Board and Audit Committee

Overall oversight of risk management and internal control framework:

  • Full annual review of effectiveness of risk management and internal control systems, corporate risk register, and risk appetite undertaken by Audit Committee with assessment delivered to Board for approval.
  • Update on changes to risk and internal control environment presented by Internal Audit to Audit Committee at each meeting.

Whistleblowing process

Regular KPI reporting

Shops, Garages, Distribution Centres and Customer-Facing Businesses

First Line Assurance

Operating within agreed policies and procedures, for example:

  • Delegated authorities ('How We Do Business').
  • Quality Standards.
  • Retail guidelines ('Retail Basics').
  • Health and Safety policies.
  • Colleague handbooks.
  • Regular oversights.
  • Performance monitoring.
  • Regular management presentation to Board and Audit Committee.

Regular management presentation to Board and Audit Committee

Corporate Functions

Second Line Assurance

  • Identify developments in risk and internal control environment.
  • Develop and implement strategy, policies, procedures and controls to manage risk.
  • Internal audits.
  • Risk and internal control analysis.
  • Internal audit reports.
  • Corporate Risk Register.

Internal Audit Reports

Corporate Risk Register

Internal Audit

Third Line Assurance

  • Independently review quality of key internal controls and management assessment of risk.
  • Challenge management to enhance control environment.
  • Maintain Corporate Risk Register.

Internal Audits

Risk and internal control analysis

Risk Management Framework

The Board has overall responsibility for the management of risk and the identification of principal risks that may affect the Group's strategic objectives. Specifically the Board determines the nature and extent of risk exposure that the business is willing to take in pursuit of its strategy. The Audit Committee, on behalf of the Board, has responsibility for maintaining oversight of the Group's framework for risk management.

Whilst ultimate responsibility for the oversight of risk management rests with the Board, the effective day-to-day management or risk is embedded within the business through a layered assurance approach.

During the year, additional rigour was added into the overall management of risk through the creation of a Risk Committee. This Committee, comprising members of the Executive Team, systematically reviews existing risks, focuses on mitigating actions and identifies emerging risks. Changes to the risk profile of the business, alongside significant and emerging risks, are escalated to the Audit Committee, which routinely receives deep dive analysis and regulatory updates on key risks. Please see the Audit Committee Report for details of Audit Committee activities during the year.

Principal Risks

The Audit Committee reviews the effectiveness of the risk management processes and monitors the assessment of the Group's principal risks, reflecting on external factors and their impact on strategic priorities. Each principal risk has an Executive owner and is included within a Corporate Risk Register, which is subject to a 'top-down' review. Operational risk registers are maintained to provide greater granularity, a 'bottom-up' perspective and a further means to identify emerging risks.

Principal risk changes:

  • COVID-19 is a present threat but is no longer regarded as a principal risk having crystallised during the year. Residual risk remains but we have elected to treat this as an elevation of our existing principal risks, many of which continue to be impacted by the pandemic.
  • Brexit is no longer a principal risk having been concluded during the year.Any residual impact of the agreement is monitored through the day-to-day risk management process.


COVID-19 had a significant impact across all sectors throughout 2020 with the imposition of lockdowns and travel restrictions disrupting global supply chains and changing consumer behaviour. Halfords responded immediately to the pandemic, with the fast set up of daily COVID-19 'war rooms' at senior management and Executive level. All risks, whether health and safety related, financial, commercial or operational, were quickly identified, managed and ultimately mitigated.

The Group was able to limit the impact of the pandemic by continuing to trade safely as an essential retailer and by making any necessary proposition changes, such as enhancing our online offer, to respond to changes in customer behaviour. The management of financial risks and liquidity was strengthened to protect the business and deliver a positive result for the year. Throughout this period, risk management was at the forefront of our response, designed to protect both customers and colleagues.

The advancement of the vaccine programme and the easing of lockdown restrictions has enabled operations at stores and centres to prepare for a return to pre COVID-19 levels of customer traffic. The risk of another rise in COVID-19 infections posed by virus variants and a return to pandemic restrictions is under constant review, and if necessary, our proven response plan can be rapidly redeployed.

Emerging Risks

The evolution of risk is actively considered at Board level and across the senior management team. Emerging risk is seen as an undefined risk that may eventually develop to materially impact the business in the future. The newly formed Risk Committee now manages the identification and progression of emerging risk with further evaluation and discussion by the Audit Committee. Climate change and the electrification of vehicles continues to be a developing area, representing both an emerging risk and an opportunity. We conduct horizon scanning with subject matter experts, who contribute to the risk management process with insight on key risk themes such as economic, environmental, technological, societal, and geopolitical.

Risk Appetite

The Board has defined risk appetite for its principal risks based on the categories of strategy, financial, compliance and operational. By grouping risks into categories, the Board is able to distinguish the risk appetite for each of the principal risks and whether mitigations are adequate.


  • Risk increasing
  • Risk decreasing
  • No risk movement

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

  • 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 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").

Focus in 2022

  • 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.

If we fail to maintain stakeholder confidence in our strategy, they may withdraw their support.

Current Mitigation

  • 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.

Focus in 2022

  • 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.

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

  • 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.

Focus in 2022

  • 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.

If we continue to lose brand relevance, we will be unable to maintain and grow our customer base and build market share.

Current Mitigation

  • 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.

Focus in 2022

  • 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.

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

  • 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.
  • 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.

Focus in 2022

  • 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 failure to adhere to our legal and/or regulatory obligations for some or all of the Group's activities leads to an inability to meet our responsibilities to stakeholders and/or the imposition of financial penalties, placing a strain or financial cost on the business.

Current Mitigation

  • The senior leadership team communicates tone from the top to provide guidance to colleagues on all policy commitments.
  • A new health and safety structure was implemented with strong application of COVID-19 secure controls applied across all function of the business.
  • An external review of financial services compliance was undertaken in the year, allowing a targeted strategy of improvement.
  • Regular horizon scanning is undertaken to capture new regulations and requirements.

Focus in 2022

  • Review and improvement of policies supported by training programmes for colleagues.
  • Regular training and information provided through user-friendly channels.
  • Deep-dive analysis into specific risk areas carried out on behalf of the Executive Risk Committee.

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

  • 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 multi-skilled retail colleagues operating across all departments.
  • Store calls are now managed through a centralised contact centre, improving response times and convenience to customers.

Focus in 2022

  • 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.

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

  • 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.

Focus in 2022

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

Our employment model may not be sufficiently attractive to recruit and retain the talent that we need.

Current Mitigation

  • 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.
  • 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.
  • 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.

Focus in 2022

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

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

  • 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.

Focus in 2022

  • 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.

Failure in our IT system(s) may cause significant disruption to, or prevention of, normal business-as-usual activities.

Current Mitigation

  • 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.
  • 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.

Focus in 2022

  • 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.

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

  • 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.

Focus in 2022

  • 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.

Going Concern

In determining the appropriate basis of preparation of the financial statements for the year ended 2 April 2021, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. The Board has concluded that it is appropriate to adopt the Going Concern basis, having undertaken an assessment of the financial forecasts.

The Group has significantly outperformed the scenarios reviewed as part of the going concern assessment in the Annual Report and Accounts to 3 April 2020.

Management has updated the assessment of going concern, which included reviewing financial forecasts and projections to 30 June 2022. Within these financial projections, management reviewed profit and net cash flow, and tested financial covenants in the period. No issues were found.

The financial forecasts have been stress tested to determine the required sales decline versus the Going Concern scenario before the covenant conditions were breached. This assessment also included variable and other cost saving measures the Group would employ in this scenario and showed that sales would have to reduce by (24.0%) before the first covenant condition is broken. Management believe that this is a significant material event which is highly unlikely to occur in the next 15 months.

If sales were to reduce by (24%), then further actions could be taken by management to prevent the breach. The key mitigating action would be to halt strategic investment in FY22, which would provide further headroom of c.5% of sales decline.

The Audit Committee recently reviewed the corporate risk register and confirmed that it gave no reason not to adopt the Going Concern principle.

The Group ended the year in a positive net debt position pre-IFRS 16 of £58.1m and continues to be cash generative. The Group has a revolving credit facility of £180m at the date of approval of these financial statements, which expires on 3 December 2023, and has no other debt or facilities. The Board has a reasonable expectation that the Group and Company will be able to continue in operation and meet its liabilities as they fall due; retain sufficient available cash and not breach any covenants under any drawn facilities over the remaining term of the debt facility. They do not consider there to be a material uncertainty around the Group or Company's ability to continue as a Going Concern.