WORLD TELEVISION Dixons Retail Interim Results Presentation - 17th December 2013
Dixons Retail - Interim Results Presentation - 17th December 2013 DIXONS RETAIL Sebastian James, Chief Executive Humphrey Singer, Group Finance Director QUESTIONS FROM Assad Malic, Citi Geoff Ruddell, Morgan Stanley Charlie Muir Sands, Deutsche Bank Adam Cochrane, UBS Page 2
Dixons Retail - Interim Results Presentation - 17th December 2013 Introduction Sebastian James, Chief Executive Officer Good morning, thank you and welcome to our Interim Results. Here we are in the very glamorous Google offices, much more exciting than inviting you to Hemel Hempstead, which I promise we'll do next time. Hemel has its qualities, but this has more, so that's great. A couple of things just to note, firstly you'll notice that we have two screens on the side, these are live feeds from two different stores, this is Kungenskurva, in Stockholm and this is closer to home, this is Guildford. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Presentation Sebastian James, Chief Executive Officer Google has been a fantastic partner for us, we've been very proud to work with them on the birth of their in store retail execution. Being Google, of course they've taken the thoughts that we developed together, they've driven those a lot further and we look forward to implementing those and developing those over time also. So let's turn now to the first half year results for Dixons. We've had a pretty good year. And I am genuinely pleased to say that we've had Group underlying sales of 7% up with like for likes 6% up. Also in this half year we've seen excellent progress on streamlining our Group and getting our disposals of the businesses that we no longer want to be leading on, done. In particular of course Turkey and Italy, where those transactions have now closed and on PIXmania where we are on track to close that at the end of this month, we've had all the necessary pre-conditions in place and we're now just getting the paperwork done. Gross margins were down 60 basis points, three things going on here, one - we've had a continued mix into tablets and other devices that are somewhat lower margin; secondly we've continued, and we will continue, to drive relentlessly to ensure that our pricing is on the money relative to all of our competitors, including single channel internet; and thirdly this is a transition in the shape of our P&L that we've been seeing for a little while now where our reported gross margins come down, but our overall EBIT comes up as we begin to get support from our suppliers in different parts of the P&L. So these are the three things that are contributing to that. We've seen excellent progress against all of the strategic priorities and I'll talk a little bit more about that in just a moment. And we have an underlying profit before tax of £30.2m, and we've returned to a reported first half profit for the first time in six years. Now that shouldn't of course make an enormous amount of difference, but to me it's comforting that this is a business that now makes money all year round, rather than just at Christmas, and I think that's a good step forward - if only psychologically. Page 3
Dixons Retail - Interim Results Presentation - 17th December 2013 If I just have a quick canter around the different markets. UK and Ireland had a particularly good year. We showed continued market share gains and we had total sales up 7%, with like for likes up 9% in the first half and 12% in quarter 2. It's worth noting that we have now annualised the Comet exit, which happened just after these numbers closed by chance. Our operating profits in the UK were £31.4m up fivefold in the first half, which I think is an excellent result and we're sitting on a market share now of 23%, which gives us a good deal of strength and power in the market, more relevance to customers and to our suppliers and that is our business model. I'm extremely pleased and Katie and I, I think are both extremely pleased with the way that UK advocacy is going, and particularly in this last month's results we got our highest ever, 83% strong advocacy in store, 95% highly likely, or likely to recommend us and significantly less than 1% either unlikely, or very unlikely to recommend us. These are remarkable results, even in the context of any other retailer in the UK like John Lewis or whatever. A hundred of our stores, double the number from last year, 100 of our stores scored 100% highly likely to recommend us on a random exit poll. And if you think about how nice you have to be for 100% of customers to say I'm highly likely to recommend you I think that's an astonishing result. And unfortunately of course the fact that we can do it in 100 stores makes me wonder why we can't do it in 450 stores - Katie is laughing there, but that's got to be our goal, we've got to be perfect. Lots of new customer initiatives this year that the team have put in place, new customer journeys, we've put across a number of areas, particularly in white goods and those have been successful. Pay and collect we've driven - we now have the whole of our ranges available to pick up in our stores. We deliver very quickly to the store and customers can come in and collect those, whereas before it used to be only the stock that was in the store. White goods repairs, we launched a new service which has done very, very well, where we can now repair white goods, no matter where you bought them from, in your home and we're getting pretty good it. We got very good customer ratings on that service. We extended our next day delivery slots to 9 pm, so you can order a new cooker at 9 pm and have it delivered at 7 am and installed in your home the following morning anywhere in the country, I think that's a pretty remarkable result and indeed in the spine of England we can deliver same day. So these are the sorts of advances that put us in line or ahead of our principal competitors both on the high street and online. Interestingly not many customers want same day delivery, but you've got to show that you can do it; it's a very important trust point. Our business model relies on two things, we recognise that nearly every customer, more than 92% of customers, if they're buying a washing machine, a fridge, a computer, a TV, want to spend part of that journey in store. The problem is although they want the advice, and the support, and the help, and to touch and look, and feel and have these Page 4
Dixons Retail - Interim Results Presentation - 17th December 2013 products demonstrated to them, they don't want to pay for it. And so we bridge that gap in two ways. The first thing is we must make price a hygiene factor, we have been driving our prices relentlessly down, these are our competitors, below the line means we're cheaper on average and above the line means we are on average more expensive. So these are Argos, John Lewis, AO - the smallish white goods online player and then this is Amazon. But against Amazon for all of our core lines, TVs, computers, white goods, small kitchen appliances we are at, or incredibly close to their prices, and in many cases cheaper. I urge you by the way to check this out, we so believe it in it that we'll be announcing things next year that will help customers to prove it for themselves and they're doing it in store anyway now with their smart phones and we think that's a good thing. So how do we pay for it, well really we are delivering to our suppliers something extraordinary which is customers like shopping with us, the customers like the conversation that we have with them. And for our suppliers that is a fantastic asset for them to use. Because if you imagine a curved OLED TV, if you say well why would I buy a curved TV, I can't think of anything more stupid than buying a curved TV? But when I show it to you and when you see the extraordinary immersive experience that you get looking at this TV, you think - I want that. And this is why suppliers value what we do, why they support us, and why we're able to drive our average revenue per product upwards against a market that is relentlessly downwards. And we think that's a very, very important thing that we do, it's one of the ways in which we pay for our stores. We've also started working much more closely with suppliers in the way we communicate with our customers. So this is - we are the first retailer in the UK to develop an advert with Apple, it's quite different to some of our normal historical advertising. This is really talking about the product for the first time and beginning to introduce the notion of us as experts with them. Let's just run the video. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Video Played http://www.dixonsretail.com/media-centre/video-library#video-3206 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Officer So simple, clean, starting to talk about the product - for those of you who are England cricket fans I apologise for reminding you. We're also doing a number of things to continue to evolve our stores, we think that our stores need to get better every year, it is the velocity of motion, rather than where we've got to which drives our competitive advantage going forwards. We are working with Apple on their new in store execution, it's very beautiful, many of the clean lines and wood and stainless steel that you're all so familiar with have stayed, but they're Page 5
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