DIXONS RETAIL SCRIPT FOR INVESTOR AND …...1 DIXONS RETAIL S CRIPT FOR I NVESTOR AND A NALYSTS PRESENTATION 9.00 AM 21 J UNE 2012 S EBASTIAN JAMES Good morning and thank you all for

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DIXONS RETAIL SCRIPT FOR INVESTOR AND ANALYSTS PRESENTATION 9.00AM 21 JUNE 2012 SEBASTIAN JAMES

Good morning and thank you all for giving up your time this morning to hear about our performance last year and, what I believe, are some exciting times ahead.

You have got the slides in front of you, but in order to save you writing everything we say down we will let you have a copy of the script as you leave.

SLIDE - INTRODUCTION

Humphrey will talk you through the financials from last year in a bit more detail shortly but overall we were satisfied that the results reflected significant improvements in the Northern European and UK & Ireland businesses and that where external events have buffeted the company – especially in Pixmania and Southern Europe, that management are taking action to mitigate these effects. Overall sales were flat across the year with like for likes down 3%. Group gross margins were down 30 basis points in the year resulting in underlying Group profits of £70.8 million. As we said in our announcement this morning we are encouraged by how the new financial year has started with the trends we saw in our fourth quarter, broadly continuing.

I am now just beyond the mythical first 100 days of my tenure here at Dixons Retail and I have had the opportunity to visit every market, meet the key teams that operate in these markets and hear their approach to their businesses. I have also been closely involved with the journey that we have been taking in the UK over the last four years as this provides some powerful insights into how consumer behaviour is evolving and how we need to react to it. As a result of the fresh look I have been able to take on the Group, it is clear to me as to what our strategic priorities need to be. We believe that if we are successful in delivering these priorities we will have a strong, profitable, cash generative and sustainable position in the world.

Before we get into too much of the detail I would just like to pay some tribute to my predecessor John Browett who, as you know, has gone to the sun-drenched pastures of Cupertino. The Renewal and Transformation plan that we have been executing has, I believe successfully, addressed the fundamental truth about modern UK multichannel retailing: Customers will reward you for doing what is right for them and giving them great service. If you don’t they will not forgive you, and nor should they.

Over these past four years, our customers and shareholders have patiently lived with us as we are turning a business that was underinvested in stores, people, systems and product into what we genuinely believe to be the best specialist in our various markets today. In an almost unprecedented economic crisis, with consumer confidence having touched an all time low, we feel proud that we have been able to sustain profitability in our core markets and generate cash across the Group while so many of our competitors have struggled. And above all, our customers are telling us that they like what we are doing for them, however there is still more to do.

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The work under the Renewal & Transformation plan will continue to improve the business. To build on this the strategic priorities going forward are three-fold and I will spend a little time talking these after reviewing the year we are reporting on today. Let me start by talking a little about how each of our divisions have performed.

SLIDE – DELIVERING IMPROVEMENTS IN THE UK & IRELAND

In the UK and Ireland, we performed very well against a tough market. I am particularly pleased with the performance in the second half and most notably the final quarter as the business started to reap the benefits of the work done under the Renewal & Transformation plan, and traded ahead of the market with like for like sales flat in the second half and up 8% in the final quarter. The actions on costs meant that we grew operating profits in the UK by 15% to £78.8 million.

We now have 269 stores, including Harrods, in our new format delivering an average gross profit uplift versus the chain of over 20% in the first year and holding on to that uplift in the second and third years. Today we have 38 Megastores, 173 superstores, 30 High street stores and 27 Dixons Travel stores refurbished. At Christmas peak two thirds of our sales went through new stores and by this Christmas we expect to have about three quarters of our sales going through new format stores. Thereafter we will be refurbishing stores as the appropriate property deals come through, and expect to complete the estate over the next 3 to 4 years. Already, most of our customers are experiencing our new store formats. Our first stores still look great and we are making sure that innovations that work are rolled back so that our stores remain fresh.

Our UK multi-channel business has taken off this year, particularly in the second half which saw growth of 48% in multi-channel sales. This has been the result of a total focus on the customer experience, much better availability and significant improvements in the store process. This year we plan to have slicker and more effective processes for customers to order online for pickup anywhere, and to order anything in-store for pickup or delivery.

SLIDE – DELIVERING FOR THE CUSTOMER

Customer advocacy since October 2010 has improved from 43% to 75%. This 32 percentage point improvement represents a dramatic shift in perception and service levels in store and afterwards, but we will never be satisfied until every customer who shops with us becomes a strong advocate. By the way during the year we had 466 stores where 100% of customers told us that they were very satisfied with the service that they received. And we have a handful of stores who achieved that 100% right across the year whenever we tested them. The measure we use here is VERY likely to recommend. If we use the more typical measure used by many of our competitors of likely and very likely to recommend we score 92% across our estate.

There have been a number of very successful product launches during the year including, of course, the new iPad but also we have been intrigued to see the success of the new Google Chromebooks in our shop in shops. These are the only ones of their kind in the World. We also saw the launch of Ultrabooks, Smart TV’s now becoming mainstream and new technology transforming the energy efficiency of white goods. We have always worked very closely with suppliers to make sure that these are successful and it is heartening to see that

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increasingly we are being seen as the

We launched KNOWHOW a year ago and it has so far exceeded our ambitious expectations. This year we also launched Harrods Technology Department which is beating its budgets and is a store we are very proud of. It is also good fun and if you haven’t done so already I urge you to go and take a look.

show in town when it comes to demonstrating and explaining amazing new technology to our customers.

SLIDE – NORTHERN EUROPE EXCEEDED EXPECTATIONS

Our Northern Europe division had another terrific year, with like for like sales up 6% across the year as they continue to grow market shares, with special mention to Denmark which had a barnstorming year growing at over 20%. Gross margins overall were down 50 basis points across the year reflecting disruptive activity as capacity exited during the year. As some of these factors eased, gross margins improved, particularly in the fourth quarter delivering a flat performance in the second half. Northern Europe delivered record profits up 12% year on year to £113.9 million.

The Nordic market continues to lead the way in simplicity of operation and cost management and we are starting to adapt the business model to other markets in the Group.

Our Central European business, now managed out of the Nordics, has been able to dramatically streamline operating costs so that they are more aligned to the Nordics enabling us to be much more competitive on pricing with like for like sales up by 13% in the year.

SLIDE – SOUTHERN EUROPE

In Southern Europe we have, predictably, had a much more difficult year with Italy and, of course, Greece suffering from the high degree of consumer volatility in their markets. Operating losses of over £30 million are of course disappointing and I will outline some actions we plan to take later.

In Greece, Kotsovolos is a strong brand and a clear market leader. Both of these positions have consolidated over the last year with market share gains of 2 points on average with growth in all segments. Cost management has been aggressive in this market again this year – in fact, over the last four years we have taken out just over a quarter of the cost base. In the year we are reporting the business will incur only a small EBITDA loss, and against a backdrop of a market that has almost halved in size over the last three years this is a remarkable achievement by the team.

In Italy the economic crisis deepened during the year and as a result the teams have been very active in taking action on costs, with further reductions planned in the year ahead. The benefit of some of these cost actions came later in the financial year and was not enough to offset the fall in sales. We are working hard to improve the estate and our competitiveness and we are pleased with some of the gains that we have made in specific markets. Without a market leadership position here we will need to think hard about how to carve a clear niche in which we can be winners. In the meantime we must focus urgently on driving cost out with the goal that the Italian business is self-sufficient in cash terms. The new financial year has started a little better than our expectations, which has been a welcome boost to team morale.

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Our Turkish business continues to develop steadily in an exciting growing market. We operate from 15 own stores and now have 15 franchise stores as we expand across the country with limited capital cost.

SLIDE – PIXMANIA – MEETING THE CHALLENGES

PIXmania has had a very difficult year encountering a perfect storm of adverse environmental factors, some of which are only now beginning to clear and some of which are still in place. Firstly and most obviously, Pixmania is a business that relies on cameras - its heritage - and data storage for over a quarter of its trade in these higher margin categories. Last year, the Fukushima Tsunami destroyed a good part of the World’s camera production and floods in Northern Bangkok destroyed over half of the World’s data storage manufacturing capacity.

In addition, over [50]% of Pixmania’s business comes from Southern Europe and France where markets have been in steep decline, and recent data from France indicates mid-twenty percent market decline . A perfect storm indeed. While many of the underlying market conditions remain, Pixmania is taking action. We have an extended pilot of new stores which can demonstrate and sell products, but at internet value, which are proving popular. We are also taking significant action to reduce costs including moving out of our offices in central Parisand moving some activities to the Group’s shared services facility in Brno in the Czech Republic.

E-merchant, PIXmania’s e-commerce platform provider for third parties signed major deals such as Carrefour e-commerce for all their non-food business in France, Spain, Italia and Belgium. E-merchant successfully launched the French e-commerce website of Carrefour in November 2011. Moreover, E-merchant also won the Celio account one of France’s largest menswear brands with a release on the platform planned for the Summer 2012.

I hope that this gives you a flavour of what has been an eventful year and one that has seen our major markets deliver encouraging results. Humphrey will now take you through some of the detail on the numbers and then I’ll talk to you in a little more detail about our place in the World and our three strategic priorities to drive profitability and cash generation.

HUMPHREY SINGER

SLIDE - FINANCIAL SUMMARY

As you have heard from Seb, many of the markets in which the Group operates remain challenging but in spite of this the Group has delivered a robust performance against our financial priorities of profitability and strengthening the balance sheet

Underlying profit before tax of £70.8m was at the top end of expectations with significant improvements in Northern Europe and UK & Ireland offset by declines in Pixmania and Southern Europe as the economic crisis deepened

The continuing weak consumer environment, in particular in Southern Europe, with the uncertain outlook has led us to take a conservative view and impair the carrying value of goodwill acquired with UniEuro, Kotsovolos and Pixmania by £196m in total. I will cover this

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and some other non-underlying items in more detail later but to be clear these impairments are non-cash items. Net of these non-underlying items Group loss before tax was £118.8m

Group gross margins were down 30 basis points with UK flat across the year and Nordic improving to flat in the second half – this is powerful evidence of the strong partnerships we have with our suppliers, our ability to sell complete solutions and also the work we have done to reduce costs and improve operational efficiencies

We generated £174m of free cash before restructuring items compared to £39m last year. The improved cash result arose partly from the sale and leaseback of the Jonkoping warehouse in Sweden, and lower levels of capital expenditure.

Consequently net debt reduced significantly, in fact halved to £104m from £207m last year. We maintained a large level of headroom on the Group’s revolving credit facility throughout the year, with it being unused in the second half.

I am very pleased that we re-negotiated the RCF more than a year in advance of its maturity which has now been extended to 30th June 2015. In line with the Group’s expected requirements and objectives, the facility will reduce in size over its life to £200m by September 2014. The financial covenants have been slightly relaxed, reflecting the Group’s improving cash generation

We continued to make significant cost savings across the Group and delivered £60m in year one of the three year £150m programme

SLIDE - SALES PERFORMANCE AHEAD OF EXPECTATIONS

Seb has already talked about the performance by division but to recap on the sales. Whilst LFLs were down 3 percent on the full year they were up 5% in the final quarter driven by Northern Europe and UK & Ireland. We had a strong Easter period helped in the UK by being earlier, wet and cold – in fact, ideal electrical retailing weather!

Overall for the Group sales were flat at approximately £8.2Bn

SLIDE – UNDERLYING PROFIT BEFORE TAX AT TOP END OF EXPECTATIONS

Turning to profits by division. The UK & Ireland improved year on year by just over £10m or 15% as we held margins and substantially reduced costs across many lines on the P&L including store efficiency, stock management, central costs and reductions in marketing.

Northern Europe had a great year, growing profits by 12% from an already strong position with an EBIT to sales ratio of 4.3% - sales grew, margin returned to flat year on year in the second half and costs as a percentage of sales fell.

Southern Europe losses increased to £30m as we saw the impact of the very difficult economic environment in Italy and Greece. In both markets we continue to take very tough action on costs to offset the sales reductions and minimise the impact on the bottom line. Both markets are reporting only relatively small EBITDA losses which is of great credit to their management teams in these turbulent economic times. Turkey’s profitability continued to improve as the business gains more critical mass, particularly through expanding its franchisee network

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Seb has already described the ‘perfect storm’ that hit PIXmania impacting sales and margins and that has resulted in a loss of £19.8m and we are taking urgent action on costs to mitigate this in the year ahead.

Central costs reduced mainly driven by a lower share option charge as share option awards did not vest. While we continue to reduce underlying central costs, but after stripping out the effect of the share option awards we expect central costs to be in the range of £18million to £20million next year.

Property losses mainly comprise store re-site and store asset disposal costs associated with the Renewal & Transformation plan in the UK. At £13.6m this is better than expected as some of the property deals slipped into the new financial year. We expect approximately £20m of property losses for FY 12/13

Underlying net finance costs were up year on year primarily due to the effect of the higher coupon rate on the 2015 bonds issued last financial year, higher net foreign exchange losses compared to prior year and increased Euribor and Libor interest rates during the year.

Underlying PBT of £70.8m therefore came out just above the top end of the range we indicated at the May trading update

SLIDE - NON UNDERLYING ITEMS – PREDOMINANTLY NON-CASH

Turning now to the non-underlying items

Net restructuring charges relates mainly to accelerated depreciation charges associated with the reformat of the UK & Ireland store portfolio and to the re-organisation of the photo processing business in PIXmania

Business impairments of £196m relates to UniEuro, Kotsovolos and PIXmania. Consideration of the on-going difficult economic environments in which these businesses operate and the uncertain outlook has led to us take a conservative view and make the following impairments

Firstly, £131m relating to UniEuro including £109m of goodwill with the balance relating to other fixed assets and onerous lease costs. There remains £27m of goodwill relating to this business

Secondly, £37m relating to Kotsovolos that represents full impairment of the goodwill relating to this business

Thirdly, £28m relating to Pixmania representing approximately 1/3 of the value of goodwill held at the beginning of the year

Trading results from closed businesses relates to the former PC City operations in Spain with closure completed in the first quarter of the FY

Amortisation of aquired intangibles of £4.5m predominantly comprises brand names

Profit of £37.2m on Jonkoping, our Swedish warehouse we reported at the interims

The cash impact is only £8m spread evenly over last year and the current year.

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SLIDE - POSITIVE FREE CASH FLOW

We have generated strongly positive free cash of £130m

This has resulted primarily from a combination of property disposals and prudent capital expenditure as the Group conserved cash in advance of the Bond repayment in November 2012

I am pleased to report that we managed to deliver a modest working capital inflow of £16m, despite a reversal of a £30m timing benefit experienced at the end of the prior year relating to the exit from Spain and an additional UK bank holiday – so another good performance. The continued cash generation largely reflects further improvements to stock management, while continuing to improve availability, range and promotion management. Overall Group stock levels year on year were down 9%.

Net restructuring reflects the cash outflows relating to strategic reorganisations as announced in this and previous years. This includes the cash costs this year of £24m associated with the closure of operations in Spain in the previous year.

We expect restructuring cash costs of approximately £20m in the current financial year

To reiterate we have halved net debt to £104m, are not currently utilising our revolving credit facility and did not use it in the second half of the financial year

SLIDE - REPHASED MATURITY PROFILE OF BONDS AND RCF

And finally to recap on our debt maturity profile

We have the 2012 Bond which we will repay in November.

As previously mentioned we have a £300m RCF that now matures in June 2015 with amortisation in line with our requirements down to £200m by September 2014

Covenants have been slightly relaxed, reflecting the Group’s improving cash generation

We have a £150m bond due for repayment in August 2015

We successfully refinanced our RCF during the year and our banks have been very supportive throughout this process. We have now managed to reduce our debt facilities from £850 million in 2008 to the current level of £610m. We remain very much on track to repay the 2012 bonds and settle approx £65m of cross currency swaps in November of this year and our RCF reduces to £200million by September 2014 as our cash position improves.

Looking ahead we recognise that there is an increasing trend across all corporates in the UK and by regulatory pressures on Banks themselves, for a move away from bank financing. We are very aware that in the current banking markets we need to keep our options open as to what the appropriate mix of debt should be.

Thank you for listening and I will now hand you back to Seb.

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SEBASTIAN JAMES

So overall the key parts of our business are moving in the right direction. The huge amount of work that has been done over the last 4 years under the Renewal & Transformation plan has stabilised our core businesses, improved our operating model, enabled us to position ourselves next to the customer and gain market share.

SLIDE – KEY PRIORITIES

I now want to spend a little time talking about the 3 key priorities that I see for the Group in the short and medium term:

Firstly, we are building a business that is SUSTAINABLE in a price-transparent, multi channel world. The work that we have been doing to improve our business gives us confidence that we have the answer to this question and I want to share my thoughts on how this will shape the business going forward.

Secondly, we need to focus on being a LEADER in the markets in which we operate. We have this in the UK & Ireland, Northern Europe and Greece. We need to find proper, durable and strategically sensible solutions to our other businesses in Southern Europe and for Pixmania.

Thirdly, we need a Group that is ALIGNED to genuinely leverage our pan-European scale and knowhow.

If we do all this we believe we can deliver a steadily improving EBIT return as well as generate cash and our shareholders should benefit from improving returns.

SLIDE – SUSTAINABLE BUSINESS MODEL

Turning to the first– sustainability. The team and I have been thinking hard about what the future of retailing in our space holds. Over the last decade there have been some structural evolutions in our marketplace which have changed, and continue to change consumer behaviour in seismic ways – and which have, and will continue to, require seismic changes from us in their turn. Please do forgive me if I sound like a professor as I describe these shifts – especially if I am talking about things that you already know – but it is vital that we all have a shared understanding of the backdrop against which we are building our strategy.

The most important change has been, of course, the arrival of online retailing into our market, especially of single channel online operators. This has happened with a variety of players and in all markets to a greater or lesser degree but for the sake of simplicity I would like to use the highly developed UK market as a prime example, since the lessons are the same in all other markets. Incidentally our own analysis of the UK market shows that single channel internet represents about 12% of our markets of which Amazon is a little under half that.

The internet is at last fulfilling the role we all envisioned in the tech bubble back in 99/2000. It truly empowers our customers with product knowledge, price transparency, and a host of other information, such as reviews and peer recommendations. As a result it’s not surprising that the web is now a critical part of any customer journey. Our research suggests that, at some stage in the purchase of a TV, domestic appliance or computer, about 82% of

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customers will spend time online. But, crucially, an even higher percentage will spend time in store. This, I suppose, shouldn’t surprise us: These are often substantial, considered purchases which cost a lot of money. They are also frequently large pieces of furniture which will form part of people’s lives for many years. Not surprisingly people want advice, they want to see the product, they want to get comfortable with it before spending their money. They want to know they are buying the right product and that it will deliver the right experience. So increasingly, we are no longer thinking “was this transaction online or offline” but are now asking the better question “did the customer, buy from us; or did they buy from somebody else?”.

The impact of price transparency has also been not exactly as expected. A single channel internet operator at scale, has a cost structure that is about 10% lower than ours on average - it used to be more but we have been cutting costs aggressively. The impact on market prices has been difficult for store-based retailers, for sure, but it has also presented challenges for suppliers who have research and development costs to amortise – and after all product development is their life blood. Because the internet is a brilliant price comparator, the very real benefits of the newer technologies which need to be demonstrated are often lost to the price-hunting customer. There has tended to be a race to the bottom which has driven some customers to wrongly choose the entry price point model, resulting in fading profitability for the industry. While a powerful tool for customers, the internet tends to be both brand agnostic and price corrosive and doesn’t ensure the customer always buys the right product.

These changes have driven us to think about our business in a more intelligent way to adapt to the changing landscape, and indeed for suppliers to also think about how customers are best exposed to their products through service led multi-channel retailers.

SLIDE – FOCUS ON FOUR KEY DIFFERENTIATING ACTIVITIES

To succeed we have to achieve one goal: to bridge the cost gap between us and single channel operators by identifying those revenue streams which are a key differentiator for services led multi-channel retailers like us. To do this we have to do four very simple things:-

Taking each of these in turn. i. We need to work with suppliers to sell the products that are fresher, newer and have

better system economics for both of us. Whenever we have done research with customers in this area we have found that the happiest customers are those who have chosen the best products for their needs. With all the customer insight and research that suppliers carry out in creating their new products, it’s not surprising that it is usually the newer and better products are the ones that make people happier. But to choose these products, to justify spending more, the real benefits need to be explained and demonstrated live and by a real person. We are in an incredibly privileged position in that we have 40 million of these conversations with customers every year across our markets. We can work with suppliers to ensure we are best equipped through training, merchandising, product demonstrations etc to have fully informed conversations with customers about the products that we know makes them happiest. Our customer journeys are a clear differentiator that helps customers

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in their shopping trip and to ensure they leave our stores happy and provide us and our suppliers with better system economics.

This way of suppliers supporting us is a relatively new phenomenon and is something that is ideally suited to a service based multi-channel model, such as ours.

We can also offer customers exclusives through our own brands. We have reduced the number of own and licensed brands in the UK & Ireland to 7 core own brands. These offer customers a clear brand architecture of good, better and best products. I think we have a particular opportunity in essentials and accessories such as our new SandstrØm cables and our range of Goji headphones a range of which are being launched tonight that are branded with Tinchy Stryder. Our own brand products currently represent 10% of our total UK sales, having grown from a low of 7% and we see an opportunity to increase this over time.

ii. We need to sell customers a complete solution. I often tell my teams in store “No customer comes in for a box”. All customers come to us because they want to DO something, to ACHIEVE something. To entertain the kids, to start a business, to wash clothes. This requires hardware, for sure, but it also requires delivery, training, peace of mind , accessories, getting rid of the old one etc etc ... There are increasing opportunities emerging in this space as customers become more reliant on content, cloud, services and technical support needed to make all their products work properly. We are significantly better at selling customers these complete solutions than pure-players on average and this is the second revenue stream not easily available to single channel online retailers.

Our KnowhowTM brand in the UK gives us one cohesive brand with which to do this. Through KnowhowTM we can also access the added value services market, such as fault and fix, cloud computing and other service based products. We conservatively estimate that this market is worth around £500million in the UK. At the moment it is a fragmented market, but having grown c.40% in it’s first year, we are confident that we can achieve a significant market share over time. With our service based multi-channel model we believe we are best placed to exploit these opportunities.

SLIDE – FOCUS ON FOUR KEY DIFFERENTIATING ACTIVITIES

iii. The third thing we need to do is continue to really embed, and be famous for, service. We need to be able to stand shoulder to shoulder with our customers. They need to know they can come to our stores and get knowledgeable advice to help them buy the right product. They need to be confident that we can solve their problem for them quickly, quietly and efficiently, so they can get on with their lives. Customers must believe that they actively choose us because we give them great service. For this we believe that they will reward us with a small premium over the single channel internet operators.

iv. The fourth thing we need to do is continue to bridge the cost gap by spending our money more wisely and reduce costs. Having made huge strides in the last few years we still see plenty of opportunities for the future. Let me give you a couple of examples:

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Our 2-in-1 programme. When we combine two stores on a park into one we take more sales in the one store than we previously took in BOTH. And of course we save the rent from one store and we can roster our staff more efficiently. As I am sure you have all experienced, the new format store is a lot more fun for customers and colleagues alike as it is more buzzy and exciting.

In this new world we have analysed the estate we need to provide this service conveniently for customers and in the UK we need 400 to 420 stores, including about 40 ‘urban toyshops’ like the new format store in Westfield Stratford. With 113 2-in-1 out of town stores now operational we still have a number of stores left to transform, delivering further upside.

We will continue to reduce costs in the business and having delivered £60 million in the year we are reporting on we have now removed a total of £285 million from the group over the last 5 financial years. While we are targeting to reduce costs by a further £90 million over the next two financial years, we continually see opportunities across the Group to do things better, simpler and cheaper as an ongoing programme of cost removal.

We have worked hard to minimise the price differential I mentioned earlier, and in some very competitive product areas actually remove it. Over the last three years we've reduced our average prices relative to single channel internet operators by around 15 ppts. We monitor market prices every day to ensure we offer consistently great value across all products areas, all the time, versus all competitors. We believe our price position is now around 5% to 10% better than some of our larger bricks and mortar competitors. Let me give you a couple of interesting examples ... Last week if you had bought a small screen television for £100 from us, it would have cost somewhere between £104 and £110 at many of our competitors whether they be single channel internet or store based. A laptop costing £400 from us would have cost you between £20 and £45 more at these competitors. Despite our improving position on price, our margin in the UK after distribution costs has remained flat as we have begun to manage these sources of value aggressively.

With all that we think we are a long way towards our long term sustainable future as we mitigate the cost gap between our multi-channel model and that of the single channel internet operators. We believe our plans take us comfortably all the way there, with maybe a little to spare...

I have been frequently asked “isn’t the internet an unbeatable force in this market”. I hope that you can now see that the internet is indeed a powerful force – but as an invaluable tool for us and our customers to build a great business together which allows us to improve their lives by buying the right products and services at the right price and with the right advice. As well as support our suppliers and provide them with the best tools to reach customers with their products. After all the single most expensive thing to do as a customer is to buy the wrong product.

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SLIDE – LEADER IN OUR MARKETS

Turning now to our second priority – being the leader in our markets. We know that to deliver this sustainable business model we need to have a strong market position in each country in which we operate and that allows us to access these critical income streams and be relevant to suppliers and customers.

In the UK the competitive environment has changed considerably this year. We won’t say that we were sorry to say goodbye to Best Buy. Although they only had 11 stores, the very noisy arrival and messaging was distracting to colleagues and customers alike. We were, nevertheless, grateful to them for the real spur that their arrival gave all of us to, quite simply, get better for our customers. Comet was sold earlier this year to a private equity firm and our market analysis shows that we can be very confident indeed that we have been growing share against them. It is also good to see the mass merchants de-emphasising the heartlands of our business in which it seems to us that they have discovered a very salutary truth: selling electricals is not as easy as it looks.

In the Nordics, too, there were a number of significant casualties in the independent sector, most notably the exit of OnOff Group in Sweden, Skousen in Denmark and ElPrice in Norway. We believe that consolidation is a trend in these markets.

We clearly have leadership positions in the UK & Ireland and in the Northern Europe divisions, so my focus here will be on Pixmania and Southern Europe. I am absolutely clear that we need to set these businesses on a path that will either make them strategically strong and profitable, or consider more creative solutions to put them on firmer footings. I am currently very focused on this and will share my ideas with you over the next 12 months.

In Greece, I believe that we have an asset that is absolutely square on our strategy, is growing market share, it has a brand well recognised by customers and has a strong team building and buying into our shared vision. While in the year just gone it did cost a little cash, it has been building on its strengths and kept that to a minimum in a much smaller market. Kotsovolos is a solid business and I believe this business can continue to react to the stormy environment, grow it’s share and continue to manage costs aggressively.

The Italian market is structured very differently to the UK and Nordic markets and is far more fragmented. There are 3 main operators in the market, one with scale and 2 with more modest shares. There remains a very large part of the market operated by buying groups and small entrepreneurial stores. We have a short term and a long term view on this. Firstly, it is clear that we need to take, and indeed are taking, aggressive action to drive out cost. Over the last three financial years the company has taken out just over a quarter of its cost base but we believe that there is materially more to come. In addition, we believe that there is a good potential to improve our stock and cash position.

PIXmania has one of the largest non-food pure-play platforms in Europe and represents a valuable source of insight and information on this segment of the market. It has expanded its ranges and offering both directly and through PIXplace and it has exploited its e-merchant platform.

PIXmania has performed disappointingly this year, although some of this was due to one off events that were not foreseeable. In the light of the changing business model facing internet

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operators we are reviewing much of PIXmania’s activities to focus on those that deliver a unique profitable competitive advantage going forward. Together with cost reductions we are confident that we can reduce the losses experienced in the year just finished.

SLIDE – ALIGN BUSINESSES

Our third priority is to align our business to enable us to leverage the knowledge, best practices and understandings across this great Group. We are often challenged about what the benefits of being a multi-market operator are. While customer focus, brand loyalty and service remain local, I believe that there are many things that we can do to exploit the advantages of operating in different markets. While some work has been done over the last few years to share best practice, for instance our new stores look very similar from Malmo to Milan to Manchester, we have only just scratched the surface. In addition last Christmas, for the first time, we bought a key peak deal across the Nordics and the UK. This generated some significant benefits for us, our suppliers as well as, of course, for our customers.

As you know our Group has largely expanded by acquisition and this means that there are different cultures and ideas that are extremely powerful. To give you one example, the ‘customer win’ strategy that has been employed by our Nordic business for more than a decade is exactly the supplier strategy that I laid out earlier and which has been modified to roll out in the UK and elsewhere. Our Nordics teams see this as a fundamental part of their model and they are right, but we can be far swifter and more effective at rolling this out elsewhere because of the shared experience that we have.

Our UK & Ireland business has developed a leading model in helping customers buy solutions that enable them to get the best out of their products, but also give us a greater return on the basket that can be re-invested in the customer offer. Through our training programmes and KNOWHOW services we can take this to our other businesses.

There are many more opportunities, and I am realistic that making this happen in a way that reaches deep into the organisation will take time, and that the unique cultures that have developed in each market are also a vital part of the DNA. On the other hand, like an early explorer in the Galapagos, I am very excited by the wealth of ideas that will emerge out of this diversity over the coming two or three years.

SLIDE - RETURNS

I am confident that delivering on these three priorities will mean that we can

i. Improve EBIT margins ii. Generate cash and iii. Improve returns for shareholders.

We have talked in the past about delivering a 3-4% EBIT return on sales. The UK and Nordics together plus associated central costs this year yielded a 2.7% EBIT return, and we believe that there is room for material improvement – especially in the UK. For these territories I believe we can achieve this goal. Sorting out the other assets in the Group – ensuring that we accept that all of our assets must be working to enhance returns – is the way in which we drive the whole group forwards.

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Cash is an important part of this and I am pleased to say that despite the tough economic backdrop we have been cash generative in the last two years. As a business we believe that we can continue to generate cash. In the short term this will enable us to repay our Bonds in November this year in line with our longer term objective of reducing the overall amount of debt the business has. As a Group we need to continue this focus on cash and make the right choices as to how we either utilise or preserve cash. For example we need to strike the right balance between the depth of range we have on display in our stores and how much cash that ties up in the business. Let me give you an example of this...we have recently introduced our customer journey for imaging – a fold out representation of which you should have found on your chair – and in introducing that we reduced the number of camera’s on display by 30% focusing on those products that customers wanted and reducing the amount of stock held in the system. The extended range is of course available on the internet and our store colleagues can order that for delivery to the customer. After being rolled out in to stores, the new customer journey increased camera sales by an average transaction value of 29. I particularly like the way we use ‘our experts love’ to make the best choices stand out for the customer.

SLIDE - SUMMARY

Overall then, I believe that Dixons Retail is in now in a much stronger position than a few short years ago and is in robust health. We have weathered – and in some territories are still weathering - the hurricane that has engulfed Europe and are beginning to repair our sails.

We are growing market shares by doing what is right by and for the customer. And we are rapidly improving our balance sheet.

As you would expect we continue to plan cautiously, particularly in relation to our cost base, but have shown that we can react to the upsides as and when they come.

Thank you for listening, Humphrey and I are happy now to answer any questions you might have.

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QUESTIONS

Fraser Ramzen, Nomura

Thanks good morning. Actually a question about Knowhow and just actually your simple definition of the £500m market, what's included within it, where do you think you are and what do you think you have to go for?

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Sebastian James, Chief Executive

Yes it's a complex question, it may be one that we should take off line because there are lots of bits of it but it includes all of the falls and fix, the training services, support services and cloud services delivered to private individuals rather than commercial. You can have some debate about the elements by the way. Sorry yes go ahead, we're back.

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Caroline Gulliver, Espirito Santo

Morning, could I ask a couple of questions about PIXmania - first of all the minus 10% like for like that you did last year are you able to quantify that between sort of the one impacts of the natural disasters, the macroeconomic environment and then the more structural sort of shift to multi-channel. Should we use sort of the minus 5 of the last quarter as a more sort of ongoing structural decline or is that too negative?

And then just in terms of the profitability, obviously you made about a £14m loss in the second half which was actually a wider operating margin loss despite the lower sales decline. What's driving that and what can you do about that?

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Sure, do you want talk about the numerical part of that and I'll talk about the straightforward stuff?

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Humphrey Singer, Group Finance Director

So just in terms of the second half situation the reality is that we did quite a lot of restructuring of the operation and dealing with some of the issues in the second half so I wouldn't necessarily take that particularly as an ongoing run rate. And in fact we now need to work really hard actually to drive out more costs which the team are currently working on.

I mean we'll probably add something to the top line situation, I think there was a reasonable chunk of what happened last year that was the perfect storm, the acts of God if you want to call it that but there is quite a chunk which is the headwinds because they are so predominantly, in France which took a downturn and in Southern Europe and those pressures remain.

And then they're also in categories which are generally more discretionary than say white goods or whatever. So there's quite a bit of headwinds for them and I think those like for likes will carry on into the New Year. I don't know if you want to say …

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… not miles away.

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Caroline Gulliver, Espirito Santo

And then could I just ask a question about the UK store base. You've indicated you're now going to sort of 400 to 420, can you update us a bit on the exit pipeline if that makes sense, of stores you might need to exit say over the next five years, I think you added £20m property losses this year but what about beyond that?

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Well I'll talk about the stores and then the numeric side. We think that the sort of run rate that we're getting at at the moment is about right. There are some stores where there's a high degree of urgency because we know that the upside is so fantastic if we can do the two

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in one, if we can get that still going or build a megastore that suits that market better. We think the bulk of those are now done now we're looking at opportunities as they come up, as deals come up, so we have an opportunity to build a number of one in two stores because a retailer came to us and said we'd like a portfolio of ten stores and we took it, it's a good deal and we were right to do it, it's slightly opportunistic on that front.

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In terms of property losses no change to the previous guidance so we think we'll have £20m and we've got another year or two of this programme. In a sense I sort of control it from here in the sense we say we don't want to spend more than that on property losses and that kind of determines how quickly we're able to do it. Now if a great property deal comes up then we'll go for it but it will be for the right economic reasons, saving the rent and driving the sales that we've seen so. Most of the high street transitions are lease expiry so the estate is quite healthy in that sense.

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Eithne O'Leary, Oriel

I was just wondering how much of the cost gap versus appearance your suppliers are inclined to help you with?

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Well to bridge the cost gap we think it is the four elements that are critical and we are getting help, all four elements are contributing very significantly to it. So the work that we do, of which we are supported, which in demonstrating and helping products - helping customers chose products our suppliers are bringing to market is a very important part of the overall piece. But so is selling complete solutions and making sure that our cost structure is right. So those elements together are how we bridge the gap.

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Geoff Lowery, Redburn

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Three questions if I may. Firstly a slightly mundane one, can you give us a heads up on your latest thinking on interest charge and capex for the year ahead? Secondly in terms of Northern Europe can you talk about your space growth potential and how you see it being realised over the next two to three years, given as you say quite a lot of market dislocation around your peers and how can you capitalise on that?

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Sorry are you talking about market space growth or …

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Your space growth in response to it. And thirdly in terms of the £90m of cost savings over the next two years can you give us a flavour of how they split by market?

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Sure, do you want to tackle one and three and I'll tackle two?

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Okay so let me do one and I think it's four actually but anyway. So interest - we expect a number in like the early 40s for the year that we're now going in to, there are some headwinds, if only interest was just interest in summary. So there's foreign exchange volatility that goes into that number which makes it hard to predict, we had quite a few million in the year just gone that cost us in that respect and it's very hard obviously to predict that going forward.

The pension charge that's in there, we know now will be probably about £2m higher than it was in the year just gone which is to do with projections on return on assets, you know all of this doesn't sound very like interest, if only it was just the amount I was borrowing on

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facilities I'd find it a lot easier to predict. And of course that will come down in time; it's just taking a while to get there.

The second question was capex so I think no change to guidance there, 100 to 110, maybe slightly more towards the top end because I had a slightly lower number than I was expecting in the year just gone. After that we'll see, I mean I think what we talked about before is going ongoingly to a level that's closer to our depreciation levels. But I think that remains an open question, you know we'll make sure that we spend prudently and so it sort of depends on how the economic environment unfolds. So that was number two.

Number four, the £90m cost savings, in terms of the split by market historically it's been very UK focussed, I think that's still going to be true going forward just because it's the biggest business. But actually increasingly we're getting cost savings of course out of Southern Europe and stretching for more of that earlier the better. And in terms of the - was there a split question by year I can't remember whether you asked that or not?

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No just by market.

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In terms of space overall, we think about our stores in a slightly different way which is to say what's important is that we're within an acceptable reach of our customer no matter what the sales turned out to be, well within reason, no matter what the sales turned out to be within the store. So if one of our major competitors in the UK were to go bust we don't think that that would make a material difference to our space requirement in the UK to give you an example.

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Yes and sorry more in the Nordics?

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So in the Nordics there are opportunities for us to build stores and we take those where they crop up. There are some markets where we think there's opportunities for us to grow share locally and we take those as they come up. We're not talking about very dramatic shifts one way or another.

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And can I while I've got the mic, one ultra, ultra geeky question, the £65m in terms of the cash hedging cost, doesn't the weakness of the Euro reduce that number or am I …?

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I was wondering if I got that question, there might be some upside, I mean I haven't left it just floating that would seem to have been a silly option so we did close out some of that position. As the rates actually improved from wherever they got to, 110 and got into the sort of teens, 118, 117, but yes there might be a bit of upside but we'll see but it's tough to predict that one.

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Chris Chaviaras, Barclays

I've got two questions as well please. So the first one just to confirm Sebastian was talking about Greece having the losses year on year if that's right but then we've seen an extension of the losses so does this mean that Italy has deteriorated in terms of its profitability, well actually its losses, is the first question.

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I don't think I said it had halved losses year on year.

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The EBITDA losses.

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No I don't think we said that.

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About Greece, no I think we said it had a small EBITDA loss.

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A smallish EBITDA loss.

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Right was it better or worse than the previous year?

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That would have been slightly worse than the previous year.

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Right okay.

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I think the point he was making was not that much worse considering the environment they've been in.

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So the thing in Greece, what's been I think an amazing achievement, but actually in Greece and Italy is given the economic environment that's been happening is how comparatively they've been able to react to mitigate those losses, but you know it's tough out there. Sorry the market is down by 55% over three years.

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Thank you and the second question would be on Norway. We had news that Media Markt is not going to enter there, I remember back at the analyst September, sitting with Nordics management they said that they were preparing for that and they were kind of taking actions. Is there scope to reverse some of these actions since Media Markt is not entering i.e. I don't know maybe reduce prices, reduce markdowns, improve margins?

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Well I don't think - we weren't certainly reducing margins a year in advance of Media Markt's arrival. I think what they were talking about is having plans in place so that when that happened we would be able to react. So clearly we won't need to take those actions with Media Markt not coming into the market but I think we want to leave the plans in place because we never know when they will change their mind.

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To be honest with you we've anticipated this move by Media Markt for some time although we've been prudent in terms of planning we thought it was unlikely given the losses they make in Sweden that they would come into Norway any time soon.

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What we have done Chris is make sure that over the years we've invested where we had the opportunity to make sure we were in absolutely the right sites to compete with them and make their life as hard as possible if they were to have entered the market. And that's maybe the actions that we've been talking about in …

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What's interesting is, one of the reasons why they've been unable to be successful in Sweden is that unlike in many of the markets where they've entered where local competition has been under invested in stores and locations actually we were in advance building up a strong base in all of the key towns and that's allowed us to be extremely powerful against them in Sweden.

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And a very last, since I have the mic again, can you quantify the cost savings maybe in PIXmania in Italy? You had quantified the costs savings in Italy of around £5m the previous time, is this kind of the level that you would expect this year? And also in PIXmania if you could quantify the costs?

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In both markets we're aiming for that number or higher and I think we're just right in the throes of sorting out what the detail is on that and we've budgeted them for a certain level but we're asking them to do more now really as we move into the year. And a lot of it is about timing and the time it takes to move to make transitional changes in those markets.

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Simon Irwin, Liberum Capital

Can I just follow up on a couple of the comments that you made in the presentation. I mean the first is on Italy, you talked about Italy finding a niche. What niche is that going to be and what does that mean for the business, I mean are you talking about becoming much more of a service led retailer and if so how many stores and what kind of profile does that mean?

And the second question is Humphrey on your comments about reducing your reliance on bank debt given the bond expiries, are you warning the bond market or the equity market?

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I'll deal with first one and leave Humphrey with the tricky one. So on Italy it's clear to me, the very first thing we need to do we must all be absolutely focussed on getting that business to a cash sustainable position as quickly as we possibly can. The team are doing I think a great job on driving that forward, we have some very aggressive actions we're taking this year; I want to remain focussed on that. At the same time I'm thinking about what are the intelligent ways in which we can deliver that niche, those ideas are still in development as soon as I can talk to you about those we'll be glad to do so.

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And just in terms of the profile of that business do you have a lot of loss making stores and a lot of profitable stores or is it kind of rather flat on that?

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No we have very few loss making stores overall. It's not so much that it's just that the overall business is relatively flat at a relatively low level of formal contribution per store and so - it means that the actions we're taking actually will impact quite well across all of the business so we think it's the right thing to do.

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So on the second question I think what I'm talking about is really how we look forward, so just to be clear and not to be ambiguous about it we think we're generating enough cash to repay the bond and that's what we plan to do this calendar year.

What I am observing and hearing from many is that there is this shift over time away from the bank markets and complete reliance on just bank financing that typically has been the case in the UK and more towards maybe an American model where there's a bit more bond financing of which of course we already have some. And so what I want to do is just be forward looking, be always ahead of the game and always have options. And that's what I'm really talking about there is making sure that I've got the optionality going forward.

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I think we've both learn quite a lot about the trends as we went through this RCF process because we heard banks talking in ways that we hadn't been talking before and it was interesting.

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And you current projections by 2015 do you think you'd be ready to refinance the bond with another bond?

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We would yes.

Sorry just to clarify that, actually on our plans we'd have the cash just to repay the bonds as we go through the next few years.

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David Jeary, Investec

First thanks that you're still selling colour presentation packs rather than the return to black and white yesterday in the electricals market, very welcome …

And a couple of questions if I may, firstly on inventories and stock, John obviously made big play about where he saw big opportunities in working capital and stock and I just wondered if you could elaborate a bit more on where you are thus far and how much more you think there is to go?

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Well last year came quite good; we've had flat sales and stocks down just under 10% so it's been quite good. We still think there are plenty more opportunities, we running at just about 6 times stock turn at the moment. We're targeting the teams with some quite aggressive progression on that, we have to be realistic and Humphrey I know you have some thoughts on this?

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Yes I sort of remain cautious, it's quite tough in some of the markets where you're going backwards rapidly in sales to keep driving those stock turns. But I think you know we've gone from what 5 a couple of years back and we're now at 6 and I think there's definitely room to improve on that.

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A third of our stock is on display stock that customers can play with and that's a very interesting dynamic in our market which is different to many other markets.

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David Jeary, Investec

And the second question I have was relating to what you were saying about the cross buying that you did at Christmas with Nordics, how much more of an opportunity is there, I mean I think some of us thought there was probably more of that going on, it's always been a little bit of a utopia for many people with multi country positions in Europe. I mean is there a substantial opportunity there or is that the thin end of what will remain a thin wedge?

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I think it's the thin end of what can be a very thick wedge but I think we have to be realistic going on time. The market is not configured to deliver those cross market benefits in our market or in many retail markets and I think that is changing. The critical thing is that for suppliers and for all of our businesses we have to recognise there's a benefit for everybody and that takes time. So we think it's a big opportunity but it will take time.

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Question - Phillip

Just a quick question then I'll hand over to Andy. Are there any plans to introduce a new management incentive scheme and if so what will your targets be based upon, can you give us some indication of what's going on?

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So the answer is yes. We're going - are you talking about us or are you talking about …

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Question - Phillip

Yes the top guys.

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So the remuneration committee is who you should probably talk to about this but they're looking at an incentive scheme which is based on share price which we think aligns our interests quite well with an EPS underpin.

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Andy Hughes, UBS

Can you say what you're observing from Comet at the moment in terms of trading strategy and store closures and perhaps how they're pushing or not pushing service contracts given what they've done to their service business and what sort of opportunity that gives you? And then perhaps just broaden it out into any of your other markets where you see bits of loose capacity which might come out over the next 12 months or so?

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Well I mean I can't comment on whether they're going to come out or not. But I think the historical electrical market and one which everybody did really well for many, many years was you buy a load of stuff, you pile it up in your stores, you then put an advert in the red top saying blimey cop a load of this 299 washing machine whatever. We think that's out of date. Our model we think is a properly multichannel service led business model where prices is hygiene factor, where you're advertising needs to be sophisticated online addressing customers, addressing customers as they think about these product lines. And we think we're doing that, we don't necessarily think other people are doing that.

And so I never want to underestimate our competitors, John Clare, who is the Chairman of Comet as you know is a very experienced retailer, much more experienced than I am, I would be foolish to under estimate him and we're watching very closely. But we think our strategy is the right one and so we're comfortable with that.

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Andy Hughes, UBS

Where you have stores close by I mean are you seeing stock outs or …

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We're certainly very comfortable with our own result in those stores yes.

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Andy Hughes, UBS

And elsewhere in Europe?

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Oh elsewhere in Europe, you know same truth applies I think even as we look at Media Markt, we think that this shoulder to shoulder with the customer approach that we're taking is actually pretty unique around Europe. And even Media Markt who are very good retailers and have fantastic stores we think that where we're up against them we're actually beating them in most of our main markets because we're offering this more attractive proposition to the customer.

So we can't see anybody who's following our approach and we think that that is causing us to win. Where players are more vulnerable we are seeing them exit the market and we think that will continue. I'm not sure I've answered your question I think I've said all I can say though.

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Andy Hughes, UBS

Well we wanted to hear you say something you couldn't say but …

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Matthew Taylor, Numis

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Are you comfortable with that 7% price premium against the pure plays, sounds quite a lot for a big ticket item?

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Yes no not at all. Overall we think that in the long run there is a small price premium that customers will rightly reward the right kind of service and multi-channel offer with. If you imagine a young couple coming to buy a telly, they wake up in the morning they decide they're going to buy a TV, they go to the store, a colleague will take them through the journey, will find the right set of TVs from them, help them curate our range and we'll say you know what the one you want is this one.

I will tell you that we're a little bit more expensive maybe than maybe pure play single channel operators, but I have one in stock, my colleague will put it in the car, my name is Seb and if something goes wrong I'm the guy you come to and I'll look after you. For that service we think that customers will rightly give us a small reward but we do think that it's less than that yes. But we do think that having travelled from 22 to 7 we now think we're pretty much most of the way to the end of that journey.

Any more? Well that's very relaxing. Thank you very much, thank you for your time, thank you.

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END

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DIXONS RETAIL SCRIPT FOR INVESTOR AND …...1 DIXONS RETAIL S CRIPT FOR I NVESTOR AND A NALYSTS PRESENTATION 9.00 AM 21 J UNE 2012 S EBASTIAN JAMES Good morning and thank you all for