17th Jan 2007 07:01
DSG International PLC17 January 2007 PR 06/07 Strictly embargoed For release after 07.00 hours 17 January 2007 DSG INTERNATIONAL plc INTERIM RESULTS FOR THE 28 WEEKS ENDED 11 NOVEMBER 2006 DSG international plc, Europe's leading specialist electrical retailer, todayannounces interim results for the 28 weeks ended 11 November 2006: Financial highlights •Total Group sales up 14% to £3,797 million (2005/06: £3,332 million) •Group like for like sales(2) up 5% with Electricals division up 4% and Computing division up 3% •Total profit before tax £78.9 million (2005/06: £105.2 million) •Underlying pre-tax profit(3) £96.9 million (2005/06: £96.6 million) •Basic earnings per share from continuing operations 2.9 pence (2005/06: 3.8 pence) •Adjusted diluted earnings per share(3) 3.5 pence (2005/06: 3.4 pence) •Free Cash Flow(4) generation of £135.4 million (2005/06: £148.1 million) •Interim dividend of 2.02 pence, an increase of 5% Operational highlights •Very strong performance in the digital television market across Europe, underpinning the Group's market leadership in consumer electricals in nine European markets •Good progress in majority of Group businesses with Group profitability held back by a weak performance in Italy; excluding Italy underlying operating profits increased by 30% •Substantial progress in e-commerce, which represented 8% of Group sales in the first half, with the acquisition of FotoVista, strong growth at Dixons.co.uk and the success of "reserve online and collect at store" •Launch of The TechGuys, the first national digital support service for UK consumers •Significant progress in restructuring of UK logistics operation; creation of pan-European distribution infrastructure approaching completion •Announced joint venture in Turkey with the intention to open the first store by the end of 2007 •UK store colleague reward system changed with personal sales commissions replaced by rewards based on team performance •Growth expectations and store openings lead to anticipated creation of 1,600 new jobs across Europe in 2007 For further information: David Lloyd-Seed Group Director of Investor Relations 01727 205065 Hamish Thompson Director of Media Relations 07702 684 290 Jonathon Brill Financial Dynamics 020 7269 7170 -------------- ------------------------------------------ Information on DSG international plc is available at http://www.dsgiplc.com -------------- ------------------------------------------ An audio webcast of the analyst presentation being held this morning will beavailable from 3.00pm today at http://www.dsgiplc.com (click "financial information", then "presentations"). -------------- ------------------------------------------ NOTES 1. Unless otherwise noted, throughout this statement figures relate to continuing operations. Total revenue including discontinued operations was £3,887.3 million (2005/06: £3,507.0 million). 2. 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. 3. Throughout this statement, references are made to 'underlying' and 'adjusted' performance measures. Underlying results are defined as being before discontinued operations, amortisation of acquired intangibles, restructuring costs, profit on sale of investments and net fair value remeasurements of financial instruments. The financial effect of these items is shown in the analyses on the face of the income statement and in note 3 to the interim financial statements. Adjusted earnings per share measures are based on underlying earnings. 4. Free Cash Flow relates to continuing operations and comprises net cash flow from operating activities, plus net finance income and cash related to finance leases, less taxation and net capital expenditure. BUSINESS PERFORMANCE ELECTRICALS DIVISION Total sales in the Electricals division were up 10% to £2,531.2 million (2005/06: £2,306.9 million) with like for like sales up 4%. Underlying operatingprofit was £54.2 million (2005/06: £53.0 million), up 2% on last year. UK & IRELAND Total sales in the UK & Ireland operations were up 5% at £1,341.2 million(2005/06: £1,281.1 million) with like for like sales up 5%. Underlying operatingprofit was £17.0 million (2005/06: £2.5 million). The white goods marketreturned to growth, increasing by 3.6% during the first half. Currys Currys, including Currys.digital and Dixons Tax Free, grew total sales by 4% to£1,285.1 million (2005/06: £1,237.3 million). Like for like sales were up 5%with strong sales of flat panel televisions and laptop computers. During thefirst half Currys introduced Reserve&Collect which combines the ease of theinternet with the convenience of Currys network of over 500 stores allowingcustomers to order online and collect from their local store. This has been verywell received by customers. Personal sales commissions have been replaced byteam commissions based on overall store performance. Progress has been madein the reorganisation of the UK Electrical logistics operation. New central warehouse space of 1.6 million square feet (of the total 2.1 million square feet planned) has come on line as the business transitions from the previous 17 stock locations. Stock availability, particularly for large white goods, was impacted by the transition for a limited period at the end of the first half. The conversion of the Dixons high street stores to the new Currys.digital formatwas completed on plan. The stores have had minor refits to improve the displayand increase the range of high definition flat panel televisions. These refitsalso allow for the introduction of new categories such as small domesticappliances and white goods as well as giving customers the opportunity topurchase any products from the full Currys Superstore ranges through dedicatedsales points. Sales at Dixons Tax Free were impacted by the disruption at UK airports duringthe summer, with increased security and some confusion as to what could bepurchased. Sales have gradually improved since and sales activity has beenfocused on accessories and peripherals in order to manage profitability. During the first half 3 stores were resited, 5 new stores opened and 28 mainlyhigh street stores were closed. Ireland Sales in Ireland grew by 28% at constant exchange rates, to £56.1 million (2005/06: £43.8 million), with like for like sales increasing by 14%. All chains in Ireland performed strongly with 3 new stores added during the period. NORDIC In the Nordic region Elkjop had a strong first half, increasing total sales by28% at constant exchange rates to £664.6 million (2005/06: £530.6 million) withlike for like sales 11% higher. Underlying operating profits were £41.8million (2005/06: £36.3 million), up 15% on last year. Elkjop made goodprogress across all its markets. In February 2006 the electricals business ofMarkantalo in Finland was acquired, consolidating Elkjop's position as thenumber one electrical retailer in that market. On 15 December the acquisition ofa 40% interest in F-Group in Denmark was completed. The Group has an option toacquire the remaining 60% of F-Group in early 2010. Franchising operations are being extended in the Nordic markets with 73 storesoperating under franchise across the region at the end of the first half.Franchising provides a suitable model to be utilised in other markets in whichthe Group currently operates and has the potential to expand into new marketsover time. The Group has been developing its multi-channel approach to customers in theNordic region with the introduction of internet operations alongside theexisting store brands in Norway and Sweden. These operations continue to showgood progress from a low base. The Group estimates that the aggregate product markets in the Nordic region grewduring the year and Elkjop increased its share. SOUTHERN EUROPE In Southern Europe total sales grew by 3% at constant exchange rates to £460.1million (2005/06: £449.6 million) with like for like sales down 5%. Underlyingoperating profit was £2.5 million (2005/06: £19.5 million). A strongperformance by Kotsovolos in Greece was offset by a very disappointingperformance by UniEuro in Italy. UniEuro Sales at UniEuro were down by 4% in total to £306.8 million (2005/06: £320.4million) with like for like sales down by 10%. Political uncertainty, proposedeconomic reforms and a subdued economy all impacted consumer confidence in Italyand this in turn has led to a more competitive market impacting gross margins.UniEuro has continued to make progress in its large scale process changes,transitioning the business from a decentralised to a centrally managedoperation. These changes have impacted all areas of the business includingbuying, stock management and logistics. At the start of the financial year the management team was strengthened andbegan implementing a plan to recover UniEuro's position in Italy. This includesincreased marketing investments and a store refurbishment programme covering asignificant proportion of the stores. 35 stores were refurbished over an 8week period prior to Christmas. The refurbished store format facilitates thedisplay of wider ranges of core products such as flat panel televisions,computing products, communications and major appliances and provides additionalspace for carry out stock, for accessories and peripherals, whilst offeringcustomers a much improved shopping experience. UniEuro opened 6 new stores during the first half. Kotsovolos Kotsovolos delivered another strong performance growing total sales by 19% to£153.3 million (2005/06: £129.2 million) with like for like sales up 8%. Despitenew entrants to the market Kotsovolos continued to gain market share. The newKotsovolos Mega stores of around 30,000 to 40,000 square feet have performedparticularly well since their introduction in 2005. Kotsovolos opened one ofthese new stores during the first half and now operates 5 such stores acrossGreece. Kotsovolos recently introduced the Group's franchise model into Greeceand now operates 5 franchises. There are further opportunities to expand thefranchise model in Greece over time. CENTRAL EUROPE Electro World grew sales by 43% to £65.3 million (2005/06: £45.6 million).Underlying investment losses were £7.1 million (2005/06: £5.3 million loss) asit continued to expand in all of its markets including Poland in November 2005.With 4 new stores opened in the first half Electro World now operates 9 storesin Czech Republic, 7 in Hungary and 4 in Poland. COMPUTING DIVISION Total sales in the Computing division were up 8% to £1,097.6 million (2005/06:£1,014.2 million) with like for like sales up 3%. Underlying operating profitwas £34.6 million (2005/06: £36.8 million). Excluding the B2B operations ofGenesis Communications, underlying operating profit was up 3%. PC World PC World sales (including PC World Business and Genesis Communications) were up6% at £940.5 million (2005/06: £891.3 million) with like for like sales up 3%. In hardware PC World benefited from strong sales of laptop computers as theseproducts become more powerful and portable with increasing appeal to customersas their main personal computer. PC World saw good growth in sales ofperipherals, in particular wireless networking to complement the growth inlaptop computers, memory for storage of digital media and components ascustomers utilise the full functionality of their computers. PC World introduced a new Connected Home department in 4 stores during the year,supported by Microsoft Inc. These departments are designed to demonstrate tocustomers how to connect all their computing and digital media together in themodern home. In addition all stores have introduced a range of high definitionflat panel televisions to support the integration of computing products incustomers' homes. Internet sales continue to grow strongly at PC World and in the period,represented over 7% of total PC World sales, with Collect@store accounting forthree quarters of these sales. During the first half 5 new PC World stores were opened, with 2 further storesplanned for the second half. PC World Business sales grew by 17% to £209.9 million (2005/06: £180.0 million). Genesis Communications is reported as part of the Computing division for thefirst time. During the first half sales were £37.6 million (2005/06: £49.3million) impacted by the sale of The Link and by the continued shift in focustowards direct distribution by the network operators. PC City PC City total sales were up 28% at constant exchange rates to £157.1 million(2005/06: £122.9 million) as the Group continued to invest in both storeexpansion and promotional activity. Product trends were similar across Europewith laptops showing strong sales. Satellite navigation, wireless networking andmemory products also grew strongly. Underlying investment losses in the firsthalf were £16.8 million (2005/06: £15.0 million loss). PC City Spain deliveredanother strong performance and is making good progress towards profitability. The Group implemented a significant change programme in France bringing theseoperations under the control of PC World in the UK in order to reduce operatingcosts and to improve the customer product offering. This change programmeincreased investment losses in France during the first half. PC City Italy opened 2 new stores during the first half and PC City Spain isexpected to open 3 new stores during the second half of the financial year. The TechGuys In response to consumers' growing reliance on new in-home technology the Grouplaunched The TechGuys during the period, the first and only nationwide technicalsupport service. This service is supported by the Group's state of the art callcentres, one of Europe's largest technical databases and a spare parts inventoryof 2 million components. The service also offers specialist repair centres toprovide consumers and small businesses with fast reliable support oninstalling, connecting, protecting, upgrading, using and fixing ITand audio-visual technology. The Group expects to invest approximately £50million over the next 5 years to roll out The TechGuys in the UK andEuropean markets in which the Group operates. In addition to operating fromstandalone sites, PC Advice clinics in all 155 PC World stores will be rebrandedunder The TechGuys. By the end of the first half 3 standalone clinics had beenopened, with a further 6 expected to be opened during the second half. NEW BUSINESSES DIVISION The division comprises FotoVista and Dixons.co.uk. Total sales were £168.1million (2005/06: £10.6 million). Underlying operating profit was £2.0 million(2005/06: £0.3 million loss). In July 2006 the Group acquired a controlling 77% interest in FotoVistaS.A.(FotoVista), the parent company of Pixmania, a leading European e-tailer of digital photographic and consumer electronic products. Since acquisition, sales have continued to grow strongly in line with expectations with good progress onintroducing broader product ranges. Dixons.co.uk, now operating as a pure online specialist electrical e-tailer,delivered sales growth of 192%. Sales performance was driven by strong pricepropositions and the introduction of new categories and products such as whitegoods, accessories, toys, fitness and games equipment. RESULTS AND DIVIDENDS An underlying sales and profit analysis by division, together with store data,can be found at the end of this document. For the 28 weeks ended 11 November2006 the Group's total and underlying results are as follows: Total results Underlying results £ million % change £ million % change------------------- ---------- ---------- ----- ---------- ---------- Sales 3,796.9 14% 3,796.9 14% Operating profit 67.6 (16%) 84.5 1% Profit before tax 78.9 (25%) 96.9 0%------------------- ---------- ---------- ----- ---------- ---------- EPS - continuing operations: Basic EPS (pence) 2.9 p (24%) Adjusted diluted 3.5 p 3% EPS (pence) ------------------- ---------- ---------- ----- ---------- ---------- Group sales increased by 14% to £3,796.9 million (2005/06: £3,331.9 million).Group like for like gross margins (which exclude the New Businesses division)were slightly lower than last year, impacted by the weak performance in Italy.Excluding Italy, like for like gross margins across the Group were in line withlast year. Underlying operating profit was £84.5 million, up 1% (2005/06: £83.8 million).Underlying profit before tax was £96.9 million, in line with last year impactedby the challenging trading conditions in the Group's Italian business. Totalprofit before tax was £78.9 million (2005/06: £105.2 million). Profit before tax included property profits of £5.5 million (2005/06: £5.4million). Adjusted diluted earnings per share were 3.5 pence (2005/06: 3.4 pence), up 3%.Basic earnings per share were 2.9 pence (2005/06: 3.8 pence). The Directors have declared an interim dividend of 2.02 pence per share (2005/06: 1.92 pence), an increase of 5%. This will be paid on 2 March 2007 toshareholders registered on 26 January 2007. FINANCIAL POSITION In the period the net cash generated from continuing operations was £210.4million (2005/06: £236.8 million). Free Cash Flow generated in the period was£135.4 million (2005/06: £148.1 million). 28 weeks ended 28 weeks ended 11 November 12 November Change 2006 2005 Year on Year £ million £ million £ million --------------------------- ----------- ----------- ---------- Operating profit 67.6 80.7 (13.1) Depreciation and amortisation 72.3 71.7 0.6 Working capital 112.8 145.0 (32.2) Working capital impact of pay-as-you-go customer support agreements (38.7) (51.1) 12.4 Other (3.6) (9.5) 5.9--------------------------- ----------- ----------- ---------- Net cash generated from continuing operations 210.4 236.8 (26.4)--------------------------- ----------- ----------- ---------- Net finance income 14.3 18.8 (4.5) Taxation paid (46.4) (39.7) (6.7) Capital expenditure (89.5) (92.5) 3.0 Capital expenditure for UK distribution restructuring (8.1) - (8.1) Sale of freehold property 54.7 24.7 30.0--------------------------- ----------- ----------- ---------- Free Cash Flow 135.4 148.1 (12.7)--------------------------- ----------- ----------- ---------- The key driver of Free Cash Flow was working capital that improved by £112.8million. This was partially offset by the £(38.7) million cash impact from theintroduction of the monthly, pay-as-you-go, customer support agreementproposition. In the period capital expenditure of £8.1 million related to therestructuring of the UK distribution network. Cash generated from the sale offreehold property increased to £54.7 million. AVAILABLE NET FUNDS At 11 November 2006 the Group had available net funds (which exclude funds heldunder trust for customer support agreement liabilities) of £135.1 million(2005/06 £178.8 million). 28 weeks ended 28 weeks ended 11 November 12 November 2006 2005 £ million £ million----------------------- ----------- ----------- Opening net funds 439.6 523.9 Free Cash Flow 135.4 148.1 The Link cash flow impact 10.7 (8.4) Acquisitions (189.8) (14.1) Dividends (119.9) (115.2) Repurchase of shares - (84.2) Other movements 20.0 2.2----------------------- ----------- ----------- Closing net funds 296.0 452.3 Less: Funds held under trust (160.9) (273.5)----------------------- ----------- ----------- Available net funds 135.1 178.8----------------------- ----------- ----------- On 15 September 2006 the Group disposed of its 60% holding in The Link StoresLimited to O2 (UK) Limited. The impact on Group net funds comprises cashoutflows relating to trading of £10.4 million (2005/06: £8.4 million) and £21.1million net proceeds from the sale. On 3 July 2006 the Group completed the acquisition of a controlling 77%interest in FotoVista for consideration and costs of €264.3 million (£183.7 million). The acquisition included net debt of £3.5 million. Dividends of £119.9 million were paid to shareholders in the period (2005/06:£115.2 million). TAX The Group's income tax expense for the first half was £23.8 million (2005/06:£33.4 million) an effective tax rate on underlying profit of 30% (2005/06 fullyear effective rate of 29%). The increase in the tax rate reflects the reducedimpact of lower overseas rates. ADJUSTMENTS TO UNDERLYING RESULTS 28 weeks ended 28 weeks ended Change 11 November 12 November 2006 2005 Year on Year £ million £ million % --------------------------- ----------- ----------- ---------- Underlying Profit Before Tax 96.9 96.6 0% Amortisation of acquired intangibles (2.1) (0.9) Net restructuring costs (14.8) (2.2) Profit on sale of investments - 2.9 Net fair value remeasurements of financial instruments (1.1) 8.8--------------------------- ----------- ----------- ---------- Reported Profit Before Tax 78.9 105.2 (25%)--------------------------- ----------- ----------- ---------- Items excluded from underlying results comprise the following: •Amortisation of acquired intangibles which mainly comprises brand names and which are excluded from underlying earnings to provide a consistency of treatment to that previously adopted for goodwill. •Net restructuring costs comprise those associated with the reorganisation of distribution operations in the UK, in particular the migration of operations of the main warehouse in Stevenage to Newark. The main constituents of the costs comprise incremental parallel running costs for the two sites, asset impairments and staff related costs. The prior year charge related to the outsourcing of the Group's information systems structure. •Last year the profit on sale of investments related to the sale of a minority shareholding in Monstermob Group PLC. No equivalent arose in the first half of this year. •Net fair value remeasurements of financial instruments: These represent the gains and losses arising from the revaluation of derivative financial instruments under methodologies stipulated by IAS 39 "Financial instruments: Recognition and measurement" compared with those on an accruals basis. Such gains and losses would only crystallise if the derivatives were sold, which the Group has no intention of doing. Furthermore, both gains and losses may reverse when revalued at future period end dates, which in the Group's view distorts underlying trading data. PENSIONS The Group's principal pension scheme is the UK defined benefit scheme and underInternational Financial Reporting Standards, the net deficit is shown on the balance sheet. At 11 November 2006, excluding deferred tax benefits, this deficit amounted to £195.6 million (29 April 2006: £141.7 million, 12 November 2005: £183.1 million). Including deferred tax benefits the deficit amounted to £136.9 million (29 April 2006:£99.8 million, 12 November 2005: £128.1 million). The value of the plan assets is sensitive to market conditions on the balancesheet date, particularly equity values where the majority of the plan's assetsis invested. The value of the plan obligations is sensitive to the discount rate applied toliabilities at the assessment date. This rate decreased significantly during theperiod from 5.30% at 29 April 2006 to 5.05% at 11 November 2006 and accounts forthe majority of the increase in the deficit since 29 April 2006. The Group has been implementing a programme of changes to pension arrangementsin order to address the deficit over the longer term. These have included thegradual increase in the Company contribution rate that rose by a percentagepoint to 12.9% in August 2006 and a proposed £50 million cash injectionin the second half of the year. The final salary section of the UK pensionscheme was closed to new members on 1 September 2002. - ENDS - Maylands Avenue John Clare Hemel Hempstead Group Chief Executive Hertfordshire HP2 7TG 17 January 2007 ------------------------- ------------------------------- Ex dividend date for interim dividend 24 January 2007 Record date for interim dividend 26 January 2007 Interim Report publication date 25 January 2007 Proposed interim dividend payment date 2 March 2007 Copies of the Interim Report will be available from the CompanySecretary at the above address and on the Group's corporate website athttp://www.dsgiplc.com ---------------------------------------------------------------------------------------- CONSOLIDATED INCOME STATEMENT Note 28 weeks ended 28 weeks ended 52 weeks ended 11 November 12 November 29 April 2006 2005 2006 Unaudited Unaudited Audited £million £million £million---------------------------- ---- ---------- ---------- --------Revenue 2 3,796.9 3,331.9 7,072.0---------------------------- ---- ---------- ---------- --------Profit from operations before associates 67.4 80.6 262.7Share of post tax results of associates 0.2 0.1 0.3---------------------------- ---- ---------- ---------- --------Operating profit 2 67.6 80.7 263.0---------------------------- ---- ---------- ---------- --------Profit on sale of investments 3,4 - 2.9 2.9Finance income 4 52.9 63.0 106.4Finance costs 4 (41.6) (41.4) (70.0)---------------------------- ---- ---------- ---------- --------Net finance income 11.3 24.5 39.3---------------------------- ---- ---------- ---------- -------- Profit before tax 78.9 105.2 302.3 Analysed as:---------------------------- ---- ---------- ---------- -------- |Underlying profit || before tax 3 96.9 96.6 317.6 ||Amortisation of || acquired intangibles (2.1) (0.9) (2.0) ||Net restructuring | | costs (14.8) (2.2) (22.4) ||Other one off charges - - (4.1) ||Profit on sale of || investments - 2.9 2.9 ||Net fair value || remeasurements of || financial instruments (1.1) 8.8 10.3 |---------------------------- ---- ---------- ---------- -------- Income tax expense 5 (23.8) (33.4) (90.3)---------------------------- ---- ---------- ---------- --------Profit after tax - continuing operations 55.1 71.8 212.0Profit on disposal of subsidiary 1.0 - -(Loss) / profit after tax for discontinued operations (6.1) 4.3 (0.3)---------------------------- ---- ---------- ---------- --------(Loss) / profit after tax - discontinued operations 11 (5.1) 4.3 (0.3)---------------------------- ---- ---------- ---------- --------Profit for the period 50.0 76.1 211.7---------------------------- ---- ---------- ---------- -------- Attributable to: Equity shareholders of the parent company 53.6 78.3 215.9Minority interests (3.6) (2.2) (4.2)---------------------------- ---- ---------- ---------- -------- 50.0 76.1 211.7---------------------------- ---- ---------- ---------- -------- Earnings per share(pence) 6---------------------------- ---- ---------- ---------- --------Basic - total 2.9p 4.2p 11.7pDiluted - total 2.9p 4.2p 11.6pBasic - continuing operations 2.9p 3.8p 11.4pDiluted - continuing operations 2.9p 3.8p 11.3p------ ------------------------ ---- ---------- ---------- -------- Non-GAAP measures:---------------------------- ---- ---------- ---------- -------- Adjusted earnings per share(pence) 6Basic - continuing operations 3.6p 3.5p 12.2pDiluted - continuing operations 3.5p 3.4p 12.1p----------------------------- ---- ---------- ---------- -------- CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE 28 weeks ended 28 weeks ended 52 weeks ended 11 November 12 November 29 April 2006 2005 2006 Unaudited Unaudited Audited £million £million £million ------------------------------ ---------- ---------- -------- Profit for the period 50.0 76.1 211.7 Actuarial (losses) / gains on defined benefit pension scheme (54.3) 4.6 47.1 Fair value remeasurement gains / (losses) on financial instruments 20.9 8.4 (22.9) Tax on charge / (credit) on items taken directly to equity 10.5 (1.1) (7.2) Currency translation movements (31.2) 8.4 27.1 ------------------------------ ---------- ---------- -------- Net (expense) / income recognised directly in equity (54.1) 20.3 44.1 ------------------------------ ---------- ---------- -------- Total recognised income and expense for the period (4.1) 96.4 255.8 ------------------------------ ---------- ---------- -------- Attributable to: Equity shareholders of the parent company (0.2) 98.6 259.8 Minority interests (3.9) (2.2) (4.0) ------------------------------ ---------- ---------- -------- (4.1) 96.4 255.8 ------------------------------ ---------- ---------- -------- CONSOLIDATED BALANCE SHEET Note 11 November 12 November 29 April 2006 2005 2006 Unaudited Unaudited Audited £million £million £million ---------------------- ----- ------ ---------- ---------- -------- Non-current assets Goodwill 1,165.1 1,038.3 1,087.6 Intangible assets 145.7 105.1 109.7 Property, plant and equipment 595.3 605.8 641.4 Investments 2.2 3.2 2.2 Trade and other receivables 20.3 13.4 50.4 Deferred tax assets 133.9 164.1 134.4 ---------------------- ----- ------ ---------- ---------- -------- 2,062.5 1,929.9 2,025.7 ---------------------- ----- ------ ---------- ---------- -------- Current assets Inventories 7 1,176.6 1,077.6 873.4 Trade and other receivables 485.5 471.6 370.4 Income tax receivable - 8.7 - Short term investments 10 201.8 255.8 232.6 Cash and cash equivalents 10 509.3 591.2 617.5 ---------------------- ----- ------ ---------- ---------- -------- 2,373.2 2,404.9 2,093.9 ---------------------- ----- ------ ---------- ---------- -------- Total assets 4,435.7 4,334.8 4,119.6 ---------------------- ----- ------ ---------- ---------- -------- Current liabilities Bank overdrafts (8.3) (16.3) - Borrowings 10 (4.0) (13.1) (8.8) Obligations under finance leases (0.9) (0.5) (0.5) Trade and other payables (2,039.8) (1,985.4) (1,644.2) Income tax payable (33.9) (95.7) (67.9) Provisions (28.7) (4.9) (27.7) ---------------------- ----- ------ ---------- ---------- -------- (2,115.6) (2,115.9) (1,749.1) ---------------------- ----- ------ ---------- ---------- -------- Net current assets 257.6 289.0 344.8 ---------------------- ----- ------ ---------- ---------- -------- Non-current liabilities Borrowings 10 (301.1) (305.5) (301.1) Obligations under finance leases (100.8) (59.3) (100.1) Retirement benefit obligations 12 (195.6) (183.1) (141.7) Other payables (375.3) (356.4) (387.0) Deferred tax liabilities (24.3) - (6.1) Provisions (4.1) (1.5) (10.8) ---------------------- ----- ------ ---------- ---------- -------- (1,001.2) (905.8) (946.8) ---------------------- ----- ------ ---------- ---------- -------- Total liabilities (3,116.8) (3,021.7) (2,695.9) ---------------------- ----- ------ ---------- ---------- -------- Net assets 1,318.9 1,313.1 1,423.7 ---------------------- ----- ------ ---------- ---------- -------- Capital and reserves 8 Called up share capital 46.0 45.8 45.6 Share premium account 165.2 142.3 145.9 Other reserves 40.7 51.0 26.1 Retained earnings 1,066.0 1,062.9 1,196.8 ---------------------- ----- ------ ---------- ---------- -------- Equity attributable to equity holders of the parent company 1,317.9 1,302.0 1,414.4 Equity minority interests 1.0 11.1 9.3 ---------------------- ----- ------ ---------- ---------- -------- Total equity 1,318.9 1,313.1 1,423.7 ---------------------- ----- ------ ---------- ---------- -------- CONSOLIDATED CASH FLOW STATEMENT------------------------- ---- ---- ---------- ---------- -------- Note 28 weeks ended 28 weeks ended 52 weeks ended 11 November 12 November 29 April 2006 2005 2006 Unaudited Unaudited Audited £million £million £million------------------------- ---- ---- ---------- ---------- -------- Operating activities - continuing operationsCash generated from operations * 10 210.4 236.8 429.6Income tax paid * (46.4) (39.7) (86.9)------------------------- ---- ---- ---------- ---------- --------Net cash flow from operating activities 164.0 197.1 342.7------------------------- ---- ---- ---------- ---------- --------Investing activities - continuing operationsPurchase of property, plant & equipment and other intangibles * (96.6) (92.3) (198.5)Purchase of subsidiaries 11 (186.3) (14.1) (56.8)Purchase of non-current investments - (3.0) (3.9)Interest received * 26.2 27.4 53.3Decrease in short term investments 31.2 51.5 74.7Disposal of property, plant & equipment and other intangibles * 54.7 24.7 69.2Disposal of non-current investments - 8.2 8.2Disposal of subsidiary 21.1 - -------------------------- ---- ---- ---------- ---------- --------Net cash flow from investing activities (149.7) 2.4 (53.8)------------------------- ---- ---- ---------- ---------- --------Financing activities - continuing operationsIssue of ordinary share capital 19.7 0.2 2.5Purchase of own shares - (84.2) (109.9)Capital element of finance lease payments * (1.0) (0.2) (0.3)Interest element of finance lease payments * (3.5) (2.3) (4.4)Decrease in borrowings due within one year (5.6) (7.5) (11.8)Increase / (decrease) in borrowings due after more than one year 0.9 1.6 (3.3)Cash received on inception of finance leases * - - 45.4Interest paid * (8.4) (6.3) (20.5)Equity dividends paid (119.9) (115.2) (149.9)------------------------- ---- ---- ---------- ---------- --------Net cash flow from financing activities (117.8) (213.9) (252.2)------------------------- ---- ---- ---------- ---------- -------- (Decrease) / increase in (i) cash and cash equivalentsContinuing operations (103.5) (14.4) 36.7Discontinued operations 11 (10.4) (8.4) (16.3)------------------------- ---- ---- ---------- ---------- -------- 10 (113.9) (22.8) 20.4Cash and cash equivalents at beginning of period (i) 617.5 597.4 597.4Currency translation differences (2.6) 0.3 (0.3)------------------------- ---- ---- ---------- ---------- --------Cash and cash equivalents at end of period (i) 10 501.0 574.9 617.5------------------------- ---- ---- ---------- ---------- --------Free Cash Flow (ii) 135.4 148.1 286.9------------------------- ---- ---- ---------- ---------- -------- (i) For the purposes of this cash flow statement, cash and cashequivalents comprise those amounts described as "cash and cashequivalents" on the consolidated balance sheet, less overdrafts, whichare classified within current liabilities on the consolidated balancesheet. A reconciliation to the balance sheet amounts is shown in note10.(ii) Free Cash Flow comprises those items marked * and comprises cashgenerated from continuing operations less income tax paid, plus netfinance income, cash flows related to finance leases and net capitalexpenditure. The directors consider that "Free Cash Flow" providesadditional useful information to shareholders in respect of cashgeneration and is consistent with how business performance is measuredinternally. NOTES TO THE INTERIM FINANCIAL STATEMENTS1 Basis of preparation and accounting policies The interim financial statements for the 28 weeks ended 11 November 2006were approved by the directors on 17 January 2007. The interim financialstatements have been prepared in accordance with the Listing Rules of theFinancial Services Authority and the accounting policies set out in theGroup's Annual Report and Accounts for the 52 week period ended 29 April2006. The interim financial statements are unaudited and do not constitutestatutory accounts within the meaning of Section 240 of the Companies Act1985, but have been reviewed by the auditors. The financial information forthe 52 weeks ended 29 April 2006 does not constitute the Company's statutoryaccounts for that period but has been extracted from those accounts whichhave been filed with the Registrar of Companies. The auditors have reportedon those accounts, their report was unqualified and did not containstatements under Sections 237(2) or (3) of the Companies Act 1985. The directors consider that the 'underlying' profit and 'adjusted' earningsper share measures provide additional useful information for shareholders onthe underlying performance of the business, and are consistent with howbusiness performance is measured internally. It is not a recognised profitmeasure under IFRS and may not be directly comparable with 'adjusted' profitmeasures used by other companies. 2 Segmental analysis On 5 April 2006 the Group announced that the Dixons brand was to focusexclusively on e-commerce operations. As a result, the e-commerce operationsof Dixons together with the operations of FotoVista which were acquiredduring the period, as described in note 11, now form a New Businessesdivision. Comparative figures for the Electricals division have beenrestated to reflect the change in management responsibility for thee-commerce activities of Dixons. During the period, the Group completed the sale of its 60 per cent stake inThe Link Stores Limited (The Link) as further described in note 11. Thispreviously comprised the majority of the Communications division and as aresult, the small remaining communications operations comprising Genesishave been integrated into the Computing division. Comparative figures havebeen restated to reflect this change in responsibility and The Link hastherefore been treated as a discontinued operation. The Group is now managed and reported according to three operatingdivisions: Computing, Electricals and New Businesses. These divisions are the basis on which the Group reports its primarysegmental information. The principal activities of each division are asfollows: •The Computing division is engaged in the retail and business to businesssale of computer hardware and software, associated peripherals and servicesand related financial and after-sales services. The division operates in theUK and Southern Europe (which also includes the small Nordic operations).The division also comprises Genesis which is engaged in the business tobusiness sale of telecommunications products and associated peripherals andafter sales services. •The Electricals division is engaged in the retail sale of high technologyconsumer electronics, domestic appliances, photographic equipment andrelated financial and after-sales services. The division operates in the UK,Ireland, the Nordic region, Southern Europe and Central Europe. •The New Businesses division is engaged in e-commerce activities being theon-line retail sale of high technology consumer electronics, domesticappliances, photographic equipment and related financial and after salesservices. The division operates in the UK, Ireland, Northern Europe,Southern Europe and Central Europe. Corporate centre and shared services includes the residual Codic propertyoperations in Germany retained by the Group following the sale of theremainder of the European Property division in 2003. There were no material exports from the locations in which the Groupoperates. 2 Segmental analysis (continued) (a) Revenue and operating profit 28 weeks ended 11 November 2006 Corporate New centre & Computing Electricals Businesses shared services Total £million £million £million £million £million----------------------- ------- ------- ------- ---------- --------Revenue 1,097.6 2,531.2 168.1 - 3,796.9----------------------- ------- ------- ------- ---------- -------- Underlying operating profit / (loss) before associates 34.6 54.0 2.0 (6.3) 84.3 Share of post tax result of associates - 0.2 - - 0.2----------------------- ------- ------- ------- ---------- --------Underlying operating profit / (loss) 34.6 54.2 2.0 (6.3) 84.5Amortisation of acquired intangibles (0.7) (0.5) (0.9) - (2.1)Restructuring costs - (14.8) - - (14.8)----------------------- ------- ------- ------- ---------- -------- Operating profit / (loss) 33.9 38.9 1.1 (6.3) 67.6----------------------- ------- ------- ------- ---------- --------Underlying operating profit / (loss) is stated after recognising net property profits of £5.5 million in Corporate centre & shared services. 28 weeks ended 12 November 2005 Corporate New centre & Computing Electricals Businesses shared services Total £million £million £million £million £million----------------------- ------- ------- ------- ---------- --------Revenue 1,014.2 2,306.9 10.6 0.2 3,331.9----------------------- ------- ------- ------- ---------- --------Underlying operating profit / (loss) before associates 36.8 52.9 (0.3) (5.7) 83.7Share of post tax result of associates - 0.1 - - 0.1----------------------- ------- ------- ------- ---------- --------Underlying operating profit / (loss) 36.8 53.0 (0.3) (5.7) 83.8Amortisation of acquired intangibles (0.6) (0.3) - - (0.9)Restructuring costs (1.0) (1.2) - - (2.2)----------------------- ------- ------- ------- ---------- --------Operating profit / (loss) 35.2 51.5 (0.3) (5.7) 80.7----------------------- ------- ------- ------- ---------- --------Underlying operating profit / (loss) is stated after recognising net property profits of £5.4 million in Corporate centre & shared services. 52 weeks ended 29 April 2006 Corporate New centre & Computing Electricals Businesses shared services Total £million £million £million £million £million----------------------- ------- ------- ------- ---------- --------Revenue 2,127.4 4,912.1 26.3 6.2 7,072.0----------------------- ------- ------- ------- ---------- --------Underlying operating profit / (loss) before associates 113.8 197.3 - (19.9) 291.2Share of post tax result of associates - 0.3 - - 0.3----------------------- ------- ------- ------- ---------- --------Underlying operating profit / (loss) 113.8 197.6 - (19.9) 291.5Amortisation of acquired intangibles (1.4) (0.6) - - (2.0)Net restructuring costs (9.7) (12.7) - - (22.4)Other one-off charges - - - (4.1) (4.1)----------------------- ------- ------- ------- ---------- --------Operating profit / (loss) 102.7 184.3 - (24.0) 263.0----------------------- ------- ------- ------- ---------- --------Underlying operating profit / (loss) is stated after recognising netproperty profits of £7.4 million in Corporate centre & shared services. (b) Seasonality Due to the seasonal nature of the business centred around the Christmastrading period, higher revenues and operating profits are generated in thesecond half of the year than in the first 28 weeks. Higher sales in thatperiod are attributed to the increase in consumer demand during Christmas. 3 Reconciliation of underlying profit before tax 28 weeks ended 28 weeks ended 52 weeks ended 11 November 12 November 29 April 2006 2005 2006 £million £million £million------------------------------ ----- ---------- ---------- ---------Underlying profit before tax 96.9 96.6 317.6Included in operating profit: Amortisation of acquired (2.1) (0.9) (2.0) intangibles Net restructuring costs (i) (14.8) (2.2) (22.4) Other one off charges (ii) - - (4.1)------------------------------ ----- ---------- ---------- --------- (16.9) (3.1) (28.5)Included in net finance income: Profit on sale of (iii) - 2.9 2.9 investments Net fair value remeasurements of financial instruments (iv) (1.1) 8.8 10.3----------------------------- ----- ---------- ---------- --------- (1.1) 11.7 13.2----------------------------- ----- ---------- ---------- ---------Profit before tax 78.9 105.2 302.3----------------------------- ----- ---------- ---------- --------- (i) Net restructuring costs: 28 weeks ended 11 November 2006 Net property Asset Other profit / (loss) impairment charges Total £million £million £million £million---------------------- -------- -------- -------- ----------Distribution network transformation - (2.9) (11.9) (14.8)---------------------- -------- -------- -------- ---------- 28 weeks ended 12 November 2005 ---------------------- -------- -------- -------- ----------Information systems - - (2.2) (2.2) outsourcing ---------------------- -------- -------- -------- ---------- 52 weeks ended 29 April 2006---------------------- -------- -------- -------- ----------Distribution network transformation 10.4 (3.6) (11.4) (4.6)Information systems outsourcing - - (7.0) (7.0)Electricals division operations and brand (1.4) (2.0) (2.6) (6.0) portfolioPC City France - (3.5) (1.3) (4.8) operating model ---------------------- -------- -------- -------- ---------- 9.0 (9.1) (22.3) (22.4)---------------------- -------- -------- -------- ---------- Net property profits include gains and losses on sale of properties associated directly with the reorganisation plans net of onerous lease contracts. Asset impairments relate to intangible assets, items of property, plant and equipment which are to be eliminated from the business over a shorter period than their current useful expected lives and inventories. Other charges are predominantly employee severance and incremental transition costs.(ii)Other one off charges: Such charges are defined as those costs deriving from events outside the ordinary course of business together with asset impairments (52 weeks ended 29 April 2006: £2.8 million related to remedial work associated with damage caused to the Group's head office premises by the Buncefield oil depot explosion in December 2005, which is the subject of an insurance claim, together with £1.3 million relating to the impairment of a small minority investment).(iii)Profit on sale of investments: £nil (28 weeks ended 12 November 2005 and 52 weeks ended 29 April 2006: Related to a profit arising from the sale of a minority shareholding in Monstermob Group PLC).(iv)Net fair value remeasurements 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 "Financial instruments: Recognition and measurement" compared with those on an accruals basis. 4 Net finance income 28 weeks ended 28 weeks ended 52 weeks ended 11 November 12 November 29 April 2006 2005 2006 £million £million £million--------------------------- --- ---------- ---------- ---------Profit on sale ofinvestments * - 2.9 2.9--------------------------- --- ---------- ---------- ---------Bank and other interest receivable 27.1 29.7 57.0Expected return on pension scheme assets 23.1 18.4 34.4Fair value measurement gains on financial instruments * 2.7 14.9 15.0--------------------------- --- ---------- ---------- ---------Finance income 52.9 63.0 106.4--------------------------- --- ---------- ---------- --------- 6.125% GuaranteedBonds 2012 interest and related charges (10.0) (10.0) (18.6)Bank loans, overdrafts and other interest payable (3.7) (4.3) (7.3)Finance lease interest (3.5) (2.3) (4.4)Interest on pension scheme liabilities (20.6) (18.7) (35.0)Fair value measurement losses on financial instruments * (3.8) (6.1) (4.7)--------------------------- --- ---------- ---------- ---------Finance costs (41.6) (41.4) (70.0)--------------------------- --- ---------- ---------- --------- Total net finance income 11.3 24.5 39.3--------------------------- --- ---------- ---------- --------- Underlying total net finance income 12.4 12.8 26.1--------------------------- --- ---------- ---------- ---------Underlying total net finance income excludes items marked *. See note 3 fora description of such items. 5 Tax 28 weeks ended 28 weeks ended 52 weeks ended 11 November 12 November 29 April 2006 2005 2006 £million £million £million--------------------------- ---------- ---------- ---------Current taxUK corporation tax at 30% 16.7 14.7 58.4Credit in respect of restructuring costs (4.4) - ----------------------------- ---------- ---------- --------- 12.3 14.7 58.4Double tax relief - - (22.8)--------------------------- ---------- ---------- ---------Total UK corporation tax 12.3 14.7 35.6Overseas taxation 7.2 13.5 21.9Adjustment in respect of earlier periods: UK Corporation tax (9.0) - (1.9) UK Overseas taxation 0.2 - 0.6--------------------------- ---------- ---------- --------- 10.7 28.2 56.2--------------------------- ---------- ---------- ---------Deferred taxCurrent period 3.9 5.8 44.9Credit in respect of net restructuring costs and other one off charges - (0.6) (3.5)Adjustment in respect of earlier periods 9.2 - (7.3)--------------------------- ---------- ---------- --------- 13.1 5.2 34.1--------------------------- ---------- ---------- --------- Total income tax expense 23.8 33.4 90.3--------------------------- ---------- ---------- --------- Analysed as:--------------------------- ---------- ---------- ---------|Underlying tax charge 29.1 31.7 91.4 ||Tax on amortisation | | of acquired || intangibles (0.6) (0.3) (0.6)||Tax on net || restructuring costs || and other one off || charges (4.4) (0.6) (3.5)||Tax on net fair value || remeasurements of || financial instruments (0.3) 2.6 3.0 |---------------------------- ---------- ---------- --------- The taxation charge based on underlying results is based on the estimatedeffective rate of taxation of 30 per cent on underlying earnings for the 52weeks ending 28 April 2007. The equivalent effective rate of taxation forthe 52 weeks ended 29 April 2006 was 29 per cent. 6 Earnings per share 28 weeks ended 28 weeks ended 52 weeks ended 11 November 12 November 29 April 2006 2005 2006 £million £million £million-------------------------- ---------- ---------- ---------Basic and diluted earningsContinuing and discontinued operations 53.6 78.3 215.9Discontinued operations (0.5) (7.2) (5.1)-------------------------- ---------- ---------- ---------Continuing operations 53.1 71.1 210.8-------------------------- ---------- ---------- ---------Adjustments (net of taxation)Amortisation of acquired intangibles 1.5 0.6 1.4Restructuring net costs 10.4 1.6 18.9Other one off charges - - 4.1Profit on sale of investments - (2.9) (2.9)Net fair value remeasurements on financial instruments 0.8 (6.2) (7.3)-------------------------- ---------- ---------- ---------Total adjustments (net of taxation) 12.7 (6.9) 14.2-------------------------- ---------- ---------- ---------Adjusted basic and diluted earnings 65.8 64.2 225.0-------------------------- ---------- ---------- --------- Million Million Million-------------------------- ---------- ---------- ---------Basic weighted average number of shares 1,834.0 1,859.1 1,844.7Employee share option and ownership schemes 28.2 15.9 18.5-------------------------- ---------- ---------- ---------Diluted weighted average number of shares 1,862.2 1,875.0 1,863.2-------------------------- ---------- ---------- --------- Pence Pence Pence-------------------------- ---------- ---------- ---------Basic earnings per shareContinuing and discontinued operations 2.9 4.2 11.7Less discontinued operations - (0.4) (0.3)-------------------------- ---------- ---------- ---------Continuing operations 2.9 3.8 11.4Adjustments (net of taxation) 0.7 (0.3) 0.8-------------------------- ---------- ---------- ---------Adjusted basic earnings per share 3.6 3.5 12.2-------------------------- ---------- ---------- ---------Diluted earnings per shareContinuing and discontinued operations 2.9 4.2 11.6Less discontinued operations - (0.4) (0.3)-------------------------- ---------- ---------- ---------Continuing operations 2.9 3.8 11.3Adjustments (net of taxation) 0.6 (0.4) 0.8-------------------------- ---------- ---------- ---------Adjusted diluted earnings per share 3.5 3.4 12.1-------------------------- ---------- ---------- ---------Basic and diluted earnings per share are based on profit for the periodattributable to equity shareholders. Adjusted earnings per share arepresented in order to present the underlying performance of the Group fromits continuing operations. Such adjustments used to determine underlyingearnings are further described in note 3. 7 Inventories 11 November 12 November 29 April 2006 2005 2006 £million £million £million-------------------------- ---------- ---------- ---------Net finished goods and goods for resale 1,175.7 1,071.1 872.5Properties held for development or resale 0.9 6.5 0.9-------------------------- ---------- ---------- --------- 1,176.6 1,077.6 873.4-------------------------- ---------- ---------- --------- 8 Reconciliation of movements in equity 11 November 12 November 29 April 2006 2005 2006 £million £million £million--------------------------- --- ---------- ---------- ---------Opening equity shareholders' funds 1,414.4 1,408.7 1,408.7Transition adjustment on adoption of IAS 32 and 39, net of tax - (10.9) (10.9)--------------------------- --- ---------- ---------- ---------Opening equity shareholders' funds - as restated 1,414.4 1,397.8 1,397.8Profit for the period 53.6 78.3 215.9Equity dividends paid (119.9) (115.2) (150.2)Actuarial (losses)/gains on defined benefit pension scheme (54.3) 4.6 47.1Purchase and cancellation of own shares - (84.2) (107.6)Investment in own shares - - (1.5)Vesting of own shares - - (0.8)Currency retranslation (30.9) 8.4 26.9Share based payment 3.3 4.3 8.8Cash flow hedges (4.8) 8.4 (3.9)Net investment hedges 25.7 0.3 (18.7)Fair value changes on investments - (0.3) (0.3)Tax on items taken directly to equity 11.1 (0.5) (1.6)Ordinary shares issued: Share option and ownership schemes 19.7 0.1 2.5--------------------------- --- ---------- ---------- ---------Closing equity shareholders' funds 1,317.9 1,302.0 1,414.4Minority interests 1.0 11.1 9.3--------------------------- --- ---------- ---------- ---------Closing total equity 1,318.9 1,313.1 1,423.7--------------------------- --- ---------- ---------- ---------During the period 17,207,477 shares were issued in respect of optionsexercised under employee share schemes. 9 Dividends 28 weeks ended 28 weeks ended 52 weeks ended 11 November 12 November 9 April 2006 2005 2006 per share £million £million £million----------------------- -------- ---------- ---------- ---------Amounts recognised as distributions to equity shareholders - on ordinary shares of 2.5p eachFinal dividend for 2004/05 6.22p - 115.2 115.2Interim dividend for 2005/06 1.92p - - 35.0Final dividend for 2005/06 6.53p 119.2 - ------------------------ -------- ---------- ---------- --------- 119.2 115.2 150.2----------------------- -------- ---------- ---------- ---------Proposed interim dividend 2006/07 2.02p 37.2 - ------------------------ -------- ---------- ---------- ---------As at 11 November 2006, the interim dividend for 2006/07 had not beenapproved by the Board and accordingly has not been recognised as a liabilityin these financial statements. 10 Notes to the cash flow statement (a) Reconciliation of operating profit to net cash generated from operating activities 28 weeks ended 28 weeks ended 52 weeks ended 11 November 12 November 29 April 2006 2005 2006 £million £million £million--------------------------- ---------- ---------- ---------Operating profit 60.9 80.6 261.9Operating loss - discontinued operations 6.7 0.1 1.1--------------------------- ---------- ---------- ---------Operating profit - continuing operations 67.6 80.7 263.0Amortisation of acquired intangibles 2.1 0.9 2.0Amortisation of other intangibles and depreciation 70.2 70.8 130.7Share based payment charge 4.2 4.3 9.5Share of post tax results of associates (0.2) (0.1) (0.3)Profit on disposal of property, plant and equipment (5.0) (5.4) (7.6)Profit on disposal of property, plant and equipment arising from restructuring - - (9.0)Net (utilisation of)/additions to non-underlying provisions and impairment (2.6) (8.3) 34.2 ------------------------------ ----- ---------- ---------Operating cash flows before movements in working capital 136.3 142.9 422.5 Movements in working capital:Increase in inventories (310.8) (244.5) (16.5)Increase in trade and other receivables (92.3) (79.3) (8.8)Increase in trade and other payables 477.2 417.7 32.4--------------------------- ---------- ---------- --------- 74.1 93.9 7.1--------------------------- ---------- ---------- ---------Cash generated from operations - continuing operations 210.4 236.8 429.6--------------------------- ---------- ---------- --------- (b) Analysis of net funds Other non- 11 30 April Acquisitions cash Exchange November 2006 Cash flow (ii) movements movements 2006 £million £million £million £million £million £million--------------- ----- --- ------- ------- ------- ------- ------- -------Cash and cash equivalents (i) 617.5 (105.6) - - (2.6) 509.3Overdrafts - (8.3) - - - (8.3)--------------- ----- --- ------- ------- ------- ------- ------- ------- 617.5 (113.9) - - (2.6) 501.0--------------- ----- --- ------- ------- ------- ------- ------- -------Short term investments 232.6 (31.2) 0.1 - 0.3 201.8Borrowings due within one year (8.8) 5.6 (1.6) - 0.8 (4.0)Borrowings due after more than one year (301.1) (0.8) - 0.3 0.5 (301.1)Obligations under finance leases (100.6) 0.9 (2.0) - - (101.7)--------------- ----- --- ------- ------- ------- ------- ------- ------- (410.5) 5.7 (3.6) 0.3 1.3 (406.8)--------------- ----- --- ------- ------- ------- ------- ------- -------Net funds 439.6 (139.4) (3.5) 0.3 (1.0) 296.0--------------- ----- --- ------- ------- ------- ------- ------- -------Funds held under trust to fund customer support agreements were £160.9million (28 weeks ended 11 November 2005: £273.5 million, 52 weeks ended 29April 2006: £193.5 million). Net funds excluding amounts held under trust tofund customer support agreements totalled £135.1 million (28 weeks ended 11November 2005: £178.8 million, 52 weeks ended 29 April 2006: £246.1million). i. Cash and cash equivalents are represented as a single class of assets on the face of the consolidated balance sheet. For the purpose of the consolidated cash flow, cash and cash equivalents comprise those amounts presented as such on the balance sheet less overdrafts (which form part of current liabilities on the balance sheet).ii. Excluding cash and cash equivalents and overdrafts. 11 Acquisitions and Disposals (a) Acquisitions The main acquisition in the period occurred on 3 July 2006 whereby the Groupacquired a controlling 77 per cent interest in Fotovista S.A. (FotoVista).FotoVista is the parent company of Pixmania, a leading European e-tailer ofdigital photographic and consumer electronic products. Consideration andcosts were €264.3 million (£183.7 million). The provisional fair value ofthe Group's share of net assets acquired amounted to €59.8 million (£41.6million) resulting in goodwill of €204.5 million (£142.1 million). (b) Disposals On 15 September 2006 the Group disposed of its 60% holding in The LinkStores Limited (The Link) to O2 (UK) Limited. The net assets disposed ofwere as follows: £million------------------------------------- ---------Intangible assets 4.4Property, plant and equipment 8.1Other assets 45.7Cash and cash equivalents 5.8Current liabilities (22.6)Equity minority interest (16.5)------------------------------------- ---------Net assets disposed 24.9Profit on disposal of subsidiary 1.0------------------------------------- --------- 25.9 --------- Consideration 30.5Disposal fees and exit costs (4.6)------------------------------------- ---------Consideration and costs 25.9------------------------------------- --------- Disposal fees mainly comprise fees payable to advisors. Exit costs mainlycomprise asset write downs and impairments together with associatedtermination costs. There is no tax arising on this profit due to theavailability of capital losses brought forward. Cash flow from disposals £million------------------------------------- ---------Consideration 30.5Disposal fees and exit costs (3.6)Net cash and cash equivalents disposed of with subsidiary (5.8)------------------------------------- ---------Net cash inflow 21.1------------------------------------- --------- As described in note 2, the operations of The Link comprised the majority ofthe Communications division which accordingly have been classified asdiscontinued. Results of these discontinued operations were as follows: 28 weeks ended 28 weeks ended 52 weeks ended 11 November 12 November 29 April 2006 2005 2006 £million £million £million--------------------------- ---------- ---------- ----------Revenue 90.4 175.1 331.4Expenses (97.1) (175.2) (332.5)--------------------------- ---------- ---------- ----------Operating loss (6.7) (0.1) (1.1)Finance income 0.6 1.0 1.7--------------------------- ---------- ---------- ----------(Loss) / profit before tax (6.1) 0.9 0.6Income tax credit /(expense) - 3.4 (0.9)--------------------------- ---------- ---------- ---------- (6.1) 4.3 (0.3)Profit on disposal of discontinued operations 1.0 - ---------------------------- ---------- ---------- ----------(Loss) / profit for the period (5.1) 4.3 (0.3)--------------------------- ---------- ---------- ----------Attributable to:Equity shareholders of the parent 0.5 7.2 5.1 companyMinority interests (5.6) (2.9) (5.4) --------------------------- ---------- ----------- ---------- (5.1) 4.3 (0.3) --------------------------- ---------- ----------- ---------- 11 Acquisitions and Disposals (continued) (c)Cash flows from discontinued operations 28 weeks ended 28 weeks ended 52 weeks ended 11 November 12 November 29 April 2006 2005 2006 £million £million £million--------------------------- ---------- ---------- ----------Operating activities (10.4) 0.6 (6.0)Investing activities - (0.8) (2.1)Financing activities - (8.2) (8.2)--------------------------- ---------- ---------- ---------- (10.4) (8.4) (16.3)--------------------------- ---------- ---------- ---------- Cash flows from investing activities relate to interest received and capital expenditure. Cash flows from financing activities comprise dividends paid to minority shareholders. 12 Retirement benefit obligation The Group's principal pension scheme operates in the UK and includes afunded defined benefit section whose assets are held in a separate trusteeadministered fund. 11 November 12 November 29 April 2006 2005 2006 £million £million £million--------------------------- ---------- ---------- ----------Fair value of plan assets 619.9 532.9 590.8Present value of defined benefit obligations (815.5) (716.0) (732.5)--------------------------- ---------- ---------- ----------Net obligation (195.6) (183.1) (141.7)--------------------------- ---------- ---------- ----------The value of obligations is particularly sensitive to the discount rateapplied to liabilities at the assessment date. The value of the plan assetsis sensitive to market conditions, particularly equity values. Theassumptions used in the valuation are listed below: Rates per annum 11 November 12 November 29 April 2006 2005 2006--------------------------- ---------- ----------- ----------Discount rate 5.05% 5.25% 5.30%Inflation 2.90% 2.80% 2.80%Rate of increase in pensionable salaries 4.40% 4.30% 4.30%Rate of increase in pensions in payment / deferred pensions 2.90% 2.80% 2.80%--------------------------- ---------- ----------- ---------- 13 Contingent liabilities 11 November 12 November 29 April 2006 2005 2006 £million £million £million--------------------------- ---------- ----------- ----------Guarantees 77.0 39.3 59.1Other 19.8 16.6 21.2--------------------------- ---------- ----------- ---------- 96.8 55.9 80.3--------------------------- ---------- ----------- ----------Guarantees comprise potential obligations to financial institutions inrespect of activities undertaken in the normal course of business. Inaddition, contingent liabilities also exist in respect of lease covenantsrelating to premises assigned to third parties. 14 Post balance sheet event On 15 December 2006, the Group acquired a 40% interest in FGH A/S("F-group"), a leading consumer electronics retailer in Denmark, for a totalcash consideration of DKK 175 million (£16 million). INDEPENDENT REVIEW REPORT To DSG international plc Introduction We have been instructed by the Company to review the financial informationfor the 28 weeks ended 11 November 2006 which comprises the consolidatedincome statement, the consolidated statement of recognised income andexpense, the consolidated balance sheet, the consolidated cash flowstatement and related notes 1 to 14. We have read the other informationcontained in the interim report and considered whether it contains anyapparent misstatements or material inconsistencies with the financialinformation. This report is made solely to the Company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so thatwe might state to the Company those matters we are required to state to themin an independent review report and for no other purpose. To the fullestextent permitted by law, we do not accept or assume responsibility to anyoneother than the Company for our review work, for this report, or for theconclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein,is the responsibility of, and has been approved by the directors. Thedirectors are responsible for preparing the interim report in accordancewith the Listing Rules of the Financial Services Authority which requirethat the accounting policies and presentation applied to the interim figuresare consistent with those applied in preparing the preceding annual accountsexcept where any changes, and the reason for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom.A review consists principally of making enquiries of Group management andapplying analytical procedures to the financial information and underlyingfinancial data and, based thereon, assessing whether the accounting policiesand presentation have been consistently applied unless otherwise disclosed.A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantiallyless in scope than an audit performed in accordance with InternationalStandards on Auditing (UK and Ireland) and therefore provides a lower levelof assurance than an audit. Accordingly, we do not express an audit opinionon the financial information. Review conclusion On the basis of our review we are not aware of any material modificationsthat should be made to the financial information as presented for the 28weeks ended 11 November 2006. Deloitte & Touche LLPChartered AccountantsLondon17 January 2007 ADDITIONAL INFORMATIONUnderlying sales and operating profit analysis Sales Operating profit/(loss)* ------- ------- ------- ------ -------- -------- 28 weeks 28 weeks 28 weeks 28 weeks ended 11 ended 12 ended 11 ended 12 November November Like for November November 2006 2005 Total like 2006 2005 £million £million % change % change £million £ million------------------ --- ------- ------- ------ ------ -------- --------ComputingUK Computing 1 940.5 891.3 6% 3% 51.4 51.8International Computing 2 157.1 122.9 28% n/a (16.8) (15.0)------------------ --- ------- ------- ------ ------ -------- --------Total Computing 1,097.6 1,014.2 8% 3% 34.6 36.8------------------ --- ------- ------- ------ ------ -------- -------- ElectricalsUK & Ireland Electricals 1,341.2 1,281.1 5% 5% 17.0 2.5Nordic 3 664.6 530.6 25% 11% 41.8 36.3Southern Europe 4 460.1 449.6 2% (5)% 2.5 19.5Central Europe 5 65.3 45.6 43% n/a (7.1) (5.3)------------------ --- ------- ------- ------ ------ -------- --------Total Electricals 2,531.2 2,306.9 10% 4% 54.2 53.0------------------ --- ------- ------- ------ ------ -------- -------- Total New Businesses 6 168.1 10.6 n/a 192% 2.0 (0.3)------------------ --- ------- ------- ------ ------ -------- --------TOTAL RETAIL 3,796.9 3,331.7 14% 5% 90.8 89.5------------------ --- ------- ------- ------ ------ -------- --------Corporate centre & shared services - 0.2 n/a n/a (6.3) (5.7)------------------ --- ------- ------- ------ ------ -------- --------TOTAL GROUP UNDERLYING 3,796.9 3,331.9 14% 5% 84.5 83.8================== === ======= ======= ====== ====== ======== ======== Underlying finance income 12.4 12.8 ------------------ --- ------- ------- ------ ------ -------- --------TOTAL GROUP PROFIT BEFORE TAX 96.9 96.6================== === ======= ======= ====== ====== ======== ======== * Underlying results are defined as being before discontinued operations, amortisation of acquired intangibles, restructuring costs, profits on sale of investments, profits on sale of subsidiaries and net fair value remeasurements of financial instruments. 1. UK Computing comprises PC World, PC World Business and Genesis. 2. International Computing comprises the PC City operations in Spain, France, Sweden and Italy. 3. Nordic comprises the Elkjop Group, which operates in Norway, Sweden, Finland, Denmark, Iceland and Faroe Islands. 4. Southern Europe comprises UniEuro in Italy and Kotsovolos in Greece. 5. Central Europe comprises Electro World, which operates in Hungary, the Czech Republic and Poland. 6. New Businesses comprises Dixons.co.uk and FotoVista (19 weeks contribution following completion of the acquisition on 3 July 2006). Total sales comparison year on year is not considered meaningful. The like for like change relates to Dixons.co.uk only. Retail Store data Number of stores Selling space'000 sq ft -------- -------- -------- -------- -------- ------- 11 November 12 November 29 April 11 November 12 November 29 April 2006 2005 2006 2006 2005 2006----------------- -------- -------- -------- -------- -------- -------Computing PC World 155 148 150 2,481 2,390 2,420The TechGuys 3 - 1 4 - 1----------------- -------- -------- -------- -------- -------- -------UK Computing 158 148 151 2,485 2,390 2,421 PC City Spain 25 22 25 437 370 424PC City France 11 9 11 190 156 190PC City Italy 9 6 7 154 110 125PC City Sweden 8 5 8 136 83 136----------------- -------- -------- -------- -------- -------- -------International Computing 53 42 51 917 719 875----------------- -------- -------- -------- -------- -------- -------Total Computing 211 190 202 3,402 3,109 3,296----------------- -------- -------- -------- -------- -------- -------ElectricalsCurrys * 545 577 568 4,995 5,001 5,005Ireland 24 20 21 242 209 211----------------- -------- -------- -------- -------- -------- ------- UK & Ireland Electricals 569 597 589 5,237 5,210 5,216----------------- -------- -------- -------- -------- -------- -------Elkjop - Norway 97 96 96 1,135 1,050 1,087Elkjop - Sweden 53 49 51 961 903 941Elkjop - Denmark 27 25 26 457 434 447Elkjop - Finland 52 19 43 699 375 667Elkjop - Iceland 2 2 2 30 30 30Elkjop - Faroe Islands 3 3 3 9 9 9----------------- -------- -------- -------- -------- -------- -------Nordic ** 234 194 221 3,291 2,801 3,181----------------- -------- -------- -------- -------- -------- -------UniEuro 116 104 110 2,237 2,002 2,111Kotsovolos ** 82 75 77 734 600 671----------------- -------- -------- -------- -------- -------- -------Southern Europe 198 179 187 2,971 2,602 2,782----------------- -------- -------- -------- -------- -------- -------Electro World Hungary 7 6 6 239 207 207Electro World Czech Republic 9 7 8 317 260 280Electro World Poland 4 1 2 149 58 91----------------- -------- -------- -------- -------- -------- -------Central Europe 20 14 16 705 525 578----------------- -------- -------- -------- -------- -------- -------Total Electricals 1,021 984 1,013 12,204 11,138 11,757----------------- -------- -------- -------- -------- -------- ------- Total Retail 1,232 1,174 1,215 15,606 14,247 15,053================= ======== ======== ======= ======== ======== ======= * Comprises Currys, Currys.digital and Dixons Tax Free. ** Includes franchise stores This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
DXNS.L