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Interim Results (26 weeks ended 28 September 2013) 14 November 2013
42

Interim Results/media/Files/D/Dixons-Carphone/inve… · Q4 FY12 Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14. CARPHONE WAREHOUSE ... • CWS platform developed with Accenture.

Sep 23, 2020

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Page 1: Interim Results/media/Files/D/Dixons-Carphone/inve… · Q4 FY12 Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14. CARPHONE WAREHOUSE ... • CWS platform developed with Accenture.

Interim Results

(26 weeks ended 28 September 2013)

14 November 2013

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AGENDA

2

H1 2013-14 Overview &

Virgin Mobile France

Roger Taylor, Deputy Chairman

Carphone Warehouse

Andrew Harrison, Chief Executive Officer

H1 Financial Performance Nigel Langstaff, Chief Financial Officer

Outlook Andrew Harrison, Chief Executive Officer

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H1 2013-14 OVERVIEW & VIRGIN MOBILE FRANCE

Roger Taylor, Deputy Chairman

3

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4

H1 2013-14 KEY RESULTS

STRONG FIRST HALF

• CPW H1 LFL revenue growth of 8.3% (H1 2012-13: 1.6%)

• Q2 LFL revenue growth 3.6% (Q2 2012-13: 5.0%) (Tough comps, transitory quarter ahead of 4G penetration)

• CPW H1 pro-forma Headline EBIT of £21m (H1 2012-13: £6m)

• Virgin Mobile France Q2 postpay net adds marginally positive (Q1: -15,000)

• Interim dividend of 2.00p (2012: 1.75p) payable in December 2013

• Reiterating full year guidance

• Cashflow

• EBIT range £140m - £160m

• EPS range 17.0p - 20.0p

• Board structure

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5

H1 STRATEGIC DEVELOPMENTS

SOLID PLATFORM FOR GROWTH

• Completed acquisition of Best Buy’s 50% interest in CPW Europe

• 4G ready

• Developing European partnerships

• Connected World Service (CWS) – breadth of opportunities

• Virgin Mobile France back to growth

• Premium listing achieved; FTSE index review in December

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VIRGIN MOBILE FRANCE

6

• Stabilising postpay base

• Pricing stabilisation with handsets + 4G

• 66% of total base on Full MVNO platform; targeting c.90% by end FY14

• Bouygues contract announced during Q2

• 4G offering available early 2014

• Contracts with the 3 major French networks

Postpay customer base Contracts with the 3 major networks

Q1FY12

Q2FY12

Q3FY12

Q4FY12

Q1FY13

Q2FY13

Q3FY13

Q4FY13

Q1FY14

Q2FY14

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CARPHONE WAREHOUSE

Andrew Harrison, Chief Executive Officer

7

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OTHER ASSETS

Two freehold properties in UK valued at c.£20m

and loans receivable from Virgin Mobile France of £18m

VIRGIN MOBILE FRANCE

46% share in largest MVNO in France

with 1.7m subscribers

8

GROUP STRUCTURE

“We exist to make more lives better through connected technology”

CARPHONE WAREHOUSE RETAIL

Multi-channel retail business providing specialist advice

to customers, helping them navigate through the

complexities of the connected world

CONNECTED WORLD SERVICES

New B2B business, converting core CPW capabilities,

expertise and systems into services

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9

H1 2013-14 HIGHLIGHTS

ENCOURAGING PROGRESS ACROSS THE BUSINESS

• H1 LFL growth 8.3% and 5th consecutive quarter of LFL revenue growth

• Market share gains in both postpay & prepay categories

• Overall cash GM maintained despite

- Market transitioning prior to full 4G roll-out

- Further decline in prepay market

• Encouraging start to wider 4G roll-out

• Investment in people & advisory sales tool

• European partnerships progressing

• CWS platform developed with Accenture

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10

CORE BUSINESS

EUROPEAN PARTNERSHIPS

CONNECTED WORLD SERVICES

CONTINUED PROGRESS TO TRANSFORM

THE BUSINESS

STRONG PLATFORM FOR GROWTH

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11

4G ADVANTAGES

EST. 9M UK SMARTPHONE USERS WAITING TO UPGRADE TO 4G

WITHIN NEXT 12 MONTHS

CPW Customer

• Long-term ARPU increase (benefits of revenue

sharing)

• An average song will take 4 seconds to download,

compared to 27 seconds on 3G

• Increase of 3 to 5X seen in data usage by 4G

users versus 3G users across developed 4G markets

• Ability to watch TV, video call, shop online & access social

media, entertainment & information on the

go more easily

• A wide range of 4G devices coming to market;

stimulating handset replacement cycles

• Estimated 34% of 4G users say watching videos on their

mobiles makes a more enjoyable commute

• More connected tablets (“Wi-Fi like”

experience on the go)

• Posting a picture to Facebook is on average 25x

Faster using 4G

• Increasing complexity of tariffs (need to

understand coverage, data allowance etc.)

• Experience similar to “Wi-Fi” but on the go

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FULLY COMPREHENSIVE 4G IN THE UK DURING 2015

12

4G UK MARKETPLACE

The three leading networks are maintaining a premium for 4G and more recently broadening the target market

Network Launched No. of Subscribers 4G Availability

Oct 2012

c.1.2m users

(as of 30 Sep 2013)

• > 100 locations

• 20 locations on double speed 4G

• population coverage of 60%

• targeting 98% coverage by end of 2014

Aug 2013 not announced • live in 11 cities

• 98% coverage during 2015

Aug 2013 > 0.1m users

(as of early Oct 2013)

• live in 14 cities

• 98% coverage during 2015

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13

OUR INVESTMENT IN 4G

• 5,000 expertly trained colleagues in just

under 800 stores in the UK

• Pin Point sales advisory tool - 3,000 employee tablets in store

• Dedicated in-store 4G bays

• Widest range of 4G devices / networks

NETWORK COVERAGE CHECKER LIVE TARIFF CHECKER PERSONALISED DEAL

PIN POINT INCREASES NPS AND CONVERSION

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EXITED H1 WITH c.20% OF CPW UK POSTPAY CONNECTIONS

SOLD ON 4G TARIFFS

4G TARIFF OVERVIEW

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• TPH Netherlands - strong business in a challenging consumer environment

• Rolling out SWAS partnership with Media-Saturn Group in 2014

• TPH Germany - market leader in distribution

• SWAS partnership with Metro Group

• TPH Spain - market leading independent retailer

• Impressive performance in changing market; potential for partnerships

• CPW Ireland - market leading with > 20% market share

• SWAS Partnership with Harvey Norman - 11 stores

• TPH Sweden – good business but highly competitive market

• Potential for partnerships

• TPH Portugal - clear market leader in a predominantly prepay, low-margin market

• Weak consumer environment

• France - exit retail market by Spring 2014; potential for CWS

• Maintain guidance of cash exit costs in region of £30m

EUROPEAN OVERVIEW

15

EARLY ADOPTION OF 4G

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EUROPEAN PARTNERSHIPS

16

IRELAND 11 Harvey Norman SWAS

now open

GERMANY Working on SWAS proposition with

METRO GROUP divisions

DISCUSSIONS

ACROSS

OTHER

TERRITORIES

CONTINUE

NETHERLANDS

• Profit share agreement with Media-Saturn Group

• Media-Markt / Saturn Connect - Plans for SWAS within majority of stores by end of Sep 2014

• Makro - 17 stores currently trading

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17

MARKET LEADING DEALS THIS CHRISTMAS

SOMETHING FOR EVERYONE

• 4G

• Prepay smartphones from £29.95

• Postpay smartphones from £7.50/mth

• Tablet bundles

• Accessories

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18

CHRISTMAS ADVERTISING CAMPAIGN

THE HOME OF GREAT DEALS

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UNDERSTANDING THE OPPORTUNITY

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CONNECTED WORLD SERVICES - OVERVIEW

Partnering with

Partnering with

HONEYBEE

PLATFORM

CONNECTED

RETAILING GLOBAL

PARTNERSHIPS

SERVICES &

SUPPORT

Provision of technology

platforms and managed

services to support complex

transactions, connections to

service providers and customer

relationship management

Multichannel consultancy and

support for connected product

and service propositions,

ranging from specific managed

services through to partnerships

on the Best Buy Mobile model

Leverages CPW Europe’s

scale and commercial

relationships, enabling partner

retailers to source hardware

and to provide network

operator services

Provision of insurance services,

including policy administration,

claims administration and

fulfilment; and provision of

technical support solutions for

connected devices

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GLOBAL CONNECTING PLATFORM

21

EXCITING PIPELINE OF OPPORTUNITIES

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H1 FINANCIAL PERFORMANCE

Nigel Langstaff, Chief Financial Officer

22

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CPW

23

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CPW - HEADLINE EARNINGS

24

CPW earnings (pro forma basis)

£'m 2013-14 2012-13 YoY

Revenue 1,566 1,480 6%

Gross margin 369 372

GM% 23.6% 25.1% -150bp

Opex (320) (328)

EBITDA 49 44 11%

D&A (28) (38)

EBIT 21 6

EBIT% 1.4% 0.4%

Interest (7) (4)

Tax (3) (1)

Profit after tax 11 1

• LFL revenue

growth of 8.3%

• GM% down by

150bp, reflecting

product mix and

investment in

proposition

• Earnings benefit

from reduced costs

and fair value

2013-14 H1

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CPW - OPERATING FREE CASH FLOW

25

2013-14 H1

CPW operating free cash flow (pro forma)

£'m 2013-14 2012-13 YoY

Headline EBITDA 49 44

Working capital (165) (91)

Capex (22) (37)

OFCF (138) (84)

• Seasonal working

capital profile

accentuated by

stock build and

supplier mix

• Maintaining full

year guidance on

working capital

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CPW – GUIDANCE UPDATE

26

2013-14 H1

June FY guidance Update

EBIT £140m-£160m NO CHANGE

OFCF Cash generation NO CHANGE

Capex range c.£70m

W-cap outflow range c.£50m (postpay)

French exit costs c.£30m

June FY guidance H1 performance H2 expectation

LFL Up single digit Up 8.3% NO CHANGE

Particularly strong in H1 Up low single digit

Tougher comps in H2

Connections Up low single digit Down 0.2% Down single digit

Continued focus on postpay Prepay weaker

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VIRGIN MOBILE FRANCE

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VMF - HEADLINE EARNINGS

28

2013-14 H1

• Revenue down

13.9% at constant

FX

• EBIT reflects prior

year market re-

pricing, offset more

fully in H2 by Full

MVNO benefits

Virgin Mobile France Headline earnings

£'m 2013-14 2012-13 YoY

Revenue 176 192 -8%

EBITDA 8 11 -27%

D&A (5) (3)

EBIT 3 8 -59%

EBIT% 1.9% 4.2%

Interest (1) (1)

Tax (1) (2)

Profit after tax 1 5

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VMF - CASH FLOW

29

2013-14 H1

• Working capital

outflow as

expected

• Capex more

reflective of

underlying run-rate

Virgin Mobile France cash flow

£'m 2013-14 2012-13 YoY

EBITDA 8 11

Working capital (10) 9

Capex (4) (12)

OFCF (6) 8

Other (1) (2)

Net cash flow (7) 6

Closing net debt (47) (34)

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VMF – GUIDANCE UPDATE

30

2013-14 H1

June FY guidance Update

EBIT Broadly flat YoY in €'m NO CHANGE

€15m in FY13 Affected by SAC investment

Competitive environment Not critical focus for VMF

Full MVNO migration

OFCF 3P financing for capex NO CHANGE

Some working capital outflow

June FY guidance H1 performance H2 expectation

Revenue Down c.10% Down 13.9% NO CHANGE

Recover the shortfall

Easier comps in H2

Stabilising prices

Postpay Broadly flat Down 15,000 NO CHANGE

Recover the shortfall

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GROUP

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GROUP – HEADLINE EARNINGS

32

2013-14 H1

• EPS reflects

earnings growth in

CPW , and phasing

of Q1/Q2 profits

Group Headline earnings

£'m 2013-14 2012-13 YoY

EBIT

Wholly-owned operations 22 2

Joint ventures (1) 1

Net interest and tax (7) -

Profit after tax 14 3 367%

EPS

Basic 2.6p 0.6p

Diluted 2.6p 0.6p

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GROUP - NON-HEADLINE ITEMS

33

2013-14 H1

• France costs

exclude future

realisation of value

on assets of the

business

Group non-Headline items

£'m Total CPW share

France exit

Provisions / losses (46) (26)

Asset write-downs (8) (4)

CPW Europe Acquisition

Fees / incentive schemes (17) (17)

Revaluation / consideration shares 10 10

Other

Amortisation of acquisition intangibles (4) (4)

Net P&L charge (41)

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GROUP – MOVEMENTS ON NET DEBT

34

2013-14 H1

• Net debt reflects

acquisition costs

• Committed facilities

of £650m

• Other costs include

France exit costs

Movements on net funds (debt) (pro forma)

£'m 2013-14 2012-13 YoY

OFCF (138) (84)

CPW Europe acquisition (360) -

Net proceeds on shares 126 -

Distributions (19) (48)

Other (41) (2)

Net cash flow (432) (134)

Closing net debt (194) (61)

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GROUP – GUIDANCE UPDATE

35

2013-14 H1

June FY guidance Update

Tax c.23% NO CHANGE

Interest c.£18m NO CHANGE

EPS 17-20p NO CHANGE

Pro forma = Actual

Shares 571m post LTIPs NO CHANGE

576m in issue

Of which 5m held by EBT

Dividends 3 x cover NO CHANGE

Reserve position on cash v scrip Cash dividends

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36

Q&A

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APPENDIX - UNDERSTANDING CWS

37

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CONNECTED WORLD SERVICES - OVERVIEW

HONEYBEE

PLATFORM

CONNECTED

RETAILING GLOBAL

PARTNERSHIPS SERVICES &

SUPPORT

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MOBILE RETAILING IS A COMPLICATED BUSINESS

CONNECTED RETAILING

Selling mobile devices

requires a range of experience and

processes that many retailers find

impossible to build

BUILD • Strategic network relationships

with manufacturers & networks

• Product sourcing & selection

• Creative propositions

• Accessory ranging

• Understanding customer needs

1

2

FULFILMENT • Multi-channel offering

• Tariff checker

• Stock management

• Fraud prevention

• Credit checking

• Eligibility checking

• SIM card fulfilment

• Activations

• Number porting SERVICES & SUPPORT

• Repairs / returns

• Insurance

• 24/7 tech support

• Set-up services

• Expert advice

• Loan phones 3

4

RETAIN • Loyalty rewards

• Upgrade eligibility

• Upgrade reminder

service

• Device trade-in

• CRM capability

• Commissions

management

• Usage monitors

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40

honeyBee suite

NEEDS

ANALYSIS ACTIVATIONS

PLATFORM

Manages full guided

sales process, helping

customers to understand

needs & make informed

decisions

Manages complexities of

selling activated device -

credit/fraud checks,

contractual elements &

activations with networks

SEAMLESS CUSTOMER EXPERIENCE

Key partnership with Accenture: • Additional intellectual property

• Experienced sales team

• Access to broader markets

• Speed to market

• Access to extensive expertise &

research

• End-to-end, multi-channel customer experience

HONEYBEE PLATFORM

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GLOBAL PARTNERSHIPS

• Commercial know-how

• Mobile World Distribution in Germany supplies Amazon, Aldi, Otto, Expert

• New partnership with Allo, Ukraine’s biggest retailer (c.900 stores)

12 MILLION HANDSETS = STRONG VENDOR RELATIONSHIPS

41

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SERVICES AND SUPPORT

• Partnering with Aviva

• Insurance business for Belgacom, RBS

and TalkTalk

• 3rd party insurance deal in France with Innov8

• Technical support for TalkTalk and British Gas Connected Home customers

2 MILLION EXISTING CPW INSURANCE CUSTOMERS PROVIDE

STRONG PLATFORM FOR GROWTH

42