Renewal & Transformation Update
3 March 2009 Contents
1 Introduction
2 Focus on the Customer
3 Portfolio update
4 TfithbiTransforming the business
5 Winning on the internet
6 Operational opportunities
7 Summary
2 Introduction (i)
● 10 Months into 3 year Renewal & Transformation plan
● Period of intense activity
● The UK business is being reset quickly
● Italian turnaround on track
● Nordic and Greece performing well in their markets and gaining share
● Restructuring of PC City Spain to focus on cash
● Tough market for review in Central Europe
3 Introduction (ii)
● Speed and depth of recession greater than expected in May 2008 ● But we have re-planned the business for a weak environment ◘ Reducing costs, focusing on margins and cash generation
● New DSGi Executive team appointed ◘ Aligning structure with customers’ needs ◘ One set of business processes ◘ Merging PC World and Currys back office
● Emerge from the recession as the leading multi-channel electronics goods retailer
4 Renewal and Transformation Plan - May 2008
1. Focus on the customer ◘ unbeatable combination of VALUE, CHOICE and SERVICE
2. Focus the portfolio on winning ◘ realise potential of UK market position positions ◘ address unprofitable stores and chains ◘ turnaround Italy
3. Transform the business ◘ broaden choices for customers ◘ improve the selling process
◘ upgrade selling space
◘ sell services more effectively
4. Win in the internet market ◘ grow our pure play business
◘ become masters of multi-channel retailing
5. Reduce cost base ◘ simplification to make processes better, easier and cheaper
◘ one set of business processes
5 Contents
1 Introduction
2 Focus on the Customer
3 Portfolio update
4 TfithbiTransforming the business
5 Winning on the internet
6 Operational opportunities
7 Summary
6 Core values Bringing life to technology
7 Core values
Customers People
They're interested in working out We love to make our customers what's right for me happy It's easy to shop
We know our stuff It's an exciting place to be
I can get what I want when I want We love to work here it
The prices are good We deliver
They make things work and keep them working
They deal with queries and complaints brilliantly
8 Service improvement started
● UK-wide training of store colleagues emphasising:
◘ Selling service Î £25m of annualised new service sales ◘ Colleague training Î 20,000 colleagues through training programme ◘ Product knowledge Î Support from suppliers ◘ Connectivity Î 5,,p000 broadband connections per week ◘ After-sales service Î 700,000 repairs per year
● Launched uniqqyyue next day delivery in 3-hourly timeslots ◘ 23,000 3-hour timeslot deliveries over Peak
● Imppgroving feedback from customers
9 Contents
1 Introduction
2 Focus on the Customer
3 Portfolio update
4 TfithbiTransforming the business
5 Winning on the internet
6 Operational opportunities
7 Summary
10 Italian turnaround plan is working
● Sales tracking ahead of the market*
● Margins up 1%*
● Total costs down by over 20%*
● Stock improvement* ◘ Availability up 20%, further work to do ◘ Total stock down 20% ◘ Clearance stock significantly reduced ● Store closure plan ahead of schedule ◘ 43 this year ◘ Further 10 stores identified for closure ◘ 96 stores remain in the portfolio
11 * = Figures are for the 24 week period to end of December 2008 versus the prior year Italian plan underpinned by new customer offer
● 14 PC City implants completed ◘ Implants producing 10% uplift for the store* ◘ 11 further stores this financial year ◘ Potential for further 30 next year ◘ PC City will operate within the UniEuro business
● New format trial store employing elements of UK learnings
€60 – €75 million of cash expected to be required to achieve profitability over next 3 years
12 * = Average gross profit uplift versus the store performance prior to the implant PC City implant in UniEuro
13 Spain
● Market conditions have resulted in DSGi pursuing strategy to retain and restructure
● Minimising cash outflow until market recovers
● Central office and store cost reduction plan underway
● Trial of new UK format planned for a limited number of stores
● Post rest ruct uri ng cash outfl ow targe tted to b e c. £5 m - £8m per annum during the recession
14 Central Europe
● Difficult trading conditions, especially in Hungary, impacting outlook
● Czech continues to be profitable
● Slovakia opening performance in line with expectations
● PlPolan d rema ins su b-scale
● Focus on margggins, cash generation and costs
● Strategic review continues ◘ Update at end of financial year
15 Contents
1 Introduction
2 Focus on the Customer
3 Portfolio update
4 TfithbiTransforming the business
5 Winning on the internet
6 Operational opportunities
7 Summary
16 Key elements of UK work
● New UK store formats opened: ◘ 41 PC World stores ◘ 13 Currys ◘ 4 CurrysDigital ◘ 1 Currys/PC World combined store
● Successful Megastore format: ◘ 1 in the UK ◘ 3 in the Nordics
● All ranges reviewed with wider and better choices ● All colleagues trained in first phase of FIVES
17 All the new UK formats work
Format Number Average gross profit uplift Capex Pay back 12 weeks* 6 weeks* per ft2# period (yrs) + CurrysDigital 4 30% 46% £90- 3 £100 Currys Full 4 16% 16% £33 3
Currys Mezzanine 4 43% 49% £36 3
Currys Lite 5 26% 19% £17 2-3
PC World 41 7% 10% £35 3-4
Currys Megastore 1 - 54% £25 2-3
Combined 2-in-1 1 - 62% £35 2-3
*= year on year gross profit uplift versus the relevant chain for 6 week and 12 week periods to 7 February 2009 # = estimated cost of reformatting the stores 18 + = estimated payback period based on expected gross profit uplift Good uplifts from refitted stores
● Transformation working across all formats ● PC World performance linked closely to availability of new ranges
100% 100%
90% 90%
80% 80%
70% 70% Uplift Uplift ss ss 60% 60% Add in second PCW column 50% 50%
40% 40% k Average k Average Sale k Average k Average Sale ee ee 6 We 6 We 30% 30%
20% 20%
10% 10%
0% 0% Currys Digital Currys Full Currys Full Mezz Currys Lite PCW Full FtFormat
19 Note: Average sales uplift by reformatted store for the 6 weeks to 21 February 2009, versus the rest of the chain Major range changes in new format
SKU Computing Computing White Consumer Vision & Essentials increase hardware non hardware Goods electronics Audio
Currys +21% Superstores
CurrysDigital +30%
Currys Megastore +58%
Combined 2-in-1 +34%
PC World +15%
20 Summary of UK changes to shopping trip
● New brand identity and in-store look and feel – less "warehouse", more departmentalised ● Category adjacencies more intuitive to improve navigation with improved signage Brand/ ● Drive aisle and straight gondolas to maximise sales space, ease of shopping and sight lines Format ● Playtables enable customers to interact with products before they buy ● Introduction of new, standard system to leverage cost and efficiency synergies
● Ranges redesigned to match consumers' needs and tailored to specific format ● More premium products, in clear trade-up architecture, supported by supplier concessions Range ● Improved ranges i n compu ting, imag ing an d gam ing w ith more f ocused range of MDA & SDA ● Much more focus on essentials across all ranges in all stores ● Introduction of product specific planograms (PSP) to improve standards and stock levels
● All Colleagues trained in new customer service model - FIVES ● All sales colleagues also given improved product training People ● Experts in store on key departments (imaging , computing , MDA , vision, gaming etc. ) ● Improved remuneration structure
21 New formats have more potential
● Combination of full and lite fit outs ● Stores chosen to be representative across the market ◘ Mix of different catchments and sizes ◘ Not chosen for potential uplift ◘ No unusual launch marketing
● Furth er uplift po ten tial throug h:- ◘ Improvements in availability ◘ Further development of store design ◘ Better execution in-store ◘ Local marketing
22 Transforming Currys Superstores - Before
23 Transforming Currys Superstores - After
24 Transforming Currys Superstores - After
25 Key changes in Currys Superstores
● Grid layout with main drive aisle – better sight lines ● New signage – easier to navigate ● Playtables enabling customers to try products more easily ● More range , improved adjacencies ● Supplier concessions ● Higher mix of computing and consumer electronics ● Uplift in computing with increased range, prominence and colleague training ● MDA & SDA now 1/3rd of space ● MDA upstairs in mezzanines ● Increase in essentials ranging
26 Transforming CurrysDigital - Before
27 Transforming CurrysDigital - After
28 Key changes in CurrysDigital
● Clear signage – easier to navigate ● More contemporary store design – less clutter ● Playtables in centre instead of counters – enables better access to products ● 30% more SKUs ● Enhanced laptop range for High Street customer base ● Authoritative camera range with high end DSLRs ● Distinctive sound and vision destination at back of store ● Accessories on side walls and under playtables focusing on higher- turn ranges ● Remove White Goods and small domestic appliances
High Street destination for portable consumer electronics
29 Transforming PC World - Before
30 Transforming PC World - After
31 Key changes to PC World ● Grid layout, central drive aisle – better sight lines ● Clear signage – easier navigation ● Playtables – easier to try products ● Improved computing range – segmental targeting ● Introduction of photography ‘department’ with authoritative range ● Better adjacencies through the store ● More open accessible TechGuys area ● Better product training in partnership with suppliers ● ‘Get Connected’ offering available across whole laptop & netbook range ● Sound and Vision department with credible range of TVs and accessories ● Demo zone – bringing products and technology to life ● Improved essentials ranging ● Supplier concessions
32 Further potential in the new PC World format
● Several stores have worked well ◘ Particularly in the larger destination stores that were in poor condition ● But availability was sometimes lower than target… ● … and some smaller stores not achieving cut through in consumer electronics ● Improving consumer electronics format for smaller stores
Continue to roll out where high upside
33 Improving new PC World format (i)
34 Improving new PC World format (ii)
35 Currys and PC World combined
● First trial store opened Dec 2008 in catchment without PC World ● Dual branded Currys and PC World ● Grid layout with clear signage – easier navigation ● Playtables – increase trial of product ● PC Wor ld bran de d compu ting - c.1/3rd groundfld floor ◘ Significant increase in range ● Currys b(dfl)dhit(i)brown (ground floor) and white (mezzanine) ● Enhanced range of accessories ● TechGuys help desk ● PC World business
36 Currys and PC World combined
37 Currys and PC World combined
38 Currys Megastore is a new format
● Megastore different business model to superstores ● Greater than 35,000ft2, including mezzanine ● Significant increase in depth and breadth of all ranges ◘ Up to 10,000 lines ● High quality, heavily incentivised management team ● Strong expert mix in staff – out-specialising the specialists ● Full departmentalisation, including space, range, staff deployment, supplier support and ordering ● All stock on the shop floor with very limited warehouse space ● 30-40 suitable sites within existing portfolio ◘ Currys stores >30, 000 ft2 ◘ Currys and PC World next door to each other
J9 on track for sales of £35 million per annum
39 Megastore extends the catchment area
● Limited impact on DSGi stores ● DiDrive time up to 90 mins
40 Roll out and capex plans
Brand 2008/09 2009/10 2010/11 CurrysDigital 4 5-10 15-20 Currys Superstore 13 45-55 40-50 Currys Megastore 1 2-5 5-10 PC World 41 15-20 20-30 Nordics - 15-20 20-30 Nordics Megastore 3 5-10 5-10 Combined 2-in-1 13 3-4 Total 61 90-123 108-154
Capex Refit £65m-£75m £75m-£85m Underlying and new stores £80m £80m Total Capex £140m - £155m £155m-£165m
41 Contents
1 Introduction
2 Focus on the Customer
3 Portfolio update
4 Transforming the business
5 Winning on the internet
6 Operational opportunities
7 Summary
42 Winning on the internet
● DSGi is uniquely positioned as a multi-channel retailer: ◘ Over £1bn sales on line per annum ◘ PIXmania e-tail is one of the most advanced internet sales engines for electricals across Europe ◘ The infrastructure for Electricals and Computing is established and low cost to roll out
● Performance in 12 week period to 10 January 2009: ◘ Both PIXmania and Dixons.co.uk pppyyrofits up year on year ◘ PIXmania sales up 20% in Euro markets ◘ Dixons.co.uk sales up 15% in the UK ◘ ‘Collect @ store’ growing as a proportion of retail sales
43 Winning on the internet
Key strategic thrusts: 1. Roll out of market leading e-merchant platform across other internet sites
2. Integration of UK warehouses and service centres
3. Make all store brands leading multi-channel electrical specialists
4. Establish PIXmania as the leading e-tail electrical specialist in Europe
5. Retail brands to leverage off PIXmania best in class e-tail platform
44 Contents
1 Introduction
2 Focus on the Customer
3 Portfolio update
4 Transforming the business
5 Winning on the internet
6 Operational opportunities
7 Summary
45 Operational improvement
● Good progress to date
● Improved delivery proposition at no extra cost
● Better control of stock
● £95million of cost savings in 08/09 ◘ Group costs up by only 1%, despite 3% space growth and 3% inflation
● Merging PC World and Currys distribution
46 Further significant potential in operational performance
● Major impact on service e.g. BttBetter ◘ Roo t cause ana lys is o f comp litlaints ◘ Right first time for deliveries and repairs
● Improved administration and improved cycle times e.g. Easier ◘ Automation of store ordering ◘ Simplified financial processes
● MjMajor programmes across a ll areas e.g. Cheaper ◘ Logistics, services, store payroll ◘ StocStockk reductionreduction
£50 million productivity improvements per annum targeted
47 Potential to reduce stock by supplier
Inventory (days)
150 Top 20 suppliers
108 99 100 91 86 83 85
74 66 67 Avg all 59 60 56 59 52 54 51 48 46 50 44 45 41 41 Avg top 20
Inventory 0 Indexed 100 0 50
48 Potential to reduce stock by category
200 196 184 Stock days
54 150 104
101 100 15 76 85 91 72 70 60 16 45 25 8 74 50 68
35 Store22 - display 21 27 Store - saleable 21 39 25 26 18 17 18 DC 0 0 20406080100To tal Sea Vision Other Brown Goods White GoodsEssentials PC non PC Hardware Hardware s onal
49 Significant opportunity within services
● Service sales are growing
◘ PC Performance
◘ Attachment rates ● Increase in-store focus ● Improved product branding – more to do ● Customer insight analysis started ● Roll out of service products to Currys
◘ Tech Guys clinics
◘ Sales training ◘ £20m profit opportunity over 3 years
Heart of what customers want
50 Contents
1 Introduction
2 Focus on the Customer
3 Portfolio update
4 Transforming the business
5 Winning on the internet
6 Operational opportunities
7 Summary
51 Delivering against the plan – Summary
1. Focus on the customer: - Significant new tangible customer service benefits being delivered - Current plans provide scope for considerable future improvements 2. Portfolio review: - Italy turnaround making progress - CtlECentral Europe con tinues - Spain to be restructured and managed for cash - Focus on CurrysDigital in core locations 3. Transform the business: - All new format stores working - Results justify Currys, CurrysDigital and PC World roll out 4. Winning on the Internet: - Step change for delivering growth will come from the integration of PIXmania and UK infrastructures in 2009 5. Reducing costs: - Costs being managed out and material future savings planned
52 Summary
Year 1 Year 2 Year 3
Wider ranges Develop ranges UK Develop customer Initial colleague Ongoing proposition further training colleague training Successful trials Format roll out
Optimise store portfolio
Business Italy Further turnaround Develop business improvement of business Costs Supply chain £95 million Further step change costs savings Stock management
New operational structure in place One Group implementation
Portfolio Resolution in Resolve weaker positions place for Spain
53 Renewal & Transformation Update
3 March 2009