Dixons Carphone Interim results 2014-15 31 weeks ended 1 November 2014
17 December 2014 Agenda
Highlights and strategy update Sebastian James, Group Chief Executive
Financial update Humphrey Singer, Group Finance Director
Page 2 Interim results 2014-15 H1 2014-15 highlights and strategy update
Sebastian James Group Chief Executive H1 2014-15 highlights
• Group H1 like-for-like up 5%; Q2 like-for-like up 9%, with stable gross margins in H1
– Market share gains across the largest electrical and mobile businesses
– Netherlands and Germany; review and restructure underway
– iPhone 6 • Group pro forma Headline PBT £78m, up 30%
– Group pro forma Headline EBIT of £100m
– Interim dividend of 2.5p, payable in January 2015 • Integration: now expected to deliver a minimum £80m of synergies by 2016-17, one year ahead of plan
Page 4 Interim results 2014-15 Value drivers
Core Synergies Services
Market cap Market
Core business Core business Synergies Connected World Services opportunities Services
• Price • New categories • SWAS • Connected retail • Direct to consumer • Service • Int'l. portfolio review • Head office • Services & support • Leveraging platform • Market share gain • Consolidation opportunities • People • Omnichannel platform • Core services growth • Commercial • Global partnerships • MVNO
Page 5 Interim results 2014-15 Market update: UK & Ireland
• Strong performance in both mobile and electrical businesses • Customer satisfaction • Pricing • Continued market share gains • Network relationships • Targeted approach to gaining Phones 4U market share • Successful iPhone 6 launch • Black Friday a success • In good shape for Christmas
Page 6 Interim results 2014-15
Market update: Northern Europe
Nordic business • Good sales momentum, putting pressure on the competition • Market share gains • Pricing and customer service improvements Germany • Closing wholesale hardware business • Closing retail business • Continuing profitable cardware distribution business Netherlands • Significant market issues • Restructuring and reviewing business
Page 7 Interim results 2014-15 Market update: Southern Europe
Spain • Tough market, revenue and profit impact this year • Agreement to sell Movistar product now in place • Restructuring largely done Portugal • Building a business in quad play • Lack of scale remains key issue • Reviewing longer-term options Greece • Good top-line growth and market share gains • Some market recovery • Expect return to profitability in short term
Page 8 Interim results 2014-15 Synergies accelerated
• Minimum of £80m synergies by 2016-17, one year ahead of plan
• Integration
– Head office
– A number of functions now integrated
– UK structure
– Sweden SAS: Stand-alone store Co-branded SAS, Skärholmen
• UK SWAS programme
– 32 CPW SWAS
– 158 Phones 4U conversions ahead of plan
SWAS: Store-within-a-store CPW SWAS, Currys PC World, Durham
Page 9 Interim results 2014-15
Services
• deployment for major global brand going well: improved NPS and conversion
• New contract to provide services to BT
• Live 3rd party discussions in US & UK
• Hiccup online phone insurance launch
• CWS profit growth
• Team coming together
Page 10 Interim results 2014-15 Pricing app now launched
Page 11 Interim results 2014-15 H1 2014-15 financial update
Humphrey Singer Group Finance Director Financial summary
• Group H1 like-for-like up 5%; Q2 like-for-like up 9%, with stable gross margins in H1
• Pro forma Headline PBT up 30% to £78m (2013: £60m)
• Pro forma Headline EBIT of £100m (2013: £85m)
• Group Headline EPS 7.1p (2013: 3.2p)
• Restructuring charges and asset write-offs in Germany and Netherlands
• Average net debt for the period c.£300m
• Dividend of 2.5p per share payable in January 2015
Page 13 Interim results 2014-15
A complicated set of financials…
Pro forma Network receivables
H1 14/15 H1 13/14 • Shift of network receivables interest from pro forma EBIT to finance costs Carphone April – October April – September – Decreases EBIT & finance costs
– £5m impact in H1 14/15
Dixons May – October May – October – £10m anticipated impact on 14/15 full year
• October 2013 EBIT from Carphone £6m – Prior year restated
• Difference on cash c.£200m
Opening balance sheet for 13/14 Segmental reporting
• New segmental structure • Carphone opening balance sheet adjustments increase pro forma Headline EBIT by £14m in H1 – UK & Ireland (includes Dixons Travel) last year – Northern Europe (Nordics, Germany & Netherlands)
– Positive impact in H1 from information received – Southern Europe (Greece, Spain & Portugal) in H2 last year – Connected World Services – No impact on full year result • Allocations to segments for full year 14/15
– Dixons central costs of c.£20m (allocated on revenue)
– Dixons property losses of c.£20m (largely UK)
Page 14 Interim results 2014-15
Prior period pro forma comparatives
£m
100 (4)
80 14 6
60
48 40 85
20 21 - CPW Dixons Central Europe Opening Discount Comparative balance sheet unwind
Pro forma Headline EBIT
Page 15 Interim results 2014-15 Strong H1 earnings growth
£m YoY +£19m -£4m -£3m +£3m +£15m +£3m +£18m 120 (4) 4 100 20 22 80
60 100 40 80 78
20
- UK & Ireland Northern Southern Connected EBIT Net finance PBT Europe Europe World cost Services Pro forma Headline
Page 16 Interim results 2014-15 Statutory result reflects restructuring costs in Netherlands and Germany
Amortisation of £m Pro forma Dixons pre- Headline PBT Asset write- Net pension acquisition Headline PBT Merger (statutory basis) Merger downs Restructuring interest intangibles Statutory PBT 100 2 80 (11)
60
40 78 80 (58)
20 (4) (9) - (18) (20) (20)
(40)
Page 17 Interim results 2014-15 Free cash flow
£m Headline EBIT D&A W. Cap Capex Tax Interest Restructuring Other Free cash flow 200
150 77 100 (216) 50 100
-
(50) (95) (100) (211) (150) (42) (14) (200) (30) 9
(250)
Pro forma basis
Page 18 Interim results 2014-15 Closing net debt broadly in line with average of c.£300m for the year
£m Acquisitions, Opening net Free cash disposals and Pension Closing net funds flow Dividends Merger disc ops contributions Other debt 100
50 63 -
(50) (211) (100)
(150) (23) (293) (200) (71) (250) (31) (13) (7) (300)
(350) Pro forma basis
Page 19 Interim results 2014-15 Full year guidance
• Comfortable with market expectations in advance of crucial Christmas period
• Full year interest c.£30m
• Effective tax rate (pro forma Headline) c.25%
• Capex c.£200m although dependent on speed of integration work
• Average net debt c.£300m
• Year end net debt expected to be broadly in line with the average
Page 20 Interim 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 21 Interim 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 22 Interim results 2014-15 Q&A