The Directors present their report and the audited financial statements of Halfords Group plc (the "Company") together with its subsidiary undertakings (the "Group") for the period ended 30 March 2018.
Halfords Group plc
|Registered Office Address||Icknield Street Drive, Washford West, Redditch, Worcestershire, B98 0DE|
|Country of Incorporation||England and Wales|
|Type||Public Limited Company|
The Company has chosen in accordance with the Companies Act 2006 to provide disclosures and information in relation to a number of matters which are covered elsewhere in this Annual Report. These matters, together with those required under the 2013 Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, are cross referenced in the following table:
Disclosures Required by the Financial Conduct Authority's ("FCA") Listing Rule 9.8.4R
The information required by Listing Rule 9.8.4R is disclosed in the following links:
The principal activities of the Group are: the retailing of motoring, cycling and leisure products and services; and garage servicing and auto repair. The principal activity of the Company is that of a holding company. The Company's registrar is Link Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU.
Profits and Dividends
The Group's results for the year are set out in the Consolidated Income Statement. The profit before tax on ordinary activities was £67.1m (2017: £71.4m) and the profit after tax amounted to £54.7m (2017: £56.4m). The Board proposes that a final dividend of 12.03 pence per ordinary share be paid on 31 August 2018 to shareholders whose names are on the register of members at the close of business on 27 July 2018. This payment, together with the interim dividend of 6 pence per ordinary share paid on 19 January 2018, makes a total for the year of 18.03 pence per ordinary share. The total final dividend payable to shareholders for the year is estimated to be £35.5m.
Computershare Trustees (Jersey) Limited, trustee of the Halfords Employees' Share Trust, has waived its entitlement to dividends.
The delivery of the Group's strategic objectives is monitored by the Board through Key Performance Indicators ("KPIs") and periodic review of various aspects of the Group's operations. The Group considers that the KPIs are appropriate measures to assess the delivery of the Group's strategy.
The following were Directors of the Company during the period ended 30 March 2018 and at the date of this Annual Report:
- Dennis Millard
- Graham Stapleton (appointed 15 January 2018)
- Jonny Mason
- David Adams
- Claudia Arney
- Helen Jones
- Jill McDonald (resigned 29 September 2017)
In accordance with the Company's Articles of Association and the UK Corporate Governance Code guidelines, all those persons holding office as a Director of the Company on 30 March 2018 will retire and offer themselves for re-election at the 2018 Annual General Meeting ("AGM"), with the exception of Dennis Millard who will be stepping down at the date of the AGM. Graham Stapleton, who was appointed on 15 January 2018, together with Keith Williams, the new Chairman, will stand for election for the first time at the 2018 AGM.
On 27 March 2018, it was announced that Jonny Mason, Chief Financial Officer resigned from the business to take up the position as Group Finance Director at Dixons Carphone plc. Jonny will remain as Chief Financial Officer until the end of his notice period in September 2018. The process for the appointment of his successor is under way.
Appointment and Removal of a Director
A Director may be appointed by an ordinary resolution of shareholders in a general meeting following recommendation by the Nomination Committee in accordance with its Terms of Reference as approved by the Board or by a member (or members) entitled to vote at such a meeting, or following retirement by rotation if the Director chooses to seek re-election at a general meeting. In addition, the Directors may appoint a Director to fill a vacancy or as an additional Director, provided that the individual retires at the next Annual General Meeting: if they are to continue, they offer themselves for election. A Director may be removed by the Company in certain circumstances set out in the Company's Articles of Association or by a special resolution of the Company.
Powers of the Directors
Subject to the Articles, the Companies Act and any directions given by the Company by special resolution and any relevant statutes and regulations, the business of the Company will be managed by the Board who may exercise all the powers of the Company. Specific powers relating to the allotment and issuance of ordinary shares and the ability of the Company to purchase its own securities are also included within the Articles, and such authorities are submitted for approval by the shareholders at the Annual General Meeting each year. The authorities conferred on the Directors at the 2017 Annual General Meeting, held on 26 July 2017, will expire on the date of the 2018 Annual General Meeting. Since the date of the 2017 Annual General Meeting, the Directors have not exercised any of their powers to issue, or purchase, ordinary shares in the share capital of the Company.
The Directors' interests in, and options over, ordinary shares in the Company are shown in the Annual Remuneration Report.
Since the end of the financial year and the date of this report, there have been no changes to such interests.
In line with the requirements of the Companies Act, Directors have a statutory duty to avoid situations in which they have, or may have, interests that conflict with those of the Company unless that conflict is first authorised by the Board.
The Company has in place procedures for managing conflicts of interest. The Company's Articles of Association contain provisions to allow the Directors to authorise potential conflicts of interest, so that if approved, a Director will not be in breach of his/her duty under company law. In line with the requirements of the Companies Act 2006, each Director has notified the Company of any situation in which he or she has, or could have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the Company (a situational conflict). Directors have a continuing duty to update any changes to their conflicts of interest and the register is updated accordingly.
Directors' and Officers' insurance has been established for all Directors and Officers to provide cover against their reasonable actions on behalf of the Company. The Directors of the Company and the Company's subsidiaries have the benefit of a third-party indemnity provision, as defined by section 236 of the Companies Act 2006, pursuant to the Company's Articles of Association.
The Group places significant emphasis upon colleague engagement at all levels and has an established framework of colleague communications providing colleagues with regular information on business performance and other relevant matters. This framework facilitates and encourages the engagement of every colleague through a programme of regular conferences, monthly magazines, team meetings and huddles and a weekly blog from the CEO. In addition, the Group undertakes its own annual colleague engagement survey and participates in the external 'Best Companies' survey which is published by the Sunday Times. Further information on colleague engagement is included in the CSR Report.
Colleague Training and Development
The Group strives to meet its business objectives by motivating and encouraging all colleagues to be responsive to the needs of its customers and continually improve operational performance. This is delivered through a range of structured training and development programmes, across the Group, in Retail, Autocentres, Performance Cycling, Boardman and Cycle Republic. The Group also continues to invest in its apprenticeship programme. Further information on colleague training and development, and the apprenticeship programme can be found in the CSR Report.
In addition, the Group runs a Leadership Development programme, called Aspire, to identify and develop colleagues across the Group, with potential to be our leaders of the future. This continues our drive to develop and therefore, possibly promote from within.
Colleague Diversity and Disabled Persons
There is a Group Diversity Policy which is reviewed annually by the Board. The Group is committed to providing equal opportunities in recruitment, training, career development and promotion for all colleagues, potential colleagues or contractors. This commitment to equality of opportunity applies regardless of anyone's physical ability, gender, sexual orientation or gender reassignment, pregnancy and maternity, race, religious beliefs, age, nationality or ethnic origin.
Full and fair consideration is given to employment applications from people with disabilities wherever suitable opportunities exist, having regard to their particular aptitudes and abilities. Should a colleague become disabled, efforts are made to ensure their continued employment with the Group, with retraining being provided if necessary.
The Group takes a zero-tolerance approach to matters of discrimination, harassment and bullying in all aspects of its business operations. Appropriate policies and procedures are in place for reporting and dealing with such matters.
The Group is committed to conducting its business with honesty and integrity, and it expects all colleagues to maintain high standards in accordance with its corporate culture. An understanding of openness and accountability is essential in order to prevent illegal or unethical conduct or malpractice and to enable any such situations to be addressed should they ever occur. The Group Whistleblowing Policy and Procedure (the "Whistleblowing Policy") is annually reviewed and communicated to all colleagues around the Group and enables colleagues to report concerns on matters affecting the Group or their employment, without fear of recrimination. The Whistleblowing Policy sets out how concerns may be raised and when response can be expected from the Company.
Share Capital and Shareholder Voting Rights
Details of the Company's share capital and of the rights attaching to the Company's ordinary shares are set out in note 22. All ordinary shares, including those acquired through Company share schemes and plans, rank equally with no special rights.
All shareholders are entitled to attend and speak at the general meetings of the Company, appoint proxies, receive any dividends, exercise voting rights and transfer shares without restriction. On a show of hands at a general meeting every member present in person shall have one vote, and on a poll, every member present in person or by proxy shall have one vote for every ordinary share held. There are no known arrangements that may restrict the transfer of shares or voting rights.
The Company has revolving credit facilities that require the Company in the event of a change of control to notify the facility agent and, if required by the majority lenders, these facilities may be cancelled. The Company does not have agreements with any Director or colleague that would provide compensation for loss of office or employment resulting from a takeover, except that provisions of the Company's share schemes and Deferred Bonus Plan may cause options and awards granted to Directors and colleagues under such schemes and plans to vest on a takeover.
Details of employee share schemes are provided in note 23.
As at 30 April 2018, this being the latest practicable date, the Company has been notified pursuant to Disclosure Guidance and Transparency Rule 5 of the following interests representing 3% or more of the Company's issued ordinary share capital.
|% of issued |
|Jupiter Asset Management Limited (UK)||20,549,795||10.32|
|Wise Investments Ltd (UK)||10,797,000||5.42|
|J O Hambro Capital Management (UK)||10,731,015||5.39|
|Norges Bank Investment Management||7,978,058||4.01|
|Dimensional Fund Advisors||7,772,290||3.90|
|HSBC Global Asset Management||7,513,337||3.77|
|Wellington Management Company||7,161,795||3.60|
|Aberforth Partners LLP (SC)||6,818,647||3.42|
Authority to Purchase Shares
At the 2017 Annual General Meeting, shareholders approved a special resolution authorising the Company to purchase a maximum of 19,911,663 shares, representing not greater than 10% of the Company's issued share capital at 1 June 2017, such authority expiring at the conclusion of the Annual General Meeting to be held in 2018 or, if earlier, on 30 September 2018.
Transactions with Related Parties
During the period, the Company did not enter into any material transactions with any related parties.
Articles of Association
In accordance with the Companies Act 2006, the Articles of Association may only be amended by a special resolution of the Company's shareholders in a general meeting.
The Group made no political donations and incurred no political expenditure during the year (FY17: nil). It remains the Company's policy not to make political donations or to incur political expenditure. However, the application of the relevant provisions of the Companies Act 2006 is potentially very broad in nature and, as last year, the Board is seeking shareholder authority to ensure that the Group does not inadvertently breach these provisions as a result of the breadth of its business activities, although the Board has no intention of using this authority.
The Group has a £200m revolving credit facility, ending in September 2021 with a one-year extension option to September 2022. At the year end, the Group had undrawn borrowing facilities of £116m (2017: £97m). The Group's current committed borrowing facilities contain certain financial covenants, which have been met throughout the period. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its borrowing facilities and covenants for the foreseeable future. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, hence they continue to adopt the going concern basis of accounting in preparing the Financial Statements.
In accordance with provision C.2.2 of the UK Corporate Governance Code, the Directors have assessed the viability of the Company over a three-year period to 2 April 2021. The Directors believe this period to be appropriate as the Company's strategic planning encompasses this period, and because it is a reasonable period over which the impact of key risks can be assessed within a fast-moving retail business.
The Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due at least until 2 April 2021. As is customary when dealing with longer term debt facilities, the Board would expect these to be renewed well in advance of their next term.
In making this statement, the Directors have reviewed the overall resilience of the Group and have specifically considered:
- a robust assessment of the impact, likelihood and management of principal risks facing the Group, including consideration of those risks that could threaten its business model, future performance, solvency or liquidity or sustainability. The assessment of viability has specifically considered risks that could threaten the Group's day-to-day operations and existence. The assessment considered how risks could affect the business now, and how they may develop over three years; and
- financial analysis and forecasts showing current financial position and performance, cash flow projections, dividend strategy, funding requirements and funding facilities.
More details of key risks, mitigations and assessment processes are set out in our Principal Risks and Uncertainties section.
Modern Slavery Statement
The Group operates retail stores across the UK and Ireland and garages throughout the UK. The products the Group sells are sourced from a broad range of national and international suppliers. Many of those international supplier relationships are sourced and managed by a dedicated Halfords Global Sourcing ("HGS") team based in Hong Kong, Taiwan and Shanghai
During the financial year, the Group updated its Ethical Trading Statement, which details how its complies with the legislation which is applicable to Ethical Trading, and sets out the standards expected of its suppliers. This is particularly in regard to conditions of employment, wages and benefits, child labour, human trafficking, as well as health and safety and environmental policy. To ensure that policies and standards are communicated as effectively as possible, the Group follows a dual strategy:
- requiring suppliers to confirm compliance with relevant legislation, which includes the Modern Slavery Act 2015 (via an annual 'Supplier Compliance Declaration'); and
- the establishment of a specific Code of Conduct which primarily applies to the organisations that supply the goods sold by the Group. These suppliers are the ones that deal mainly with the Global Sourcing Operation, HGS.
Furthermore, the Group has amended its terms of business when purchasing Goods For Resale so that the contracts now oblige suppliers to comply with their obligations under the Modern Slavery Act 2015 Act. The responses from suppliers to the audit of the supply chain have been positive and the completed replies have identified good levels of compliance and have not unearthed any adverse findings.
The Modern Slavery Statement is annually reviewed by the Board of Directors and was last approved on 29 September 2017.
Creditor Payment Policy
The Group does not follow any formal Code of Practice on payment. Instead it agrees terms and conditions for transactions when orders for goods or services are placed, and includes relevant terms in contracts, as appropriate. These arrangements are adhered to when making payments, subject to the terms and conditions being met by suppliers. The number of trade creditor days outstanding as at 30 March 2018 for the Group was 66 days (2017: 59 days). The Company is a holding company and has no trade creditors.
The Company and its subsidiaries have established branches in the different countries in which they operate.
The Company's Auditor is KPMG LLP. A resolution proposing the reappointment of KPMG LLP is expected to be in the Notice of the Annual General Meeting and will be put to shareholders at the meeting.
Disclosure of Information to the Auditor
In accordance with Section 418(2) of the Companies Act 2006, each Director in office at the date the Directors' Report is approved confirms that:
- so far as the Director is aware, there is no relevant audit information of which the Company's Auditor is unaware; and
- he/she has taken all the steps that he/she ought to have taken as a Director in order to make himself or herself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.
Important Events Since Year End
On 22 May 2018, it was announced that Keith Williams will be joining Halfords as Chairman on 24 July 2018.
Annual General Meeting ("AGM")
The AGM will be held at the Hilton Garden Inn, 1 Brunswick Square, Brindleyplace, Birmingham, B1 2HW on Tuesday 24 July 2018. The Notice of the AGM and explanatory notes regarding the ordinary and special business to be put to the meeting will be set out in a separate circular to shareholders.
By order of the Board
Group Company Secretary
22 May 2018