Page 2 Dixons Retail - Results Presentation 29th November 2012 - - PDF document
WORLD TELEVISION Dixons Retail Results Presentation - 29th November 2012 Dixons Retail - Results Presentation 29th November 2012 DIXONS RETAIL Sebastian James, Chief Executive Humphrey Singer, Group Finance Director QUESTIONS FROM Charlie
Dixons Retail - Results Presentation 29th November 2012 Page 2 DIXONS RETAIL Sebastian James, Chief Executive Humphrey Singer, Group Finance Director QUESTIONS FROM Charlie Muir Sands, Deutsche Bank Eithne O'Leary, Oriel Chris Chaviaras, Barclays Geoff Lowery, Redburn Nick Hawkins, Cenkos Geoff Ruddell, Morgan Stanley Matthew Taylor, Numis Assad Malic, Citi Andy Hughes, UBS Rod Whitehead, Deutsche Bank Simon Bowler, Exane Andy Wade, Numis
Dixons Retail - Results Presentation 29th November 2012 Page 3 Presentation Sebastian James, Chief Executive Thank you first of all very much for coming this morning. I'm just also very grateful to
use it again. I want to run through this morning a quick canter round the Group and how we've done in these first six months. Overall I think we're pretty pleased with these results and I think that they show some encouraging trends in terms of how customers are choosing to shop with us more and more and so I want to talk about that a little bit. Then Humphrey is going to go through in more detail the numbers, then I wanted to go through with you to recap on what I think the three key strategic priorities are for the Group and to give you a little bit of an update on how we're doing on them and give you some examples of some of the new products and how we're working … that's a fantastic ringtone by the way. All of that should take a little over half an hour after which Humphrey and I will be delighted to answer any questions you may have. So just to start with the interim results for this year, firstly overall Group like for likes up 3%. And particularly I'm pleased with the UK and Ireland up 3%, Northern Europe up 11%, we've seen some very good growth in various areas and I'll talk about that a little bit later on. In particular I'm pleased to see Group EBIT up by 5.1, I think that's a little better than consensus expectation and certainly I think augurs well for performance this year. We have got difficulties in France with PIXmania having a very difficult and poor trading first half and I'm going to talk a little bit later about actions we're taking to address that which are both radical and urgent. The business has had a very good and strong cash year so far, and we've been absolutely thrilled that we've been able to pay down our bond and our currency hedge without drawing on our revolving credit facilities, this is something that I think only a year ago much of the market would have thought was quite impossible and we were very pleased to be able to do it. And we have made good progress on our core three strategic priorities. So just to canter around the Group very quickly and give you a sense of what's happening in each of the territories. First half we're up 3%; we had an extremely strong quarter, helped by the summer of sport and helped by relatively weak comparables, so we had an excellent first quarter. The second quarter was as expected a little quieter, there were a few things playing into that, one was a lot of people who bought TVs for the Olympics obviously didn't buy them in the second quarter and also the timing of these results is such that Windows 8 was launched just after the end of these results so we were running down computing stocks of Windows 7 and that had some impact.
Dixons Retail - Results Presentation 29th November 2012 Page 4 But overall we were quite comfortable with our second quarter, and we have seen, as expected, as we got computers back in stock we have seen some improvement since then and we would expect - at the moment we're cautiously expecting that to continue. Market consolidation continues, that is probably the politest way of saying Comet has gone out of business. And Comet, you know, as our principal specialist competitor exiting the market is clearly helpful from a capacity point of view. We do not feel complacent about that, we think that that means that we will need to continue to drive
think that Comet's departure increases the pressure on us in a very competitive world. We have returned to first half profitability in the UK for the first time in five years, I think that's a great result and I'm very pleased with it; I'm very proud of the team and what they've achieved. And I think it's given a real boost to our morale, I think those of you who've been into our stores recently will feel a sense of a team that feels what it's like to be on the winning side. And actually making money in both halves of the year is curiously psychologically impactful for our team. And our gross margins overall have been flat, which as we'll see later, given what we've been able to do on pricing I think is again a remarkable achievement. This Christmas and in fact from now three quarters of our sales go through our new format and as I said earlier this year, I'm really pleased that most of the customers who buy from us are buying with us with our best foot forward, with our new format stores they're really getting the kind of experience that I want them to get from the Dixons Retail Group and I'm pleased that we're doing that now in three quarters. Over the next two or three years we will complete the journey, it's really a property story now, we need to make sure we get the right deals and investors and stakeholders generally will want me to be sensible about how we do that and we're doing that in a sensible way. And we've had further improvements to our multichannel offer, so when we spoke earlier this year I said that we were determined to become as good as the best multichannel retailer in the UK and I think we've done that. We've got our pay and collect working now, so we you can not only reserve products that are in store but you can get products delivered to store. You can choose to have any combination of order, deliver and pick up from any point, either your home, your store, your office, anything. And you can
allocate store sales, internet sales to the nearest store, so that stores are genuinely indifferent, we're beginning to properly feel that we are an Omni-channel retailer. We did one other thing which I'm just going to show you, we introduced - a lot of businesses have multichannel, have mobile sites and we're no exception. But we introduced one this year, the so called liquid HTML and it automatically adapts to the screen size that you have. So even if you have it on a browser on your PC and you make it smaller we will adapt the website that we serve you to exactly give you the best experience that you can for the size of screen that you want to operate on. And we think we're unique in retail to do that. It's a small thing, but it's an indication that we're absolutely determined to be at the cutting edge of our so called Omni-channel retail.
Dixons Retail - Results Presentation 29th November 2012 Page 5 And our overall multichannel offering is up very substantially with collect at store up 44%. So we're really seeing the benefit of that, we're really seeing customers wanting to shop with us in this kind of Omni-channel way. Northern Europe has continued to deliver extremely well. We've seen a lot of growth in particular in Denmark, an astonishing performance, 28% growth. It's somewhat lower margin, Denmark is a somewhat lower margin country and when we talk about margins in just a second that's important. We've seen market share growth in all of our territories in Scandinavia and we have seen consolidation in the market there too with the departure of Expert from Sweden the number three player. And we think that that's a good thing because we think that Sweden probably did have too much capacity and everybody except us is losing a great deal of money in that territory and we like it that way. We've seen strong growth in multichannel sales, 29% growth, actually a little bit behind the UK but very strong nevertheless. Gross margins are down, that is mostly a mix story, so we've seen good growth in internet, we've seen good growth in franchise and we've seen good growth in Denmark and also in tablets. All of those categories are profitable, but as a percentage are somewhat lower profitability. So these margins are definitely down but they don't worry us, we're quite comfortable that overall profitability is enhanced in those territories. And we saw operating profits up to just over £40m, so again a pleasing result for the first half. And I'm also proud of what's happened in Southern Europe. I think in particular in Italy the team were tasked with stopping the bleeding and I think they've done a terrific job
in Italy. They've also been extremely skilful in management of cash in Italy and I think the progress that we're making in Southern Europe generally has meant that we can now look at a relatively stable platform from which we can start thinking intelligently about what we do next for the longer term. So I'm pleased with the Southern European results and I'm pleased that we can look forward to a period of relative stability despite extremely difficult market conditions continuing there. In Greece I think we are the only business to up like for like. So if anybody can find another Greek business which is up like for like please do let me know. But I think we certainly are and we're very proud of that result. The only fly in our ointment I would say is PIXmania. PIXmania you'll remember is our single channel internet business in France, based in France and operating in 29
needed to make some quite radical changes. That proved to be quite difficult in the shareholding structure that we have and so I'm pleased that I was able to come to an agreement with our joint venture partners that they would leave the business. I've put a new management team in there and a month ago we launched a fairly aggressive social plan which envisages reducing the number of countries in which we
which were not profitable, so we had a wide range of new categories which were not
Dixons Retail - Results Presentation 29th November 2012 Page 6 profitable and for which we were not famous, and which were spreading our resources too thin. And also we are exiting, or considering exiting our stores as part of this social plan. Now as you know in France social laws are complex and these processes take quite a long time and we are in consultation to do these things. But if we are successful in reaching agreement on them that would represent about a quarter of the cost base of PIXmania and again would leave us with a much more stable business and that must be
with them is. So that's PIXmania. I'm going to pass over to Humphrey now who's going to talk in more detail about the numbers and then I'd like to come back if I may and talk a little bit about how we're doing on our strategic priorities. Thank you. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Performance Humphrey Singer, Group Finance Director Thank you. So I think an encouraging start to the year. Trading well in pretty much all the markets that we operate, gaining share in most of those markets and that enabled us to drive Group sales, which we're reporting as up 4% local currency, like for like up 3%. We also as Seb said improved our Group EBIT quite significantly by £5.1m. We're reporting an underlying loss before tax of £22.2m and a pre-tax loss of £79.5m in total. So given the difficult environment that we face, the challenges we faced in PIXmania we are impairing the goodwill balance that exists there. Group gross margins were down 50 basis points, we traded hard in the Nordics for cash profitability and that had some impact on the gross margins, in the UK we were flat. We are on target to deliver the £90m of cost reductions over two years that we have previously talked about and we generated a very strong, positive cash flow performance
explain some of the detail behind that. And overall of course we've strengthened the balance sheet quite substantially in this last period with renegotiating our revolving credit facility and with the bond transaction that we did towards the end of September. So overall we improved the underlying loss before tax, particularly pleasing to see the performance in the UK and Ireland where we went from a loss of £6m to a profit of £5.6m and as Seb said that is the first time in five years that we have made a profit in the first half in the UK, which we are particularly pleased about. We also improved the profitability of Northern Europe, so that was up to £40.4m and reduced the losses in Southern Europe with some significant cost savings, again in Greece and even more materially now in Italy, so managing very well the difficult situation that we faced there. PIXmania is the one issue, significant challenges and that meant that we're reporting a loss of £17.1m in the first half of the year.
Dixons Retail - Results Presentation 29th November 2012 Page 7 Overall underlying loss before tax reducing to £22.2m. The other thing I'd just highlight is the expected effective tax rate will be higher given the situation in PIXmania and so that is at 55%. If we didn't have the PIXmania losses that we're now choosing not to recognise the benefit of then it would be 42%. So there is a quite significant impact from choosing not to recognise the losses in PIXmania and that's really because as we look ahead and the challenges for that business that seemed the sensible and prudent thing to do. It doesn't change the cash tax position of course. So in non-underlying terms we start with underlying loss before tax and that has improved as I said to £22.2m. There's really one significant item again related to PIXmania, as I mentioned before we've written off the entire goodwill balance now so that's a £45.2m charge and overall leads to a total loss before tax of £79.5m. Free cash - and let me dwell for a little bit on this chart because there's quite a lot to unpick here. I mean overall strongly cash generative with the net debt at £9.9m down from £143m. A few things to talk about, working capital first of all, so the prior year number if you recall was affected by a £30m timing issue, and if that hadn't happened that would be a more positive number last year, so nearer £90m. So year on year you can see that there's not as big a gap if you strip out that effect. The reality is in every year given the time of when we do this announcement you will see strongly positive working capital inflow, that's just the natural cycle of the business. However, underlying that there is a strong stock management improvement. So our turns are up to 6.15 that's an improvement of nearly 8%. So actually we're very pleased with the way that we're managing working capital. But some of it is just timing at this stage in the year. My guidance for where we'll end up on working capital for the full year remains as really previously guided, which is some kind of modest inflow, reflecting the improving working capital management. Capex is another one to talk about, so that's obviously favourable in the first half of the year, but again that's just a phasing issue, so I'm not changing our view on what the full year capex position which is somewhere between £100m and £110m. Net restructuring is another one to talk about, so last year we had the cost in the first half of exiting Spain. This year I expect that the exceptional outflow will be somewhere between £30m and £40m. So that's up on where we had previously talked about and reflects the actions that we're now taking, or planning to take, proposing to take, consulting on taking with PIXmania, so £30m to £40m is the total figure, the majority of that will be our expected outflow on the French transaction. Free cash overall generating £106.8m, again to clarify that for the full year I'm not changing my view which is net debt will be either in line with where it was last year at £104m, or maybe slightly better. So where are we at in terms of the balance sheet? Well I think we've done a lot really
previously advised reduce to £200m in August and doesn't mature until June 2015. It's a headroom only facility; we've not used it - well really materially since August of 2011.
Dixons Retail - Results Presentation 29th November 2012 Page 8 We drew for like five, or six, maybe seven days in October and since then we've not used that facility at all. And on the bond front we've obviously issued the new 2017 bond, bought back some of the 2015, so smoothed out our maturity profile and retained some liquidity on the balance sheet for the rainy day should that arise. So I think in summary a quick canter through the numbers there but I think we are delivering really on all of our financial objectives. We're improving profitability and that's despite the headwind from PIXmania. The UK and Ireland particularly pleasing, growth also in Northern Europe and an improving position in Greece and Italy, we're on track to deliver to the £90m of savings over the two years. We're generating cash, we're reducing net debt and I believe we have now a strong balance sheet. I'll now hand back to Seb. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strategic Priorities Sebastian James, Chief Executive So I wanted to now run through a little bit about the progress we're making on our core strategic goals. And if you remember there were three that I felt were incredibly important to this group over the next two or three years and they are these. The first is we need to overcome once and for all the existential crisis to which we were brought by the arrival of the internet. We think we've made amazing progress on this and I'm going to show you later some real data that indicates the strength of our business model, relative to single channel internet and I think it makes for very compelling reading. Secondly we need to identify where we're going to play and where we're going to win. And we need to find a leadership position of some sort in all of the markets in which we play and I want to give you some updates on progress there. And finally I believe that we have a big unrealised opportunity in this Group, which is how do we make sure that we begin to play as a team and really leverage the benefits that come from our scale and our power across, particularly Northern Europe. Just to remind you of the shape of the market and this is a very interesting truth which is that when you look at the market just under 65%, just under two thirds of the market is currently a service led model, so either we, or John Lewis or countless independent stores are providing service to customers in stores and having a conversation with them. And that blue section has remained constant for nearly three years now. So a very large proportion of the UK customer base want to go to stores that have a service based element to them. And interestingly after 20 years of extraordinarily aggressive competition the whole of single channel internet now only represents 12% of the UK market and Amazon are under 5%. Now I think these are very interesting numbers, because what - the key truth is that although 84% of customers who are looking to buy a computer, a TV, or a washing machine spent part of the journey online 92% of customers who buy those products are spending part of that journey in store. And I think that's a very, very interesting
Dixons Retail - Results Presentation 29th November 2012 Page 9 number because it gives us the opportunity to have an extraordinarily valuable conversation with our customers. The question is in a world where prices are completely transparent and we must be as a hygiene factor very close to Amazon's pricing and to single channel internet pricing, how do we afford to do that? And we do that by four simple things. And I'll ask you just to focus again on this conversation, how do we get value from the conversation we had with customers. I calculated, I can't remember why actually, but I calculated that we speak across the Group 13.2 billion words to our customers every year, not necessarily a very useful number from an analyst model perspective. But these words I think all have value; I think this is something we can deliver. And we do that in four very simple ways and the first is this, if you remember suppliers reward us for selling products that have better system economics, and those are typically newer products. We are good at, incredibly better at, and getting better at selling the products to customers that suppliers can make money out of, we can make money out of and which make customers happier, that is the newest, best and most exciting technologies. Some of them are here for you to look at and you'll see they are a step forward from what people might have earned in the past. Secondly we remain seven to ten times more effective at selling complete solutions to customers, selling them the services and additional products which make a difference to them and we're getting better at that and I'll show you some figures later. Thirdly we need to keep containing our costs, we have a cost differential, a structural cost differential between us and single channel internet. That needs to get tighter, it is getting tighter, it is getting more expensive to run an internet business and it's getting cheaper to run our business and we think that's a very important step forward. And finally we continue to narrow the gap between our pricing and single channel internet pricing, we are not burying our head in the sand and believing that customers can't compare prices themselves on their smart devices. We think prices are completely transparent and the only reason customers will buy from us is because our prices are at
But what's very encouraging is that when we do that we are still more profitable than the single channel and that makes us an extremely robust and long term business model. This year we rolled out - remember I spoke to you about customer journeys in TVs where we curate our 140 TV range down to the five or six televisions that suit that customer having had a conversation by travelling through this journey. And then we say to them, the product that we would choose if it was us buying today is this one. And that is how we do it, we always have that product in stock and that has made a dramatic different to the extent to which we're able to sell premium TVs to people. And when we've done surveys the customers who bought those premium TVs have expressed more satisfaction then those customers who chose cheaper models and I think that's a really fantastic triple win, because we win, the supplier wins, and the customer wins and I think that's a big step forward.
Dixons Retail - Results Presentation 29th November 2012 Page 10 And we've rolled out that customer journey mentality to - laundry and we've rolled it out into our imaging products and we've also rolled out our experts love notion into computing and it's had some quite significant impacts on average revenue per product. The computing hardware and laundry are both quite new, so this is full year to date and we've seen - in TVs we're seeing a consistent 12% average revenue per product increase, which is huge in our business. But much more importantly those are the products on which the system economics are much more attractive. So we're excited about the success of this and we intend to continue driving this process and driving the process by which customers get to choose better quality products and we get to be rewarded for doing so. Another good example of how suppliers are helping us is because they know that we're the only place where you can sell the better quality products. To give you an example
think are worthy of special endorsement for displaying their Windows 8 products. Of those 15, six are exclusive to us. Now I think that's a very impressive endorsement of what we're doing. I'm just going to show - I don't often do an ad but I'm going to do
If you're looking for a computer this is the one to buy, this is the HP MVX2 it's a very beautiful Windows 8 computer, you know, sort of full Windows 8, full touch screen, but what is particularly exciting about it, really good power, powerful enough to build those complicated models that all of you do, but also that separates into a tablet, fully functioning Windows 8 tablet. It has two batteries; this one drains first so that your tablet is always charged. I think it's a brilliant machine, 800 quid. In store next week. But I think what's exciting to me is that all of these manufacturers, Microsoft, Intel, are all supporting us to carry these lines exclusively because they know that we're the only place which will really get customers excited about these kinds of products, you need to show it to really like it. And it's not just in computing, we're getting exclusivity from all
not sure I'd necessarily put the - washing machine into that category, but some of the exciting products in the market are exclusive to us. This Samsung Wi Fi camera is an Android camera, so the screen on it is like a mobile
you can deliver them to Facebook you can do whatever you want. Not quite so good of course if your children are taking photographs of you in the bath to find they're suddenly posted on Facebook unexpectedly. And then some of the popular TVs, interestingly 55 inch TVs have quadrupled, people are buying enormous TVs this year. This LG top end 55 inch TV is exclusive to us and we're seeing exclusive lines right across the board. And that is a growing phenomenon not a shrinking one. And we think that's exciting for our business model. Secondly, solutions - we've made really good further progress on selling complete
Dixons Retail - Results Presentation 29th November 2012 Page 11 margin out of selling but also because customers who go home without buying these additional products are actually unhappy about the product they bought. We launched a product last year which was Cloud Backup and Share, we'll have a million customers by Christmas using our cloud services and we're on average to a laptop attaching two units for every laptop that we sell. This is something that single channel internet players cannot do and do it much, much less effectively than we do. The same is true of large screen TVs, we're selling home theatre kits, we're selling cabling, we're selling services, we're selling installation. These services are actually making customers happy. They get home and they can really achieve the goals they came into our store to achieve and I think that is our duty and that is our responsibility and that is also how we make money where single channel internet does not. And it's also true in laundry, we will install 1.6 million pieces of white goods this year, that is an amazing trust the customers are doing, they let us into their homes to spend between 20 minutes and an hour installing pieces of kit in their homes and trusting our knowledge and expertise and that is a growing business and we're excited about that. One other example and we try to keep innovating, so now have a product called Show How; this is a picture of our new Solihull store which is very comfy. And Show How is a product where you buy a half hour or a one hour tutorial from our staff on how to use your product. So Windows 8 is quite a different interface, half an hour with it, we'll show you the power of it and how very exciting a product that is. We sold last week 1100 lessons, I think that's amazing for a new product, I think it's a real step forward, it's totally proprietary. If you want this product you have to buy it from us, you know we continue to drive forward, where we can build proprietary shells around these branded goods so that people are actively choosing us to buy these products and we're making good progress. And increasingly we're talking less about, you know - cor blimey you can buy a washing machine for 299 and more about buy the complete package, buy the service, you know buy what we are all about. So for instance this is a classic TV price ad and we've changed our graphic presentation, but above all we're talking about service, we're talking about what you came to do and how we can make that happen. We had a bit of fun with Barack Obama's campaign, but again this is a high copy ad talking about what it is that we can do for you as a business. And I'm just going to run a short reel which is
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Video played . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive So fans of Poirot will recognise David Suchet's voice doing the voice overs there. But I think it gives you a real good picture of how our mentality has changed from being a price and product, stack it high, sell it cheap and do a not very good job in store, to a
Dixons Retail - Results Presentation 29th November 2012 Page 12 total fixation and focus on the service that we provide which gives us permission to have the conversation which generates the value. And that is our story in a nutshell. I'm pleased to say we continue to make progress on driving forward our strong advocacy, we use strong advocacy - quite a tough measure, are you strongly - highly likely to recommend is the question we ask questions. We're running at 75% - the general trend is forwards, I see no reason this can't go on to 80 and beyond. This benchmarks with the best retailers in the UK, but we are therefore happy with it, but not satisfied and we will continue to drive this forward so that we can be measurably better than anybody else, either in our sector globally or in the UK in any sector. And our price has improved over the last, certainly three years and even during the course of even this year, very dramatically improved against our competition. We are determined that in a price transparent world, no customer will come to us and say I'm not buying from you because of price. We don't think that means necessarily we always need to be at exactly single channel internet pricing, but by goodness we have to be
The top line is a well-known, US based, non-taxpaying retailer in the UK, and the second line is a white goods specialist retailer where you'll see that we've actually come and matched - pretty much matched those prices and we think that makes a huge difference. As a result I think customers increasingly are choosing us more and more and more. The other lines I don't want to say who they are but one of them is orange and stops, so. This is another example of our pricing, this is last Friday, David took the bestselling lines in the key TV sizes and just pulled up as customers will do on their smart phones in our stores, just pulled up the prices, Amazon prices and our pricing and ran them next to each other. And what I think is very interesting here are two things, firstly I think that's a pretty good result. You know we've been fighting and fighting to - you know if you look at it in the context of our gross margin performance I think the ability to get within this of single channel internet is proving more and more that our model really works. And secondly the other thing that's interesting is that the best products on here, the Samsung 8000 series in 40 inch and the LG 760 in 42 inch are not available from
internet to sell these products, I want them to be demonstrated and shown in store. And I will give them exclusively to the companies that will do that for me and we are that company. So I think this is a very interesting slide. I said at the beginning that I would show real data indicating how our model stacks up against single channel internet. And this is I think quite a complicated slide so I'll just explain it briefly. You have the online margin position, so we have a pretty good sense
money that we get from exclusivity, from supplier contributions because of the demonstrations we do, from marketing contributions because we have a store estate, from having in store exposure, etc, this is a margin which is not available to online.
Dixons Retail - Results Presentation 29th November 2012 Page 13 This is the extra products that we sell relative to single channel online in terms of services, protection and additional products; this is the margin that we get from it. Interestingly if you look at the margin that an online players gets, by the time we've added the supplier contributions and the solutions we're already nearly three times as
per click customer acquisition costs. And so that's another advantage that we have relative to single channel internet. We what do have to pay for is our colleagues in store, we have to pay for of course their wages and their training and their uniforms and so on and we have to pay landlords and we have to pay for heat and light. But what's interesting is that when you tot it all up
sale of computer relative to single channel internet players. And this is unexpected; this is the truth of our business model strategy. Computing is probably our best category, but as a group as a whole it's still true and I think that's a very exciting step forward. We haven't had historic real data collected in this way before so I thought I'd share it with you. In terms of market leadership turning to our second point which is that we need to decide where we're going to play and we need to win where we play. In nearly all of our markets we are already market leader, in nearly all of our markets we are consolidating that position and we're driving our market leadership forward and we think that's a very exciting and good place to be, because market leadership makes you relevant to suppliers and unlocks permission to talk to the customer and the supplier benefits that you derive from that. There are some areas where we're not, so in Italy we are the number three player. I think I've said before that I consider us to be too small and we need to think very hard about how we consolidate our strategic position. We have time to do that now that we've stopped the bleeding in the Italian business and I think that that is now important that we think intelligently about solutions to that territory. In Turkey we are much too small and I anticipate that there will be consolidation in that market and we'll have to see how that plays out. And PIXmania is not really relevant because we're operating in a whole load of countries, but we clearly do not have a market leadership position in PIXmania and it's interesting that those are the three territories that we really need to focus on in terms of finding ways to play where we win. We're starting at last to align our businesses by at least beginning to share intellectual property, so KNOWHOW is a good example; we launched KNOWHOW under the No Problem name in Italy that's the one that researched best. But you can see that all of the collateral and all of the presentation and branding is identically the same, the suite
And we did a test in Denmark which has launched well and we're now going to roll it out, in fact this brought me so much pleasure, somewhat to the surprise of the easyJet staff, I brought it home of Denmark, for those of you who are Killing fans you'll be able to translate it. But this is our KNOWHOW poster, exactly the same as we would see in the
Dixons Retail - Results Presentation 29th November 2012 Page 14 UK but in Danish and we will begin to see this rolled out right across our Nordic business
And I think this is really exciting, when we think of the cost of developing and promoting KNOWHOW in the UK and what we learnt from doing that, the ability to roll that out much quicker and much more cheaply - thank you my lovely assistant - is a real step
to copy from territory to territory without spending and investing again in learning everything from scratch. Also when we last met I talked about the first ever computing deal what we did last Christmas for an HP computer for Boxing Day, this year we have a great swath of products that we're buying right across Europe to put into our Christmas deals. And increasingly we're beginning to think about all of our big deal events in terms of pan- European buying. And our international buying generally is beginning to move forward to start inviting more suppliers into this club. And we're finding really quite a lot of acceptance of joining our pan-European club and we think that's only going to move forward as the months and years go by. So to summarise we are very pleased with the UK and Northern Europe's results for these six months and they are improving profitability and we think that's entirely a good
recognise that that is - and I recognise that is one of the areas that we must sort out
generation and we've done some extremely good work and particularly Humphrey and his team have done some extremely good work in organising and tidying up the balance sheet so that we could feel completely comfortable about our balance sheet and liquidity position going forward. We continue to plan prudently, I don't think the market is going to do us any favours, I know it's not going to do us any favours in Southern Europe or France and in the UK we seem to be bumping along, I always tell my teams, you know we've got to make our
considerable time. But it's been an encouraging start to the year, you know we're not unhappy with it, we're never satisfied, but we're not unhappy with it. I think that's it, any questions? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Questions and Answers Charlie Muir Sands, Deutsche Bank A number of questions on PIXmania if I may. Firstly, can you clarify that the cost savings you're talking about trying to implement in PIXmania sit within the £90m programme, or are they in addition, because this … . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive
Dixons Retail - Results Presentation 29th November 2012 Page 15 Which £90m programme? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Humphrey Singer, Group Finance Director The two year £90m programme? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Charlie Muir Sands, Deutsche Bank The two year £90m cost saving programme, because I think it's only been more recently that you've started to say that that's what you're going to be doing there? On the scaling back of categories and countries, can you give us an idea as to what proportion
saying that you estimate the cash restructuring costs to be £30m to £40m? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Humphrey Singer, Group Finance Director Yes, so just on the last one first, £30m to £40m is the restructuring cost for the entire Group, there are some other costs in Italy and the UK that we'd expect, but the majority
PIXmania costs are largely part of the £90m that we've talked about. But I guess we'll see how that goes really. I mean we're right in the middle of negotiating if you like that social plan and what it will cost and we'll come back with better guidance when the process is complete. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive And then in terms of the sales, it's less than 20% of the total sales within the categories and the countries that we're exiting, that's why we are exiting them. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Charlie Muir Sands, Deutsche Bank Sorry, if I could have one follow up, you obviously showed some quite impressive charts
categories versus single channel internet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive That was actually all categories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Charlie Muir Sands, Deutsche Bank How close do you think you are before you'll be able to expand your price promise to the internet as well? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive
Dixons Retail - Results Presentation 29th November 2012 Page 16 That's a very good question, I'm not sure that a price promise is the right vehicle; I think we now live in a price transparent world. And what I think the next step will be and I think it will be quite a bold step would be for us to allow customers to view our code for the product and see price comparison and to be completely open about what
Sometimes I will want to say to customers, yeah no we're ten quid more for a 500 quid telly, but you know, you know where I live and if something goes wrong I'm here for
for. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Charlie Muir Sands, Deutsche Bank Thank you. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Excuse me, I sound like I'm in a diving bell, it's because my children have given me a cold so I apologise. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Eithne O'Leary, Oriel That's all right. I'm afraid PIXmania again, the decision to close the store it seems a bit at odds with what you're saying about multichannel for the rest of the Group, or Omni- channel for the rest of the Group, are they in the wrong place, are they the wrong size, what's the problem? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive You've got to be a proper multichannel. PIXmania stores represented about 7% of their
multichannel player, a multichannel player needs to have stores that have a proper display, a proper range and are within reach of the customer. And to get to that place is inconceivable from a standing start. And so it was an interesting experiment to see whether with a few stores you could - a few small stores you could get to that place, those stores are not profitable and they're not delivering these four benefits that are so critical to our business model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chris Chaviaras, Barclays Two questions, the first one is on PIXmania again I'm afraid. Can you remind us what the cost base is on PIXmania? And also you talked about closing the stores, but that is kind of the good scenario, it will take time due to the French legislation, how much time do you think? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dixons Retail - Results Presentation 29th November 2012 Page 17 Sebastian James, Chief Executive Do you want to talk about the cost base and I'll talk about the timeframe? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Humphrey Singer, Group Finance Director Yeah. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive So we launched the social plan about a month ago, the average social plan time, assuming all goes well is between four and six months, four is quite punchy, we think that the average, the overall average of six months is about the time it will take us. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Humphrey Singer, Group Finance Director So on the cost base I'm not sure we'll give a very precise number, but let's say we've got 1300 employees in France, another probably hundred in Brno, so it's quite a sizable
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chris Chaviaras, Barclays Okay, that's fair. And my second one is in the Nordics, given Expert now has exited the Swedish market, should we expect the same kind of trend in terms of the disruption in the beginning and the gains as … . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive No it's finished, so Expert is out, some stores have been taken over by other players, small players, they're not causing us much worry, the stock is gone. So the disruption is not an issue. The capacity has definitely come out with Expert's departure, but Media Markt had two or three years ago signed deals for new stores for this year which they've
Markt have announced that they no longer seeking to open any more new stores. But the timeframe in property in the Nordic countries is so long that they've had a tail of deals they signed a while back. So overall the market remains pretty competitive and we still have principal competitor in place, nevertheless it's good to have capacity out. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chris Chaviaras, Barclays Thank you. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Geoff Lowery, Redburn Thank you, two questions please. Firstly in terms of exclusive product, can you talk to us about what percentage of your Group or UK business exclusive product you think
Dixons Retail - Results Presentation 29th November 2012 Page 18 represents at the moment on annualised basis? And the second question, good job on the balance sheet, when do you think you can make material progress in reducing your net finance charge in the P&L? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive So exclusive product, we have two sources of exclusive product, one is the exclusive brands that we own and operate, which represent just under 10% of our business and
variable across the year. So I don't want to give you a number which won't make sense from one month to the next. But it's growing and it is - and some exclusivities are for a short time and some for a long time. But it's a growing proportion of our overall … . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Geoff Lowery, Redburn Double digit, single digit? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Double digit yeah. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Humphrey Singer, Group Finance Director So on the finance charges I think it's always a balance isn't it between liquidity and deleveraging and we clearly did a bond in September, there's an on cost from doing that and so we erred on the side of caution if you like and liquidity. It remains our goal, you know, to eliminate our on balance sheet debt and that hasn't changed. And so as those bonds come up for paying off we're going to pay them off and we've now got an RCF that we're not drawing on, so there's no debt there. That's still our intention. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Geoff Lowery, Redburn An ultra anoraky one, when you look at your Group tax rate, if you just had Northern Europe and the UK central overhead, what's a sort of normalised tax rate for the Group? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Humphrey Singer, Group Finance Director That's definitely a techy question, there will always be an element of items that are disallowable and they're relatively fixed actually in size. I mean overtime if you eliminated all those losses in the Southern European countries you'd come down to a rate that's probably in the 30s, so you're never going to get down to the actual headline tax rate of - 24 going down to 23 in the UK, but it's that kind of order of magnitude. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Early 30s.
Dixons Retail - Results Presentation 29th November 2012 Page 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Humphrey Singer, Group Finance Director Early 30s, yeah. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nick Hawkins, Cenkos Could you give us an idea of what percentage of Comet sales you think you might be able to pick up? And secondly which is the greatest strategic priority, is it to move to the 3 to 4% margin, or to take the windfall you're going to get from these sales and invest it in closing, narrowing the price gap with Amazon? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Yes, so let me not answer the first question first. We won't want to guide with any degree of precision on how much of Comet's sales we're going to get right now. We will do that; we will be able to give a much clearer picture as we come towards the end of this year. At the moment it's extremely turbulent so we have got no data and as a sort
There's a few facts I can tell you, Comet last year was £1.2bn of UK sales, some of that was B2B and some of that has been lost through this year through their like for like
define it, and I will be disappointed if we don't get more than our fair share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nick Hawkins, Cenkos And the strategic priorities? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Oh sorry, and the strategic priorities, I think we are in a business as usual place. If Comet's customers choose to come to us and improve our densities that will help us to drive our business, I don't think those two things are incompatible. I think that as we - what we have found and you'll see through our profit performance is what we've found is as we've driven prices down our profits have improved. So I don't really see a fight between those two priorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Geoff Ruddell, Morgan Stanley Just to give us an update on exactly how multichannel you are at the moment could you just explain, or give us an update on what proportion of Currys sales are being ordered
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive
Dixons Retail - Results Presentation 29th November 2012 Page 20 Yes, so if we take Currys and PC World together because we don't really think of them separately we are running at about 17% throughout - about 18% for the full year, about 17% so far, it will be more over Christmas, it goes up as high as 25 we think this
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Geoff Ruddell, Morgan Stanley Great thank you. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Matthew Taylor, Numis I know you don't like talking about individual categories too much, but I wonder if you can talk a little bit about your computing business, in terms of materiality and what your view is of it sort of medium term as it becomes sort of less PCs and more tablets, perhaps more sold on subscriptions and things like that? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Yes, I think it's a really good question. I think my plan is probably to talk a little bit more about that in a bit more detail as we come to next summer. But you're absolutely right to highlight one of the key challenges and opportunities for us is the seismic shift that we're seeing in computing where we're seeing a shift towards convergence into devices, various devices, smart phone and tablet in particular where lots of different pieces of kit are now moving into those two or three pieces of equipment. And how do we operate that and how do we make that work in our favour and we think we have some answers to that. And then the second is virtualisation where a lot of the services that we used to buy as hardware are now being sold as software, and how do we make sure that we get our
What's interesting is we're having some quite encouraging conversations with suppliers because the fundamental truth about our business is that we see suppliers shouting on billboards and on TV about the wonders of their ecosystem, their Windows 8, or the Google Chrome, or the IOS6. But we are the only people who can whisper in the customers' ear. And that ability to sell customers into an ecosystem and sell their future revenue streams to a supplier we think is a valuable asset and one that we can monetise. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assad Malic, Citi Just one question really on supplier benefits that you've been seeing. Can you quantify whether that's still increasing in terms of the gross margin benefit you're getting and secondly when would you expect that to sort of annualise out? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive
Dixons Retail - Results Presentation 29th November 2012 Page 21 It's still increasing but of course we're spending some of it on keeping our prices tight, so the model works as a whole. So you know we work on the supplier side, the solutions side, and the pricing side all at the same time and then you end up with a net result, which hopefully is increased profitability. I don't want to parcel it into the three bits; I think that's difficult to do. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assad Malic, Citi But in terms of the price gap narrowing that we've seen, you're incurring that over the last 12 months, is the plan to actually end up being cheaper than your competitors over time, or do you think you stop once you get to that sort of one or two percent? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Yes, so we always believe that there is room for a small premium that we get from a customer in return from knowing where we live and we think that we're not quite there but we're very, very close. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Humphrey Singer, Group Finance Director It varies a bit by category. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Yeah it does vary by category, so on an iPad I need to be at exactly the same price, but there are some products where customers are saying actually - particularly large TVs for instance, customers saying, you know what I'm pleased that you're here so I can come and talk to you if something goes wrong. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assad Malic, Citi Thank you. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Andy Hughes, UBS You made some good progress on your cash flow and balance sheet as you were saying in the presentation. Are you saying that's the same thing as you don't feel cash constrained in any way. So if I said to you someone dumped £100m in your cash - in your plc. bank account what would be your priorities for spending that money? Would it be putting a bit more back into stock, or capex, or buying a few Comet stores, or speeding up restructuring, what would be the priorities? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Sorting out the problems would be what I would spend it on. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dixons Retail - Results Presentation 29th November 2012 Page 22 Andy Hughes, UBS So if you had more cash you could move faster, is that what you're saying? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive If we had unlimited cash and nobody worried about return on capital, sure. But what I want to do is to try and do it as intelligently as possible so we maximise return for our investors and I think there are cleverer solutions than the most blunt ones. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Andy Hughes, UBS Thanks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rod Whitehead, Deutsche Bank Just on the problems in Southern Europe, 9% negative like for likes despite Greece being positive, so it must have been mid-teens negative for Turkey and Italy, are those equally bad, are they still getting worse? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive It's tough down there, and I think that we are very focused on making sure that we cut
well because it has a good month and it has a bad month, so I wouldn't like to predict where it's going to end up this year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Humphrey Singer, Group Finance Director It's been tougher for Turkey in terms of the actual numbers, so your blended average there wouldn’t be as bad as that for Italy and that's partly 'cos Turkey in the first half of last year was growing at like 25% you know the comps were particularly tough for Turkey. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive In Turkey, the market has continued to grow slowly but the amount of space in electrical retail has exploded and so like for likes are really tough in Turkey. And there are ten national chains in Turkey, which we think is sort of eight too many. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rod Whitehead, Deutsche Bank How quickly do you think that you could realistically see consolidation in Turkey? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive
Dixons Retail - Results Presentation 29th November 2012 Page 23 I think there'll be some this year and some next year and I think within five years it'll shake it into its final position. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rod Whitehead, Deutsche Bank Thanks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Simon Bowler, Exane Just one quick question, I think you've set out before your plans for and view of where you'd like the UK store estate to get to. I'm just wondering post the departure of Comet whether there's anything on that front at all? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive No, we think it's the same number. And actually thankfully that is the answer because the real valuable thing to us is density - more conversation that's what's valuable. We are on nearly all the same parks as Comet, we've just had a very disciplined conversation actually in our capex committee where for five years I have wanted to take the corner of store that Comet currently occupies in New Malden and make it part of our store, for five years I've wanted to do this. And we were in the capital committee and at last we had the opportunity and we looked at it and very dispassionately we decided we didn't need the space. So it's going to Topps Tiles, I'm miserable about it, but there it is. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Simon Bowler, Exane You're going to get more signage though right? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive You'll get more signage, we'll get more signage, I'll have to make do with that. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Question Could I just ask one other question, you picked me up on the point about Currys and PC World, will the PC World brand still be around in five years' time, particularly as nobody will be buying PCs? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Well Carphone Warehouse is still with us I suppose; the answer is PC World has almost 100% consideration for computing purchases of all sorts. You have to be quite brave to rethink that. I think that the brand architecture in the UK is quite complicated at the moment and we are thinking about what the right long term solution is. But I wouldn't expect anything immediately.
Dixons Retail - Results Presentation 29th November 2012 Page 24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Andy Wade, Numis Just looking at the chart on page 29, the profit bridge you draw between the online and store, I just wondered is this to scale in the sense that the margin benefit you get from suppliers is equivalent to your rent rates and depreciation? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Yes, it's to scale, it's to scale so yes that's about right, it only takes a very small percentage of sales to match our rent, rates and deprecation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Andy Wade, Numis Thanks that was it. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Otherwise we couldn't survive. The model is very robust. That section also includes the small premium that we continue to charge, so that's our commercial benefit if you like. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Question Now you're half way through the year I wonder if you could just tighten up the £90m cost saves over two years is it still a roughly 50/50 spilt? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Humphrey Singer, Group Finance Director Half and half. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Question Secondly in PIXmania obviously the margins were down, but was the gross margin also still heavily down year on year? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Yes, so PIXmania's gross margin is - well do you want to? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Humphrey Singer, Group Finance Director Yeah, no they were both the trading so the product sales on the website, but also we had a particular issue with a contract we had with Bouygues Telecom which we lost towards the end of last year which was very high margin. So what you've got is a rather complicated mix of trading of electrical on the website and the margins which are
Dixons Retail - Results Presentation 29th November 2012 Page 25 multiply higher from selling the merchant technology. So you can get some big shifts as a result of that. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Question Finally on the bonds if you had the cash are they callable at par or at premium or could you repay them quicker if you had the cash flow to do that? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Humphrey Singer, Group Finance Director I think we'd have to have a consultation with the banks before we did that, so no is the answer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive We have been thinking about what we'll do when we have lots of money and there are
it won't be so long now. Any other thoughts or questions? Thank you very much, thank you so much for coming this morning. Thank you. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . END DISCLAIMER This transcription has been derived from a recording of the event. Every possible effort has been made to transcribe this event accurately; however, neither World Television nor the applicable company shall be liable for any inaccuracies, errors or omissions.