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World Television WORLD TELEVISION DSGi Webcast 19th March 2010 Page 2 DSGi - 19.03.10 John Browett: Well welcome it's great to see you all. You'll really enjoy the store which we've laid on here today. It's a fantastic place to shop, it's been very successful and we - I think there's some nice things here. Make sure you have a good look at the 3D TV, of course you can't miss it; but it's had a tremendous reaction from customers in the store. We've had to actually change the layout because there are such big crowds at the weekend. But you'll get a good sense of what this store is all about. So just in terms of what we're actually going to go through here today; I'll go through a quick introduction, explain to you some of the work we've done to actually make this a customer focused business. We'll then go through the store transformation update and we'll also talk about how we're improving service support for customers and this is after sales and then how we are starting to do the work to win on the internet. You'll probably all have seen that we've actually relaunch our websites. There's not a big customer change yet, because the main thing was to get the platform in. But you'll see more development of that as we go through the year. Nick will take you through the financials and Jeremy Fennell, who is our Category Director for Computing is going to talk to you about technology and why we all should be excited about the prospect for technology and how it's going to impact our business over the next few years, and then we'll quickly obviously summarise all of that. Well I mean you know this, so this is being completely invariant from the time we started. So in May 2008 we laid out this for you in terms of what we were actually going to do. And we're absolutely on track with that and we're going to make our target returns. Obviously I didn't quite on fix on having the worst recession since the 1930s in order to do this in, but we're absolutely on track; were not blown off course by any of that. Page 3 DSGi - 19.03.10 You also know a lot about this which is that, you know we operate across Europe; today we're going to focus a lot on what we're doing in the UK. I'll say some brief things about some of the UK business, but obviously it's the UK today. Just to remind everybody and it's sometimes odd for me when I see the reactions, especially by the traders in the market - of course just over half of our turnover is outside the UK and a little bit more of our profit at the moment. So that's just a bit of background, obviously the Nordic business had a fantastic run; it is now a quarter of our turnover and a bit more of our profit of course. The Nordic business really has had a tremendous run through the recession. And it is a customer service driven business, what Elkjøp is famous for is what the - you know the selling process in store. It's at place which you go in order to get help advice and it really is leading the market in that way. I mean you've all got estimated sales here, this is a not a sales prediction, this is what the consensus is for the Elkjøp business; total sales of 2 billion. It's a very low cost operating model. They've managed to combine fantastic customer service, which then of course has driven very high sales density within the stores with a very lean operating cost structure. And in fact this is the model which we're using throughout the whole business. We're also benchmarking back to the Nordics and they're actually continuing to improve what they're doing. You're in a megastore; this is what we're rolling out across the Nordics as well. We are getting - and we're a clear market leaders in the Nordics so it's probably in a sense a bit harder in that marketplace than us to get the uplifts, we're getting the same uplifts in megastores which we're getting here adjusted for size and sales density, etc. But it's a really good impact in the overall business. So you know, sort of circa 25% on average with all the other things going on. Page 4 DSGi - 19.03.10 As I said the business has incredibly high sales density, market leading, in fact world leading in the way it works. And we've only just started to get the full offer going. So multi channel has grown very strongly this year in Nordics, in fact the pure players are actually reduced in sales last year, and we've been growing that business very fast. Again, on a consensus basis we're not making a forecast here, between 4 and 5% EBIT return and we think there's a lot of potential in that business. The double digit sales growth I think was even a surprise to them this year. But of course historically when we looked back at the Elkjøp numbers in a recession they've always taken a lot of market share. It's a relatively premium market they operate in all of their four markets and it tends to be when the economies are going well they actually lose a little bit out to people who do convenience shopping; but in a recession people get more focused on price and rush to their stores. And that's why the growth has been very good; so they've a good run in terms of gaining market share. Italy, which was - obviously when I started the business a huge problem for us, because we had increasing losses and no real sense of actually how you're going to get through that. We now are down to an estate of 97 stores which are largely out of time. We have fantastic brand recognition in Italy. It's a really well known brand because of course it was the first broad based electrical out of town retailer. We've considerably improved the execution and our turn around plan is going very well. We're now in a set of stores which we want to have. The PC City implementation where we've actually made them two in one stores in Italy is going very well. The stock is now under control and there's more to do on stock turn there but it's doing very well and we've reduced the costs in the business dramatically. We're now going through and refurbishing the estate, this is a picture on the right hand side of the Muratella store in Rome, it's a megastore, it is Page 5 DSGi - 19.03.10 performing in the same way as the rest of the estate. It has really been a fantastic success and really built our position. We'd love to have many more of those in Italy, it will take a little bit of time before we can get those, real estate is a bit slow to go there but we think we've got a fantastic opportunity to really get back into a strong position in Italy. It's okay now, but we need to get stronger. You know our other international businesses, just a quick couple of comments around those. Greece, we are the clear market leader and profitable. It's a very difficult one; the lawyers are always sort of worried about what I say on this, because it's quite a private market. But as far as we can tell we are the only people making money out of selling electrical products in Greece and that goes for everybody. It is an incredibly strong brand name, if you've got Greek friends ask them about Kotsovolos and you would say they're absolutely the best brand you could possibly have in that marketplace. We've been doing some really good work in terms of our learnings around computing in the other markets, say in Italy and we've been put that into the Kotsovolos stores and it's going very, very well indeed. We also operate Electro World there, those of have been slightly larger stores. We obviously had a market entry from Media Mart and they came in with two brands, Media Mart and Saturn so we had to respond to that; but that's going well as well. So we think this is a great business and irrespective of the problems with the capital markets around Greece we think it's a great business and will be in the long terms a fantastic place. Again, we are using the lessons across the group, the stuff we've done in the Nordics and Italy and the UK. We're using the same store refurbishment programme and we're opening megastores in Greece and they're going really well. Page 6 DSGi - 19.03.10 If I had one criticism of our Greek business - was the estate was a little bit tired and old and every time we've upgraded the stores we've had a fantastic response from customers. The Czech Republic and Slovakia, we're in a strong position there, we've got very good quality out of town stores.
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