• The implementation and double-running costs of installing new systems to sort, pack and distribute products from our three main warehouses, as well as restructuring the distribution network to utilise a higher proportion of self employed couriers.

• Increased levels of bad debt, amounting to £10m, partly due to external economic conditions.

• Sales levels from new direct catalogues tested during the year were below expectations. The cost of integrating the Innovations group of catalogues, acquired in December 1997, also affected this year’s results.
  
  Innovations catalogue: April-June 1999

Plans for the division include:

• The three agency catalogues (Great Universal, Kays and Choice) will continue to represent the majority of sales. The agency "big book" system provides customer friendly credit and service for the purchase of a wide range of apparel and household goods.
  

• The Marshall Ward direct catalogue, which achieved a 13% growth in sales in 1998/99, will continue to increase its customer appeal will benefit from improved supply chain and customer service as a result of integration with the Group’s systems and logistics infrastructure.

• Our direct home shopping business will increase with the offer of a clothing and household textiles catalogue to Argos customers. This is being tested this autumn, following a successful trial of a textile catalogue.

• Increasingly close relationships with Argos will lead to revenue benefits as the infrastructure of the Division is made available to Argos for home delivery of its product ranges and as merchandise sourced by the Home Shopping Division is offered by Argos to Argos customers. In addition, cost synergies are being pursued in areas such as joint buying of merchandise and the delivery of bulky goods.

• Financial and Insurance sales will continue to grow with a wider range of products, including personal loans and motor and home insurance.
  
  Great Universal catalogue: Autumn/Winter 1999/2000

• Further development of our customer database, in conjunction with Argos. This will help us to anticipate our customers’ needs in a timely manner and to organise our marketing activities to fulfil these needs.

• Increased investment in electronic commerce, with the aim both of providing ease of use for existing customers for their transactions. We shall also use our core assets of product, service and distribution to reach new customers through e-commerce.
  

• Continued investment in operational excellence to deliver problem-free shopping to our customers. The investments over the last two years in distribution and call centres have laid the foundation for a significant improvement in customer service and lower transactional costs. Our aim is to be able to track a customer’s order from receipt in our call centre to final delivery, with a consistency and speed which is the industry best in home delivery.

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