PR 42/05 Strictly embargoed For release after 07.00 hours 22 June 2005 DIXONS GROUP plc PRELIMINARY AUDITED RESULTS FOR THE 52 WEEKS ENDED 30 APRIL 2005 Dixons Group plc, Europe’s leading specialist electrical retailer, today announces preliminary full year results: Financial highlights • Total Group sales up 8% to £6.98 billion (2003/04: £6.49 billion) • International sales of £2.16 billion, with one third of Group sales generated outside the UK in the second half • Group like for like sales(1) up 2%; UK like for like sales up 2% and international like for like sales up 1% • Underlying profit before tax(2) up 4% to £343.1 million (2003/04: £329.3 million) • Pre-tax profit down 8% to £336.8 million, including a net exceptional gain of £0.9m (2003/04: £366.2 million, including a net exceptional gain of £38.8 million) • Adjusted diluted earnings per share(2) up 3% to 12.6 pence; basic earnings per share down 13% to 12.6p • Strong free cash flow(3) generation up 34% at £278.6 million (2003/04: £207.8 million) • Proposed final dividend of 6.22p, making total dividends for the period of 8.05p per share, an increase of 10% • Ongoing share buyback programme with £122 million of shares bought and cancelled as at 21 June 2005 Operational highlights • Significant progress with European expansion through a combination of acquisitions and organic growth • Co-operation agreement with Eldorado Group provides potential platform for future growth in Russia and Ukraine • Successful launch of pay monthly option for customer support agreements in the UK • Group wide efficiency and cost reduction initiatives underway with anticipated savings of £30 million in 2005/06 with further savings in 2006/07 • Progress towards new divisional structure with scaled down corporate centre • Corporate name, DSG International plc, to be adopted reflecting the Group’s international reach NOTES (1) Like for like sales are calculated based on stores that have been open for a full financial year both at the commencement and end of the financial period. Customer support agreement sales are excluded from all UK like for like calculations to remove the distorting effect of the introduction of pay as you go customer support agreements. (2) Throughout this statement, references are made to ‘underlying’ and ‘adjusted’ performance measures. Underlying earnings are stated before discontinued operations, goodwill amortisation and exceptional items. The financial effect of these items is shown in separate columns in the profit and loss account on page 15 and the notes thereto, which provide a reconciliation between underlying and statutory amounts. Adjusted diluted earnings per share are based on underlying profits and can be reconciled to the statutory equivalent in note 6 to the financial information. (3) Free cash flow is defined as net cash inflow from operating activities, plus net interest, less taxation and net capital expenditure. Page 1 of 33 John Clare, Group Chief Executive, commented: “The Group achieved further profit growth in a challenging year. In the UK it was a year of two halves, with strong like for like sales growth in the first half offset by the impact of tougher conditions in the second half as retail expenditure slowed. Our International businesses in aggregate had a stronger year, with double-digit profit growth, and we were particularly encouraged by the performances of our investment businesses. We anticipated the downturn in the UK and made adjustments to our trading stance which impacted positively on full year performance. We are in the process of leveraging the benefits of our international scale through greater integration of buying, distribution and systems across all 13 countries in which we operate. In support of this we have made good progress with the development of our business into two divisions of Electricals and Computing & Communications which lays the foundation for a truly international, integrated electricals business. The outlook for the year ahead is uncertain, but we are anticipating a challenging trading environment, particularly in the UK and Italy. We will continue, above all, to adapt our retail approach to meet the needs of our customers, through an unwavering focus on leading the market on price, range and service. Our priorities are clear. Our measured approach to international expansion, which we believe will be a significant engine of future growth, our focus on free cash flow and margin delivery and the implementation of further cost savings.” For further information: John Clare Group Chief Executive 0870 8503333 Kevin O’Byrne Group Finance Director 0870 8503333 David Lloyd-Seed Director of Investor Relations 01727 205065 Hamish Thompson Director of Media Relations 01727 203195 Information on Dixons Group plc is available at http://www.dixons-group-plc.co.uk An audio webcast of the analyst presentation being held this morning will be available from 2.00pm today at http://www.dixons-group-plc.co.uk (click "financial information", then "presentations"). Page 2 of 33 RESULTS AND DIVIDENDS Group turnover for the 52 weeks ended 30 April 2005 increased by 8% to £6,983 million (2003/04: £6,492 million). Sales include first time contributions from Kotsovolos and Micro Warehouse. Group like for like sales were up 2% in the year. Underlying profit before tax grew by 4% to £343.1 million (2003/04: £329.3 million). Profit before tax decreased by 8% to £336.8 million, including a net exceptional gain of £0.9m (2003/04: £366.2million, including a net exceptional gain of £38.8 million). Adjusted diluted earnings per share were 12.6 pence (2003/04: 12.3 pence), an increase of 3%. Basic earnings per share were 13% lower at 12.6 pence (2003/04: 14.4 pence). Profit before tax included property profits of £7.4 million (2003/04: £8.0 million). Group gross margins were down 0.6 percentage points versus last year as a result of lower credit commissions, higher business to business sales and changes in product mix. Gross margins in the second half were down 0.5 percentage points, an improvement on the first half. Free cash flow generated in the year was £278.6 million (2003/04: £207.8 million), an increase of £70.8 million, 34%, on the prior year. Reflecting the strong cash generation this year, the directors have proposed a final dividend of 6.22 pence per share (2003/04: 5.66 pence), an increase of 10%. Subject to shareholder approval at the AGM on 7 September, it will be paid on 30 September 2005 to shareholders registered on 26 August 2005. This gives total dividends for the year of 8.05 pence (2003/04: 7.32 pence) an increase of 10%. The Group’s dividend policy is to increase dividends in line with earnings over time. EXCEPTIONAL ITEMS Net exceptional items for the year were £0.9 million (2003/04 £38.8 million) and comprised three principal items: • A profit of £12.2 million generated from exchanges by bondholders of the 1% Exchangeable Bonds 2004 into shares in France Telecom S.A. • A profit of £3.8 million generated from the sale of a subsidiary company • An impairment to fixed assets of £15.4 million relating to cost reduction programmes in distribution and information systems. There is no cash flow impact from this impairment. Page 3 of 33 2004/05 PERFORMANCE UK RETAIL UK Retail made an operating profit before goodwill amortisation and exceptional items of £232.2 million (2003/04: £254.2 million), a decrease of 9%. Turnover increased by 3% to £4,819 million (2003/04: £4,698 million). Like for like sales grew by 2%. Gross margins were down by 0.7 percentage points compared with the prior year. A decline in credit commission, the diluting impact of growth in business to business sales and changes in product mix had a negative impact on gross margin performance. A continued focus on margins throughout the year resulted in lower margin declines of 0.5% in the second half compared with the prior year. The UK’s overall cost to sales ratio was flat year on year. The Group completed the UK rollout of new branch systems and made further improvements in supply chain management, distribution and after sales support. In the UK the Group has embarked on a major cost reduction exercise. Over the next two years the distribution platform will be rationalised from the current 17 locations into two. The Group is also in the process of negotiating the outsourcing of certain information systems support functions. MARKET SHARE AND PRODUCT MARKETS UK product markets decreased in value by 1% overall. The brown goods market grew by 5% with strong growth in flat panel televisions, digital cameras and internet audio products. Sales of games consoles, CRT televisions and 35mm cameras all declined. The white goods market grew by 4% with strong growth in laundry and cooking. The overall computing market fell by 10%. The PC hardware market fell by 11%, with strong unit volume growth more than offset by accelerated price deflation. There were significant declines in the value of both the PC peripheral and PC accessory markets. Mobile phone connections grew by 30% during the year, with growth driven by a stronger market for prepay connections, albeit at lower retail prices. Prepay connections grew by 41% year on year. The UK retail division continued to grow its overall market share, driven by gains in computing and white goods. Market share growth was particularly strong in PC hardware and peripherals. Page 4 of 33 CURRYS Currys sales were £1,852 million (2003/04: £1,752 million), an increase of 6%.