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Financial Highlights T h rough all our brands we aim to provide unrivalled value to our customers by the range and quality of our products, our competitive prices and our high standards of serv i c e . 28 weeks ended 13 November 1999 £million 28 weeks ended 14 November 1998 £million Change % We specialise in the sale of high technology consumer e l e c t ronics, personal computers, domestic appliances, photographic equipment, communications products and after sales service through Dixons, Currys, PC World, The Link, @ j a k a rta and Masterc a re. Elkjøp is the leading consumer e l e c t ronics retailer in the Nordic re g i o n . ● T h rough Fre e s e rv e , we provide the UK’s leading internet service, offering fre e i n t e rnet connection, a comprehensive selection of UK content and e-commerc e . ● Our European Pro p e rty division, Codic, has established a reputation for high quality retail and off i c e developments in Belgium, Luxembourg and France. Our objective is to create value for our shareholders, care e r o p p o rtunities for our employees and the best value and service for our customers. Turnover 1,720.7 1,455.2 +18% Profit before taxation, exceptional items and Freeserve 92.5 81.4 +14% Profit on ordinary activities before taxation and exceptional items 83.9 80.9 +4% Profit on ordinary activities before taxation 299.4 68.9 +335% Pence Pence % Adjusted diluted earnings per Ordinary share 12.8 13.2 -3% Diluted earnings per Ordinary share 56.7 11.3 +402% Dividends per Ordinary share 4.2 3.5 +20% ● P rofit before taxation of £299.4 million ● Underlying profit before taxation (before exceptional items and Fre e s e rv e losses) of £92.5 million, up 14% ● Interim dividend 4.20 pence per Ord i n a ry share, up 20% ● Retail sales up 18%, to £1,676 million, up 8% like for like ● Successful flotation of Fre e s e rve yields £219 million exceptional profit. Dixons G roup retains 80% stake in the UK’s largest internet business ● Over £30 million investment planned in e-commerce over the next two years ● S h o rtly after the half-year end, the Group acquired Elkjøp, the leading consumer electronics retailer in the Nordic re g i o n Contents 1 Financial highlights 2 Chairman’s statement 6 Consolidated profit and loss account 7 Consolidated balance sheet 8 Consolidated cash flow statement 9 Notes to the interim financial report 16 Investor information ● Corporate re s t ructuring announced. £121 million to be re t u rned to s h a re h o l d e r s Dixons Group plc Dixons Group plc 1
Chairman’s Statement Results and Dividends Profit on ordinary activities before taxation for the 28 weeks ended 13 November 1999 was £299.4 million (1998/99 £68.9 million). Diluted earnings per Ordinary share were 56.7 pence (11.3 pence). The exceptional credit of £215.5 million mainly relates to the profit arising from the sale of approximately 20 per cent of Freeserve. Excluding the exceptional profit and the loss incurred by Freeserve, the underlying profit before tax increased by 14 per cent to £92.5 million (£81.4 million). Despite the positive operating performance, adjusted diluted earnings per share, which exclude exceptional items, fell slightly to 12.8 pence (13.2 pence), reflecting the Group's share of Freeserve losses and an increase in the Group's effective tax rate. The directors have declared an interim dividend of 4.20 pence per Ordinary share (3.50 pence), an increase of 20 per cent, payable on 6 March 2000 to shareholders registered on 4 February 2000. Retail The Retail division made an operating profit before exceptional items of £71.5 million (£63.1 million), an increase of 13 per cent. Total sales in the period increased by 18 per cent to £1,676 million (£1,426 million), with like for like sales 8 per cent higher than in the first 28 weeks of 1998/99. New technology and price deflation were the key factors affecting the consumer e l e c t ronics market. Mobile phones, w i d e s c reen televisions and digital products including camcorders, minidisc and DVD players enjoyed strong growth. H o w e v e r, markets such as games consoles and VCRs suff e red fro m particularly heavy price deflation that was not fully offset by volume growth. Retail gross margin declined by 0.7 p e rcentage points reflecting aggre s s i v e pricing action and the growth of lower margin areas of the business such as PC World Business. The continuing downward pre s s u re on margins was partially offset by a reduction in costs as a proportion of sales. The reduction of 0.5 percentage points reflected improved operating efficiencies and the benefits of leveraging the Group's costs against the higher sales base. Retail rents remain a source of cost inflation, although there is some evidence that rents are moderating on new leases. Dixons sales, at £368 million (£334 million), were up 10 per cent overall and 7 per cent like for like. Sales of new technology products were strong, although the decline in the games console market, which fell by 25 per cent over the period, had an adverse effect. Eight stores were opened in the period and a further two were resited. A new concept store was trialled with an improved layout and product merchandising designed for easier shopping for the customer and more efficient management. Initial results are encouraging. Currys sales were £688 million (£629 million), an increase of 9 per cent in total and 4 per cent like for like. Currys gained market share in the period with particularly s t rong perf o rmances in domestic appliances and widescreen televisions. Exclusive brands allow Currys to offer the widest available range of pro d u c t s supported by a market leading service proposition. This was further enhanced by the availability of next day delivery, seven days a week on some 2,000 product lines. In June, Currys piloted a range of fitted kitchens in four stores, offering the consumer a wide range of quality kitchens in conjunction with the widest selection of appliances in the UK. The trial stores have achieved good sales levels. As a result, kitchens have been rolled out to a further 20 stores with further expansion planned. Currys continued to increase both the number of stores (7 Superstores opened during the period) and the size of stores, with 3 stores extended and a further 5 resited into larger units. PC World sales, at £454 million (£362 million), increased by 26 per cent overall and 8 per cent like for like. PC World's growth in sales and market share reflects its combination of market beating prices, the widest product range and an unrivalled service proposition. PC Health Check has been introduced into all stores, offering customers the opportunity to have their PC performance optimised and upgraded. A further 11 new Superstores were opened. Of these, 3 were in a new format of around 12,000 square feet designed for smaller markets. Their success confirms PC World's potential to expand its store base into smaller towns. Despite a cautious business market ahead of the millennium, PC Wo r l d Business continued to achieve stro n g growth with sales up 35 per cent at £53 million. The Link sales were £125 million (£71 million), an increase of 77 per cent in total and 43 per cent on a like for like basis. 20 new stores were opened, taking the total to 195. The Link benefited from the strong growth in pre-pay mobile phones. There is now a vast combination of handsets, tariffs and networks available, reinforcing the need for a specialist communications store. To assist the customer, The Link has installed, EasyLink, an advanced computer facility that, on the basis of each customer's individual re q u i re m e n t s , recommends the most appro p r i a t e selection of tariff, network and handset. E-commerce The Group continues to develop its e- commerce strategy. Total on-line sales in the first half, although a very small proportion of turnover, were six times higher than the same period last year. This t rend accelerated over the Christmas period. @jakarta, the Group's combined 'bricks and mortar' and e-commerce games and s o f t w a re retailer successfully launched its transactional web site (www.jakarta.co.uk). In November, the site was incorporated within the games channel on Freeserve, supported by an extensive advertising campaign. Downloadable software was also made available shortly thereafter. 2 Dixons Group plc Dixons Group plc 3
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