Dixons Carphone plc (LON: DC.) today provided preliminary results for the 12 months to 27th April 2019.
FY19 financial results in line with our plan
• Gained market share in Electricals in all territories
• Group FY like-for-like revenue(3) up 1%; UK & Ireland electricals like-for-like revenue(3) up 1%; International like-for-like revenue(3) up 4%; UK & Ireland mobile like-for-like revenue(3) down 4%
• Statutory revenue down 1% to £10,433 million
• Group headline PBT(1) of £298 million (2017/18: £382 million):
• Statutory loss before tax of £259 million (2017/18: profit of £289 million), including non-headline charges of £557 million (2017/18: £93 million), primarily non-cash impairments relating to the changing UK mobile market, as outlined in December interim results, mainly goodwill(4)
• Free cash flow(5) of £153 million (2017/18: £172 million). Operating cash flow of £286 million (2017/18: £312 million)
• Net debt(6) of £265 million (2017/18: £249 million)
• Final dividend of 4.50p proposed (2017/18: 7.75p), full year dividend at 6.75p (2017/18: 11.25p)
Alex Baldock, Dixons Carphone plc Group Chief Executive, said:
“The past year has seen us keep our promises to investors, delivering around £300 million of headline profit, resilient free cash flow, and continued growth in sales and market share in UK & Ireland electricals and International. And we’ve taken the first big strides in our transformation.
But we know we have it in us to be a much more valuable business. That will take time. In December, we set out a clear strategy to help everyone enjoy amazing technology, and early progress is promising.
In UK & Ireland electricals, we expect growing sales and headline profits this year and beyond. We’ve made significant gains in Credit and Online – both big profitable growth opportunities for us. Early steps towards an easier customer experience have seen satisfaction scores start to rise. And we’ve laid important foundations for Services to make our customer relationships stickier and more valuable.
The same focus on Credit, Online and Services will ensure our strong International business continues its trajectory of growing sales and market share, while further improving profitability.
In UK mobile, the market is changing in the way we described in December, but doing so faster. So, we’re moving faster to respond: we’ve renegotiated all our legacy network contracts, we’re developing our new customer offer, and are accelerating the integration of Mobile and Electricals into one business. This means taking more pain in the coming year, when Mobile will make a significant loss. But accelerating our transformation provides certainty that this year is the trough, as during next year the legacy contractual constraints on our Mobile business lift, and the integration cost benefits build. We expect Mobile will at least break even within two years, and beyond that, equipped with a stronger and unconstrained offer, we will of course aim to do better. In any case, cash generation from Mobile will be strong.
Overall, with investment in our transformation underpinning UK & Ireland electricals and International growth in sales and headline profits, and accelerating the changes in Mobile, we’re confident to bring forward our long-term ambitions. We still commit to over £1 billion of Group free cash flow over the five year plan, but also to accelerate our £200 million cost reduction promise by two years, and our promise of at least 3.5% Group EBIT margins by a year.
I want to thank my tens of thousands of colleagues at Dixons Carphone for their unrelenting hard work. This business matters, not just to us, but to the millions of people whose lives we can improve through the power of amazing technology. So it’s with a sense of responsibility that we commit to transforming Dixons Carphone into a world class business for colleagues, customers and shareholders. We believe we will.”
5 year transformation plan: earlier forecast delivery of Group cost savings and margin
• Group headline EBIT margin improvement to at least 3.5% by FY23, a year earlier than originally planned
• Underpinned by £200 million of identified gross cost savings, delivered two years earlier by FY22, with more thereafter
• Combination of transformation benefits and Mobile improvement to drive headline PBT to over £300 million by FY22
• Nordics to benefit from adoption of Group strategy in Services, Credit and Online, taking margins to at least 3.5%
• On track for over £1 billion of cumulative free cash flow over the plan, including working capital improvements of over £500 million, mostly from Mobile debtor
FY20 Group financial guidance(7),(9),(10)
• Sales and profit to grow in Electricals in both UK & Ireland and International
• UK mobile: significantly loss making this year; improving materially in following two years by accelerating transformation
• Headline PBT expected to be around £210 million, with growth thereafter as transformation benefits feed through
• Capex of circa £275 million, in line with overall transformation capex guidance; peak year of transformation investment
• Exceptional cash costs expected of circa £80 million
• Net debt broadly flat year on year given strong cash flow from working capital improvements
• Full year dividend expected to be flat year on year reflecting confidence in both cash flow and future profit growth
(1) Headline results exclude amortisation of acquisition intangibles, significant reorganisation costs, significant impairments, businesses to be exited, property rationalisation costs, acquisition-related costs, net interest on defined benefit pension schemes and discontinued operations. Such excluded items are described as ‘non-headline’. For further details see note 3 of the Financial Information.
(2) Change in local currency revenue reflects total revenue on a constant currency and period basis as defined in the glossary on page 34.
(3) Like-for-like revenue is defined in the glossary on page 34
(4) During the period, the reportable segments of the Group have been changed and comparatives restated accordingly. The restatement is detailed in note 2 to the Financial Information. As part of the strategic review, the Group has separated the previous UK & Ireland operating segment into the separate electricals and mobile operating segments. Given the challenges in the mobile market, and the corresponding change in the UK & Ireland mobile performance in the period, the Group has changed the information presented to the Board to provide greater clarity over the relative performance of the two UK & Ireland businesses and to support decisions related to the allocation of the Group’s resources. This change has included the provision of separate financial information in respect of the UK & Ireland mobile and electricals segments. As a result of the change, the goodwill previously allocated to the UK & Ireland was separated into UK & Ireland electricals and UK & Ireland mobile and an impairment review was then performed over the new segments. This identified a material non-cash impairment charge of £225 million recorded over the goodwill of the UK & Ireland mobile segment, together with impairment of related assets of £122 million and additional onerous lease charges of £36 million recorded against individual stores.
(5) Free cash flow is defined in the glossary on page 36
(6) Net debt is defined in the glossary on page 36
(7) Dixons Carphone has in place substantial contingency plans to mitigate the operational disruption expected in the event of a ‘hard Brexit’. However, all financial guidance is provided on the basis that there is no significant change in macroeconomic outlook
(8) Peak and Post Peak are defined in the glossary on page 38
(9) Group financial guidance is excluding any impact arising as a result of the adoption of IFRS 16
(10) Group financial guidance excludes any revaluation of mobile network debtor which may arise, up or down