Earnings Release • Jun 28, 2017
Earnings Release
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RNS Number : 3556J
Dixons Carphone PLC
28 June 2017
Dixons Carphone plc
Good results with headline profit before tax up 10%
Preliminary results for the 12 months to 29 April 2017*
• Group like-for-like revenue(3) up 4%. Statutory revenue up 9%
• Strong profit performance:
- Headline PBT(1) of £501 million (2015/16: £457 million), up 10%.
- Headline basic EPS(1) 33.8p (2015/16: 30.2p), statutory basic EPS 25.6p (2015/16: 14.0p)
- Total statutory profit before tax of £386 million (2015/16: £263 million) after non-headline(1) charges of £115 million (2015/16: £194 million).
• Free cash flows(8) of £160 million (2015/16: £202 million) and net debt(9) broadly flat year-on-year at £271 million
• Final dividend of 7.75p (2015/16: 6.50p) proposed, taking total dividends for the year to 11.25p (2015/16: 9.75p), up 15% year-on-year
| Headline results*(1) | Headline revenue(1) | Headline profit / (loss)(1) | ||||||
| Note | 2016/17 £million |
2015/16 - restated £million |
Reported rate % change |
Local currency(2) % change |
Like-for-like(3) % change |
2016/17 £million |
2015/16 - restated £million |
|
| UK & Ireland | (4) | 6,550 | 6,402 | 2% | 2% | 4% | 385 | 371 |
| Nordics | (5) | 3,156 | 2,632 | 20% | 5% | 1% | 89 | 79 |
| Southern Europe | (6) | 661 | 550 | 20% | 4% | 6% | 22 | 17 |
| Connected World Services | (7) | 213 | 152 | 41% | 37% | N/A | 21 | 11 |
| Group | 10,580 | 9,736 | 9% | 3% | 4% | 517 | 478 | |
| Net finance costs | (16) | (21) | ||||||
| Profit before tax | 501 | 457 | ||||||
| Tax | (112) | (110) | ||||||
| Profit after tax | 389 | 347 | ||||||
| Headline basic EPS | 33.8p | 30.2p |
Notes:
- In the UK & Ireland, like-for-like revenues in the full year improved by approximately 3% as a net result of sales successfully transferred from closed stores and sales disruptions.
* See notes on page 2 for an explanation of the basis of preparation and defined terms.
Seb James, Group Chief Executive, said:
"Over the last few years a great deal of work has been done to make the company stronger, lower risk and more resilient. We are seeing the upside of these efforts now as we declare record headline profits before tax of over half a billion pounds - up 10%. More importantly, the improvement in our cost base, the strong leadership position that we have built, the investment that we have made in our digital business and, above all, the enormous shift in customer satisfaction and price competitiveness that we have driven leave us well positioned to flourish in the years ahead.
While the UK consumer environment seems to be holding up for us, there will undoubtedly continue to be changes in the way people buy all of the products that we sell from phones to washing machines. Change always represents opportunity, and our job is to find the propositions that keep us compelling to our customers forever. We are excited about our plans in services and about the myriad of initiatives that will drive long-term relationships with our customers.
In short, it has been a good year for Dixons Carphone and it gives me great pleasure once again to thank my 43,000 colleagues for the work that they have done to deliver so well and so energetically for our customers."
Investor and analyst webcast
There will be a conference call with presentation for investors and analysts at 9:00 am today. The presentation slides will be available via webcast (listen only) on our corporate website, www.dixonscarphone.com
Next announcement
The Group will publish its Q1 trading statement on 7th September 2017.
For further information
| Kate Ferry | IR, PR & Corporate Affairs Director | +44 (0)7748 933 206 |
| Mark Reynolds | Head of Investor Relations | +44 (0)7979 696 498 |
| Hannah Collyer | Head of Media Relations | +44 (0)7834 256 775 |
| Nick Cosgrove, Helen Smith | Brunswick Group | +44 (0)207 404 5959 |
| Information on Dixons Carphone plc is available at www.dixonscarphone.com Follow us on Twitter: @dixonscarphone and @DCSebJ |
||
| About Dixons Carphone Dixons Carphone plc is Europe's leading specialist electrical and telecommunications retailer and services company, employing over 43,000 people in ten countries. Focused on helping customers navigate the connected world, Dixons Carphone offers a comprehensive range of electrical and mobile products, connectivity and expert after-sales services from the Geek Squad and Team Knowhow. Dixons Carphone's primary brands include Carphone Warehouse and CurrysPCWorld in the UK & Ireland, Elkjøp, Elkjøp Phonehouse, Elgiganten, Elgiganten Phone House, Gigantti and Lefdal in the Nordic countries, Kotsovolos in Greece, Dixons Travel in a number of UK airports as well as Dublin and Oslo, and Phone House in Spain. Our key service brands include Team Knowhow in the UK, Ireland and the Nordics, and Geek Squad in the UK, Ireland and Spain. Business-to-business (B2B) services are provided through Connected World Services, CurrysPCWorld Business and Carphone Warehouse Business. Connected World Services aims to leverage the Group's existing expertise, operating processes and technology to provide a range of services to businesses. Dixons Carphone was voted 'Retailer of the Year' at the Retail Week Awards last year. |
Certain statements made in this announcement are forward-looking. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future events or results referred to in these forward-looking statements. Unless otherwise required by applicable laws, regulations or accounting standards, we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. Information contained on the Dixons Carphone plc website or the Twitter feed does not form part of this announcement and should not be relied on as such.
Notes
(1) Headline results exclude amortisation of acquisition intangibles, Merger integration and transformation costs, businesses to be exited, property rationalisation costs, acquisition-related costs and other one-off, non-recurring items, net interest on defined benefit pension schemes and discontinued operations. Such excluded items are described as 'non-headline'. Comparatives have been restated following the classification of the iD mobile operations in the Republic of Ireland and the Sprint Joint Venture as businesses to be exited, and therefore included in non-headline results. For further details see notes 3, 9 and 11 to the financial information.
(2) Change in local currency revenue reflects total revenues on a constant currency and period basis.
(3) Like-for-like revenue is defined in the Glossary and definitions section.
(4) UK & Ireland comprises operations in the UK and Ireland and the Dixons Travel business.
(5) Nordics comprises operations in Norway, Sweden, Finland, Denmark, and Iceland.
(6) Southern Europe comprises operations in Spain and Greece.
(7) Connected World Services comprises the Group's B2B operation which leverages the specialist skills, operating processes and technology of the Group to provide managed services to third parties looking to develop their own connected world solutions.
(8) Free Cash Flow comprises cash generated from / (utilised by) continuing operations before special pension contributions, less net finance expense, less income tax paid and net capital expenditure.
(9) Net debt is defined in the Glossary and definition section.
See glossary on pages 24 to 28 for further definitions of terms
Performance review
The performance review below refers, unless otherwise stated, to headline information for continuing businesses. Prior year comparatives have been restated to remove the results of businesses to be exited as disclosed in note 11 to the financial information.
Group
Group headline revenue increased 3% on a local currency basis and 9% in Sterling terms to £10,580 million (2015/16: £9,736 million). Like-for-like revenue growth was 4%, reflecting growth across all divisions.
Headline EBIT was up 8% to £517 million (2015/16: £478 million).
Headline profit before tax was £501 million (2015/16: £457 million), with a reduced year-on-year interest charge.
UK & Ireland
Revenue in the UK & Ireland increased by 2% to £6,550 million (2015/16: £6,402 million), with like-for-like revenue for the year up 4%, benefiting by approximately 3% as a net result of sales transferred from closed stores and sales disruption. The electricals business delivered a solid result with market share gains across consumer electronics, white goods, computing and multiplay.
The mobile market was more challenging due to product safety and supply issues, limited product innovation, delays in product launches and more competitive SIMO propositions. iD in the UK continues to benefit from its differentiated proposition and innovative tariffs with the number of active customers increasing to more than 600,000 from 325,000 in the prior year.
Headline EBIT has increased 4% to £385 million. Electricals profitability growth has reflected revenue growth with margins remaining relatively flat year on year. There has been an in-year benefit of £28 million from changes in the cost profile of services provided under long-term customer support agreements.
Electricals growth has offset lower mobile margin caused by higher handset costs. In addition we have seen lower out of bundle spend (partly due to new EU roaming legislation) but have experienced higher average customer contract life (net impact positive £21 million; 2015/16: £32 million). Changes in contractual terms for the sale of third party insurance contracts have benefited headline EBIT by £22 million.
We have made the decision to exit our iD mobile operations in the Republic of Ireland. The iD mobile operations in the Republic of Ireland represent a different business model to the UK, as it is a capacity MVNO with options for expanding its spectrum. This brings with it excellent control, but that comes with upfront costs and increased administration, and we believe the business will flourish faster under dedicated ownership.
Nordics
The Nordic business delivered 5% revenue growth on a local currency basis with growth across all countries. Reported revenues increased 20% to £3,156 million (2015/16: £2,632 million) benefiting from the weakness of Sterling.
Like-for-like revenue was up 1% with the difference between like-for-like growth and local currency growth predominantly reflecting new store openings, FONA store acquisitions and the contribution of Infocare, which was acquired in the prior year. Like-for-like revenue growth was helped by strong audio and mobile sales more than offsetting a decline in tablet sales.
Headline EBIT in local currency remained broadly flat year on year. Reported headline EBIT growth of 13% to £89 million reflects the translation benefit of weaker Sterling.
Southern Europe
Southern Europe had strong underlying results with like-for-like revenue up 6%, and revenue on a local currency basis up 4%. The increase was driven by the business in Greece which delivered excellent growth. Our Spanish business continues to evolve to offer multi-play, sim-only and handset propositions and move to a more flexible franchise approach in a changing market.
Southern Europe headline EBIT was £22 million (2015/16: £17 million), up 29% benefiting from the increased revenue noted above and the relative strengthening of the Euro against Sterling.
Connected World Services
Connected World Services ('CWS') has continued to grow, delivering revenue of £213 million, up from £152 million in the prior year with headline EBIT growth of £10 million to £21 million. Year on year revenue and profit growth is driven by contracts with EE and TalkTalk for mobile phone insurance and the distribution of mobile, TV and broadband connectivity, as well as the honeybee platform development contract with Sprint.
On 9 June the Group announced that in light of the changing US mobile market landscape and Sprint's review of its own distribution strategy, the companies have reached mutual agreement that CWS will focus on the deployment of the honeybee platform across the entire Sprint estate and that Sprint will acquire the CWS 50% share of the distribution joint venture. The Group's share of joint venture losses (£17 million 2015/16: £4 million): have been classified as non-headline items in accordance with the Group policy for businesses to be exited.
We continue to develop the honeybee pipeline, and have signed an agreement with WebHelp, a large French outsourcer and a pilot call centre agreement with Capita, both of which we anticipate will deliver further agreements with new customers.
Net finance costs
Headline net finance costs were £16 million (2015/16: £21 million). The reduction in net financing costs reflects the full year benefit of lower margin on the revolving credit facility negotiated in October 2015 coupled with reduced LIBOR rates and finance income received from the loan with the Group's investment in the Unieuro operations.
Tax
The headline effective tax rate for the full year is 22% (2015/16: 24%). The rate is higher than the UK statutory rate of 20% due mainly to higher statutory rates in the Nordics, certain non-deductible items mainly in the UK and a net increase in tax related provisions in the year.
Cash and movement on net debt
Free Cash Flow
| 2016/17 £million |
2015/16 £million |
|
| Headline EBIT | 517 | 478 |
| Depreciation and amortisation | 152 | 137 |
| Working capital | (104) | (80) |
| Capital expenditure | (242) | (221) |
| Taxation | (72) | (56) |
| Interest | (23) | (31) |
| Other items | 2 | 18 |
| Free cash flow before restructuring items - continuing operations | 230 | 245 |
| Restructuring costs | (70) | (43) |
| Free Cash Flow | 160 | 202 |
Free Cash Flow before restructuring was an inflow of £230 million (2015/16: £245 million), a decrease of 6%.
The Group experienced a working capital outflow of £104 million (2015/16: £80 million), largely as a result of increased receivables balances relating to network commissions in the UK and changes in contractual terms for the sale of third party insurance contracts coupled with lower deferred income as a result of changes to the cost profile of services provided under long-term customer support agreements as discussed earlier in this report.
Capital expenditure in the period was £242 million (2015/16: £221 million). The year-on-year increase reflected spend on SWAS stores and the refit of the stores as part of the property rationalisation programme announced in the prior year, together with further investment in IT platforms and continued development in both our retail and Connected World Services businesses.
The reduction in interest paid is as a result of facility fees that were paid in H1 2015/16 and the reduction in financing costs explained above.
Restructuring costs primarily comprise the cash costs associated with the Merger, transformation activities and the property rationalisation programme noted below within non-headline items.
A reconciliation of free cash flow to cash flow from operations is presented at note 8c to the financial information.
Funding
| 2016/17 £million |
2015/16 £million |
|
| Free Cash Flow | 160 | 202 |
| Dividends | (115) | (106) |
| Acquisitions and disposals including discontinued operations | (25) | (82) |
| Pension contributions | (43) | (35) |
| Other items | 19 | 14 |
| Movement in net debt | (4) | (7) |
| Opening net debt | (267) | (260) |
| Closing net debt | (271) | (267) |
At 29 April 2017 the Group had net debt of £271 million, broadly flat year-on-year to net debt of £267 million in the prior year. Free Cash Flow was an inflow of £160 million (2015/16: £202 million) for the reasons described above.
Net cash outflows from acquisitions and disposals in the current year represents cash outflows relating to the Sprint joint venture, the acquisition of Simplifydigital and the FONA stores in Denmark, offset by cash receipts in relation to the Group's previously disposed retail operations in Germany.
The increase in pension contributions reflects the agreed deficit reduction plan following the 2016 triennial valuation. Other items primarily relate to foreign exchange movements on net debt.
Statutory results
Income statement - continuing operations
| 2016/17 £million |
2015/16 £million |
|
| Revenue | 10,585 | 9,738 |
| EBIT | 418 | 304 |
| Net finance costs | (32) | (41) |
| Profit before tax | 386 | 263 |
| Tax | (95) | (84) |
| Profit after tax - continuing operations | 291 | 179 |
| Proft / (loss) after tax - discontinued operations | 4 | (18) |
| Profit after tax for the period | 295 | 161 |
| Basic EPS | 25.3p | 15.6p |
| Diluted EPS | 25.2p | 15.1p |
Revenue increased 9% to £10,585 million due to the reasons discussed earlier in this report.
Earnings before interest and tax increased from £304 million to £418 million in the current period, largely due to the reasons discussed earlier in this report and a reduction in non-headline costs incurred in the current year which are explained later in this report.
Net finance costs have decreased by £9 million due to reduced interest on borrowings reflecting the full year benefit of lower interest rates on amounts drawn under the revolving credit facility as described above and prior year non-headline costs relating to the write off of deferred facility fees incurred as disclosed below.
The tax charge increased from £84 million to £95 million reflecting higher statutory profit in the year partially offset by the impact of the lower effective tax rate discussed above. Tax credits on non-headline items reduced as a result of lower non-headline costs incurred in the year.
Basic EPS has increased from 15.6p to 25.3p for the period due to the higher reported profit after tax. Diluted EPS has increased from 15.1p to 25.2p reflecting the increase in the reported profit after tax and the lower number of potentially dilutive shares following the post-Brexit decline in the Group share price.
Non-headline items
Statutory profit before tax of £386 million (2015/16: £263 million) includes non-headline charges of £115 million (2015/16: £194 million). These charges are analysed below. Further details can be found in note 3 to the financial information.
| 2016/17 £million |
2015/16 £million |
|
| Businesses to be exited | (28) | (10) |
| Merger and transformation related costs | (31) | (52) |
| Amortisation of acquisition intangibles | (34) | (40) |
| Property rationalisation costs | - | (70) |
| Acquisition related costs | - | (6) |
| Share plan taxable benefit compensation | (11) | - |
| Unieuro income | 5 | - |
| Total non-headline items before interest and tax | (99) | (178) |
| Net pension interest | (16) | (16) |
| Total non-headline items before tax | (115) | (194) |
| Tax | 17 | 26 |
| Profit / (loss) after tax - discontinued operations | 4 | (18) |
| Total non-headline items | (94) | (186) |
Businesses to be exited relates to the trading losses of the iD mobile operations in the Republic of Ireland of £10 million (2015/16: £6 million), and the share of trading losses from joint ventures of £18 million (2015/16: £4 million) (including segmental allocation of central costs of £1 million (2015/16: £nil)) for which an agreement has been reached to sell the Group's 50% interest to Sprint.
Costs incurred in relation to the Merger relate to integration costs of £18 million (2015/16: £48 million) and functional transformation costs of £13 million (2015/16: £nil). Integration costs primarily reflect professional fees, employee severance and incentive costs associated with the initial integration of the two merged businesses. During the current period functional transformation projects have commenced across the finance, procurement and human resources functions to rationalise shared service centre activities and harmonise policies and procedures across key support functions of the business. During 2015/16, Merger-related costs also included the write-off of £4 million deferred facility fees which were incurred as a result of the Merger and the financing required to facilitate the Merger at short notice.
The charge for the amortisation of acquisition intangibles was £34 million (2015/16: £40 million) with the decrease due to some of the acquisition intangibles arising on the CPW Europe Acquisition being fully amortised during the prior period.
In the prior year the Group initiated a reorganisation of its property portfolio. The costs associated with this programme recognised in the prior year of £70 million related to committed property exit costs, asset write-downs and operational costs associated with the 3-in-1 store concept roll out across the UK & Ireland.
Acquisition-related costs in the prior period related to professional fees incurred as a result of the acquisition of Simplifydigital in the UK and Infocare in the Nordics and the revaluation of deferred consideration payable to the former shareholders of the Epoq kitchen business in the Nordics.
In the event of non-vesting, compensation will be paid to participants of the Share Plan for any tax charges arising from taxable benefits from the waiver of any portion of loans granted under the scheme. Based on the current share performance it is considered probable that this liability will crystallise, and therefore a provision of £11 million has been made during 2016/17.
Unieuro income relates to a special dividend to the Group to distribute the proceeds raised through the 31.8% IPO of its investment in Unieuro on the Milan stock exchange.
Net pension interest was £16 million reflecting the charge incurred in relation to the Dixons Retail UK pension scheme.
Discontinued operations
A loss of £18 million was recognised during the prior year in relation to the disposal of the Group's retail operations in Germany, the Netherlands and Portugal. In the current year, £4 million income principally relates to the write back of the previously impaired loan to Unieuro which was repaid during the year. Consistent with the original impairment this income is treated as discontinued operations.
Balance Sheet
| 2016/17 £million |
2015/16 £million |
|
| Goodwill | 3,111 | 3,054 |
| Other fixed assets | 973 | 906 |
| Working capital | (203) | (361) |
| Net debt | (271) | (267) |
| Tax, pension & other | (555) | (472) |
| 3,055 | 2,860 |
The movement in goodwill is primarily due to the retranslation of currency denominated balances largely in the Nordics. Other fixed assets have increased, with the higher capital expenditure during the year exceeding amortisation and depreciation. Negative working capital has reduced in the year largely as a result of network commission receivables increasing due to favourable assumptions over future contractual receipts, increased consumer insurance commission receivables following changes in contractual terms for the sale of third party insurance contracts, a reduction in provisions due to utilisation of property related provisions in the year and increases in stock offset by increases in trade payables. Net debt has marginally increased as described above. Other net liabilities (tax, pension & other) have increased primarily as a result of the increase in the IAS 19 accounting deficit described below offset by the increase in carrying value of the joint venture and recognition of the investment in the remaining interest in Unieuro.
Cash flow statement
| 2016/17 £million |
2015/16 £million |
|
| EBIT - continuing operations | 418 | 304 |
| EBIT - discontinued operations | - | (4) |
| Depreciation and amortisation | 186 | 177 |
| Working capital | (154) | (8) |
| Other operating cash flows | (86) | (73) |
| Cash flows from operating activities | 364 | 396 |
| Acquisitions | (46) | (59) |
| Capital expenditure | (242) | (221) |
| Other investing cash flows | 41 | 54 |
| Cash flows from investing activities | (247) | (226) |
| Dividends paid | (115) | (106) |
| Other financing cash flows | (41) | (11) |
| Cash flows from financing activities | (156) | (117) |
| (Decrease) / increase in cash and cash equivalents | (39) | 53 |
The statutory EBIT increase and working capital outflow increase in the year are for those reasons outlined above.
Acquisition cash outflows in the current period of £46 million relate to £29 million further capital injected into the US joint venture with Sprint, £10 million deferred consideration payment for the prior year acquisition of Simplifydigital, £2 million in the Nordics in relation to the 'Epoq' kitchen business acquired in 2011/12 and £5 million for the acquisition of ten FONA stores in Denmark. The prior year reflected the final CPW Europe Acquisition deferred payment and the acquisitions of Simplifydigital and InfoCare. The increase in capital expenditure reflects those reasons outlined above.
The increase in other financing outflows is due to interest paid on and reduction in year end amounts drawn under the revolving credit facilities.
Comprehensive income / changes in equity
Total equity of the Group has increased from £2,860 million to £3,055 million primarily reflecting the total statutory profit of £295 million, the gain on retranslation of overseas operations of £76 million offset by the payment of dividends of £115 million and actuarial loss (net of taxation) relating to the defined benefit pension scheme of £123 million.
Other matters
Pensions
The IAS 19 accounting deficit of the defined benefit section of the UK pension scheme of Dixons Retail amounted to £589 million at 29 April 2017 compared to £472 million at 30 April 2016. Contributions during the period under the terms of the deficit reduction plan amounted to £43 million (2015/16: £35 million). The deficit has increased during the year as a result of changes in financial assumptions, primarily the discount and inflation rates, which determine liabilities, partially offset by an increase in underlying asset values.
Dividends
The Board declared an interim dividend of 3.5p per share, up from 3.25p per share last year. The interim dividend was paid on 27 January 2017.
We are proposing a final dividend of 7.75p per share, taking the total dividend for the year to 11.25p per share, a 15% increase on the previous year (2015/16: 9.75p). The final dividend is subject to shareholder approval at the Company's forthcoming Annual General Meeting. The ex-dividend date is 24 August 2017, with a record date of 25 August 2017 and an intended final dividend payment date of 22 September 2017.
Consolidated income statement
| Year ended 29 April 2017 | Year ended 30 April 2016 | ||||||
| Note | Headline* £million |
Non- headline* £million |
Total £million |
Headline (restated)* £million |
Non- headline (restated)* £million |
Total £million |
|
| Continuing operations | |||||||
| Revenue | 2 | 10,580 | 5 | 10,585 | 9,736 | 2 | 9,738 |
| Profit / (loss) from operations before share of results of joint ventures |
517 | (82) | 435 | 478 | (170) | 308 | |
| Share of results of joint ventures | - | (17) | (17) | - | (4) | (4) | |
| Profit / (loss) before interest and tax | 2,3 | 517 | (99) | 418 | 478 | (174) | 304 |
| Finance income | 17 | - | 17 | 17 | - | 17 | |
| Finance costs | (33) | (16) | (49) | (38) | (20) | (58) | |
| Net finance costs | 4 | (16) | (16) | (32) | (21) | (20) | (41) |
| Profit / (loss) before tax | 501 | (115) | 386 | 457 | (194) | 263 | |
| Income tax (expense) / credit | 5 | (112) | 17 | (95) | (110) | 26 | (84) |
| Profit / (loss) after tax - continuing operations | 389 | (98) | 291 | 347 | (168) | 179 | |
| Profit / (loss) after tax - discontinued operations | 9 | - | 4 | 4 | - | (18) | (18) |
| Profit / (loss) after tax for the period | 389 | (94) | 295 | 347 | (186) | 161 | |
| Earnings per share (pence) | 6 | ||||||
| Basic - continuing operations | 33.8p | 25.3p | 30.2p | 15.6p | |||
| Diluted - continuing operations | 33.7p | 25.2p | 29.2p | 15.1p | |||
| Basic - total | 25.6p | 14.0p | |||||
| Diluted - total | 25.5p | 13.6p |
* Headline results exclude amortisation of acquisition intangibles, Merger integration and transaction costs, property rationalisation costs, acquisition related costs, net interest on defined benefit pension schemes, businesses to be exited and discontinued operations. Such excluded items are described as 'non-headline'. The headline and non-headline results have been restated for the year ended 30 April 2016 to reflect the current year classification of the iD mobile operations in the Republic of Ireland and the Sprint JV operations as businesses to be exited as discussed in note 3 and note 11 to the financial information.
Consolidated statement of comprehensive income
| Year ended 29 April 2017 £million |
Year ended 30 April 2016 £million |
|
| Profit after tax for the period | 295 | 161 |
| Items that may be reclassified to the income statement in subsequent years: | ||
| Cash flow hedges | ||
| Fair value movements recognised in other comprehensive income | 20 | (23) |
| Reclassified and reported in income statement | (18) | (35) |
| Amount recognised in inventories | 22 | 46 |
| Available-for-sale financial assets | ||
| Gains arising during the period | 19 | - |
| Exchange gain arising on translation of foreign operations | 76 | 66 |
| Other foreign exchange differences | - | 2 |
| Tax on items that may be subsequently reclassified to profit or loss | (3) | - |
| 116 | 56 | |
| Items that will not be reclassified to the income statement in subsequent years: | ||
| Actuarial (losses) / gains on defined benefit pension schemes - UK | (144) | (5) |
| - Overseas | - | 2 |
| Deferred tax on actuarial (losses) / gains on defined benefit pension schemes | 21 | (9) |
| (123) | (12) | |
| Other comprehensive (expense) / income for the period (taken to equity) | (7) | 44 |
| Total comprehensive income for the period | 288 | 205 |
Consolidated balance sheet
| Note | 29 April 2017 £million |
30 April 2016 £million |
|
| Non-current assets | |||
| Goodwill | 3,111 | 3,054 | |
| Intangible assets | 553 | 540 | |
| Property, plant & equipment | 420 | 366 | |
| Investments | 19 | - | |
| Interests in joint ventures and associates | 18 | 5 | |
| Trade and other receivables | 531 | 408 | |
| Deferred tax assets | 253 | 234 | |
| 4,905 | 4,607 | ||
| Current assets | |||
| Inventory | 1,101 | 958 | |
| Trade and other receivables | 1,136 | 1,113 | |
| Derivative assets | 17 | 18 | |
| Cash and cash equivalents | 209 | 233 | |
| 2,463 | 2,322 | ||
| Total assets | 7,368 | 6,929 | |
| Current liabilities | |||
| Trade and other payables | (2,502) | (2,268) | |
| Derivative liabilities | (13) | (42) | |
| Deferred and contingent consideration | (8) | (12) | |
| Income tax payable | (94) | (89) | |
| Loans and other borrowings | (10) | - | |
| Finance lease obligations | (3) | (2) | |
| Provisions | (84) | (78) | |
| (2,714) | (2,491) | ||
| Non-current liabilities | |||
| Trade and other payables | (368) | (423) | |
| Deferred and contingent consideration | (14) | (21) | |
| Loans and other borrowings | (381) | (409) | |
| Finance lease obligations | (86) | (89) | |
| Retirement benefit obligations | (591) | (474) | |
| Deferred tax liabilities | (138) | (115) | |
| Provisions | (21) | (47) | |
| (1,599) | (1,578) | ||
| Total liabilities | (4,313) | (4,069) | |
| Net assets | 3,055 | 2,860 | |
| Capital and reserves | |||
| Share capital | 1 | 1 | |
| Share premium reserve | 2,260 | 2,256 | |
| Accumulated profits | 1,513 | 1,398 | |
| Translation reserve | 31 | (45) | |
| Demerger reserve | (750) | (750) | |
| Equity attributable to equity holders of the parent company | 3,055 | 2,860 |
Consolidated statement of changes in equity
| Note | Share capital £million |
Share premium reserve £million |
Accumulated profits £million |
Translation reserve £million |
Demerger reserve £million |
Total equity £million |
|
| At 2 May 2015 | 1 | 2,256 | 1,369 | (113) | (750) | 2,763 | |
| Profit for the period | - | - | 161 | - | - | 161 | |
| Other comprehensive income and expense recognised directly in equity | - | - | (24) | 68 | - | 44 | |
| Total comprehensive income and expense for the period |
- | - | 137 | 68 | - | 205 | |
| Net purchase of own shares | - | - | (5) | - | - | (5) | |
| Equity dividends | 7 | - | - | (106) | - | - | (106) |
| Net movement in relation to share schemes | - | - | 10 | - | - | 10 | |
| Tax on items recognised directly in reserves | - | - | (7) | - | - | (7) | |
| At 30 April 2016 | 1 | 2,256 | 1,398 | (45) | (750) | 2,860 | |
| Profit for the period | - | - | 295 | - | - | 295 | |
| Other comprehensive income and expense recognised directly in equity | - | - | (83) | 76 | - | (7) | |
| Total comprehensive income and expense for the period |
- | - | 212 | 76 | - | 288 | |
| Ordinary shares issued | - | 4 | - | - | - | 4 | |
| Equity dividends | - | - | (115) | - | - | (115) | |
| Net movement in relation to share schemes | - | - | 17 | - | - | 17 | |
| Tax on items recognised directly in reserves | - | - | 1 | - | - | 1 | |
| At 29 April 2017 | 1 | 2,260 | 1,513 | 31 | (750) | 3,055 |
Consolidated cash flow statement
| Note | Year ended 29 April 2017 £million |
Year ended 30 April 2016 £million |
|
| Operating activities | |||
| Cash generated from operations | 8 | 479 | 487 |
| Special contributions to defined benefit pension scheme | (43) | (35) | |
| Income tax paid | (72) | (56) | |
| Net cash flows from operating activities | 364 | 396 | |
| Investing activities | |||
| Interest received | 2 | - | |
| Net cash outflow arising from acquisitions | (17) | (50) | |
| Proceeds from disposal of property, plant & equipment | 9 | 24 | |
| Proceeds on sale of business | 22 | 30 | |
| Dividends received from available-for-sale investments | 8 | - | |
| Acquisition of property, plant & equipment and other intangibles | (242) | (221) | |
| Investment in joint ventures | (29) | (9) | |
| Net cash flows from investing activities | (247) | (226) | |
| Financing activities | |||
| Interest paid | (17) | (20) | |
| Repayment of obligations under finance leases | (8) | (6) | |
| Net purchase of own shares | - | (5) | |
| Issue of ordinary shares | 4 | - | |
| Equity dividends paid | (115) | (106) | |
| (Decrease) / increase in borrowings | (18) | 25 | |
| Facility arrangement fees paid | (2) | (5) | |
| Net cash flows from financing activities | (156) | (117) | |
| (Decrease) / increase in cash and cash equivalents | (39) | 53 | |
| Cash and cash equivalents at beginning of the period | 233 | 163 | |
| Currency translation differences | 15 | 17 | |
| Cash and cash equivalents at end of the period | 8 | 209 | 233 |
Notes to the Financial Information
1 Basis of preparation
The financial information, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and extracts from the notes to the accounts for the year ended 29 April 2017 and 30 April 2016, has been prepared in accordance with the accounting policies set out in the full financial statements and on a going concern basis.
In their consideration of going concern, the directors have reviewed the Group's future cash forecasts and profit projections, which are based on market data and past experience. The directors are of the opinion that the Group's forecasts and projections, which take into account reasonably possible changes in trading performance, show that the Group is able to operate within its current facilities and comply with its banking covenants for the foreseeable future. In arriving at their conclusion that the Group has adequate financial resources, the directors were mindful of the level of borrowings and facilities available and that the Group has a robust policy towards liquidity and cash flow management.
Accordingly the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operation for the foreseeable future and consequently the directors continue to apply the going concern basis in the preparation of the financial statements.
The financial information set out in this announcement does not constitute statutory accounts within the meaning of Sections 434 to 436 of the Companies Act 2006 and is an abridged version of the Group's financial statements for the year ended 29 April 2017 which were approved by the directors on 27 June 2017. Statutory accounts for the year ended 30 April 2016 have been delivered to the Registrar of Companies, the auditor has reported on those accounts, their report was unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006. Statutory accounts for the year ended 29 April 2017 will be delivered in due course. The auditor has reported on those accounts, their report was unqualified and did not contain statements under Section 498 of the Companies Act 2006.
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, IFRS issued by the International Accounting Standards Board and those parts of the Companies Act 2006 applicable to those companies reporting under IFRS. The consolidated financial statements incorporate the financial statements of the Company and its subsidiary undertakings for the year ended 29 April 2017.
The Group's income statement and segmental analysis identify separately headline performance and non-headline items. Headline performance measures reflect adjustments to total performance measures. The directors consider 'headline' performance measures to be a more accurate reflection of the ongoing trading performance of the Group and believe that these measures provide additional useful information for shareholders on the Group's performance and are consistent with how business performance is measured internally. The accounting policy for the use of these measures is outlined in the 'Alternative Performance Measures' section of the Glossary and definitions.
Non-headline items in the current and prior periods comprise businesses to be exited, amortisation of acquisition intangibles, Merger integration and transformation costs, property rationalisation costs, acquisition related costs, net interest on defined benefit pension schemes, share plan taxable benefit compensation and discontinued operations. A reconciliation of headline profit and losses to total profits and losses is shown in note 2. Items excluded from headline results can evolve from one financial year to the next depending on the nature of exceptional items or one off type activities described above. Headline performance measures and non-headline performance measures may not be directly comparable with other similarly titled measures or "adjusted" revenue or profit measures used by other companies.
2 Segmental analysis
The Group's operating segments reflect the segments routinely reviewed by the Board and which are used to manage performance and allocate resources. This information is predominantly based on geographical areas which are either managed separately or have similar trading characteristics such that they can be aggregated together into one segment.
The Group's reportable segments have been identified
as follows:
• UK & Ireland comprises operations in the UK and Ireland.
• Nordics operates in Norway, Sweden, Finland, Denmark and Iceland.
• Southern Europe comprises operations in Spain and Greece.
• Connected World Services is the Group's B2B operation which leverages the specialist skills, operating processes and technology of the Group to provide managed services to third parties looking to develop their own connected world solutions.
UK & Ireland, Nordics and Southern Europe are involved in the sale of consumer electronics and mobile technology products and services, primarily through stores or online channels.
Transactions between segments are on an arm's length basis.
2 Segmental analysis continued
| Year ended 29 April 2017 | |||||||
| UK & Ireland £million |
Nordics £million | Southern Europe £million |
Connected World Services £million | Eliminations £million |
Total £million |
||
| Headline external revenue | 6,550 | 3,156 | 661 | 213 | - | 10,580 | |
| Inter-segmental revenue | 81 | - | - | - | (81) | - | |
| Total headline revenue | 6,631 | 3,156 | 661 | 213 | (81) | 10,580 | |
| Headline EBIT before share of results of joint ventures |
385 | 89 | 22 | 21 | - | 517 | |
| Share of headline results of joint ventures | - | - | - | - | - | - | |
| Headline EBIT | 385 | 89 | 22 | 21 | - | 517 |
Reconciliation of headline profit to total profit before tax
| Year ended 29 April 2017 | ||||||||
| Headline profit / (loss) £million |
Businesses to be exited £million | Amortisation of acquisition intangibles £million | Merger integration and transformation costs £million |
Pension scheme interest £million |
Unieuro income £million |
Share plan taxable benefit compensation £million |
Total profit / (loss) £million |
|
| UK & Ireland | 385 | (11) | (20) | (28) | - | - | (10) | 316 |
| Nordics | 89 | - | (12) | (3) | - | - | (1) | 73 |
| Southern Europe | 22 | - | (1) | - | - | 5 | - | 26 |
| Connected World Services | 21 | - | (1) | - | - | - | - | 20 |
| EBIT before share of results of joint ventures | 517 | (11) | (34) | (31) | - | 5 | (11) | 435 |
| Share of results of joint ventures | - | (17) | - | - | - | - | - | (17) |
| EBIT | 517 | (28) | (34) | (31) | - | 5 | (11) | 418 |
| Finance income | 17 | - | - | - | - | - | - | 17 |
| Finance costs | (33) | - | - | - | (16) | - | - | (49) |
| Profit / (loss) before tax | 501 | (28) | (34) | (31) | (16) | 5 | (11) | 386 |
2 Segmental analysis continued
| Year ended 30 April 2016 (restated) | |||||||
| UK & Ireland £million |
Nordics £million | Southern Europe £million |
Connected World Services £million | Eliminations £million |
Total £million |
||
| Headline external revenue (restated)* | 6,402 | 2,632 | 550 | 152 | - | 9,736 | |
| Inter-segmental revenue | 60 | - | - | - | (60) | - | |
| Total headline revenue (restated)* | 6,462 | 2,632 | 550 | 152 | (60) | 9,736 | |
| Headline EBIT before share of results of joint ventures (restated)* |
371 | 79 | 17 | 11 | - | 478 | |
| Share of headline results of joint ventures (restated)* | - | - | - | - | - | - | |
| Headline EBIT (restated)* | 371 | 79 | 17 | 11 | - | 478 |
Reconciliation of headline profit to total profit before tax
| Year ended 30 April 2016 (restated) | ||||||||
| Headline profit / (loss) (restated)* £million |
Businesses to be exited* £million |
Amortisation of acquisition intangibles £million | Dixons Retail Merger £million |
Property rationalisation costs £million |
Acquisition related £million |
Pension scheme interest £million |
Total profit / (loss) £million |
|
| UK & Ireland | 371 | (6) | (24) | (37) | (70) | (1) | - | 233 |
| Nordics | 79 | - | (13) | (5) | - | (5) | - | 56 |
| Southern Europe | 17 | - | (2) | - | - | - | - | 15 |
| Connected World Services | 11 | - | (1) | (6) | - | - | - | 4 |
| EBIT before share of results of joint ventures | 478 | (6) | (40) | (48) | (70) | (6) | - | 308 |
| Share of results of joint ventures | - | (4) | - | - | - | - | - | (4) |
| EBIT | 478 | (10) | (40) | (48) | (70) | (6) | - | 304 |
| Finance income | 17 | - | - | - | - | - | - | 17 |
| Finance costs | (38) | - | - | (4) | - | - | (16) | (58) |
| Profit / (loss) before tax | 457 | (10) | (40) | (52) | (70) | (6) | (16) | 263 |
* Headline results have been restated to exclude the results of the iD mobile operations in the Republic of Ireland and the Sprint JV operations, which have
been classified as businesses to be exited in the current year and comparatives have been restated accordingly as discussed in note 3 and note 11.
3 Non-headline items
| Note | Year ended 29 April 2017 £million |
Year ended 30 April 2016 (restated)* £million |
|
| Included in revenue: | |||
| Businesses to be exited | (i) | 5 | 2 |
| 5 | 2 | ||
| Included in profit / (loss) before interest and tax: | |||
| Businesses to be exited | (i) | (28) | (10) |
| Amortisation of acquisition intangibles | (ii) | (34) | (40) |
| Exceptional items - Merger and transformation related costs | (iii) | (31) | (48) |
| - Property rationalisation costs | (iv) | - | (70) |
| - Acquisition related | (v) | - | (6) |
| Share plan taxable benefit compensation | (vii) | (11) | - |
| Unieuro income | (viii) | 5 | - |
| (99) | (174) | ||
| Included in net finance costs: | |||
| Net non-cash finance costs on defined benefit pension schemes | (vi) | (16) | (16) |
| Exceptional items - Merger and transformation related costs | (iii) | - | (4) |
| (16) | (20) | ||
| Total impact on profit / (loss) before tax | (115) | (194) | |
| Tax on non-headline items | 17 | 26 | |
| Total impact on profit / (loss) after tax - continuing operations | (98) | (168) | |
| Discountinued operations | 9 | 4 | (18) |
| Total impact on profit / (loss) after tax | (94) | (186) |
* Comparative hon-headline results for the year ended 30 April 2016 have been restated as set out in note 11.
(i) Businesses to be exited:
Comprises the trading result of businesses to be exited where they do not meet the criteria under IFRS 5 for separate disclosure as discontinued operations. In the current period, this comprises of the iD mobile operations in the Republic of Ireland and the results of the Sprint Joint Venture. For iD mobile Ireland, a decision was reached to exit the business, most likely through a sale to a third party. The results of the Ireland MVNO have therefore been reclassified as non-headline items in the current year in the income statement and related disclosures. The iD mobile operations in the Republic of Ireland contributed £5 million in revenue and a loss of £10 million in EBIT in 2016/17 (2015/16: Revenue of £2 million and a loss of £6 million) which has been classified as non-headline. Restated amounts are set out in note 11.
In June 2017 the Group announced the sale of the 50% interest in the Sprint Joint Venture. The share of loss recognised in the year of £17 million, together with central costs directly related to the operation of £1 million, have therefore been classified as a business to be exited. The share of loss for 2015/16 of £4 million has been restated accordingly as set out in note 11.
(ii) Amortisation of acquisition intangibles:
A charge of £34 million arose during the year in relation to acquisition intangibles arising on the CPW Europe Acquisition, the Dixons Retail Merger and the Simplifydigital acquisition (2015/16: £40 million).
3 Non-headline items continued
(iii) Exceptional items - Merger and transformation related costs:
| Year ended 29 April 2017 £million |
Year ended 30 April 2016 £million |
|
| Merger integration costs | (18) | (48) |
| Transformation related costs | (13) | - |
| Revolving Credit Facility fee write off | - | (4) |
| (31) | (52) |
The Merger has given rise to the following costs which have been treated as exceptional items:
• Merger integration costs relate to the reorganisation of the Group following the Merger and primarily comprise professional fees, employee severance and incentive costs associated with the integration process.
• During the current period, functional transformation projects have commenced across the finance, procurement and human resources functions to rationalise shared service centre activities and harmonise policies and procedures across key support functions of the business. The costs primarily relate to consultancy fees.
• In the year ended 30 April 2016, the Revolving Credit Facility fee write off recognised in finance costs relates to the deferred facility fees written off. The fees incurred were a result of the Merger and the financing required to facilitate the Merger at short notice. No related amounts were recognised in the current year.
(iv) Property rationalisation costs:
Following the Merger it was announced that the Group would launch a major roll out of its fully refurbished 3-in1 store concept in the UK & Ireland. This involves merging the remaining PC World and Currys stores and inserting a Carphone Warehouse, reducing the overall store portfolio by 134. The costs associated with this initiative, being early lease termination premiums, onerous lease provisions, dilapidations and fixed asset impairments, have been treated as exceptional items. On a net basis, there have been no additional costs incurred in the year ended 29 April 2017 relating to the property rationalisation, and existing provisions have been utilised.
(v) Acquisition related:
Acquisition related comprise costs incurred in the year ended 30 April 2016 relating to an increase in the contingent consideration payable on a business acquired by Dixons in the Nordics in 2011/12 (£5 million), and costs incurred in the acquisition of Simplifydigital and Infocare (£1 million).
(vi) Net non-cash financing costs on defined benefit pension schemes:
Under IAS 19 'Employee Benefits', the net interest charge on defined benefit pension schemes is calculated by applying the corporate bond yield rates applicable on the last day of the previous financial year to the net defined benefit obligation. Corporate bond yield rates vary over time which in turn creates volatility in the income statement and balance sheet and results in a non-cash remeasurement cost which can be volatile due to corporate bond yield rates prevailing on a particular day and is also unrepresentative of the actual investment gains or losses made or the liabilities paid and payable. Consistent with a number of other companies, the accounting effects of these non-cash revaluations of net defined benefit pension liabilities have been excluded from headline earnings.
(vii) Share plan taxable benefit compensation:
In the event of non-vesting, compensation will be paid to participants of the Share Plan for any taxable benefit arising on the waiver of any portion of loans granted under the scheme. Based on the current share performance it is considered probable that this liability will crystallise, and therefore provision of £11 million has been made during 2016/17.
(viii) Unieuro income:
In November 2013, the Group disposed of its Unieuro operations, and retained an investment of 14.96% in Italian Electronics Holdings s.r.l (IEH), a holding company which in turn owned 100% of the Unieuro operations. The investment was initially recognised at £Nil based on the fair value of the retained interest. In March 2017, Unieuro undertook an IPO for 31.8% of its shareholdings, which reduced the Group's investment to 10.2% of the Unieuro operations. As a result of the IPO, the Group received a dividend from the intermediate holding company of £5 million, which is treated as non-headline as relates to a disposal of a portion of our investment. A repayment was also received of £5 million for a loan previously impaired following the disposal, which has been treated as a discontinued operation income in line with the treatment of the original disposal, as disclosed in note 9.
4 Net finance costs
| Year ended 29 April 2017 £million |
Year ended 30 April 2016 £million |
|
| Unwind of discounts on trade receivables | 15 | 17 |
| Interest receivable | 2 | - |
| Finance income | 17 | 17 |
| Interest on bank overdrafts, loans and borrowings | (12) | (16) |
| Finance lease interest payable | (6) | (6) |
| Net interest on defined benefit pension obligations(i) | (16) | (16) |
| Unwind of discounts on liabilities | (8) | (10) |
| Amortisation of facility fees | (1) | (2) |
| Revolving credit facility fee write off (i) | - | (4) |
| Other interest expense | (6) | (4) |
| Finance costs | (49) | (58) |
| Total net finance costs | (32) | (41) |
| Headline total net finance costs | (16) | (21) |
(i) Headline finance costs exclude net interest on defined benefit pension obligations and the write off of revolving credit facility fees (see note 3).
5 Tax
The effective tax rate on headline earnings of 22% (2015/16 (restated): 24%) has decreased due to a reduction in items attracting no tax relief or liability and a reduction in tax paid at higher overseas tax rates, largely as a result of statutory rate changes in the Nordics. The UK corporation tax rate for the year ended 29 April 2017 was 20% for the 11 months to 31 March 2017 and 19% thereafter (2015/16: 20%). The total effective tax rate for continuing operations is 25% (2015/16: 32%).
6 Earnings per share
| Year ended 29 April 2017 £million |
Year ended 30 April 2016 (restated) £million |
||
| Headline earnings | |||
| Continuing operations | 389 | 347 | |
| Total earnings / (loss) | |||
| Continuing operations | 291 | 179 | |
| Discontinued operations | 4 | (18) | |
| Total | 295 | 161 | |
| Million | Million | ||
| Weighted average number of shares | |||
| Average shares in issue | 1,152 | 1,151 | |
| Less average holding by Group ESOT | (1) | (1) | |
| For basic earnings per share | 1,151 | 1,150 | |
| Dilutive effect of share options and other incentive schemes | 4 | 38 | |
| For diluted earnings per share | 1,155 | 1,188 | |
| Pence | Pence | ||
| Basic earnings per share | |||
| Total (continuing and discontinued operations) | 25.6 | 14.0 | |
| Adjustment in respect of discontinued operations | (0.3) | 1.6 | |
| Continuing operations | 25.3 | 15.6 | |
| Adjustments for non-headline - continuing operations (net of taxation) | 8.5 | 14.6 | |
| Headline basic earnings per share | 33.8 | 30.2 | |
| Diluted earnings per share | |||
| Total (continuing and discontinued operations) | 25.5 | 13.6 | |
| Adjustment in respect of discontinued operations | (0.3) | 1.5 | |
| Continuing operations | 25.2 | 15.1 | |
| Adjustments for hon-headline - continuing operations (net of taxation) | 8.5 | 14.1 | |
| Headline diluted earnings per share | 33.7 | 29.2 |
Basic and diluted earnings per share are based on the profit for the period attributable to equity shareholders. Headline earnings per share is presented in order to show the underlying performance of the Group. Adjustments used to determine headline earnings are described further in note 3.
7 Equity dividends
| 29 April 2017 £million |
30 April 2016 £million |
|
| Amounts recognised as distributions to equity shareholders in the period - on ordinary shares of 0.1p each |
||
| Final dividend for the 13 months ended 2 May 2015 of 6.00p per ordinary share | - | 69 |
| Interim dividend for the year ended 30 April 2016 of 3.25p per ordinary share | - | 37 |
| Final dividend for the year ended 30 April 2016 of 6.50p per ordinary share | 75 | - |
| Interim dividend for the year ended 29 April 2017 of 3.50p per ordinary share | 40 | - |
| 115 | 106 |
The following distribution is proposed but had not been effected at 29 April 2017 and is subject to shareholders' approval at the forthcoming Annual General Meeting:
| £million | |
| Final dividend for the year ended 29 April 2017 of 7.75p per ordinary share | 89 |
8 Notes to the cash flow statement
a) Reconciliation of operating profit to net cash inflow from operating activities
| Year ended 29 April 2017 £million |
Year ended 30 April 2016 £million |
|
| Profit before interest and tax - continuing operations | 418 | 304 |
| Profit before interest and tax - discontinued operations | - | (4) |
| Depreciation and amortisation | 186 | 177 |
| Investment income | (8) | - |
| Share-based payment charge | 17 | 10 |
| Share of results of joint ventures | 17 | 4 |
| Impairments and other non-cash items | 3 | 4 |
| Operating cash flows before movements in working capital | 633 | 495 |
| Movements in working capital: | ||
| Increase in inventory | (112) | (16) |
| Increase in receivables | (130) | (245) |
| Increase in payables | 110 | 170 |
| (Decrease) / increase in provisions | (22) | 83 |
| (154) | (8) | |
| Cash generated from operations | 479 | 487 |
In the current year, the presentation of the above reconciliation and statement of cash flows include both continuing and discontinued operations. Comparative amounts have been presented accordingly.
b) Analysis of net debt
| 1 May 2016 £million |
Cash flow £million |
Other non-cash movements £million |
Currency translation £million |
29 April 2017 £million |
|||
| Cash and cash equivalents | 233 | (39) | - | 15 | 209 | ||
| 233 | (39) | - | 15 | 209 | |||
| Borrowings due within one year | - | (10) | - | - | (10) | ||
| Borrowings due after more than one year | (409) | 28 | - | - | (381) | ||
| Obligations under finance leases | (91) | 8 | (6) | - | (89) | ||
| (500) | 26 | (6) | - | (480) | |||
| Net (debt) / funds | (267) | (13) | (6) | 15 | (271) |
| 3 May 2015 £million |
Cash flow £million |
Other non-cash movements £million |
Currency translation £million |
30 April 2016 £million |
|||
| Cash and cash equivalents | 163 | 53 | - | 17 | 233 | ||
| 163 | 53 | - | 17 | 233 | |||
| Borrowings due within one year | (55) | 55 | - | - | - | ||
| Borrowings due after more than one year | (330) | (80) | - | 1 | (409) | ||
| Obligations under finance leases | (91) | 6 | (6) | - | (91) | ||
| (476) | (19) | (6) | 1 | (500) | |||
| Net (debt) / funds | (313) | 34 | (6) | 18 | (267) |
8 Notes to the cash flow statement continued
c) Reconciliation of cash inflow from operations to free cash flow
| Year ended 29 April 2017 £million |
Year ended 30 April 2016 £million |
|
| Cash inflow from operations | 479 | 487 |
| Operating cash flows from discontinued operations | 1 | (2) |
| Taxation | (72) | (56) |
| Interest, facility arrangement fees, dividends from investments and repayment of finance leases | (15) | (31) |
| Capital expenditure | (242) | (221) |
| Proceeds from disposal of fixed assets | 9 | 24 |
| Other movements | - | 1 |
| Free cash flow | 160 | 202 |
9 Discontinued operations and assets held for sale
a) Profit / (loss) after tax - discontinued operations
The net profit of £4 million recognised in the current year primarily relates to the income recognised relating to the Unieuro investment. In April 2017 the Group received £5 million as repayment of a loan to the disposed operation from the disposal in 2013, which was fully impaired as part of the loss on disposal. In the current year, as repayment of the principle has been made, this income has been classified as a discontinued operation as the original impairment of the loan was recognised in the original loss on disposal.
There were no other significant movements in results relating to other discontinued operations in the year ended 29 April 2017.
The net loss on disposal recognised in the prior year of £18 million primarily relates to working capital adjustments agreed with acquirers, adjustments to net assets disposed, the recycling of foreign currency translation reserves of discontinued operations and other costs associated with the exits.
b) Cash flows from discontinued operations
The net cash flows incurred by the discontinued operation during the year are as follows. These cash flows are included within the Consolidated cash flow statement:
| Year ended 29 April 2017 £million |
Year ended 30 April 2016 £million |
|
| Operating activities | (1) | 2 |
| Investing activities | 22 | 30 |
| 21 | 32 |
10 Related party transactions
Transactions between the Group's subsidiary undertakings, which are related parties, have been eliminated on consolidation and accordingly are not disclosed.
The Group had the following transactions and balances with its associates and joint venture:
| 29 April 2017 £million |
30 April 2016 £million |
|
| Revenue from sale of goods and services | 11 | 24 |
| Amounts owed to the Group | 6 | 2 |
All transactions entered into with related parties were completed on an arm's length basis.
11 Restatement of comparative information
During the year, the iD mobile operations in the Republic of Ireland and the Sprint Joint Venture in the United States have been classified as 'businesses to be exited' as set out in Note 3, and therefore classified in non-headline results. In accordance with the accounting policy as described in Note 1, comparative information for the financial year ended 30 April 2016 has been restated accordingly. The impact of the restatement has been set out below:
Consolidated income statement
The results of both operations have been reclassified from headline to non-headline results. There has been no impact on the total reported performance measures. The impact of the restatement has been set out below:
| Headline results | Non-Headline results | Total | |||||||||
| 2015/16 as previously reported £million |
iD mobile Ireland £million |
Sprint Joint Venture £million |
2015/16 as restated £million |
2015/16 as previously reported £million |
iD mobile Ireland £million |
Sprint Joint Venture £million |
2015/16 as restated £million |
2015/16 as previously reported and restated £million |
|||
| Continuing operations | |||||||||||
| Revenue | 9,738 | (2) | - | 9,736 | - | 2 | - | 2 | 9,738 | ||
| Cost of sales | (7,553) | 5 | - | (7,548) | - | (5) | - | (5) | (7,553) | ||
| Gross profit | 2,185 | 3 | - | 2,188 | - | (3) | - | (3) | 2,185 | ||
| Operating expenses | (1,713) | 3 | - | (1,710) | (164) | (3) | - | (167) | (1,877) | ||
| Profit / (loss) from operations before share of results of joint ventures | 472 | 6 | - | 478 | (164) | (6) | - | (170) | 308 | ||
| Share of results of joint ventures | (4) | - | 4 | - | - | - | (4) | (4) | (4) | ||
| Profit / (loss) before interest and tax | 468 | 6 | 4 | 478 | (164) | (6) | (4) | (174) | 304 | ||
| Net finance costs | (21) | - | - | (21) | (20) | - | - | (20) | (41) | ||
| Profit / (loss) before tax | 447 | 6 | 4 | 457 | (184) | (6) | (4) | (194) | 263 | ||
| Income tax (expense) / credit | (110) | - | - | (110) | 26 | - | - | 26 | (84) | ||
| Profit / (loss) after tax - continuing operations | 337 | 6 | 4 | 347 | (158) | (6) | (4) | (168) | 179 | ||
| Loss after tax - discontinued operations | - | - | - | - | (18) | - | - | (18) | (18) | ||
| Profit / (loss) after tax for the period | 337 | 6 | 4 | 347 | (176) | (6) | (4) | (186) | 161 | ||
| Earnings per share (pence) | |||||||||||
| Basic - continuing operations | 29.3p | 0.5p | 0.4p | 30.2p | 15.6p | ||||||
| Diluted - continuing operations | 28.4p | 0.5p | 0.3p | 29.2p | 15.1p | ||||||
| Basic - total | 14.0p | ||||||||||
| Diluted - total | 13.6p | ||||||||||
Segmental information
The comparative segmental information provided in note 2 has been adjusted to reflect the above reclassifications. The iD mobile operations were previously included in the UK & Ireland operating segment and have decreased the headline external revenue of the UK & Ireland operating segment for 2015/16 by £2 million, from £6,404 million to £6,402 million. The headline EBIT of the UK & Ireland segment for 2015/16 has increased by £6 million from £365 million to £371 million. The Sprint Joint Venture operations were previously included in the Connected World Services operating segment, and the restatement has increased the headline EBIT of the Connected World Services operating segment by £4 million, from £7 million to £11 million.
Other disclosures
In accordance with the policy as set out in Note 1, there have been no restatements made to the consolidated balance sheet, consolidated statement of other comprehensive income, consolidated statement of changes in equity or consolidated cash flow statement, as these statements do not separately distinguish headline and non-headline measures.
Risks to Achieving the Group's Objectives
The Group is subject to a number of risks and uncertainties which could have a material effect on its results. The Group's principal risks, and the factors which mitigate them, are set out in the 2015/16 Annual Report and Accounts on pages 20 to 23. These risks remain relevant in the current period and are summarised below:
1. Dependence on networks and key suppliers in driving profitability, cash flow and market share;
2. Failure to maintain a sustainable business model in the face of a changing consumer environment could result in a loss of competitive advantage impacting financial performance;
3. The Greek exit from the Euro could lead to a deterioration in consumer confidence impacting the performance of the Greek business, Kotsovolos;
4. Failure to adequately invest in and integrate the Group's IT systems and infrastructure could result in restricted growth and reputational damage impacting financial performance;
5. Failure in appropriately safeguarding sensitive information and responding to cyber risks could result in reputational damage, financial penalties and a resultant deterioration in financial performance;
6. Failure to comply with FCA regulation could result in reputational damage, customer compensation, financial penalties and a resultant deterioration in financial performance;
7. Failure to attract, develop and retain staff with sufficient talent and capabilities could lead to a loss of competitive advantage impacting financial performance;
8. Business continuity plans are not effective and major incident response is inadequate resulting in reputational damage and a loss of competitive advantage;
9. Failure to operate an effective fraud control environment may result in the loss of revenue and reputational damage;
10. Failure to action appropriate Health and Safety measures resulting in injury could give rise to reputational damage and financial penalties; and
11. The decision of the UK to leave the European Union could lead to a period of economic uncertainty and a loss of consumer confidence, foreign exchange volatility and long term changes in tax and other regulations which may impact the Group's ability to operate across our European businesses.
In the 2016/17 Annual Report and Accounts, dependence on networks and dependence on key suppliers (risk 1 above) have been specified as separate risks. In addition, in order to provide the Board of directors greater detail over specific elements of data protection risk, compliance with data protection legislation has now been specified as a separate risk from the information security risk above (risk 5). Failure to comply with data protection legislation may lead to reputational damage and financial penalties, which could lead to a loss of competitive advantage and deteriorating revenues and cash flows. The risk has been considered alongside potential mitigations, which include the Group currently engaging in preparations for the requirements of the EU General Data Protection Regulation ("GDPR"), which becomes effective in May 2018.
Glossary and definitions
Alternative performance measures (APMs)
In the reporting of financial information, the Group uses certain measures that are not required under IFRS. We consider that these additional measures (commonly referred to as 'alternate performance measures') provide additional information on the performance of the business and trends to shareholders. These measures are consistent with those used internally, and are considered critical to understanding the financial performance and financial health of the Group. APMs are also used to enhance the comparability of information between reporting periods, by adjusting for non-recurring or items considered to be distortive on trading performance which may affect IFRS measures, to aid the user in understanding the Group's performance. These alternative performance measures may not be directly comparable with other similarly titled measures or 'adjusted' revenue or profit measures used by other companies, and are not intended to be a substitute for, or superior to, IFRS measures.
Headline and non-headline measures
The Group's income statement and segmental analysis identify separately headline performance and non-headline items. Headline performance measures reflect adjustments to total performance measures. The directors consider 'headline' performance measures to be an informative additional measure of the ongoing trading performance of the Group. Headline results are stated before non-headline items.
Non-headlines items consist of the results of discontinued operations or exited / to be exited businesses, amortisation of acquisition intangibles, acquisition related costs, any exceptional items considered sufficiently material that they distort underlying performance (such as reorganisation costs, impairment charges, property rationalisation costs and other non-recurring charges), income from previously disposed operations and net pension interest costs.
Items excluded from headline results can evolve from one financial year to the next depending on the nature of exceptional items or one-off type activities. Where appropriate, for example where a business is classified as exited / to be exited, comparative information is restated accordingly.
Local currency
Some comparative performance measures are translated at constant exchange rates, called 'Local currency' measures. This restates the prior period results at a common exchange rate to the current year in order to provide appropriate year-on-year movement measures without the impact of foreign exchange movements.
In response to the Guidelines on Alternative Performance Measures issues by the European Securities and Markets Authority (ESMA), we have provided additional information on the APMs used by the Group below.
| Alternative performance measure |
Closest equivalent GAAP measure | Reconciliation to IFRS measure | Definition and purpose |
|---|---|---|---|
| Revenue measures | |||
| Headline / non-headline Revenue | Revenue | See note 3 and note 11 for details of restated amounts for 2015/16. | Headline revenues represent the ongoing revenues of the Group, and are adjusted to remove non-headline revenue items. In the current and restated comparative periods, this relates to the iD mobile operations in Republic of Ireland, which is classified as a 'business to be exited' and therefore presented in non-headline results. |
| Like for Like (LFL) % change | No direct equivalent | Not applicable | Like-for-like revenue is calculated based on headline store and internet revenue using constant exchange rates. New stores are included where they have been open for a full financial year both at the beginning and end of the financial period. Revenue from franchise stores are excluded and closed stores are excluded for any period of closure during either period. Customer support agreement, insurance and wholesale revenues along with revenue from Connected World Services and other non-retail businesses are excluded from like-for-like calculations. We consider that LFL revenue represents a useful measure of the trading performance of our underlying and ongoing store and online portfolio. |
| Local currency % change | Revenue compared to prior period consolidated at a constant exchange rate. | Not applicable | Reflects total revenues on a constant currency and period basis. Provides a measure of performance excluding the impact of foreign exchange rate movements. |
| Profit measures | |||
| Headline / Non-headline profit/(loss) before tax, EBIT and profit/(loss) after tax | Profit/(loss) before interest and tax, profit/(loss) after interest and tax. | See Note 3 and note 11 for details of restated amounts for 2015/16. | As discussed above, the Group uses headline profit measures in order to provide a useful measure of the ongoing performance of the Group. These are adjusted from total measures to remove 'non-headline' items, the nature of which are disclosed above. |
| EBIT | Profit/(loss) before interest and tax | No reconciling items | Earnings before interest and tax (EBIT) is directly comparable to profit/(loss) before tax. The terminology used is consistent with that used historically and in external communications. |
| Other earnings measures | |||
| Headline / non-headline net finance costs | Net finance costs | See Note 3 | Headline net finance costs are adjusted from total finance costs to remove non-headline finance cost items. Non-headline finance costs includes the finance charge of businesses to be exited, net pension interest costs, finance income from previously disposed operations not classified as discontinued, and other exceptional items considered so one-off and material that they distort underlying finance costs of the Group. Under IAS 19 'Employee Benefits', the net interest charge on defined benefit pension schemes is calculated based on corporate bond yield rates at a specific date, which, as can vary over time, creates volatility in the income statement and is unrepresentative of the actual investment gains or losses made on the liabilities. Therefore this item has been removed from our headline earnings measure in order to remove this non-cash volatility. |
| Headline / non-headline income tax expense / (credit) | Income tax expense / (credit) | See Note 3 | Headline income tax expense / (credit) represents the income tax on headline earnings. Non-headline income tax expense / (credit) represents the tax on items classified as 'non-headline', either in the current year, or the current year effect of prior year tax adjustments on items previously classified as non-headline. We consider the headline income tax measures represent a useful measure of the ongoing tax charge / credit of the Group. |
| Headline / Total effective tax rate | No direct equivalent | The effective tax rate measures provide a useful indication of the tax rate of the Group. Headline effective tax is the rate of tax recognised on headline earnings, and total effective tax is the rate of tax recognised on total earnings. | |
| Earnings per share measures | |||
| Headline basic EPS - continuing operations, headline diluted EPS - continuing operations, headline basic EPS - total, headline diluted EPS - total | Statutory EPS figures | Note 6 | EPS measures are presented to reflect the impact of non-headline items in order to show a headline EPS figure, which reflects the headline earnings per share of the Group. We consider the headline EPS provides a useful measure of the ongoing earnings of the underlying Group. |
| Cash flow measures | |||
| Free Cash Flow | Cash generated from operations | See Note 8 | Free Cash Flow comprises cash generated from / (utilised by) continuing operations before special pension contributions, less net finance expense, less income tax paid and net capital expenditure. The directors consider that 'Free Cash Flow' provides additional useful information to shareholders in respect of cash generation and is consistent with how business performance is measured internally. |
| Net debt | Cash and cash equivalents less loans and other borrowings and finance lease obligations. | See Note 8 | Comprises cash and cash equivalents and short term deposits, less borrowings and finance lease creditors. We consider that this provides a useful measure of the indebtedness of the Group. |
| Other measures | |||
| Return on Capital Employed (ROCE) | No direct equivalent | Not applicable | Calculated on a pre-tax and lease adjusted basis. The return is based on headline EBIT, adjusted to add back the interest component associated with capitalising operating lease costs. Capital employed is based on net assets including capitalised leases, but excluding goodwill, cash, tax and the defined benefit pension obligations. The calculation is performed on a moving annual total in order to best match the return on assets in a year with the assets in use during the year to generate the return. We consider this a useful measure to understand how the Group has used the capital employed during the period. |
Pro forma results
In previous periods (up to the Annual Report and Accounts 2015/16), the Group presented 'pro forma' comparative financial information in order to reflect results of both Carphone Warehouse and Dixons Retail throughout the comparative periods as if the Merger on 6 August 2014 had occurred at the start of the 2013/14 financial year. In the current year, pro forma information is not presented as does not affect the comparative periods for the current year, other than in the five year summary. For information on the pro forma financial information and reconciliations please refer to the 2015/16 Annual Report.
Other definitions
The following definitions apply throughout this Annual Report and Accounts unless the context otherwise requires:
| Acquisition intangibles | Acquired intangible assets such as customer bases, brands and other intangible assets acquired through a business combination capitalised separately from goodwill. Where businesses have grown organically rather than through acquisition, there is no amortisation of acquired intangibles and therefore the non-cash amortisation charge is removed from our headline earnings measures in order to increase comparability between segments. |
| ADRs | American Depositary Receipts |
| ARPU | Average revenue per user |
| B2B | Business to business |
| Best Buy | Best Buy Co., Inc. (incorporated in the United States) and its subsidiaries and interests in joint ventures and associates |
| Best Buy Europe | Best Buy Europe Distributions Limited and its subsidiaries and interests in joint ventures and associates (incorporated in England & Wales) |
| Board | The Board of directors of the Company |
| Businesses to be exited | Businesses exited or to be exited are those which the Group has exited or committed to or commenced to exit through disposal or closure but do not meet the definition of discontinued operations as stipulated by IFRS and are material to the results or operations of the Group. Comparative results in the statement of comprehensive income and the notes are restated accordingly for the impact of businesses exited or to be exited. |
| Carphone, Carphone Warehouse or Carphone Group | The Company or Group prior to the Merger on 6 August 2014 |
| CGU | Cash Generating Unit |
| Company or the Company | Dixons Carphone plc (incorporated in England & Wales under the Act, with registered number 07105905), whose registered office is at 1 Portal Way, London W3 6RS |
| CPW | The continuing business of the Carphone Group |
| CPW Europe | Best Buy Europe's core continuing operations |
| CPW Europe Acquisition | The Company's acquisition of Best Buy's interest in CPW Europe, which completed on 26 June 2013 |
| CWS | The Connected World Services division of the Company |
| Dixons or Dixons Retail | Dixons Retail plc and its subsidiary companies |
| Dixons Carphone or Group | The Company, its subsidiaries, interests in joint ventures and other investments |
| Dixons Retail Merger or Merger | The all share merger of Dixons Retail plc and Carphone Warehouse plc which occurred on 6 August 2014 |
| EBT | Employee benefit trust |
| ESOT | Employee share ownership trust |
| HMRC | Her Majesty's Revenue and Customs |
| Honeybee | Honeybee is our proprietary IT software, developed in-house initially to serve our mobile phone customers. It is a unique omni-channel, multi-industry software that simplifies the delivery and management of complex digital customer journeys. |
| IFRS | International Financial Reporting Standards as adopted by the European Union |
| Market position | Ranking against competitors in the electrical and mobile retail market, measured by market share. Market share is measured for each of the Group's markets by comparing data for revenue or volume of units sold relative to similar metrics for competitors in the same market |
| MNO | Mobile network operator |
| MVNO | Mobile virtual network operator |
| New CPW | Dixons Carphone Holdings Limited, previously called New CPW Limited (incorporated in England & Wales) |
| NPS | Net promoter score, a rating used by the Group to measure customers' likelihood to recommend its operations |
| Old Carphone Warehouse | TalkTalk Telecom Holdings Limited (formerly 'The Carphone Warehouse Group PLC') (incorporated in England & Wales) |
| RCF | Revolving credit facility |
| SIMO | Sales of SIM-only contracts, without attached handset |
| Sharesave or SAYE | Save as you earn share scheme |
| Sprint JV | The 50% investment held by the Group in Sprint Connect LLC, a distribution joint venture held with Sprint LLC in the USA |
| SWAS | Stores-within-a-store |
| TalkTalk or TalkTalk Group | TalkTalk Telecom Group PLC and its subsidiaries and other investments |
| TSR | Total shareholder return |
| UK GAAP | United Kingdom Accounting Standards and applicable law |
| Virgin Mobile France | Omer Telecom Limited (incorporated in England & Wales) and its subsidiaries, operating an MVNO in France as a joint venture between the Company, Bluebottle UK Limited and Financom S.A.S. |
| WAEP | Weighted average exercise price |
Responsibility Statement
The 2016/17 Annual Report and Accounts which will be issued in August 2017, contains a responsibility statement in compliance with DTR 4.1.12 of the Listing Rules which sets out that as at the date of approval of the Annual Report and Accounts on 27 June 2017, the directors confirm to the best of their knowledge:
• the Group and unconsolidated Company financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Group and Company, respectively; and
• the performance review contained in the Annual Report and Accounts includes a fair review of the development and performance of the business and the position of the Group together with a description of the principal risks and uncertainties that they face.
At the date of this statement, the directors are those listed in the Group's 2015/16 Annual Report and Accounts with the exception of the following appointments and resignations:
| Appointments | Resignations |
| Fiona McBain (appointed 1 March 2017) | Graham Stapleton (resigned 27 April 2017) Sir Charles Dunstone (resigned 30 April 2017) |
The financial statements were approved by the directors on 27 June 2017 and signed on their behalf by:
| Sebastian James Group Chief Executive |
Humphrey Singer Group Finance Director |
Retail Store Data
Number of stores
| 29 April 2017 |
30 April 2016 |
|||||
| Own stores |
Franchise stores | Total | Own stores |
Franchise stores | Total | |
| UK Dixons | 355 | - | 355 | 419 | - | 419 |
| Ireland Dixons | 20 | - | 20 | 28 | - | 28 |
| UK Carphone | 687 | - | 687 | 734 | - | 734 |
| Ireland Carphone | 86 | - | 86 | 90 | - | 90 |
| UK & Ireland | 1,148 | - | 1,148 | 1,271 | - | 1,271 |
| Norway | 78 | 63 | 141 | 80 | 62 | 142 |
| Sweden | 111 | 51 | 162 | 118 | 39 | 157 |
| Denmark | 39 | - | 39 | 29 | - | 29 |
| Finland | 21 | 17 | 38 | 21 | 17 | 38 |
| Other Nordics | - | 13 | 13 | 0 | 13 | 13 |
| Nordics | 249 | 144 | 393 | 248 | 131 | 379 |
| Greece | 68 | 26 | 94 | 68 | 27 | 95 |
| Spain | 243 | 261 | 504 | 249 | 249 | 498 |
| Southern Europe | 311 | 287 | 598 | 317 | 276 | 593 |
| Total | 1,708 | 431 | 2,139 | 1,836 | 407 | 2,243 |
Selling space '000 sq ft
| 29 April 2017 |
30 April 2016 |
|||||
| Own stores |
Franchise stores | Total | Own stores |
Franchise stores | Total | |
| UK Dixons | 5,757 | - | 5,757 | 6,545 | - | 6,545 |
| Ireland Dixons | 227 | - | 227 | 266 | - | 266 |
| UK Carphone | 580 | - | 580 | 645 | - | 645 |
| Ireland Carphone | 46 | - | 46 | 49 | - | 49 |
| UK & Ireland | 6,610 | - | 6,610 | 7,505 | - | 7,505 |
| Norway | 1,198 | 602 | 1,800 | 1,240 | 523 | 1,763 |
| Sweden | 1,302 | 312 | 1,614 | 1,290 | 287 | 1,577 |
| Denmark | 681 | - | 681 | 580 | - | 580 |
| Finland | 540 | 142 | 682 | 546 | 134 | 680 |
| Other Nordics | - | 87 | 87 | - | 78 | 78 |
| Nordics | 3,721 | 1,143 | 4,864 | 3,656 | 1,022 | 4,678 |
| Greece | 846 | 108 | 954 | 831 | 113 | 944 |
| Spain | 140 | 111 | 251 | 137 | 109 | 246 |
| Southern Europe | 986 | 219 | 1,205 | 968 | 222 | 1,190 |
| Total | 11,317 | 1,362 | 12,679 | 12,129 | 1,244 | 13,373 |
This information is provided by RNS
The company news service from the London Stock Exchange
END
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