Half Yearly Report

PR 16/13

7.00am, Tuesday, 17 December 2013

DIXONS RETAIL PLC

ENCOURAGING FIRST HALF

excellent PROGRESS MADE ON STREAMLINING the group

Dixons Retail plc, Europe's leading specialist multi-channel electrical retailing and services company, today announces Interim results for the 6 months to 31 October 2013.

KEY HIGHLIGHTS

· Encouraging first half with Group like for like sales(3) up 6%.

· Improved profitability with Underlying Group EBIT(6) up 52% to £48.1 million.

- UK & Ireland delivered a strong performance, with underlying operating profits up five-fold to £31.4 million.

- Northern Europe continues to perform well in competitive markets, delivering an underlying operating profit of £45.5 million.

· Good cash generation, achieving net cash of £55.4 million compared to a net debt position of £21.9 million in the first half of last year.

· Excellent progress made on the strategic goal to focus on our leading market positions:

- Completed the disposals of Electroworld operations in Turkey and Unieuro in Italy.

- Completion of the disposal of PIXmania expected by the end of December.

· On track to reduce costs by our targeted £45 million in the current year.

· Return on Capital Employed(8) in the 12 months to 31 October 2013 has improved to 15.6%, up from the 11.6% reported at 30 April 2013.

Sebastian James, Chief Executive commented:

"I am pleased to report that we have had a successful first half with customer satisfaction and profitability up considerably year on year. In fact, as a Group we are reporting an underlying profit for the first time in six years. The UK & Ireland, in particular, has performed very well while our Nordic business is more than holding its own in a - somewhat - more competitive market. Our Greek business continues to grow market share against some gusty headwinds.

I am very happy that, in the last few months, we have been able to streamline the Group substantially. The transactions that we have announced with PIXmania, Unieuro and Electroworld in Turkey represent a real achievement and will leave Dixons in a leadership position in all of our major markets. Quite apart from removing a significant profit-drag on the business, these changes mean that we can really focus on new and exciting opportunities to do more for our customers and suppliers, and on working more closely to drive tangible benefits from being part of our Group.

We remain cautious about the outlook for consumers in our markets; very strong trading this time last year, together with the fact that we have now annualised Comet's exit makes the second half more challenging. Nevertheless, we have had a great first half and our stores have never looked better - or had better offers for customers."

FINANCIAL HIGHLIGHTS

· Total Underlying Group sales(1) of £3.43 billion (2012/13(2) £3.20 billion), up 5% on a currency neutral basis.

· Underlying(1) Group gross margins down 0.6%.

· Underlying pre-tax profit(1) of £30.2 million (2012/13(2) £14.0 million).

- Total profit before tax from continuing operations of £22.7 million (2012/13(2) £0.6 million), after net non-underlying charges of £7.5 million.

· Underlying diluted earnings per share(1) of 0.5 pence (2012/13(2) 0.2 pence). Basic earnings per share for continuing operations of 0.3 pence (2012/13(2) nil pence).

· Total loss after tax, including the discontinued operations of Electroworld Turkey, Unieuro and PIXmania, of £83.5 million (2012/13 £101.0 million).

- Ends -

Underlying sales and profit analysis(2)

Notes

(1) Throughout this report, references are made to 'underlying' performance measures. Underlying results are defined as excluding trading results from businesses exited (PC City Spain and Equanet), amortisation of acquired intangibles, net restructuring and business impairment charges and other one off non-recurring items, profits / (losses) on sale of investments or businesses, net interest on defined benefit pension schemes, net fair value remeasurements of financial instruments and, where applicable, discontinued operations (Electroworld Turkey, Unieuro and PIXmania). These excluded items are described as 'non-underlying'. The financial effect of these items is shown in the analyses on the face of the income statement and in notes 3 and 8 to the financial information.

(2) Historically, the Group has prepared its financial statements to the Saturday closest to its accounting reference date of 30 April, meaning that financial years have comprised 13 four week financial periods. This has resulted in the interim financial statements historically being drawn up for 24 weeks ended in mid October. Commencing 30 April 2013, the Group now draws up its accounts for years ending on 30 April comprising twelve calendar monthly periods and accordingly, the Group's interim period now ends on 31 October. As a result, financial information for the 6 months ended 31 October 2012 has been presented for the first time as a comparative.

(3) Like for like sales are calculated based on underlying store and internet sales using constant exchange rates. New stores are included where they have been open for a full financial year both at the beginning and end of the financial period. Closed stores are excluded for any period of closure. Customer support agreement sales are excluded from all UK like for like calculations.

(4) UK & Ireland comprises Currys, PC World, CurrysDigital, Dixons Travel, Harrods concession, operations in Ireland, PC World Business and KNOWHOW.

(5) Northern Europe comprises the Elkjøp group and Electroworld in the Czech Republic and Slovakia.

(6) Earnings Before Interest and Tax (EBIT) equates to underlying operating profit and is defined as underlying earnings from continuing retail operations, after property losses, before deduction of net finance costs and tax.

(7) Free Cash Flow relates to continuing operations and comprises net cash flow from operating activities before special pension contributions, less net finance costs, less income tax paid and net capital expenditure.

(8) The Group calculates ROCE on a pre tax and lease adjusted basis. The return is based on underlying operating profit, adjusted to add back the estimated interest component associated with capitalising operating lease costs. Capital employed is based on net assets including capitalised leases, but excluding goodwill, cash, tax and the defined benefit pension obligations. The calculation is performed on a moving annual total in order to best match the return on assets in a year with the assets in use during the year to generate the return .

(9) Unless otherwise noted, throughout this statement figures relate to continuing operations. Discontinued operations comprise Electroworld Turkey, Unieuro and PIXmania. Total revenue including discontinued operations was £3,892.1 million (2012/13 £3,819.7 million).

(10) Certain statements made in this announcement are forward looking. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future events or results referred to in these forward looking statements. Unless otherwise required by applicable laws, regulations or accounting standards, we do not undertake any obligation to update or revise any forward looking statements, whether as a result of new information, future developments or otherwise.

Strategic Priorities

1) Deliver a sustainable business model in a multi-channel world

We believe that we have created a sustainable business model for a multi-channel world by focusing on what our customers, and suppliers, want. Customers tell us that, as well as great value, they want advice on technology and to experience products to ensure they choose the right one. Suppliers want customers to experience their products, particularly their latest innovations. We are very well placed to meet the needs of both, to create an exciting and engaging shopping trip for customers. In building this sustainable model we have achieved the following:

i. We monitor over 20,000 products daily to ensure that we offer very competitive prices every day. On average, in the UK & Ireland, our prices are 5-10% cheaper than our multi-channel competitors and competitive with pure online competitors.

ii. In the UK & Ireland our advocacy ratings continue to improve with 95% of customers "likely" to recommend our stores to their friends and family. Our more important measure of those customers "very likely" to recommend our stores, recently hit a record high of 83%.

iii. We have well established and strong relationships with suppliers. Online and in-store we ensure that our customers experience their brands with the support of our expert colleagues, who are trained to explain the features and benefits of their latest products. In the UK & Ireland we have Customer Journeys to help customers choose the right solution for their needs and in support of this, we often secure exclusive Our Experts Love products.

iv. Our KNOWHOW end-to-end services brand continues to go from strength to strength, and we have started to roll it out into the Nordics. We have also added new services such as white goods repair and Showhow one-to-one tutorials, as well as improved delivery options for customers, including same day delivery.

v. We continue to reduce costs and are on target to achieve our stated £45 million this year.

2) Be a leader in each of the markets in which the Group operates

We know that we deliver the strongest offer for customers, the most effective route to market for suppliers and the best return for shareholders by focusing on those territories where we are the market leading multi-channel electrical specialist. We are the number one player in the UK & Ireland, Nordics and Greece, where we continue to grow market share, particularly as competitors exit our markets. Over the last 12 months we successfully streamlined the Group with transactions either completed, or agreed, to dispose of the Electroworld operations in Turkey, Unieuro operations in Italy, as well as the pure play operations of PIXmania.

3) Leverage international scale and knowledge to deliver Group benefits

With leading multi-channel operations across the UK, Ireland, Nordics and Greece, we have started, over the last 18 months, to share best practices that really make a difference for customers, for example:

i. Our Customer Journeys, now well embedded in the UK & Ireland, help customers choose exactly the right product for their needs. Often these are products that we have carefully selected with suppliers and that earn the badge of Our Experts Love. This concept has been adapted from the Win model used by our Nordic business.

ii. Our shared services centre in the Czech Republic is fast becoming a real centre of expertise in many back office functions. With rigorous process improvement, high quality staffing and lower cost structures we can exploit these strengths to lower our operating costs right across the Group.

iii. Through our sourcing office in China, we offer exclusive brands, enabling us to achieve better margins in many product categories, such as accessories and entry price point products.

iv. Earlier in 2013 we initiated our store management swap programme. This has got off to a good start, highlighting many exciting opportunities, after a manager from the UK and Norway exchanged places to learn what is done well in their sister operations.

v. Having introduced KNOWHOW into the Nordics last year, we now have a KNOWHOW bar in each megastore.

These strategic priorities enable us to improve our EBIT margin as well as, of course, to generate cash and the UK & Ireland and Northern European divisions remain on track for a 3-4% EBIT return. In Greece, while the market remains challenging, losses are being contained through careful management actions. In June we introduced a Return On Capital Employed ("ROCE") metric for the Group alongside cash and profit measures. We believe that this combination of metrics creates greater alignment between management and shareholders in maximizing the focus on driving shareholder returns. Over the last 12 months ROCE has improved to 15.6%, up by 1.1% for continuing operations since 30 April 2013, and by 4.0% overall.

Business performance

The Group had an encouraging start to the year, outperforming in most of our markets and gaining share with underlying Group sales of £3,431.4 million (2012/13 £3,198.9 million), up 6% on a like for like basis. Group gross margins were down 0.6% across the half, as we manage the levers in our business to deliver even better value for our customers as well as the competitive environment in the Nordics. Underlying earnings before interest and tax were significantly improved year on year to £48.1 million (2012/13 £31.6 million). Underlying profit before tax was £30.2 million (2012/13 £14.0 million).

UK & Ireland

The UK & Ireland division had a particularly strong start to the year with total sales up 7% at £1,856.4 million (2012/13 £1,732.8 million) and like for like sales up 9% in the half. We are very pleased to have substantially increased first half profitability with underlying operating profit improving by £24.5 million to £31.4 million (2012/13 profit of £6.9 million).

This strong performance has partly been driven by the continued benefit of the exit of competitors, most notably Comet at the end of 2012, which has now been anniversaried. Our relentless drive for better value, choice and service for customers has also helped CurrysPCWorld gain further market share which we now believe stands at approximately 23%. Warmer weather in the early part of the period shifted trading patterns a little, but despite the anniversary of sporting events the UK & Ireland delivered a very strong second quarter with like for likes up 12%.

KNOWHOW, our end-to-end services offer for customers, continues to go from strength to strength with added value services sales growing by 13% to £19.6 million in the first half. Our logistics infrastructure offers customers a variety of choices for delivery and installation to suit their needs, from same day, to selected time slots and market leading prices, and in many instances free. Over the last 12 months we carried out 2.6 million deliveries and installations ensuring our customers are kept informed of their delivery all the way from placing their order to the knock on the door. Showhow, where we offer customers individual tutorials on their new products has been very well received with 76,000 Showhows being carried out since their introduction in September / Autumn 2012. Over the last 12 months we have sold 1.1 million KNOWHOW Cloud services and carried out approximately 750,000 laptop, TV and tablet repairs.

We continue to innovate in our store designs and during the period we opened a new High Street format store in Bluewater and a new CurrysPCWorld 2-in-1 superstore in Aylesbury. These stores are trialing a number of new retailing innovations, such as mobile and flexible fittings, with all new play tables moveable to adjust to seasonal and technology trends, Showhow areas around the store and heat map cameras to understand how customers use the store and interact with product displays. Results from both stores have so far been encouraging and many of the innovations will be rolled out into other stores.

We have also made further improvements to our online stores of www.currys.co.uk and www.pcworld.co.uk, with richer content including customer journeys complementing those in our physical stores. Our store colleagues can now offer the extended range available on our websites to customers in store. With the disposal of PIXmania, the UK & Ireland has been transitioning its e-commerce platform to the UK, a move that will enable us to make our multi-channel offering truly market leading.

Northern Europe

The Northern Europe division continues to perform well with sales growing by 4% at constant exchange rates, while in sterling, underlying sales grew by 8% to £1,435.4 million (2012/13 £1,324.9 million). Like for like sales were up 3% as the Elkjøp Group continued to gain share across its markets. Underlying operating profits were £45.5 million (2012/13 £48.5 million).

Having experienced exceptional growth across the Nordics over the last 2-3 years, sales growth has now returned to more normalised levels and continues to be ahead of competitors. The Elkjøp Group has gained share across the Nordics in the half year, and has delivered another year of record turnover. The competitive landscape, particularly in Norway, Sweden and Denmark remains challenging, but a low cost structure and an efficient sales and logistics platform enables the Elkjøp Group to continue offering customers great value.

 We installed 'Happy or Not' kiosks, where customers can score their store experience, in all of our Northern Europe stores. Satisfaction scores are high and have risen since the introduction of the kiosks. As a dynamic customer satisfaction measurement tool, it enables our stores to respond through, for example, adjusted shift patterns in real time. We have installed the technology in a small number of UK stores and are encouraged by early indications.

During October this year, we rebranded the Elkjøp Group's brands in Denmark and Norway. The new logo has a more modern look and underlines our commitment to our customers. The logo launch has been a huge success, and next year Finland and Sweden will be rebranded.

We continue to embed the KNOWHOW services brand into the Nordics with KNOWHOW bars in all our megastores. Initial customer response to the range of KNOWHOW services has been very encouraging.

Greece

Total underlying sales in Kotsovolos were £139.6 million (2012/13 £141.2 million). Like for like sales were down 14%. Strong cost control limited the overall effect on underlying operating loss, with an increase of £1.7 million to £5.8 million (2012/13 loss of £4.1 million).

The Greek economic environment continues to be challenging. Additionally, the prior year reflected an unusually hot summer that drove air conditioning sales versus a cooler summer this year, and the digital switchover in Athens. Against this backdrop, Kotsovolos' performance in the first half was robust.

The management team in Greece continues to take a number of actions to deal with this trading environment and to provide a stronger base for the business going forward. With learnings from the UK & Ireland and Nordics businesses, Kotsovolos has improved its offer of complete solutions for customers, resulting in higher attach rates of products and services. The outlook in Greece continues to be challenging, but we believe that Kotsovolos is a fundamentally sound business and will return to profitability in due course.

Financial position

The Group has delivered a strong start to the year against the ongoing financial priorities of improving profitability, strengthening the balance sheet and driving shareholder returns:

· Positive Free Cash Flow of £59.0 million generated;

· Net funds of £55.4 million, this is:

- £13.3 million better than the net funds of £42.1 million at the end of the 2012/13 financial year; and

- £77.3 million better than the net debt of £21.9 million at 31 October 2012;

· The £200 million revolving credit facility ("the RCF") has been undrawn since October 2011 and remains so up to the date of this announcement;

· On target to reduce costs by £45 million this financial year; and

· Return on Capital Employed for the 12 months to 31 October 2013 was 15.6%. Since 30 April 2013, this represents an improvement of 1.1% for continuing operations, and 4.0% overall.

Free Cash Flow

Free Cash Flow was £59.0 million (2012/13 £96.7 million). This reflects continued strong cash generation, especially given the reversal of working capital timing benefits from the end of the last financial year, mainly in respect of stock payments relating to the strong Easter sales.

Taxation paid increased, mainly as a result of earlier payment of Norwegian taxes falling into the first half of this financial year.

Other cash items of £35.0 million (2012/13 £1.9 million) comprise the add back of non-cash costs included in profit, such as share option charges and property loss provision charges, as well as other cash movements including settlements of certain hedge contracts. The improvement year on year is primarily due to hedges relating to foreign currency cash balances, where hedge inflows have acted as an offset to the revaluation of foreign cash balances noted in the funding analysis below. The prior year also included costs relating to the refinancing of the RCF and the 2012 Bond redemption.

Funding

At 31 October 2013 the Group had net funds of £55.4 million compared to net debt of £21.9 million at 31 October 2012 and net funds of £42.1 million at the end of the 2012/13 financial year.

Net funds / (debt) is stated inclusive of restricted funds of £100.3 million (2012/13 £104.7 million), which predominantly comprise funds held under trust for potential customer support agreement liabilities.

The improvement in net funds was due to the Free Cash Flow generated, partly offset by £10.0 million paid to the UK Defined Benefit Pension Scheme under the terms of the deficit reduction plan and cash outflows in discontinued operations of £29.3 million. The £12.1 million outflow in other items mainly comprised the revaluation of cash balances held in non UK subsidiaries.

Adjustments to underlying results

Underlying profit before tax is reported before net non-underlying charges before tax of £7.5 million.

The main component of non-underlying items comprises £8.5 million of net pension interest costs, which owing to their non-cash nature and volatility to "point in time" remeasurement are treated as non-underlying. The prior year included Bond redemption related charges.

Discontinued operations

Discontinued operations comprise Electroworld Turkey, Unieuro and PIXmania and are made up of the disposal losses of £(75.6) million and post tax trading losses, including any restructuring and impairments, of £(19.4) million (2012/13 losses of £(101.0) million). The transactions are described as follows:

· On 31 October 2013, the Group completed the disposal of its Electroworld Turkey operations to Bimeks.

· On 29 November 2013, the disposal completed of Unieuro in Italy to a new holding company, Italian Electronics Holdings s.r.l. (IEH), that now indirectly owns both Unieuro and Marco Polo in Italy. Under the terms of the agreement, Dixons Retail left Unieuro with €25 million of cash and has invested €7.5 million in the form of a loan note. Dixons Retail now owns a 15% share in IEH.

· On 27 September 2013, the Group announced it had signed an agreement to sell PIXmania S.A.S. to mutares A.G.("mutares"), a German listed industrial holding company. As part of its purchase, mutares has developed a robust plan to build on PIXmania's pure play e-commerce operations as well as to further develop its market leading software platform. In order to support this plan, and to provide ongoing funding for PIXmania, the Group will provide approximately £59 million (€69 million) of ring-fenced capital. Completion of this transaction is expected to take place at the end of December 2013.

Property losses

Underlying property losses were £15.5 million (2012/13 loss of £12.1 million), mainly comprising UK store re-site and exit costs.

Underlying net finance costs

Underlying net finance costs were £17.9 million (2012/13 £17.6 million). The increase was primarily due to the net effect of issuance of the 2017 Notes, redemption of the 2012 Bonds and associated hedges, and partial redemption of the 2015 Notes.

Tax

The Group's underlying tax charge is based on current expectations of the tax charge to be incurred on full year earnings which equates to an effective rate of 35% (2012/13 full year 36%). The rate has decreased marginally year on year owing mainly to the UK rate of taxation reducing from 23% to 20% by March 2015. Our reported rates decrease substantially from 52% in 2012/13 owing to the exclusion of the discontinued loss making businesses.

Pensions

The IAS 19 accounting deficit of the defined benefit section of the UK pension scheme amounted to £432.6 million compared to £406.4 million at 30 April 2013 and £289.8 million at 31 October 2012. The increase since 30 April 2013 arises from both a decrease in the valuation of assets and an increase in the valuation of the liabilities. The liability increase arises mainly from adverse changes in actuarial assumptions, including interest rates, used in the valuation of these liabilities.

The last triennial actuarial valuation showed a net deficit of £239.0 million whereby the recovery plan agreed with the trustee results in £20 million payable in 2013/14 which rises gradually thereafter to £35 million by 31 March 2021. The next triennial valuation is as at 31 March 2013 with the results expected in 2014.

Consolidated Income Statement

* Underlying figures exclude the trading results of businesses exited, amortisation of acquired intangibles, net restructuring and business impairment charges and other one off, non-recurring items, profits / losses on sale of investments or businesses, expected return and interest on defined benefit pension schemes, net 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, 2, 3, 4, 5 and 8.

Businesses exited comprise businesses which have either been sold or closed. Certain businesses meet the criteria of discontinued operations as stipulated by IFRS 5 and are disclosed as such, whereas the remainder do not. Accordingly, despite all of the business exits having similar characteristics, the disclosures within non-underlying items differ across these businesses. Further information is shown in notes 3 and 8

† Results for the year ended 30 April 2013 have been restated for the impact of the amendment to IAS 19 'Employee Benefits', which is described further in note 1. Underlying figures for the year ended 30 April 2013 have been re-presented to exclude the trading results of businesses exited / to be exited for which the decisions were made or executed in 2013/14.

Consolidated Statement of Comprehensive Income and Expense

Consolidated Balance Sheet

Consolidated Cash Flow Statement

Consolidated Statement of Changes in Equity

At 31 October 2013, non-controlling interests (minority interests) comprise shareholdings in Dixons South-East Europe A.E.V.E. (Kotsovolos).

On 27 June 2013 the Group acquired 40% of Electro World lç ve Dış Ticaret A.Ş (Electroworld Turkey) for TL 2 (£1) in cash, bringing its stake in EW Turkey to 100%. The Group subsequently sold the business on 31 October 2013 as described further in note 8. On 7 August 2013 the Group acquired the remaining 0.8% of PIXmania S.A.S. (PIXmania) for €0.6 million (£0.5 million) in cash, bringing its stake in PIXmania to 100%. The Group has since announced the sale of PIXmania, although this has not yet completed. Further information is set out in note 8.

Notes to the Financial Information

1 Basis of preparation

The interim financial information for the 6 months ended 31 October 2013 was approved by the directors on 17 December 2013. The interim financial information, which is a condensed set of financial statements, has been prepared in accordance with the Listing Rules of the Financial Services Authority and International Accounting Standard 34 'Interim Financial Reporting' (IAS 34) as adopted by the European Union and has been prepared on the going concern basis as described further in the section on principal risks and uncertainties. Other than as set out below, the accounting policies adopted are those set out in the Group's Annual Report and Accounts for the year ended 30 April 2013.

Historically, the Group has prepared its financial statements to the Saturday closest to its accounting reference date of 30 April, meaning that financial years have comprised 13 four week financial periods. This has resulted in the interim financial statements historically being drawn up for 24 weeks ended in mid October. Commencing 30 April 2013, the Group now draws up its accounts for years ending on 30 April comprising twelve calendar monthly periods and accordingly, the Group's interim period now ends on 31 October. As a result, financial information for the 6 months ended 31 October 2012 has been presented for the first time as a comparative.

The Group has applied the amendment to IAS 19 'Employee Benefits' for the first time in this interim statement. The amendment replaces interest cost and expected return on plan assets with a simple net interest amount which is calculated by applying the discount rate to the net defined benefit scheme liability. The Group has applied this amendment retrospectively and the results for the year ended 30 April 2013 and the 6 months ended 31 October 2012 have been restated to include the impact of this amendment.

The Group has also adopted the amendment to IAS 34 "Interim Financial Reporting" in respect of financial instruments for the first time in this interim statement. The amendment requires certain disclosures to be made in respect of IFRS 13 "Fair Value Remeasurement" which becomes effective for the first time for the year ending 30 April 2014.

Except for the impact of the amendments described above, new accounting standards, amendments to standards and IFRIC interpretations which became applicable during the period were either not relevant or had no impact on the Group's net results or net assets.

The interim financial information is unaudited and does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006, but has been reviewed by the auditors. The financial information for the year ended 30 April 2013 does not constitute the Company's statutory accounts for that period but has been extracted from those accounts which have been filed with the Registrar of Companies. The auditor has reported on those accounts, their report was unqualified, did not draw attention to any matters by way of emphasis, and did not contain statements under Sections 498 (2) or (3) of the Companies Act 2006.

The Group's income statement and segmental analysis identify separately underlying performance measures and non-underlying items. Underlying performance measures reflect an adjustment to total performance measures to exclude the impact of businesses exited / to be exited and other non-underlying items. Underlying performance measures comprise profits and losses incurred as part of the day-to-day ongoing retail activities of the Group and include profits and losses incurred on the disposal and closure of owned or leased properties that occur as part of the Group's annual retail churn. The profits or losses incurred on disposal or closure of owned or leased properties as part of a one-off restructuring programme are excluded from underlying performance measures and are therefore included, among other items, within non-underlying items as described below. The directors consider 'underlying' performance measures to be a more accurate reflection of the ongoing trading performance of the Group and believe that these measures provide additional useful information for shareholders on the Group's performance and are consistent with how business performance is measured internally.

Non-underlying items comprise trading results of businesses exited / to be exited, amortisation of acquired intangibles, net restructuring and business impairment charges and other one-off, non-recurring items, profits / losses on sale of businesses or investments, net pension interest costs, fair value remeasurements of financial instruments and, where applicable, discontinued operations. Businesses exited / to be exited are those which do not meet the definition of discontinued operations as stipulated by IFRS 5. A reconciliation of underlying profit and losses to total profits and losses is shown in note 2. Items excluded from underlying results can evolve from one financial year to the next depending on the nature of reorganisation or one-off type activities described above, however, there were no new exclusions in the 6 months ended 31 October 2013.

Underlying performance measures and non-underlying performance measures may not be directly comparable with other similarly titled measures or "adjusted" revenue or 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. Accounting policies for each operating segment are the same as those for the Group and are set out in the 2012/13 Annual Report and Accounts. The Group evaluates each operating segment based on underlying operating profits which excludes those items described in note 1.

On 5 September 2013 and 10 October 2013, the Group announced the sales of its Electroworld Turkey and Unieuro S.p.A. (Unieuro) operations which subsequently completed on 31 October 2013 and 29 November 2013, respectively. On27 September 2013, the Group also announced the sale of its PIXmania operations, although this sale has not yet completed. All three businesses have been classified as discontinued operations and hence are now excluded from the reportable segments listed below with the balance sheets of both PIXmania and Unieuro being treated as assets held for sale as at 31 October 2013. Electroworld Turkey and Unieuro were previously reported within the Southern Europe segment (which is now renamed 'Greece' to reflect its sole constituent). Further information on these sale transactions is set out in notes 8 and 12.

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 (B2B) and online.

The Group's reportable segments have been identified as follows:

· UK & Ireland comprises electrical and computing retail chains as well as in-store B2B activities. The division is engaged predominantly in multi-channel retail sales, associated peripherals and services and related financial and after sales services. The division also includes operations in airports across Europe (the majority of which are in the UK), all of which are managed from the UK.

· Northern Europe operates in Norway, Sweden, Finland, Denmark, the Czech Republic, Slovakia, Iceland, Greenland and the Faroe Islands. The division engages in multi-channel retail sales and provides related product support services to its customers. It also engages in B2B sales of computer hardware, software and services. Across the region, the division operates a successful franchise business, typically in smaller markets.

· Greece comprises retail sales (including multi-channel sales) and provides related product support services to its customers. In addition, it engages in B2B sales of computer hardware, software and services and also has franchise operations.

Any residual income statement activity in respect of the exited businesses of PC City Spain (which was closed in June 2011) and Equanet (which was sold in March 2013) is excluded from underlying results and accounted for at centre. Such activities were previously included (as non-underlying items) as part of the respective divisions of Southern Europe (now renamed 'Greece') and UK & Ireland and with comparative information being restated accordingly. Central assets and liabilities predominantly comprise intersegment balances, cash and cash equivalents, borrowings, net retirement benefit obligations, derivative financial instruments tax assets, tax liabilities and items relating to the exited businesses described above.

Businesses exited: in respect of PC City Spain because of the closure rather than disposal of these operations, they not meet the definition of discontinued operations as stipulated by IFRS 5. Equanet was sold rather than closed, however, because it did not form a major line of business under the definitions of IFRS 5, it also did not meet the definitions of discontinued operations.

Reconciliation of underlying profit to total profit

Total external revenue for the Group of £3,246.2 million includes £47.3 million relating to businesses exited.

Reconciliation of underlying profit to total profit

Share of post tax result of associates relates to Northern Europe.

Total external revenue for the Group of £7,252.2 million includes £82.6 million relating to the businesses exited.

Reconciliation of underlying profit to total profit