Dixons Retail

8/13/2019 Dixons Retail

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Dixons Retail plcAnnual Report and Accounts2010/11

Bringing

life totechnology


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Dixons Retail plcAnnual Report and Accounts2010/11

www.dixonsretail.com


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Dixons Retail plc 01Annual Report and Accounts2010/11

EBIT(4)

(million)

2010/11 127.6

133.2

95.3

214.3279.2

2009/10

2008/09

2007/082006/07

Underlying diluted earnings per share(1,5)

(pence)2010/11 1.6

1.5

1.3

7.0

9.4

2009/10

2008/09

2007/08

2006/07

Underlying profit before tax(1)

(million)

2010/11 85.3

90.9

70.6

228.4

304.2

2009/10

2008/09

2007/08

2006/07

Underlying Group sales(1)

(million)

8,154.4

8,320.0

7,955.8

8,074.8

7,531.7

2010/11

2009/10

2008/09

2007/08

2006/07

Highlights

FinancialStatements

ShareholderInformation

Directors

ReportandBusinessReview

CorporateGovernance

36 Board of Directors37 Executive Committee38 Statutory Information40 Corporate Governance

Report44 Audit Committee Report45 Nominations Committee

Report46 Remuneration Report

55 DirectorsResponsibilities

56 Independent AuditorsReport

57 Consolidated IncomeStatement

58 Consolidated Statementof ComprehensiveIncome and Expense

59 Consolidated BalanceSheet

60 Consolidated Cash FlowStatement

61 Consolidated Statementof Changes in Equity

62 Notes to theConsolidated FinancialStatements

108 Company BalanceSheet

109 Company CashFlow Statement

110 Company Statement ofChanges in Equity

111 Notes to the CompanyFinancial Statements

120 Five Year Record122 Shareholder

Information123 Index

PerformanceReview

23 Overview25 UK & Ireland26 Nordics27 Other International28 Pure Play e-commerce

29 Group FinancialSummary

32 Corporate ResponsibilityReport

StrategicSummary

08 Bringing life to

technology16 Business Model18 Looking Forward19 Key Performance

Indicators20 Risks to Achieving the

Groups Objectives

BusinessOverview

02 Group at a Glance04 Chairmans Statement05 Chief Executives Review

Note: References related to definitions appear on page 24.

Cautionary statementCertain statements in this Annual Report and Accounts are forward-lookingstatements. Such statements are based on current expectations and aresubject to a number of risks and uncertainties that could cause actualresults to differ materially from any expected future events or results referredto in these forward looking statements. Unless otherwise required byapplicable laws, regulations or accounting standards, we do not undertakeany obligation to update or revise any forward looking statements, whetheras a result of new information, future developments or otherwise. Nothing inthis Annual Report and Accounts should be regarded as a profit forecast.

BusinessOverview

01--05

S

trategicSummary

08

--22

PerformanceReview

23--35

CorporateGovernan

ce

36--55

FinancialStatements

56--119

S

hareholderInformation

12

0--124


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02 Dixons Retail plcAnnual Report and Accounts2010/11

UK & IrelandFor more information please go to page 25

NordicsFor more information please go to page 26

Directors ReportBusiness Overview

Group at a GlanceLeading Europeanelectrical retailingand servicescompany

Currys and PC World are the UK & Irelandslargest specialist electrical retailing andservices chains.

We operate from High Street stores,Superstores and Megastores. We areincreasingly opening combined 2-in-1Currys and PC World stores across allformats, bringing customers the benefits ofboth brands in one convenient location.

Dixons Travel stores are based at all majorUK airports.

KNOWHOW is our new market leadingservices brand.

Elkjp is the leading specialist electricalretailer across the Nordics.

Elkjp and Lefdal stores operate inNorway, El Giganten in Sweden andDenmark and Gigantti in Finland.

www.currys.co.ukwww.pcworld.co.ukwww.dsgibusiness.comwww.knowhow.co.uk

HighlightsOur Renewal and Transformation plan is working and customersare experiencing better store environments, improved ranges andincreased levels of service.

250 stores have been transformed so far, 31 of which areMegastores.

We launched KNOWHOW, our new face of service and productsupport which puts customers at the heart of everything we do.This features delivery and installation, set up of equipment andupgrades, help and support as well as repairs and protection.

The multi-channel offering provides customers with the

convenience of online shopping alongside the accessibilityof our stores, particularly through the reserve&collectfacility.

Dixons Travel is expanding its brand overseas with operationsnow in Copenhagen, Rome, Milan and Dublin airports.

HighlightsElkjp continues to perform strongly in all of its markets and isexpanding its business significantly as we grow market shareacross the Nordic region. Elkjp operates an efficient operatingmodel with centralised warehousing in Sweden serving all fourprincipal markets in which it operates. With the lowest store-based cost to sales ratio in the Group it provides the basis for thefavoured operating model for the Group.

Elkjp is increasing its footprint through Megastores by extendingor refitting existing stores as well as refurbishing superstores tothe new Group format. During the year Elkjp delivered strongperformance in Norway and delivered particularly strong

improvement in Denmark, Finland and Sweden.

Underlying sales(million)

2,268.9


3,816.1Average selling area

per store(sq ft)

12,752

Average selling areaper store

(sq ft)

14,818

Number of stores

285

Number of stores

642Average employees

23,091

Average employees

7,343

Selling space(000 sq ft)

4,223


8,187

Our brandsOur brands

www.elkjop.nowww.elgiganten.sewww.elgiganten.dkwww.gigantti.fiwww.lefdal.com


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Other InternationalFor more information please go to page 27

Pure play e-commerceFor more information please go to page 28

Underlying sales by division(million)

123

4

UK & Ireland 3,816.1mNordics 2,268.9mOther International 1,226.7mPure play e-commerce 842.7m

1

2

3

4Directors ReportBusiness Overview

Kotsovolos is Greeces leading specialistelectrical retailer.

In Italy, we operate Unieuro electricalstores with some as combined 2-in-1Unieuro and PC City stores.

In the Czech Republic and Slovakia, weoperate under the Electro World brand.

In Turkey, we operate the Electro Worldbrand with a local joint venture partner.

PIXmania is one of the largest pure playelectrical retailers in Europe operating in26 countries.

Dixons.co.uk is one of the leading UKonline electrical retail brands.

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

www.pixmania.comwww.dixons.co.uk

HighlightsThe turnaround in Italy remains on track and the businessdelivered a positive EBITDA performance in the year, the first forseveral years.

Trading conditions in Greece remain difficult, however, Kotsovoloscontinues to generate cash and as market leader is wellpositioned to gain further market share.

Electro World in Central Europe is already a leading brand and iswell positioned for the development of the Czech and Slovakianmarkets in the medium term.

Electro World in Turkey remains a long term opportunity for the

Group with our joint venture partner.

HighlightsOur pure play brands work together with our store basedmulti-channel brands to provide our customers with the shoppingtrip that suits their needs.

Overall the Group continues to see strong growth in themulti-channel operations.

The functionality of PIXmanias e-merchant platform wasdeveloped further for Dixons.co.uk to provide an improved onlineshopping experience.


1,226.7


842.7Average selling area

per store(sq ft)

14,380

Average selling areaper store

(sq ft)

1,412

Number of stores

308

Number of stores

17Average employees

6,191

Average employees

1,398


4,429


24

Our brands Our brands

BusinessOverview

01--05


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Chairmans StatementJohn Allan

This has been a year when the economic environment hasremained particularly challenging in many of the markets inwhich we operate. The Group has, however, remained focusedon delivering a better experience for customers, which willposition the business for significant progress when theeconomic environment improves.

I am conscious that the Group has made only limited progress infinancial returns year on year, but I can assure you that the Board isalive to the need to improve returns for shareholders. The workunder the Renewal and Transformation plan has continued whichwill make the business better for our customers, simpler for our

colleagues to manage and cheaper to run. This has started toshow encouraging developments with improvements in customersatisfaction measures; we have maintained gross margins over thelast two years in the face of competitive and challenging markets;our operations in the Nordics continue to go from strength tostrength with sales up eight per cent. over the last year; we havetaken decisive action in Spain to close our operations in a marketwhere we saw little opportunity for short to medium term profitablerecovery; and we have reduced costs by 50 million in the year.

Delivering a betterexperience for

customers willposition the Group forsignificant progresswhen the economicenvironment recovers

In March this year we launched the KNOWHOW brand in the UKwhich encompasses all our after-sales services. KNOWHOWclearly puts the customer at the heart of everything we do andempowers all our colleagues to focus determinedly on ourcustomers. Our KNOWHOW distribution and repair centre inNewark is world class. The logistics, distribution, repair andservices areas are far better than many of our competitors. Theefficient operation illustrates how far we have progressed in gettingit right for customers first time.

During the early part of the financial year we successfully issued a150 million bond due 2015, which enabled us to repurchase justunder half of the Groups existing 2012 Bonds as well as extendthe maturity of the Groups working capital facility to 2013. Thisgives the Group a much more appropriate maturity profile on itsdebt facilities.

We have made significant progress in transforming our storeswith over 360 stores now in the Groups new format, including65 Megastores across the Group. With a solid base of storesnow transformed and significant improvements having been madeto the Groups operational processes we can now manage ourcapital expenditure carefully to ensure the Group has adequatecapital to repay the remaining 2012 Bonds irrespective of thetrading environment.

Recognising challenging conditions in some of our markets,and the ongoing business restructuring under the Renewal andTransformation plan, we have reviewed the balance sheet andmade impairment and other non-underlying charges totalling309.4 million. The additional cash impact of these charges isestimated as 39 million, of which approximately 8 million wasincurred in 2010/11.

This year, the Group selected two national charities to support,Lifelites and the e-Learning Foundation, which help to provideaccess to technology for disadvantaged children or those withdisabilities. I am very proud of our colleagues, who haveorganised so many fundraising activities throughout the yearfor both these charities as well as a number of charities local tothe communities in which our stores operate.

This year we welcomed Dharmash Mistry to the Board as a

non-executive director, who has substantial retail experience inconsumer-facing and internet businesses.

The year ahead remains a challenging one, particularly in the UK,Greece and Italy. Your Board is confident that the changes thathave been, and are being, made to the Group will enable it tonavigate the difficult environment ahead in a better shape than ithas ever been. I would like to thank the management team led byJohn Browett, and in addition all of our colleagues across theGroup, for their persistent hard work. I am convinced that we willemerge increasingly as a winner in the electricals and servicesmarket as the economy recovers.

John AllanChairman


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BusinessOverview

01--05


Chief Executives ReviewJohn Browett

The tough economic backdrop in many of our markets has madethis a difficult year. Nonetheless, we have been able to balanceimproving our offer for customers whilst maintaining profitability.The shopping trip we provide to customers is more competitiveand we see the impact on our business as we make our offereven better. Customers come to our stores because they arelooking for great new products; however, they need a completesolution to get the best out of the latest technology. It is our jobto make sure they leave our stores with the right products andservices to meet all their needs. Increasingly, we are seeing thebenefits of selling services effectively, particularly with the launchof KNOWHOW in the UK.

Our Customer Plan is at the heart of the business and a keyelement of delivering on our core purpose of bringing life totechnology, so I thought I would again lay out our progress inthe last year under the plan. As ever, our objective is to makethe business better for customers, easier for colleagues andcheaper to operate.

Theyre interested in working out whatsright for meOur unique FIVES training programme has formed the basis ofensuring all our colleagues across Europe are equipped with theright tools to understand and meet customers needs. This yearwe have continued to refine and develop FIVES training, withcolleagues attending many refresher courses. Alongside this we

have introduced better product learning tools under our web

based Product Learning Centre. We have also worked with

suppliers in the UK to hold over 900 workshops, enabling ourcolleagues to immerse themselves in fully understanding thefeatures and benefits of a wide range of products, ensuring theycan explain the exciting technology we sell to our customers.We have also introduced a new colleague scheduling tool to allour shops in the UK to better ensure colleague availability meetsour customer footfall patterns. This has already improved themeasure of our colleague availability to our customers footfallin our stores by 20%.

Our objective is to be famous for great service. Our operationsin the Nordics are already famed for excellent customer serviceand we can take many learnings from them and make furtherimprovements as we roll out our vision to our other businesses.

Through the actions so far we have made great progress with

customer satisfaction metrics improving significantly since westarted the Renewal and Transformation plan. In the year aheadthere is much more we can do. Our new KNOWHOW servicesbrand, launched in the UK at the beginning of 2011, embodiesthe behavioural attitudes that deliver a fantastic experience forour customers. Improved services and enhanced training planswill give our colleagues further tools to ensure every customergets the right solution for their needs.

Its an exciting place to beWe continue to develop our stores, making them exciting placesto experience technology and find the right solutions for ourcustomers needs. During the year we transformed over 130stores across the Group, which included 32 Megastores. In Italythe combined 2-in-1 format of Unieuro and PC City is now open

in 19 locations and is proving to be a format that is as popularwith Italian customers as it is in the UK. This to me proves thata well designed store and customer offer works across manymarkets. In the Nordics we now have 20 Megastores and willcontinue to transform stores to the larger Megastore format therein the years ahead. In the UK we now operate 31 Megastoresand 56 combined 2-in-1 Currys and PC World superstores. Wehave also introduced the 2-in-1 format to the High Street withgreat initial results. These new store formats are consistentlydelivering gross profit uplifts of between 15% and 20% and insome cases higher in the first year versus the unrefurbishedestate. Encouragingly they are maintaining these uplifts into thesecond year.

Our objective is tomake the business

better for customers,easier for colleaguesand cheaper to operate

Customerplan

Its easyto shop

Its an excitingplace to be

Theyreinterested

in working outwhats right

for meThey deal withqueries andcomplaintsbrilliantly

They makethings workand keep

them working

The pricesare good

I can getwhat I want

when I want it


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Chief Executives Reviewcontinued


A significant validation of the changes we are making manifesteditself in the fact that we were a key partner for Apples launch ofthe iPad in the UK. The fact that our stores are great places fornew technology where products can be demonstrated and theirfeatures explained fully is why Apple chose to partner with us onthis important product launch. In October 2010 we launched anexciting new advertising campaign around the Megastore formatin the UK, featuring R2D2 and C3PO from the Star Wars films,which was hugely popular with customers. It is testament to thework we are doing that Lucas Films allowed their iconic Star Warscharacters to be used to advertise the greatest technology storesin our universe. We have also started to implement in-storedemonstrations which bring the features and benefits of kitchenappliances to life in our stores with the introduction of live kitchens.

Having integrated PIXmanias market leading e-merchantplatform into our UK sites we have now been able to improvethe customer offer on both the pure play internet business ofdixons.co.uk and our multi-channel businesses such ascurrys.co.uk and pcworld.co.uk.

We are also looking at ways to raise the bar in our store formats evenhigher and during the year we opened a trial store in Birminghamcalled Black. The aim is to trial new ways of merchandising anddemonstrating high end technology products as well as integratingour new KNOWHOW services into the proposition. During 2011 wewill learn from this trial and will be using the elements that customerslike the most in all our store transformations.

Its easy to shopOur new store layout and improved websites make it easier thanever before for our customers to choose the right product. Wehave made great progress this year in helping customers choosethe right product for their needs through clearer signage andbetter information at point of sale, helping to untangle technologyfor our customers.

Ourreserve&collectfacility is proving to be a great success withour customers, giving them the ease of the internet combinedwith the convenience of our stores. In the last year we have seenour multi-channel internet sales, driven byreserve&collect,rise by13% across the Group.

In the year ahead we will make further improvements to ourmulti-channel offering providing customers with improvedinformation on our websites as well as access to a widerrange of products online and in-store through our websites.

I can get what I want when I want itWe have launched our own label brands of Currys and PC Worldessentials, Logik, Advent, Goji and Sandstrm. Having had over70 different own brands previously, this simplified our of fering andgives customers a clear good-better-best range of products fromwhich to choose.

With our partner, Phones4U, we opened 57 shop in shops, givingour customers access to the latest smartphones and networksfrom one of the UKs largest mobile phone retailers.

We must ensure that we provide excellent service to ourcustomers every time we come into contact with them. Throughour At home with FIVES training we can ensure that a customerhas everything they need when we visit their homes, reducing theneed for a further call out by 52%.

Having made significant progress in managing our stock in thewarehouse and in-store across the Group, this year we plan tosimplify processes still further which will improve availability onlineand in-store while freeing up more time for our colleagues tospend with customers.

As a part of the KNOWHOW rollout to our home services teamwe have introduced Personal Digital Assistants (PDAs) to the

team which will help improve customer feedback and timemanagement of our colleagues.


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BusinessOverview

01--05

The prices are goodOur scale across Europe means that we are continually ableto give our customers the latest products at the best prices.We monitor prices against our competitors regularly with, forexample, over 300,000 products checked every week in the UK,so we know we are offering real value to our customers everyday. All this is backed up by our market leading price promiseto refund 110% of the difference if a customer finds the sameproduct cheaper elsewhere.

There are further changes we plan to make in the year ahead.By simplifying our promotions processes, for example, we can

give customers better deals on new products by making our ownbrand products even better value through cost reductions andgiving customers good, better and best choices acrossour ranges. We are also conscious that not all of our customersare aware of the significant value we offer compared to ourcompetitors, so we will start to improve the communication ofthat messaging in the year ahead.

They make things work and keep them workingThis was a significant year for our support services. We broughtthe majority of the service operations in house in the UK. Weknow we can only improve the service we offer by owning andbeing directly responsible for all contacts with our customers.That enabled us to launch the KNOWHOW brand bringingtogether the home services, distribution, contact centre and

repair operations. With all these services now operating as oneclear customer focused brand we have already started to seethe benefits for our customers. I am immensely proud of ourcolleagues enthusiasm for the KNOWHOW brand, but moreimportantly their desire to really help customers as much aspossible every step of the way through the lifecycle of thetechnology they use. Our turnaround times for repair products isfaster, with 93% being returned at a pre-booked time. Our rightfirst time delivery is one of the highest in the industry and ourcustomer satisfaction levels are continually improving.

Under the KNOWHOW brand we will make further improvementsto the services our customers receive by, for example, shorteningthe repair times even further; enabling customers to track theirproduct while it is being repaired; and a no lemons policy whichmeans that, under our support agreements, if we fail to fix theproduct properly after three attempts a customer can requesta replacement. We will also start to roll out the KNOWHOWservices to our international businesses. This is a multi-year projectwhich will require tailoring to each market, but our customers needour help with their products wherever they are, so this presents amajor opportunity for our customers and our shareholders.

They deal with queries and complaints brilliantlyThis year we consolidated our UK call centres into one locationin Sheffield as well as enabled many of our call centre colleaguesto work from home, increasing the ability to match colleagueavailability with customer calls. By analysing the reasons whycustomers call us and providing them with better information toreduce the need to call us, we have reduced the number of callswe receive by 11%. Together with increased cross skilling wehave increased the availability and ability of our colleagues toresolve customers issues. As a result we have seen increasedcustomer satisfaction and reduced repeat calls. We have alsomade the processes for stores dealing with customers issueseasier for our colleagues and better for our customers.

In the year ahead we will improve our systems further so thatcustomers and their products can be identified more easilywhen they call. We will continue to identify the root cause ofcustomer calls and eliminate the need for customers to call inthe first place.

As you can see, the volume of work on our Renewal andTransformation plan is still very high. Our reward is improvingcustomer satisfaction and higher share in many of our markets.We are starting to stand out for customers and we havemuch more to deliver to make our customers shopping tripeven better.

These achievements would not be possible without theenthusiasm, dedication and hard work of our 38,000 colleaguesacross the business and I would like to thank them all for theircontribution to making Dixons Retail a great business.

OutlookThe economic backdrop remains challenging, particularly in thefirst half as we anniversary the World Cup and iPad launch.However the Group is well prepared for this environment. We arecreating a market leading dif ferentiated customer offer, leaving uswell set to emerge from the current climate ahead of thecompetition.

John BrowettChief Executive


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Point and shoot and the moments captured.Transferred over to my iPad 2 and my photosare ready to edit, print or upload to the internetto share with my mates. The guys at Curryshelped me find the right camera, lens andmemory card too. They explained how to use

KNOWHOW online storage solutions whereI can save my precious photos, music andvideos. Its amazing. Its exactly what I need.Shoot, save and share!

I love to

capture themoment

Technology at your fingertips with the

iPad 2. Games, maps, apps, reading, filmsand photos have all been made faster andeasier. Talk to your friends face to faceusing FaceTime and instantly upload photosand films for shar ing online. Tablets arerevolutonising the way we interact with ourdigital content.

The Nikon D5100 Digital SLRCamera

delivers crystal clear images. It boastsFull HD 1080p video recording optionswith a 3 vari-angle LCD monitor makingit easy to look back at photos and films.

Have fun taking perspective shots with the

Nikon 10.5mm SLR Fisheye Lens. The 8GBKodak High Speed Memory Card means youcan take action shots in quick successionand has plenty of space for storing photosand films.


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You dont need to use a controller with XBoxKinect, just your body and voice. Its magic!We jump, dance, drive and play and theKinect senses it all. Its even better whenMum and Dad or even Gran and Grandad joinin. We can watch movies too. They look

amazing on the 3DTV which the KNOWHOWman put on the wall. He even set up Mum andDads Bose DVD home entertainment systemand connected the Kinect to the internet.Our family has so much fun, I cant wait forthe weekends!

We just want

to have fun

For a premium home cinema surround sound

experience, connect a Bose Lifestyle38DVD home entertainment systemto your TV.The HD viewing quality brings your films tolife. Audio can be shared in up to 14 rooms,even outdoors. It can also store up to340 hours of digital music.

The Xbox Kinectsensor puts you into the

heart of the gaming action like never before.Your body is the game controller. You donthave to hold controllers or struggle withwires. Just jump in front of the sensorand start playing.

Put on your 3D glasses and experience

breathtaking 3D films and TV programmeson the Samsung 55 HD LED 3D SmartTVwith integrated Freeview. Its Smart Hubprovides access to the internet with featuresand apps. Watch films through a connectedgames console or stream them throughthe internet.

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A new baby boy, a football mad son, and atap dancing daughter equates to a mountainof washing alone. I needed a large, highperformance energy-efficient washingmachine. The team at Currys suggested theLG Direct Drive the answer to my prayers!

It can take a huge 11kg wash load and ispacked with features such as allergensanitisation and Scrub motion perfect forthe kids clothes. Its even got a Baby carewash programme and its so quiet. WithKNOWHOWs WHATEVER HAPPENSKitchen Cover, Ive got peace of mind too.

Thats a load

off my mind

Steam irons take the strain out of ironing,

cutting through the pile of ironing in no time.The ceramic soleplate and variable steamsettings mean you can use the GV8360 ProExpress Turbo Steam Iron as a dry iron too.

Washing larger loads is light work with the

11kg load LG Direct Drive Washing Machine.Inverter Technology means it effectivelyremoves the dirt and bacteria that canaggravate allergies and has an A++ rating forenergy efficiency.

We will deliver your appliance at a time to

suit you and well even recycle your oldproduct for free. If you want us to installit, we KNOWHOW. If it needs a minor ormajor repair, well fix it....and if we cant, wellreplace it. If you simply need a bit more helpto get the most out of your purchase oreven want an upgrade, we KNOWHOWtohelp you.


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Store Internet Products After-salesservice

Support

Value

Low cost operating model

Choice Service

Customer insight

Sales adviceEasy to shopPlaytables2-in-1 store offering

Multi-channelPure playreserve&collect

Specialist

Great brandsWide rangeExclusivityOwn brand product

Delivery & installationSet up & upgradeHelp & supportRepair & protect

Directors ReportStrategic Summary

Business Model

Bringing life to technologyOur customers are at the centre of an increasingly digitised worldwhich they can access and utilise in numerous dif ferent ways.Whether this be social media, online gaming, downloadingmovies, sharing pictures, cloud computing or energy efficientproducts, customers do not just come into our stores to buyproducts, but to find a solution to a need. It is our job to help findthe right solution for our customers, ensuring they get the mostout of the products they buy. As such we put our customers atthe heart of everything we do. Our core purpose of bringing life totechnology embodies our belief that in this increasingly complexworld our customers need solutions and help. From this corepurpose we have built our customer plan which is discussed inmore detail in the Chief Executives Review on pages 5 to 7.

As one of Europes leading specialist electrical retailing andservices companies we operate a business model that supportsdelivery of our Customer Plan.

Customer insightIn order to ensure we understand what our customers want, howthey use the products they buy from us, and what they think of theservice they get from us, we use extensive customer insight. Thisincludes discussions at customer panels, interviews, home visitsand other research. This is supported by mystery shopping in ourown and competitors stores, exit surveys and customer feedback.We use this information to build our ranges, improve our stores andservices as well as help us with other business decisions.

Stores and internetConvenience and ease of navigation are key in attractingcustomers to shop with us. Through the Renewal andTransformation plan (more detail of which can be found atwww.dixonsretail.com) 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 andCurrys stores into 2-in-1 stores which give our customers greateraccess to our specialist computing offer combined with ourmarket leading mixed electrical offering, and enables us to

improve our sales densities and rent to space mix. We favour thecombined store format and we are implementing this in ourstores across the Nordics and Other International businesses.

Our FIVES sales training programme combined with our ProductLearning Centresprovides our colleagues with the right tools toreally understand 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 help them be experts in the products we sell.

Many of our customers research products online before comingin to store to buy, so ease of navigation, clear descriptions ofproducts and related information are important for our websites.We are increasingly seeing customers combining the ease of the

internet with the convenience of our stores by using ourreserve&collectservice. In the UK, we have implemented themarket leading e-merchant platform from PIXmania whichenables us to continually evolve and improve our online offer toensure customers are engaged with our internet operations.

ProductsCombining our customer insight with our market strength acrossEurope we can make sure we have the right range of productsin our stores to suit customers needs. Our scale means thatwe can work with suppliers to showcase the latest technologyand products in our stores, with areas dedicated to key suppliersproducts. This also enables us to get products exclusively in ourstores, such as the iPad on launch in 2010.

Own brand products enable us to offer customers a greater rangeand choice of products at competitive prices. We have defined aclear good-better-best brand range of: Currys and PC Worldessentials; Logik; Advent; Goji; and Sandstrm brands.

Customers areat the heart of

everything we do


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After-sales services and supportMany of our customers need help with their products, whetherit be delivery and installation, keeping their products up andrunning or repairing them when things go wrong. Our businessin the UK & Ireland sets the benchmark for our servicesinfrastructure. In May 2011 we relaunched our services underthe new KNOWHOW brand with four clear pillars of supportfor customers to choose from.

We operate the largest network of two man deliveries in the UKwith around 60,000 deliveries per week enabling us to providecustomers with the convenience of next day delivery in a three hourtime slot or the value of a free delivery later. Our KNOWHOW teamin store, in our call centre and out in the field can provide set upand upgrade services as well as online fix and back up services.Our market leading range of help and support services help ensurea customer has the backing of expertise and support that keepstheir technology up and running. In the event that a customer hasa problem with their product we fix it. For example our state ofthe art repair facility in Newark repairs 600,000 laptops

and televisions each year and is able to repair and return alaptop in six days. We offer customers a choice of supportagreements such as Premier which provides them with a loanTV, for example, if theirs needs to be taken in for repair.

Business Modelcontinued

Our low cost operating model drives continuous improvementin our processes and services. This continuous improvementenables us to re-invest back into providing better value productsand services to our customers.

Direct ownership of the service infrastructure from end to endmeans we can ensure the best service at all touch points withour customers. We believe this gives us a unique operatingmodel for a specialist electrical retailer and a significantcompetitive advantage in meeting the needs of our customers.

While much of the improvement work has been focused on the

UK, core elements of the business model exist in our businessesin the Nordics and Other International divisions. Further servicesunder the KNOWHOW brand will be rolled out to these divisionsover the medium term.

Low cost operating modelDixons Retail operates in a highly competitive market. In order todeliver an unbeatable customer offer we need to have a low costto sales ratio relative to the service based business we run. Thismeans we have to:

have sufficient scale economics in each market usuallynumber one or two by market share;

lean business processes minimising wasteful activity;

design our business processes end to end to minimise cost

and deliver a high quality of service; and find new ways to continually improve what we do.

We use a technique called Lean Six Sigma to re-engineer ourbusiness processes to make them better for customers, easierfor colleagues to operate and therefore cheaper to run.

Through this low cost operating model we can deliver anunbeatable offer for customers meaning that they reward us withincreased market share and improved returns for our shareholders.

WEH = Whateverhappenscustomer support agreements

Delivery & Recycling

Built-in Cooker Installation

Cooker Installation

Washer and DishwasherInstallation

Fridge Freezer Installation

TV Set Up & Demo

TV Wallmount & Demo

Integrated Appliance Install

Home Theatre Set Up &Demo

Aerial Install & Tune

Aerial Multiroom Install andTune

Freesat Setup & Demo

Freesat Install & Demo

Freesat + Install & Demo

Set up and Support

Store & Protect

Virus & Spyware Removal

24 7 Help and Advice

Store & Share

PC Tune Up

System Reset & Restore

Infinity

Data Transfer & Check

Data Wipe & Check

Data Rescue & Protect

Computer Set up &Personalise

Software Install & Check

Operating SystemUpgrade & Check

Camera Set up &Personalise

Component Install & Check

Network Set up & Secure

Memory Install & Check

Tablet Set up & Tutorial

Tablet Set up Tutorial &Internet Protection

Netbook Set up

Knowhow Appcentre

Network Fault & Fix

Aerial Fault & Fix

WEH - Computing

WEH Premier -Computing

WEH - TV

WEH Premier- TV

WEH - Kitchen

WEH Premier - Kitchen

WEH - Technology

Instant Replacement

Games Console Fault& Fix

Desktop PC Fault & Fix

Digibox Fault & Fix

Laptop Fault & Fix

TV Fault & Fix

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Looking Forward

The Group is making significant progress under the Renewaland Transformation plan. The operational processes across thebusiness are on a firmer foundation, the customer offer is betterthan it has ever been and costs are under control.

Our offer for customers must continually improve. Here we setout just some of the innovations in the business which will enableus to remain one step ahead of the competition and firmlyfocused on customer needs in every market in which we operate.

This year we opened an exciting new concept store called Black inBirmingham. This is a 15,000 sq ft high street store on three floors,

totally new in design and positioned as the ultimate place to get upclose with the most wanted gadgets around. It is a must-visit store,appealing to customers who love their brands and how their kitlooks. We are using Black to conduct a variety of trials, exploringnew ways of making the shopping trip and the presentation of ourexciting technology and services even better for customers. Atotally new store layout, department style disciplines in categories,interactive displays and new ways of merchandising are all beingexplored in this store. We have embedded the new KNOWHOWservices brand in the store, providing areas for customers to usethe services we can provide in a more interactive and relaxedenvironment. Our colleagues have been encouraged to explorenew ways of excelling at providing high levels of services and bettersolutions for customers. The customer feedback has been veryencouraging and we are already taking learnings from this format

into the rest of the store portfolio across the Group.

Simplifying the shopping trip for our customers is key to helpingthem buy the right solution as well as getting the best out ofthe technology they buy. This is why we created the customerjourney in each category. We have trialled new ways of doing thisin Blackand elsewhere in our por tfolio. We have now developedan improved customer journey around a vision which not onlysimplifies the technology for customers, but also helps themchoose other products and services to get the complete solution.Trials of this have proved to be very successful and set thegroundwork for improved customer journeys in other categories.

Added value services are a key differentiator in our businessmodel (as discussed on page 17) and we will continue to innovatein this area. For example, having introduced PDAs for our deliveryand installation team we are looking at other ways to use thistechnology, such as dynamic routing of our colleagues out in thefield to make sure we meet and even exceed customers needs,the ability to provide customers with added value services whilein their homes rather than on a second call out and use of thedata provided by the PDAs to improve processes.

A lot of exciting things are going on, but we wont sit still. Wewill continue to innovate to deliver a better shopping trip forour customers.

Keeping ahead of thecompetition


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Risks to Achieving theGroups Objectives

1.Macro-economic risks

Risk Examples of mitigating action

Economic environment

Risk that the economic downturn is prolonged through 2011,particularly in the UK

Ongoing monitoring by Finance and the Executive Committee,including review of portfolio of the businessesRenewal and Transformation plan to improve our businessperformance irrespective of macro economic factorsStrategy and business planning which takes into account varying

economic scenarios

Market specific characteristics

SeasonalityA substantial proportion of revenue and operatingprofit is generated during the third financial quarter, whichincludes the Christmas and New Year season. Adverse tradingin this relatively short period is likely to impact significantly thefull years results

Price deflationPrice deflation has been a common featureacross most electrical goods categories for a number of years,primarily driven by technological advances and improvedproduction efficiencies

Financial planning takes into account expected peaks and troughsduring the year and the business is run accordinglyIncreasing the proportion of services related business, which offersa regular stream of income over the course of the year

Effective launches of new technology as it becomes available tothe marketGrowth of services related business to increase the number andvalue of non-product salesImprove gross profit uplifts in transformed storesControl of stock and strong management over clearance andexit routes

2.Competitor and market place risks


Competition

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

Renewal and Transformation plan is improving our stores, coststructure and service propositionContinuing development of strong online brands, notably PIXmaniaand Dixons.co.ukEnsuring our prices offer good value, including a customerprice indexContinuing to take money out of our cost base, and leveraging

group-wide benefits where opportunities ariseBuilding ever stronger relationships with suppliers

Risk management is an integral part of business management and it is something that Dixons Retail takes seriously. The Group has

continued to develop its approach during the past year and has taken steps to integrate risk management into business decisionmaking. In addition, the Board and Group Executive have invested time to identify and assess the key risks facing the business.The principal risks and uncertainties are set out below along with an illustration of what is being done to mitigate them:


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2.Competitor and market place risks continuedRisk Examples of mitigating action

Changing technology/consumer preferences

Risk that we fail to capitalise on new technology or emergingtrends to maximise revenues

Our retail brands fail to meet the expectations of customers

Strong supplier relationships (e.g. UK launch partner ofApple iPad)Delivery of Customer Plan to respond to identified changesin technologyStore transformations to take into account emerging trends instore layoutsExciting product launches to make our stores the destination forthe latest technology (e.g. 3D TVs)

Understanding our customers and monitoring our levels of servicethrough mystery shopping, customer exit surveys and analysis ofpurchase dataContinued focus on ensuring we have an excellent range acrossall price points, including own label brandsRenewal and Transformation plan improving the quality andoptimising the location of our stores across the GroupFIVES customer service training for all colleagues and productworkshops to improve product knowledgeImplementation of the Customer Plan in the UK to improve thecustomer journey a clear and focused plan at the heart ofthe businessInnovations in service propositions and improved customer servicelevels across the GroupClearer and easier navigation of our e-commerce websites

Legislative, contractual, reputational and

regulatory risksRisk that as a result of a change in legislation, a decision by aregulatory authority, or exposure in our compliance activities, theGroups business is impacted by reputational or financial damageor a need to adapt the Groups business and processes (e.g.competition, consumer rights, intellectual property, contractualobligations, health and safety or compromise of confidentialcustomer data)

In-house legal teams communicate on a frequent basis and legalreports are submitted to the BoardLaunch of Group Ethical Conduct policy, supported by annualdeclaration of compliance by colleaguesMonitoring changes in legislation/regulationCorporate Responsibility Committee meets regularly to discussreputational and regulatory risksQuality checks and factory audits for own-branded product assemblyCompliance Committee approves activity that may impact theterms of Group credit facilitiesContact with regulatory authorities, such as in relation to the Officeof Fair Tradings (OFT) market study into extended warranties

3.Operational risks


Employees

Risk that we fail to attract, develop and retain the necessarytalent for our business

Group-wide standardised performance managementTalent reviews across the businessStore structures which provide a clear career path forall employeesImproved quality of training courses and developmentprogrammes with specialist focus on service, product, commercialand technicalBonus plans, which include a component relating to individualperformance and business performanceReward strategy aligned to retain the best talent


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3.Operational risks continuedRisk Examples of mitigating action

Systems failure and damage to property andconsequential business interruption

Risk that a key system becomes unavailable for a period of time

The Groups ability to distribute merchandise to its stores and tosell and distribute merchandise to its customers is reliant on itsoperational infrastructure, particularly the efficient functioning of

its distribution centres and distribution network

Contingency plans developed that are tested regularlyEvaluation, planning and implementation analysis carried outbefore updating or introducing new systems that have an impacton critical functionsOngoing systems implementation in key areas of the business

Disaster recovery plans are in placeInsurance is purchased to mitigate against business interruptionPreventative measures are constantly being updated to reduce the

likelihood of an incident

Project delivery

Risk that a project delivering an element of our Renewal andTransformation plan does not deliver its anticipated benefits

The portfolio plan is clearly defined and is managed and governedthrough clear processes and regular meetingsPost-investment analysis and performance tracking is in placeincluding financial and customer measuresProjects under the Customer Plan are aligned to ourUK budget

Internet

Risk we fail to build a successful internet business, both in itsown right and as part of a multi-channel retailing model

Execution of online strategyInvestment in site functionality and user friendlinessRoll-out of our e-merchant platform across our businessesSuccessful marketing campaigns to raise the profile of online brands

4.Financial risks


Changes in supplier credit

Risk that credit insurance is no longer available to electrical andcomputing suppliers

Ongoing engagement with suppliers and credit insurersImprovements in stock managementInnovations in and close scrutiny of working capital together withregular monitoring and review

Finance and treasury

Risk that the Groups exposure to exchange rate, interest rate,liquidity and credit risks have an adverse or unexpected impact

on results, funding requirements or purchasing ability

Detailed Group hedging policies reviewed through a separate Taxand Treasury Committee

Balance sheet management and reviewsStrong cash managementRegular monitoring of receivables balancesStrong pre and post investment appraisal processesCentral control of treasury activity

Pensions risk and policies

Risk that the pension funding policy fails to react to or addressdeficits, which may arise on the Groups pension schemes

Deficit reduction activities in placeDefined benefit section of UK scheme closed to future accrual

Risks to Achieving theGroups Objectivescontinued


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Directors ReportPerformance Review

Business highlights Renewal and Transformation plan delivering a market leading

offer for customers.

Store transformation programme on track:

360 stores reformatted at the year end;

70 Megastores now open with average annual sales of20 million;

Over 80 Megastores across the Group, including 40 inthe UK and 25 in the Nordics will have been reformattedby Peak 2011;

Newly reformatted stores continue to deliver gross profituplifts of 20% versus the unreformatted stores in the UKand 15% in the Nordics; and

Second year trading for reformatted stores maintained.

Elkjp performed strongly in all of its markets, gainingsignificant market share.

New customer services brand KNOWHOW launched in theUK encompassing all after sales and support services.

Multi-channel internet sales up 13% across the Group, reflectingthe continued shift of sales to the multi-channel brands.

Closure of loss making PC City operations in Spain ahead of plan.

Cost savings on track:

50 million savings delivered in the financial year; and

50 million of additional cost savings expected in each ofthe next three years.

Impairment and restructuringRecognising challenging conditions in some of our markets,and the ongoing business restructuring under the Renewal and

Transformation plan, we have reviewed the balance sheet andmade impairment and other non underlying charges totalling309.4 million. The additional cash impact of these charges isestimated as 39 million, of which approximately 8 millionwas incurred in 2010/11. The impairments primarily relate to theclosure of operations in Spain (70.6 million), the impairmentof acquired goodwill in relation to Kotsovolos in Greece(53.2 million) and PIXmania (106.3 million).

Overview

Key highlights Margins and underlying profit before tax, at 85.3 million,

maintained in challenging market conditions.

Investment in the customer offer through the Renewal andTransformation plan is delivering.

Increasing market share across most markets and sectors,particularly in the UK and Nordics.

Step change to the customer focused business model,differentiating the offer for customers.

Further benefits to come through rolling out refurbished andMegastore formats, the transformation of the services offerthrough KNOWHOW, upgraded websites and a leaner

operating model.

Financial highlights Total underlying Group sales(1)(2)down 2% to 8,154.4 million

(2009/10 8,320.0 million) and down 1% on a constantcurrency basis.

Total Group sales, including those from businesses tobe closed and closed businesses, were 8,341.8 million(2009/10 8,532.5 million).

Group like for like sales(3)down 4% in the second half anddown 2% in the full year.

Underlying Group gross margins were flat in the second halfof the year and up 0.1% in the full year.

EBIT(4)of 127.6 million (2009/10 133.2 million).

Underlying pre-tax profit(1)of 85.3 million (2009/10 90.9 million).

Underlying diluted earnings per share(1)of 1.6 pence (2009/10 (5)1.5 pence). Basic loss per share for continuing operations of(6.6) pence (2009/10 earnings per share of 2.0 pence).

Total loss before tax, after deducting non-underlying items of(309.4) million, was (224.1) million (2009/10 profit before taxof 112.7 million).

Free Cash Flow(6)of 38.9 million before restructuring charges(2009/10 28.1 million).

As at 30 April 2011 the Group had net debt of (206.8) million(2009/10 (220.6) million).

Rephased debt profile following issue of new 2015 Bonds andpart repurchase of existing 2012 Bonds in July 2010.

PerformanceReview

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Underlying sales and profit analysisUnderlying sales Under lyin g pr ofit /(loss)

52 weeksended

30 April 2011million

52 weeksended

1 May 2010million

Currencyneutral(7)

% changeLike for like (3)

% change

52 weeksended

30 April 2011million

52 weeksended

1 May 2010million

UK & Ireland(8) 3,816.1 4,013.5 (5)% (3)% 71.3 71.1

Nordics(9) 2,268.9 2,093.7 +7% +5% 105.6 97.4

Other International(10) 1,226.7 1,291.6 (2)% (5)% (21.6) (8.3)

Pure play e-commerce(11) 842.7 921.2 (5)% (5)% 0.9 11.3

Central costs (15.8) (19.5)

Total Group Retail 8,154.4 8,320.0 (1)% (2)% 140.4 152.0

Property losses (12.8) (18.8)

EBIT 127.6 133.2

Underlying net finance costs (42.3) (42.3)

Group underlying profit before tax 85.3 90.9

Notes

(1) Throughout this report, references are made to underlying performance measures. Underlying results are defined as excluding trading results from the business to be closed, closedbusinesses, the amortisation of acquired intangibles, net restructuring and business impairment charges and other one off non-recurring items, profit on sale of investments, net fair valueremeasurements of financial instruments and, where applicable, discontinued operations. These excluded items are described as non-underlying. The financial effect of these items isshown in the analyses on the face of the income statement and in note 4 to the financial statements.

(2) Business to be closed comprises PC City Spain. Closed businesses comprise the operations of PC City Sweden and Markantalo in Finland. Discontinued operations comprise operations inPoland and Hungary.

(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. Storessubject to a refurbishment are excluded during the period of refurbishment. All e-commerce pick-up store sales are included in like for like sales.

(4) Underlying Earnings Before Interest and Tax (EBIT) equates to underlying operating profit and is defined as underlying earnings from retail operations, after property losses, before deductionof net finance costs and tax.

(5) The weighted average number of shares used in the calculation of earnings per share for the period prior to the rights issue, which completed on 9 June 2009, has been multiplied by anadjustment factor to reflect the bonus element of the shares issued under the terms of the rights issue (as described in note 8 to the financial statements). The adjustment factor used was 1.2138.

(6) 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 andnet capital expenditure.

(7) Currency neutral change percentage reflects the year on year growth or decline in underlying sales, calculated excluding the effect of currency movements.

(8) UK & Ireland comprises Currys, CurrysDigita l, Dixons Travel, PC World, operations in Ireland, DSGi Business and KNOWHOW. Like for like sales exclude DSGi Business.

(9) Nordics comprises the Elkjp group and Dixons Travel Denmark.

(10) Other International comprises Greece (Kotsovolos), Italy (Unieuro, combined 2-in-1 Unieuro and PC City stores and Dixons Travel Italy), Czech Republic (Electro World), Slovakia

(Electro World) and Turkey (Electro World).

(11) Pure play e-commerce division comprises Dixons.co.uk and PIXmania.

(12) Unless otherwise noted, throughout this statement figures relate to continuing operations, excluding the results of the business to be closed / closed businesses. Total revenue includingdiscontinued operations and business to be closed / closed businesses was 8,341.8 million (2009/10 8,543.4 million).

Business performanceUnderlying Group sales (excluding discontinued operations and the business to be closed / closed businesses) were down 2% to8,154.4 million (2009/10 8,320.0 million) and down 2% on a like for like basis. Underlying Group sales were down 1% at constantexchange rates. Total Group sales (including the business to be closed / closed businesses) were down 2% to 8,341.8 million(2009/10 8,532.5 million). Group gross margins were up 0.1% across the year.

Group EBIT (underlying profit before interest and tax) was 127.6 million (2009/10 133.2 million). Group underlying profit before taxwas 85.3 million (2009/10 90.9 million). Total loss before tax, after deducting non-underlying items of 309.4 million, was (224.1)million (2009/10 profit before tax 112.7 million).

Overviewcontinued


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2010/11 3,816.1

4,013.52009/10

Underlying operating profit(million)

2010/11 71.3

71.12009/10


Dixons Travel continues to go from strength to strength with allstores now operating in the new format which allows for morecustomer focused ranges, with a particular focus on portableitems and accessories. The demographic of its customer base inairports has meant the business has been less impacted by theconsumer downturn. In addition to the UK, Dixons Travel nowoperates in Copenhagen, Dublin, Rome and Milan airports withfurther opportunities in other airports across Europe.

Internet sales continue to be driven by the shift of consumersand manufacturers to multi-channel retail outlets with significantgrowth in reserve&collect. At the start of the financial year, thePIXmania e-merchant platform was implemented across the UKwebsites significantly improving the navigation, operation andcustomer experience. Further work to improve the offer andextended ranges online are planned for the new financial year.

Gross margins in the UK & Ireland were up throughout the yearas a result of a number of factors:

Improvements in stock control, enabling the business to exitthe year with lower inventory levels than last year despite thevery weak markets. This has included improved processes forexiting aged stock, limiting the need for excessive discounting;

Introduction of better promotional planning, enabling bettersupport from suppliers, par ticularly as they increasingly favourmulti-channel operators; and

Cost saving initiatives in the distribution and services infrastructure.

The division made good progress on the Renewal andTransformation plan through the year with 250 stores now refittedin the UK & Ireland, including 31 Megastores. The preferred formatfor customers and for the business is the combined 2-in-1 Currysand PC World format. All High Street and out of town Superstoreswill be in this format. The majority of the 70 Megastores the Groupis targeting will also be in this format, with a small number ofstandalone Currys Megastores in larger catchments. The Groupsplanned store base for the UK & Ireland is 450 stores, comprising70 High Street stores, 310 Superstores and 70 Megastores. Theportfolio will be managed to this size as existing leases expire andstores in each catchment are refitted.

The Group operates the most comprehensive end to endservice offering in electrical retailing in the UK, giving the Groupa unique services model versus the competition. In the springof 2011 the new services brand of KNOWHOW was launched.

This follows an intensive period of investment and significantimprovement in our service offering for customers. The newbrand was introduced into stores in May 2011 with roll out toall stores being completed by the autumn. The KNOWHOWbrand provides customers with clear easily identifiable valuefor money services under four distinct categories; Deliver &Install; Set up & Upgrade; Help & Support; and Repair & Protect.

Through growth and continuous process improvements theunit costs can be reduced, enabling further investment in theservices offer.

UK & Ireland

Profit and margins maintaineddespite challenging markets.

Performing ahead of ourcompetitors.

Launch of KNOWHOWservices.

Total sales in the UK & Ireland were down 5% to 3,816.1 million(2009/10 4,013.5 million) and like for like sales were down 3%across the year. Underlying operating profit for the full year wasflat year on year at 71.3 million (2009/10 71.1 million).

This is an encouraging per formance in the context of a weakmarket. During the first half we benefitted from sales of TVs inthe lead up to the World Cup. The cash for goals promotioncaught customers imagination and enabled the business tocapture more than its market share of the uplift in sales of TVs.The work being done under the Renewal and Transformationplan to improve the store environment and the shopping trip for

customers was recognised by Apple when they chose us astheir key partner for the launch of the iPad. Trade continuedto be robust in the lead up to Christmas and in the early saleperiod, interrupted only by very poor weather conditions inthe two week period preceding Christmas. However, like forlike sales in the second half were down 7% as the consumerenvironment weakened in the fourth quarter. Against thisenvironment Currys and PC World traded ahead of thecompetition and gained market share. During the year, whitegoods held up well and computing has been supported byiPads and tablets, with the new iPad 2 selling very strongly.Television sales benefitted from a strong World Cup, but havebeen particularly weak since January.

PerformanceReview

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2010/11 842.7

921.22009/10

Underlying operating profit(million)

2010/11 0.9

11.32009/10


PIXmania traded well in itscore markets.

dixons.co.uk benefits fromthe UK & Ireland operatingplatform.

Investments being made infuture e-commerce operations.

Pure play e-commerce

This division comprises PIXmania and dixons.co.uk. Total saleswere down 5% in local currency and down 9% in sterling at842.7 million (2009/10 921.2 million). Underlying operatingprofit was 0.9 million (2009/10 11.3 million). The Pure playe-commerce business forms a core and integrated part of theGroups overall internet strategy, alongside the multi-channeloperations of the other main business divisions. Internet salesacross the Group represent 16% of total sales.

Several factors have reduced the sales and profits of our Pure playe-commerce operations. First, we have been making significantinvestments in developing the operation. We have implementeda new platform in the UK to support all of our websites, whichhas caused disruption while being integrated into the UK systemsand trading platforms. We have also been investing in e-merchantwhich supplies IT services to the Group and other retailers.Second, while it delivered a solid performance in France, PIXmaniahas strong market positions in Southern Europe which have beenadversely impacted by reduced consumer demand. Third, inseveral markets we have had increased competition from storebased brands expanding their e-commerce business. Finally therehas been a significant shift of suppliers and customers in favouringmulti-channel brands and away from pure play internet operators.

In the UK the Group operates the dixons.co.uk business alongsidethe multi-channel brands of currys.co.uk and pcworld.co.uk. Duringthe year management directed internet sales activity through themore profitable multi-channel brands, particularly as these arebecoming the favoured route for customers and suppliers. As apure play business dixons.co.uk competes on price and is animportant tool in enabling management to understand andcompete in the pure play electricals retail section of the market.The implementation of the e-merchant platform and fur therimprovements to the offer have incurred additional costs. However,as dixons.co.uk is fulfilled from the UK & Irelands main warehouseand stock files, its cost to serve is relatively low. While thedixons.co.uk operation is now on a much stronger footing, it hasbeen impacted by the weak consumer environment, impactingprofitability of the Pure play e-commerce division.

PIXmania now operates a total of 17 stores. These stores, withan average space of approximately 1,400 sq ft per store,combine the ease and value of the internet and the convenience

of stores to collect products. It is expected that PIXmania willopen further stores as they achieve high sales densities drivenby internet pricing in high footfall shopping centre locations.

PIXmania also operates PIXplace which provides a platform forthird party resellers under the PIXmania brand. This also enablesPIXmania to extend its offer for customers while benefitting froma charge for third party transactions.

In addition, PIXmania is able to provide its proprietary and marketleading e-merchant platform and IT services to third party operators.As well as dixons.co.uk, currys.co.uk and pcworld.co.uk, PIXmaniaprovides these services to Bouygues Telecom. The Group considersthat there are further opportunities in this area over the medium term.


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PerformanceReview

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Financial position

The year has seen very challenging markets with pressure onsales and margins as well as cost inflation. In spite of thesechallenges we have delivered a robust trading performanceagainst the financial priorities of profitability and strengtheningthe balance sheet:

Group Gross Margins were up 0.1% in the year, the secondyear of flat or growing gross margins in a market wherecompetitors have seen gross margins erode;

EBIT held at 127.6 million (2009/10 133.2 million);

Costs reduced by 50 million in the year and a further50 million being targeted in each of the next threefinancial years;

Exit of loss making operations of PC City in Spain announced;

Completion of sale and leaseback of Swedish warehouseexpected in June, raising 59 million;

Rephased debt profile following issue of new 2015 Bonds andpart repurchase of existing 2012 Bonds in July 2010;

Significant headroom maintained on the Groups revolvingcredit facility (the RCF) throughout the year, with the RCFextended to August 2013;

Agreement in principle reached with the trustee of the UK definedbenefit scheme following the triennial valuation which showed ashortfall of assets compared to liabilities of 239 million;

Positive Free Cash Flow, before restructuring items, of38.9 million was generated; and

Net debt at year end of 206.8 million (2009/10 220.6 million).

Adjustments to underlying resultsThe weak consumer environment impacted the financialperformance of certain of the Groups businesses, with theoutlook in Southern Europe, in particular, remaining uncertain.This has resulted in an impairment in the value of goodwillacquired with PIXmania and Kotsovolos in 2006 and 2004,respectively. There is also a non-underlying charge relating tothe closure of the PC City business in Spain. Under the Renewaland Transformation plan, a number of re-organisation chargescontinue to be incurred and as in prior years, these havealso been treated as non-underlying charges. The totalnon-underlying charge is 309.4 million. The additional cashimpact of this charge is estimated as 39 million, of whichapproximately 8 million was incurred in 2010/11. Furtherdetails of the non-underlying charges are set out below:

52 weeksended

30 April2011

million

52 weeksended

1 May 2010million

Underlying profit before tax 85.3 90.9Non underlying (charges) / gains:

Trading results Business tobe closed / closedbusinesses (8.5) (0.6)

Other non-underlying items:Amortisation of acquired

intangibles (4.5) (4.6)Net restructuring charges:

Strategic reorganisation (17.1) (5.6)Business impairments (251.6) Other items (24.9)

Change in pension benefits 33.4Financing items:

Net fair value remeasurements (2.8) (0.8)Accelerated amortisation of

facility fees (7.8) Net 2012 Bond redemption

gains 7.8

Other non-underlyingitems total (300.9) 22.4

Total net non-underlyingcharges to add back (309.4) 21.8

(Loss) / profit before tax (224.1) 112.7

In April the Group announced the closure of PC City Spain,and in the prior year completed the closure of PC City inSweden and Markantalo in Finland. Trading results from thebusiness to be closed / closed businesses comprise thepre-tax losses from these operations, excluding closure costswhich are provided for separately below as part of thebusiness impairment.

Amortisation of acquired intangibles of 4.5 millionpredominantly comprises brand names.

Strategic reorganisation costs of 17.1 million relatepredominantly to the UK business transformation and primarilycomprise redundancy costs and additional lease liabilities on avacant head office building following the UK restructuring.

Business impairments include:

costs of 70.6 million relating to the closure of PC City

operations in Spain. This comprises goodwill and otherasset write offs together with provisions for onerous leasecosts and employee severance;

106.3 million impairment of goodwill acquired withPIXmania in 2006. PIXmanias profit performance is behindthat envisaged at the time of the acquisition as a result of:

weakness in the Southern European economies in whichit operates;

investment in the e-merchant platform;

changes in the internet retailing market, with the switchin growth to multi-channel.

53.2 million impairment of goodwill relating to Kotsovolos,the Groups Greek business. Despite gaining market shareduring the period and remaining cash generative, thisfollows a period of economic difficulty and uncertainty inthe Greek market; and

Group Financial Summary


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Group Financial Summarycontinued

21.5 million impairment in respect of the Groups 40%

stake in a Danish associate, F-Group. F-Group hasexperienced a prolonged period of declining results due tothe weak underlying Danish economic environment.

Other items of 24.9 million mainly comprise:

the impairment of capitalised development costs in respectof the Groups systems in the UK following the decision todefer the project in order to focus on existing processimprovements; and

the write off in PIXmania of supplier receivables, datingback to 2008/09 and prior years. This write of f has arisendue to the implementation of new systems highlighting theextent of the receivables outstanding and a detailed reviewof the Groups ability to recover these balances.

The financing charge comprises the following elements:

2.8 million of net fair value remeasurement losses onrevaluation of financial instruments as required by IAS 32and 39;

accelerated amortisation of facility fees which relate to therefinancing activities and comprise the write off of fees relatingto the now cancelled credit facility which were previously beingamortised over the life of that facility. Equivalent fees relating tothe current RCF are being amortised into underlying interest inthe same manner as the historical facility fees were; and

net 2012 Bond redemption gains which arise on thenotional cancellation of interest rate swaps used to hedgethe 140 million redeemed portion of the 2012 Bonds,offset mainly by the redemption premium paid.

The 2009/10 credit of 33.4 million in respect of the changein pension benefits arose from the curtailment of the definedbenefit section of the UK pension scheme whereby thissection was closed to future accrual on 30 April 2010.

Free Cash FlowFree Cash Flow, before restructuring items, at 38.9 million(2009/10 28.1 million) improved on the prior year despite thesignificant increase in capital invested in the Renewal andTransformation programme. This was driven mainly throughimproved working capital management and reduced hedgecash outflows. Total free cash flow after restructuring itemswas 10.0 million (2009/10 outflow of (17.6) million).

52 weeks ended30 April 2011

million

52 weeksended

1 May 2010

million

Underlying profit before tax 85.3 90.9Business to be closed / closed

businesses loss before tax (8.5) (0.6)Depreciation and amortisation 139.4 128.6Working capital 40.4 39.7Taxation (26.2) (31.9)Capital expenditure (223.2) (165.3)Proceeds from sale of property(i) 2.0 0.7Other cash items 29.7 (34.0)

Free Cash Flow beforerestructuring items 38.9 28.1

Net restructuring and impairment(i) (ii) (28.9) (45.7)

Free Cash Flow 10.0 (17.6)

(i) Proceeds from sale of property in the prior year excludes 9.0 million relating to the sale ofthe Groups former warehouse in Stevenage. These sale proceeds are shown within netrestructuring and impairment.

(ii) Net restructuring and impairment includes 2.0 million of cash recoveries made in thecurrent year, mainly in relation to closed businesses.

As previously announced, it should be noted that the year end

working capital and cash position benefited due to the additionalbank holiday at the end of the financial year and the timing oftrading cash flows associated with the closure of operations inSpain. This benefit is estimated as approximately 30 million,of which approximately half was as a result of the timing ofclosing the operations in Spain across the year end. The Groupcontinues to anticipate net closure costs of PC City Spain ofapproximately 30 million. This represents an incremental costof 20 million.

Capital expenditure was 223.2 million (2009/10 165.3 million),up 57.9 million reflecting the increased investment associatedwith the Renewal and Transformation plan, particularly in the UKand Nordics.

Other cash items of 29.7 million (2009/10 (34.0) million) mainlycomprise the add back of non-cash costs included in profit, suchas pension interest, share option charges, and property lossprovision charges, and in addition reflect other cash movementssuch as settlements of certain hedge contracts. The improvementyear on year of 63.7 million is primarily due to the 62.2 million ofhedge outflows reported in 2009/10.

As previously disclosed, the Group has in place certain historicalhedging agreements. The principal outstanding agreementsrelate primarily to foreign exchange and interest hedges. Themajority of these were put in place at the time the Group issuedits Bonds in 2002, and in relation to overseas investments. Theremaining hedges at year end rates would imply a net future cashoutflow of approximately 65 million, primarily payable in 2012.

Net restructuring and impairment mainly reflects the cash outflowsrelating to the strategic reorganisation activities as announced inprevious years. These primarily comprise lease and other propertyrelated payments and employee severance costs.

The Groups priority is to ensure that cash flow is managed to meetthe repayment of the 6.125% Bonds due in November 2012 andassociated hedge maturities. Alongside the proceeds from the saleand leaseback of the warehouse in Sweden, and further cashgeneration from operations, management will retain flexibility in thelevel of capital expenditure in the 2011/12 and 2012/13 financialyears. As previously announced, capital expenditure will be limitedto a maximum of 160 million in the 2011/12 financial year. To dateapproximately 100 million of capital has been committed for2011/12, with further commitments to be reviewed against theeconomic environment and the Groups performance.

FundingNet debtAt 30 April 2011 the Group had net debt of (206.8) million,compared with net debt of (220.6) million at the end of theprevious year.


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PerformanceReview

23--35


52 weeksended

30 April2011

million

52 weeksended

1 May 2010million

Opening net debt (220.6) (477.5)Free Cash Flow 10.0 (17.6)

Equity Placing and RightsIssue 291.3

Acquisitions and disposals (7.0)Discontinued operations (0.1) (8.6)Special pension contribution (12.0) (12.0)Other items 15.9 10.8

Other movements in netdebt 3.8 274.5

Closing net debt (206.8) (220.6)

Since the start of the previous financial year, the Group hasimproved its financial position significantly through refinancingactions. In the prior year, the proceeds received from the Placingand Rights Issue were used to reduce debt and finance the Renewaland Transformation plan. In July 2010 the Group rephased its debtwith the issue of 150 million 8.75% Guaranteed Notes repayablein August 2015 (the 2015 Bonds). The net proceeds of the 2015Bonds were used to repurchase 140 million of the Groups existing300 million 6.125% Bonds (the 2012 Bonds). The transaction alsoenabled the extension of the maturity of the Groups RevolvingCredit Facility (RCF) to August 2013.

The rephasing of debt maturity, coupled with actions to generatefunds to reduce net debt, ensures that the Group has an appropriaterepayment profile on its debt facilities and has suitable working

capital facilities with sufficient headroom to enable it to continue toexecute the Renewal and Transformation plan.

On 1 June 2011 the Group announced the exchange ofcontracts for the sale and leaseback of its Jnkping distributionfacility for SEK600 million (approximately 59 million). Completionof the transaction is expected in June 2011.

The gain on other items in the current year includes a 10.2 milliongain arising on the notional cancellation of interest rate swaps,which were previously in a designated hedge relationship on theportion of the 2012 Bonds which has now been redeemed.

Net debt is stated inclusive of restricted funds of 120.3 million(Full Year 2009/10 78.9 million, Interim 2010/11 118.4 million),

which predominantly comprise funds held under trust forpotential customer support agreement liabilities. As previouslyreported in our interim results, the increase year on year isprimarily as a result of cancellation of letter of credit facilitiesas part of the refinancing of the RCF in July 2010.

Underlying net finance costsUnderlying net finance costs were (42.3) million (2009/10(42.3) million). Although the overall cost has remainedunchanged year on year, there have been offsettingimpacts from the following key areas:

Net reductions in borrowing costs, arising from lowerborrowing levels following the Placing and Rights Issue in theprior year, as well as from lower borrowing and amortisationcosts following the refinancing of the revolving credit facility,partly offset by increased costs resulting from the highercoupon on the 2015 Bonds;

Lower net pension interest costs, set at the beginning of

the financial year, largely as a result of higher asset valuescompared to the beginning of the previous financial year; and

Reduced interest income, predominantly due to one-offinterest earned in the prior year relating to overpaymentsof tax in earlier years.

Property lossesProperty losses decreased to 12.8 million (2009/10 18.8 millionloss). They primarily relate to closure or refit of stores as part ofthe Renewal and Transformation plan in the UK and Nordics. Inthe prior year costs were also incurred in Greece through storeclosures and refits, including rebranding of the Electro Worldchain to Kotsovolos.

DividendsThe Board believes that Dixons Retails existing financialresources should be used to invest in the Renewal andTransformation plan, which is showing encouraging signs ofdelivering changes in the Groups performance, as well asrepayment of the existing 2012 Bond due in November 2012.

Subject to an assessment of whether certain conditions have beenmet, and the progress of the Renewal and Transformation plan, theBoard aims to resume dividend payments when appropriate,consistent with a sustained recovery in Dixons Retails operationaland financial performance.

TaxThe Groups tax rate on underlying profit before tax was 37%(2009/10: 45%). The high effective tax rate is affected by the

proportion of loss making businesses where tax benefits arenot fully utilised.

PensionsAt 30 April 2011, the IAS 19 accounting deficit of the definedbenefit section of the UK pension scheme amounted to244.0 million (1 May 2010 263.5 million). The assumptionsused for determining the accounting valuation use a consistentbasis to that adopted in prior periods but build from the mostrecent triennial valuation as at 31 March 2010.

The overall decrease is a result of an increase in the assets ofthe scheme which have continued to recover year on year.This increase has partially been offset by an overall increase inliabilities which are affected by a lower discount rate, reflecting

corporate bond yields, and the fact that liabilities are one yearcloser to crystallising.

A full triennial actuarial valuation of the UK defined benefit pensionscheme as at 31 March 2010 was recently completed and showsa shortfall of assets compared with liabilities of 239.0 million. Thisshortfall and the associated recovery plan have been agreed inprinciple with the trustee, with formal agreement expected shortly.The proposed recovery plan based on this valuation commencedin 2010/11 with payments of 12 million which rise to 16 million in2011/12, 20 million in 2012/13 and 2013/14 and rising thereafter to35 million by 2020/21. The next triennial valuation is expected tocommence in March 2013.


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Waste recycled as a percentage of total waste*

2010/11 2009/10

UK 73% 67%Nordics** 91% 91%

* Not including WEEE.

** Data for Denmark, Sweden and Norway only.

Transport and distributionKeeping our stores stocked with the thousands of products we sellmeans our fleet of commercial vehicles is constantly transportingproducts around the country. The Group seeks to reduce theenvironmental impact of delivering its products by efficient routeplanning to avoid unnecessary mileage, using rail freight whereappropriate, increasing vehicle load and making use of emptyvehicles on return journeys.

Fleet carbon emissionsTonnes of CO2produced 2010/11 2009/10

UK home delivery fleet 7,830

Documents

Dixons Retail