dixons_annualreport2011_12.pdf

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Dixons Retail plcAnnual Report and Accounts 2011/12


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Read the Annual Report and much more at

www.dixonsretail.com

Cautionary statementCertain statements in this Annual Report and Accounts areforward looking statements. Such statements are based oncurrent expectations and are subject to a number of r isks anduncertainties that could cause actual results to differ materiallyfrom any expected future events or results referred to in these

forward looking statements. Unless otherwise required byapplicable laws, regulations or accounting standards, we donot 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 AnnualReport and Accounts should be regarded as a profit forecast.

About us

Dixons Retail plc is a specialist electrical

retailer and services company whichsells consumer electronics, personalcomputers, domestic appliances,photographic equipment, communicationproducts and related services.

We are one of Europes leading specialistelectrical retailing groups. We trade throughover 1,200 stores and online, spanning 28countries and we employ 36,500 people.

Scan here to downloadour Investor Relations apponto your iPad or iPhone


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01Annual Report and Accounts2011/12 Dixons Retail plc

Contents

EXPERTISE

CHOICE

RELIABILITY

FOCUS

12

16 18

14

Financial Statements68 Independent Auditors Report

69 Consolidated Income Statement

70 Consolidated Statement ofComprehensive Income and Expense

71 Consolidated Balance Sheet

72 Consolidated Cash Flow Statement

73 Consolidated Statement of Changesin Equity

74 Notes to the Consol idatedFinancial Statements

120 Company Balance Sheet

121 Company Cash Flow Statement

122 Company Statement of Changes inEquity

123 Notes to the Company FinancialStatements

Shareholder Information132 Five Year Record

134 Shareholder Information135 Index

Business Overview

02 Delivering transformation and renewal

04 Group at a Glance

06 Chairmans Statement andFinancial Highlights

08 Interview with the Group Chief Executive

Strategic Summary

11 The customer experience

12 FOCUS

14 CHOICE

16 EXPERTISE

18 RELIABILITY

20 Our Markets

21 Business Model and Strategy

24 Resources

26 Looking Forward

27 Key Performance Indicators

28 Principal Risks to Achieving theGroups Objectives

Performance Review

31 Overview

33 UK & Ireland

34 Northern Europe

35 Southern Europe

36 PIXmania

37 Group Financial Summary40 Corporate Responsibility Report

Corporate Governance

44 Board of Directors

46 Chairmans Introduction

47 Statutory Information

49 Corporate Governance Report

52 Audit Committee Report

54 Nominations Committee Report

56 Remuneration Report

67 Directors Responsibilities

Directors report and business review


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Directors ReportBusiness Overview

36,500colleagues employed across the Group

No.1selling product of the year

in the UK was the iPad2

Deliveringtransformationand renewal 8.2bn

total Group sales

97mGB of data equating to 155,000 KnowhowClouds have been purchased by customers to

protect their photos, music and documents

128,252tonnes of WEEE collected and recycledin UK & Ireland and Nordics


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Annual Report and Accounts2011/12 Dixons Retail plc 03

1,211stores and online operations

spanning 28 countries

BusinessOverview

97%right first time deliveries increased from 88% to 97%

7own brands: Currys and PC World essentials,

Logik, Goji, Advent, Sandstrm and iWantit


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04 Dixons Retail plc Annual Report and Accounts2011/12


UK & IrelandFor more informationplease turn to page:

Northern EuropeFor more informationplease turn to page:

HighlightsWe are well positioned to continue to deliver world-class value, choice

and service to our customers as we execute the Customer Plan. Stores

are being refitted so customers can enjoy the best of both Currys and

PC World formats under one roof.

We are improving the Customer Journey for each category to help

customers purchase the right product with the right solution for their needs.

Our multi-channel offering provides customers with the convenience of

online together with the accessibility of stores, particularly through the

reserve&collectfacility, and grew 28% during the year.

Under the Knowhow brand, we offer the most comprehensive range

of services to customers such as delivery and installation, set-up, Cloud

back-up and Knowhow Movies.

Dixons Travel stores deliver a wide range of products aimed at the

travelling customer.

An agreement was signed with Harrods to sell leading edge electrical

products as well as Knowhow services from their iconic London store.

HighlightsThe Nordic management team continues to drive the Elkjp business

forward, retaining market leader status and growing share across the

Nordics. The division continues to perform well as more stores are

extended or refitted and Superstores are refurbished to the new

Group format.

First class customer service, a cost effective supply chain structure, strong

retail sites in all countries and great relationships with suppliers delivers an

excellent shopping trip for Elkjp customers.

During the year, Elkjp delivered a strong performance across all four

countries with total sales up 10% with a particularly strong performance

in Denmark.

The Electroworld operations in the Czech Republic and Slovakia are now

managed alongside the Nordic operations to benefit from the successful

Nordic business model.

Group at a Glance

Our brandsCurrys and PC World are the largest specialist

electrical retailing and services operators in the

UK and Ireland.

Knowhow is our market leading services brand

which puts customers at the heart of everything we do.

Dixons Travel operates in all major UK airports as

well as Dublin, Copenhagen, Rome and Milan.

DSGi Business provides computing products

and services to business to business customers.

Our brandsElkjp is the leading specialist electrical retailer

across the Nordics.

Elkjp and Lefdal stores operate in Norway,

El Giganten in Sweden and Denmark and Gigantti

in Finland.

In the Czech Republic and Slovakia, we operate

under the Electroworld brand.

Underlying sales(million)

3,834


2,628

Average sellingarea per store(sq ft)

13,591

Average sellingarea per store (sq ft)

15,994

Number of stores

587

Number of stores

315

Average employees

20,851

Average employees

8,748

Selling space(000 sq ft)

7,978


5,038

We are a leading

European electricalretailing andservices company

www.currys.co.uk

www.pcworld.co.ukwww.dixons.co.ukwww.knowhow.co.ukwww.equanet.co.ukwww.currys.iewww.pcworld.ie

www.elkjp.nowww.elgiganten.sewww.elgiganten.dkwww.gigantti.fiwww.lefdal.comwww.electroworld.cz

33 34


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05Annual Report and Accounts2011/12 Dixons Retail plc

BusinessOverview

SouthernEuropeFor more informationplease turn to page:

HighlightsDespite the economic instability across Southern Europe, Unieuros

customer offer has improved and the turnaround of the business has enabled

Unieuro to trade ahead of its competitors. In the difficult trading environment,

further cost reduction has been identified to strengthen the business.

A difficult trading environment in Greece remains challenging for Kotsovolos.

The business, however, remains the market leader and further actions

to reduce costs in the business have limited the impact of the weak

sales environment.

Electroworld in Turkey continues to expand in an exciting growth market.

HighlightsPIXmania has experienced a difficult year with a number of factors impacting

performance, some of which could not have been foreseen. The natural

disasters in Japan and Thailand severely limited the supply of key product

lines in photography and digital storage.

PIXmania has been transforming its operating model and widening its

product categories. PIXplace, its market place, continues to grow strongly

with over 1,500 active third party resellers offering over 1.5 million products

in 26 countries. PIXmania now operates 27 stores giving customers more

flexibility for reserve&collect. Further investments in E-merchant, its market

leading e-commerce platform for third party customers, has seen it win the

Carrefour account, launched in November 2011 and more recently Celio,one of Frances largest menswear brands with a launch planned for summer

2012. It has also been streamlining processes and reducing costs.

PIXmaniaFor more informationplease turn to page:

Our brandsKotsovolos is Greeces leading specialist

electrical retailer.

In Italy, we operate Unieuro electrical stores

with some as combined 2-in-1 Unieuro and

PC City stores.

In Turkey, we operate the Electroworld brand

with a local joint venture partner.

Our brandsPIXmania is one of the largest pure play electrical

retailers in Europe operating in 26 countries.


1,060


665

Average selling areaper store (sq ft)

13,699

Average selling areaper store(sq ft)

1,592

Number of stores

282

Number of stores

27

Average employees

5,075

Average employees

1,402


3,863


43

www.pixmania.com

www.kotsovolos.grwww.unieuro.itwww.electroworld.grwww.electroworld.com.tr

1.

2.

3.

4.

Underlying sales by division

1.UK & Ireland 3,834m

2.Northern Europe 2,628m

3.Southern Europe 1,060m

4.PIXmania 665m

35

36


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Chairmans StatementJohn Allan

Dixons Retail has continued to make significant progress since Ilast reported to you. We remain relentlessly focused on two goals continuously improving our offer to customers while at the same timestrengthening our business in the long term interests of shareholders.

A key component to both is to develop and engage our people.

During the course of the year both John Browett, our ChiefExecutive, and Nicholas Cadbury, our Group Finance Director,chose to leave to join Apple and Premier Farnell, respectively.We are grateful to them for the contribution they made and weresorry to see them go, but one of our areas of focus has been onensuring we were well placed in terms of senior managementsuccession. As a result we were pleased to be able to appointstrong successors from within the Group in Sebastian James andHumphrey Singer and also to be able to appoint Katie Bickerstaffe

to the Board in the new role of Chief Executive UK & Ireland.

Sebastian and Katie have led much of the successful change inthe UK & Ireland business over the last four years. We are quietlyconfident that Sebastians strong management team will build on thefoundations that have been laid and take the Group to sustainablesuccess over the next few years.

The economic environment has remained challenging in all of ourmarkets and this has held back our overall profit progress. In theUK & Ireland, Nordics and Greece where we are market leaders wehave continued to gain market share. We delivered another strongperformance in the Nordics while in the UK & Ireland, despitea declining market, we managed to grow profitability through astrengthened customer offer, tight management of costs and careful

margin management. The Italian and Greek economies have beenparticularly difficult and PIXmania has had to adapt its businessmodel significantly in a rapidly changing multi-channel environment.Recognising the continuing challenges in these markets, we haveimpaired the goodwill of these businesses which, together with othernon-underlying charges, totalled 189.6 million, therefore resultingin a pre-tax loss of 118.8 million.

Our Southern European business units and PIXmania are receivingparticular focus at present and we are determined to reduce theprofit drag they represent as quickly as possible.

In spite of the continuing economic and performance challenges wefeel we can now look to the future with real confidence, particularlyin the UK & Ireland and Northern European divisions. Having fixed

many of the issues in the Group we will now ensure we completethe job and deliver a competitively superior offering. The interview

Dixons Retail has continuedto make significant progress.We can now look to the futurewith real confidence.


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2010/11 8,154.4

2011/12 8,186.7

2009/10 8,320.0

2008/09 7,955.8

Underlying Group sales*(million)

(million)

2010/11 127.6

2011/12 115.1

2009/10 133.2

2008/09 95.3 214.3

EBIT*

2010/11 85.3

2011/12 70.8

2009/10 90.9

2008/09 70.6

Underlying profit before tax*(million)

2010/11 1.6

2011/12 1.1

2009/10 1.5

2008/09 1.3

Underlying diluted earnings per share*(pence)

*Underlying per formance measures are as defined in the Performance Review.

07

BusinessOverview

Annual Report and Accounts2011/12 Dixons Retail plc

with Sebastian on the following page and which is available to viewon our corporate website, sets out some of the opportunities ahead.

We are delighted with the successful launch of our Knowhowbrand in the UK which encompasses all of our service offerings.All of our colleagues, whether in stores, or in our service and logisticcentres, have worked hard to deliver great service and to give realmeaning to the brand and we have begun to broaden our offeringthrough the launch of new services.

During the year the Group continued its modest support for twonational charities Lifelites and the e-Learning Foundation, whichhelp provide access to technology for children with disabilities orwho are disadvantaged. Our colleagues have organised some greatevents to raise money for these charities and I would like to thankthem for their efforts. In the year ahead we will review whether and

how we can provide greater support and access to technology fordisadvantaged children and their families.

Andrew Lynch retired from the Board after nine years as a non-executive director. I would like to thank him for his considerablecontribution as both Senior Independent Director and as Chairmanof the Audit Committee. Tim How has taken on the role of SeniorIndependent Director and Jock Lennox, who joined the Board inJanuary, has taken on the Chairmanship of the Audit Committee.Jock has a wealth of experience from a long and distinguishedcareer at Ernst & Young and I am sure will add real value bothto the Audit Committee and the Board.

I would particularly like to thank my non-executive colleagues fortheir tireless efforts throughout the year. The executive director

changes led to a number of meetings and calls to which all thenon-executives committed and contributed wholeheartedly.

In the year ahead it is likely that the economic challenges will remainand possibly in some markets intensify. However we are confidentthat our single-minded focus on getting the customer offer rightwhile continuing to improve our efficiency will position us to makethe maximum possible progress.

I would like to thank all our colleagues for their successful effortsover the last year and I am sure they will work equally hard to achievefurther success in the year ahead.

John AllanChairman


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Interview with theGroup Chief Executive

Sebastian James

The following is taken from a video of an interview withSebastian James that is available on our corporate website,www.dixonsretail.com.

Dixons and the sector have faced somewell-documented challenges in recentyears. How do you see the business now?

We think we are in pretty good shape. If we think about the last yearweve halved our net debt. We have put in place a new revolvingcredit facility that will give us bank support for the next three years.And weve got a terrific plan to drive the business forward andimprove its performance and profitability in the coming years.

If we consider where we were three or four years ago we had abusiness where we had really lost sight of the customer in what wewere trying to do. At the same time, the market was getting muchmore competitive. Of course, we didnt know it then, but we werealso heading into a powerful economic storm. Its been very excitingand made me very proud to be part of a team that really faced thosechallenges and began to make proper differences, particularly forour customers.

What are your priorities for the Group?

There are three things that emerge for me as the priorities for theGroup, having visited all our businesses and understood what their

issues are.

1. In every market the first and most important thing we need to dois build a sustainable position for the business, to really establishour place in the world in that market, to build this position as theplace that a customer would rationally choose all the time to buyelectrical goods.

2. The second thing is we have a number of businesses that areperforming extremely well, and that are generating good returns.I need to tackle very hard those areas of the business whichperhaps are not generating as good returns. I need to make surethat we take those businesses and find solutions that notably givethem the right strategic position but also return them to profitability.

Above all, we need to be thebest electrical retailer who helpscustomers make great choices.


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09

BusinessOverview


3. Thirdly, weve only just scratched the surface of the potential thatwe have in learning from one another and in leveraging our scaleacross our Group. One example would be that we have severalsuppliers with whom we have significant relationships. We will lookat how we can make these work better for the Group as a whole.

If we do these three things we can improve returns for ourshareholders. We need to focus very explicitly as a whole businessright down the organisation on doing this. I am very committed thatthe whole business begins to think about how it makes sure thateveryone is doing a great job for our customers, and that generatesa return for our shareholders.

What do you really mean by doing a greatjob for customers?

If I use the UK, as an interesting example, and this holds true alsoin Italy and Greece and in a number of the territories in which weoperate, we have moved from being a business that was all aboutpile it high, sell it cheap in stores into a business that really takesseriously the question of how do I make my customers happy?.Our job is to take customers fears and anxieties and use technologyto make their lives better. I genuinely believe that most of mycolleagues in all of our stores and all of our home delivery vans,are thinking how do I make people happier today. After all the mostexpensive thing a customer can do is choose the wrong product.

We, of course, need to be very competitive on price. But above allwe need to be the people who help customers make great choices.

That means taking the time, the effort to demonstrate, to displayand to understand what customers are trying to achieve when theycome into our stores looking for electrical goods.

How do you make sure your colleaguescan deliver this?

We have retrained all of our colleagues right the way through thecycle at least three times in the UK. If you took all of our colleaguesa year ago and you take all our staff today 85% of the people whoare here today in the UK were also here a year ago. And in retailthats quite a high number. We are equipping our colleagues everyday to do a better job for customers.

How do you measure this?

Over the last year and half we have moved our customer advocacyin the UK, and we use a very tough measure of strong advocacyof very likely to recommend us, from 43% to 75%. If we use themeasure that a lot of people use in the market which is likely torecommend us we reach 92%.

While these numbers are comparable with the very best retailers inthe UK, I will never be satisfied until we hit 100%. But this shift is aprofound change in the way customers who shop with us are talkingabout us, thinking about us and referring to us. We are not nearlythere yet. We have much more to do, but I think its a very powerfulsignal that we have changed our approach to the world.

We also reward our colleagues in the UK on these metrics and soare explicitly rewarding them for doing a better job for customers.

Isnt the internet a threat to yourbusiness model?

We must be price competitive with the internet and we must be pricecompetitive with supermarkets, and increasingly we are, very. In factwe are quite often cheaper than the internet.

We can differentiate on service, but it does of course cost more toprovide the convenience of stores as well as service. We can affordto do it because we think weve solved a number of very importantproblems about how we bridge the gap in our cost between ourcost structure and that of a single channel internet operator.

The internet is a friend to us. We have a very large multi-channelbusiness in the UK, and its growing incredibly fast. We need to thinkabout a world where a customer starts their journey online, goes tostore to look at the product and to make a good choice and mightend up ordering it back at home for pick up in-store. This is a quitenormal transaction now.

So increasingly Im not thinking is this an online or offline transaction,but did the customer end up buying from me or did they end upbuying from somebody else? And that I think is the critical question.


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Interview with theGroup Chief Executive

Sebastian James

So what makes your model sustainable?

There are four activities we can do that are key strengths of ourmulti-channel service-led business model.

The first very important thing that we need to do is work withsuppliers to understand which products they would like customersto choose. Generally speaking there is a combination of things.The customers that are happiest are the ones that buy the productsthat are best for them, and the products that are best for them areusually the newest ones with the best technology.

Suppliers also make more money out of the products that are newer,because they invest a lot of money in research and then they are able

to charge a premium for those products because they have genuinedifferentiating benefits for the customer.

With the 40 million conversations a year that we have with customers,we can talk to them to explain the benefits, demonstrate the newerand better products that make customers happy and whichsuppliers want to sell. Our suppliers support us for this workin a number of ways.

The second very important thing we need to do is that whencustomers come in and they say they want a piece of hardwaresuch as a television what they mean is they want to do something.They want to watch the game, they want to entertain the children.Thats also true for a computer, say, if they want to start a business.Its the doing that they want to do. To do so they actually need

a whole variety of other things as well as just the box.

Where customers might be able to go to the internet and choose abox and get it delivered, we will provide the installation, the teachingthat helps them to learn how to use it, all the bits and pieces theyneed as well as the peace of mind that if anything goes wrong theyknow where we are. So these things are very important sourcesof revenue for us.

Thirdly, we believe that customers will reward us with a smallpremium for providing excellent service, for being there, for givingthem peace of mind if they trust us.

The final thing we need to be is very efficient. Weve taken a hugeamount of cost out of our business over the last four years, whileimproving customer service, and we need to go on doing that.We need to be really smart about every penny that we spend andabout fixing our processes, improving our systems, improving the

way we think about our business so that we can be efficient.

With those things together we think we more than bridge the gapbetween our cost structure and the single channel internet operators.

We think we now have a business in which nearly all of the time, innearly all of the markets, in nearly all of our stores we are providingthe sort of service that customers want, and are telling us they want.And we are doing that efficiently and well. I believe thats a greatspringboard and I believe that we are the best and the only show intown if you want to come and buy electrical goods and have a reallygood experience doing so.

Sebastian James

Group Chief Executive


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11

StrategicSummary


EXPERTISE

CHOICE

RELIABILITY

FOCUS

Our role is shoulder to shoulder

with our customers as we helpthem navigate the increasinglycomplex world of technology.Sebastian James, Group Chief Executive

We listen to our customersthrough feedback andsurveys. This enables usto focus our business ondelivering an unbeatablecombination of value,choice and service.

Turn to page: 12

Through our own trainingprogrammes and by workingwith suppliers, we ensure ourcolleagues understand thelatest technology to helpcustomers choose the right

solution and get the mostout of it.

Turn to page: 16

Knowhowoffers customersa fantastic range of servicesincluding in-store help,home delivery and set-up,after-sales advice and supportas well as repair services.

Turn to page: 18

With wide ranges andan improved multi-channeloffering, customers can buythe products and servicesthey want, how they want,when they want.

Turn to page: 14

Directors ReportStrategic Summary


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Theyre interestedin working out

whats right for me

Customer feedback& surveys

Customer journeys helpexplain technology

They deal withqueries brilliantly

Buy the rightsolution first time

SERVICE

Dixons Retail plc Annual Report and Accounts 2011/12

Strategic Summary

75%Our focus on the customer is driving

higher advocacy levels with 75% ofthose leaving our stores very likely to

recommend us in the UK. This is a

32 percentage point increase versus

last year.

411Since we began the Renewal and

Transformation plan in May 2008,we have transformed or re-fitted

411 stores across the Group. This

year alone, we transformed 49 stores

across the Group which included

19 Megastores.

FOCUS

12


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Delivery, recycling &

installation options

Multi-channelgives more choice

7,500products ina Megastore

The pricesare great

Peace of mind withwhateverhappens

CHOICE

VALUE

Annual Report and Accounts 2011/12 Dixons Retail plc 13

StrategicSummary


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Play tables to trybefore buying

Deliverychoices to suit

Easy tofind whatIm after

Online orin-store...its easy

ONLINESTORES

123

14 Dixons Retail plc Annual Report and Accounts 2011/12

CHOICE

Strategic Summary

10,000We offer our customers over 10,000

products to choose from online acrossour UK websites and our Megastores

stock over 7,500 different products.

76Knowhowis the new face of

technology and support in the UK.We offer 76 different Knowhow

services to suit our customers

individual needs.


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Good, better, bestproduct choices

The right productfor you

Major brands& own brands

RANGE

15

StrategicSummary

Annual Report and Accounts 2011/12 Dixons Retail plc


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PRODUCTS

EXPERTS

Demos help tocompare choices

Accessories tomake it work better

Knowhowexpertise

Informed advice in-store,online or over the telephone

They helped me choose

the right solution

16 Dixons Retail plc Annual Report and Accounts 2011/12

Strategic Summary

EXPERT321,000Knowhowcolleagues set up 321,000

products for our customers in-store inthe UK. Customers left with their product

ready to use and knew how to get the

most of it.

17,883So far, 17,883 colleagues have

received training in the UK to helpour customers buy the right solution

for their needs and give them the

proper advice they want.


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SOLUTIONS

They help me getmy products up& running

They make things work& keep them working

Walk out working

Guidance & support

17

StrategicSummary


ISE


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Well get you up and runningand show you how it works

SERVICE INSTALL

Deliver at atime to suit

Well call you whenwere on our way

Next day delivery & 3-4 hour

time slots across the Group

Dixons Retail plc Annual Report and Accounts 2011/12

RELIABI

Strategic Summary

70,000We made over 70,000 big box product

deliveries a week over Peak in the UK, withclose to 35% of these being installations

at a time to suit our customers.

7 daysOur average repair turnaround time

for laptops and TVs has decreasedand is down from 10 days to 7 days

in the UK.

18


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Remove and recycleold products for free

FIX

We repairover 800,000laptops,desktopPCs and TVsevery year

No lemonsguarantee

Faster repairtimes

StrategicSummary


LITY

19


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Our Markets

Specialist electrical retailers are the predominant destinationfor customers in the European market. Buying groups, generalmerchants and independents also have a retail presence in mostEuropean markets. The market is served by a relatively small numberof global manufacturers supplying goods to local, regional, nationaland international electrical retailers.

The electrical retail market can be split between specialist electricalretailers, such as Dixons Retail, and general retailers which sellcertain electrical goods as part of a wider offering, such ascatalogue retailers, department stores, large supermarket chainsand single channel internet retailers. The market can also be brokendown into two distinct distribution channels: assisted andunassisted. In the assisted channel, specialist retailers such as us,help customers through the buying process in the form of productadvice, add-on services, delivery and installation. The unassistedchannel, which includes single channel internet retailers as wellas general retailers, tend not to offer all of these services.

We are one of the largest specialist electrical retailing and servicescompanies in Europe and with leading market shares in the UK,Ireland, the Nordic region and Greece we benefit from long-

established and widely recognised brands. In each of our marketsthere are varying numbers of specialist retailers who compete inthe assisted market. While we do compete against general retailers,this is generally limited to certain lower unit price product categoriesas these operators do not offer the full range of products, assistedsale or associated ancillary services we are able to provide.

We do maintain a presence in the unassisted channel throughour pure play internet businesses of PIXmania and Dixons.co.uk.This enables us to compete directly with a large number of internetretailers across Europe, it also provides useful insight into thedynamics of this part of the market.

The internet delivers enhanced product information and facilitatesprice comparability for consumers. Whilst this creates new

challenges, it also provides a significant opportunity. We believe that,over time, internet demand will polarise towards the larger retailerswith scalable distribution and systems, together with proven aftersales service and support. In particular customers are showing anincreasing propensity to combine the internet with stores as theyconsider their purchase with, for example, collect@storeproving tobe increasingly popular where customers can order on the internetand collect from a convenient store at a time to suit them.

Innovation brings new products and products with improvedfunctionality, such as 3D and Smart TVs, Ultrabooks and ApplesiPad, in turn driving sales growth. New content, such as socialmedia, apps, digital media and cloud computing, also help todrive hardware innovation and replacement. Product sales are alsodriven by structural shifts such as analogue to digital and standardformat to HD television. In addition, innovation drives new service

requirements such as TV installation and data backup. In thisincreasingly complex world we believe our assisted sales model isbest placed to help customers navigate the products available andto help them choose a complete solution that best meets their needs.

Electrical products, and in particular brown goods, are predominantlydiscretionary purchases. However, increasing penetration of digitaltechnology in the home drives replacement cycles as these productsbecome less discretionary. The economic backdrop also determineswhether customers buy up or down price points. Accordingly,the electrical market tends to grow at a rate which is at or exceedingthe economy during boom years. While the opposite can be trueduring a downturn, this may be influenced by new innovationand products.

The current economic backdrop has led to a number of electricalretail operations, both store and internet based, exiting the market,helping us gain market shares. This underpins our view that a strongservice led multi-channel operation satisfies both customer andsupplier needs while delivering a sustainable business as customershopping habits continue to evolve.

The rapid innovation cycle leads to price deflation in brown goodsand computing but also drives volume as products become moreaffordable and replacement cycles accelerate. For larger ticket items,the low frequency of purchases limits the impact of price deflationon total market sales as consumers typically trade up.

The sale of white goods is underpinned by the replacement cycle.Due to higher costs of repair, it often makes better economic

sense for consumers to replace white goods outright rather than toarrange for their repair. The sale of white goods is also driven by thedynamics of the housing market, as new construction, house salesand refurbishment trigger new purchases.

The UK and Nordic markets have high broadband penetration anda maturing online sales platform. The increase in online penetrationprovides us with the opportunity to increase both the range of goodson offer and the availability of product information. Our multi-channelapproach is well placed to exploit synergies between our internetsites and stores.


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21

StrategicSummary


Business Model and Strategy

Technology and the digitised world increasingly embed themselves intoour customers lives, whether it be keeping up with friends and familythrough social media, online gaming, watching movies on the move,sharing pictures with others or across different technologies in thehome, backing up precious memories in the cloud or through energyefficiency. The latest technology allows our customers to do all thisand more with tablets, Smart TVs and apps. The ecosystems behind

the current digital revolution, are simplifying our customers lives.Customers come to us not just for the enabling technology, but tofind a solution.

StrategyThe Renewal and Transformation plan continues to make significantimprovements to our business. We have set out three strategicpriorities that will build on that work and improve our businessfor customers. This will, we believe, deliver improving returns forshareholders through a focus on improving Free Cash Flowgeneration and EBIT margins of the Group:

1. Drive a successful and sustainablebusiness modelin a multi-channel world

2. Be a leaderin each of the marketsin which the Group operates

3.Alignthe Group to leverage consistentlypan-European scale and knowhow

1. Drive a successful and sustainablebusiness modelin a multi-channel worldThe way in which a customer shops is fundamentally changing.Our customers tell us that they want advice, to experienceproducts and to ensure they are making the right choices,particularly as these are often major purchases that they will ownfor several years. The internet empowers customers with lots ofinformation including product knowledge and price transparency.Single channel internet operators have structurally lower coststo sell products and have historically been able to offer highlycompetitive prices versus store based operators. We have closedthe price and cost gap dramatically in recent years and we willnow increase our focus on four distinct activities that we believeare the key strengths of our multi-channel service based modeland will support our competitive advantage going forward:

i. Work closely with suppliers to harness benefits available toour business model: Suppliers want to ensure that customersnot only choose their brands, but also experience the benefits ofthe latest products they have developed to meet customersneeds. As a multi-channel operator we work with our suppliersto ensure we can explain the benefits of these products anddemonstrate them to customers in our stores and our supplierssupport us in this work in a number of ways.

ii. Focus on complete solutions for customers: Customers buyproducts in order to achieve something, such as watching movies,or to entertain the children. This does not just mean buying thehardware, but increasingly includes delivery, explanation and

Building a sustainable

business in an everchanging world

peace of mind through product support and after sales services,as well as accessories and recycling. The conversations ourcolleagues have in store with customers gives us an opportunityto explain the benefits of these solutions. Our KnowhowTMbrandin the UK offers customers one cohesive services brand. We areconfident that there are increasing opportunities emerging in theadded value services market as customers become more reliant

on content, Cloud, services and technical support that enablethem to get the most out of the products they buy.

iii. Drive our service proposition: We need to ensure thatcustomers recognise Dixons Retail for great service. We need tobe able to stand shoulder to shoulder with our customers and theyneed to know they can come to our stores and get knowledgeableadvice to help them buy the right product. They need to beconfident that we will solve their problem for them quickly andefficiently. If we get this right we believe that customers will beprepared to pay us for this service.

iv. Reduce costs: The scale of our operations across stores, ranges,logistics, distribution, repairs and services means that we cancontinually improve processes to reduce costs. Over the last fivefinancial years the Group has removed a total of 285 million ofcosts and we are targeting a further 90 million of costs to beremoved over the next two financial years.

2. Be a leaderin each of the markets in whichthe Group operatesWe have strong market positions in the UK & Ireland, NorthernEurope and in Greece. In each of these markets we have seenconsolidation amongst competitors and we see opportunities toimprove these positions further as we implement the initiativesdiscussed above. Across the Southern European division andin PIXmania we need to set these businesses on paths that willmake them strategically strong and profitable, and drive solutionsthat will put them on firmer footings.

While the economic environment in Greece is very tough,Kotsovolos is a strong brand and has a leading market share.

We believe that this business will be able to continue to leverageits position to grow its share and manage costs aggressively.Our Italian business has continued to make progress againsteconomic headwinds and in the short term we will continue totake aggressive action on costs as well as improve the stockand cash position.

PIXmania has one of the largest non-food pure play platformsin Europe and represents a valuable source of insight andinformation on this segment of the market. It has expanded itsranges, offering both directly and through PIXplace and it hasexploited its E-merchant platform by offering hosting servicesto third parties, most notably Carrefour. However, its recentperformance has been disappointing. In the light of the changingbusiness model facing internet operators we are reviewing much

of PIXmanias activities to focus on those that deliver a competitiveadvantage going forward, such as product diversification,multi-channel offering as an e-commerce provider for thirdparties. Together with cost reductions we are confident that wecan reduce the losses experienced in the year just finished.


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3.Alignthe Group to leverage consistently pan-Europeanscale and knowhow

The Group has many best practices in each of its businessdivisions. Some work has taken place to align these and sharethem across the Group, such as the new store formats, supplierrelationships and to a l imited degree own brands. However, thereremain many opportunities to share knowledge, expertise and best

practice across the Group. Some of these will take time, but wemust exploit further the benefits of being a pan-European operator.

Delivering on these priorities will build on the improvements alreadydelivered by the Renewal and Transformation plan and enable theGroup to improve its EBIT margin going forward as well asstrengthen our focus on cash generation.

Our UK & Ireland and Northern Europe divisions together delivereda 2.7% EBIT return after associated central costs in the 2011/12financial year. We believe that a 3-4% EBIT return for thesebusinesses, is certainly achievable. In the other businesses, returnshave been disappointing and we need to focus on reducing thelosses to support an improvement in the Groups EBIT return.

Cash is an important part of this and the Group has been cashgenerative in each of the last two financial years which has enabledus to more than halve our net debt position to 104 million. As aGroup we need to make the right choices as to how each of ourdivisions utilise or preserve cash, whether it be determining rangesand stock held in store, managing returns and related processes,improving working capital and stock turn.

Business ModelOur business model enables us to offer our customers a trulymulti-channel integrated service based electrical retailing experiencethat delivers a sustainable business. Taking each of the componentparts in turn, it can be described as follows:

Customer InsightIn order to ensure we understand what products and services ourcustomers want, how they use the products they buy from us, andwhat they think of the service they get from us we use extensivecustomer insight. This includes discussions at customer panels,interviews, home visits and detailed surveys. We use this informationto build our ranges, improve our stores and services and otherbusiness decisions. This is supported by mystery shops in ourown and competitor stores, exit surveys and customer feedback.During the year our UK businesses made considerable progress incustomer satisfaction metrics as we continue to improve the business.

Multi-channelThe shopping trip for customers is constantly evolving. Our objectiveis to provide our customers with a seamless experience whereconvenience, ease of navigation and simplicity are key in attractingcustomers to shop with us whether it is online, in-store or acombination of both. We are improving our stores making themeasier to shop with, for example, improved navigation, bettersignage, playtables to allow customers to interact with productsbefore they buy, as well as good advice on features and benefitsfrom our colleagues. We are also combining our PC World and

Business Model and Strategy(continued)

MULTI-CHANNEL

Sales advice

Easy to shop

Playtables

2-in-1 store offering

reserve&collect andcollect@store

Seamless online / in-store experience

Specialist

PRODUCTS

Great brands

Wide range

Exclusivity

Own brand product

AFTER SALES

SERVICE & SUPPORT

Delivery & installation

Set up & upgrade

Help & support

Repair & protect

LOW COST OPERATING MODEL

VALUE CHOICE SERVICE

CUSTOMER INSIGHT


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23

StrategicSummary


Currys stores into 2-in-1 stores, which often feature a mezzaninelevel, give our customers greater access to our specialist computingoffer, combined with our market leading mixed electrical offering.This enables us to improve our sales densities and rent to space

mix. As mentioned above our websites are an integral part of theway in which customers choose products and we have carried out awide range of improvements to them during the year. In recognitionof how customer trends are evolving we have made it easier for ourcolleagues to access products and extended ranges in store. Forexample, our store colleagues are rewarded for all sales in theircatchment, whether it be online or in store. We are also introducingpay&collect, alongside our existing collect@storeservice, wherecustomers can buy products not immediately available in their localstore for collection later.

Our training programmes combined with our Product LearningCentresprovide our colleagues with the right tools to reallyunderstand customers needs and to provide them with thecomplete solution to properly meet those needs. We will continueto improve the training of our colleagues and the ways in whichwe can really make them experts in the products we sell.

ProductsCombining our customer insight with our market strength acrossEurope we can make sure we have the right range of products inour stores to suit customers needs. Our scale and relationships withsuppliers means that we can work with them to showcase the latesttechnology and products in our stores with areas dedicated to keysuppliers products.

Own brand products enable us to offer customers greater choiceand access to a range of products at competitive prices. We havedefined a clear good, better, best brand range of: Currys andPC World Essentials; Logik; iWantit, Advent; Goji; and Sandstrmbrands. We see particular opportunities in the area of accessoriesand essentials and during the year launched our very successfulSandstrm cable range and Goji headphones.

After-Sales Services and SupportOur customers need help with their products, whether it be deliveryand installation, help keeping their products up and running orrepair when things go wrong. Our business in the UK & Ireland sets

the benchmark for our services infrastructure. In May 2012 ourKnowhow services brand celebrated a very successful first year.

We operate the largest network of two man deliveries in theUK with an average of 50,000 deliveries per week enabling usto provide customers with the convenience of next day deliveryin a three hour time slot or the value of a free delivery later.

Our Knowhow teams in stores, in our call centre and fieldtechnicians can provide set up and upgrade services as wellas online fix and back up ser vices. Our market leading range ofhelp and support services ensure a customer has the backing ofexpertise and support that keeps their technology up and running.In the event that a customer has a problem with their product wecan fix it. For example, our state of the art repair facility in Newark,

now repairs 800,000 televisions, desktop PCs and laptops eachyear and is able to repair and return a laptop in seven days. Weprovide customers with a choice of support agreements such asPremier services which provide customers with a loan TV, forexample, if theirs needs to be taken away for repair.

Through ownership of the service infrastructure we can ensure thequality of service delivered to customers. This, we believe, providesus with a significant competitive advantage in meeting the needs ofour customers, as well as a revenue stream not readily available tosingle channel online and mass market competitors.

While much of the improvement work has been focused on theUK, core elements of the business model exist in our businessesin the Northern and Southern European divisions and we see more

potential to develop this area.

These factors combined ensure that we can offer our customersvalue, choice and service.

Market leading delivery& installation

Flexible, reliable andunbeatable value

Choices to suit the customer

Personalised hasslefree set up

Make it easy forthe customer

Range of upgradesdesigned to maximisethe performance of the

products for customers

Help me understand it

Remove the frustrationof technology

Telephone, online andin-home support

Peace of mind ifsomething goes wrong

Always there to help getit fixed


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Resources

Our resources

Customers

People

Suppliers

Distribution and Logistics

Store Portfolio

Intellectual Property

Cash

Energy

Customers

To deliver on our strategies and to evolve them according tocurrent requirements, we must listen effectively to customers andunderstand their needs. As a company, since 2008 we have investedin comprehensive customer research programmes spanning avariety of tools including exit surveys, mystery shops, focus groupsand effective data gathering.

Through this research, managed by our in-house Customer Insightteam, we have developed a clear and detailed understanding of whatwe are doing well and more importantly of where we can target furtherimprovements. Customers tell us that they need us to deliver a strongcombination of Value, Choice and Service across all our shoppingchannels, and it is clear from their feedback that more and more theyrecognise that we are doing this consistently, and moreover that weare outperforming our competitors. We will continue to deliver easier,more exciting places to shop for customers whether that be in-store,online or a multi-channel combination of both.

Listening to customers extends into how we approach the salesprocess in-store. Our FIVES training programme, designed toensure customers leave our stores with a complete solution thatis right for them, is now embedded in our colleagues training

programme, and this year was adapted to support the launch of ourend-to-end service brand Knowhow and its 4,000 team members.

By maintaining our absolute focus on the customer and deliveringwhat they want in a retail environment that is constantly evolving,we will continue to attract new customers and retain existing ones.

People

Dixons Retail is an organisation spanning most of Europe, with nearly37,000 colleagues in over 1,200 stores, offices, call centres anddistribution centres. For our colleagues, we believe there are fourcore values that constitute who we are, as individuals and as a team:

We love to make our customers happy

We know our stuff

We love to work hereWe deliver

In 2009, in the UK, we launched a comprehensive Customer Planin collaboration with our colleagues. The Customer Plan involvesimproving every possible aspect of the shopping trip for customers,whether that be in our exciting new stores, better ranges at great

value, untangling the shopping trip for customers, helping themget their products up and working, or keeping them working astechnology gets more and more embedded into daily lives.

We made huge progress last year across every aspect thatwe measured in the Shopping Trip. However, we must never besatisfied and we can and must make further improvements to delightcustomers and to outpace the competition. This year, the CustomerPlan will remain our vehicle for demonstrating to the team whatneeds to be delivered, building on last years successes, introducingnew work-streams and sharing our practices across Europe.

We are focusing on building a career development framework thatrewards customer centric behaviour and instils a sense of pridein our colleagues. We now provide tailor-made developmentprogrammes and support fur ther education qualifications for ourcolleagues throughout the business. Our development programmesuse modules, training workshops and a dedicated e-learning intranetservice that helps provide the skills colleagues need to succeed atevery level and career stage.

We operate sophisticated tracking and measuring processes,including regular mystery shops and exit surveys, to measureindividuals and stores performance, and to ensure we rewardappropriate behaviours. Each region within the Group defines its ownreward system as is appropriate to local customers expectationsand colleague behaviours. However, all these systems incentivisea combination of good customer service and contribution to a storeor teams performance.

Suppliers

As we build our market-leading reputation and become known notjust for Value, Choice and Service, but also as the go to locationfor all the latest technology, our relationship with suppliers becomesever more important. Product sourcing offices for each of the UK &Ireland division, Northern Europe, Italy, Greece, Turkey and PIXmaniacontinually monitor current and future product cycles with existingand potential suppliers.

In a complex multi-channel environment, suppliers trust us with theirnew product releases and stock allocations, as they appreciate thesuperior service and advice offered by our stores and indeed ourwebsites, as well as the exciting environments offered by ourtransformed stores.

We work closely with suppliers of all sizes to help them deliver theright product for customers, through the forecasting and planningstages to ensure we deliver the right levels of stock for customers atthe right time. The electrical and computing industry is characterisedby a number of large global manufacturers, who account for a largeproportion of our sales. However, we also source product froma large number of smaller suppliers. We seek to maintain strongrelationships with all of these suppliers, not just to source the rightproduct for customers, but also to ensure the Group can purchasethe appropriate level of stock on favourable terms. While we leveragethe Groups scale and buying power through an International Buyingteam, we also maintain strong relationships at a local level.

Our in-house design team continues to work closely withsuppliers to develop exciting environments in-store for colleaguesto demonstrate brands and products and ensure customers leavewith the right products for them.


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25

StrategicSummary


Alongside this, we continue to refine our own-brand ranges to suitall budgets and taste. Our most notable successes this year havebeen the launch of our own Sandstrm cables brand and theunveiling of a Goji headphone range fronted by Tinchy Stryder.

We also continue to embed our Currys and PC World Essentialsranges as key entry level products in our good, better, best line-up.These products are designed and sourced by the Groups teamsbased in the UK and Hong Kong in collaboration with manufacturersin, for example, Asia.

Distribution and Logistics

The Group sees distribution as one of the keys to the success ofthe Group in maintaining highly competitive margins and deliveringoutstanding, market-beating service to customers. We operatea centralised system of distribution centres in all the countries inwhich we operate. This delivers significant competitive advantages,including reduced operating costs, reduced supplier delivery costs,reduced stock volumes in store, increased flexibility as to where todeliver and when, and easier home deliveries.

While continuing to reduce costs, we are also constantly raisingthe bar, both in terms of successful delivery and installation rates,but also the range and quality of services we offer customersnationwide. The launch of our Knowhow brand was in partrecognition of the huge strides we have made in this area.

In our Nordic operations, (Jnkping, Sweden) and the UK, (Newark),we operate two of the largest distribution centres of their kind inEurope. In the UK alone we now make some 2.5 million deliveries,including some 500,000 installations per year.

Store portfolio

We operate a wide variety of stores to suit the local customerdemographics. We operate small, very popular outlets in airport

locations up to Megastores in out-of-town locations, up to 70,000square feet.

We constantly review our store portfolio to ensure we have the rightstore for customers in the most competitive location. As part of thisongoing review in the UK, we are currently reducing our exposure tothe High Street, only maintaining a presence in the most profitablelocations. We are also transitioning a number of stores, whereappropriate to a 2-in-1 format. These stores allow us to offer the bestof both worlds to customers, attracting new footfall and often ata lower cost.

Throughout Europe, we have replicated the success of the storerefits first trialled in the UK and Nordics, delivering exciting, easy toshop stores offering the latest technology to customers. We also

refine our Group portfolio strategy to suit local market conditions.In the Nordics for example, we have opened a number of ElkjpExpress High Street shops, clearly establishing ourselves as theNorwegian market leader in mobile communication sales.

In the Nordic region, Italy, Greece and Turkey we also operate anumber of franchise agreement stores. This arrangement allowsour brands to be present in a wider range of catchments, whileincreasing the volume of purchases and therefore buying powerof the Group.

Intellectual Property

Dixons Retail is one of the largest electrical and computingspecialist groups in Europe, and leads the market in a number ofits operations, in the UK and Ireland through Currys and PC World,

in the Nordics through its Elkjp brands, in Greece throughKotsovolos, and in a number of countries online through PIXmania.

These and its other brands such as Unieuro in Italy, Electroworldin Turkey and Central Europe are extremely well-established andrespected in their markets. The Group is also building a strongservice business (branded Knowhow) in the UK, aiming to delight

customers while generating significant new business opportunitiesand outpacing the competition.

As well as our retail and service brands outlined above, we alsosell a range of own brand products such as Sandstrm, Goji,Essentials and Advent. Each of these brands have specific targetmarkets defined in conjunction with our customer research findings.Previously, Dixons Retail had operated a much wider range of ownbrands but many of these had become irrelevant tomodern customer needs or to business requirements.

Cash

It remains the Groups policy to maintain a strong capital base so asto maintain investor, creditor and market confidence and to sustain thefuture development of the business. This approach has never been

more important than during the current downturn, with reducingcosts having been one of the five key corporate priorities highlightedat the launch of the Renewal & Transformation plan in 2008.

As we move forward under a new Group Chief Executive, our targetsin the short term for the Group have been clearly laid out: we will befocusing on delivering a suitable and sustainable return on EBITas well as generating cash.

The Group has been cash generative in each of the last twofinancial years. As a Group we need to make the right choicesas to how each division utilises or preserves cash whether itbe in determining ranges and stock held in store or managingreturns and related processes.

Over the last five financial years the Group has removed a totalof 285 million of costs. The company is also targeting a furtherfurther 90 million to be removed over the next two financial yearsand we have a cautious programme to reduce costs every year.

Energy

Saving energy is good for the business, good for customers andof course good for the environment. We take energy efficiencyextremely seriously and whilst we have already made progress ina number of areas, we are investing in a wider range of initiativesto significantly reduce our consumption going forward.

Over the past two years we have developed an ongoing programmeto reduce energy consumption throughout our estate. To give somesimple examples, in the last two years in the UK alone we have:

Established a dedicated energy function within the company todeliver our energy programme;

Installed low-energy lighting at nearly 200 stores within our portfolio;

Installed energy-efficient building controls at a similar numberof stores; and

Trained over 11,000 colleagues in good energy saving practice.

As a result of our various efficiency works last year we saved over6% in the UK on our electricity consumption, with the expectationwe can make further improvements this year.


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Looking ForwardOutpacing the competition

The Group has made significant changes over the last four years.Fundamental to this has been the absolute focus on doing what isright for the customer. During this time the basics have been fixed,the rubble has been cleared and the business streamlined, makingthe business better for our customers, easier to operate for ourcolleagues and cheaper to run. Decision making driven by rigoroususe of customer insight is becoming easier and quicker to execute.

The Group can look forward with confidence. However, we cannotsit still and our offer for customers must continually improve.Innovations within the business will enable us to remain one stepahead of the competition and firmly focused on customer needsin every market in which we operate.

Across Europe, we will continue to roll out our Megastore,Superstore and High Street transformation programme, whichis continuing to delight customers and deliver significantly higheraverage gross profits.

We have developed our award-winning Black concept store furtherwith the opening of CurrysPCWorld Stratford next to the OlympicPark in London. Building on the Black concept, first opened inBirmingham last year, this store puts more products on playtables,

further improves accessory ranges, with easier navigation and highlevels of service all within an appealing environment. The successof this store demonstrates that an exciting retail environment that is

easy to shop with great customer service is exactly what customersare looking for when buying technology. We are continuing to applyour learnings from Black to our mainstream stores. During the yearahead we will be rolling this format out to other High Street locationsand trialling a Megastore using the same principles. Our uniquein-house award winning design team will continue to innovatethis format for customers including how we showcase the latest

technology with major manufacturers.

We have opened a new technology department with Harrods in theiriconic flagship store in London. Our in-house design team delivereda high quality retail space in keeping with the Harrods ethos anddemonstrating how we are able to push the boundaries for electricalretailing. The new department required us to explore merchandisingof very high value product and Knowhow service offerings to meetthe requirements of the Harrods customer demographic. These areuseful learnings we can apply to our remaining stores and as wedevelop Knowhow further.

Knowhow has had a fantastic first year as our new customer-focusedservices brand in the UK. It has helped drive customer satisfaction andadvocacy scores considerably. New products such as Cloud back-up

and share, Movies and Fault & Fix for laptops have resonated wellwith customers as we deliver the sort of services and support theyhave been looking for. We believe this provides us with a differentiatednationwide advantage over our competitors. In the year aheadKnowhow will continue to improve its current offering and thestandards to which it delivers as well as innovate its product range.

As part of our programme of improvements and streamlining of ourown brand ranges, we launched Sandstrm cables during the year.These enable us to deliver a clear good, better, best range of highquality cables at good value for money for customers. Our Goji brandhas teamed up with British pop rapper, Tinchy Stryder, to launch arange of headphones and other audio products. We now have a strongrange of own brands Currys & PCWorld Essentials, Logik, Advent,iWantit, Goji and Sandstrm each with a clear brand identity coupled

with dedicated design, sourcing and commercial teams. We willdevelop these brands and ranges for our business outside the UK &Ireland as we build the Groups overall share in own brand products.

Our customers do not distinguish between our stores and ourwebsites when choosing to shop with us and we are becominga truly multi-channel retailer. We led the way withreserve&collectoptions many years ago and we are now innovating in the ways ourstore colleagues can help customers utilise the power of our onlineoffering in store, for example accessing our wider product offeringin any store for delivery to home or collection later. This year we willlaunch apay&collect option for customers to buy whatever theysee in our online range and collect it instore.

These are just some of the examples of how we are improving

our business for customers and shareholders. By innovating andleading in our markets we will remain ahead of our competitorsand deliver a sustainable business in a world where consumershopping behaviours are constantly evolving.

The Group can look forward withconfidence and continues to

innovate the offer for customers.Sebastian James, Group Chief Executive


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27

StrategicSummary


Key Performance Indicators

Financial and operational

For more information on our CorporateResponsibility KPIs see pages 40 to 43.

Shareholder

Underlyingdilutedearnings pershare* (EPS)

The level of growth in EPS provides a suitable measure of thefinancial health of the Group and its ability to deliver returns toshareholders each year. The Group targets growth in EPScommensurate with growth in earnings.

2011/12: 2010/11:

1.1p 1.6p

Totalshareholder

return (TSR)

This metric provides a relative performance measure over thelonger term of the Groups ability to deliver returns for shareholders.

From 2010/11, the base which the Group used was to measure againstthe FTSE 250 Index (comprising FTSE 101-350 companies), excludinginvestment trusts, over a three year period.

See graph on page 61

*Underlyingperformance measures are as defined in the Performance Review.

Definition Performance

Totalunderlyingsales*

Growth in total underlying sales. The ability to grow sales is an importantmeasure of a brands appeal to customers and its competitive position.

Like forlike sales

The Board measures like for like sales as sales in stores that havebeen open for a full financial year both at the beginning and end of thefinancial period and are calculated using constant exchange rates.Customer support agreement sales are excluded from all UK like for likecalculations. Operations that are subject to closure have sales excludedas of the announcement date. Stores subject to closure due to arefurbishment are excluded during the period of closure. All PIXmaniapick-up store sales are included in like for like sales. Sales targets andgrowth are set relative to the market and expected economic conditions.

2011/12: 2010/11:

(3)% (2)%

Marketposition

In line with the Groups strategy to be the leading specialistelectrical retailer in Europe, this is an important measure of how wellcustomers are being engaged by the Groups brands in each market.

Retailing operations should be, or be capable of becoming, the numberone or number two specialist electrical retailer in their market, measuredby market share.

No.1 market positions in:

UK & IrelandNordicsGreeceCzech Republic

Underlyingoperatingprofit*

Continued growth of underlying operating profit enables theGroup to invest in its future and provide a return for shareholders.Targets are set relative to expected market performance.

Underlyingprofit beforetax*

Continued growth of underlying profit before tax representsa measure of Group performance to external investors and shareholders.Targets are set relative to expected market performance.

Free CashFlow

The Group defines Free Cash Flow as net cash generated fromoperations, less net finance costs, taxation and net capital expenditure

and excluding certain discrete items such as special pensioncontributions. The management of cash usage, in particular workingcapital employed in the business, optimises resources available for theGroup to invest in its future growth and to generate shareholder value.

2011/12: 2010/11:

130.3m 10.0m

(million)

2011/12 115.1

2010/11 127.6

(million)

2011/12 70.8

2010/11 85.3

(million)

2011/12 8,186.7

2010/11 8,154.4


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Principal Risks to Achievingthe Groups Objectives

The Group recognises that taking risks is an inherent part of doing business and that competitive advantage can be gained througheffectively managing risk. We continue to develop our risk management processes, integrating risk management into business decisionmaking. In addition, the Board and Senior Executives have invested time to identify and assess the key risks facing the business andactively manage the risks to achieving Group strategic objectives. Risk management is performed from both a top-down and a bottom-upperspective, ensuring that strategic and operational risks are appropriately addressed and mitigating activities aligned. The principal risksand uncertainties are set out below along with an illustration of what is being done to mitigate them.

Examples of mitigating action

1. Economic environment

The economic downturn is prolonged and volatile through 2012 andbeyond, which could inhibit our performance and create uncertainty,particularly in the eurozone

Greece exits from the euro, leading to a step change deterioration ofthe Greek economy and challenging the sustainability of our business

Strategy and business planning which takes into accountvarying economic scenarios

Ongoing monitoring by Finance and Senior Executives

Renewal and Transformation plan to improve our businessperformance irrespective of macro economic factors

Contingency management planning for economies most at risk

Preparing for a further, more significant reduction in market sizethrough additional cost reduction initiatives

Post event crisis management planning ongoingProfit and cash flow scenario planning to help the Group tomanage the impact of a range of possible scenarios

Reducing exposure to currency devaluation

2. Multi-channel business model

We fail to deliver our business model through a seamlessmulti-channel strategy that leverages the Groups strengths

Bring store and online formats together by further developingour websites

Introducingpay&collect and rolling out online in-store tooffer customers the full range of products regardless of theirpreferred location

FIVES customer service training for all colleagues and productworkshops to improve product knowledge

Successful marketing campaigns to raise the profile of

multi-channel brandsDevelopment of best practice processes to support themulti-channel, which are rolled out across the Group

3. Changing technology / consumer preferences

We do not respond quickly enough to capitalise on changes incustomer demand for technology, content and service delivery

Ongoing investment in service offerings with roll out, throughthe Customer Plan, of customer journeys to help demonstratewinning solutions

Increasing investment in digital content services,e.g. Knowhow Movies

Improvements in our range planning capability

Exciting product launches to make our stores the destinationfor the latest technology, e.g. 3D TVs, new iPad

Continued focus on ensuring we have an excellent range

across all price points, including own label brands

Risk


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29

StrategicSummary



4. Competition

Competitors reduce the Groups market share and / or drive downmargins in specific markets

Renewal and Transformation plan is improving our stores,cost structure and service proposition

Continuing development of strong multi-channel propositionsand brands

Ensuring our prices offer good value, including use of acustomer price index

Continuing to take money out of our cost base and leveragingGroup-wide benefits where opportunities arise

Building ever stronger relationships with suppliers

5. Employees

We fail to attract, develop and retain the necessary talent forour business

Group-wide standardised performance management

Talent reviews across the business

Store structures which provide a clear career path for all employees

Continued improvements in the quality of training courses and

development programmes with specialist focus on service, product,commercial and technical

Bonus plans, which include a component relating to individualperformance and business performance

Reward strategy aligned to retain the best talent

6. Finance and treasury

Our trading position suffers from a lack of availability of funding,fluctuations in exchange rates and interest rates and reduction inavailability of credit funding

Implementation of extended revolving credit facility

Tight balance sheet management with independent reviews byGroup Finance

Strong cash management and monitoring

Rigorous pre and post-investment appraisal processes

Ongoing engagement with suppliers and credit insurers

Innovations in, and close scrutiny of, working capital togetherwith regular monitoring and review

Detailed Group hedging policies, managed centrally and reviewedthrough a Group Tax and Treasury Committee

Close scrutiny and management of the business portfolio

Ongoing review and optimisation of store footprint, with closuresor relocations as appropriate

Risk


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Principal Risks to Achievingthe Groups Objectives

(continued)



7. Technology infrastructure support

A key system becomes unavailable for a period of time, or ourIT systems do not support changing business needs and preventus from leveraging business opportunities

Contingency plans are in place and are tested regularly

Evaluation, planning and implementation analysis carried outbefore updating or introducing new systems that have animpact on critical functions

Investment in site functionality and user friendliness

Development and implementation of IT strategy to further embedCRM in the business, enabling customer information to flowacross all customer touchpoints

Implementation of appropriate measures to secure key systemsand data against malicious attack

8. Legislative, contractual, reputational and regulatory risks

As a result of a change in legislation, a decision by a regulatoryauthority, exposure in our compliance activities or disputes with thirdparties and business partners, the Groups business is impacted

by reputational or financial damage or a need to adapt the Groupsbusiness and processes (relevant areas include competition,consumer rights, intellectual property, contractual obligations,health and safety or compromise of confidential customer data)

In-house legal teams communicate on a frequent basis andlegal reports are submitted to the Board

Legal teams manage issues which arise and there is Group

oversight of significant mattersGroup Ethical Conduct policy supported by annual declarationof compliance by colleagues

Corporate Responsibility Committee meets regularly to discussreputational and regulatory risks and monitor mitigating action

Quality checks and factory audits for own-branded product assembly

Compliance Committee approves activity that may impact theterms of Group credit facilities

Contact with regulatory authorities

Monitoring changes in legislation / regulation

Risk


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Key highlightsGroup underlying total sales(1), (2)flat in the full year withstrong momentum in the final quarter.

Group like for like sales(3)down 3% in the full year, up 5%in the final quarter.

Like for like sales in the final quarter up 8% in the UK & Irelandand up 10% in the Nordics.

Growing share across most markets, particularly in the UKand Northern Europe.

Underlying pre-tax profit (1)of 70.8 million (2010/11 profit of85.3 million).

Good progress in UK & Ireland and Northern Europe withprofits up 15% and 12% respectively.

Offset by weaker performances in Southern Europe and PIXmania.

Strong growth in multi-channel with sales up 30% in thesecond half.

Net debt reduced to 104.0 million from 206.8 million yearon year.

300 million revolving credit facility signed, extending the maturitydate to June 2015.

On target to repay 160 million 6.125% Bonds due 15 November2012 and associated hedge cost of approximately 65 million.

Customer satisfaction and advocacy measures continueto show good progress, particularly in the UK.

Financial highlightsTotal Underlying Group sales flat at 8.19 billion(2010/11 8.15 billion).

Group gross margins down 0.3% in the full year.

Gross margins flat in the UK in the ful l year.

Northern Europe gross margins down 0.5% in the full yearbut recovering to flat in the second half.

Total loss before tax of 118.8 million (2010/11 loss of224.1 million), after non-underlying items(1)of 189.6 million,which are predominantly non-cash and comprise the writeoff of goodwill relating to Unieuro, Kotsovolos and PIXmania.

Underlying diluted earnings per share(1) 1.1 pence (2010/11earnings of 1.6 pence). Basic loss per share for continuingoperations 4.3 pence (2010/11 loss per share of 6.6 pence).

60 million of cost reductions delivered in the year with90 million targeted over the next two years.

Overview

Directors ReportPerformance Review


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Directors ReportPerformance Review

Underlying sales and profit analysis

Und erl ying sales Und erl ying profit /(loss)

52 weeksended

28 April 2012million

52 weeksended

30 April 2011million % change

Like for like(3)% change

52 weeksended

28 April 2012million

52 weeksended

30 Apri l 2011million

UK & Ireland(4) 3,833.9 3,925.3 (2)% (4)% 78.8 68.7

Northern Europe(5)

2,628.0 2,375.6 +11% +6% 113.9 102.1Southern Europe(6) 1,059.8 1,120.0 (5)% (8)% (30.4) (18.1)

PIXmania 665.0 733.5 (9)% (10)% (19.8) 3.5

Central costs (13.8) (15.8)

Total Group Retail 8,186.7 8,154.4 Flat (3)% 128.7 140.4

Property losses (13.6) (12.8)

EBIT(7) 115.1 127.6

Underlying net finance costs (44.3) (42.3)

Group underlying profit before tax 70.8 85.3

Notes

(1) Throughout this report, references are made to underlying performance measures. Under lying results are defined as excluding trading results from closed businesses, amortisation of acquiredintangibles, net restructuring and business impairment charges and other one off non-recurring items, net fair value remeasurements of financial instruments and, where applicable,discontinued operations. These excluded items a re described as non-underlying. The financial effect of these items is shown in the analyses on the face of the income statement and in note 4to the financial statements.

(2) Closed business comprises the operations of PC City Spain.

(3) Like for like sales are calculated based on stores that have been open for a full financial year both at the beginning and end of the financial period and are calculated using constant exchangerates. Customer support agreement sales are excluded from all UK like for like calculations. Operations that are subject to closure have sales excluded as of the announcement date. Storesclosed for refurbishment are excluded during the period of closure. All PIXmania store sales are included in li ke for like sales.

(4) UK & Ireland comprises Currys, CurrysDigital, Dixons Travel, PC World, combined 2-in-1 Currys and PC World, Harrods concession, operations in Ireland, DSGi Business, Dixons.co.uk and

KnowhowTM. Like for like sales exclude DSGi Business.

(5) Northern Europe comprises the Elkjp group, Dixons Travel Denmark and Electroworld in the Czech Republic and Slovakia.

(6) Southern Europe comprises Greece (Kotsovolos), Italy (Unieuro, combined 2-in-1 Unieuro and PC City s tores and Dixons Travel Italy), and Turkey (Electroworld).

(7) Earnings Before Interest and Tax (EBIT) equates to underlying operating profit and is defined as underlying earnings from retail operations, after propert y losses, before deduction of net financecosts and tax.

(8) Free Cash Flow relates to continuing operations and comprises net cash flow from operating activities before special pension contributions, less net finance costs, less income tax paid and netcapital expenditure.

Business performanceUnderlying Group sales were flat at 8,186.7 million (2010/11 8,154.4 million) and down 3% on a like for like basis, outperforming localmarkets in general. Underlying Group sales were also flat at constant exchange rates. Underlying profit before interest and tax was115.1 million (2010/11 profit of 127.6 million). Underlying profit before tax was 70.8 million (2010/11 profit of 85.3 million). Group

gross margins were down 0.3% across the full year and down 0.1% in the second half.

Overview(continued)


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Underlying operating profit(million)

2010/11 3,925.3

2011/12 3,833.9

2010/11 68.7

2011/12 78.8

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UK & Ireland

Profit growth of 15%

Significant progress made inmulti-channel business

Opened Harrods technology store

Total sales in the UK & Ireland division were down 2% to 3,833.9million (2010/11 3,925.3 million) and like for like sales were down 4%.Like for like sales in the second half were flat, showing an improvingtrend with the final quarter up 8%. Underlying operating profitsincreased to 78.8 million (2010/11 68.7 million).

The UK & Ireland division has performed strongly against atough market. The benefits of the work under the Renewal andTransformation plan increasingly benefitted the business through

the year with a particularly strong performance in the final quarter.This enabled the division to grow operating profits by 15% in theyear putting the business on track towards a sustainable return.

We have made significant progress with our multi-channel businessduring the year, particularly in the second half which saw growth of48%. Improvements to availability and processes have improved theexperience for customers. We are planning further improvements inthe year ahead as we deliver a seamless experience for our customers.

We now have 269 refurbished stores which continue to deliveraverage gross profit uplifts of over 20% in the first year andmaintained in the second and third years. A further 63 s

dixons_annualreport2011_12.pdf

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