Half Year Results & Strategy Update 12 December 2018 Todays - - PowerPoint PPT Presentation

Half Year Results & Strategy Update

12 December 2018

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Q&A Alex Baldock & Jonny Mason OUR VISION, STRATEGY & TRANSFORMATION PLAN Alex Baldock H1 RESULTS OVERVIEW & FINANCIAL GUIDANCE Jonny Mason CLOSING REMARKS Alex Baldock

Today’s agenda

OUR VISION, STRATEGY AND TRANSFORMATION PLAN

Alex Baldock

Group Chief Executive

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Strengths Opportunities

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A business with great strengths and big opportunities

Top line growth ≥3.5% EBIT Margin >£1bn free cash flow

Financial Upside

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Building a sustainable business…

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Top line growth

…more valuable for its shareholders in the long run

≥3.5% EBIT Margin

Financial Upside

Credit Online Easy Services Lower cost Stronger infra- structure Market leading Profitable & cash generative

Growth Opportunities Customer Experience One Business Mobile Colleagues Customers Shareholders

>£1bn free cash flow

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Building a sustainable business…

They find tech exciting and amazing… …but also confusing and expensive They value help to discover and choose… …and to afford the item they really want… …to get the most out of it

… and Dixons Carphone is uniquely placed to help

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The opportunity starts with the customer…

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 (postpay) Nordics Greece

2015/16 2014/15 2016/17 2018/19 H1 2017/18 2017/18 2015/16 2014/15 2016/17 2018/19 H1 21.1% 24.2% 25.0% 25.4% 2018/19 H1 2015/16 2014/15 2016/17 2017/18 2018/19 H1 2015/16 2014/15 2016/17 2017/18

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20.6% 24.6% 23.8% 21.9% 19.2% 26.3% 28.7% 32.2% 34.4% 35.2% 23.0% 24.7% 25.6% 25.7% 26.3%

Market shares

We are big and growing

• nline as

well as in stores

26.2% 21.1% +510bps 19.5% 22.1% +260bps

Online revenue as a % of sales

UK mobile UK electricals

2015/16 2017/18

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

2015/16 2017/18 12.6% 10.4% +220bps

International

2015/16 2017/18

We have a strong customer franchise

Website visits Store visits

220m 687m

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Source: Dixons Carphone Group store visits and total website visitors during 2017/18

People Core retail skills Flexible well invested stores New Capabilities Services

Strong capabilities

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DIRECTION FOCUS ON THE CORE ONE BUSINESS STRONGER INFRASTRUCTURE DISCIPLINED EXECUTION

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We need…

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DIRECTION

• New long term direction
• Plan that starts with the customers

ONE BUSINESS

• Good progress, but will take time

STRONGER INFRASTRUCTURE

• IT and Supply Chain

FOCUS ON THE CORE

• Dealt with distractions
• Opportunity in the core

DISCIPLINED EXECUTION

• New team and structure
• Business aligned around the vision
• Transformation programme underway

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We are underway…

TRANSFORM AND PERFORM

• LFL growth and share gains

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

• ur 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:

• nline or in store

We have an easy end to end customer experience We are with our customers throughout the life

• f the product –

via our Services Our sites and stores are amazing Our partnerships with suppliers make a big difference Mobile is central to

• ur vision

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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

• ur 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:

• nline or in store

We have an easy end to end customer experience We are with our customers throughout the life

• f the product –

via our Services Our sites and stores are amazing Our partnerships with suppliers make a big difference Mobile is central to

• ur vision

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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

• ur 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:

• nline or in store

We have an easy end to end customer experience We are with our customers throughout the life

• f the product –

via our Services Our sites and stores are amazing Our partnerships with suppliers make a big difference Mobile is central to

• ur vision

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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

• ur 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:

• nline or in store

We have an easy end to end customer experience We are with our customers throughout the life

• f the product –

via our Services Our sites and stores are amazing Our partnerships with suppliers make a big difference Mobile is central to

• ur vision

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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

• ur 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:

• nline or in store

We have an easy end to end customer experience We are with our customers throughout the life

• f the product –

via our Services Our sites and stores are amazing Our partnerships with suppliers make a big difference Mobile is central to

• ur vision

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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

• ur 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:

• nline or in store

We have an easy end to end customer experience We are with our customers throughout the life

• f the product –

via our Services Our sites and stores are amazing Our partnerships with suppliers make a big difference Mobile is central to

• ur vision

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Colleagues One Business Stronger infrastructure Assisted selling Data Range Credit Online Easy Services Sites and stores Suppliers Mobile

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We offer amazing advice to our customers through assisted selling We understand technology and

• ur customers;

data

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Assisted selling 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:

• nline or in store

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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:

• nline or in store

Assisted selling Data

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Credit: largest and fastest growing segment of services

Services Addressable Market

5yr CAGRs

2016/17 2017/18 2018/19 2019/20 2020/21 Delivery Credit Installation and set up Protection Repair

8.6%

1.1% 0.8% 1.5% (0.4)%

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Source: Dixons Carphone Group internal analysis

• Customers afford more and better technology
• Reason to shop with us
• Installments help services
• Profitable
• Responsible lender

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Credit adoption drives higher average basket value

Average basket value

Source: Dixons Carphone internal data: credit sales by different price bands for the 24 months to 27/10/2018

Adoption

Good for suppliers Good for customers Good for us

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0% 5% 10% 15% 20%

Credit: growth opportunity with strong foundations

100 200 300 400 500 600 700 800 Sales (£m) Customers (000s) 2016/17 2018/19 28

Source: Dixons Carphone internal data - credit sales (2016/17 actual, 2018/19 forecast) and customer bases (as at 25/10/16 and 20/11/18)

Credit: our strong foundations

Your Plan

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“We’re delighted to extend our strategic partnership with Dixons Carphone…to create innovative solutions and provide customers with helpful, affordable finance solutions to buy the technology they want.”

BNP Paribas Personal Finance UK CEO, Stephen Hunt

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Credit: much improved deal with BNP Paribas

We expect to at least double credit adoption from 8% today

Much improved BNP Paribas partnership New credit offer and platform Trained colleagues Building capability and experience

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Credit: we’re underway

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:

• nline or in store

Assisted selling Data

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• Market growth all online
• A scaled online business growing

faster than the market…

• …but still we’re underweight online

Our UK electricals market share by channel Online growth

32 0% 2% 4% 6% 8% 10% 12% 14% 16% 2017/18 2018/19 UK electrical UK electrical market

Sources: Dixons Carphone internal data and GfK, based

• n 6 months to end of October 2018

Online: growth opportunity with strong foundations

0% 5% 10% 15% 20% 25% 30% 35% 2018/19 H1 Online In store

…making it easier to find, buy and get the right technology

Larger range Increase personalisation Contact centres Supply Chain Less friction Easier to find Easier to buy Easier to get Transactional app Smartphone first SKUs from 8k to 40k by 21/22 30% faster site speed Improved search Faster check out Better routing Upgraded warehouse and stock systems Contact centre CX and efficiency improvements Faster smartphone site speed

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Online: we will accelerate growth…

Smartphone first development Services Crossover benefits Credit

New leadership team Increased resource Agile working Technology platform

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Online: we are underway

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Online: making the most of being multichannel at scale

We have an easy end to end customer experience We are with our customers throughout the life

• f the product –

via our Services Range Credit Online Assisted selling Data

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We have an easy end to end customer experience We are with our customers throughout the life

• f the product –

via our Services Range Credit Online Assisted selling Data

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Source: Dixons Carphone internal data - Currys PC World NPS based on purchases for the 6 months to end of July 2018

Making the end to end customer experience easy

Customer satisfaction leakage through the journey

Purchase in store Purchase

• nline

Collect Delivery Install / Set up Returns Customer support Repair

NPS

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Easy customer experience: end to end

H1 17/18 H1 18/19

% Right first time delivery and installation +210bps

100%

Source: Dixons Carphone internal data – Currys PC World two-man delivery and installation Currys PC World NPS for the 6 months to end of October 2018

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Easy customer experience: end to end

We have an easy end to end customer experience We are with our customers throughout the life

• f the product –

via our Services Range Credit Online Assisted selling Data

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Shortening product replacement cycles >300k laptop set-ups Bundles Electricals and mobile Maintenance Health checks Insurance

We are underway…

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

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Easy customer experience: throughout the life of products

Our sites and stores are amazing Our partnerships with suppliers make a big difference Mobile is central to our vision Easy Services Range Credit Online Assisted selling Data

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Our sites and stores are amazing Our partnerships with suppliers make a big difference Mobile is central to our vision

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Easy Services Range Credit Online Assisted selling Data

Mobile Whites Computing Consumer electronics

Our product sales by category

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Sources: Dixons Carphone UK&I revenues by major category in 1H 2018/19, mobile includes connectivity revenues. UK product sales data from GfK (not mobile) and Mintel (mobile – value of mobile phone sales in the UK)

Mobile: we are committed

• Volumes
• Mix
• Mix
• Mix
• Contractual
• Costs

Market Share Profitability

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Mobile: 3 challenges

• New deals
• Secured the connectivity volumes we need
• Widened the choice
• Access to best tariffs
• Improved terms

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Mobile: relationships with

• ur network partners

Handsets Connectivity Ways to pay Accessories Services

• Multichannel
• Individually/bundles
• Including our bundles

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Mobile: radically improving our offer

Our Customers Our Business

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Mobile: joined up

Our Customers

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Mobile: joined up

Source: Dixons Carphone internal data based upon capture of name, address and email on purchases in the last three years. Overlap based on postcode and surname.

18m 6.5m

Electricals customers Mobile customers

2.8m

Our Customers Our Business

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Mobile: joined up

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Complete the merger to realise cost savings

£200m cumulative gross cost saving, by initiative

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Reinforced number one position in number

• ne category

Sustainable, profitable and cash generative business

Mobile: the prize

Improved partnerships Improved offer Lower costs

Capable and committed colleagues We work together as One Business Stronger infrastructure Mobile Easy Services Range Credit Online Assisted selling Data

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Capable and committed colleagues We work together as One Business Stronger infrastructure Mobile Easy Services Range Credit Online Assisted selling Data

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Capable & committed colleagues

Training Career paths Leadership development Communications Recognition Reward

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Capable & committed colleagues

Training +25% YoY Career paths Leadership development Communications Recognition Reward

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Capable & committed colleagues

Training +25% YoY Career paths Leadership development Communications Recognition Reward £1,000

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Capable and committed colleagues We work together as One Business Stronger infrastructure Mobile Easy Services Range Credit Online Assisted selling Data

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Joined up for customers Joined up behind the scenes

One Business

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Capable and committed colleagues We work together as One Business Stronger infrastructure Mobile Easy Services Range Credit Online Assisted selling Data

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EASY

ONLINE MOBILE

CREDIT

INFOSEC

Cloud infrastructure Security design embedded into infrastructure New Customer 360o MDM Personal data kept secure Higher GDPR compliance Move to one IT stack More secure Modern, best in class platforms for back-

• ffice

Increased capabilities & access controls Utilise 3rd party services Increased PCI compliance Order Management System Better stock visibility & keeping

• ur

promises Improve right first time Warehouse Management Systems Routing system Single eCommerce platform Store mode Easier, cross- channel customer journeys Adoption of micro-services approach Shorter time to market & increased flexibility Product Information Management & Digital Asset Management Personalised content, larger range, quicker new product introduction Credit + SIM + Trade in/upgrade + repair + Insurance Wider choice, access to best tariffs Channel & network agnostic More choices for customers Channel & brand agnostic Provide more credit

• ptions for

customers Full scale credit functionality

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Stronger infrastructure

We are de-risking execution

Focus and tolerate Leadership team Improved partnerships More resource Lower risk vanilla solutions Integration technology Underway

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Credit Online Easy Mobile Capable and committed colleagues One Business Stronger infrastructure Assisted selling Data Range Services

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We have an easy end to end customer experience Mobile is central to

• ur vision

We are affordable: trusted on price and through credit We serve our customers however they want to shop: online or in store

Credit Online Easy Mobile

Priorities Enablers

Stronger infrastructure One Business Capable & committed colleagues

To summarise: what matters most

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• 40% of our profits not exposed to UK

consumer

• #1 in their markets, with strengthening

shares

• Good profit trajectory
• H1 results show strong top line and

bottom line trajectory continuing, on track for FY

• Strong management
• Jaan-Ivar Semlitsch now CEO

International, on Group ExCo

• John Vasilakos CEO Greece

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We have a strong international business with significant further potential

Colleagues Costs Stronger infrastructure Online Credit Services Smart Home Kitchen B2B

International: 3 year strategic priorities

Easy

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• We’re underway - early progress flagged today
• Working to a clear plan
• Focussing on the core
• Prudent in assumptions
• Realistic on the size of the challenge
• Cost and working capital important
• Growth opportunities are within reach
• Strong supplier partnerships
• Stronger governance & control

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What gives us confidence

• n execution?

New leadership team and structure New strategy developed, launched, colleagues aligned Colleagues as shareholders Costs: £16m org. design savings YTD IT:

• New leadership
• New partnerships
• Target architecture

Improved monitoring, control and testing Infosec, x4 increase in spend YoY

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Underway: early delivery. Transform

Kit and connectivity:

• Store mode
• Headsets
• Wifi

25% more frontline training:

• Induction
• Product
• Assisted sales

Stockless tech for increased range Revionics pricing Credit >3x and >£400m of sales, 21k trained colleagues Improved partnership with BNP Paribas New leadership Offer improvements (monthly pricing, personalised offers) Online

• £2bn sales, share gains
• Improved customer

experience (site speed, search, recommendations, checkout) Easy Planning and forecasting systems Improved right first time delivery Improved routing technology Improved contact centre customer experience Improved IVR Services: >300k set ups New maintenance solutions Improvements to mobile and electricals repairs New trade-in offer Joint personalisation campaigns Mobile New MNO/MVNO deals Better access, choice and terms Connectivity secured Lower costs, 2 – 1, org. changes, 102 store closures

• We’re underway - early progress flagged today
• Working to a clear plan
• Focussing on the core
• Prudent in assumptions
• Realistic on the size of the challenge
• Cost and working capital important
• Growth opportunities are within reach
• Strong supplier partnerships
• Stronger governance & control

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What gives us confidence

• n execution?

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• Customer first training

rolled out

• Reduced central costs
• Delivery tracking
• New credit partnership
• Online CX improvement
• Full mobile credit offer in

all channels

• Transactional app and

tablets rolled out in all stores

• One retail training

academy

• Single customer view
• Single supply chain and

point-of-sale system

• Improved warehouse

management system

• SKU range increased

>40k

• Single unified online

account

• New order

management system

• Personalised customer

journeys in store

• Decommissioning of IT

systems

• Simplified contact

centre estate

KPIs

Group headline PBT Group headline EBIT% Group ROCE Group free cash flow Colleague engagement Customer satisfaction Market share Total shareholder return 2018/19 2019/20 2020/21 2021/22

Examples

• f

milestones

We will track our progress through

• perational milestones and KPIs

H1 RESULTS OVERVIEW & FINANCIAL GUIDANCE

Jonny Mason

Group Chief Financial Officer

H1 2018/19 YoY Revenue £4,893m 1% EBIT £61m £(21)m EBIT % 1.2% (40)bps PBT £50m £(23)m Non-headline* £(484)m £(473)m Free cash flow £116m £(58)m EPS 3.3p (1.5)p Dividend 2.25p (1.25)p Net debt £(274)m £(68)m

73 * Total non-headline before interest and tax, includes £338m of non-cash impairment

Group financial highlights H1 2018/19

LFL Revenue EBIT Q1 2018/19 Q2 2018/19 H1 2018/19 H1 2018/19 YoY UK&I electricals Flat 3% 2% £42m £(28)m UK&I mobile (1)% 1% Flat £(31)m £5m Nordics Flat 7% 3% £44m £2m Greece 9% 12% 11% £6m Flat

Memo: International 1% 7% 4% £50m £2m

Group Flat 4% 2% £61m £(21)m

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Divisional financial highlights H1 2018/19

H1 2018/19 YoY Revenue £1,997m 2% EBIT £42m £(28)m EBIT % 2.1% (150)bps

• Overall market down ~2%, more than offset by share gains
• EBIT lower year-on-year due to:
• One-off credits in the prior year
• Lower services margin from mix to online and from computing

H1 2018/19 LFL 2%

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UK & Ireland electricals

H1 2018/19 YoY Revenue £1,009m (4)% EBIT £(31)m £5m EBIT % (3.1)% 30bps

• Postpay market down 3%*, gaining share in SIMO and SIM free
• Like-for-like flat for the half, up 1% in Q2
• EBIT higher due to change in debtor revaluations
• £(10)m in 2018/19 vs £(19)m in 2017/18

H1 2018/19 LFL Flat

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UK & Ireland mobile

* Sources: GfK and Dixons Carphone internal analysis based on 24 month contracts

H1 2018/19 YoY Revenue £1,887m 2% EBIT £50m £2m EBIT % 2.6% 10bps

• Share gains in Nordics and Greece
• Like-for-like up 3% in Nordics and 11% in Greece
• Two year like-for-like up 12% in Nordics and 18% in Greece benefitting

from share gains and market growth

• Further EBIT margin progression

H1 2018/19 LFL 4%

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International

78

£m H1 2018/19 Prior Year

• Op. net debt

(249) (271) Free cash flow 116 174 Dividend (90) (89) Pension (46) (46) Other (5) 26

• Cl. net debt

(274) (206)

Free cash flow and net debt

£m P&L Non-cash Cash (in year)2 Cash (future) Strategic change programme (57) (3) (24) (30) Impairment of assets (344) (338) (1) (5) Data incident costs (17) (2) (15)

• Regulatory costs1

(57)

• (34)

(23) Acquisition related (9) (15) (1) 7 Total before interest and tax (484) (358) (75) (51)

1 Regulatory costs includes pension equalisation and staff related provisions 2 In addition to c.£25m cash cost from previously provided property restructuring

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Non-headline before interest & tax

80

Financial guidance

Group PBT

• f around £300m

Capex

• f c.£190m

Net debt broadly flat Dividend to 3x cover Exceptional cash costs

• f c.£100m

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Financial guidance for 2018/19

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 flow

1

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Financial targets for medium term

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

pension contributions

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

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Prudent balance sheet

Capital allocation

CLOSING REMARKS

Alex Baldock

Group Chief Executive

• Clear strategy: grounded in what customers value and our strengths
• Financial upside, including >£1bn free cash flow
• Delivery underway:
• Builds on our strengths (especially scale)
• Focus on big growth opportunities (credit and online), well-equipped to win
• Improving retention and margins through easy customer experience and services
• Mobile turnaround, to profitability and cash generation
• Enablers:
• Capable and committed colleagues
• One Business, simpler and lower cost
• Stronger infrastructure
• De-risking execution
• Building a sustainable success: engaged colleagues, satisfied customers, more valuable for

shareholders

• Strong team: belief & determination

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In conclusion

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Alex Baldock Group Chief Executive Jonny Mason Group Chief Financial Officer

Q&A