Paul Loft

Managing DirectorHome Shopping

The Business Review

• What we said

– keeping and fixing is the best option

– programme to save £80m p.a.

– create a smaller, stable, profitable agency business

– financially low risk strategy

– improve proposition and retail disciplines

– leveraging the assets

Sales by Business Area

Choice11%

Direct8%

Other11%

Kays33%

Great Universal

37%

Agency £1,253m (-4%)

Year to March 2001 Numbers in brackets is annual growth in 2001

Other £169m(-14%)

Direct £120m(+3%)

% of sales

Three Year Plan

Phase IIIPhase IIIGrowthGrowth

Roll out newpropositions

Phase IPhase IStabiliseStabilise

Establish newteam

Create smallerbusiness withstable profits

Phase IIPhase IITest GrowthTest Growth

Improve theproposition

Explore low riskgrowth opportunities

Increase customerunderstanding

Cost Efficiency Savings

Marketing cost base 30 20

Supply chain savings 20 4

Customer service and logistics 15 7

Integration and rightsizing 15 4

Total £mTotal £m 8080 3535 2525 2020

Business Business reviewreview

Saving Saving 0101

Forecast Forecast 0202

Forecast Forecast 0303

Agency Customer Dynamics - Kays

0

200

400

600

800

1,000

1,200

1,400

99 00 01200

210

220

230

240

250

260

270

280

Customers

Spend per customer (£)

Spring / Summer

No. of customers

(000s)Spend per

customer (£)

Agency Product Dynamics

Product mix %

Home & Home & LeisureLeisure

FashionFashion

70%

60%

50%

40%98 99 00 01

Spring / Summer

• Top 250 line availability

• More brands

• New services

• ARG product pool

• VIP Club service

• Mid season catalogue

• Call centre/delivery

• On-line offer

• VIP Club discounts

• ‘Key line’ prices

• Product quality

ChoiceChoice

Improving the Agency Customer Experience

ValueValue ConvenienceConvenience

Current Perspective

• Growth of remote shopping market

• Improving offer in hard goods driving agency proposition

• Substantial opportunity to improve the ‘big book’

proposition

• CRM platform can give us competitive advantage

• Strong growth potential in the direct market

Lessons from Direct Trials

• High Street prices

• Different style

• Free delivery

• Range of credit

• Strong brands

• Unique product

abound – A World of Ideas Direct to Your Door

abound – A World of Ideas Direct to Your Door

• New direct test

• Learning from Kays Direct

• Aimed at the working woman

• Aspirational and contemporary

• Substantially different presentation

High Street Prices

• Prices 15% lower than agency

• Free delivery

abound – A World of Ideas Direct to Your Door

The Biggest Brands Direct to Your Door

abound – A World of Ideas Direct to Your Door

• Prices 15% lower than agency

• Free delivery

• Contemporary fashion

• Wide range of brands

Flexible Payment Options

abound – A World of Ideas Direct to Your Door

• Prices 15% lower than agency

• Free delivery

• Contemporary fashion

• Wide range of brands

• Flexible payment options

Summary

• Cost saving targets and stabilisation of profits on track

• In a strong position to exploit a mature agency market

• Agency business is an enabler

• Remote shopping is a growth market

• Testing growth in new direct propositions and services