DSGi 2009/10 Preliminary Results
By Dsg International Plc, PRNEThursday, June 24, 2010
Full Year Profits at top end of Expectations, up 61%
LONDON, June 25, 2010 - DSG international plc, one of Europe's largest specialist
electrical retailers, today announces preliminary audited results for the 52
weeks ended 1 May 2010:
Financial Highlights
- Total Underlying Group sales(1) (2) up 4% to GBP8,531.6 million
(2008/09 GBP8,180.2 million).
- Total Group sales, including those from closed businesses, up 3% to
GBP8,532.5 million (2008/09 GBP8,317.8 million).
- Group like for like sales(3) up 2% in the full year and up 6% in the
second half.
- Underlying Group gross margins flat across the full year.
- Underlying EBIT(4) up 60% at GBP133.2 million (2008/09 GBP83.0
million).
- Significant profit improvements across the Group, including UK &
Ireland up 21% and Nordics up 28%.
- Underlying pre-tax profit(2) up 61% at GBP90.5 million (2008/09
GBP56.1 million).
- Underlying diluted earnings per share(2) up 50% at 1.5 pence
(2008/09(5) 1.0 pence). Basic earnings per share for continuing
operations of 1.7 pence (2008/09 loss per share of (10.2) pence).
- Total profit before tax after net non-underlying items was GBP112.7
million (2008/09 loss GBP(123.6) million).
- Free Cash Flow(6) of GBP28.1 million before restructuring and
impairment charges (2008/09 outflow of GBP(340.0) million).
- As at 1 May 2010 the Group had net debt of GBP(220.6) million (2008/09
GBP(477.5) million).
- New GBP360 million revolving credit facility signed with syndicate of
banks, providing the Group with flexibility.
John Browett, Chief Executive, commented:
"Focus on our customers drives everything we do and I am delighted with
the excellent progress we have made over the past twelve months as we
continue to transform the Group, despite the recessionary environment across
Europe. We have made significant improvements throughout the business,
transforming the shopping experience for customers with better choice, value
and service both in stores and online. We are now two years into the Renewal
and Transformation plan and are encouraged by the improved profitability and
competitiveness it continues to deliver."
Operational Highlights
- Group name of Dixons Retail plc to be ratified by shareholders at the
AGM.
- Renewal & Transformation plan improving the offer for customers.
- Store transformation programme on track:
- Over 200 stores reformatted across the Group by the year end;
- Additional 80 reformatted stores to be opened by Peak in the UK,
including 21 Megastores;
- Two thirds of store portfolio by sales will be transformed in the
UK by October 2010;
- Nordic store reformatting continues, with 16 Megastores now open;
- Portfolio review completed with over 160 stores exited over the
last 2 years.
- Reformatted stores continue to perform strongly:
- Average gross profit uplifts of 20% versus the rest of the chains;
- Average gross profit uplifts of 50% achieved in the Megastores and
2-in-1s;
- Second year trading for reformatted stores remains strong.
- Significant improvements to services for customers:-
- Further compelling services for customers launched including free
delivery slots, next day timed delivery slots and 'follow-me-home'
services from Megastores;
- Better availability of stock in store with stock turn up 12% year
on year;
- Satisfaction measures rising, due to focus on service,
connectivity, delivery, installation and repair.
- Good progress with online operations:-
- Pure internet sales of GBP1.4 billion, representing 16% of total
Group sales;
- Successful roll-out of 'e-merchant' operating platform to UK
internet sites.
- International plans making progress:-
- Turnaround plans in Italy ahead of schedule with positive like for
like sales and margin improvements;
- Greece and Spain weathering economic challenges well and gaining
market share.
- GBP200 million 4 year cost saving programme on track, delivering GBP50
million reduction in the year.
- UK defined benefit pension scheme closed to future accruals thereby
reducing risk for the Group.
- On track for medium term target of a 3%-4% EBIT return on sales.
Outlook
The economic backdrop across Europe has remained challenging throughout
the year. The Group expects these conditions to continue in the coming year
in many of its markets where consumer spending is likely to come under
pressure from fiscal tightening. The Group is well prepared for this
environment and continues to focus on improving the offer for customers while
managing costs, margins, stock turn and cash flow. Consequently, given the
Renewal and Transformation plan, Group profitability will continue to
improve.
About Currys:
Currys is the UK's biggest electrical retailer with a network of over 500
stores nation-wide, including out of town stores, high street Currys.digital
stores and a Currys Megastore in the Midlands. It also stocks a wide range of
fridge freezers (www.currys.co.uk/), laptop bags
(www.pcworld.co.uk/gbuk/laptops-netbooks/laptops-703-c.html) and
desktop pcs (
www.dixons.co.uk/gbuk/computers/desktop-pc-monitor-packages-122-c.html
.)
UNDERLYING SALES AND PROFIT ANALYSIS
Underlying sales Underlying profit
/(loss)
52 weeks 52 weeks Like 52 weeks
ended ended for 52 weeks ended
like(2) ended 1
1 May 2010 2 May 2009 May 2010 2 May 2009
%
GBPmillion GBPmillion change GBPmillion GBPmillion
UK & Ireland 2,650.6 2,657.8 (1)% 32.0 17.7
Electricals
UK Computing 1,362.9 1,570.8 (9)% 39.1 41.0
UK & Ireland 4,013.5 4,228.6 (3)% 71.1 58.7
Nordics 2,093.7 1,625.2 13% 97.4 76.1
Other 1,503.2 1,519.0 flat (8.3) (23.7)
International
e-commerce 921.2 807.4 11% 11.3 15.0
Central Costs - - (19.5) (25.0)
Total Group 8,531.6 8,180.2 2% 152.0 101.1
Retail
Property losses (18.8) (18.1)
EBIT 133.2 83.0
Underlying net finance costs (42.7) (26.9)
Group underlying profit before tax 90.5 56.1
NOTES
(1) UK & Ireland Electricals comprises Currys, CurrysDigital and
Dixons Travel in the UK as well as the operations in Ireland.
(2) UK Computing comprises PC World, DSGi Business and The
TechGuys. Like for like sales are for PC World only.
(3) Nordics comprises the Elkj0p group (Elkj0p, El Giganten,
Gigantti and Lefdal).
(4) Other International comprises Greece (Kotsovolos and Electro
World), Cyprus (Kotsovolos), Italy (UniEuro, PC City Italy and Dixons Travel
Italy), Spain (PC City Spain), Turkey (Electro World), Czech Republic
(Electro World) and Slovakia (Electro World).
(5) e-commerce division comprises PIXmania and Dixons.co.uk.
BUSINESS PERFORMANCE
Underlying Group sales (excluding discontinued operations and closed
businesses) were up 4% to GBP8,531.6 million (2008/09 GBP8,180.2 million) and
up 2% on a like for like basis. Underlying Group sales were up 2% at constant
exchange rates. Total Group sales (including closed businesses) were up 3% to
GBP8,532.5 million (2008/09 GBP8,317.8 million). Group gross margins were
flat across the year.
Group underlying EBIT (underlying profit before interest and tax)
increased by 60% to GBP133.2 million (2008/09 GBP83.0 million). Group
underlying profit before tax was up 61% at GBP90.5 million (2008/09 GBP56.1
million). Total profit before tax, after adding back non-underlying items of
GBP22.2 million, was GBP112.7 million (2008/09 loss before tax of GBP(123.6)
million).
UK & IRELAND
Total sales in the UK & Ireland were down 5% to GBP4,013.5 million
(2008/09 GBP4,228.6 million) and like for like sales were down 3% across the
year. Like for like sales in the second half were up 3% as the Renewal and
Transformation plan began to deliver benefits. Underlying operating profit
for the full year was up 21% at GBP71.1 million (2008/09 GBP58.7 million).
The economic environment in the UK & Ireland remained challenging across
the year. During the first half the Group was focused on cash margins while
much of the Renewal and Transformation and store reformatting was taking
place. The business then experienced a strong Christmas Peak as the benefits
of the plan started to improve the business performance and deliver market
share gains in all major categories.
UK & Ireland Electricals includes Currys, CurrysDigital and Dixons Travel
in the UK and Currys and PC World in Ireland. Total sales were flat year on
year at GBP2,650.6 million (2008/09 GBP2,657.8 million) with like for like
sales down 1%, across the year, but up 6% in the second half. Underlying
operating profit improved by 81% to GBP32.0 million (2008/09 GBP17.7
million).
UK Computing includes PC World, DSGi Business and TechGuys. Total sales
were down 13% at GBP1,362.9 million (2008/09 GBP1,570.8 million) with like
for like sales down 9%. The decline in sales was predominantly driven by
lower sales in the DSGi Business operations as small businesses reduced
capital expenditure during the credit crunch. Despite the weak sales
environment, underlying operating profit was relatively stable at GBP39.1
million (2008/09 GBP41.0 million).
UK & Ireland has historically been reported separately as UK & Ireland
Electricals and UK Computing. A key objective of the Renewal and
Transformation plan is to remove complexity, simplify processes, make
operations easier for colleagues and reduce costs in the Group. As a result
the back office functions supporting the PC World, Currys, CurrysDigital and
Dixons Travel operations have been brought together with the combined
commercial, merchandising and buying teams supporting all brands. The
logistics infrastructure has also been consolidated with the main warehouse
in Newark providing one fulfilment centre for stores and customers. In
addition, with an increasing number of combined 2-in-1 Currys and PC World
stores, the Electricals and Computing operations in the UK & Ireland will no
longer report figures separately and will consequently be reported as one
operation going forward.
The main focus of the Renewal and Transformation plan has, to date,
primarily benefitted the UK & Ireland operations. The stores are benefitting
from improved ranges and selling service. All colleagues have now undergone
FIVES training, our bespoke training programme focusing on understanding and
meeting a customer's needs as well as improving product knowledge. Stock
management processes have been improved significantly, improving availability
and ranges while controlling costs and working capital utilised in the
business.
During the year significant improvements have been made to the services
infrastructure. This enables Currys and PC World to offer customers flexible
options to suit their needs even better, from the market leading next day
delivery in 3 hour timed slots to free delivery. Delivery times continue to
improve with 'right first time' achieving 97% with 'right second time' even
higher. Utilising our logistics infrastructure we are able to offer free
recycling without materially impacting costs or carbon emissions.
The repair and support operations have been restructured improving
processes and reducing costs. A new state of the art repair facility for TVs
and laptops has been opened in Newark. These changes have enabled the Group
to considerably improve repair times, for example, halving the average repair
time for televisions to 6 days, with further improvements under way. The
contact centre was successfully brought back in house enabling us to improve
the quality of service and support offered to our customers.
Dixons Travel continues to perform well. The new format stores are being
rolled out to existing locations bringing improved ranges, play tables and
store layouts to the airport stores. Dixons Travel initiated its overseas
expansion opening stores in Rome airport. Since the year end Dixons Travel
has opened a store in Dublin airport. Further international locations are
expected to be added over time.
The TechGuys continues to be a valued differentiator providing service
and expertise to customers. The TechGuys service desk is now operational in
PC World and combined 2-in-1 stores and has been incorporated in the Currys
Megastores. In August the TechGuys launched a range of over 60 enhanced
services for customers as well as introducing "Club" and "Premier Club"
options for the "Whateverhappens" customer support agreements. Under the
"Premier Club", support agreement customers experience enhanced levels of
service such as faster response times and the loan of a product if theirs has
to be taken away for repair.
In Ireland, the economic environment has been particularly tough. The
business there took early actions to manage costs resulting in an improving
performance in the second half with sales and profits up year on year.
DSGi Business experienced an extremely challenging trading environment as
smaller businesses reduced capital expenditure during the credit crunch. The
new management team is focused on managing costs and cash. The B2B operations
are well placed to benefit when small businesses restart investment as the
economic environment improves.
As at 18 June 2010 the Group had transformed 164 stores in total in the
UK, of which 12 were Megastores and 20 were combined 2-in-1 Currys and PC
World Superstores. The transformed stores continue to deliver gross profit
uplifts of 20%, with uplifts of 50% in the Megastores and combined 2-in-1
Currys and PC World stores. Management estimate that the transformed stores
benefitted the like for like sales in the UK by approximately 3% across the
year. While there are a limited number of reformatted stores over a year old,
performance in the second year remains strong.
Having traded the new format stores through the important Peak period the
Group has determined the appropriate portfolio and transformation programme
going forward, and announced its intention to reduce the number of stores in
the UK to approximately 500 (excluding stores under the Dixons Travel brand)
over time. The Megastore and 2-in-1 combined stores are proving to be
particularly popular with customers. 70 locations for the Megastore format
have been identified with 60 being developed using existing stores in the
portfolio and the remainder resulting from the relocation of existing stores.
In addition the Group expects to have approximately 330 out of town
superstores, predominantly of the combined 2-in-1 Currys and PC World format
which can be similarly created from within the existing portfolio. With
limited overlap between the PC World and Currys customer demographic the
combined 2-in-1 stores provide access to the PC World brand in existing
Currys markets. The Group also expects to continue to operate up to 100 High
Street locations.
In the UK & Ireland the Group expects to refurbish approximately 100
stores during the 2010/11 financial year, with the majority to be completed
before Christmas 2010, as follows:-
- 21 new Megastores, taking the total in the UK to 33 Megastores;
- 44 combined 2-in-1 Currys and PC World stores;
- 12 Currys and PC World standalone superstores; and
- 3 CurrysDigital High Street stores.
The Group has also been implementing those parts of the store
transformation programme to existing stores across the portfolio that improve
the shopping trip for customers but require little or no additional
expenditure. As a result these stores have already benefitted from the
improved ranges, colleague training, and enhanced after sales help and
support.
NORDICS
In the Nordic region, Elkj0p delivered a very strong performance with
sales increasing by 22% in local currency and 29% in sterling to GBP2,093.7
million (2008/09 GBP1,625.2 million). Like for like sales were up 16% in the
second half and up 13% across the year. Underlying operating profits
increased by 28% to GBP97.4 million (2008/09 GBP76.1 million). Nordic region
results are stated excluding the businesses of PC City in Sweden and
Markantalo in Finland closed at the beginning of the financial year.
Elkj0p performed very strongly in all of its markets and product
categories. It has performed particularly strongly in Sweden and Denmark
despite the more challenging economic environments experienced in these
markets across the year. With excellent in store service and customer
engagement, the Nordic business is the preferred operating model for the
Group and practices are being increasingly shared across all of the Group's
divisions. Management continue to simplify the business, taking out costs and
reducing complexity. The efficient central operating structure, customer
focused business model and strong market positions have enabled Elkj0p to
gain market share from other competitors.
Elkj0p has now opened 16 Megastores which have performed particularly
well. It has also started a programme to refurbish existing superstores using
the same principles employed in the UK businesses.
Elkj0p's multi-channel offering continued to grow in all markets doubling
its sales through the internet during the year. Its Reserve and Collect
service continues to be well received by customers.
OTHER INTERNATIONAL
This division comprises operations in Italy, Greece, Spain, the Czech
Republic, Slovakia and Turkey. Total sales were down 5% at constant exchange
rates and by 1% in sterling to GBP1,503.2 million (2008/09 GBP1,519.0
million). A better performance in the second half with like for like sales up
4% resulted in a flat like for like performance across the year. Underlying
operating losses were reduced significantly to GBP(8.3) million (2008/09 loss
of GBP(23.7) million).
Italy
This comprises UniEuro, PC City implants in UniEuro stores and Dixons
Travel Italy operating in the airport in Rome. The turnaround plan in Italy
continues to make good progress. Management actions have resulted in an
improving trend in sales with positive like for like sales, particularly in
the second half of the year despite a continued challenging economic
environment. Gross margins improved further year on year. Stock control has
also been improved, with stock turn up 10%, while availability has increased
by approximately 20%. UniEuro has experienced good growth in vision,
computing, communications, built-in appliances and accessories.
At the beginning of the year UniEuro successfully completed its store
rationalisation plan ahead of schedule, closing 51 underperforming stores and
now operates from 97, largely out of town, stores. It has added 35 PC City
implants into the portfolio, all of which are performing well. During the
year UniEuro opened its first Megastore in Muratella in Rome. This is a
40,000 sq ft store refurbished along the same principles as those in the UK
and Nordics and has experienced strong gross profit uplift. Management have
also developed a new format for their smaller stores and have completed the
first 3 refits which were successfully launched in May 2010 with strong gross
profit uplifts. The range improvements and cost efficiencies identified as
part of the turnaround plan continue to make good progress.
The economic outlook in Italy remains challenging, but the turnaround
plan puts UniEuro in a strong competitive position. The improving performance
gives management further confidence in the prospects for UniEuro.
Greece
Kotsovolos is the market leading specialist electrical retailer in
Greece. The difficult economic environment currently being experienced in
Greece is well documented. The business has seen total sales impacted,
particularly against tough comparables in the prior year. However, management
have continued to focus on the customer, maintained margins, reduced costs
and improved cash flow by increasing stock turn. They have also continued to
invest in the store renewal programme to limit the effects of the weakening
environment on bottom line performance.
During the period, Kotsovolos refurbished 9 stores into the Renewal and
Transformation plan format, which are showing encouraging uplifts and
excellent feedback from customers. The focus has also been on building new
channels of business and in one year Kotsovolos has become a significant
player online, increased the franchise network to 30 stores and commenced
operations of business to business sales, all of which have helped to offset
the negative trends in the market.
The operations in Greece are in a strong position with a market leading
offer and a strong focus on delivering for customers. As such it will benefit
when the economy recovers. These strengths will enable Kotsovolos to
capitalise on the tough environment for competitors and to grow market share.
Spain
While the consumer environment has been very tough in Spain over the last
2 years, PC City remains the leading computer specialist in the market. Costs
have been reduced while continuing to focus on the customer offer. 11 stores
have been closed and PC City now operates from 32 stores. Using some of the
principles of the UK transformation plan, management introduced a light refit
plan which adds incremental sales while keeping the cash payback period to a
minimum. These actions have started to deliver improved gross margins,
enabling the business to deliver significantly reduced losses year on year.
They have also enabled PC City to maintain its overall market share with 11
fewer stores while positioning the business better for when the Spanish
economy recovers. Encouragingly the business delivered positive like for like
sales during the second half, despite the continued weak consumer
environment. This performance gives management further confidence in the
prospects for the business.
Czech Republic and Slovakia
On 19 May 2009 and 1 September 2009 the Group sold the operations of
Electro World in Hungary and Poland, respectively, in each case for a
consideration of EUR1. Following these disposals the central operations in
Prague and logistics infrastructure in Brno have been refocused on its core
operations of the Czech Republic and Slovakia, significantly reducing costs
and complexity.
Operations in the Czech Republic have performed well in their markets,
despite the weak consumer environment. During the year Electro World
reformatted its first store in Prague, utilising the Renewal and
Transformation plan format which has reported encouraging results with a
great response from customers. The Group now operates 16 stores and a
multi-channel internet operation in the Czech Republic and 3 stores in
Slovakia which are trading in line with expectations. Management recently
announced plans to open 3 new stores in time for the Christmas peak.
Turkey
The Group now operates 12 stores in Turkey under the Electro World brand
with its local joint venture partner. These new stores are based on the
Group's new large space format, providing a greater product range and
exciting retail environment for customers. The business continues to deliver
good sales growth as customers recognise the benefits of large store formats
in delivering value, choice and service. With a solid store base now
established, it was announced in April 2010 the intention to roll out a
franchise operation in Turkey. The first franchise store opened very
successfully in Sakarya and further franchise stores will be opened over the
next two years.
E-COMMERCE DIVISION
This comprises PIXmania and Dixons.co.uk. Total sales were up 14% at
GBP921.2 million (2008/09 GBP807.4 million). Underlying operating profit was
GBP11.3 million (2008/09 GBP15.0 million).
PIXmania continues to trade strongly across all its markets. It has
experienced very strong sales growth in its core European markets (France,
Italy and Spain) driven by increased customer acquisition through increased
online and offline communication. PIXmania has made good progress in all key
categories, including growth outside its traditional consumer electronics
categories. In addition it has been investing in growth outside of its main
markets especially emerging markets (e.g. Central and Eastern Europe).
PIXmania's newest channel, its reseller marketplace platform, PIXplace,
has grown its sales three-fold since launch with expansion in new countries,
the introduction of new categories as well as an increase in new merchants
transacting through this platform.
The market-leading e-merchant platform was rolled out into the Group's UK
internet operations (dixons.co.uk, currys.co.uk, pcworld.co.uk) in February
2010 and has improved navigation, product display and information as well as
the ability to show attachments to customers.
With 276 million unique visitors during the year, PIXmania websites
reached the 4th rank of the most visited consumer electronics e-tailers in
the world according to Alexa.com.
Dixons.co.uk has been operating as a pure play internet operation for
over 3 years. Following strong growth during this period, a number of changes
have been made to the operating model to make the business even more relevant
for customers. While Dixons.co.uk performed well over the important Christmas
Peak, these changes impacted sales performance during the rest of the year.
OPERATIONAL IMPROVEMENTS
The Group is focused on re-engineering and simplifying the operational
processes within the Group in order to reduce costs for the Company, improve
the service provided to customers, and assist colleagues in operating the
business effectively.
There remains significant opportunity for productivity improvements
within the Group and management are targeting these improvements to deliver
some GBP200 million in cost savings over a four year period. In the first
year of this programme the Group has delivered GBP50 million of cost savings
through efficiency initiatives in head office administration and in-store
processes. Process improvement initiatives have already contributed to
reductions in levels of stock held by the Group as well as improving stock
turn by approximately 12% during the year.
The Group continues to implement the step change programme that makes the
business even better for customers, easier for colleagues and cheaper to
operate.
Management remains confident that it can achieve a 3% - 4% EBIT return on
sales, through the Renewal and Transformation plan, over the medium term.
GROUP NAME
Subject to shareholder approval, the Group's registered name will be
amended to Dixons Retail plc in order to harness the strength of the Dixons
name and to reflect the resurgence of the company. The Dixons name resonates
strongly with suppliers, the market, and colleagues in a way that DSG
international has not been able to without significant investment in the
brand.
FINANCIAL POSITION
The Group's financial priorities in 2009/10 included improving
profitability and strengthening the balance sheet. To this end:
- Underlying EBIT increased by 60% to GBP133.2 million
(2008/09 GBP83.0 million);
- Underlying profit before tax increased by 61% to GBP90.5
million (2008/09 GBP56.1 million);
- Underlying diluted earnings per share increased by 50% to
1.5 pence (2008/09 1.0 pence, after adjusting for the rights issue);
- Loss making businesses in Hungary and Poland were disposed
of successfully;
- Net proceeds of GBP291.3 million were received following the
Equity Placing and Rights Issue;
- Significant headroom was maintained on the revolving credit
facility throughout the year and a new revolving credit facility of
GBP360 million was signed in May 2010;
- The UK defined benefit scheme was closed to future accruals
reducing the deficit by GBP33.4 million;
- Positive free cash flow, before restructuring items, of
GBP28.1 million was generated;
- The Group's working capital position was improved, through a
reduction in debtors, and stock turn improved by 12%.
FREE CASH FLOW
Free cash flow before restructuring items was GBP28.1 million
(2008/09 outflow GBP(340.0) million) and total free cash outflow was
GBP(17.6) million (2008/09 GBP(404.2) million).
52 weeks ended 52 weeks ended
1 May 2010 2 May 2009
GBPmillion GBPmillion
Underlying profit before tax 90.5 56.1
Closed businesses loss before tax (0.2) (14.1)
Depreciation and amortisation 128.6 134.7
Working capital 39.7 (285.4)
Taxation (31.9) (35.7)
Capital expenditure (165.3) (140.7)
Sale of freehold property (i) 0.7 10.8
Other cash items (34.0) (65.7)
Free Cash Flow before restructuring items 28.1 (340.0)
Net restructuring and impairment costs (45.7) (64.2)
(i)
Free Cash Flow (17.6) (404.2)
(i) Sale of freehold property excludes GBP9.0 million of sale
proceeds relating to the sale of the Group's former warehouse in Stevenage
(2008/09 GBP18.0 million). These sale proceeds are shown within net
restructuring and impairment costs.
Free Cash Flow before restructuring showed a significant
improvement over the prior year, driven by improved profitability, improved
working capital management and reduced hedge losses, partly offset by
increased capital expenditure relating to the Renewal and Transformation
plan.
The improved working capital movement was primarily due to
improved stock management including GBP43.9 million reduction in stock aged
over 6 months, and improved control of debtors. This was partly offset by the
continued unwinding of the historically higher proportion of term versus
pay-as-you-go Customer Support Agreement deferred income. The prior year was,
as previously announced, impacted by the unwinding of deferrals of supplier
payments made at the end of the 2007/08 financial year which have not
recurred.
Capital expenditure was GBP165.3 million (2008/09 GBP140.7
million), up GBP24.6 million reflecting the increased investment associated
with the Renewal and Transformation plan, particularly in the UK. There were
no significant disposals during the year, with cash generated from the sale
of property of GBP0.7 million (2008/09 GBP10.8 million).
As previously disclosed, the Group has in place certain
historical hedging agreements. The principal outstanding agreements relate
primarily to foreign exchange and interest hedges. The majority of these were
put in place at the time the Group issued its Bonds in 2002, and in relation
to overseas investments. A number of these hedges matured during the
financial year and resulted in a cash outflow of GBP62.2 million (2008/09
GBP83.3 million). The remaining hedges at year end rates would imply a net
cash outflow of approximately GBP50 million, primarily payable in 2012.
Other cash items of GBP(34.0) million (2008/09 GBP(65.7) million)
improved by GBP31.7 million mainly due to increased add back of non cash
costs included in profit, such as pension interest and fee amortisation, and
the reduced hedge outflows mentioned above.
Net restructuring and impairment reflects the cash outflows
relating to the strategic reorganisation activities and business impairment,
predominantly provided for in 2008/09. These mainly comprise lease and other
property related payments and employee severance costs, less the final
tranche of disposal proceeds from the sale of a former warehouse in the UK.
FUNDING
Net funds/debt
At 1 May 2010 the Group had net debt of GBP(220.6) million,
compared with net debt of GBP(477.5) million at the end of the previous year.
The Group's net debt includes restricted funds of GBP78.9 million (2008/09
GBP67.6 million) which predominantly comprise funds held under trust for
potential Customer Support Agreement liabilities.
52 weeks ended 52 weeks ended
1 May 2010 2 May 2009
GBPmillion GBPmillion
Opening net (debt) / funds (477.5) 50.1
Free Cash Flow (17.6) (404.2)
Dividend - (60.3)
Equity Placing and Rights issue 291.3 -
Acquisitions and disposals (7.0) (27.6)
Discontinued operations (8.6) (21.6)
Special pension contribution (12.0) (12.0)
Other items 10.8 (1.9)
Other movements in net funds / (debt) 274.5 (123.4)
Closing net debt (220.6) (477.5)
Movements in net debt include net proceeds of GBP291.3 million
received from the Equity Placing and Rights issue in the first half of the
financial year, GBP7.0 million acquisition costs primarily representing an
associated undertaking in Norway being acquired following the exercise of a
put option, and GBP8.6 million representing the net cash utilisation of the
discontinued operations in Hungary and Poland. The GBP12.0 million special
pension contribution was made in accordance with the agreement with the
trustee of the UK defined benefit pension scheme to reduce the pension
deficit. Other items include the impact on net debt of the accounting
revaluation of the 2012 Bonds, and of net funds held in foreign currencies,
as well as capital contributions made by the joint venture partner in Turkey.
On 12 May 2010 the Group signed a new revolving credit facility
agreement (the New Facility) for GBP360 million. The New Facility will come
into effect by 15 August 2010 at which time it will replace the Group's
existing GBP400 million Facility. The terms and covenants attaching to the
New Facility are substantially the same as that for the GBP400 million
Facility except that the guarantee structure comprises UK and Irish companies
only, thereby aligning it more closely to the Group's 2012 Bond.
At the earliest, the New Facility will mature on 15 August 2012
and would be extended to 15 August 2013 in the event that the Group raises
additional finance of a minimum of GBP100 million by November 2011. It is the
Group's intention that the proceeds from any such financing would principally
be used to refinance the Group's 2012 Bond.
This new agreement gives the Group the appropriate level of
committed financing for its working capital needs. It also provides the Group
with the flexibility of either a longer term on the New Facility or to enter
into a new or revised revolving credit facility at a later date.
UNDERLYING NET FINANCE COSTS
Underlying net finance costs were GBP(42.7) million (2008/09 (GBP26.9)
million). The movement year on year was driven by the following key areas:
- Increased borrowing costs subsequent to the refinancing of the Group's
revolving credit facility;
- Higher net pension interest set at the beginning of the financial year
largely as a result of a higher discount rate applied to liabilities,
which is a non-cash item;
- Partly offset by interest earned on overpayments of tax in prior
periods.
ADJUSTMENTS TO UNDERLYING RESULTS
Underlying profit before tax is reported before net
non-underlying credits of GBP22.2 million. A further explanation of these
items is shown below:
52 weeks 52 weeks
ended ended
1 May 2010 2 May 2009
GBPmillion GBPmillion
Profit / (loss) before tax 112.7 (123.6)
Add back non underlying items:
Trading results from Closed businesses 0.2 14.1
Other non-underlying items:
Amortisation of acquired intangibles 4.6 4.9
Net restructuring charges:
Strategic reorganisation 5.6 59.1
Business impairments - 96.1
Change in pension benefits (33.4) -
Other items - Buncefield release - (1.9)
Financing items:
Net fair value remeasurements 0.8 7.4
Other non-underlying items - total (22.4) 165.6
Total net non-underlying charges to add (22.2) 179.7
back
Underlying profit before tax 90.5 56.1
- In May the Group closed the standalone stores of PC City in
Sweden and Markantalo in Finland. Trading results comprises the pre-tax
losses from these operations.
- Amortisation of acquired intangibles of GBP4.6 million
predominantly comprises brand names with the year on year change being
affected by currency movements.
- Strategic re-organisation costs of GBP5.6 million relate to the
UK business transformation and primarily comprises accelerated
Depreciation charges associated with the reformat of the UK & Ireland
store portfolio and onerous lease obligations following re-organisation
of the service infrastructure.
- The change in pension benefits of GBP33.4 million arises from
the curtailment of the defined benefit section of the UK pension scheme
whereby this section was closed to future accrual on 30 April 2010. The
amount represents the effect of active members' future salary
increases, included in the valuation assumptions of the deficit, now
being capped at inflation as they are now being treated as deferred
members of the scheme.
- The financing charge of GBP0.8 million relates to net fair
value remeasurement losses on revaluation of financial instruments as
required by IAS 32 and 39 and can be volatile, dependant on market
conditions existing at the balance sheet date.
PROPERTY LOSSES
Property losses increased to GBP18.8 million (2008/09 GBP18.1 million
loss), primarily due to provisions made relating to closure or refit of
stores as part of the Renewal and Transformation plan.
DIVIDENDS
The Board believes that DSGi's existing financial resources should be
used to invest in the Renewal and Transformation plan, which is showing
encouraging signs of delivering changes in DSGi's performance.
The Revolving Credit Facility and Letter of Credit Facilities, prohibit
payments of dividends to Shareholders in respect of the 2009/10 Financial
Year. The same agreements however do allow the Company, subject to certain
conditions, to pay a dividend in respect of the 2010/11 Financial Year and
beyond.
Subject to an assessment of whether certain conditions have been met, and
the progress of the Renewal and Transformation plan, the Board aims to resume
dividend payments when appropriate, consistent with a sustained recovery in
DSGi's operational and financial performance.
TAX
The Group's tax rate on underlying profit before tax was 45% (2008/09:
61%). The decrease in the tax rate reflects a reduced proportion of loss
making businesses where tax benefits are not fully recognised.
PENSIONS
At 1 May 2010, the IAS 19 accounting deficit of the defined benefit
section of the UK pension scheme amounted to GBP263.5 million (2 May 2009
GBP148.8 million). The assumptions used for determining the accounting
valuation use a consistent basis to that adopted in prior periods. Although
the assets of the scheme have recovered considerably year on year, the
overall deficit has still increased substantially due to a significant
increase in the liabilities. This is due to an increase in the assumption for
long term inflation (which affects "final salary" on retirement) coupled with
a significant decrease in the discount rate applied to the liabilities which
reflects yields on corporate bonds.
Over recent years, the Group has implemented a number of changes to
pension arrangements in order to address the deficit over the longer term.
Since 1 September 2002, the defined benefit section of the UK pension scheme
has been closed to new entrants and on 30 April 2010 was closed to future
accrual with automatic entry into the defined contribution section being
offered to those active members of the defined benefit section. The effect of
this change is to remove the future volatility associated with adding further
accrual for active employees as well as a more immediate benefit of GBP33.4
million to the valuation of the liabilities which has been treated as a
non-underlying item as described further above.
The actuarial deficit of GBP61.0 million (measured as at 5 April 2007) is
being addressed by special cash contributions of GBP12 million per annum
which are payable in two equal tranches of GBP6 million by June and December
each year until December 2012. A further actuarial valuation as at 5 April
2010 is currently underway, however, its results will not be known until
early in the 2011/12 financial year.
Maylands Avenue John Browett
Hemel Hempstead Chief Executive
Hertfordshire HP2 7TG 24 June 2010
Report and Accounts publication date 15 July 2010
Annual General Meeting 8 September 2010
Copies of the Report and Accounts will be available from the
Company Secretary at the above address and on the Group's
website at www.dsgiplc.com
52 weeks ended 1 May 2010
Non-underlying*
Under- Closed **
lying* businesses Other Total
Note GBPmillion GBPmillion GBPmillion GBPmillion
Continuing
operations
Revenue 2 8,531.60 0.9 - 8,532.50
Profit /
(loss) from
operations
before
associates 131.6 -0.2 23.2 154.6
Share of
post-tax
results of
associates 1.6 - - 1.6
Operating
profit /
(loss) 2 133.2 -0.2 23.2 156.2
Finance
income 58.2 - 1.1 59.3
Finance costs -100.9 - -1.9 -102.8
Net finance
costs 4 -42.7 - -0.8 -43.5
Profit /
(loss) before
tax 90.5 -0.2 22.4 112.7
Income tax
(expense) /
credit 5 -40.7 0.1 -6.1 -46.7
Profit / (loss) after tax -
continuing operations 49.8 -0.1 16.3 66
Loss after tax -
discontinued
operations - - -8.7 -8.7
Profit / (loss) for
the period 49.8 -0.1 7.6 57.3
Attributable to:
Equity shareholders of the
parent company 52.3 -0.1 7.6 59.8
Minority interests -2.5 - - -2.5
49.8 -0.1 7.6 57.3
Earnings / (loss)
per share (pence)
6
Basic - total 1.7p
Diluted - total 1.7p
Basic - continuing 2.0p
operations
Diluted - continuing 1.9p
operations
Underlying earnings
per share (pence)
6
Basic - continuing 1.5p
operations
Diluted - continuing 1.5p
operations
CONTINUED
52 weeks ended 2 May 2009
Non-underlying*
Under-lying* Closed **
GBPmillion businesses Other Total
GBPmillion GBPmillion GBPmillion
Continuing
operations
Revenue 8,180.20 137.6 - 8,317.80
Profit / (loss)
from operations
before associates
79.4 -12.2 -158.2 -91
Share of post-tax
results of
associates 3.6 - - 3.6
Operating profit / 83 -12.2 -158.2 -87.4
(loss)
Finance income 69.6 - 32.2 101.8
Finance costs -96.5 -1.9 -39.6 -138
Net finance costs -26.9 -1.9 -7.4 -36.2
Profit / (loss)
before tax 56.1 -14.1 -165.6 -123.6
Income tax
(expense) / credit -34.3 2.7 -25.2 -56.8
Profit / (loss)
after tax -
continuing
operations 21.8 -11.4 -190.8 -180.4
Loss after tax -
discontinued
operations - - -38.9 -38.9
Profit / (loss) for 21.8 -11.4 -229.7 -219.3
the period
Attributable to:
Equity shareholders
of the parent
company 21.7 -11.4 -229.7 -219.4
Minority interests 0.1 - - 0.1
21.8 -11.4 -229.7 -219.3
Earnings / (loss)
per share (pence)
Basic - total (10.2)p
Diluted - total (10.2)p
Basic - continuing (8.4)p
operations
Diluted - continuing (8.4)p
operations
Underlying earnings
per share (pence)
Basic - continuing 1.0p
operations
Diluted - continuing 1.0p
operations
* 'Underlying' profit and earnings per share measures exclude the trading
results of closed businesses, amortisation of acquired intangibles, net
restructuring and business impairment charges and other one off,
non-recurring items, profit on sale of investments, fair value remeasurements
of financial instruments and, where applicable, discontinued operations. Such
excluded items are described as 'Non-underlying'. Further information on
these items is shown in notes 1, 3, 5 and 6.
** Closed businesses comprise Markantalo and PC City Sweden whereby these
store based businesses were closed on 10 May 2009 and 20 May 2009,
respectively. These operations do not meet the definition of discontinued
operations as stipulated by IFRS 5 and accordingly the disclosures made above
differ from those for discontinued operations.
52 weeks 52 weeks
ended ended
1 May 2010 2 May 2009
GBPmillion GBPmillion
Profit / (loss) for the period 57.3 (219.3)
Actuarial (losses) / gains on - UK (156.0) (114.3)
defined benefit pension schemes
- Nordics 1.5 (2.1)
Cash flow hedges
Fair value remeasurement (losses) / gains (18.4) 42.6
Losses / (gains) transferred to carrying 15.1 (27.4)
amount of inventories
Gains transferred to income statement (3.8) (13.4)
Net investment hedges
Fair value remeasurement gains / (losses) 2.7 (74.3)
Investments
Fair value remeasurement gains / (losses) 0.8 (0.9)
Tax on items taken directly to equity 44.2 53.2
Currency translation movements 45.3 122.5
Net expense recognised directly in equity (68.6) (14.1)
Total comprehensive expense for the (11.3) (233.4)
period
Attributable to:
Equity shareholders of the parent company (8.9) (236.9)
Minority interests (2.4) 3.5
(11.3) (233.4)
1 May 2010 2 May 2009
GBPmillion GBPmillion
Non-current assets
Goodwill 1,116.5 1,069.1
Intangible assets 130.7 148.4
Property, plant & equipment 541.0 489.6
Investments in associates 26.4 29.8
Trade and other receivables 58.0 68.5
Deferred tax assets 169.4 150.3
2,042.0 1,955.7
Current assets
Inventories 972.6 971.9
Trade and other receivables 395.1 508.2
Income tax receivable 1.9 8.3
Short term investments 8.5 9.0
Cash and cash equivalents 295.7 192.6
1,673.8 1,690.0
Assets held for sale - 13.2
Total assets 3,715.8 3,658.9
Current liabilities
Bank overdrafts (4.9) (4.8)
Borrowings (98.5) (250.1)
Obligations under finance leases (2.4) (2.8)
Trade and other payables (1,605.9) (1,664.5)
Income tax payable (47.0) (58.0)
Provisions (22.3) (72.1)
(1,781.0) (2,052.3)
Net current liabilities (107.2) (362.3)
Non-current liabilities
Borrowings (321.4) (322.5)
Obligations under finance leases (97.6) (98.9)
Retirement benefit obligations (266.8) (153.0)
Other payables (325.7) (369.8)
Deferred tax liabilities (18.7) (22.7)
Provisions (29.5) (40.4)
(1,059.7) (1,007.3)
Liabilities directly associated with - (14.4)
assets classified as held for sale
Total liabilities (2,840.7) (3,074.0)
Net assets 875.1 584.9
Capital and reserves 90
Called up share capital 90.2 44.3
Share premium account 169.4 169.4
Other reserves (537.5) (534.9)
Retained earnings 1,124.4 880.1
Equity attributable to equity 846.5 558.9
holders of the parent company
Equity minority interests 28.6 26.0
Total equity 875.1 584.9
The financial statements were approved by the directors on 24 June 2010
and signed on their behalf by:
John Browett Nicholas Cadbury
Chief Executive Group Finance Director
52 weeks 52 weeks
ended ended
1 May 2010 2 May 2009
GBPmillion GBPmillion
Note
Operating activities - continuing
operations
Cash generated from / (utilised by) * 7 270.3 (143.8)
operations
Special contributions to defined benefit (12.0) (12.0)
pension scheme
Income tax paid * (31.9) (35.7)
Net cash flows from operating activities 226.4 (191.5)
Investing activities - continuing
operations
Purchase of property, plant & equipment and * (165.3) (140.7)
other intangibles
Purchase of subsidiaries (7.0) (27.6)
Interest received * 25.5 20.9
Decrease in short term investments 1.3 73.3
Disposals of property, plant & equipment * 9.7 28.8
and other intangibles
Dividend received from associate 4.0 4.9
Proceeds from sale of discontinued - -
operations
Net cash flows from investing activities (131.8) (40.4)
Financing activities - continuing
operations
Issue of ordinary share capital 291.3 -
Additions to finance leases - 2.4
Capital element of finance lease payments (1.7) (1.7)
Interest element of finance lease payments * (7.1) (6.9)
(Decrease) / increase in borrowings due (151.6) 249.9
within one year
Increase / (decrease) in borrowings due - (0.1)
after more than one year
Interest paid * (118.8) (126.8)
Investment from minority shareholder 5.0 5.7
Equity dividend paid - (60.3)
Net cash flows from financing activities 17.1 62.2
Decrease in cash and cash equivalents (i)
Continuing operations 111.7 (169.7)
Discontinued operations (8.6) (21.6)
103.1 (191.3)
Cash and cash equivalents at beginning of (i) 7 187.8 363.7
period
Currency translation differences (0.1) 15.4
Cash and cash equivalents at end of period (i) 7 290.8 187.8
Free Cash Flow (ii) (17.6) (404.2)
(i) For the purposes of this cash flow statement, cash and cash
equivalents comprise those items disclosed as "cash and cash equivalents" on
the face of the balance sheet, less overdrafts, which are classified within
current liabilities on the face of the balance sheet. A reconciliation to the
balance sheet amounts is shown in note 7.
(ii) Free Cash Flow comprises those items marked * and comprises cash
generated from / (utilised by) continuing operations before special pension
contributions, less net finance expense, less income tax paid and net capital
expenditure. The directors consider that 'Free Cash Flow' provides additional
useful information to shareholders in respect of cash generation and is
consistent with how business performance is measured internally.
Share Share Other Retained
reserves earnings
capital premium GBPmillion
GBPmillion
GBPmillion GBPmillion
At 4 May 2008 44.3 169.4 (502.9) 1,115.9
Loss for the period - - - (219.3)
Other comprehensive income - - (52.8) 35.2
and expense recognised
directly in equity
Total comprehensive income - - (52.8) (184.1)
and expense for the period
Equity dividends paid - - - (60.7)
Minority - increase in - - - -
interests capital
Transfers - - (6.7) 6.7
Put option exercised - - 27.5 -
Share-based payments - - - 2.1
Tax on share-based payments - - - 0.2
At 2 May 2009 44.3 169.4 (534.9) 880.1
Profit for the period - - - 57.3
Other comprehensive income - - (2.6) (63.6)
and expense recognised
directly in equity
Total comprehensive income - - (2.6) (6.3)
and expense for the period
Minority - increase in - - - -
interests capital
Placing and Rights Issue 45.9 - 245.4 -
Transfer - - (245.4) 245.4
Share-based payments - - - 4.9
Tax on share-based payments - - - 0.3
At 1 May 2010 90.2 169.4 (537.5) 1,124.4
CONTINUED
Sub total Minority Total
interests equity
GBPmillion
GBPmillion GBPmillion
At 4 May 2008 826.7 26.8 853.5
Loss for the period (219.3) - (219.3)
Other comprehensive income and (17.6) 3.5 (14.1)
expense recognised directly in
equity
Total comprehensive income and (236.9) 3.5 (233.4)
expense for the period
Equity dividends paid (60.7) - (60.7)
Minority
interests
Transfers - - -
Put option exercised 27.5 (10.0) 17.5
Share-based payments 2.1 - 2.1
Tax on share-based payments 0.2 - 0.2
At 2 May 2009 558.9 26.0 584.9
Profit for the period 57.3 - 57.3
Other comprehensive income and (66.2) (2.4) (68.6)
expense recognised directly in
equity
Total comprehensive income and (8.9) (2.4) (11.3)
expense for the period
Minority
interests
Placing and Rights Issue 291.3 - 291.3
Transfer - - -
Share-based payments 4.9 - 4.9
Tax on share-based payments 0.3 - 0.3
At 1 May 2010 846.5 28.6 875.1
Minority interests comprise shareholdings in Pixmania S.A.S., (PIXmania),
ElectroWorld Ic ve Dis Ticaret AS (ElectroWorld Turkey) and DSGi South-East
Europe A.E.V.E. (Kotsovolos).
1 Basis of preparation
The financial information, which comprises the consolidated income
statement, consolidated statement of comprehensive income and expense,
consolidated balance sheet, consolidated cash flow statement,
consolidated statement of changes in equity and extracts from the notes
to the accounts for 1 May 2010 and 2 May 2009, has been prepared in
accordance with the accounting policies set out in the full financial
statements.
The financial information set out in this announcement does not
constitute statutory accounts within the meaning of Sections 434 to 436
of the Companies Act 2006 and is an abridged version of the Group's
financial statements for the 52 weeks ended 1 May 2010 which were
approved by the directors on 24 June 2010. Statutory accounts for the
52 weeks ended 2 May 2009 have been delivered to the Registrar of
Companies, the auditors have reported on those accounts, their report
was unqualified and did not contain statements under Section 498(2) or
(3) of the Companies Act 2006. Statutory accounts for the period ended
1 May 2010 will be delivered following the Company's annual general
meeting. The auditors have reported on those accounts, their reports
were unqualified and did not contain statements under Section 498 of
the Companies Act 2006.
The consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS) as adopted by
the EU, IFRS issued by the International Accounting Standards Board and
those parts of the Companies Act 2006 applicable to those companies
reporting under IFRS.
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiary undertakings for the 52
weeks ended 1 May 2010. Comparative figures are for the 52 weeks ended
2 May 2009.
The directors consider that the 'underlying' performance measures,
together with the associated Income Statement presentation, provide
additional useful information for shareholders on underlying
performance of the business, and are consistent with how business
performance is measured internally. Such measures exclude the trading
results of closed businesses, impact of amortisation of acquired
intangibles, net restructuring and business impairment charges and
other one off, non-recurring items, profit on sale of investments, fair
value remeasurements of financial instruments and, where applicable,
discontinued operations. These measures may not be directly comparable
with 'adjusted' profit measures used by other companies.
2 Segmental analysis
The Group's operating segments have been determined based on the
information reported to the Board. This information is predominantly based on
geographical areas which are either managed separately or have similar
trading characteristics such that they can be aggregated together into one
segment and in the case of e-commerce, as a business area with geographical
territories aggregated. Accounting policies for each operating segment are
the same as those for the Group as described in note 1. The Group evaluates
each operating segment based on underlying operating profits which excludes
those items described in note 1.
All segments are involved in the multi-channel sale of high technology
consumer electronics, personal computers, domestic appliances, photographic
equipment, communication products and related financial and after-sales
services. The principal categories of customer are retail, business to
business and on-line.
During the period the Group disposed of its operations in Hungary and
Poland, both of which have been classified as discontinued operations and
were previously shown in the Other International division.
The Group's reportable segments have been identified as follows:
- UK & Ireland comprises UK & Ireland Electricals (which consists of
Currys, CurrysDigital, Dixons Travel and the Irish business) and UK
Computing (which consists of PC World, DSGi Business and The TechGuys)
both of which are engaged predominantly in retail sales, associated
peripherals and services and related financial and after sales services
with the latter also engaging in business to business sales of computer
hardware and software.
- Nordics comprises the Elkj0p Group which operates in Norway, Sweden,
Finland, Denmark, Iceland, Greenland and the Faroe Islands. The Nordics
division engages predominantly in retail sales.
- Other International comprises operations in Central and Southern
Europe. Central Europe comprises ElectroWorld operating in the Czech
Republic and Slovakia whilst Southern Europe operates in Italy, Greece,
Spain, Cyprus and Turkey. The Other International division engages
predominantly in retail sales.
- e-commerce comprising PIXmania and Dixons.co.uk, is engaged in on-line
retail sales and operates in all of the countries in which the other
divisions operate and across Europe.
Closed businesses comprise Markantalo and PC City Sweden whereby these
store operations were closed on 10 May 2009 and 20 May 2009, respectively.
Owing to their closure rather than disposal, these operations do not meet the
definition of discontinued operations as stipulated by IFRS 5.
2 Segmental analysis continued
(a) Income statement
2009/10
External Intersegmental Underlying Total
revenue revenue
Revenue profit profit
GBPmillion GBPmillion
GBPmillion GBPmillion GBPmillion
UK & Ireland 4,013.5 101.7 4,115.2 71.1 93.7
Nordics 2,094.6 1.7 2,096.3 95.8 95.6
Other 1,503.2 1.5 1,504.7 (8.3) (9.0)
International
e-commerce 921.2 3.8 925.0 11.3 7.9
Eliminations - (108.7) (108.7) - -
8,532.5 - 8,532.5 169.9 188.2
Share of post-tax result of associates 1.6 1.6
Operating profit before central costs and 171.5 189.8
property losses
Central costs (19.5) (14.8)
Property losses (18.8) (18.8)
Operating profit 133.2 156.2
Finance income 58.2 59.3
Finance costs (100.9) (102.8)
Profit before tax for the period 90.5 112.7
External revenue for the Nordics includes GBP0.9 million relating to
closed businesses.
Reconciliation of underlying profit to total profit
Under- Net
Amortisa-tion restruc-turing
lying Closed of acquired
intangibles charges
profit businesses
GBPmillion GBPmillion GBPmillion GBPmillion
UK & Ireland 71.1 - (0.5) (5.6)
Nordics 95.8 (0.2) - -
Other International (8.3) - (0.7) -
e-commerce 11.3 - (3.4) -
169.9 (0.2) (4.6) (5.6)
Share of post-tax 1.6 - - -
result of associates
Operating profit 171.5 (0.2) (4.6) (5.6)
before central costs
and property losses
Central costs (19.5) - - -
Property losses (18.8) - - -
Operating profit 133.2 (0.2) (4.6) (5.6)
Finance income 58.2 - - -
Finance costs (100.9) - - -
Profit before tax 90.5 (0.2) (4.6) (5.6)
for the period
CONTINUED
2009/10
Net fair
value
Change in remeasure Total
pension
benefits -ments profit
GBPmillion GBPmillion GBPmillion
UK & Ireland 28.7 - 93.7
Nordics - - 95.6
Other International - - (9.0)
e-commerce - - 7.9
28.7 - 188.2
Share of post-tax - - 1.6
result of associates
Operating profit 28.7 - 189.8
before central costs
and property losses
Central costs 4.7 - (14.8)
Property losses - - (18.8)
Operating profit 33.4 - 156.2
Finance income - 1.1 59.3
Finance costs - (1.9) (102.8)
Profit before tax 33.4 (0.8) 112.7
for the period
Share of post-tax result of associates relates to the Nordics.
2 Segmental analysis continued
(a) Income statement
2008/09
External Intersegmental Underlying Total
revenue revenue Revenue profit / profit /
(loss) (loss)
GBPmillion GBPmillion GBPmillion
GBPmillion GBPmillion
UK & Ireland 4,228.6 84.2 4,312.8 58.7 (17.0)
Nordics 1,762.8 1.1 1,763.9 72.5 14.2
Other 1,519.0 2.3 1,521.3 (23.7) (42.6)
International
e-commerce 807.4 0.4 807.8 15.0 11.7
Eliminations - (88.0) (88.0) - -
8,317.8 - 8,317.8 122.5 (33.7)
Share of post-tax result of associates 3.6 3.6
Operating profit / (loss) before central costs 126.1 (30.1)
and property losses
Central costs (25.0) (39.2)
Property losses (18.1) (18.1)
Operating profit / (loss) 83.0 (87.4)
Finance income 69.6 101.8
Finance costs (96.5) (138.0)
Profit / (loss) before tax for the period 56.1 (123.6)
External revenue for the Nordics includes GBP137.6 million relating to
closed businesses.
Reconciliation of underlying profit / (loss) to total profit / (loss)
Under-
lying Net
profit / Closed Amortisa-tion restruc-turing
of acquired
(loss) businesses intangibles charges
GBPmillion GBPmillion GBPmillion GBPmillion
UK & Ireland 58.7 - (0.4) (43.0)
Nordics 72.5 (12.2) (0.5) -
Other International (23.7) - (0.7) -
e-commerce 15.0 - (3.3) -
122.5 (12.2) (4.9) (43.0)
Share of post-tax 3.6 - - -
result of associates
Operating profit / 126.1 (12.2) (4.9) (43.0)
(loss) before
central costs and
property losses
Central costs (25.0) - - (14.2)
Property losses (18.1) - - -
Operating profit / 83.0 (12.2) (4.9) (57.2)
(loss)
Finance income 69.6 - - -
Finance costs (96.5) (1.9) - -
Profit / (loss) 56.1 (14.1) (4.9) (57.2)
before tax for the
period
CONTINUED
2008/09
Net fair
Business value Total
impairment remeasure profit /
charges -ments (loss)
GBPmillion GBPmillion GBPmillion
UK & Ireland (32.3) - (17.0)
Nordics (45.6) - 14.2
Other International (18.2) - (42.6)
e-commerce - - 11.7
(96.1) - (33.7)
Share of post-tax - - 3.6
result of associates
Operating profit / (96.1) - (30.1)
(loss) before
central costs and
property losses
Central costs - - (39.2)
Property losses - - (18.1)
Operating profit / (96.1) - (87.4)
(loss)
Finance income - 32.2 101.8
Finance costs - (39.6) (138.0)
Profit / (loss) (96.1) (7.4) (123.6)
before tax for the
period
Share of post-tax result of associates relates to the Nordics.
3 Non-underlying items
2009/10
Closed
businesses Other Total
GBPmillion
GBPmillion GBPmillion
Included in operating profit / (loss):
Closed businesses (i) (0.2) - (0.2)
Amortisation of acquired - (4.6) (4.6)
intangibles
Net restructuring charges (ii) - (5.6) (5.6)
Business impairment (iii) - - -
charges
Change in pension benefits (iv) - 33.4 33.4
Other items (v) - - -
(0.2) 23.2 23.0
Included in net finance costs:
Closed businesses - - -
Net fair value - (0.8) (0.8)
remeasurements of
financial instruments (vi)
- (0.8) (0.8)
Total impact on profit / (loss) (0.2) 22.4 22.2
before tax
Included in income tax expense:
Closed businesses 0.1 - 0.1
HMRC settlement (vii) - - -
Other non-underlying items - (6.1) (6.1)
0.1 (6.1) (6.0)
Total impact on profit / (loss) after (0.1) 16.3 16.2
tax
CONTINUED
2008/09
Closed
businesses
Other Total
GBPmillion GBPmillion
GBPmillion
Included in
operating profit
/ (loss):
Closed businesses (12.2) - (12.2)
Amortisation of - (4.9) (4.9)
acquired intangibles
Net restructuring - (59.1) (59.1)
charges
Business impairment - (96.1) (96.1)
charges
Change in pension - - -
benefits
Other items - 1.9 1.9
(12.2) (158.2) (170.4)
Included in net finance costs:
Closed businesses (1.9) - (1.9)
Net fair value - (7.4) (7.4)
remeasurements of
financial instruments
(1.9) (7.4) (9.3)
Total impact on profit / (14.1) (165.6) (179.7)
(loss) before tax
Included in income tax expense:
Closed businesses 2.7 - 2.7
HMRC settlement - (52.7) (52.7)
Other non-underlying - 27.5 27.5
items
2.7 (25.2) (22.5)
Total (11.4) (190.8) (202.2)
impact
on
profit /
(loss)
after
tax
(i) Closed businesses: Comprises the operating activities of Markantalo
and PC
City Sweden which were closed on 10 May 2009 and 20 May 2009,
respectively.
(ii) Net restructuring charges - strategic reorganisation
Property Asset Other Total
charges impairments charges
GBPmillion
GBPmillion GBPmillion GBPmillion
2009/10 (2.3) (3.3) - (5.6)
2008/09 (3.9) (13.6) (41.6) (59.1)
Net restructuring charges relate to the renewal and transformation of
the UK business which has been focused mainly on the reformatting of
the UK store portfolio and the reorganisation of the service offering.
Property charges comprise onerous lease costs and charges related to
vacating properties. Asset impairments, which are mainly in respect of
the reformatting of the UK store portfolio, relate to intangible assets
and items of property, plant & equipment which are to be eliminated
from the business over a shorter period than their current useful
expected lives and in addition for 2008/09, inventories. Impairments of
intangible assets and property, plant & equipment comprise a
combination of asset write offs and incremental accelerated
depreciation charges associated with the economic useful life of these
assets being shortened and for which incremental charges of GBP5.0
million (2008/09 GBP5.0
million) are expected to be incurred, spread over the next three
financial periods. In 2008/09, other charges predominantly comprised
employee severance and contract termination costs.
3 Non-underlying items continued
(iii) Net business impairment charges:
Property Other Total
credits / credits /
Goodwill Other (charges) (charges) GBPmillion
impairment assets
impairment GBPmillion GBPmillion
GBPmillion
GBPmillion
2008/09
Italian
business - - 12.4 6.4 18.8
Other
businesses (10.2) (45.2) (50.5) (9.0) (114.9)
(10.2) (45.2) (38.1) (2.6) (96.1)
In 2009/10, no such charges were incurred.
2008/09: The Italian business impairment credits related to the
reversal of charges incurred in prior periods whereby
liabilities were settled at lower amounts than those originally
provided.
2008/09: Other business impairments comprised businesses in
Spain, closed businesses in the Nordics as well as stores in
underperforming locations in the UK High Street. Goodwill
impairment related to the full write off of Markantalo in
Finland following the announcement of the closure of this
business. Other asset impairments comprised the Markantalo
brand name, other intangible assets, property, plant &
equipment and inventory. Other charges related predominantly to
employee severance.
(iv) The change in pension benefits arises from the closure to
future accrual of the defined benefit section of the UK pension
scheme which occurred on 30 April 2010.
(v) 2008/09: Other items related to releases of unutilised
provisions and settlement income received for claims for
damages incurred following the Buncefield explosion in December
2005 and for which exceptional charges were incurred in the
2005/06 financial year.
(vi) Net fair value remeasurement gains and losses on revaluation of
financial instruments: Items excluded from underlying finance
income and expense represent the gains and losses arising from
the revaluation of derivative financial instruments under
methodologies stipulated by IAS 39 compared with those on an
accruals basis (the basis upon which all other items in the
financial statements is prepared). Also included within this
amount are remeasurement losses relating to put options
predominantly held by minority shareholders. Such a treatment
is a form of revaluation gain or loss created by an assumption
that the derivatives will be settled before their maturity.
Such gains and losses are unrealised and in the directors' view
also conflict with both the commercial reasons for entering
into such arrangements as well as Group Treasury policy whereby
early settlement in the majority of cases would amount to
speculative use of derivatives.
(vii) 2008/09: On 4 June 2009, following an agreement in principle in
April 2009, the Group agreed a settlement with HMRC in respect
of a dispute concerning certain historical intra group trading
arrangements in the years 1997 to 2005 as well as certain other
matters. The settlement exceeded the provision already held in
the balance sheet and accordingly a non-underlying income tax
charge of GBP52.7 million was recorded in current tax. This
charge was in addition to the tax effects applied to the net
non-underlying charges before tax and was treated as
non-underlying owing to its size and one-off non-recurring
nature.
4 Net finance costs
2009/10 2008/09
GBPmillion GBPmillion
Bank and other interest receivable 20.6 21.8
Expected return on pension scheme assets 37.6 47.8
Fair value remeasurement gains on * 1.1 32.2
financial instruments
Finance income 59.3 101.8
6.125% Guaranteed Bonds 2012 interest and (18.3) (18.3)
related charges
Bank loans, overdrafts and other interest
payable
Underlying (29.9) (24.1)
Closed businesses * - (1.9)
Finance lease interest payable (7.1) (6.9)
Interest on pension scheme liabilities (45.6) (47.2)
Fair value remeasurement losses on * (1.9) (39.6)
financial instruments
Finance costs (102.8) (138.0)
Total net finance costs - continuing (43.5) (36.2)
operations
Underlying total net finance costs - (42.7) (26.9)
continuing operations
Underlying total net finance income excludes items marked *. See note 3
for a description of such items. Net finance costs for closed businesses
comprise interest on bank loans and overdrafts.
5 Taxation
2009/10 2008/09
GBPmillion GBPmillion
Current tax
UK corporation tax at 28% 0.4 0.2
Double tax relief (0.4) (0.2)
- -
Overseas - underlying 25.0 24.2
taxation
- non-underlying: closed * - (1.1)
businesses
Credit in respect of other * - (3.1)
non-underlying items
Adjustment in respect of
earlier periods:
UK - underlying (1.8) 6.8
corporation
tax
- non-underlying * - 52.7
Overseas taxation 1.3 (5.3)
24.5 74.2
Deferred tax
Current - underlying 18.0 9.6
period
- non-underlying: closed * (0.1) (2.5)
businesses
Charge / (credit) in respect of * 6.1 (24.4)
other non-underlying items
Adjustment in respect of
earlier periods:
UK - underlying (6.0) 1.6
corporation
tax
Overseas - underlying 4.2 (2.6)
taxation
- non-underlying: closed * - 0.9
businesses
22.2 (17.4)
Income tax expense - continuing operations 46.7 56.8
Underlying income tax expense - continuing 40.7 34.3
operations
Underlying income tax expense excludes those items marked *. The
effective tax rate on underlying earnings of 45% (2008/09 61%) is expected to
fall in future periods due mainly to unrecognised losses starting to form a
lower proportion of net profits.
6 Earnings / (loss) per share
2009/10 2008/09
GBPmillion GBPmillion
Basic and diluted earnings / (loss)
Total (continuing and discontinued operations) 59.8 (219.4)
Discontinued - loss after tax 8.7 38.9
operations
Continuing operations 68.5 (180.5)
Adjustments
Closed businesses 0.2 14.1
Amortisation of acquired intangibles 4.6 4.9
Net restructuring charges 5.6 59.1
Business impairment charges - 96.1
Other items - (1.9)
Change in pension benefits (33.4) -
Net fair value remeasurements of financial 0.8 7.4
instruments
(22.2) 179.7
Tax on adjustments
Closed businesses (0.1) (2.7)
HMRC settlement - 52.7
Other non-underlying items 6.1 (27.5)
6.0 22.5
Total adjustments (net of taxation) (16.2) 202.2
Underlying basic and diluted earnings 52.3 21.7
Million Million
Basic weighted average number of shares 3,495.6 2,148.7
Employee share option and ownership schemes 23.9 3.1
Diluted weighted average number of shares 3,519.5 2,151.8
Pence Pence
Basic earnings / (loss) per share
Total (continuing and discontinued operations) 1.7 (10.2)
Discontinued operations 0.3 1.8
Continuing operations 2.0 (8.4)
Adjustments (net of taxation) (0.5) 9.4
Underlying basic earnings per share 1.5 1.0
Diluted earnings / (loss) per share
Total (continuing and discontinued operations) 1.7 (10.2)
Discontinued operations 0.2 1.8
Continuing operations 1.9 (8.4)
Adjustments (net of taxation) (0.4) 9.4
Underlying diluted earnings per share 1.5 1.0
The weighted average number of shares used in the calculation for
earnings per share information for the periods prior to the rights issue,
which completed on 9 June 2009, has been multiplied by an adjustment factor
to reflect the bonus element in the shares issued under the terms of the
rights issue. The adjustment factor used was 1.2138.
Basic and diluted earnings / (loss) per share are based on the loss for
the period attributable to equity shareholders. Underlying earnings per share
are presented in order to show the underlying performance of the Group.
Adjustments used to determine underlying earnings are described further in
note 3.
7 Notes to the cash flow statement
(a) Reconciliation of operating loss to net cash inflow / (outflow) from
operating activities
2009/10 2008/09
GBPmillion GBPmillion
Operating profit / (loss) 153.2 (125.7)
Operating loss - discontinued operations 3.0 38.3
Operating profit / (loss) - continuing operations 156.2 (87.4)
Amortisation of acquired intangibles 4.6 4.9
Amortisation of other intangibles 25.8 23.3
Depreciation 102.8 111.4
Share-based payment charge 5.7 1.8
Share of post-tax results of associates (1.6) (3.6)
Loss on disposal of property, plant & equipment 19.6 19.9
Additions to - provisions 2.3 84.5
non-underlying
- impairment and accelerated 3.3 69.0
depreciation / amortisation
- change in pension benefits (33.4) -
Utilisation of non-underlying provisions (54.7) (82.2)
Operating cash flows before movements in working 230.6 141.6
capital
Movements in working capital:
Decrease in inventories 14.1 166.7
Decrease / (increase) in trade and other 117.6 (58.5)
receivables
Decrease in trade and other payables (92.0) (393.6)
39.7 (285.4)
Cash generated from / (utilised by) operations - 270.3 (143.8)
continuing operations
(b) Analysis of net funds / (debt)
Other Currency
Cash flow non-cash translation 1 May 2010
3 May 2009 movements
GBPmillion GBPmillion GBPmillion GBPmillion GBPmillion
Cash and * 192.6 102.8 - 0.3 295.7
cash
equivalents
Bank (4.8) 0.3 - (0.4) (4.9)
overdrafts
187.8 103.1 - (0.1) 290.8
Short term 9.0 (1.3) 0.8 - 8.5
investments
Borrowings (250.1) 151.6 - - (98.5)
due within
one year
Borrowings due (322.5) - 1.1 - (321.4)
after more than
one year
Obligations under (101.7) 1.7 - - (100.0)
finance leases
(674.3) 153.3 1.1 - (519.9)
Net debt (477.5) 255.1 1.9 (0.1) (220.6)
7 Notes to the cash flow statement continued
(b) Analysis of net funds / (debt) continued
Other Currency
4 May 2008 Cash flow non-cash translation 2 May 2009
movements
GBPmillion GBPmillion GBPmillion GBPmillion GBPmillion
Cash and * 365.8 (188.8) - 15.6 192.6
cash
equivalents
Bank (2.1) (2.5) - (0.2) (4.8)
overdrafts
363.7 (191.3) - 15.4 187.8
Short term 82.0 (73.3) (0.9) 1.2 9.0
investments
Borrowings (0.2) (249.9) - - (250.1)
due within
one year
Borrowings due (294.6) 0.1 (28.0) - (322.5)
after more than
one year
Obligations (100.8) 1.7 (2.4) (0.2) (101.7)
under
finance
leases
(395.6) (248.1) (30.4) (0.2) (674.3)
Net funds / 50.1 (512.7) (31.3) 16.4 (477.5)
(debt)
Restricted funds, which predominantly comprise funds held under trust to
fund customer support agreements were GBP78.9 million (2009 GBP67.6 million).
Net debt excluding restricted funds totalled GBP299.5 million (2009 GBP545.1
million).
* Cash and cash equivalents are represented as a single class of assets
on the face of the consolidated balance sheet. For the purposes of the
consolidated cash flow, cash and cash equivalents comprise those amounts
represented on the consolidated balance sheet as cash and cash equivalents,
less bank overdrafts (which are disclosed separately on the consolidated
balance sheet).
8 Related party transactions
Transactions between Group undertakings, which are related parties, have
been eliminated on consolidation and accordingly are not disclosed.
Steve Rosenblum and Jean-Emile Rosenblum, members of the Executive
Committee, together with close family members and companies controlled by
them, own 22.0% of PIXmania, a company controlled by the Group. In connection
with their management roles with respect to PIXmania, Steve Rosenblum and
Jean-Emile Rosenblum received management fees of EUR258,000 (GBP228,000)
(2008/09 EUR258,000 (GBP217,000)). Steve Rosenblum and Jean-Emile Rosenblum
together hold call options over additional shares in PIXmania representing
16.8% of its share capital. The options can be exercised from 30 April 2011
and are subject to certain conditions including the achievement of targets
related to earnings and certain capitalisation values of the PIXmania
business. In addition to the call options, Steve Rosenblum and Jean-Emile
Rosenblum have certain exit rights exercisable between July 2011 and July
2013 in relation to their holdings in PIXmania.
Steve Rosenblum and Jean-Emile Rosenblum own a building which is occupied
and leased by PIXmania. During 2009/10 total rental payments of EUR645,000
(GBP570,000) (2008/09 EUR597,000 (GBP502,000)) were charged in relation to
this property.
9 Post-balance sheet event
On 12 May 2010, the Group signed a new revolving credit facility
agreement (the New Facility) for GBP360 million. The New Facility will come
into effect by 15 August 2010 at which time it will replace the Group's
existing GBP400 million Facility. The terms and covenants attaching to the
New Facility are substantially the same as that for the GBP400 million
Facility except that the guarantee structure comprises UK and Irish companies
only, thereby aligning it more closely to the Bonds. At the earliest, the New
Facility will mature on 15 August 2012 and the Group has the ability to
extend the New Facility to 15 August 2013 in the event that it raises
additional finance of a minimum of GBP100 million by November 2011.
The 2009/10 Annual Report and Accounts which will be issued on 15 July
2010, contains a responsibility statement in compliance with DTR 4.1.12 of
the Listing Rules which states that as at the date of approval of the Annual
Report and Accounts on 24 June 2010, the directors confirm to the best of
their knowledge:
- the Group and unconsolidated Company financial statements give a true
and fair view of the assets, liabilities, financial position and profit
/ (loss) of the Group and Company, respectively; and
- the business and financial review includes a fair review of the
development and performance of the business and the position of the
Group together with a description of the principal risks and
uncertainties they face.
At the date of this statement, the directors are those listed in the
Group's 2008/09 Annual Report and Accounts with the exception of the
following appointments and resignations:
- Sir John Collins who resigned as a director and Chairman of the Board
on 2 September 2009;
- John Allan who was appointed to the Board on 23 June 2009 and was
appointed Chairman on 2 September 2009;
- Count Emmanuel d'Andre who retired as a director with effect from 2
September 2009;
- Tim How who was appointed to the Board on 8 September 2009;
- Prof. Dr. Utho Creusen who was appointed to the Board on 1 February
2010; and
- John Whybrow who retired as a director with effect from 31 March 2010.
"In my view risk management is an integral part of business management
and it's something we at DSGi take seriously. The Group's approach to risk
management combines a top-down understanding with bottom-up activity to gain
a holistic view of risk. For example, the Board undertakes a regular review
of risks facing the business, which included a thorough risk assessment from
first principles at the beginning of 2010. Below are some of the key risks
facing the business, along with an illustration of what is being done to
mitigate them." John Browett
Key Risks
Risk Examples of Mitigating Action
Economic environment
Risk that a prolonged economic - Ongoing monitoring by Finance
downturn, particularly in the and the Executive Committee,
UK, severely impacts our including review of portfolio of
business businesses
- Renewal and Transformation plan
to improve our business
performance irrespective of macro
economic factors
- Strategy and business planning
which takes into account varying
economic scenarios
Meeting customer needs
Risk that our retail brands - Understanding our customer and
fail to meet the expectations monitoring our level of service
of our customers through mystery shopping, customer
exit surveys and analysis of
purchase data
- Renewal and Transformation plan
improving our stores across the
Group
- 'FIVES' customer service
training for all colleagues and
product workshops to improve
product knowledge
- Implementation of the 'Customer
Plan' in the UK to improve the
customer journey - a clear and
focused plan at the heart of the
business
- Innovations in service
propositions and improved customer
service levels across the Group
- Clearer and easier navigation of
our e-commerce websites
Competition
Risk that competitors reduce - Renewal and Transformation plan
the Group's market share and/or improving our stores and service
drive down margins in specific proposition
markets
- Continuing development of strong
online brands, notably PIXmania
and Dixons.co.uk
- Ensuring our prices offer good
value, including a customer price
index
Market margin pressure
Risk that margins are reduced - Continued focus on ensuring we
due to falling consumer demand, have an excellent range across all
manufacturer supply, price points, including own label
competitors, regulation and tax brands
- Continuing to take money out of
our cost base
- Building ever stronger
relationships with suppliers
Changes in supplier credit
Risk that credit insurance is - Ongoing engagement with
no longer available to suppliers and credit insurers
electrical/computing suppliers
to protect their receivables - Improvements in stock turn
against the risk of bad debt
- Innovations in and close
scrutiny of working capital
together with regular monitoring
and review
Employees
Risk that we fail to attract, - Group-wide standardised
develop and retain the performance management
necessary talent for our
business - Talent reviews across the
business
- Store structures which provide a
clear career path for all
employees
- Improved quality of training
courses and development programmes
with specialist focus on service,
product, commercial and technical
- Bonus plans, which include a
component relating to individual
performance and business
performance
- Reward strategy aligned to
retain best talent
Changing technology/consumer
preferences
- Strong supplier relationships
Risk that we fail to capitalise (e.g. exclusive UK launch of iPad)
on new technology or emerging
trends to maximise revenues - Delivery of Customer Plan to
respond to identified changes in
technology
- Store transformations to take
into account emerging trends in
store layouts
- Exciting product launches to
make our stores the destination
for the latest technology (e.g. 3D
TVs)
Finance & Treasury
Finance /Treasury/Exchange - Detailed group hedging policies
Rate/Interest Rate/ Liquidity/ reviewed through a separate Tax
Credit Risk and Treasury Committee
- Balance sheet management and
reviews
- Regular monitoring of
receivables balances
- Strong pre and post investment
appraisal processes
- Central control of treasury
activity
Pension risk & policies
Risk that the pension funding - Deficit reduction activities in
policy fails to react to or place
address deficits, which may
arise on the Group's pension - Defined benefit section of UK
schemes scheme closed to future accrual
Systems failure
Risk that a key system becomes - Contingency plans developed that
unavailable for a period of are tested regularly
time
- Evaluation, planning and
implementation analysis carried
out before updating or introducing
new systems that have an impact on
critical functions
- Ongoing systems implementation
in key areas of the business
Legislative, contractual,
reputational and regulatory
risks - In-house legal teams communicate
on a regular and frequent basis
Risk that we suffer and legal reports are submitted to
reputational and/or financial the Board
damage as a result of an
exposure in our compliance - Launch of Group Ethical Conduct
activities (e.g. competition, policy, supported by annual
consumer rights, intellectual declaration of compliance by
property, contractual colleagues
obligations, health & safety or
compromise of customer - Monitoring changes in
confidentiality data) legislation / regulation
- Corporate Responsibility
Committee meets regularly to
discuss reputational and
regulatory risks
- Quality checks and factory
audits for own-branded product
assembly
- Compliance Committee approves
activity that may impact the terms
of Group credit facilities
Project delivery
Risk that a project delivering - The portfolio plan is clearly
an element of our Renewal and defined and is managed and
Transformation Plan does not governed through regular processes
deliver its anticipated and meetings
benefits.
- Post-investment analysis and
performance tracking put in place
including financial and customer
measures
- Projects under the Customer Plan
aligned to our UK budget
Other Risks Specific to a Specialist Electrical Retailer
In addition to the above, the Group is also subjected to a number of
risks that are generic to a specialist electrical retailer. These include:
Risk Examples of Mitigating Action /
Factors
Seasonality
A substantial proportion of - Financial planning takes into
revenue and operating profit is account expected peaks and troughs
generated during the third during the year and the business
financial quarter, which is run accordingly
includes the Christmas and New
Year season. In addition, in - The proportion of services
Southern Europe a second peak related business offers a regular
exists in the summer period stream of income over the course
through sale of air of the year
conditioning units
Price deflation
Price deflation has been a - Effective launches of new
common feature across most technology as it becomes available
electrical goods categories for to the market
a number of years, primarily
driven by technological - Growth of services related
advances and improved business to increase the number
efficiencies in production and value of non-product sales
throughout the life cycle of a
product - Improve gross profit uplifts in
transformed stores
Quality & location of store
portfolio
- The store portfolio is reviewed
This is a key contributor to on a regular basis with a view to
the Group's performance and optimising our retail estate
growth strategy presence
Damage to property &
consequential business
interruption
The Group's ability to - Disaster recovery plans are in
distribute merchandise to its place
stores and to sell and
distribute merchandise to its - Insurance is purchased to
customers is reliant on its mitigate against business
operational infrastructure, interruption
particularly the efficient
functioning of its distribution - Preventative measures are
centres and distribution constantly being updated to reduce
network the likelihood of an incident
Change in government policy
The Group is subject to a range - A number of committees exist to
of legal and regulatory help the Group manage its
requirements originating from regulatory risks. There is a
the UK and European Union Corporate Responsibility Committee
and a Compliance Committee, both
of which are supported by our
Legal and Company Secretarial
functions
Number of stores Selling space '000 sq ft
1 May 2 May 2009 1 May 2010 2 May
2010 2009
UK & Ireland
UK 654 680 7,582 7,533
Ireland 29 32 307 329
Total UK & Ireland 683 712 7,889 7,862
Nordics
Norway 121 114 1,506 1,348
Sweden 69 66 1,299 1,148
Finland 39 34 616 544
Denmark 28 27 481 473
Iceland 3 3 32 32
Islands 9 9 127 130
Total Nordics * 269 253 4,061 3,675
Other International
Italy * 158 174 2,314 2,587
Greece * 103 102 1,147 1,133
Spain 32 41 408 603
Turkey 11 8 367 270
Southern Europe 304 325 4,236 4,593
Czech Republic 16 17 426 441
Slovakia 3 3 57 57
Central Europe 19 20 483 498
Total Other 323 345 4,719 5,091
International
Continuing Retail 1,275 1,310 16,669 16,628
Hungary - 9 - 299
Poland - 9 - 257
Closed businesses - 30 - 429
Total Retail 1,275 1,358 16,669 17,613
* Includes franchise stores.
For further information
Press and Media:
Mark Webb
+44-(0)1727-205019
For further information: Press and Media: Mark Webb , +44-(0)1727-205019
Tags: Dsg International Plc, June 25, London, United Kingdom
