UK Computing division largely to blame for 30 percent profit drop at DSGi

UK and Ireland

Below is a copy of the UK and Ireland summary from the document.

Currys, including Currys.digital, experienced a strong start to the year, with share gains in key categories. The second half was more challenging as the consumer environment worsened and increased promotional activity impacted margins.

Currys internet sales continued to grow strongly, supported by the reserve and collect facility which is an increasingly popular route to purchase for customers. Currys added mezzanines to 12 stores during the year. The addition of the extra space enables extended ranges of products particularly for flat panel televisions as well as improved display of essentials and accessories.

Early indications for this trial have been very encouraging and a further 5 stores have been identified for mezzanine installation in time for Christmas Peak, with further conversions planned before year end. Ireland grew total sales by 5% across the year, driven by the opening of new stores underpinning the Group’s leading position in that market. With a sharp slowdown in the consumer environment, particularly in the second half, like for like sales were impacted.

UK Computing

UK Computing comprises PC World, DSGi Business and The TechGuys. PC World is the leader in its market and is having to adapt to a changing, and increasingly competitive, computing retail market. Technology change, digital products, convergence and connectivity in the home as well as customers’ increasing need for service and support are driving PC World’s move from selling computers to computing.

The plans outlined on 15 May will ensure PC World is well positioned to capitalise on, and benefit from, these changing dynamics. Total sales were down 1% at £1,818.7 million (2006/07 £1,846.3 million) with like for like sales down 5%. Underlying operating profit was £63.2 million (2006/07 £124.6 million). PC World’s profitability was materially impacted during the year by:

• Increased promotional activity as a result of the need to reduce laptop stocks in the first half;
• A higher mix of lower margin sales of hardware due to the strong demand for laptops;
• A reduction of higher margin non-hardware products in the sales mix as these products became more widely available; and
• The weaker consumer environment, particularly in the second half.

The plans announced on 15 May 2008 are designed to improve PC World’s hardware and non-hardware performance by focusing on giving customers a unique offer of value, choice and service for computing related products. This includes helping customers with the complete solution for the technology they use and providing after sales services to ensure they get the most out of their technology.

Collect@store continues to engage customers and is proving to be a popular route to purchase. PC World continues to develop this proposition both online and in-store to increase attachment levels.

The TechGuys performed well in its first year, more than doubling sales. It is the UK’s only truly national digital support service for UK homes. It employs 500 engineers, 1,500 call centre technicians, 40 product evaluation specialists and 450 in-store experts. The TechGuys service is a key part of the Group’s offering to customers, with The TechGuys service desks now operational in all PC World stores.

PC World is well placed to leverage the benefit of product and services being available together for customers in store. The Group remains excited about the prospects for The TechGuys, particularly as a significant differentiator for the specialist in the computing market.