22nd Jun 2005 07:01
Dixons Group PLC22 June 2005 PR 42/05Strictly embargoedFor release after 07.00 hours22 June 2005 DIXONS GROUP plc PRELIMINARY AUDITED RESULTS FOR THE 52 WEEKS ENDED 30 APRIL 2005 Dixons Group plc, Europe's leading specialist electrical retailer, todayannounces preliminary full year results: Financial highlights •Total Group sales up 8% to £6.98 billion (2003/04: £6.49 billion) •International sales of £2.16 billion, with one third of Group sales generated outside the UK in the second half •Group like for like sales(1) up 2%; UK like for like sales up 2% and international like for like sales up 1% •Underlying profit before tax(2) up 4% to £343.1 million (2003/04: £329.3 million) •Pre-tax profit down 8% to £336.8 million, including a net exceptional gain of £0.9m (2003/04: £366.2 million, including a net exceptional gain of £38.8 million) •Adjusted diluted earnings per share(2) up 3% to 12.6p; basic earnings per share down 13% to 12.6 p •Strong free cash flow(3) generation up 34% at £278.6 million (2003/04: £207.8 million) •Proposed final dividend of 6.22p, making total dividends for the period of 8.05p per share, an increase of 10% •Ongoing share buyback programme with £122 million of shares bought and cancelled as at 21 June 2005 Operational highlights •Significant progress with European expansion through a combination of acquisitions and organic growth •Co-operation agreement with Eldorado Group provides potential platform for future growth in Russia and Ukraine •Successful launch of pay monthly option for customer support agreements in the UK •Group wide efficiency and cost reduction initiatives underway with anticipated savings of £30 million in 2005/06 with further savings in 2006/07 •Progress towards new divisional structure with scaled down corporate centre •Corporate name, DSG International plc, to be adopted reflecting the Group's international reach NOTES 1. Like for like sales are calculated based on stores that have been open for a full financial year both at the commencement and end of the financial period. Customer support agreement sales are excluded from all UK like for like calculations to remove the distorting effect of the introduction of pay as you go customer support agreements. 2. Throughout this statement, references are made to 'underlying' and 'adjusted' performance measures. Underlying earnings are stated before discontinued operations, goodwill amortisation and exceptional items. The financial effect of these items is shown in separate columns in the profit and loss account and the notes thereto, which provide a reconciliation between underlying and statutory amounts. Adjusted diluted earnings per share are based on underlying profits and can be reconciled to the statutory equivalent in note 6 to the financial information. 3. Free cash flow is defined as net cash inflow from operating activities, plus net interest, less taxation and net capital expenditure. John Clare, Group Chief Executive, commented: "The Group achieved further profitgrowth in a challenging year. In the UK it was a year of two halves, with stronglike for like sales growth in the first half offset by the impact of tougherconditions in the second half as retail expenditure slowed. Our Internationalbusinesses in aggregate had a stronger year, with double-digit profit growth,and we were particularly encouraged by the performances of our investmentbusinesses. We anticipated the downturn in the UK and made adjustments to ourtrading stance which impacted positively on full year performance. We are in the process of leveraging the benefits of our international scalethrough greater integration of buying, distribution and systems across all 13countries in which we operate. In support of this we have made good progresswith the development of our business into two divisions of Electricals andComputing & Communications which lays the foundation for a truly international,integrated electricals business. The outlook for the year ahead is uncertain, but we are anticipating achallenging trading environment, particularly in the UK and Italy. We willcontinue, above all, to adapt our retail approach to meet the needs of ourcustomers, through an unwavering focus on leading the market on price, range andservice. Our priorities are clear. Our measured approach to international expansion,which we believe will be a significant engine of future growth, our focus onFree cash flow and margin delivery and the implementation of further costsavings." For further information:John Clare Group Chief Executive 0870 8503333Kevin O'Byrne Group Finance Director 0870 8503333David Lloyd-Seed Director of Investor Relations 01727 205065Hamish Thompson Director of Media Relations 01727 203195 --------------------------------------------------------------------Information on Dixons Group plc is available at http://www.dixons-group-plc.co.uk --------------------------------------------------------------------An audio webcast of the analyst presentation being held this morning will beavailable from 2.00pm today athttp://www.dixons-group-plc.co.uk (click "financial information", then"presentations"). -------------------------------------------------------------------- RESULTS AND DIVIDENDSGroup turnover for the 52 weeks ended 30 April 2005 increased by 8% to £6,983million (2003/04: £6,492 million). Sales include first time contributions fromKotsovolos and Micro Warehouse. Group like for like sales were up 2% in theyear. Underlying profit before tax grew by 4% to £343.1 million (2003/04: £329.3million). Profit before tax decreased by 8% to £336.8 million, including a netexceptional gain of £0.9m (2003/04: £366.2million, including a net exceptionalgain of £38.8 million). Adjusted diluted earnings per share were 12.6 pence (2003/04: 12.3 pence), anincrease of 3%. Basic earnings per share were 13% lower at 12.6 pence (2003/04:14.4 pence). Profit before tax included property profits of £7.4 million (2003/04: £8.0million). Group gross margins were down 0.6 percentage points versus last year as a resultof lower credit commissions, higher business to business sales and changes inproduct mix. Gross margins in the second half were down 0.5 percentage points,an improvement on the first half. Free cash flow generated in the year was £278.6 million (2003/04: £207.8million), an increase of £70.8 million, 34%, on the prior year. Reflecting the strong cash generation this year, the directors have proposed afinal dividend of 6.22 pence per share (2003/04: 5.66 pence), an increase of10%. Subject to shareholder approval at the AGM on 7 September, it will be paidon 30 September 2005 to shareholders registered on 26 August 2005. This givestotal dividends for the year of 8.05 pence (2003/04: 7.32 pence) an increase of10%. The Group's dividend policy is to increase dividends in line with earningsover time. EXCEPTIONAL ITEMSNet exceptional items for the year were £0.9 million (2003/04 £38.8 million) andcomprised three principal items: •A profit of £12.2 million generated from exchanges by bondholders of the 1% Exchangeable Bonds 2004 into shares in France Telecom S.A. •A profit of £3.8 million generated from the sale of a subsidiary company •An impairment to fixed assets of £15.4 million relating to cost reduction programmes in distribution and information systems. There is no cash flow impact from this impairment. 2004/05 PERFORMANCE UK RETAILUK Retail made an operating profit before goodwill amortisation and exceptionalitems of £232.2 million (2003/04: £254.2 million), a decrease of 9%. Turnoverincreased by 3% to £4,819 million (2003/04: £4,698 million). Like for like salesgrew by 2%. Gross margins were down by 0.7 percentage points compared with the prior year. Adecline in credit commission, the diluting impact of growth in business tobusiness sales and changes in product mix had a negative impact on gross marginperformance. A continued focus on margins throughout the year resulted in lowermargin declines of 0.5% in the second half compared with the prior year. TheUK's overall cost to sales ratio was flat year on year. The Group completed theUK rollout of new branch systems and made further improvements in supply chainmanagement, distribution and after sales support. In the UK the Group has embarked on a major cost reduction exercise. Over thenext two years the distribution platform will be rationalised from the current17 locations into two. The Group is also in the process of negotiating the outsourcing of certain information systems support functions. MARKET SHARE AND PRODUCT MARKETSUK product markets decreased in value by 1% overall. The brown goods market grewby 5% with strong growth in flat panel televisions, digital cameras and internetaudio products. Sales of games consoles, CRT televisions and 35mm cameras alldeclined. The white goods market grew by 4% with strong growth in laundry andcooking. The overall computing market fell by 10%. The PC hardware market fell by 11%,with strong unit volume growth more than offset by accelerated price deflation.There were significant declines in the value of both the PC peripheral and PCaccessory markets. Mobile phone connections grew by 30% during the year, with growth driven by astronger market for prepay connections, albeit at lower retail prices. Prepayconnections grew by 41% year on year. The UK retail division continued to grow its overall market share, driven bygains in computing and white goods. Market share growth was particularly strongin PC hardware and peripherals. CURRYSCurrys sales were £1,852 million (2003/04: £1,752 million), an increase of 6%.Like for like sales grew by 6% for the full year, with 2% growth in the secondhalf. Sales of vision products benefited from Euro 2004 and the Olympic Games.Whilst Currys delivered strong sales over the important peak period, performanceover the balance of the year reflected the slowdown in consumer expenditure.Sales via the internet were strong, benefiting from a range of improvements insite design and content. Sales performance in the year was driven by strong advertising, in-storepromotion and by competing robustly on range and price. Customer footfall andconversion rates improved, offsetting retail price deflation. Currys relaunchedits customer support proposition, branded "whateverhappens" in the fourthquarter, with enhanced levels of service, including fast, guaranteed home callswithin two business days and a pay-as-you-go option. Early reaction from customers has been positive. Currys completed the roll out of a new EPOS system, Eclipse, which enablesfaster transaction times. Eclipse is Chip and Pin compliant and will improve instore efficiency in the current financial year. Currys resited five stores,opened two new stores and closed 12 High Street stores in the year to protectagainst anticipated future rent increases. Currys retail space grew by 2% duringthe year. DIXONSFollowing the previously announced store closures at the beginning of the year,Dixons sales were down 14% to £688 million (2003/04: £798 million). Like forlike sales were up 4%. Like for like sales performance benefited from therealignment of store space around growth categories and simpler operationalprocedures. A new brand strategy, supported by stronger advertising andaggressive price promotions from September, positioned the chain as the sourcefor new digital technology under the strap line "The Future for Less". Trials of alternative format Dixons stores continued in seven locations duringthe year, with a focus on mid-size sites of approximately 10,000 sq. ft in edgeof prime locations. The Dixons management team has been integrated with Currys, enabling thebusiness to reduce costs, leverage shared expertise and integrate theirpromotional strategies more effectively. Dixons retail space reduced by 27%during the year and now represents 5% of total Group space. PC WORLDPC World sales (including PC World Business) grew by 11% to £1,695 million (2003/04: £1,532 million) with like for like sales 2% lower, affected by significantprice deflation in PC hardware. Seven new PC World stores were opened during theyear and four stores were resited to protect against anticipated future rentincreases. A similar number of stores is expected to open or resite thisfinancial year. PC World continued to gain market share. There were encouraging sales of laptopsand newer high value media centre PCs. Sales of services performed well duringthe year. All in-store PC Clinics were rebranded as Advice and Service centres.Sales of in-store health checks grew by more than a third. Internet sales grew strongly and a new Collect@Store proposition, launched atEaster, is generating encouraging levels of in-store sales from websitevisitors. PC World Business sales grew by 61% to £329 million (2003/04: £205 million),reflecting a first time contribution from Micro Warehouse, which was acquired inJune. PC World Business gross margins improved during the year. There was stronggrowth in store catalogue and Public Sector sales. Sales of services, includingremote IT management, also performed well. THE LINKSales in The Link (including Genesis Communications) grew by 4% to £531 million(2003/04: £511 million) with like for like sales up 2%. The competitiveenvironment in the mobile phone market intensified during the year, especiallyin the pre-pay market. The availability of phones through mass merchantsheightened competition. New technology was a principal driver of demand duringthe year, with sales of pre-pay camera phones and feature-rich contract phonesperforming well. The Link opened 13 new stores, closed five stores and resited two stores duringthe year. The chain completed a comprehensive store refurbishment programme. TheLink lost market share during the year, largely in lower price point phones tomass merchants. Internet sales were strong, with new contract connections morethan doubling. The Link launched pay monthly customer support agreements,branded Linkplan, on contract phones during the year. Customer reaction to thepay monthly option was positive. Genesis Communications sales were £103 million (2003/04: £103 million) with dataconnections growing by 4% during the year and the average billing subscriberbase up 16% year on year. During the year Genesis launched a new customerservices strategy and a business accessories campaign. CUSTOMER SUPPORT AGREEMENTSFurther innovations in customer support agreements were implemented during theyear, with new convenient payment options introduced for customers at Currys, PCWorld and The Link. All chains made significant changes to their serviceofferings and focused on improving the clarity of the terms of the agreements.Currys launched "whateverhappens" in February 2005, offering customers theoption of monthly, pay as you go, or term payments, and PC World offered PCPerformance on a monthly pay as you go basis. Early indications are thatcustomers have embraced the changes positively. The Group is actively engaged inmaintaining dialogue with customers and consumer organisations to ensure thatthe benefits and the terms of its customer support agreements are wellunderstood and to keep abreast of, and respond to, the views of opinion formersand stakeholders. INTERNATIONAL RETAILSales in International Retail were £2,164 million (2003/04: £1,760 million), anincrease of 23% in total and 1% on a like for like basis. International salesachieved an important milestone in the second half of the year, with a third ofsales generated outside the UK for the first time. The performance reflectsprofit growth in the Group's established operations and a first timecontribution from Kotsovolos, more than offsetting planned start up losses indeveloping markets. Gross margins declined by 0.1 percentage points versus theprior year with a weaker performance in the second half reflecting the tougherconsumer backdrop in Italy. Operating profit (before goodwill amortisation) increased by 27% to £80.6million (2003/04: £63.6 million). The Group made several significant announcements affecting its internationaloperations during the year, including an accelerated store opening programme forPC City in France. It also announced the intention to enter the Polish marketwith Electro World and Portugal with PC City. The Group also announced aco-operation agreement with Eldorado, the market leading electricals retailer inRussia and Ukraine. This presents the Group with the opportunity to acquireEldorado by 2011 for a fixed price of US$1.9 billion. INTERNATIONAL RETAIL - ESTABLISHED BUSINESSESSales in the established international businesses increased by 21% to £1,840million (2003/04: £1,524 million), with operating profits (before goodwill amortisation) growing by 8% to £107.7 million (2003/04: £100.0 million). ELKJOPElkjop recorded a strong performance, particularly in Norway, Sweden andFinland. Total sales increased by 14% to £1,003 million (2003/04: £880 million)with like for like sales 4% higher. Trading conditions were more challenging inDenmark. Operating profits for Elkjop grew by 14% to £66.3 million (2003/04:£58.1 million). In aggregate, the Group estimates that the product markets inthe Nordic region grew by 6% during the year with growth in the computing,communications and large white goods markets and small declines in the browngoods and small appliances markets. Elkjop grew share in all four of itsmarkets. UNIEUROSales in UniEuro were £585 million (2003/04: £571 million), an increase of 3% intotal but 4% lower on a like for like basis. The business had a disappointingyear with operating profits of £31.3 million (2003/04: £40.3 million) in asubdued Italian consumer environment. The business continues to generatesignificant profit and several successful initiatives were implemented duringthe year with good progress made in consumer credit and with customer supportagreements relaunching successfully in the fourth quarter. A new management team is now in place. During the year UniEuro continued torestructure its operations, moving from a decentralised buying model to acentrally managed operation better equipped to leverage Group synergies. A storeupgrade programme commenced with a detailed plan for every store in theportfolio and during the year seven new stores were opened and one store closed.Over a period of three years, every store will be either refurbished, resitedor, if under performing, closed. UniEuro has also embarked on a cost reductionplan with a focus on the supply chain platform, stock management and centralcosts. Over the next two years UniEuro is proposing to restructure itsdistribution platform moving from seven locations to two. KOTSOVOLOSIn September the Group acquired a controlling stake in Kotsovolos, the leadingelectricals retailer in Greece and the business has since been delisted from theAthens Stock Exchange. Total sales were £160 million, with a first timecontribution to Group operating profit (before goodwill amortisation) of £8.1 million. Since the Group acquired the controlling stake, a new management team has been appointed, a central cost reduction programme has been implemented and a major store refit and resite programme is underway. IRELANDSales in Ireland grew by 11% to £80 million (2003/04: £72 million), with likefor like sales increasing by 3%. Operating profit was £2.5 million (2003/04:£1.4 million). In the year one new PC World store was opened. INTERNATIONAL RETAIL - INVESTMENT BUSINESSESTotal sales in Investment Businesses increased by 37% to £324 million (2003/04:£237 million). Operating losses in these businesses reduced by 26% to £27.1million (2003/04: £36.4 million). PC CITYPC City total sales were up 45% to £218 million (2003/04: £151 million). Theproduct trends across mainland Europe were similar to those in the UK, with PCsand laptops selling well. Investment losses were £19.7 million (2003/04: £24.8million). Losses fell in Spain, France and Italy. At the year end, there were 37 PC City stores trading in four countries. PC City France made good progress. The business is delivering consistent salesgrowth with all stores making a positive contribution to central costs. TheGroup is now satisfied that the PC City business in France is sufficientlyrobust to pursue national coverage in that market and in May announced its plansto accelerate the rate of new store openings in France, with a projected targetof 100 stores over time. One new store was opened during the year. PC City Spain also continued to make progress. Credit sales were encouraging anda new customer support agreement, "PC a Punto Gold", was launched. An improvedB2B offering was launched in Spain, leveraging the UK expertise, and initialperformance has been encouraging. Six new stores were opened during the year. The Group recently announced its intention to open a PC City store in Portugal, leveraging the existing infrastructure in Spain. The format is still in the early stages of being tested in Italy (six stores)and Sweden (two stores) and the Group plans six further store openings in thesemarkets this financial year. ELECTRO WORLDElectro World sales increased by 23% to £106 million (2003/04: £86 million).Operating losses were £7.4 million (2003/04: £11.6 million). During the yearmargin performance improved and cost reduction initiatives were implemented. Acentral warehouse has been established to serve both the Czech and Hungarianmarkets. The same infrastructure will be leveraged to support openings in Polandin the near term. A move towards a centralised buying model for the Groupenabled Electro World to reduce head office costs. FINANCIAL POSITIONThe Group's financial position is strong. In the period the net cash generatedfrom operating activities was £456.1 million, an improvement of £127.9 millionon the same period last year. FREE CASH FLOWFree cash flow generated in the period was £278.6 million, an increase of £70.8million (34%) year on year and was underpinned by an improvement in workingcapital. 52 weeks ended 52 weeks ended Change 30 April 2005 1 May 2004 Year on Year £million £million £million ----------- ----------- ----------Underlying operatingprofit 312.8 317.8 (5.0)Depreciation 134.1 119.5 +14.6Working capital 77.9 (86.2) +164.1Working capital impact of pay-as-you-go customer support agreements (38.4) - (38.4)Other (30.3) (22.9) (7.4) ----------- ----------- ----------Net cash from operating activities 456.1 328.2 +127.9 ----------- ----------- ----------Net interest 33.1 9.1 +24.0Taxation (90.9) (52.9) (38.0)Capital expenditure (168.8) (146.2) (22.6)Sale of freehold property 49.1 69.6 (20.5) ----------- ----------- ----------Free cash flow 278.6 207.8 +70.8 ----------- ----------- ---------- The key drivers of the Free Cash Flow improvement were lower working capital of£164.1 million, with improvements in stock turns, creditor and debtor days, andan increase of £24.0 million from interest income reflecting the Group'simproved cash position and higher Sterling interest rates. Cash reducedby £38.4 million as a result of the introduction of the monthly payment option for customer support agreements. Capital expenditure increased by £22.6million driven by the investment in new store systems. AVAILABLE NET FUNDSAt 30 April 2005 the Group had available net funds (which exclude funds heldunder trust for extended warranty and customer support agreement liabilities) of£239.0 million, compared with £342.2 million in the previous year. 52 weeks ended 52 weeks ended 30 April 2005 1 May 2004 £million £million --------- ----------- --------- -----------Opening net funds 644.8 170.1Free Cash Flow 278.6 207.8 - Dividends (144.2) (132.3) - Repurchase of shares (92.6) - - Acquisitions (184.3) (5.2)Disposals/other 49.0 404.4* --------- ----------- --------- -----------Other movements (372.1) 266.9in net funds ----------- -----------Closing netfunds 551.3 644.8Less: Funds heldunder trust (312.3) (302.6) ----------- -----------Available netfunds / (borrowings) 239.0 342.2 ----------- ----------- * Includes £213.4 million proceeds from the sale of Wanadoo shares and £127.2 million from exchanges of 1% Exchangeable Bonds 2004 Other movements in funds in the period included £144.2 million dividend payment,£92.6 million share buy back, £184.3 million related to acquisitions (including£70.3 million of net debt acquired with Kotsovolos) and £43.8 million exchangeof the 1% Exchangeable Bonds 2004 into shares in France Telecom S.A. ACQUISITIONS & DISPOSALSOn 4 June 2004, the Group acquired the UK operations of Micro Warehouse for£22.0 million. The integration into PC World business is nearing completion. During the period, the Group paid the final instalment of £19.9 million (€29.8million) for the purchase of UniEuro. On 8 September 2004, the Group acquired a controlling interest in Kotsovolos fora cash consideration (including costs) of £53.5 million (€78.6 million), afterpreviously having increased its investment from 13.6 per cent to an associateshareholding of 24.4 per cent on 8 July 2004. By 30 April 2005 the Group hadfurther increased its shareholding to 79.1 per cent bringing the totalconsideration paid in the period to £63.9 million (€94.1million).One shareholder retains a 20 per cent interest in Kotsovolos which theGroup has the right to acquire after five years. This shareholder has the rightto sell to the Group in equal tranches after two and four years. TAXThe Group's tax rate on underlying profit was 27.0% (2003/04: 26.0%). Theincrease in the tax rate reflects the reduced impact of lower overseas taxrates. SHARE BUYBACKThe Group continued its current programme to repurchase £200 million of itsshares. At the year end the Group had purchased 57,650,000 shares forcancellation, for a total consideration of £92.6 million, representing 2.96% ofthe issued share capital at the start of the financial year.As at 21 June 2005 the Group had repurchased and cancelled a total of 77,650,000shares for a total consideration of £122.4 million. The remainder of therepurchase programme is expected to be carried out over the course of the 2005/06 financial year. PENSIONSThe Group continues to account for pension costs under SSAP 24 and provides thedisclosures regarding the profit and loss account and balance sheet figurescalculated under FRS 17. The principal pension scheme is the UK defined benefitscheme. The pension charge for the period for this scheme under SSAP 24 was£21.7 million (2003/04: £18.0 million) which includes the £5.6 million (2003/04:£nil) of amortisation of the pension deficit over the average remaining servicelives of current employees. On a funding basis, the pension deficit wascalculated as £62 million by a full actuarial valuation as at 5 April 2004. TheGroup has initiated a programme of changes to the pension arrangements toaddress the shortfall over the longer term which include the employers'contribution rate for future periods increasing by annual increments of 1 percent up to August 2006. The Group's pension deficit under FRS 17, net of deferred tax, was £130.5million, an increase of £42.5 million over the corresponding deficit last year.Diminished long term risk free returns have increased the expected liabilitiesand the performance of equities over the year was insufficient to compensate,noting that the value of the assets is sensitive to market conditions as at thebalance sheet date. The final salary section of the UK pension scheme was closedto new members on 1 September 2002. INTERNATIONAL FINANCIAL REPORTING STANDARDSFollowing a European Union Regulation issued on 19 July 2002, the Group will berequired to report its results in accordance with International FinancialReporting Standards (IFRS) as adopted by the European Commission (EC) from 1 May2005. The Group's first Annual Report under IFRS will be for the 52 week periodending 29 April 2006. A separate announcement describing in detail the impactsof IFRS will be released today. This announcement will provide a description ofthe differences in the Group accounts between UK GAAP and IFRS. It will includethe Group's key accounting policies under IFRS, together with reconciliationsfrom UK GAAP to IFRS of the Group's profit and loss account for 2004/05, balancesheet as at 30 April 2005 and opening balance sheet as at 1 May 2004. PROPOSED CHANGE OF GROUP NAMEDixons Group plc now trades in 13 European countries. After due considerationthe Board has concluded that the current corporate name is no longer reflectiveof the Group's scale and reach and is too closely associated with the Dixonschain, which, whilst a valued brand, now accounts for less than 10% of Groupsales and 5% of Group trading space. Accordingly the Group Board intends,subject to shareholders' approval at the AGM, to adopt the name DSGInternational plc. In keeping with the Group's policy of prioritising investmentin its retail brands, the transition to DSG International plc, if approved, willbe achieved at minimal cost. OUTLOOKThe outlook for the year ahead is uncertain, but the Group anticipates achallenging trading environment, particularly in the UK and Italy. The Groupwill continue to adapt its retail approach to meet the needs of customers,through an unwavering focus on leading the market on price, range and service. The Group's priorities are clear. A measured approach to internationalexpansion, which the Group believes will be a significant engine of futuregrowth, a focus on free cash flow and margin delivery and the implementationof further cost savings. - ENDS - Maylands Avenue John ClareHemel Hempstead Group Chief ExecutiveHertfordshire HP2 7TG 22 June 2005 ------------------------- ------------------------------- Ex dividend date for final dividend 24 August 2005Record date for final dividend 26 August 2005Report and Accounts publication date 1 August 2005Annual General Meeting 7 September 2005Proposed final dividend payment date 30 September 2005 Copies of the Report and Accounts will be available from the CompanySecretary at the above address and on the Group's website at http://www.dixons-group-plc.co.uk ----------------------- --------------------------------- CONSOLIDATED PROFIT AND LOSS ACCOUNT 52 weeks ended 52 weeks ended 30 April 2005 1 May 2004 Continuing operations Continuing operations -------------------------- -------------------------- Goodwill Goodwill Note amortisation amortisation and and Underlying exceptional Underlying exceptional Discontinued results items Total results items operations Total £million £million £million £million £million £million £million ------ ------- ------ ------- ------ ------- -------------Turnover 2Continuing operations 6,715.8 - 6,715.8 6,458.0 - - 6,458.0Acquisitions 266.9 - 266.9 - - - -Discontinued operations - - - - - 33.7 33.7 ------ ------- ------ ------- ------ ------- ------- 6,982.7 - 6,982.7 6,458.0 - 33.7 6,491.7Operating profitContinuing operations 302.7 (19.7) 283.0 317.8 (48.2) - 269.6Acquisitions 9.1 (2.8) 6.3 - - - -Discontinued operations - - - - - 2.2 2.2 ------ ------- ------ ------- ------ ------- ------- 311.8 (22.5) 289.3 317.8 (48.2) 2.2 271.8Share of profit of associates Acquisitions 1.0 (0.1) 0.9 - - - - ------ ------- ------ ------- ------ ------- -------Total operating profit 2,3 312.8 (22.6) 290.2 317.8 (48.2) 2.2 271.8Profit on sale of investments 3 - 12.5 12.5 - 79.6 - 79.6Profit on sale of subsidiary 3 - 3.8 3.8 - - - -Profit on disposal of business assets 3 - - - - 3.2 - 3.2 ------ ------- ------ ------- ------ ------- ------- Profit on ordinary activities before interest 312.8 (6.3) 306.5 317.8 34.6 2.2 354.6Net interest 30.3 - 30.3 11.5 - 0.1 11.6 ------ ------- ------ ------- ------ ------- ------- Profit on ordinary activities before taxation 343.1 (6.3) 336.8 329.3 34.6 2.3 366.2Taxation on profit on ordinary activities 4 (92.6) 4.5 (88.1) (85.7) 5.4 (2.6) (82.9) ------ ------- ------ ------- ------ ------- -------Profit on ordinary activities after taxation 250.5 (1.8) 248.7 243.6 40.0 (0.3) 283.3Equity minority interests (5.6) - (5.6) (2.9) - - (2.9) ------ ------- ------ ------- ------ ------- -------Profit for the period 244.9 (1.8) 243.1 240.7 40.0 (0.3) 280.4Equity dividends 5 (149.3) - (149.3) (142.6) - - (142.6) ------ ------- ------ ------- ------ ------- -------Retained profit for the period 7 95.6 (1.8) 93.8 98.1 40.0 (0.3) 137.8 ------ ------- ------ ------- ------ ------- -------Earnings per share 6(pence) -Adjusted diluted (before discontinued operations, goodwill amortisation and exceptional items) 12.6p 12.3p -Basic 12.6p 14.4p -Diluted 12.5p 14.3p ------ ------- ------ ------- ------ ------- ------- STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 52 weeks 52 weeks ended ended 30 April 2005 1 May 2004 £million £million -------- -------- Profit for the period 243.1 280.4 Currency translation adjustments 2.6 (48.8) -------- -------- Total gains and losses recognised in the period 245.7 231.6 -------- -------- CONSOLIDATED BALANCE SHEET Group -------- -------- Note 30 April 2005 1 May 2004 £million £million -------- -------- Fixed assets Intangible assets 1,010.4 937.1 Tangible assets 638.0 583.9 Investments 3.2 48.9 -------- -------- 1,651.6 1,569.9 -------- -------- Current assets Stocks 811.3 793.0 Debtors - falling due within one year 419.0 427.2 - falling due after more than one year 87.6 79.3 Short term investments 867.0 765.1 Cash at bank and in hand 144.0 239.3 -------- -------- 2,328.9 2,303.9 Creditors - falling due within one year Borrowings (141.8) (61.5) Other creditors (1,594.8) (1,504.3) -------- -------- (1,736.6) (1,565.8) -------- -------- Net current assets/(liabilities) 592.3 738.1 -------- -------- Total assets less current liabilities 2,243.9 2,308.0 -------- -------- Creditors - falling due after more than one year Borrowings (317.9) (298.1) Other creditors (436.1) (505.6) -------- -------- (754.0) (803.7) Provisions for liabilities and charges (14.7) (36.6) -------- -------- 1,475.2 1,467.7 -------- -------- Capital and reserves 7 Called up share capital 47.3 48.7 Share premium account 142.1 140.5 Investment in own shares - (1.5) Merger reserve (386.1) (386.1) Capital redemption reserve 426.9 425.5 Profit and loss account 1,202.7 1,200.9 -------- -------- Equity shareholders' funds 1,432.9 1,428.0 Equity minority interests 42.3 39.7 -------- -------- 1,475.2 1,467.7 -------- -------- CONSOLIDATED CASH FLOW STATEMENT -------- -------- Note 52 weeks 52 weeks ended ended 30 April 2005 1 May 2004 £million £million -------- -------- Net cash inflow from operating 8 activities 456.1 328.2 Returns on investments and servicing of finance Interest received 55.9 40.8 Interest paid (22.8) (31.7) -------- -------- 33.1 9.1 -------- -------- Taxation paid (90.9) (52.9) -------- -------- Capital expenditure and financial investment Purchase of tangible assets (168.8) (146.2) Sale of tangible assets 49.1 69.6 Sale of fixed asset investments 1.9 216.2 -------- -------- (117.8) 139.6 -------- -------- Acquisitions and disposals Consideration for acquisitions (114.0) (5.2) Net cash acquired with subsidiaries 7.4 - Consideration for sale / partial sale of subsidiaries 3.8 23.3 Net cash disposed of with subsidiaries - (3.8) -------- -------- (102.8) 14.3 -------- -------- Equity dividends paid (144.2) (132.3) -------- -------- Net cash inflow before management of liquid resources and financing 33.5 306.0 Management of liquid resources Increase in short term investments 8 (102.1) (57.2) Financing Issue of ordinary share capital 1.7 1.9 Repurchase of own shares (92.6) - Decrease in debt due within one year 8 (36.2) (123.8) Decrease in debt due after more than one year 8 (2.2) (32.9) ------- -------- (129.3) (154.8) -------- -------- (Decrease) / increase in cash in 8 (197.9) 94.0 the period -------- -------- -------- -------- Note 52 weeks 52 weeks ended ended 30 April 2005 1 May 2004 £million £million -------- -------- Reconciliation of net cash flow to movement in net funds 8 -------- -------- (Decrease) / increase in cash in the period (197.9) 94.0 Cash outflow from increase in short term investments 102.1 57.2 Cash outflow from decrease in debt 38.4 156.7 -------- -------- (Decrease) / increase in net funds resulting from (57.4) 307.9 cash flows Debt arising from or issued for acquisitions (77.7) - Debt and short term investments disposed of with - 32.9 subsidiary Other non-cash movements 43.8 127.2 Currency translation adjustments (2.2) 6.7 -------- -------- Movement in net funds in the period (93.5) 474.7 Opening net funds 644.8 170.1 -------- -------- Closing net funds 551.3 644.8 -------- -------- NOTES TO THE FINANCIAL INFORMATION 1 Basis of preparation The financial information has been prepared in accordance with the accounting policies set out in the full financial statements. The consolidated financial statements are prepared in accordance with the historical cost convention. The consolidated financial statements incorporate the financial statements of the Company and its subsidiary undertakings for the 52 weeks ended 30 April 2005. Comparative figures are for the 52 weeks ended 1 May 2004. The financial information set out in this announcement does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985 and is an abridged version of the Group's financial statements for the 52 weeks ended 30 April 2005 which were approved by the directors on 22 June 2005. Statutory accounts for the 52 weeks ended 1 May 2004 have been delivered to the Registrar of Companies and those for the period ended 30 April 2005 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 237(2) or (3) of the Companies Act 1985. 2 Segmental analysis (a) Turnover and operating profit 52 weeks ended 52 weeks ended 30 April 2005 1 May 2004 --------------- --------------- Operating Operating Turnover profit Turnover profit £million £million £million £million -------- -------- --------- -------- Continuing operations: UK Retail 4,712.0 230.5 4,697.9 254.2 International Retail 2,003.8 72.2 1,760.1 63.6 -------- -------- --------- -------- 6,715.8 302.7 6,458.0 317.8 Acquisitions: UK Retail 107.0 1.7 - - International Retail - Subsidiary companies 159.9 7.4 - - - Associated undertakings - 1.0 - - -------- -------- --------- -------- 266.9 10.1 - - -------- -------- --------- -------- Underlying results 6,982.7 312.8 6,458.0 317.8 -------- -------- --------- -------- Discontinued operations: European Property - - 33.7 2.2 Goodwill amortisation: - UK Retail - (4.4) - (3.4) - International Retail - (2.8) - (0.8) -------- -------- --------- -------- - (7.2) - (4.2) Exceptional items: - UK Retail - (15.0) - (44.0) - International Retail - (0.4) - - -------- -------- --------- -------- - (15.4) - (44.0) -------- -------- --------- -------- 6,982.7 290.2 6,491.7 271.8 -------- -------- --------- -------- Underlying operating profit is stated after recognising net property profits of £7.4 million (2003/04 £7.0 million) arising in UK Retail and £nil (2003/ 04 £1.0 million) arising in International Retail. Associated undertakings predominantly comprise the investment in P. Kotsovolos S.A. (Kotsovolos) held during the period and over which the Group was able to exercise significant influence from 8 July 2004 prior to the acquisition of a controlling stake on 8 September 2004. Codic International S.A., which comprised the majority of the European Property division, was sold on 8 December 2003 and accordingly, has been classified as discontinued. Management responsibility for the residual property operations in Germany, which are to be discontinued, remain within the Group and the results have been integrated into the International Retail division. (b) Net assets --------- -------- 30 April 2005 1 May 2004 £million £million --------- -------- Continuing operations: UK Retail (190.8) (163.1) International Retail 1,243.5 1,077.7 --------- -------- Net operating assets 1,052.7 914.6 --------- -------- Net non-operating liabilities (128.8) (91.7) Net funds borrowings 551.3 644.8 --------- -------- Total net assets 1,475.2 1,467.7 --------- -------- The International Retail division operates in the Nordic region, Italy, Greece, Spain, Ireland, France, Hungary and the Czech Republic. There were no material exports from the locations in which the Group operates. Net non-operating liabilities predominantly comprise dividends payable and financial instruments (1 May 2004: dividends payable, deferred consideration, financial instruments and the Group's investment in France Telecom S.A.). Net funds include amounts held under trust to fund extended warranty and service contract liabilities. Net funds excluding these amounts, totalled £239.0 million (1 May 2004: net funds of £342.2 million). 3 Goodwill amortisation and exceptional items --------- -------- 52 weeks ended 52 weeks ended 30 April 2005 1 May 2004 £million £million --------- -------- Operating items: Goodwill amortisation (7.2) (4.2) Restructuring charge (i) (15.4) (44.0) --------- -------- (22.6) (48.2) --------- -------- Non-operating items: Profit on sale of investments (ii) 12.5 79.6 Profit on sale of subsidiary (iii) 3.8 - Profit on sale of business assets (iv) - 3.2 --------- -------- 16.3 82.8 --------- -------- i. Restructuring charge: Relates to the impairment of fixed assets which are to be eliminated from the business over a shorter period than their current expected useful lives resulting from the decision to re-organise the distribution network and information systems of the Group. 2003/04 related to the closure of 106 Dixons stores. Costs related predominantly to surplus leasehold property obligations, fixed asset impairment, stock write off and write down and employee severance. ii. Profit on sale of investments: £12.2 million relates to profit arising from exchanges into shares in France Telecom S.A. by holders of the 1% Exchangeable Bonds 2004 and the sale of remaining France Telecom S.A. shares in July 2004 (2003/04 related to profit of €63.1 million (£44.0 million) arising on the sale of 48.4 million shares in Wanadoo S.A. on 24 November 2003 together with further profits of €53.9 million (£35.6 million) arising from the exchanges into shares in Wanadoo S.A. by bondholders of the 1% Exchangeable Bonds 2004). iii.Profit on sale of subsidiary: Relates to the sale of a subsidiary company within UK Retail (2003/04 £nil). iv. Profit on sale of business assets: 2003/04 related to the sale of intangible assets held at £nil book value within a division of DSG Retail Limited, a subsidiary undertaking within UK Retail. 4 Taxation on profit on ordinary activities --------- -------- 52 weeks ended 52 weeks ended 30 April 2005 1 May 2004 £million £million --------- -------- Current taxation: UK corporation tax at 30% 62.2 68.7 Overseas taxation 18.2 15.6 Credit in respect of exceptional items - (5.4) Adjustment in respect of earlier periods: - Corporation tax (1.3) 2.2 - Overseas taxation 1.9 - --------- -------- 81.0 81.1 --------- -------- Deferred taxation: Current period 13.6 3.9 Credit in respect of exceptional items (4.5) - Adjustment in respect of earlier periods (2.0) (2.1) --------- -------- 7.1 1.8 --------- -------- --------- -------- Taxation on profit on ordinary activities 88.1 82.9 --------- -------- A reconciliation of the notional current tax charge to the actual current tax charge is set out below: --------- -------- Profit on ordinary activities at UKRelated Shares:
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