Bringing life to technology Annual Report and Accounts 2008/09 Contents Directors’ Report Financial Statements Business Overview Strategic Summary 63 Independent Auditors’ Report 1 DSGi’s Five Point Plan 34 Group Overview 64 Consolidated Income Statement 6 Group at a Glance 34 The market in which the 65 Consolidated Statement of 8 Highlights Group operates Recognised Income and Expense 9 Chairman’s Statement 34 Principal activities 66 Consolidated Balance Sheet 10 Chief Executive’s Statement 34 Overview of products 67 Consolidated Cash Flow Statement and services 68 Notes to the Financial Statements Performance Review 35 Key Performance Indicators 111 Independent Auditors’ Report on the 14 Overview (KPIs) Parent Company Financial Statements 16 UK & Ireland 36 Risks to achieving the 112 Balance Sheet of the Parent Company 16 UK & Ireland Electricals Group’s objectives 113 Notes to the Parent Company 18 UK Computing Financial Statements 20 Nordics Corporate Governance 21 Other International 40 Board of Directors 21 Southern Europe 41 Executive Committee Information for Shareholders 22 Central Europe 42 Statutory Information 23 e-commerce 45 Corporate Governance Report 118 Five Year Record 24 Group Financial Summary 49 Audit Committee Report 120 Shareholder Information 28 Corporate Responsibility Review 50 Nominations Committee Report 121 Index 51 Remuneration Report 62 Directors’ Responsibilities A five point plan for the renewal and transformation of the Group Cautionary statement Certain statements made in this Annual Report and Accounts are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future events or results referred to in these forward-looking statements. Unless otherwise required by applicable laws, regulations or accounting standards, we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. Nothing in this Annual Report and Accounts should be regarded as a profit forecast. Business Overview Listen 1.We are listening to our customers and delivering what they want, providing Performance Review better value, choice and service. Our new ‘FIVES’ selling process helps Strategic Summary colleagues better understand our customers’ needs, and to help them get the most out of their products, we offer our customers an unbeatable combination of value, choice and service. Corporate Governance Financial Statements Information for Shareholders DSG international plc Annual Report and Accounts 2008/09 1 Fast forward 2.We are transforming the business with new and better ranges, stores and selling processes. We are improving our stores, making them easier to navigate with more interactive product displays. Product ranges in every category are being improved to provide better choices for our customers. 2 DSG international plc Annual Report and Accounts 2008/09 Business Overview Performance Review Strategic Summary Focus Corporate Governance 3.We are looking at all of our businesses and focusing on winning positions. Financial Statements By focusing the Group on winning positions and on our customers’ needs, we are confident of delivering 3% to 4% return on sales over the medium term. Information for Shareholders DSG international plc Annual Report and Accounts 2008/09 3 Click 4.We are winning on the internet with over £1.2 billion of sales achieved in 2008/09 and we’re still growing. DSGi is the number one electrical retailer on the internet in Europe. Going forward, we will become leaders of multi-channel retailing, giving customers a choice of online, in-store or a combination of both through reserve&collect and collect@store. 4 DSG international plc Annual Report and Accounts 2008/09 Business Overview Reduce 5.We are reducing costs and driving efficiency. In 2008/09 we achieved £95 million of cost Performance Review savings with a further £200 million identified over the next four years. One set of processes makes the Strategic Summary business better for customers, easier for our colleagues and cheaper to operate. Corporate Governance Financial Statements Information for Shareholders DSG international plc Annual Report and Accounts 2008/09 5 Directors’ Report: Business Overview Group at a Glance Underlying sales by division ■ UK & Ireland £4,228.6m ■ Nordics £1,625.2m ■ Other International £1,565.8m ■ e-commerce £807.4m Our brandsDescription Highlights The UK and Ireland’s biggest specialist Currys opened its flagship 55,000 sq ft Megastore and refitted a number electricals chain, combining Currys of Superstores and Currys.digital stores. It also launched further services Megastores and Superstores and for customers including next-day delivery and market leading three-hour Currys.digital on the high street. Dixons timed delivery slots. Travel stores are based at UK airports During the year, Dixons Tax Free rebranded as Dixons Travel and new and the Eurotunnel terminal. format stores were introduced, including a first PC World airport store Ireland operates as Currys and at Heathrow, Terminal 5. PC World. UK & Ireland Electricals UK & Ireland PC World is the UK’s biggest chain of PC World unveiled its new store concept which helps customers get computing superstores. DSGi Business the most out of their shopping trip with numerous ‘experience zones’ is the specialist provider of business to try out hundreds of products throughout the store. ‘Get Connected’, IT solutions comprising PC World a market-beating mobile broadband proposition was launched, offering the Business, Equanet, MacWarehouse biggest range of subsidised or free laptops and netbooks. Improvements and Microwarehouse. The TechGuys are being made to The TechGuys operations to provide improved choices are the UK’s largest national digital and services for customers. support service for customers in-store and in their homes. UK Computing UK & Ireland Elkjøp is the leading electrical retailer At the start of the year, Elkjøp opened a new Megastore in Lørenskog across the Nordics. in Norway. Offering customers significantly increased ranges, it has had a strong first year’s trading with positive customer feedback. A further Elkjøp and Lefdal stores operate in two Megastores have been opened in the Nordics during the year. Norway, El Giganten stores operate in Sweden and Denmark and Gigantti stores operate in Finland. Nordics Greece’s leading electrical retailer Greece grew market share in a challenging market and Turkey performed operates as Kotsovolos and in line with expectations. The turnaround plan in Italy is showing progress Electro World. Electro World with encouraging signs in a difficult economic environment. A store closure stores also operate in Turkey. programme concluded ahead of schedule, and management have made significant improvements in a number of areas, including stock levels, In Italy, we operate UniEuro electrical availability and margins. In Spain, a plan to reduce costs, manage stocks stores, some with PC City ‘stores- and preserve cash has been implemented. in-stores’. PC City also operates in Spain. Southern Europe Electro World stores operate in the Operations in the Czech Republic continue to perform well despite the weak Czech Republic, Poland and Slovakia. environment. The Group’s first stores in Slovakia have performed in line with expectations. In May, the Group announced it had sold the operations of Electro World Hungary, confirming at the same time that Poland remains under strategic review. Central Europe Other International PIXmania.com is a pan-European PIXmania performed well in most of its key markets, although sales growth online electrical retailer. was impacted by the slowing consumer environment, and sales in the UK were held back by the strength of the euro. Dixons.co.uk is one of the leading UK electrical e-tailers. Dixons.co.uk continues to improve its consumer proposition which will be bolstered further when it transitions to the PIXmania e-merchant platform. e-commerce 6 DSG international plc Annual Report and Accounts 2008/09 Business Overview Countries we operate in Performance Review Stores and online presence Online presence only Stores only Average selling Website Underlying sales Stores Selling space area per store Employees £million ’000 sq ft sq ft www.currys.co.uk 2,657.8 551 5,317 9,650 22,978 Strategic Summary www.pcworld.co.uk www.pcwb.co.uk 1,570.8 161 2,545 15,807 www.thetechguys.com www.elkjop.no Corporate Governance www.elgiganten.se 1,625.2 247 3,562 14,421 5,966 www.elgiganten.dk www.gigantti.fi www.lefdal.com www.kotsovolos.gr www.unieuro.it 1,405.4 325 4,593 14,132 6,802 www.pccity.es www.electroworld.gr Financial Statements www.electroworld.cz www.electroworld.pl 160.4 29 755 26,034 1,358 www.pixmania.com www.dixons.co.uk 807.4 – – – 1,213 Information for Shareholders DSG international plc Annual Report and Accounts 2008/09 7 Directors’ Report: Business Overview Highlights Underlying Group sales* £million Underlying profit before tax* £million 2008/09 8,227.0 2008/09 50.5 2007/08 8,338.6 2007/08 225.6 2006/07 7,834.5 2006/07 307.9 2005/06 6,888.2 2005/06 321.7 2004/05 6,392.1 2004/05 298.6 Underlying diluted earnings per share* Pence Dividends per share Pence 2008/09 0.7 2008/09 n/a 2007/08 7.2 2007/08 5.45 2006/07 9.6 2006/07 8.87 2005/06 10.2 2005/06 8.45 2004/05 9.3 2004/05 8.05 *Underlying results exclude the trading results of businesses to be closed, impact of amortisation of acquired intangibles, net restructuring and business impairment charges, other one-off non-recurring items, profit on sale of investments, net fair value remeasurements of financial instruments and, where applicable, discontinued operations. 8 DSG international plc Annual Report and Accounts 2008/09 Business Overview Chairman’s Statement Well placed to deliver the Renewal and Performance Review Transformation plan Sir John Collins John Allan and Sir John Collins Extraordinary times call for extraordinary effort, initiative plan and our determination to serve the customer better Strategic Summary and resilience.