Interim Results 2017/18 13 December 2017
Agenda • Introduction Seb James • Financial update Humphrey Singer • Business review Seb James Page 2
Summary • Strong performance in electricals across the Group with growing revenues, profitability and market share • Maintaining scale in UK mobile but profitability challenging • Repositioning mobile business to deliver a simpler, less capital intensive business • Board intends to maintain total full year dividend at 11.25p • Expect to deliver full year 2017/18 Headline PBT within £360m - £400m range • Headline PBT consensus for FY18: range £362m-£420m, average £383m • Good start to peak trading with record Black Friday in all geographies Page 3
Humphrey Singer Group Finance Director
Financial highlights H1 2017/18 Headline revenue Headline profit / (loss) Reported Like-for- H1 17/18 H1 17/18 H1 16/17 rate like £m % change % change £m £m UK & Ireland 3,009 (2)% 2% 34 130 Nordics 1,666 13% 8% 42 34 Greece 191 14% 7% 6 3 honeybee 2 (80)% n/a (12) (4) Group 4,868 3% 4% 70 163 Net finance costs (9) (9) Profit before tax 61 154 • Group headline PBT of £61 million (2016/17: £154 million); YoY includes (£58) million impact from revaluations • Group H1 like-for-like revenue up 4%; Q2 like-for-like up 3% • Group H1 electricals like-for-like up 7%; UK&I electricals like-for-like up 6%; Nordics like-for-like up 8%; Greece like-for-like up 7%, strong growth in all markets and growth in all categories • UK H1 mobile like-for-like down 3%, including the impact of delayed iPhone X launch into H2 • Free cash flow of £169 million (2016/17: £64 million); reduction in capex YoY, improved stock management and favourable timing on working capital • Net debt of £206 million (2016/17: £285 million) • Full year total dividend maintained at 11.25p Page 5
Profit bridge YoY £(96)m +£8m +£3m £(8)m £(93)m Flat £(93)m 6 (12) (9) 42 £m 70 61 34 UK & Nordics Greece honeybee EBIT Net finance PBT Ireland cost Page 6
Free Cash Flow Headline Dep. & Working Free EBIT amort. capital Capex Taxation Interest Restruct. Other cash flow (96) 171 £m (30) (12) (19) 2 83 169 70 Page 7
Balance Sheet Opening Free Acq. and Pension Closing Net debt cash flow disposals Dividends contributions Other Net debt 29 (206) (89) (271) £m (46) 169 2 Page 8
H1/H2 split of revaluations • H1 this year includes (£19) million of network debtor revaluation • Last year +£39 million including insurance 16/17 H1 H2 FY Customer support agreements 28 28 Network debtors 17 4 21 Insurance 22 22 Total 39 32 71 Page 9
UK & Ireland like-for-like and Gross Margin Mobile - Q1 like-for-like flat - Q2 like-for-like (6)%, impacted by phasing of iPhone launches - Trading gross margin down ~200bps - Further reduction of ~400bps due to revaluations Electricals - Q1 like-for-like +7%, +1% excl. sales transfers - Q2 like-for-like +5%, +1% excl. sales transfers - Gross margin broadly flat Page 10
UK & Ireland EBIT (39) Trading* 130 £m 91 (19) (38) 53 34 Reported Revals Excl Revals Dixons CPW Excl Revals Revals Reported 16/17 17/18 *Indicative split Page 11
Guidance FY 2017/18 • Full year headline PBT expected to be within £360m to £400m range – Consensus headline PBT for FY18: £362m-£420m, average £383m • We anticipate that our electrical businesses will deliver earnings growth this year across the Group • Full year headline interest of c.£18m • The 2017/18 effective headline tax rate is expected to be around c.22% • Mobile debtor revaluation, including EU roaming, expected to be in line with a negative £10-£40m range provided • Exceptional cash flow in 2017/18 c.£40m honeybee Greece • Pension contribution of £46m • Nordics Capital is expected to be c.£200m: Capex by geography UK&I • Full year total dividend maintained at 11.25p Page 12
Seb James Group Chief Executive
Transforming Carphone Warehouse
The Carphone proposition remains just as relevant today ASSETS CHALLENGES Brand Strength / Relevance Network Relationships Market Change Cost Base and Profit × Increasing handset prices Strong commercials × High central costs driven by Compare and Save × New aggressive market complex business model Highly relevant to networks - 22% market share 33 % share of new subs entrants × New customer buying Exclusive large indirect partner 78% brand consideration behaviours Deep system integration New Category Growth Service Capability Customer Proposition Balance Sheet × Price difference vs. × Large receivable built up 1m insurance agreements SIMO customer perception 1.1m repairs a year Multiplay £ 370,000 trade in a year Energy switching +72 instore net promoter score Page 15
Traditional postpay connections continue to shift with lengthening handset cycle and increased SIMO penetration CPW market share Total UK mobile connections H1 17/18 13% 11% 16% 19% 19% 19% 24% 12% 16% 25% 19% 21% 4% 34% 16% 13% 11% 12% 49% 49% 49% 47% 43% 22% FY 13/14 FY 14/15 FY 15/16 FY 16/17 1H 17/18 Postpay Postpay SIMO Prepay Prepay SIMO Page 16
What has caused the reduction in Carphone profitability? • Rising handset prices through technology and currency effects • A lower demand in smartphones (lengthening of the upgrade cycle) through a slowdown in the technology cycle and smartphone saturation • Competitive SIMO pricing • Reduced trading margin to achieve volumes • Falling out of bundle spend, 4G data premiums and EU regulation on roaming • Performance of current model being addressed NO ROAMING REVENUE Page 17
How have we responded to changes in consumer behaviour so far? • Handset leasing launched in Q2, credit offering to follow • New SIMO offers introduced • Grow iD • Diversification into new categories such as fixed, broadband, TV content and energy switching • Multi-play market share increased to 10% • Better leverage of existing 3in1 estate where appropriate • Cost focus Page 18
What does the longer term look like? • A sustainable and simpler model • Improved ROCE • Closer matching of P&L and cash receipts • Potentially meaningful cash release • Further alignment of distribution strategies Whilst maintaining relevance to the customer Page 19
Develop market leading Electrical businesses further
UK & Ireland key performance indicators UK electrical pricing UK electrical advocacy UK electricals share 100% 95% 90% 25.8% 25.7% 85% 25.1% 24.0% 80% 23.2% 75% 70% Q1 1415 Q2 1415 Q3 1415 Q4 1415 Q1 1516 Q2 1516 Q3 1516 Q4 1516 Q1 1617 Q2 1617 Q3 1617 Q4 1617 Q1 1718 Q2 1718 FY14 FY15 FY16 FY17 H118 Page 21
UK & Ireland achievements Stores • 3in1 largely completed • Launched new format Heathrow Terminal 3 store • Opened our first cruise ship Travel store • Tesco trial (2 stores) Services and range • Launch of nationwide same day delivery • Midnight cut off for next day delivery • Benefiting from extended range • Team Knowhow: Same day repairs and white goods promise • Your Plan: 422k customers, £1.4bn of credit approved, £365m drawn Online • Revenue 3YR CAGR 17% • Traffic 3YR CAGR 8% Page 22
UK & Ireland initiatives • Nationwide roll out of same day mobile phone repairs • Launching Apple authorised same day repairs in the new year • White goods same day repairs • Expanding gaming proposition • Online developments: • New ways to pay – one click check out, ApplePay • Beacon technology to deliver in-store notifications • Carphone new concept store rollout • Expansion of multiplay and energy saving Page 23
UK & Ireland: Black Friday Black Friday extended this year, with excellent performance in the “Why wait?” and Black Tag Event campaigns New records achieved on Black Friday: • Online penetration reached 41% • Mobile traffic mix was up to 73% at 6am • Highest average order value at 1am • Orders per second reached 4.55 at 9:34am • Big categories: gaming and consoles, LSTVs, headphones and smart tech • On the day in Currys PC World we processed 27k Home Delivery orders and 75k Reserve & Collect Orders Page 24
Nordic achievements • Record profits and low cost ratio in H1 Outperforming the market in most categories • Strong total sales growth of 8% in H1 Elkjop White goods • Driven by online, increased range and Market improved availability Cons. electronics • Increased market shares in all geographies Small domestic • Strong growth for the consumer electronics appliances and telecoms Telecoms • Improved customer satisfaction index in all markets Computing • First Nordic retailer to top 1BNOK on Black Friday • More than 450k orders / 315 per minute • 32% online penetration • Higher order volumes 4-5pm Page 25
Nordic achievements (cont.) • City store concept successfully launched • Increased range in Jönköping Nordic DC (6,000 to 12,000 SKUs) • Automatic replenishment working well, driving record availability in stores • New Nordic customer contact centre up and running in Denmark • Consolidated country head offices into one Oslo site Page 26
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