Source - RNS
RNS Number : 4374P
Dixons Carphone PLC
29 May 2018
 

Dixons Carphone plc

 

Trading Update and 2018/19 Outlook

(16 weeks ended 28 April 2018)

·      Full year Group revenue up 3% year-on-year, like-for-like up 4%, maintained market leading share

UK & Ireland full year like-for-like revenue up 2% (4Q up 1%)

Strong growth in International; Nordics like-for-like full year revenue up 9% (4Q up 8%), Greece up 11% (4Q up 10%)

·      Expect to deliver Group headline PBT for 2017/18 of approximately £382m1

Gross margins: Challenges in UK mobile continued given market and current contractual constraints, UK electricals margin impacted in second half largely by category and channel mix

Includes c£25m credit from acceleration of trade balances reconciliation ahead of new system launch

Mobile debtor revaluation expected to be -£20m

Disposal of honeybee in the period (non-headline item)

Board intends to maintain a full year dividend at 11.25p

·      Stronger cash conversion with net debt expected to improve to c£250m at 2017/18 year end

·      2018/19 Group headline PBT expected to be around £300m

Credit of c£25m from trade balances reconciliation in 17/18 not expected to repeat

Non-cash accounting adjustment from the first time adoption of IFRS 15 expected to be c-£8m

Early, necessary action to correct recent underinvestment in our colleagues and customer proposition

UK Electricals: Further contraction in our markets, some cost increases to be partially offset by margin initiatives, while maintaining our market leading price position

UK Mobile: Market and contractual pressures partially offset by cost improvements, expected lower levels of inflation in mobile customer bills resulting in c£15m lower RPI income growth

Continued growth in revenue and profits expected across International businesses

Anticipate a similar level of free cashflow conversion versus the prior year

 

Alex Baldock, Group Chief Executive

"Eight weeks in the business have cemented my optimism about Dixons Carphone's long-term prospects. I've found exceptional strengths, and though there's plenty to fix, it's all fixable.

 

We're number one in each of our markets, with people and capability no competitor can match. Our opportunity lies in making the most of those strengths, which we are nowhere near doing. And we must: nobody is happy with our performance today.

 

We're getting on with it, through a new leadership team and structure that's promoted top talent, cleared away unnecessary layers and silos, and started to speed up decision-making. We're already giving new impetus to  areas crucial to our transformation such as data and analytics, marketing, digital, services and technology.

 

And we're working at pace to bring clear long-term direction to the business. We will give our customers what they value while making the most of our many strengths. We will address underinvestment in important areas of the colleague and customer experience. We will sharpen our focus on the core business and on fewer, bigger initiatives. We will bring this business closer together, the better to give customers the full benefit of everything we have to offer them, and to deliver that through a truly integrated business - it is not today. We will also bring greater conviction and discipline to our execution.

 

Right now, with our international business in good shape, we're focusing early action on the UK. In electricals, we're focused on gross margin recovery. In mobile, we're stabilising our performance through improvements to our proposition and network agreements. In both, we'll work hard to improve our cost efficiency. We won't tolerate our current performance in mobile, or as a Group. We know we can do a lot better.

 

I've been struck since my first day by the commitment and know-how of so many of my colleagues, by the breadth and depth of our multichannel capability, by the sheer energy we can release here. Equally I've been struck by the strength of our market position, of our appeal to customers. There's so much more to come from Dixons Carphone, though plenty of hard work lies ahead.

 

I look forward to giving you more of my initial thoughts at our full year results in June, and a fuller update on our plans and progress in December."

 

Business Review

The International businesses had a strong end to the financial year with 4Q like-for-like revenue growth up 8% across the Nordics and 10% across Greece. Both achieved record levels of market share, extending their market leadership with an increase in operating margins.

 

In the UK & Ireland, 4Q like-for-like growth of 1% across electricals was delivered against a more subdued market backdrop while maintaining our market leading share. With a softer computing market, our category mix during the year shifted towards consumer electronics and white goods, and online sales saw another year of double digit growth, ahead of the market. The combination of channel and category mix effects were more pronounced in the second half of the year driving a greater adverse gross margin due partly to the costs of providing home delivery and installation services.

 

Like-for-like % change2

Q4

Q3

Q2

Q1

   UK & Ireland

1%

3%

1%

4%

   Nordics

8%

11%

8%

8%

   Greece

10%

23%

7%

6%

   Group

3%

6%

3%

6%

              Note: In the UK & Ireland, like-for-like revenue in 4Q improved less than 1% as a result of sales successfully transferred from closed stores. This

              benefited UK&I electricals, where like-for-like revenues grew 1%. UK Mobile like-for-like revenues were broadly flat

   

 FY 2017/18 revenue

Reported revenue

% change

Local

currency

% change

Like-for-

like  

% change2

   UK & Ireland

(1)%

(1)%

2%

   Nordics

10%

7%

9%

   Greece

18%

13%

11%

   Group

3%

2%

4

    Note: In the UK & Ireland, like-for-like revenue in the year improved by less than 2% as a result of sales successfully transferred from closed

    stores. This benefited UK&I electricals, where like-for-like revenues grew 3%. UK Mobile like-for-like revenues were flat

 

Our UK mobile business maintained its leadership position delivering flat like-for-like sales growth across the year in a declining postpay market. As seen throughout the year, postpay market conditions and our contractual commitments with the networks have meant that gross margins continued to be challenged.

 

Across the Group we therefore expect to deliver full year headline PBT of around £382m with an effective headline tax rate of 21%. This included a benefit from a systems implementation where we accelerated data reconciliation of trade balances ahead of a new financial system launch. In total this amounted to approximately £25m and is not expected to repeat in 2018/19. Approximately £16m of this relates to UK electricals and £9m to UK mobile.

During the period we disposed of our honeybee business to Synchronoss. As a result, as previously advised, there will be a non-cash write off associated with the transaction.

 

As previously guided, total group cash exceptional charges for the year will be in the region of £50m relating predominantly to the UK property optimisation programme.

 

Our cashflow conversion has been stronger year-on-year with net debt expected to be around £250m, £20m better year-on-year. As previously indicated, full year dividend will be maintained at 11.25p.

 

2018/19 Outlook

In 2018/19 we expect our International businesses to reinforce their market leadership positions. As in 2017/18, we are budgeting for a contraction in the UK electricals market  and will use our scale to maintain our market share. We expect some cost increases in UK electricals, notably National Living Wage and IT depreciation, partially offset by gross margin recovery initiatives, including range optimisation, better availability and reduced levels of markdown.

 

In mobile, we are making progress in our contract discussions with the networks with the aim of improving our business model. In 2018/19 we expect a further decline in the postpay market against which we expect to increase our share of SIMO and SIM free handsets. A lower forecast level of inflation (source: OBR) in 2018/19 versus prior year is expected to drive a c£15m lower year on year contribution from network commissions income linked to RPI on mobile customer's line rental. Overall, gross margins are expected to be down, partially offset by cost initiatives. We have taken early action here with the planned closure of 92 Carphone Warehouse standalone stores this year. At this stage we are not expecting any material revaluation in our mobile debtor however, as seen in prior periods there can be some variability, both up and down, given market conditions.

 

In addition to this, we will correct recent underinvestment in both our colleague and customer proposition. In the coming year we expect to make a cost investment of around £30m in these areas across the UK & Ireland, giving our colleagues the right tools and the customer an improved experience.  

 

Furthermore, we anticipate an accounting adjustment from the first time adoption of IFRS 15 of around -£8m relating principally to the timing of revenue recognised for customer support agreements (CSAs).

 

Taking these factors into account we expect Group headline PBT for 2018/19 to be around £300m and we currently anticipate a similar level of free cashflow conversion versus the prior year.

 

Investor and analyst call

There will be a conference call for investors and analysts at 7:45am BST (8:45am CET) this morning

Dial-in details - UK/International: +44(0) 20 3936 2999; passcode: 01 57 35

Seven-day replay - UK/International: +44(0) 20 3936 3001; passcode: 76 45 28

Next announcement

The Group will publish its preliminary results on Thursday 21 June 2018

For further information

Assad Malic

IR, PR & Corporate Affairs Director

+44 (0)7414 191044

Mark Reynolds

Head of Investor Relations

+44 (0)7979 696 498

Amy Shields

Head of External Communications

+44 (0)7588 201 442

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

 

About Dixons Carphone:

Dixons Carphone plc is Europe's leading specialist electrical and telecommunications retailer and services company, employing over 42,000 people in nine 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 Team Knowhow.

 

Dixons Carphone's primary brands include Currys PC World and Carphone Warehouse in the UK & Ireland, Elkjøp, Elkjøp Phonehouse, Elgiganten, Elgiganten Phone House, Gigantti in the Nordic countries, Kotsovolos in Greece, and Dixons Travel in a number of UK airports as well as Dublin and Oslo. Our key service brand is Team Knowhow in the UK, Ireland and the Nordics.

 

Business-to-business (B2B) services are provided through Connected World Services, Currys PC World 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.

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.

 

 

 

1 Excludes honeybee whose disposal was announced on the 4 May

2 Like-for-like revenues are calculated based on Headline store and internet sales 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. Revenues 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. Revenues from Carphone Warehouse stores-within-a-store are included in like-for-like


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
END
 
 
TSTBVLLLVEFLBBX