres, Cycle Republic and Tredz & Wheelies have dedicated, experienced management teams supported by appropriate infrastructure and allocated resources. The businesses have their own websites. The performances of these businesses are closely monitored by the Board. ï¿½ ï¿½ ï¿½ ï¿½	No risk movement
3. Competition
The retail industry is highly competitive and dynamic. The Group competes with a wide variety of retailers of varying sizes and faces competition from UK retailers, in both shops and online, as well as international operators. The car servicing market is a service-based market with a number of different-sized providers where trust is extremely important to customers. Failure to compete with competitors on areas including price, product range, quality, service and trustworthiness could have an adverse effect on the Group's financial results.	The Board is aware of the risks faced from UK retailers both in-shop and online, and from the national car-servicing networks and smaller independents. ï¿½ We have a significant investment programme to support 'Moving up A Gear'. The investment programme is allowing us to improve the service we provide to customers by improving the quality of our shops, IT infrastructure, training and website (including optimisation for mobile and tablet devices). Excellent service is fundamental to differentiating ourselves from our competitors. We are increasing the number of sales that we are able to associate with individual customers. ï¿½ The national geographical coverage of our shops underpins our 'Click & Collect' offering. Our WeFit service is a key differentiator. Our Cycle Repair and extended Parts, Accessories and Clothing range offer confirm our credibility within the Cycling market. ï¿½ The Group seeks to continually strengthen its 'own-brand' retail offer and develop opportunities to differentiate the Halfords brand, including TV, radio, press and social media advertising. We also have high profile partnerships to market brands like 'Pendleton', 'Wiggins' and 'Boardman'. ï¿½ Our Autocentres business continually seeks to provide innovative solutions for their customers, such as 'brakes4life'. ï¿½ Particular attention is given to the changes to our marketplace that are driven by the 'connected car'. The retail motoring team, digital team, and Autocentres management are working collaboratively to respond to opportunities and threats.
4. Compliance
The Group operates in an environment governed by legislation and codes in areas including, but not limited to, Listing Rules, trading standards, advertising, product quality, health and safety, hazardous substances, Bribery Act and data protection. ï¿½ The Group recognises that failure to comply with ethical standards could expose the business to reputational risk and loss of goodwill.	Regulatory requirements are closely monitored by our Company Secretarial team which includes colleagues with relevant professional qualifications and experience. The Group has Quality Assurance and Compliance teams working in both the Retail and Autocentres businesses. Specialist Health and Safety teams ensure that the Group has adequate policies and risk assessments. Retail margin erosions are minimised by a dedicated profit protection team. A General Data Protection Regulation (GDPR) Steering Group is overseeing the introduction of the compliant GDPR arrangements. Colleagues and management are trained to identify and handle in-shop regulatory issues using Gears training modules on our online Learning Management System. We have a Whistleblowing hotline that allows colleagues to raise concerns in confidence. We operate a Code of Conduct that clearly sets out our expectations of suppliers. We have a corporate delegated authorities framework (How We Do Business) setting out key authorisation levels. Anti-bribery and corruption training, and training on anti-competitive behaviours have been delivered through face-to-face and online training sessions. The Group has a dedicated Investor Relations Team which ensures that there is frequent and appropriate communication with investors and the wider financial community. The Group has a dedicated Corporate Social Responsibility Committee, which calls upon cross-functional support as required. The Group has a comprehensive record of community engagement through events such as children's bike workshops, and support of the Re~Cycle charity. Our training programme at HMP Onley was judged 'CSR Initiative of the Year' at the 2017 Retail Week awards.	No risk movement
5. Supply Chain Disruption
Halfords sources a significant proportion of the merchandise it sells in its shops from outside of the UK, either directly or via third-party suppliers. Consequently, the Group is subject to the risks associated with international trade (particularly those which are common in the import of goods from developing countries) including, but not limited to, inflation, currency fluctuation, the imposition of taxes or other charges on imports, the exposure to different legal standards, the burden of complying with a variety of foreign laws and changing foreign government policies and natural disasters. UK withdrawal from the EU is likely to impact on our supply chain, although it is currently very difficult to predict how, pending ongoing government negotiations. The Group could also be impacted in the event of disruption to domestic logistic arrangements; for example, unavailability of distribution centres or road transport problems.	Extensive research is conducted into quality and ethics before the Group procures products from any new country or supplier. The Group's strong management team in the Far East blends expatriate and local colleagues. It understands the local culture, market regulations and risks and we maintain very close relationships with both our suppliers and shippers to ensure that disruption to production and supply are managed appropriately. We work with suppliers in a number of territories to reduce the risks of disruption, and we monitor sourcing opportunities nearer to the UK. We maintain firm security and protection measures at our distribution centres. We have business continuity plans to manage any incidents that may occur. Our logistics are overseen by an experienced, dedicated warehouse and logistics team who maintain contacts with a range of logistics businesses who could be utilised if necessary. We are closely monitoring Brexit developments and preparing contingency plans for any changes in the nature of the border between the UK and the Republic of Ireland.	No risk movement
6. Product and Service Quality and Brand Reputation
The Board recognises that the quality and safety of both our products and services in our shops and Autocentres are of critical importance and that any major failure will affect consumer confidence and our reputation. Failure to protect the Group's reputation and brand could lead to a loss of trust and confidence. This could result in a decline in the customer base and affect the ability to recruit and retain good people. There is also the risk that our service proposition fails due to inconsistent levels of service at individual shops and individual centres.	The Group constantly seeks to enhance its position as the shop or centre of first choice in each of the markets that it serves. Our 3-Gears training programme uses online modules to ensure that colleagues are consistently knowledgeable about our products and able to deliver quality services to customers. This online training is reinforced by face-to-face learning and assessments. Shops use an accreditation matrix to ensure that all building and fitting is undertaken by competent colleagues. Product knowledge among colleagues is promoted through specialist conferences for selected staff (e.g. BikeHut managers). We have also implemented measures to ensure that we attract and retain the best colleagues; for example, engagement surveys aim to identify opportunities to reduce colleague turnover, which is at its lowest for several years. We have again been recognised as one of the Sunday Times "Best Big Companies to Work For". Our recruitment processes are now centralised to improve efficiency and consistency. Our products are risk assessed and rigorously tested for quality and safety by qualified engineers in our dedicated quality team. We monitor customer comments and complaints and, when necessary, we have established recall processes. We work closely with suppliers and frequently visit factories to ensure manufacturing standards are maintained. Our Autocentres utilise a comprehensive quality assurance process with checks by regional and centre managers. Technicians are regularly checked to ensure quality of workmanship, and the priority status allocated to individual jobs is reviewed to ensure safety and prevent overselling. There is a dedicated Operations Quality team. We utilise mystery shoppers.	No risk movement
7. Information Technology ("IT") Systems and Infrastructure
In common with most businesses, Halfords is dependent on the reliability and suitability of a number of important IT systems where any sustained performance problems (including those caused by cyberattack) could potentially compromise our operational capability for a period of time, impacting on shops, centres or warehouse, multi-channel and distribution systems. With ambitious growth plans for our multi-channel offer, our trading capacity could be affected by internal and external systems' resilience and interdependencies. Commercial data could be lost or stolen through cyberattack, sabotage, or other security breaches. Press reports and professional advisors indicate that cyberattacks are becoming more sophisticated and common.	Extensive controls are in place to maintain the integrity of our systems and to ensure that systems changes are implemented in a controlled manner. Halfords' key trading systems are hosted within a secure data centre operated by a specialist company remote from our support centre. These systems are also supported by a number of disaster recovery arrangements including a comprehensive backup and patching strategy, and a hotlink secure data centre hosted in a different location. IT recovery processes are tested regularly. We review our IT security processes and risk assessments on an ongoing basis and our IT team has dedicated IT security and continuity experts. We utilise appropriate firewalls and we have undertaken network penetration testing. The Audit Committee is briefed by senior IT management on the business' IT security framework and continues to closely monitor this area.	Risk increasing
8. Dependence on Key Management Personnel
The success of the Group's business depends upon its senior management closely supervising all aspects of its business, in particular, the operation of the shops and Autocentres, including the appropriate training of in-shop and centre colleagues, and the design, procurement and allocation of merchandise.	Our Remuneration Policy summarised on pages 80 to 81 details the strategies in place to ensure that high calibre executives are attracted and retained. The Group looks to improve its senior manager cadre through operating a talent management process to help individuals achieve their full potential within Halfords and to ensure that appropriate succession plans are in place to meet the future needs of the business. At a junior level, the Group continues to invest in graduate and apprenticeship programmes and shop and Autocentre colleague training and development.	No risk movement

Approved by order of the Board.

Dennis Millard

Chairman

22 May 2018