Dixons Carphone : Full Year Results 2019/20 Presentation

FULL YEAR RESULTS

2019/20

15 July 2020

1

Today's agenda

BUSINESS UPDATE

Alex Baldock

COVID-19 - RESPONSE &

OUTLOOK

Alex Baldock

FINANCIAL RESULTS

Jonny Mason

Q&A

Alex Baldock & Jonny Mason

2

3

OMNICHANNEL

Omnichannel accelerating

Easier to find		Easier to buy		Easier to get		Smartphone first		Exciting stores

2020/21

Larger range	Less friction	Supply Chain	Smartphone first	Exciting place to shop
development
	Increase
	Contact Centres		Services
	personalisation

		Search						121 Stores
+ 2k SKUs		Recommendation		Delivery CSAT		0.5m Transactional		remodeled
	Site Speed
		+9pts		App downloads		Online-in-stores sales
		Price
		Availability						+64%

4

OMNICHANNEL

Online share of business growing

	ONLINE REVENUE	ONLINE SHARE OF BUSINESS
UK&I ELECTRICALS
	+22%			+7pts

FY19

FY20

FY19

FY20

NORDICS
	+20%				+3pts

GREECE

FY19

FY20

FY19

FY20

+56%		+3pts

FY19	FY20	FY19	FY20	5

CREDIT

Credit: making good progress

Credit Customer NPS	+18pts vs non-credit customers
Credit Adoption (% of Sales)	11.2%,+240bps yoy
Active Credit Customers	Almost 1.2m, +36% yoy
Credit Sales	+27% yoy

6

EASY / SERVICES

Services: focus on protection paying off

Delivery &	Set up &	Protect	Maintain	Repair	Trade	-	in
installation	connectivity	& upgrade

3.8m two-person	>250k laptop	Mobile insurance	Maintenance	Repair 1.3m	Shortening
deliveries per year	set-ups	almost 1m customers		products	product
			Health		replacement
1m installations		10m protection plans	checks	Inc repair 550k	cycles
in homes		"Care & Repair"		phones
		launched

7

EASY / SERVICES

Successful launch of Customer Club in Nordics

Successful rollout

+275%

May 19	May 20
0.9m	3.4m
customers	customers

40% of Swedish households

Customer benefit

Always discount on		Club deals every
	month/week, as part of
Telecom accessories etc		main campaign
VIP		DAYS
		50
VIP shopping		Extended Buy & Try
+1
Every X for free		Collaboration with
Accessories and essential		streaming services

Higher engagement

Revenue per customer

+30%

Non-Club Club

Gross profit per customer

+100%

Non-Club Club

8

EASY / SERVICES

Customer satisfaction improving end-to-end

		+17pts
			+20pts
+12pts

+9pts

+19pts

CSAT

Purchase in store	Purchase online		Collection	Delivery	Installation
			2017/18		2018/19		2019/20

Source: Dixons Carphone internal data - Currys PC World CSAT based on purchases for 1H FY20 vs 1H FY19

9

MOBILE

Mobile was on track, impacted by Covid

Before Covid-19

Network renegotiations

Lower volume commitments

Wide range of connectivity O2 Virgin, VOXI, iD Mobile

Improved offer

Credit based bundles on track for 2020/21

		Cost reduction
	On track for £200m	531 standalone store closures

On track

For when unconstrained (2020/21)

To eliminate downside risk

To go after upside with new Mobile offer

Smaller, integrated, profitable, cash generating category

Covid-19

Enforced store closures

Lower sales transfer online

More prudent on new connection revenue recognition Online investment focussed on UK&I Electricals

Paused transformation

New Mobile offer

De-duplication of IT systems

Longer to breakeven

2019/20 losses worse than £90m 2020/21 losses slightly higher 6-12 months delay to breakeven FCF stronger than P&L

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	CAPABLE & COMMITTED	ONE BUSINESS	STRONGER
	COLLEAGUES	INFRASTRUCTURE

Capable & committed colleagues

	NEW HIRE		NEW HIRE
Jonny Mason	Erik Sønsterud	Mark Allsop
Chief Financial Officer	CEO International	Chief Operating Officer

NEW HIRE		NEW HIRE
Paula Coughlan	Ed Connolly	Nigel Paterson
Chief Human	Chief Commercial	General Counsel &
Resources Officer	Officer	Company Secretary

		NEW HIRE
Antreas	Assad Malic	Lindsay Haselhurst
Athanassopoulos	Corporate Affairs and	Chief Supply
Chief Customer Officer	Strategy Director	Chain Officer

One Business

IT & other central costs

Supply	Org
Chain	structure

Other

Contact

Centres Repairs

Stronger Infrastructure

Upgradedleadership

Customer facing colleague tools

Pricingtechnology

Improved routing softwarefor deliveries

LaunchedMobile App

SAP basedNext Generation

Retailin Nordics

Omnichannel innovation

Expected in 2020/21

Restart paused projects

Agile approach for technology innovation and delivery

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Progress reflected in increased customer satisfaction…

		UK&I ELECTRICALS		UK&I MOBILE
	STORES	ONLINE		+1pts
NPS	+11pts	+12pts
	FY19	FY20	FY19	FY20	FY19	FY20
	NORDICS		GREECE
		+1pts			+1pts
HAPPY OR NOT
	FY19	FY20		FY19	FY20

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…and strengthening market leading positions

UK&I ELECTRICALS

UK&I MOBILE

22.5%	24.2%	25.1%	25.2%	25.8%	26.5%
2014/15	2015/16	2016/17	2017/18	2018/19	2019/20

20.6%	24.6%	23.8%	21.9%	18.9%	16.0%
2014/15	2015/16	2016/17	2017/18	2018/19	2019/20

NORDICS

GREECE

		24.2%	25.0%	25.5%	26.0%	26.3%	28.7%	32.2%	34.4%	35.0%	35.3%
	21.1%
0.0%
2014/15	2015/16	2016/17	2017/18	2018/19	2019/20	2014/15	2015/16	2016/17	2017/18	2018/19	2019/20

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

13

Guidance and results for 2019/20

UK&I Electricals & International growth low single digit UK Mobile expect loss of up to £90m

Group Headline PBT expected to be around £210m Capex of ~£200m (from £275m)

Exceptional cash cost of c£80m

Dividend broadly flat*

Net debt lower (2018/19: £265m)

UK +1% / International +4% £104m loss

£166m

£191m

£79m

Final dividend not declared

Adjusted net debt £284m

14

COVID-19 -

RESPONSE & OUTLOOK

COVID-19 - RESPONSE & OUTLOOK

Focused on three priorities

Keeping colleagues and		Helping our customers			Securing our future
customers safe
•Focus on colleagues leaving homes	•	International: Largely unaffected		•	Protected livelihoods
•New standards in hygiene and social	•	UK: Successful pivot to online pureplay		•	Increased cash headroom
distancing	•	Focus on vulnerable customers and NHS		•Raised gaze beyond crisis

•Permission to keep helping customers

16

COVID-19 - RESPONSE & OUTLOOK

Sales impacted by enforced closures

		Like for like sales
UK&I	3%				UK&I
ELECTRICALS					ONLINE
	Pre-Covid	Post-Covid
		-16%

NORDICS	24%	NORDICS
	ONLINE
3%
Pre-Covid	Post-Covid

GREECE	5%				GREECE
		Pre-Covid		Post-Covid		ONLINE

-40%

Pre Covid refers 47 weeks to 21 March 2020. Post Covid refers to 5 weeks to 25 April 2020

166%

10%

Pre-CovidPost-Covid

98%

14%

Pre-CovidPost-Covid

597%

19%

Pre-Covid

Post-Covid

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COVID-19 - RESPONSE & OUTLOOK

Resilient to expected downturn

Technology increasingly important

• Connected
• Productive
• Healthy
• Entertained

Group well positioned

•Market leading positions

•Unambiguous price promise

• Strong supplier relationships•Diversified revenue

PRICING RELATIVE TO COMPETITORS

130%

125%																																	Competitor 1
120%																																	Competitor 2
115%
110%																																	Competitor 3
105%
																																Competitor 4
100%
95%																																	Competitor 5
90%
85%
80%
2011	2012	2013	2014	2015	2016	2017	2018	2019	2020

Source: Dixons Carphone Competitor Price Index. Curry PC world price = 100

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COVID-19 - RESPONSE & OUTLOOK

Strongly positioned for Online growth….

NORDIC - ONLINE SHARE OF

BUSINESS

GROUP ONLIINE ELECTRICAL SALES

UK&I ELECTRICALS - ONLINE MARKET SHARE

30%

28%

26%

24%

+25%

+240bps

+100bps

£2.3bn

22%

20%

18%

16%

14%

12%

10%

Jan

Feb

Mar

Apr

May

+12%

£1.8bn

£1.6bn

FY18 FY19 FY20

+1040bps

20202019

FY18 FY19 FY20

April 2019

April 2020

Source: GfK

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COVID-19 - RESPONSE & OUTLOOK

…but customers prefer Omnichannel

20%

	ONLINE
38%	ONLY

BOTH ONLINE

AND IN-STORE

IN-STORE

ONLY

42%

Source: Dixons Carphone Consumer Insight Survey. Purchase channel used

in L12M. Base: All L12M purchasers April '18 to April '19 (n=10,376)

NORDIC STORES FOOTFALL - RECOVERED QUICKLY

10%

5%

0%

-5%

-10%

-15%

-20%

-25%

-30%
Jan-20	Feb-20	Mar-20	Apr-20	May-20

Source: Year on year store footfall recorded using Viametrics.

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COVID-19 - RESPONSE & OUTLOOK

Shift to Online is margin dilutive, but modestly…

Product margin	Marketing
Service adoption	Delivery &
	Installation
	1/4 of store sales
	delivered to home
	1/4 of online sales
	collected in-store

Note: Gross margin is defined as revenue less COGS, Services costs, marketing and delivery & installation

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COVID-19 - RESPONSE & OUTLOOK

…and we're narrowing the gap

Increasing Online adoption rates

UK&I ELECTRICALS - ONLINE CREDIT

ADOPTION RATE

+3.7%pts

April 2019

April 2020

UK&I ELECTRICALS - ONLINE SERVICE

ADOPTION RATE

+1.5%pts

April 2019

April 2020

Source: Management data systems

Increasingly Omnichannel colleagues

25,000 Expert store

colleagues

UPSIDES

• Sales
• Product margin
• Services adoption
• Colleague productivity

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COVID-19 - RESPONSE & OUTLOOK

Meanwhile, costs are more flexible and reducing

Cost flexibility

Low average lease lengths

UK: 5 years

Nordics : 4 years

ELECTRICALS LEASES BY DATE OF

EXPIRY

120

100

80

60

40

20

0

Source: Management data. Greek stores shown to next lease break.

Cost reduction		One Business

UK 3-in-1 Leases

IT & other central costs

-30%	Supply	Org
Chain	structure

Other

Contact

Centres Repairs

23

SUMMARY

Summary

Strong progresson Omnichannel, Credit, Services, Easy and Mobile Gainsin customer satisfaction and market leadingpositions

Robust financial performance delivering on guidanceup until Covid-19 Pivoted quicklyin crisis to safely serve customer needs on vital technologyOver £1bn of liquidityprovides confidence

Trading strong butoutlook uncertain and we are cautiousOmnichannel is right model for customers and for our economics

Group wellpositioned to deliver on transformation

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FINANCIAL

RESULTS

Jonny Mason

Group Chief Financial Officer

FINANCIAL RESULTS

Group financial highlights 2019/20

	2019/20	2018/19	YoY
Revenue	£10,170m	£10,433m	(3)%
Electricals LFL	+2%	+3%
Adjusted EBIT	£194m	£363m	£(169)m
Adjusted EBIT %	1.9%	3.5%	(160)bps
Adjusted PBT	£166m	£339m	£(173)m
Statutory PBT	£(140)m	£(259)m	£119m
Free cash flow	£109m	£153m	£(44)m
Net debt	£(284)m	£(265)m	£(19)m

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FINANCIAL RESULTS

Estimated impact of COVID-19

IMPACT ON UK&I ELECTRICALS

IMPACT ON MOBILE

£162m

£(104m)

• Overall impact on PBT estimated to be £50m
• Overall impact on cashflow estimated to be c.£40m, as lost sales were offset by delayed tax payments, rent deferrals and lower capital expenditure

27

FY FINANCIAL RESULTS

UK&I Electricals

	H2 2019/20	FY 2019/20
Revenue	£2,559m	£4,538m
YoY (inc 53wk)	+3%	+1%
LFL (ex 53wk)	+2%	+1%
Online revenue	+32%	+22%
(52 wk)
Adj EBIT	£131m	£162m
YoY	(5)%	(10)%
Adj EBIT %	5.1%	3.6%
YoY	(50)bps	(40)bps

• Overall market share grew +0.7%, gains both online andin-store, consistent gains throughout H2 until store closures
• Strong sales in large screen TVs, computing, gaming and smart tech
• White goods saw solid performance until sales were impacted by lockdown
• In 11 months preCovid-19 online revenue+10%, accelerated to +166% in April
• Online share of business 35% ,+7%pts higher than last year, boosted by growth in April

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FINANCIAL RESULTS

UK&I Electricals EBIT margin - H2

• Full year underlying gross margin down 80bps. Investment in customer offer (delivery, price) and channel shift
• Full year underlying cost ratio improved by 120bps.

29

FINANCIAL RESULTS

International

	H2 2019/20	FY 2019/20
Revenue	£2,138m	£4,043m
YoY	+3%	+2%
YoY (local ccy)	+7%	+5%
LFL	+6%	+4%
Online revenue	+22%	+22%
(52 wk)
Adj EBIT	£82m	£136m
YoY (local ccy)	+7%	+8%
Adj EBIT %	3.9%	3.4%
YoY	(10)bps	-

Nordics LFL +4%, H2 LFL +7%

• Overall market share growth +0.5% YoY
• Strong sales in kitchens, headphones, wearables and cordless vacuums
• In 11 months preCovid-19 online revenue +14%, accelerated to +98% in April
• Online share of business 19% (+3%pts higher than last year)

Greece LFL +2%, H2 -3%

• Good sales in TVs, laundry and cooling equipment. Pre- COVID LFL was +5%
• In 11 months preCovid-19 online revenue +19%, accelerated to +597% in April
• Online share of business 8% (+3%pts higher than last year)

30

FINANCIAL RESULTS

UK&I Mobile

	H2 2019/20	FY 2019/20
Revenue	£759m	£1,589m
YoY	(23)%	(20)%

Adj EBIT	£(55)m	£(104)m
Adj EBIT %	(7.2)%	(6.5)%

• Losses reflect declining sales due to constrained offer on
• Large legacy cost base includes
  c.£200m of store operating cost and c.£200m of central operating costs
• First onerous legacy contract rolled off in March, enabling stores closure

31

FINANCIAL RESULTS

Other adjusting items

£m	P&L	Non-cash	Cash	Cash
(in period)	(future)
Mobile network debtor revaluation	47	47
Acquisition and disposal related	26	26
Strategic change programme	121	48	30	43
Regulatory costs	30		16	14
Impairment and onerous leases	18	18
Impact of IFRS16	(20)	(20)
Total before interest and tax	222	72	46	57
Prior Exceptional Items			33
Exceptional FCF			79

32

FINANCIAL RESULTS

Free cash flow - Full Year

							FCF before
		Dep. &	Working	Network		Tax / Int /	Exceptional	Exceptional	Free cash
	Headline EBIT	Amort.	capital	Debtor	Capex	Other	items	items	flow
				£134m	£(191)m
			£(26)m
		£128m
						£(51)m
								£(79)m
	£194m						£188m
									£109m
Prior Yr	363	146	(236)	219	(166)	(66)	260	(107)	153
YoY	(169)	(18)	210	(85)	(25)	15	(72)	28	(44)

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FINANCIAL RESULTS

Net debt

	Opening					Closing
	Net debt	Free cash flow	Dividend	Pension	Other*	Net debt
	£(265)m					£(284)m
			£(78)m
		£109m
				£(46)m
					£(4)m
Prior Yr	(249)	153	(116)	(46)	(7)	(265)
YoY	(16)	(44)	38	-	3	(19)

Dividend

• Final 2018/19 and interim 2019/20 dividend paid in year
• Board has decided not to pay a final dividend for 2019/20

Pension

• IAS 17 Net obligation £550
• Actuarial review as at 31 March 2019 showed £645m deficit
• • Recovery plan agreed
  • Payments moved to monthly instalments
  • Contributions increase to £78m pa from 2020/21

* TY Other includes Net issue of new shares and purchase of own shares £(12)m and Other items £8m

PY Other includes Acquisition/disposals £(1)m and FX £(6)m

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FINANCIAL RESULTS

Net debt

Liquidity, £m

Facility	Expiry date	Amount	Year end	Headroom
Revolving Credit Facility	Oct-22	£800m	£280m	£520m
Revolving Credit Facility	Nov-22	£250m	-	£250m
Revolving Credit Facility	Apr-21	£266m	-	£266m
€50m term loan	Oct-20	£44m	£44m	-
		£1,360m	£324m	£1,036m

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr 2019 2019 2019 2019 2019 2019 2019 2019 2019 2020 2020 2020 2020

0

(100)

(200)

(300)

(400)

(500)

(600)

(700)

(800)

(900)

(1000)

(1100)

(1200)

(1300)

(1400)

(1500)

Liquidity

Total Committed Facilities

35

FINANCIAL RESULTS

Guidance

Group

• Over £1bn of unutilised committed debt facilities
• £46m annual pension contribution will rise to £78m from 2021/22
• Exceptional transformation cash costs to be c.£175m, mainly related to Mobile restructuring
• Due to the delay to transformation projects, we would expect 2020/21 expenditure to be closer to run rate of £175m than the previously expected £240m.

Mobile

• Adjusted EBIT losses to be slightly worse in 2020/21 and breakeven6-12 months later than previously expected
• 2020/21 cashflow from Mobile to be slightly negative as operating losses and restructuring costs will be offset by net working capital unwind
• Total positive cashflow from Mobile will be£125m-175m (previous guidance of c.£200m)

36

SUMMARY

Summary

Strong progresson Omnichannel, Credit, Services, Easy and Mobile Gainsin customer satisfaction and market leadingpositions

Robust financial performance delivering on guidanceup until Covid-19 Pivoted quicklyin crisis to safely serve customer needs on vital technologyOver £1bn of liquidityprovides confidence

Trading strong butoutlook uncertain and we are cautiousOmnichannel is right model for customers and for our economics

Group wellpositioned to deliver on transformation

37