preliminary results 2018/19 · •in 2019/20 results including and excluding ifrs 16 will be...

PRELIMINARY

RESULTS

2018/19

20 June 2019

Q&A

Alex Baldock & Jonny Mason

CEO UPDATE

Alex Baldock

PRELIMINARY RESULTS OVERVIEW

AND FINANCIAL GUIDANCE

Jonny Mason

Today’s agenda

2

PRELIMINARY RESULTS OVERVIEW

& FINANCIAL GUIDANCE

Jonny MasonGroup Chief Financial Officer

3

FY 2018/19 YoY

Revenue £10,433m -1%

EBIT £322m £(78)m

EBIT % 3.1% (70)bps

PBT £298m £(84)m

Non-headline* £(545)m £(466)m

Free cash flow £153m £(19)m

EPS 20.4p (5.8)p

Net debt £(265)m £(16)m

Final proposed Dividend 4.50p (3.25)p

4* Total non-headline before interest and tax, includes £387m of non-cash items

Group financial highlights FY 2018/19

LFL Revenue Sales EBIT

Peak*

FY 2018/19

Post Peak*

FY 2018/19H2 2018/19 FY 2018/19 FY 2018/19 FY 2018/19 YoY

UK&I

electricals2% -% 1% 1% £4,475m £180m £(51)m

UK&I mobile (7)% (8)% (8)% (4)% £1,998m £9m £(34)m

International 5% 3% 4% 4% £3,960m £133m £7m

Group 1% (1)% -% 1% £10,433m £322m £(78)m

5

Divisional financial highlights FY 2018/19

*Peak refers to the 10 week trading period ending on 5 January 2019 as reported in the Group’s Christmas Trading statement on 22 January 2019. Post peak refers to the trading period

from 6th January 2019 to the Group’s year-end on 27 April 2019

FY 2018/19 YoY

Revenue £4,475m 1%

EBIT £180m £(51)m

EBIT % 4.0% (120)bps

• Overall flat market with share gains in consumer electronics and computing

• EBIT lower year-on-year due to:

➢ One-off credits in the prior year

➢ Lower services margin from mix to online and transition to new service

propositions

H2 2018/19 LFL

1%

6

UK & Ireland electricals

FY 2018/19 YoY

Revenue £1,998m (11)%

EBIT £9m £(34)m

EBIT % 0.5% (140)bps

• Postpay market* down ~2% reflecting growth in 36 month contracts, impacting

overall market share in postpay, partially mitigated by growth in SIMO

• EBIT impacted by revaluation of debtors £(47)m, mostly from regulatory changes

impacting customer behaviour

H2 2018/19 LFL

(8)%

7

UK & Ireland mobile

* Excludes Postpay contract > 24ms

FY 2018/19 YoY

Revenue £3,960m 2%

EBIT £133m £7m

EBIT % 3.4% 10bps

H2 2018/19 LFL

4%

8

International

• Market share gains in Nordics and Greece

• Like-for-like sales up 3% in Nordics and 13% in Greece

• Further EBIT margin progression

£m P&L Non-cash Cash

(in year)

Cash

(future)

Acquisition and disposal related (23) (23) - -

Strategic change programme (67) - (31) (36)

Data Incident costs (20) (2) (12) (6)

Regulatory costs (52) (15) (23) (14)

Impairment and onerous leases (383) (347) (2) (34)

Total before interest and tax (545) (387) (68) (90)

9

Non-headline before interest & tax

10

£m FY 2018/19 Prior Year

Op. net debt (249) (271)

Free cash flow 153 172

Dividend (116) (130)

Acquisitions/disposals (1) 24

Pension (46) (46)

Other2 (6) 2

Cl. net debt (265) (249)

Free cash flow and net debt

400 160 (80) (173) (63) (25) - 219 (47) 172

(78) (14) 104 7 18 (5) 9 41 (60) (19)

Prior Yr

YoY

1 Restructuring of £107m includes £68m from FY 18/19 provisions and £39m from prior years

2 Other relates to FX

1

322

260

153

146

24

9

166

45

30

107

Headline

EBIT

Dep. &

amort.

Working

capital Capex Taxation Interest Other

FCF

before

Excep. Excep.

Free

Cash

Flow

11

Financial guidance

12

Financial guidance for 2019/20

* Target to be covered by Free Cash Flow minus pension contributions

All of this guidance is based on assumptions of no major macro economic changes, for example no material impact

from Brexit, and the profit numbers also exclude any significant revaluation in network debtors, up or down, which

might arise from changes in regulatory environment or for other reasons. It is also based on current accounting

UK Mobile

expect loss of up to £90m

Exceptional cash cost of

c£80mCapex of ~£275m

Dividend broadly flat*

UK&I Electricals &

International

growth low single digit

Net debt broadly flat

Group Headline PBT expected to be around £210m

13

IFRS 16

• All numbers in the presentation are pre IFRS 16

• IFRS 16 numbers will be announced from interims

• In 2019/20 results including and excluding IFRS 16 will be reported

• Expected recognition of lease liability in the region of £1.5bn

• Cash flows will not be impacted

• Statutory profit will not be impacted over the life of a lease. Negative impact in

earlier years and positive in later years

Market share gains1

• Positive like-for-like revenue growth

Improving profitability

• EBIT margin of at least 3.5%

• £200m cost savings identified

Strong cash flow

• Incremental capex of £200m

• Funded by working capital

14

Financial targets for medium term

1 Excludes UK mobile during transformation2 Free cash flow including incremental capex and exceptional charges but before dividends and pension

contributions

£1bn of free

cash flow

over 5 years2

1

2

3

4

Invest to grow core business

Pay and grow the ordinary dividend

and fund the pension deficit

Strategic investments to enhance core

Any surplus available to shareholders

15

Prudent balance sheet

Capital allocation

CEO UPDATE

Alex BaldockGroup Chief Executive

16

Preliminary FY19 Results - Group

£10,433m

Sales

£322m

EBIT

£298m

PBT

1%

LFL Growth FCF

£153m

17

We are the

clear market leader

Sources: GfK. DC internal analysis and supplier data. Nordics data unavailable on same basis for 2014/15

UK&I electricals UK&I mobile

Nordics Greece

2015/162014/15 2016/17 2018/192017/18 2017/182015/162014/15 2016/17 2018/19

21.1%24.2% 25.0% 25.5%

2018/192015/162014/15 2016/17 2017/18 2018/192015/162014/15 2016/17 2017/18

20.6%24.6% 23.8% 21.9% 18.9%

26.3% 28.7% 32.2% 34.4% 35.0%

Market share

23.0% 24.7% 25.6% 25.7% 26.0%

18

• UK & International electrical sales and profit progress

• Strong free cash flow

• Dividend to be maintained

• UK Mobile:• Market changing fast• Significant loss this year• Certainty this year is the bottom; profit growth

FY21• Legacy contractual and cost constraints lift next

year• Cash generation strong

Outlook for FY20

19

Previous Long Term Guidance

Market share gains

• Positive like-for-like revenue growth

Improving profitability

• EBIT margin of at least 3.5%

• £200m cost savings identified

Strong cash flow

• Incremental capex of £200m

• Funded by working capital

£1bn of free

cash flow1

1 Free cash flow including incremental capex and exceptional charges but before dividends and

pension contributions 20

FY20 FY21 FY22 FY23 FY24

> FCF £1BN

≥ 3.5% EBIT

£200M COST

SAVINGSGROUP

MOBILETROUGH

YEARREDUCED

LOSSES≥ BREAKEVEN

1 Free cash flow including incremental capex and exceptional charges but before dividends and pension contributions

Now: commit to earlier delivery of cost savings and margin

UPSIDE

21

Capable and

committed

colleagues

We work together

as One Business

Stronger

infrastructure

We offer amazing

advice to our

customers through

assisted selling

We understand

technology and

our customers;

data

We are big – we

have something for

everyone; range

We are affordable:

trusted on price

and through credit

We serve our

customers however

they want to shop:

online or in store

We have an easy

end to end

customer

experience

We are with our

customers

throughout the life

of the product –

via our Services

Our sites and stores

are amazing

Our partnerships

with suppliers make

a big difference

Mobile is central to our vision

22

UK ELECTRICALS

UK MOBILE

Customers beginning to notice

STORES ONLINE

FY18 FY19 FY18 FY19

FY18 FY19 FY18 FY19

+7pps+4pps

+6pps+8pps

NPS

Note: NPS is now measured in a more demanding way, 7 day NPS encompasses the end to end customer sales journey from research to

purchase and fulfilment

23

24

Mobile is central to our

vision

We are affordable:

trusted on price and

through credit

We serve our customers

however they want to

shop: online or in store

We have an easy end to

end customer experience

We help customers get

the most out of their tech

Online Easy / Services MobileCredit

Priorities

Enablers

Good early progress on Strategy

Capable &

committed

colleaguesOne Business

Stronger

infrastructure

Capable and

committed

colleagues

We work together

as One Business

Stronger

infrastructure

We offer amazing

advice to our

customers through

assisted selling

We understand

technology and

our customers;

data

We have an easyend to end customer

experience

We are with our customers

throughout the life of the product –via our Services


are amazing

Our partnerships

with suppliers make

a big difference


We are big – we

have something for

everyone; range

We are affordable:

trusted on price

and through credit

We serve our

customers however

they want to shop:

online or in store

25

Online Easy/Services MobileCredit

Credit CustomersCredit Adoption

(% of Sales)

FY18FY18 FY19FY19

+150bpsto over 9%

+50%to over 900k

Credit: We have made good early progress

Credit Sales

+20%to over £420m

FY18 FY19

26

Capable & committed colleagues

Stronger Infrastructure

OneBusiness

Good for Customers

✓ Afford new and better

technology

✓ 20pts higher NPS

27

Good for Us

✓ Whole Group

✓ Reason to shop with us

✓ x3 lifetime value

✓ 45% higher services

adoption

✓ Recurring cashflow

Good for Suppliers

✓ Incremental volume

✓ Trade up

Credit: big profitable growth opportunity

Online Easy/Services MobileCreditCapable & committed colleagues


OneBusiness

Good for Customers Good for Us Good for Suppliers

We expect customer

adoption of credit to

grow to least 16% of

revenues over the life

of our plan

Plan for FY20

Better capabilities

Better partnerships

Better offer and customer

experience

Responsible lender

28



OneBusiness

Capable and

committed

colleagues

We work together

as One Business

Stronger

infrastructure

We offer amazing

advice to our

customers through

assisted selling

We understand

technology and

our customers;

data


experience




are amazing

Our partnerships

with suppliers make

a big difference


We are big – we

have something for

everyone; range

We are affordable:

trusted on price

and through credit

We serve our

customers however

they want to shop:

online or in store

29

UK electricals

International

21.1%

28.2%

10.4%

15.5%

+510bps

15/16 18/19

Online: big profitable growth opportunity



OneBusiness

15/16 18/19

+710bps

FY18 FY19 FY18 FY19

UK Electricals Market Share

StoresOnline

+30bps +50bps

Source (Market Share): GfK Market Data, DC Internal

Source (Online SOB): Dixons Carphone Group online revenues including order and collect as a % of mobile and electrical revenues

Online Share of Business

30

31

Accelerating growth online

Larger

range

Increase

personalisationContact Centres

Supply ChainLess

friction

Easier to find Easier to buy Easier to get Smartphone first

Smartphone first

development

Services

Crossover benefits

Credit

FY

20

+ 5k SKUs

Search

Recommendation

Checkout

Site Speed

Transactional App

Exciting stores Click & collect

32

Towards true omnichannel retail

C&C share of online sales+2pps

(37%)Gaming

Market Share+3pps +45%Gaming

Sales

Capable and

committed

colleagues

We work together

as One Business

Stronger

infrastructure

We offer amazing

advice to our

customers through

assisted selling

We understand

technology and

our customers;

data

We are big – we

have something for

everyone; range

We are affordable:

trusted on price

and through credit

We serve our

customers however

they want to shop:

online or in store


are amazing

Our partnerships

with suppliers make

a big difference


We have an easy

end to end

customer

experience

We are with our

customers

throughout the life

of the product –

via our Services

33

Right First Time Delivery Call Answer Rate1

+20pps+2.5pps

34

Right First Time Contact

Resolution2

+22%

1 UK Electronics Customer Service answer rates over 18 week peak period2 Based on pilot results



OneBusiness

Trade-in& upgrade

Set up&

connectivityProtect Maintain Repair

Helping customers get the most out of their Tech…

…and we are making good progress35

Shortening product

replacement cycles

>300k laptop set-ups

Bundles

Electricals and mobile

Maintenance

Health checks

Insurance



OneBusiness

Protect

36

Good for Customers Good for Us

✓ Unique assets (10m warranty customers)

✓ Stickier and more valuable customers

✓ Annuity stream

✓ 69% want

protection

Underway to make protection products big and sustainable for us

Building market-leading, customer-friendly protection products

Protection Service Feature CPCWCompetitor A Competitor B

Competitor C Competitor DProduct 1 Product 2 Product 1 Product 2

Insurance/Service Service Insurance Insurance Insurance Insurance Insurance Service

Length of Term 2yr, 3yr, 4yr 2yr, 3yr, 4yr Monthly 3yr 2yr, 5yr Monthly 2yr, 3yr, 4yr

Breakdown Cover ✓ ✓ ✓ ✓ ✓ ✓

Accidental Damage/Mishap Cover ✓ ✓ ✓ ✓ ✓ ✓ ✓

No fault no charge ✓ ✓ ✓ ✓ ✓ ✓ ✓

No excess ✓ ✓Excess on phones

>£149.99✓ ✓ ✓ ✓

Unlimited Repairs ✓ ✓ ✓ ✓ ✓ ✓ ✓

Fix or Replace ✓ ✓ ✓ ✓ ✓ ✓ ✓

Monthly Payment Option ✓ ✓ ✓

Term Option ✓ ✓ ✓ ✓ ✓

24/7 Help & Support ✓

New for Old ✓ ✓ ✓ ✓ ✓ ✓ ✓

Repair Promise ✓

7 days

✓

14 days

✓

6 weeks

Valet Service ✓

Whites

Virus Removal ✓

Data Recovery ✓

Repair Guarantee ✓

4th breakdown (manufacturer guarantee

only)

Loss/Theft Mobiles only

Worldwide Cover ✓ ✓ ✓ ✓

30 days

Accessories ✓

Transferable ✓ ✓ ✓ ✓ ✓

37



OneBusiness

Source: Dixons Carphone internal data - Currys PC World CSAT based on purchases for FY18/19

Customer Satisfaction has improved at every stage

CSAT

Purchase in store Purchase online Collect Delivery Install / Setup

FY18 FY19

+7pps

+4pps+10pps

+8pps

+12pps



OneBusiness

38

We offer amazing

advice to our

customers through

assisted selling

We understand

technology and

our customers;

data

We are big – we

have something for

everyone; range

We are affordable:

trusted on price

and through credit

We serve our

customers however

they want to shop:

online or in store


experience




are amazing

Our partnerships

with suppliers make

a big difference


Capable and

committed

colleagues

We work together

as One Business

Stronger

infrastructure

39


✓ 5500 colleague tablets

✓ Colleague Shareholder

Scheme

✓ Last year: 25% increase in

colleague training

✓ This year: 400% increase in

colleague training

✓ 4000 headsets

+15% CSAT

for customers assisted by

colleague with tablet

✓ Needs based selling

✓ Freedom in a Framework

management

Fundamental change to how

we sell and manage

40


OneBusiness


41



OneBusiness

Accelerating delivery of planned savings of £200m by FY22


Single IT platform project underway

Stronger infrastructure: consistently meeting our

delivery promises, faster product set-up, lower cost to operate and standard processes

Easy E2E experiences for customers: full range

on all channels, for collection or delivery, with the right marketing messages, at the right time

Truly joined up business: one way of working

supported by a single set of systems, with a single view of customer and product data

Improvements in FY19

✓ Better kit for frontline colleagues

✓ Stockless technology extending the range

✓ Enabling more trust in pricing through Revionics tool

✓ Improved product availability through improved planning

and forecasting systems

✓ Significantly improved our security, having increased

spend on InfoSec by four times

✓ Improved routing efficiency and customer visibility of

2-man deliveries

42



OneBusiness


✓ Share growth, profits on good trajectory

✓ Record customer satisfaction and colleague engagement

✓ Further upside from group strategy:

• Nordic EBIT margin: 3.2% to ≥3.5% by FY22

• Credit, Online & Services

• Group Synergies

✓Record Investment

43

Group strategy will sustain International trajectory

Capable and

committed

colleagues

We work together

as One Business

Stronger

infrastructure

We offer amazing

advice to our

customers through

assisted selling

We understand

technology and

our customers;

data

We are big – we

have something for

everyone; range

We are affordable:

trusted on price

and through credit

We serve our

customers however

they want to shop:

online or in store


experience




are amazing

Our partnerships

with suppliers make

a big difference

Mobile is central to

our vision

44



OneBusiness


• Challenges as stated in December

• Market changing faster; responding faster

• Loss this year

• Certainty this is the bottom

• Profits to improve from FY21

• Mobile at least breakeven, FY22

• Upside: new offer

• Strengthening FCF

Mobile: summary

45

PROTECT VS DOWNSIDE

PURSUE UPSIDE

CONSTRAINTS LIFTED FY21

Legacy contracts

Costs

WE CAN

BECAUSE

46

3 key challenges to overcome

62% 56% 51% 44% 40% 36%

38% 44% 49%52% 51% 51%

4% 9% 12%

14/15 15/16 16/17 17/18 18/19 19/20

24m NS SIMO NS >24m NS

20.6%24.6% 23.8% 21.9%

18.9%

17/1815/1614/15 16/17 18/19

Market Share Profitability



OneBusiness

Sources: GfK & DC Internal

• Volumes

• Mix• Mix

• Mix

• Contractual

• Costs


Traditional postpay market

declining

Mix driven declining DC market

shareMobile profitability declining

47

Renegotiated all legacy network contracts

47

Lower volume commitments• Better terms, without extending tenure

• c£60m positive EBIT impact, FY20

• But: still constraining

Better choice of SIMO connectivity • Wider choice of networks (e.g. Virgin)

• Better SIMO offers• Better security of supply (iD now competitive)

Still constrained until FY21



OneBusiness


Handsets Connectivity Ways to pay Accessories Services

Credit-based bundles in FY20

Unconstrained during FY21

48

Radically improving our mobile offer



OneBusiness


49

One Business: accelerating cost

reduction

£200m of savings by FY22

c£100M of

savings in

Mobile



OneBusiness


Alternative options considered



OneBusiness

?

50

✓ Faster to new

✓ New offer

✓ Lower cost model

✓ Ready for FY21: unconstrained

Certainty FY20 is the bottom✓Open Ended Losses

Old separate model

✓ Smaller decline in FY20 profits

✓ Tactical credit bundles

✓Prohibitive exit costs today

✓Reduce

c£100m costs✓

Free Cash

Flow✓

Shareholder

value

Mobile

offer✓


preliminary results 2018/19 · •in 2019/20 results including and excluding ifrs 16 will be...

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