Infrastructure — Systems

We believe that our systems meet our requirements and thus enable us to perform and to deliver on our promises to both our investors and our customers, providing a solid platform for driving investor returns and enabling an enhanced customer experience.

Our systems provide us with effective tools that work all day, every day. As everyone knows, "retail is all about the detail" and our systems allow us to see below the surface and work out what is really going on in our business and across our multi-channel offering.

By being closer to our business we understand those actions we need to take to stabilise and build momentum on gross margin performance across the business, reinforcing our growth potential.

We also continue to build resilience into our systems and therefore strengthen our business. During the year we transitioned our disaster recovery plan; it is now supported in Somerset, UK and replicated in Bilbao, Spain.

In terms of customer facing systems, we continue to improve our multi-channel strategy that connects our stores with an online presence (www.halfords.com and www.halfordsautocentres.com), providing a compelling alternative to other online competition.

Change Management

Ongoing systems development including integration and update roll-outs, enables the necessary change required in the business to ensure scalability of our business model — strengthening the overall Halfords proposition.

However, for Halfords it is essential that change is achieved against a need to continue to deliver "business as usual" as well as "deliver the key enablers" to drive the execution of our strategy.

Systems are embedded to enable improved productivity, increasing our ability to respond to the constantly changing retail landscape. Halfords continues to strengthen its multi-channel teams and further integrate techniques and knowledge within our core retail business.

Sourcing and Inbound Logistics

We are leveraging our supply chain relationships to develop new, innovative and exclusive ranges across our store portfolio and online interface. Direct, proactive and agile global sourcing arrangements help to sustain gross margin improvements.

Increasingly we are sourcing more product directly from the international markets. In particular, our offices in Hong Kong have continued to investigate and source new sources of supply, building on our historic sourcing arrangements developed in the Far East.

All of our suppliers are subject to our Code of Ethics, based on auditable procedures consistent with established international standards. Virtually all of our products are manufactured to EN, BS and/or ISO standards including ISO 9001 and 14001. External verification is provided by BVQI, an international quality audit company.

Distribution and Outbound Logistics

We continue to upgrade our warehousing, enterprise resource and web systems to improve the efficiency of our store logistics and successful multi-channel offer.

Our systems are enabling us to compete more effectively. Our customers can now order up until 6.00 pm for guaranteed next day delivery, representing an attractive and compelling offer for busy, time-constrained customers.

Inventory Management

Effective inventory management helps us to achieve more with less, reducing our inventory holding costs and ensuring we have the right product, in the right place, at the right time. From time to time, surplus inventory may accumulate — our integrated systems are three times more effective at clearance.

Better availability linked to accurate inventory information (achieved through hand-held terminals and labels that scan) improves forecasting and leads to increasingly profitable sales.

"Reserve & Collect" and "Order & Collect" integrate our website with store and Distribution Centre inventories. This increases store footfall and range opportunities for smaller store formats.

Customer Capture

Our systems and expertise enable us to really understand and gain insight into our customers' behaviour — merging multiple databases to achieve a single, holistic customer view; increasingly being able to anticipate what our customers want before they know what they want. Good customer metrics based on the valuable data we get from our customers — both in our stores and online — enable us to talk to customers in a more meaningful and focused way. This empowers our "Helpful" culture and enhances the customer experience.

Our dynamic web offer builds on our multi-channel proposition and continues to drive customers into our stores, following their research powered by our systems, including recommendation functionality based on both manual and logarithmic prompts. This allows us to improve attachment rates through upgrade and accessorisation opportunities.

Customers are increasingly attracted by our website promotions that combine with the convenience of delivery or collection from store, backed up by in-store services. In addition, mobile applications will continue to provide many opportunities for assisting in-store customers as well as those customers away from store.

3.83 million Reserve & Collect transactions to date

Apple & Android Apps launched June 2011

Over 400,000 items available to order in-store

43 million visits to website in FY12

36,000 Order & Collect transactions in FY12

New O&C delivery schedules landed in March 2012

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