16th May 2007 07:03
DSG International PLC16 May 2007 PR 62/07 Strictly embargoed For release at 07.00 hours 16 May 2007 DSG INTERNATIONAL plc FULL YEAR TRADING STATEMENT DSG international plc is today updating the market on trading for the 24 and 52weeks ended 28 April 2007. • Total Group sales up 14% and like for like sales up 4% • Total international sales up 30%, now representing 41% of Group sales • Internet sales now represent 10% of total Group sales, up from 3% in the previous year • Like for like gross margins across the Group were down 0.3% year on year, following improvements in Q4 • Strong gross margin performance in Currys superstores, up 0.6% year on year • Underlying operating profit in line with current market expectations • Restructuring and impairment of £180m - £200m, in respect of the impairment of Italian operations, the planned closure of PC City France and the sale of Genesis Communications 24 weeks ended 28 April 2007 52 weeks ended 28 April 2007Sales Total growth Like for like growth Total growth Like for like growth Computing Division +6% +3% +8% +3% UK Computing +4% +4% +6% +4% International Computing +18% n/a +22% n/a Electricals Division +6% +1% +8% +3% UK & Ireland Electricals +0% +1% +2% +3% UK (1%) +1% +1% +3% Ireland +30% +3% +29% +8% Nordic - Elkjop +20% +6% +24% +9% Southern Europe +6% (2)% +4% (3)% Italy - UniEuro +3% (6)% (1)% (8)% Greece - Kotsovolos +14% +5% +17% +7% Central Europe - Electro World +30% n/a +36% n/a E-Commerce Division n/a +176% n/a +182% Total Group +13% +3% +14% +4% John Clare, Group Chief Executive, commented: "This has been a year of significant change for the Group, and in that context Iam pleased with the good performance we have delivered in the UK, Nordics,Greece and in our organic start up businesses in Central Europe and Spain. Ournew e-commerce division has seen strong growth across the year. Our sales performance in the final quarter of the year was affected by theunseasonal hot weather in April in the UK and Nordic. Underlying operatingprofit for the year will show good growth in most businesses, but has beenadversely affected by a disappointing performance particularly in Italy. As a result of the significant changes in the Group this year we will incurrestructuring and impairment charges of between £180m and £200m in respect ofthe costs associated with a write down of the carrying value of our operationsin Italy, the closure of PC City operations in France and the sale of GenesisCommunications. Overall we expect to deliver underlying operating profit for the Group in linewith current market expectations for the year. UK & Ireland Electricals. Total sales were up 2%, with like for like sales up3%. Currys delivered a strong performance this year and saw like for like sales inthe superstores up 4%. Gross margins showed a good improvement versus lastyear, with Currys superstores increasing gross margins by 0.6%, as initialbenefits from the Group's new buying strategy were realised. In Ireland our business continued to make significant market share gains in allmain categories with like for like sales up 8% and total sales up by 29%. Total sales in our tax free stores were down 8%, impacted by the security issuesearlier in the year at UK airports, but it has managed its margins to limit theimpact of the lower levels of sales. Overall UK & Ireland electricals will show significant profit growth year onyear. UK Computing. PC World grew sales by 6% in total and 4% like for like as itgained share in computing hardware and brown goods categories. Sales of laptopsgrew by 58% in units and 31% in value across the year although the strong salesof laptop computers have had a negative mix effect on the gross margin. Salesof flat panel televisions were better than expectations during their first yearin PC World. PC World Business grew sales 8% year on year. The multi-channel approach to customers in the UK in electricals and computinghas been underpinned by very strong growth in internet sales of 75% year on yeardriven by the positive customer reaction to 'reserve and collect' at Currys and'collect@store' at PC World. Nordic. Total sales in the Elkjop group were up 24% with like for like sales up9%. Good growth in sales and market share were achieved across the Nordicregion. Elkjop's gross margins were impacted by the consolidation of Markantalointo the business in Finland, and by a growing contribution from multi-channelinternet operations in the mix together with strong sales growth in Sweden andDenmark. Greece. In Kotsovolos total sales were up 17% with like for like sales up 7%driven by a strong performance in our successful Mega Kotsovolos store formatand as we continue to gain share in this growing market. Gross margins inKotsovolos were flat year on year. Italy. Total sales in UniEuro were down 1% and like for like sales were down8%. UniEuro has been impacted by significant operational issues as the businesshas been transitioned to a centralised operating model in line with the rest ofthe Group. The impact on the business of this significant change programme wasexacerbated by the challenging market environment existing throughout thefinancial year. The electricals market in Italy became more promotional andUniEuro reduced prices to remain competitive, impacting gross margins. Underaccounting rules we are required to review the carrying value of UniEuro on ourbalance sheet at the year end. Following the disappointing performance, weexpect to reduce the carrying value by between £110 million and £130 million,with the resulting goodwill carrying value being between £310 million and £330million. Our plans for the year ahead in Italy include opening 20 new stores andrefurbishing a further 25 existing stores, as well as key initiatives on marginimprovement and cost reduction. We are determined to return UniEuro toprofitability and remain confident in its long term prospects. Investment businesses. In France we have taken the decision to close our lossmaking PC City retail operations, and to focus on growing our internetbusinesses through Pixmania which has greater potential to deliver growth inthis market. We currently expect that the cost of this closure will beapproximately £40 million, half of which is expected to be a cash cost. Our other investment businesses performed well. Excluding France, PC City grew total sales by 26%. PC City Spain is expected to deliver its first full year of positive earnings,after good sales growth and improvements in gross margin. PC City in Italy and Sweden continue to make good progress in line withexpectations. Our Electro World operations grew total sales by 36%. We expect the business inCzech Republic to deliver a small operating profit for the first time. InHungary we continued to make progress, despite a difficult economic andpolitical environment, and our new business in Poland also performed well. E-Commerce Division. Comprising Dixons.co.uk and PIXmania.com, our e-commercedivision traded well, with Dixons.co.uk sales up 182% year on year. Pixmania,acquired during the year, grew sales by 42% year on year. In March we announcedthat Pixmania's operating profits this year would be impacted by fraud andcontrol issues in its supply chain operations. We are confident that theseissues have now been resolved and should not impact future years. During thesecond half we expanded the range of products offered through Pixmania toinclude Group ranges of computing and vision products, particularly in France.We will be introducing further ranges and categories in more countries during2007. Pixmania is Europe's leading specialist electrical e-tailer operating in27 countries, and the acquisition has brought expertise into the Group that weare able to use in our other internet and multi-channel operations. We remainexcited about the opportunities for this business as part of the Group. Genesis Communications. Following the sale of The Link earlier in the year, andthe continued shift towards direct distribution by the network operators,Genesis Communications became non core and we recently agreed its sale. Thissale will result in a non cash write off of approximately £30 million." OUTLOOK "DSG international now has retailing operations in 14 countries and e-commerceoperations in 27 countries across Europe. Our prospects are linked to theeconomies of each country in which we operate together with the overall productpipeline. The economic outlook for each of the markets in which we trade is mixed, withgood growth expected in the Nordics, Ireland, Poland, Czech Republic and Spain,more modest growth in France and Greece, and a difficult environment continuingin Hungary and Italy. In the UK the consumer continues to face a number offinancial issues, particularly in the short term, including the impact of highertax and interest rates, however we still expect modest growth in the UK consumereconomy in the year ahead. New technology will continue to drive our product markets across the Europeanlandscape, led by flat panel televisions and laptop PCs. This year we shouldalso benefit from new High Definition DVD products, new games consoles andbroadband communication products. I am confident of our Group strategy of leveraging our increasing internationalscale to deliver competitive advantages and value for our customers by improvingoperating efficiencies and stock management. We are determined to recover ourposition in Italy, and are well placed overall to deliver growth this year." NOTES: (1) The change in total sales for the Divisions and the Group are in Sterlingand exclude discontinued operations. All other figures are in local currency. (2) Like for like sales in the UK exclude sales of customer supportagreements. (3) UK Electricals comprises Currys, Currys.digital and Dixons Tax Free. (4) UK Computing comprises PC World, PC World Business and The TechGuys. Likefor like sales are for PC World stores only. All numbers exclude GenesisCommunications which is treated as a discontinued operation. (5) The numbers of PC City and Electro World stores trading are insufficientfor a meaningful like for like comparison to be made. (6) E-Commerce division, which comprises Dixons.co.uk and FotoVista, totalsales growth is not meaningful due to the acquisition of FotoVista during theyear. Like for like sales are for Dixons.co.uk only. - ENDS - For further information:David Lloyd-Seed Group Director of Investor Relations 01727 205 065Hamish Thompson Director of Media Relations 01727 203 195 / 07702 684 290Jonathon Brill Financial Dynamics 020 7269 7170 Information on DSG international plc is available at http://www.dsgiplc.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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