DSG international plc Trading update announcement 14 January am ANALYSTS SCRIPT

Transcription

1 DSG international plc Trading update announcement 14 January am ANALYSTS SCRIPT Good morning Ladies and Gentlemen. I am joined on this call by Nicholas Cadbury and David Lloyd-Seed. The purpose of this call is to give you an update on our trading for the 12 week period to 9 January Thank you for calling in on this very busy morning for the sector, as such we will keep this brief and give you some time for questions and answers. We are very pleased to report that total underlying sales for the period were up 11% in sterling, and up 8% in local currency terms. Like for like sales for the reported period were up 8%. We saw a good performance across all categories and all markets, particularly in UK Electricals, Nordics, the Internet and in Italy. This performance was better than we had expected and demonstrates that the self help actions we are taking under our renewal and transformation plan are starting to bear fruit. We are particularly pleased with the performances we are seeing in our new store formats with consistent gross profit uplifts being achieved through the Christmas period and notably in the Megastores and 2-in1 stores across the Group. Gross margins for the Group were down 0.8% for the period. This was partly as a result of our planned intention to invest in sales through the Peak period, but also as a result of product mix as well as the mix across markets, particularly as we continue to invest to grow share in the Nordics and online. Following all the work done during the course of last year on stock management we experienced very good levels of availability across the Christmas period whilst operating with lower levels of stock. Our key measure, stock turn, was up over 10% year on year. Just a brief comment on each region: 1

2 Starting with UK & Ireland Electricals, total and like for like sales were both up 8%. We experienced particularly strong trading in UK Electricals with strong like for likes reflecting share gains in all major categories. With some disruption from the weather last week, it is difficult to know precisely whether the VAT changes pulled forward demand, but it may well have done. The economic backdrop in Ireland remains difficult, but our business there performed well and saw positive like for likes in the sale period post Christmas, resulting in low single digit declines across the whole reported period. Our business there is taking all the right actions managing stock levels, reducing costs and focusing on cash generation. In UK computing total sales were down 8% and like for like sales were down 3%. PC World retail has seen a dramatic improvement in its trading performance and while overall sales performance continues to be held back by the very weak B2B market, retail sales were broadly flat over the period. In particular the launch of Windows 7 helped drive sales in the weeks since its launch and again in the sale period. I am particularly pleased with how well the new format stores performed across the UK, notably the new Megastores and the combination 2-in1 stores where customers really get the full range experience with service and expertise to suit their needs. While footfall across the UK was down year on year, we saw a much improved conversion rate as the best practices from the transformed stores have been shared across the rest of the business where possible. While we invested in the customer offer over Christmas, gross margins across both businesses in the UK & Ireland were only slightly down year on year as 2

3 we saw the benefits of the actions we have been taking in the distribution and service network. We continued to experience a fantastic trading performance across the Nordics with total sales up 40% in sterling, 28% in local currency and like for like sales up 18% in the 12 weeks. As we have mentioned before ElkjØp has been investing in margin to grow its market share and capitalise on the weakness of competitors. In addition it has implemented a programme to bring pricing of key product ranges more into line with that of the internet, as we did in the UK, which impacted gross margins by between 1.5% to 2% over the period. However as the sales numbers show these programmes have resulted in improving cash margins for the business. The business has opened 11 new stores year on year all in the new transformation format and all are performing well. In Other International total sales were up 1% in sterling and down 1% in local currency. Like for like sales were up 5%. The turnaround plan in Italy is ahead of schedule and we saw a very strong performance with like for like sales up over 9% across the Christmas period. While the economic woes in Greece and Spain are much publicised, the businesses have delivered robust performances with broadly flat performances and both growing market share in all their categories. Similarly Central Europe continues to trade robustly in a very tough market. The start up operations in Turkey continue to deliver good sales growth as customers recognise the benefits of our large store formats delivering choice and service. The pure internet business performed very strongly across the period with sales up 16%. This reflected increased advertising to drive traffic to our websites as well as the changes implemented during the year, particularly in 3

4 Dixons. PIXmania performed strongly across all its markets and categories and particularly in its Southern Europe markets. We ended the period with net cash and now expect year end net debt to be in the region of 220m. We are about to commence a period of consultation with the active members of our defined benefit scheme to close the scheme to future accruals and to enrol members into the Groups defined contribution scheme. Assuming these proposals go ahead it will help to protect the existing commitments by reducing the risk to future liabilities and reducing the current deficit. Based on current assumptions the reduction would be approximately 20 to 25 million. These changes would then be in place ahead of the results of the next triennial valuation. There are currently around 2,400 active members in this scheme compared to approximately 23,000 employees in the UK. The defined benefit scheme has been closed to new members since September We are on track to reduce costs by 50million this year as part of our 4 year 200million cost reduction programme. So overall a very pleasing performance reflecting the strength of our customer offer as we make the changes to the business under the renewal and transformation plan. While we remain cautious about the economic environment for 2010, particularly in the UK given the economic environment, we are getting on with our Renewal & Transformation plan this year and expect that our customers and shareholders will benefit from the self help this will bring. Ladies and Gentlemen, that ends the formal part of this call and I would now like to open up the call to questions. 4

5 I would like now to draw the call to a close. Thank you for listening and thank you for your questions. If you have any more please do contact one of us. 5