12th Jan 2005 07:00
Dixons Group PLC12 January 2005 PR 02/2005Strictly embargoed.For release after 07.00 hours12 January 2005 DIXONS GROUP plc INTERIM RESULTS FOR THE 28 WEEKS ENDED 13 NOVEMBER 2004 Dixons Group plc, Europe's leading specialist electrical retailer, withoperations in 13 countries, today announces its interim results. •Group sales from continuing operations up 9% to £3.4 billion (2003/04 restated(3): £3.1 billion). UK sales up 7% and International up 14%. Including discontinued, non-retail operations, turnover up 8% •Group like for like sales(1) up 5%; UK like for like sales up 6% and International like for like up 1% •Underlying operating profit(2) up 2% to £112.3 million (2003/04 restated(3): £110.4 million) •Underying profit before tax(2) up 15% to £127.5 million (2003/04 restated(3): £111.3 million) •Profit before tax up 23% to £136.5 million (2003/04 restated (3): £111.3 million) •Strong cash flow with closing available net funds(4) of £144.8 million (2003/04: net borrowings of £246.1 million) •Adjusted diluted earnings per share(2) up 12% to 4.6 pence (2003/04 restated(3): 4.1 pence). Basic earnings per share up 30% to 5.2 pence (2003/ 04 restated(3): 4.0 pence) •Interim dividend up 10% to 1.83 pence per share (2003/04: 1.66 pence per share) •Purchased £43 million of shares under previously announced £200 million share buy back programme •Acquired controlling stake in leading electrical Greek retailer, P. Kotsovolos S.A. and acquired the UK operations of Micro Warehouse •Over 2,000 jobs will be created across the Group over next 12 months NOTES (1) Like for like sales are calculated based on stores that have been open for a full financial year both at the commencement and end of the financial period.(2) Throughout this statement, references are made to 'underlying' and 'adjusted' performance measures. Underlying earnings are stated before discontinued operations, goodwill amortisation and exceptional items. The financial effect of these items is shown in separate columns in the full profit and loss account below and the notes thereto, which provide a reconciliation between underlying and statutory amounts. Adjusted diluted earnings per share are based on underlying profits and can be reconciled to the statutory equivalent in note 7 to the financial information.(3) 2003/04 interim figures have been restated to reflect the 2003/04 full year implementation of Application Note G to FRS 5 and the adoption of UITF 38.(4) Available net funds exclude amounts held under trust to fund extended warranty and service contract liabilities. John Clare, Chief Executive, commented as follows: "In the first half, Group sales grew 9% to £3.4 billion with UK up 7% andInternational up 14%. Underlying profit before tax grew 15% to £127.5 million onthe back of operating profit up 2% and strong interest income growth, resultingfrom our improved cash position. In the UK we saw like for like sales growth across all our businesses despitethe very competitive market conditions. Currys grew like for like sales by 9%through driving higher footfall and conversion levels. PC World grew like forlike sales by 3%, a satisfactory performance in the light of the significantprice deflation in both desktops and laptops. We strengthened PC World Business'position in the fragmented business to business sector through the acquisitionof Micro Warehouse. Dixons like for like sales grew by 3%, reversing the trendof recent years, largely due to the refitting of 100 stores and a newadvertising campaign. The Link traded well following the completion of the refitprogramme to the remaining 200 locations, with like for like sales up 8%. We are building a strong international business that now accounts for almost 30%of Group sales. International sales grew by 1% on a like for like basis. Elkjop,our Nordic business, grew by 3% on a like for like basis with strongperformances in computing and telecommunications. In UniEuro, our Italianbusiness which is undergoing significant transition, like for like sales weredown 2% with weak sales of air conditioning and refrigeration. During the periodwe acquired control of Kotsovolos, the leading specialist electrical retailer inGreece. The Group's financial position is strong, enabling us to continue to investappropriately in all of our businesses. Continued focus on working capitalmanagement resulted in a £92 million increase in operating cash generation. Net funds were £145 million. The interim dividend has been increased by 10%." RESULTS AND DIVIDENDSFor the 28 weeks ended 13 November 2004 the Group's total and underlyingresults, excluding discontinued operations, goodwill amortisation andexceptional items, are as follows: Total results Underlying results * £ million % change £ million % change------------------- ---------- ---------- ----------- -----------Turnover 3,394 + 8% 3,394 + 9%Operating profit 109.1 ( 1%) 112.3 + 2%Profit before tax 136.5 +23% 127.5 +15%------------------- ---------- ---------- ----------- ----------- Basic EPS (pence) 5.2 p +30%Adjusted diluted 4.6 p +12% EPS (pence)------------------- ---------- ---------- ----------- ----------- * Excluding discontinued operations, goodwill amortisation and exceptionalitems. Discontinued operations comprise the European Property division sold inDecember 2003. The Group's underlying turnover increased by 9% to £3,394 million (2003/04restated: £3,110 million). This included the acquisitions of Kotsovolos andMicro Warehouse, which together contributed £88 million of sales during theperiod. Group like for like sales were 5% higher. The increase of 15% in underlying profit before tax to £127.5 million (2003/04restated: £111.3 million) includes £5.5 million of UK property profits (2003/04:£7.7 million). Group gross margins were lower year on year by 0.7 percentage points largely asa result of lower credit commissions, the proportionately higher level ofbusiness to business sales and changes in product mix. These factors primarilyaffected the UK. Although costs rose by 6%, the cost to sales ratio improved by0.5 percentage points. Excluding Micro Warehouse and Kotsovolos, costs grew by4%. Exceptional profits of £12.2 million (€18.4 million) were generated fromexchanges by holders of the 1% Exchangeable Bonds 2004 into shares in FranceTelecom S.A. and the sale of the remaining holding of France Telecom S.A.shares. This increased net funds by £45.7 million. This is the final realisationof the Group's Freeserve investment previously sold to Wanadoo S.A. On 4 June 2004 the Group acquired the UK operations of Micro Warehouse for £20.7million. These are being integrated into PC World Business. During the period, the Group paid the final instalment of £19.9 million for thepurchase of UniEuro. On 8 September 2004 the Group acquired a controlling interest in P. KotsovolosS.A. (Kotsovolos), for cash consideration of £51.5 million (€75.7million),taking its investment from 13.6% to 68.3%. By 13 November 2004 the Group hadfurther increased its shareholding to 78.0% bringing the consideration to £60.9million (€89.6 million). Adjusted diluted earnings per share were 4.6 pence (2003/04 restated: 4.1pence), an increase of 12%. The underlying effective rate of taxation is 28.0%(2003/04 full year effective rate 26.0%). Net cash generation from operating activities in the period increased by £92.1million, year on year, driven by improvements in working capital. Furtheranalysis is included in the section on Financial Position. The directors have declared an interim dividend of 1.83 pence per share (2003/04: 1.66 pence per share), an increase of 10%, payable on 28 February 2005 toshareholders registered on 28 January 2005. BUSINESS PERFORMANCE UK RETAILUK Retail sales in the period increased by 7% to £2,420 million (2003/04restated: £2,257 million), with like for like sales up 6%. Operating profitbefore goodwill amortisation was £88.3 million (2003/04 restated: £90.4million), 2% down versus last year. Excluding property profits, operating profitwas £82.8 million (2003/04 restated: £82.7 million), in line with last year,after bearing an increase in pension costs of £3 million. Gross margins decreased by 0.9 percentage points primarily due to the impact ofreduced credit commissions, the growth in business to business sales and productmix changes in the electrical businesses. The cost to sales ratio was 0.6percentage points better. Progress resulting from the Dixons store closureprogramme and from improvements in payroll were partially offset by increases inpension, marketing and rental costs. Pension costs in the period increased by £3million year on year due to the amortisation of the pension deficit under SSAP24. PRODUCT MARKETSUK markets were flat in value terms. The brown goods market grew by 3% in valuewith strong growth in new technology products including plasma & LCD TVs,digital photography and portable internet audio products such as iPods and otherMP3 players. These growth categories were partially offset by lower sales ofgames consoles, VCRs, domestic audio and 35mm photography. The white goodsmarket grew by 7% in value with strong growth in cooking and laundry. Theoverall computing market fell by 7% in value while unit sales grew 9%. Themarket continued to shift away from desktops in favour of laptops. Laptop growthin value of 3% was offset by a 12% decline in the larger desktop market. The mobile phone market grew strongly with total connections up by 28% as a result of reducing average retail prices ("ARPs") and the launch of many new feature rich models. Overall the Group continued to grow its share despite the Dixons store closures.Share growth was achieved in most core categories, including PC hardware, flatpanel TVs and audio products. CURRYSCurrys sales were £913 million (2003/04 restated: £834 million), an increase of9%. Like for like sales were up 9%. Good sales growth was achieved in mostcategories including domestic appliances, plasma and LCD TVs, digitalphotography, internet audio, portable TVs, and laptops. Sales of games consolesand hi-fi products fell. Currys grew sales in a market with decreasing ARPs by driving higher footfalland conversion levels. The chain continued to relocate to larger out of townsites, re-siting three new stores during the period while closing eight highstreet stores, taking the total number of stores to 371. PC WORLDTotal PC World sales grew by 17% to £847 million (2003/04 restated: £724million). PC World sales, excluding PC World Business, grew by 8% to £678 million (2003/04restated: £625 million) with like for like sales up 3%. This was against abackdrop of significant market ARP decline, including a 17% reduction in desktopARPs versus last year and a 15% reduction in laptop ARPs. Sales of laptops andbusiness software were strong. PC World increased its focus on wi-fi networkingproducts, media centre PCs and ultra-thin laptops. Four new PC World stores wereopened or re-sited during the half year, taking the total to 140. PC World Business sales grew by 71% to £168 million (2003/04: £99 million).Excluding Micro Warehouse, sales grew by 17% to £115 million (2003/04: £99million). Good progress was made on the integration of Micro Warehouse into PCWorld Business. From 2005/06, the Group expects to secure synergies from thecombined business. PC World Business operates on lower gross margins than therest of PC World but does not have to support store infrastructure costs andrelated capital investment. PC World Business continued its strong growth in thePublic sector. DIXONSDixons sales at £350 million (2003/04 restated: £397 million) were down 12% dueto the previously announced store closures. Stores closed represented 28% of thechain's floor space. Like for like sales were up 3% reversing the trend ofrecent years. This was driven by strong sales of internet audio, plasma and LCDTVs. In the period a refit programme was completed with over 100 stores beingupdated and re-merchandised. A new advertising campaign, "The Future for Less",was launched in the last eight weeks of the period and has started to driveincreased footfall and sales. The large space trials continue but it is apparent that the largest two storesin Birmingham and Cardiff, both over 25,000 square feet, are too big. Dixonswill reduce the trading area in these two cities to around 10,000 square feet. Anew 10,000 square feet store has been opened in Canterbury. The number of Dixonsstores at the half year was 217. THE LINKSales in The Link were £230 million (2003/04 restated: £201 million), anincrease of 14% in total and 8% on a like for like basis. Sales of both contractand pre pay phones have been strong. The Link refurbished nearly 200 stores inthe period, building on the successful trials of last year. Five stores werere-sited during the period. At the half year, The Link traded from 288 stores. Genesis Communications, the business to business mobile phone service provider,grew its sales by 21% to £53 million (2003/04: £44 million), achieving a 13%increase in its subscriber base. INTERNATIONAL RETAILInternational Retail sales were £974 million (2003/04 restated: £853 million),an increase of 14% in total and 1% on a like for like basis. ExcludingKotsovolos, sales growth was 10%. Sales growth in local currencies was 17%, asmost European currencies weakened against Sterling. At constant exchange rates,total sales would have been £38 million higher. Gross margins in the International businesses remained broadly flat. Operatingprofit (excluding goodwill amortisation) grew by 20% to £24.0 million (2003/04restated: £20.0 million). At constant exchange rates, profits grew 25% withadverse translation effects having arisen from the weaker Euro and NorwegianKrone. Excluding Kotsovolos, operating profit grew 11% in Sterling and 16% atconstant exchange rates. INTERNATIONAL RETAIL - ESTABLISHED BUSINESSESSales in the established international businesses (Elkjop, UniEuro, Kotsovolosand Ireland) increased by 11% to £836 million (2003/04 restated: £755 million).Operating profits grew by 10% at constant exchange rates. In Sterling terms,operating profits were £43.0 million (2003/04 restated: £40.6 million) up 6%. Excluding Kotsovolos operating profit grew 5% at constant exchange rates and 1%in Sterling. ELKJOPLocal currency sales grew 13% with like for like sales up 2%. In Sterling,Elkjop sales increased by 8% to £465 million (2003/04: £430 million), continuingits strong performance of the last financial year. Operating profits grew by 1% at constant exchange rates. In Sterling operatingprofits were £28.1 million (2003/04 restated: £28.9 million), a decrease of 3%. The Group estimates that the product markets in the Nordic region grew by around3% during the period, with Elkjop achieving good market share gains in each country with strong growth in computing and telecommunications. There has beengood progress in sales of service contracts as Elkjop continues to benefit from Group expertise in this area. Cost synergies from the Nordic regional structure are being achieved, particularly in marketing, buying and the centralisation of administration functions. Five new stores were opened and two were re-sited in the period bringing the total to 173. UNIEUROLocal currency sales grew 4% with like for like sales down 2%. Sales growth inSterling was impacted negatively by the weakening Euro with sales reducing by 1%to £289 million (2003/04: £292 million). Sales growth was strong in computingand vision products but was partially offset by a weaker performance in audio,air conditioning and refrigeration. Operating profits grew by 14% at constant exchange rates. In Sterling, operatingprofits were £12.4 million (2003/04: £11.3 million), up 10%. As outlined in June, UniEuro is a business in transition. Business operationsare being restructured, with investment in new systems throughout head office,supply chain and branch networks. The outcome will be a centralised approach tobuying, product pricing, stock control and marketing. This programme will taketwo years to complete and will create a more robust base from which to enhanceUniEuro's current position in the Italian market. During the period, UniEuro opened a new central distribution centre and threenew stores taking the total number of stores to 99. IRELANDSales in Ireland grew by 15% in local currency with like for like salesincreasing by 6%. Sterling sales grew by 10% to £36 million (2003/04 restated:£32 million). Operating profits in the period were £0.5 million (2003/04: £0.1million). At the half year, the Group had 15 stores in Ireland. A new PC Worldstore was opened in Galway in December. KOTSOVOLOSSales by Kotsovolos in the period were £116 million of which £35 million weregenerated post acquisition on 8 September 2004 and have therefore been consolidated into Group sales. Operating profits included in the half year results were £1.9 million. Kotsovolos is the leading mixed electricals specialist in Greece with 78 stores and a market share of 16%. The Group owned 78% of the share capital at 13 November 2004. The intention is that an additional 2% will be purchased as Kotsovolos delists from the Greek stock market by the year end. Fourlis Holdings S.A. (Fourlis) will retain 20% of the share capital for a maximum period of five years. Fourlis has the right to sell its shareholding to the Group in two equal tranches after two and four years respectively. INTERNATIONAL RETAIL - INVESTMENT BUSINESSESSales in the investment international businesses (PC City and Electro World)increased by 41% to £138 million (2003/04 restated: £98 million). Investmentlosses for the half year were 8% lower at £19.0 million (2003/04 restated: £20.6million). PC CITY GROUPThe Group continues to make progress with its PC City brand. Sales increased by45% to £94 million (2003/04 restated: £65 million). Operating losses in theperiod were £14.2 million (2003/04 restated: £14.1 million). In the first halfPC City increased its store numbers by 23% to 32 adding six new stores - threein Spain, one in Italy, one in France and one in Sweden. Since 13 November 2004 a further four stores have been opened, three in Spain and one in Italy. Gross margins in PC City have improved year on year in line with expectations.Margin increases have been primarily driven by better purchase prices,successful launch of service contracts and increased credit commissions. Thelaunch of service contracts in PC City Spain has been particularly successfulwith penetration levels similar to those achieved in the UK. Spain is the moremature PC City market where the Group now trades from 22 stores. The business isdelivering consistent sales growth, with all stores making a positivecontribution to central costs. In France, where the Group currently trades fromseven stores, gross margins have continued to improve towards target levels andsales have been encouraging. The other trial stores in Italy (five stores) andSweden (two stores) have performed in line with expectations. ELECTRO WORLDElectro World sales increased by 33% to £44 million (2003/04: £33 million).Operating losses in the period were £4.8 million (2003/04: £6.5 million). Marketconditions remain very competitive and, against this backdrop, Electro World hasperformed well, gaining market share in both Hungary and the Czech Republic.During the half year, one store was opened in Hungary and another store wasopened in the Czech Republic in November. Electro World now trades from elevenstores, five in Hungary and six in the Czech Republic. In addition a new centralwarehouse was opened in Brno in the Czech Republic to create a platform fora centralised supply chain serving the Central European region. FINANCIAL POSITIONThe Group's financial position remains strong. In the period the net cashgenerated from operating activities was £220 million, an improvement of £92million on the same period last year. Free Cash Flow generated in the 28 weeksincreased £87 million to £122 million. The Group defines Free Cash Flow as netcash from operating activities, after interest, taxation and capitalexpenditure, but before acquisitions, disposals, dividends and financing. 28 weeks ended 28 weeks ended Change£ million 13 November 15 November Year on Year 2004 2003 ------------- ------------- -------------Underlying operatingprofit 112.3 110.4 +1.9Depreciation 63.7 64.9 (1.2)Working capital 64.6 (35.5) +100.1Other (20.6) (11.9) (8.7)-------------------- ------------- ------------- -------------Net cash from operating activities 220.0 127.9 +92.1-------------------- ------------- ------------- -------------Interest income 17.2 5.2 +12.0Taxation paid (36.0) (48.8) +12.8Net capital expenditure (78.8) (48.7) (30.1)-------------------- ------------- ------------- -------------Free Cash Flow 122.4 35.6 +86.8-------------------- ------------- ------------- ------------- Key drivers of the Free Cash Flow improvement were lower working capital of £100million, driven by increased creditor days and an increase of £12 million frominterest income on net funds that include funds held under trust for extendedwarranty and service contract liabilities. Improving working capital managementremains an area of focus for the business. Net capital expenditure increased by£30 million driven by previously announced investments in new store systems. Free Cash Flow usage in the period included £109 million dividend payment, £43million share buy back and £98 million for acquisitions made in the period(Kotsovolos £57 million, Micro Warehouse £21 million and deferred considerationfor UniEuro of £20 million). It is the Directors' intention to continue the £200million share buy back programme following the announcement of the interimresults. At 13 November 2004 the Group had available net funds (which exclude funds held under trust for extended warranties and service contract liabilities) of £145 million compared with £246 million net borrowings in the previous year, an increase of £391 million. £ million 13 November 15 November Change 2004 2003 Year on Year ------------- ------------- -------------Opening net funds 644.8 170.1 +474.7-------------------- ------------- ------------- -------------Closing net funds 492.9 106.6 +386.3Less: Funds held under trust (348.1) (352.7) +4.6-------------------- ------------- ------------- -------------Available net funds / (borrowings) 144.8 (246.1) +390.9-------------------- ------------- ------------- ------------- TAXThe Group tax rate on underlying profit was 28.0% (2003/04 full year: 26.0%).The increase in the current year tax rate reflects the impact of UK ControlledForeign Companies legislation, which brings certain profits from the sale ofextended warranties and service contracts within the scope of UK taxation. PENSIONSThe triennial valuation of the Group's defined benefit pension scheme, carriedout as at 5 April 2004, shows a deficit of £62 million under SSAP 24. Thedeficit will be amortised over the average remaining service lives of currentemployees giving an additional charge of around £6 million for the full year. SERVICE CONTRACT ACCOUNTING POLICY CHANGEAs noted in June 2004, FRS 5 'Reporting the substance of transactions': RevenueRecognition (Application Note G) requires the Group to spread the revenuearising from the sale of extended warranty and service contracts over the lifeof the agreements. For comparative purposes, the effect of the change, for the28 weeks to 15 November 2003, was to increase sales by £8.7 million andoperating profit by £7.8 million. The change results in revenues relating to extended warranty and service contract sales being included in deferred income and released to the profit and loss account over the life of the agreements.Claims costs are now charged to the profit and loss account as they areincurred. The prior full year reported numbers do not change. INTERNATIONAL FINANCIAL REPORTING STANDARDSThe Group is required to prepare its financial statements, from the financialyear 2005/06 onwards, under International Financial Reporting Standards(IFRS). Work on quantification of any differences, detailed disclosures and therestatement of the Group's opening balance sheet position under IFRS, iscurrently in progress. Following the year end results for 2004/05, it isintended to provide a reconciliation of the Group's results and balance sheetfrom UK GAAP to IFRS. - ENDS - Maylands Avenue John ClareHemel Hempstead Group Chief ExecutiveHertfordshire HP2 7TG 12 January 2005-------------------------------------------------------------------------------- The Interim Statement will be mailed to shareholders on 26 January 2005.Copies will be available from the Company Secretary at the above address and onthe Group's website at http://www.dixons-group-plc.co.uk-------------------------------------------------------------------------------- For further information:John Clare Group Chief Executive 020 7499 3494Kevin O'Byrne Group Finance Director 020 7499 3494Hamish Thompson Head of Press & PR 01727 203195-------------------------------------------------------------------------------- Information on Dixons Group plc is available at http://www.dixons-group-plc.co.uk-------------------------------------------------------------------------------- An audio webcast of the analyst presentation being held this morning will beavailable at http://www.dixons-group-plc.co.uk (click "investors",then "presentations") from 10.00am today. CONSOLIDATED PROFIT AND LOSS ACCOUNT ------------------------------------ ----------------------------------------------- 28 weeks ended 28 weeks ended 13 November 15 November 2004 2003 (restated) Unaudited Unaudited ------------------------------------ ----------------------------------------------- Discontinued Continuing operations Continuing operations operations -------- -------- -------- -------- -------- -------- -------- Note Underlying Goodwill Total Underlying Goodwill Total results amortisation £million results amortisation and exceptional items £million £million £million £million £million £million £million---------------- ----- -------- -------- -------- -------- -------- -------- -------- Turnover 2 Continuing operations 3,305.5 - 3,305.5 3,109.7 - - 3,109.7 Acquisitions 88.3 - 88.3 - - - - Discontinued operations - - - - - 33.7 33.7 ---------------- ----- -------- -------- -------- -------- -------- -------- -------- 3,393.8 - 3,393.8 3,109.7 - 33.7 3,143.4Operating profit Continuing operations 109.9 (2.3) 107.6 110.4 (2.3) - 108.1 Acquisitions 1.7 (0.8) 0.9 - - - - Discontinued operations - - - - - 2.2 2.2 ---------------- ----- -------- -------- -------- -------- -------- -------- -------- 111.6 (3.1) 108.5 110.4 (2.3) 2.2 110.3Share of profit of associated undertaking Acquisitions 0.7 (0.1) 0.6 - - - - ---------------- ----- -------- -------- -------- -------- -------- -------- --------Total operating profit 2 112.3 (3.2) 109.1 110.4 (2.3) 2.2 110.3Profit on sale of investment - 12.2 12.2 - - - - Profit on disposal of business assets 3 - - - - - - ----------------- ----- -------- -------- -------- -------- -------- -------- --------Profit on ordinary activities before interest 112.3 9.0 121.3 110.4 (2.3) 2.2 110.3 Net interest 4 15.2 - 15.2 0.9 - 0.1 1.0 ---------------- ----- -------- -------- -------- -------- -------- -------- --------Profit on ordinary activities before taxation 127.5 9.0 136.5 111.3 (2.3) 2.3 111.3 Taxation on profit on ordinary activities 5 (35.7) - (35.7) (29.7) - (2.6) (32.3)---------------- ----- -------- -------- -------- -------- -------- -------- --------Profit on ordinary activities after taxation 91.8 9.0 100.8 81.6 (2.3) (0.3) 79.0Equity minority interests (1.1) - (1.1) (1.5) - - (1.5)---------------- ----- -------- -------- -------- -------- -------- -------- --------Profit for the period 90.7 9.0 99.7 80.1 (2.3) (0.3) 77.5Equity dividends 6 (35.2) - (35.2) (32.3) - - (32.3)---------------- ----- -------- -------- ------ ------ -------- -------- --------Retained profit for the period 9 55.5 9.0 64.5 47.8 (2.3) (0.3) 45.2---------------- ----- -------- -------- -------- -------- -------- -------- --------Earnings per share (pence) 7Adjusted diluted (before discontinued operations, goodwill amortisation and exceptional items) 4.6p 4.1pBasic 5.2p 4.0p Diluted 5.1p 4.0p---------------- ----- -------- -------- -------- -------- -------- -------- -------- CONSOLIDATED PROFIT AND LOSS ACCOUNT (conttinued) 52 weeks ended 1 May 2004 Audited ----------------------------------------------------- Discontinued Continuing operations operations ---------------- ----- -------- -------- -------- -------- Note Underlying Goodwill Total results amortisation and exceptional items £million £million £million £million---------------- ----- -------- -------- -------- --------Turnover 2 Continuing 6,458.0 - - 6,458.0 operations Acquisitions - - - - Discontinued - - 33.7 33.7 operations ---------------- ----- -------- -------- -------- -------- 6,458.0 - 33.7 6,491.7Operating profit Continuing 317.8 (48.2) - 269.6 operations Acquisitions - - - - Discontinued - - 2.2 2.2 operations ---------------- ----- -------- -------- -------- -------- 317.8 (48.2) 2.2 271.8Share of profit of associated undertaking Acquisitions - - - ----------------- ----- -------- -------- -------- --------Total operating 2 317.8 (48.2) 2.2 271.8 profitProfit on sale - 79.6 - 79.6 of investmentProfit on disposal of 3 - 3.2 - 3.2 business assets ---------------- ----- -------- -------- -------- --------Profit on ordinary 317.8 34.6 2.2 354.6 activities before interestNet interest 4 11.5 0.1 11.6---------------- ----- -------- -------- -------- --------Profit on ordinary activities before taxation 329.3 34.6 2.3 366.2Taxation on profit on ordinary activities 5 (85.7) 5.4 (2.6) (82.9)Profit on ordinary activities after taxation 243.6 40.0 (0.3) 283.3Equity minority interests (2.9) - - (2.9)---------------- ----- -------- -------- -------- --------Profit for the period 240.7 40.0 (0.3) 280.4Equity dividends 6 (142.6) - - (142.6)---------------- ----- -------- -------- -------- --------Retained profitfor the period 9 98.1 40.0 (0.3) 137.8---------------- ----- -------- -------- -------- -------- Earnings per 7 share (pence) Adjusted diluted (before 12.3p discontinued operations, goodwill amortisation and exceptional items) Basic 14.4p Diluted 14.3p---------------- ----- -------- -------- -------- -------- STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 28 weeks ended 28 weeks ended 52 weeks ended 13 November 15 November 1 May 2004 2004 2003 (restated) Unaudited Unaudited Audited £million £million £million-------------------------- --------- -------- --------Profit for the period 99.7 77.5 280.4Currency translationmovements 12.9 (36.6) (48.8)-------------------------- --------- -------- --------Total gains and lossesrecognised in the period 112.6 40.9 231.6-------------------------- --------- -------- -------- CONSOLIDATED BALANCE SHEET ----------------------- ----- --------- --------- -------- Note 13 November 15 November 1 May 2004 2004 2003 (restated) Unaudited Unaudited Audited £million £million £million----------------------- ----- --------- --------- --------Fixed assets:Intangible assets 1,035.1 976.1 937.1Tangible assets 675.0 598.7 583.9Investments 2.6 315.7 48.9----------------------- ----- --------- --------- -------- 1,712.7 1,890.5 1,569.9----------------------- ----- --------- --------- --------Current assets:Stocks 8 1,137.0 1,109.2 793.0Debtors - amounts falling due within one year 545.3 473.5 427.2 - amounts falling due after more than one year 121.0 81.6 79.3Short terminvestments 754.5 742.9 765.1Cash at bankand in hand 101.7 113.6 239.3----------------------- ----- --------- --------- -------- 2,659.5 2,520.8 2,303.9Creditors - amountsfalling due within oneyearBorrowings (39.5) (419.3) (61.5)Other creditors (2,009.2) (1,765.7) (1,504.3)----------------------- ----- --------- --------- -------- (2,048.7) (2,185.0) (1,565.8)----------------------- ----- --------- --------- --------Net current assets 610.8 335.8 738.1----------------------- ----- --------- --------- -------- Total assets less current liabilities 2,323.5 2,226.3 2,308.0 Creditors - amounts falling due after more than one yearBorrowings (323.8) (330.6) (298.1)Other creditors (473.7) (497.1) (505.6)----------------------- ----- --------- --------- -------- (797.5) (827.7) (803.7) Provisions forliabilitiesand charges (23.6) (11.4) (36.6)----------------------- ----- --------- --------- --------Net assets 1,502.4 1,387.2 1,467.7----------------------- ----- --------- --------- -------- Capital and reserves: Called up share capital 48.1 48.7 48.7Share premium account 141.9 140.4 140.5Investment in own shares - (1.7) (1.5)Capital reserve - 158.0 -Merger reserve (386.1) (386.1) (386.1)Capital redemption reserve 426.1 425.5 425.5Profit and loss account 1,234.2 962.8 1,200.9----------------------- ----- --------- --------- --------Equity shareholders' funds 9 1,464.2 1,347.6 1,428.0Equity minority interests 38.2 39.6 39.7----------------------- ----- --------- --------- -------- 1,502.4 1,387.2 1,467.7----------------------- ----- --------- --------- -------- CONSOLIDATED CASH FLOW STATEMENT Note 28 weeks ended 28 weeks ended 52 weeks ended 13 November 15 November 1 May 2004 2004 2003 Unaudited Unaudited Audited £million £million £million----------------------- ----- --------- --------- -------- Net cash inflow fromoperating activities 10 220.0 127.9 328.2 Returns on investmentsand servicing offinanceInterest received 27.2 15.9 40.8Interest paid (10.0) (10.7) (31.7)----------------------- ----- --------- --------- -------- 17.2 5.2 9.1----------------------- ----- --------- --------- -------- Taxation paid (36.0) (48.8) (52.9)----------------------- ----- --------- --------- -------- Capital expenditure and financial investmentPurchase of tangible fixed assets (101.9) (78.8) (146.2)Sale of tangible fixed assets 21.2 27.7 69.6Sale of fixed asset investments 1.9 2.4 216.2----------------------- ----- --------- --------- -------- (78.8) (48.7) 139.6----------------------- ----- --------- --------- -------- Acquisitions and disposalsCash consideration for acquisitions (98.3) - (5.2)Cash acquired with subsidiaries 7.4 - -Consideration for sale of subsidiaries - - 23.3Net cash disposed of with subsidiaries - - (3.8)----------------------- ----- --------- --------- -------- (90.9) - 14.3----------------------- ----- --------- --------- -------- Equity dividends paid (109.1) (100.3) (132.3)----------------------- ----- --------- --------- -------- Net cash (outflow) / inflow before management of liquid resources and financing (77.6) (64.7) 306.0 Management of liquid resourcesDecrease / (increase) in short term investments 10.6 (29.1) (57.2) FinancingIssue of ordinary share capital 1.0 1.9 1.9Repurchase of own shares (42.9) - -(Decrease) / increase in debt due within one year (30.6) 60.5 (123.8)(Decrease) / increase in debt due after more than one year 3.4 (2.5) (32.9)----------------------- ----- --------- --------- -------- (69.1) 59.9 (154.8)----------------------- ----- --------- --------- -------- (Decrease) / increase in cash in the period (136.1) (33.9) 94.0----------------------- ----- --------- --------- -------- Reconciliation of net cash flowto movement in net funds 10----------------------- ----- --------- --------- --------(Decrease) / increase in cash in the (136.1) (33.9) 94.0 periodCash (inflow) / outflow from (decrease) / increase in short term in short term investments (10.6) 29.1 57.2Cash outflow / (inflow) from decrease / (increase) in debt 27.2 (58.0) 156.7 ----------------------- ----- --------- --------- --------(Decrease) / increase in net funds resulting from cash flows (119.5) (62.8) 307.9 Debt arising from acquisitions (77.7) - -Debt and short term investments disposed of with subsidiary - - 32.9Other non-cash movements 43.8 - 127.2Currency translation movements 1.5 (0.7) 6.7-------------------------- --------- --------- --------Movement in net funds in the period (151.9) (63.5) 474.7Opening net funds 644.8 170.1 170.1-------------------------- --------- --------- --------Closing net funds 492.9 106.6 644.8-------------------------- --------- --------- -------- NOTES TO THE INTERIM FINANCIAL STATEMENTS 1 Basis of Preparation The interim financial statements for the 28 weeks ended 13 November 2004 were approved by the directors on 12 January 2005. They have been prepared in accordance with relevant accounting standards and on the basis of the accounting policies set out in the Group's Annual Report and Accounts 2003/04. They are unaudited and do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985, but have been reviewed by the auditors. During 2003/04, the Group implemented "Amendment to FRS 5 'Reporting the substance of transactions': Revenue Recognition" (Application Note G) and adopted Urgent Issues Task Force Abstract 38 "Accounting for ESOP Trusts" (UITF 38), further details of which are discussed below. Figures for the 28 weeks ended 15 November 2003 have been restated accordingly. •Application Note G: Application Note G requires the seller to recognise as revenue the fair value of the seller's right to consideration through performance of its contractual obligations. Accordingly, turnover in respect of extended warranties and service contracts is recognised over the life of the agreement on performance of the contractual obligations to the customer. Related costs are charged to the profit and loss account as incurred. Revenues earned from extended warranties and service contracts were previously included in turnover in the period in which they were sold with full provision for liabilities for repair costs which the Group had assumed under these contracts. This change has been accounted for as a prior period adjustment and previously reported figures have been restated accordingly. •UITF 38: UITF 38 supersedes UITF 13 and amends UITF 17 and requires own shares held through an employee share ownership plan trust to be deducted in arriving at shareholders' funds and amends the requirements of UITF 17 concerning the recognition of the cost of awards of shares to employees. The change in accounting policy arising from Application Note G has resulted in comparative figures for the 28 weeks ended 15 November 2003 being restated as follows: Turnover increased by £8.7 million, profit on ordinary activities before taxation increased by £7.8 million and the tax charge increased by £2.3 million. The effect on the balance sheet has been that creditors have been restated to exclude the liability for extended warranties and service contracts relating to future performance and instead to include accruals and deferred income arising from extended warranty and service contracts. Provisions for deferred tax have been reduced resulting in the recognition of a net deferred tax asset. The figures for the 52 week period ended 1 May 2004 do not constitute the Company's statutory accounts for that period but have been extracted from those accounts which have been filed with the Registrar of Companies. The auditors have reported on those accounts, their report was unqualified and did not contain statements under Section 237(2) or (3) of the Companies Act 1985. 2 Segmental analysis(a) Turnover and operating profit 28 weeks ended 28 weeks ended 52 weeks ended 13 November 15 November 1 May 2004 2004 2003 (restated)------------- ------- -------- -------- -------- -------- -------- Turnover Total Turnover Total Turnover Total £million operating £million operating £million operating profit profit profit £million £million £million------------- ------- -------- -------- -------- -------- --------Continuingoperations:UK Retail 2,366.9 87.8 2,256.9 90.4 4,697.9 254.2InternationalRetail 938.6 22.1 852.8 20.0 1,760.1 63.6------------- ------- -------- -------- -------- -------- -------- 3,305.5 109.9 3,109.7 110.4 6,458.0 317.8Acquisitions: UK Retail 53.0 0.5 - - - -InternationalRetail- Subsidiarycompanies 35.3 1.2 - - - -- Associatedundertakings - 0.7 - - - -------------- ------- -------- -------- -------- -------- -------- 88.3 2.4 - - - -------------- ------- -------- -------- -------- -------- -------- Underlyingresults 3,393.8 112.3 3,109.7 110.4 6,458.0 317.8------------- ------- -------- -------- -------- -------- -------- Discontinuedoperations:EuropeanProperty - - 33.7 2.2 33.7 2.2------------- ------- -------- -------- -------- -------- -------- 3,393.8 112.3 3,143.4 112.6 6,491.7 320.0Goodwillamortisation - (3.2) - (2.3) - (4.2)Exceptionalitems - - - - - (44.0)------------- ------- -------- -------- -------- -------- -------- 3,393.8 109.1 3,143.4 110.3 6,491.7 271.8------------- ------- -------- -------- -------- -------- -------- Underlying operating profit is stated after recognising net property profits of £5.5 million in UK Retail (28 weeks ended 13 November 2003 £7.7 million, 52 weeks ended 1 May 2004 £7.0 million) and £nil in International Retail (28 weeks ended 13 November 2003 £nil, 52 weeks ended 1 May 2004 £1.0 million). (b) Net assets 13 November 15 November 1 May 2004 2004 2003 (restated) £million £million £million ------------------------ ---------- --------- ---------Continuing operations:UK Retail (160.8) (116.7) (163.1)International Retail 1,284.6 1,135.6 1,077.7------------------------ ---------- --------- --------- 1,123.8 1,018.9 914.6Discontinued operations:European Property - 55.0 ------------------------- ---------- --------- ---------Net operating assets 1,123.8 1,073.9 914.6------------------------ ---------- --------- --------- Net non-operating(liabilities) / assets (114.3) 206.7 (91.7) Net funds / (borrowings):Continuing operations 492.9 135.7 644.8Discontinued operations - (29.1) ------------------------- ---------- --------- --------- 492.9 106.6 644.8------------------------ ---------- --------- --------- ------------------------ ---------- --------- ---------Total net assets 1,502.4 1,387.2 1,467.7------------------------ ---------- --------- --------- 2 Segmental analysis (continued) The International Retail division operates in the Nordic region, Italy, Greece, Spain, Ireland, France, Hungary and the Czech Republic. Codic International S.A., which comprised the majority of the European Property division and operates mainly in Belgium, Luxembourg and France, was sold on 8 December 2003. As a result, these operations have been classified as discontinued. Management responsibility for the residual property operations in Germany, which are to be discontinued and which currently remain in the Group, have been integrated into the International Retail division. Comparative figures have been restated to reflect this change in responsibility. There were no material exports from the locations in which the Group operates. Associated undertakings comprise the investment in P Kotsovolos S.A. held during the period and over which the Group was able to exercise significant influence prior to the acquisition of a controlling stake on 8 September 2004. Net non-operating (liabilities)/assets predominantly comprise dividends payable and financial instruments (15 November 2003: dividends payable, deferred consideration, financial instruments and the Group's investment in Wanadoo S.A.; 1 May 2004: dividends payable, deferred consideration, financial instruments and the Group's investment in France Telecom S.A.). Net funds include amounts held under trust to fund extended warranty and service contract liabilities. Net funds excluding these amounts totalled £144.8 million (15 November 2003: net borrowings of £246.1 million; 1 May 2004: net funds of £342.2 million). 3 Goodwill amortisation and exceptional items 28 weeks ended 28 weeks ended 52 weeks ended 13 November 15 November 1 May 2004 2004 2003 £million £million £million------------------------- ----- ---------- ---------- ---------Operating items Goodwill amortisation (3.2) (2.3) (4.2) Restructuring charge (i) - - (44.0)---- ------------------- ----- ---------- ---------- --------- (3.2) (2.3) (48.2)---- ------------------- ----- ---------- ---------- --------- Non-operating items: Profit on sale of (ii) 12.2 - 79.6 investment Profit on sale of (iii) - - 3.2 business assets ---- ------------------- ----- ---------- ---------- --------- 12.2 - 82.8---- ------------------- ----- ---------- ---------- ---------Related Shares:
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