| 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, DAB switchover) may also affect our consumers' ability to benefit from our products and services. | 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. It ensures that marketing and merchandising can be revised quickly to react to weather conditions.
We also ensure that we have representation with Governmental decision-makers in the areas supporting our core categories. |
| 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. | The Group has its established 'three pillars' strategy. Following a thorough review, a retail three-year plan (Getting into Gear) was announced during the year. Strategic issues, including the three-year plan, 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. |
| 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 stores and online, as well as international operators. The car servicing 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-store and online, and from the national car-servicing networks and smaller independents.
We announced a significant investment programme at the start of the year to support Getting into Gear. The investment programme is allowing us to improve the service we provide to customers by improving the quality of our stores, IT infrastructure, training and website (including optimisation for mobile and tablet devices). Excellent service is fundamental to differentiating ourselves from our competitors.
The national geographical coverage of our stores 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.
The Group seeks to continually strengthen its "own-brand" and "sub-brand" retail offer and develop opportunities to differentiate the Halfords brand including TV, radio, press and social media advertising. |
| Compliance | |
| The Group operates in an environment governed by legislation, standards and codes in areas including, but not limited to, trading, advertising, product quality, health and safety, hazardous substances, bribery act and data protection. | Regulatory requirements are closely monitored by our Company Secretarial team. 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.
Colleagues and management are trained to identify and handle regulatory issues using the 3-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 has been delivered through face-to-face and online training sessions. |
| Changing Customer Preferences | |
| Some of the products that Halfords sells, particularly in the Car Enhancement category, are subject to rapidly changing consumer preferences. Products such as children's cycles face competition from alternative products (such as games consoles) and some of the products that the Group sells are non-discretionary in their nature and predicting future trends is difficult. | Halfords has recruited experienced, knowledgeable trading colleagues who can identify and interpret trends and consequently respond in a timely manner to changes in consumer preferences. Colleagues also monitor developments in alternative products and our forecasts reflect the latest assumption in these areas. We are continually looking at ways of moving into new merchandising opportunities to mitigate technology changes and to improve forecasting and planning to ensure we meet our customers' changing needs. |
| Reliance on Foreign Manufacturers | |
| Halfords sources a significant proportion of the merchandise it sells in its stores 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. | 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 has been recruited locally and 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. |
| Product and Service Quality and Brand Reputation | |
| The Board recognises that the quality and safety of both our products and services in our stores and Autocentres is of critical importance to us 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 stores and individual centres, or through unavailability of stock as a result of disruption to the supply chain (e.g. unavailability of distribution centre). | The Group constantly seeks to enhance its position as the store or centre of first choice in each of the markets that it serves. Halfords continues to invest in both its existing estate to ensure that it remains contemporary and in constant product innovation to meet customer needs. In addition, the Group's market leading in-store wefit proposition provides a range of services at a lower cost to our customers than that provided by competitors.
Our 'Gears' training programme uses online modules to ensure that colleagues are consistently knowledgeable about our products and able to deliver quality services to customers. We have also implemented measures to ensure that we attract and retain the best colleagues: Engagement Surveys aim to identify opportunities to reduce colleague turnover; we have recently been recognised as one of the Sunday Times 25 Best Big Companies to Work For; our recruitment processes are now centralised to improve efficiency and consistency.
Our products are thoroughly tested for safety and quality. Complaints received in stores are closely monitored. Management in both retail stores and Autocentres are incentivised on quality of service targets. Our product recall procedures have been comprehensively reviewed and revised during the year. We clearly set out our expectations for retail disciplines in-store to ensure on-shelf availability.
Our Autocentres business continually seeks to provide innovative solutions for their customers, such as brakes4life. In our centres, the training of our technicians to provide high quality motor vehicle repairs is enhanced through an apprenticeship programme. The majority of our centres workshop colleagues hold a Motor Industry qualification. Repairs are subject to extensive quality assurance processes.
The business has developed and tested continuity plans. |
| 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 cyber-attack), could potentially compromise our operational capability for a period of time impacting on stores, 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. | 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 strategy, and a hotlink secure data centre hosted outside the UK. IT recovery processes are tested regularly. We have successfully completed an upgrade of our core SAP system.
We have thoroughly reviewed our IT security processes this year and recruited a number of specialists to the IT team, including dedicated IT security and continuity experts. |
| 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 stores and autocentres, including the appropriate training of in-store and centre colleagues, and the design, procurement and allocation of merchandise. | Our Remuneration Policy 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 programmes and store and centre colleague training and development. |