Preliminary results 2014/15
16 July 2015
FY 2014/15 highlights and strategy update
Sebastian JamesGroup Chief Executive
Quite a year
• Strong like-for-like revenue growth for the Group (+6%), in particular in the UK & Ireland (+8%), driven by both mobile and electricals
• 21% year-on-year growth in Headline pro forma PBT to £381m
• Further market share gains across electricals and mobile in the UK&I, Nordics and Greece
• Very strong customer satisfaction and progress on pricing
• Integration progressing well- Synergies to be delivered one year ahead of plan (at least £80m by FY 2016/17)- SWAS roll-out continues, 244 Carphone Warehouse stores now within Currys PCWorld- Head office and organisational decisions made
• Disposal of non-core operations in Germany and the Netherlands
• Good progress in CWS - agreement with Sprint and a strong pipeline
Page 3 Preliminary results 2014/15
Recap of value driversM
ark
et
ca
p
• Price• Service• Range• Market share gains• Kitchen• Multi-play
• Int’l portfolio review• Property portfolio• New categories• Consolidation opportunities• MVNO
• SWAS• Nordic co-
branding• Head offices• Warehousing• People• Commercial
• Connected retail• Services & support• Technology platform• Product solutions• MVNO/MVNE
• Direct to consumer• Leveraging platform
Core business Core businessopportunities
Synergies Connected WorldServices
Services
Core ServicesSynergies
Page 4 Preliminary results 2014/15
Good progress on strategic value drivers
Core business Core business opportunities Synergies Connected World Services Services
Core ServicesSynergies
• New propositions to be trialled this year
• Shift of repair activities to central location
• Focus on future model
• New structure in place• Sprint agreement
announced• honeyBee deployment
in Canada in the coming months
- UK performing well• Filling pipeline
• Market share gains in all key markets in all categories
• Captured more than fair share of P4U
• Customer satisfaction scores at all time highs
• Price at most competitive ever in UK
• Progress on initiatives:• Warranty, price,
delivery, online
• Launch of UK MVNO• Irish capacity MVNO to
launch imminently• Disposals of German and
Dutch businesses• Portugal exit announced• Significant work done on
end-state store portfolio• Multi-play propositions
in late stage development
• 244 SWAS (114 full CPW executions)• c.4 more per week• Trading encouraging
• Nordics co-branding• H/O: UK move in Oct,
Sweden complete• UK warehouse/repair
integration announced• Key organisational
structures in place
Page 5 Preliminary results 2014/15
Core business – 2014/15 highlights
Financials
• Group LFL revenue up 6% • UK and Ireland up 8% • Nordics up 4%
• Group pro forma Headline PBT of £381m (2013/14: £316m), up 21%
• Group pro forma Headline basic EPS from continuing operations 25.5p (2013/14: 20.5p)
• Final dividend of 6.0p (2013/14: 4.0p) proposed, taking total dividends for the year to 8.5p (2013/14: 6.0p)
• Integration progressing well and expect to deliver a minimum £80m of synergies by 2016/17, one year ahead of plan
Market share gains in all key categories in all key markets
UK electricals
UKpostpaymobile
Nordics
21.5%
23.2%
24.4%
FY 12/13 FY 13/14 FY 14/15
15.5% 16.0%
19.6%
FY 12/13 FY 13/14 FY 14/15
25.9%
26.6%
27.1%
FY 12/13 FY 13/14 FY 14/15
Page 6 Preliminary results 2014/15
Pricing
• UK pricing at most competitive ever
• Nordic price positioning good but more to do in Norway
Comparative pricing
Core business – 2014/15 highlights (cont.)
90%
95%
100%
105%
110%
115%
120%
125%
Ap
r-1
1
Jul-
11
Oct
-11
Jan
-12
Ap
r-1
2
Jul-
12
Oct
-12
Jan
-13
Ap
r-1
3
Jul-
13
Oct
-13
Jan
-14
Ap
r-1
4
Jul-
14
Oct
-14
Jan
-15
Ap
r-1
5
Competitor 1 Competitor 2 Competitor 3 Competitor 4
Customer satisfaction
• Customer satisfaction scores at record levels in the UK and Nordics
Page 7 Preliminary results 2014/15
Core business – opportunities
MVNO
• Launched iD in the UK in May- Encouraging start- Innovative propositions to launch shortly
• iD launch in Ireland later in the summer
International portfolio
• Focus on markets in which we have scale and relevance
- Disposals of German and Dutch businesses finalised- Announced plans to exit Portugal- Completed Central Europe and Pixmaniadisposals- Sale of Virgin Mobile France
Property
• Continuation of Currys and PC World 2-in-1 programme
• Trialling property options to help determine end state store portfolio
New categories
• Multi-play
• Smart tech (health and fitness)
• Connected Home (security, heating and lighting)
• Drones
Page 8 Preliminary results 2014/15
Synergies
Stores
• 244 Carphone Warehouse SWAS across the CurrysPCWorld estate
- 114 full CPW SWAS executions- Opening/converting c.4 per week
• Trialled co-branded stores in Sweden
• Launched Phone House in Norway
People
• New organisational structures for the Group, UK & Ireland and Sweden in place
• Established strong structure for CWS
• Warehouse and distribution centre integration announced
Head office
• Acton redevelopment underway- Hemel site to close in autumn
• Swedish head office relocation complete
• Irish head office relocation complete
Commercial
• Combining best buying practices and integrated group buying
• Leveraging scale on cost prices in goods not for resale
• Developed integrated cross category marketing campaigns
Page 9 Preliminary results 2014/15
Connected World Services - overview
• First full year set of full year results reported
• EBIT of £8m (FY 2013/14: £5m) • Investment continues• Contracts require longer lead times
• Sprint agreement announced on 2nd July
• honeyBee:• Continues to perform well in the UK• Expected to launch in Canada in the coming months
• Establishment of European services hub in the Netherlands
• Strong pipeline
Page 10 Preliminary results 2014/15
Connected World Services - Sprint
• Announced agreement with Sprint, two components:i. JV to enable rapid roll-out of up to 500 Sprint branded stores if initial 20 store trial
successfulii. Provide support across the wider Sprint estate
• Initial trial period for 20 stores in Chicago and Miami• First store expected to open mid August in Chicago• All expected to be open late November• Decision to move to wider roll-out within 6 months
• Support agreement to provide specialist knowledge and skills to deliver a best in-class experience across Sprint platforms has already commenced
• Opportunity to be a part of Sprint’s transformational journey
Page 11 Preliminary results 2014/15
Services – building a technology led home services and support business
Early trial launch later this year
Long term strategy under development
Hiccup and Knowhow proposition launched
Software and app development underway
Future proposition and building blocks to deliver
key services across the home
First stage research and planning complete
Positive customer reaction and supplier support
Product demonstration built
First port of call for our customers
Independent and expert help in reducing household spend
Indispensable to suppliers
Home as a fourth channel
Longitudinal relationships with customers
Attractive margins
Access to new growth markets
Leveraging existing platform – building new capabilities
Page 12 Preliminary results 2014/15
The year ahead
• Continue momentum in core retail operations• Further improvement in delivery options, pricing and warranty propositions• iD MVNO• Kitchen roll-out• Further growth in KNOWHOW added value services• Multi-play
• Deliver synergies• Head office moves• Nordic co-brand roll-out• Property integration
• Grow CWS• Successful Sprint trial and roll-out of Phase II• Convert and grow pipeline
• Build / buy / partner to develop services capabilities
• Reinvest for sustainable long term growth
Page 13 Preliminary results 2014/15
Summary
• Strong foundations in place
• Core business in strong position with tangible and material opportunities
• Integration going well
• CWS gaining traction
• Services plans evolving well
• Plenty left to do
Page 14 Preliminary results 2014/15
FY 2014/15 financial update
Humphrey SingerGroup Finance Director
• Group like-for-like revenue up 6% (UK & Ireland up 8% and Nordics up 4%)
• Strong profit performance:
- Group pro forma Headline PBT of £381m (2013/14: £316m), up 21%
- Group pro forma Headline basic EPS from continuing operations 25.5p (2013/14: 20.5p)
• Total statutory profit of £97m (2013/14: £48m) after Non-Headline charges of £188m (2013/14:
£55m) which include a loss from discontinued operations of £114m (2013/14: £10m)
• Strong balance sheet with year end net debt of £260m
• Final dividend of 6.0p (2013/14: 4.0p) proposed, taking total dividends for the year to 8.5p
(2013/14: 6.0p), up 42% year-on-year
• Integration progressing well, expecting to deliver at least £80m of synergies in 2016/17, one year
ahead of plan
• Disposals of non-core operations in France, Germany, the Netherlands and Portugal
Financial summary
Page 16 Preliminary results 2014/15
A complicated set of financials…
2014/15 2013/14
Carphone April – April April – March
Dixons May – April May – April
Pro forma
Segmental reporting
• New segmental structure
– UK & Ireland (includes Dixons Travel)
– Nordics
– Southern Europe (Greece & Spain)
– Connected World Services
Page 17 Preliminary results 2014/15
Prior period pro forma comparatives
Pro forma Headline EBIT
Page 18 Preliminary results 2014/15
Strong earnings growth
Pro forma Headline
YOY +£64m -£16m +£4m +£3m +£55m +£10m +£65m
Page 19 Preliminary results 2014/15
Statutory result
Page 20 Preliminary results 2014/15
Free cash flow
Pro forma basis
Page 21 Preliminary results 2014/15
(112)
(70)
(186)
(65)
(47)
(16)
414
141
13
(296)
(200)
(100)
100
200
300
400
500
600
Headline EBITDepreciation/amortisation
Working capitalincl. timing
Working capital- supplierfinancing
arrangementsCapital
expenditure Taxation Interest OtherRestructuring /
Merger Free cash flow
£m
(260)
(112)
(52)
(90)
(41)
(28)
63
(300)
(250)
(200)
(150)
(100)
(50)
50
100Opening net funds Free cash flow Dividends
Merger transactioncosts
Acquisitions anddisposals*
Pensioncontributions Closing net debt
£m
Strong balance sheet
Pro forma basis* - includes discontinued operations
Page 22 Preliminary results 2014/15
Pension
• Actuarial valuation as at 31 March 2013 showed a shortfall of £373m
• Recovery plan over 11 financial years agreed with Trustees
• Contributions of £28m made in 2014/15
• Contributions rise to £35m in 2015/16
• Contributions rise to £47m by 2024/25
Page 23 Preliminary results 2014/15
Full year 2015/16 guidance
• Full year Headline interest c.£25m
• Effective tax rate (pro forma Headline) c.25%
• Capex c. £250m although dependent on speed of integration work
• Integration synergies c. £40m in 2015/16 with at least £80m in 2016/17
• Exceptional cash flow in 2015/16 c. £40m
Page 24 Preliminary results 2014/15
Priorities
• Business as usual
• Focus on core and partnership opportunities
• Integration benefits
• Cash management and capex discipline
• Strong internal control environment
Page 25 Preliminary results 2014/15
In summary
• The business is in robust shape today
• Integration progressing well
• Tangible plans for future growth
• Plenty left to do
Page 26 Preliminary results 2014/15