Page 2 Dixons Retail - Interim Results Presentation - 17th December - - PDF document
WORLD TELEVISION Dixons Retail Interim Results Presentation - 17th December 2013 Dixons Retail - Interim Results Presentation - 17th December 2013 DIXONS RETAIL Sebastian James, Chief Executive Humphrey Singer, Group Finance Director
Dixons Retail - Interim Results Presentation - 17th December 2013 Page 2 DIXONS RETAIL Sebastian James, Chief Executive Humphrey Singer, Group Finance Director QUESTIONS FROM Assad Malic, Citi Geoff Ruddell, Morgan Stanley Charlie Muir Sands, Deutsche Bank Adam Cochrane, UBS
Dixons Retail - Interim Results Presentation - 17th December 2013 Page 3 Introduction Sebastian James, Chief Executive Officer Good morning, thank you and welcome to our Interim Results. Here we are in the very glamorous Google offices, much more exciting than inviting you to Hemel Hempstead, which I promise we'll do next time. Hemel has its qualities, but this has more, so that's great. A couple of things just to note, firstly you'll notice that we have two screens on the side, these are live feeds from two different stores, this is Kungenskurva, in Stockholm and this is closer to home, this is Guildford. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Presentation Sebastian James, Chief Executive Officer Google has been a fantastic partner for us, we've been very proud to work with them on the birth of their in store retail execution. Being Google, of course they've taken the thoughts that we developed together, they've driven those a lot further and we look forward to implementing those and developing those over time also. So let's turn now to the first half year results for Dixons. We've had a pretty good year. And I am genuinely pleased to say that we've had Group underlying sales of 7% up with like for likes 6% up. Also in this half year we've seen excellent progress on streamlining
leading on, done. In particular of course Turkey and Italy, where those transactions have now closed and on PIXmania where we are on track to close that at the end of this month, we've had all the necessary pre-conditions in place and we're now just getting the paperwork done. Gross margins were down 60 basis points, three things going on here, one - we've had a continued mix into tablets and other devices that are somewhat lower margin; secondly we've continued, and we will continue, to drive relentlessly to ensure that our pricing is
thirdly this is a transition in the shape of our P&L that we've been seeing for a little while now where our reported gross margins come down, but our overall EBIT comes up as we begin to get support from our suppliers in different parts of the P&L. So these are the three things that are contributing to that. We've seen excellent progress against all of the strategic priorities and I'll talk a little bit more about that in just a moment. And we have an underlying profit before tax of £30.2m, and we've returned to a reported first half profit for the first time in six years. Now that shouldn't of course make an enormous amount of difference, but to me it's comforting that this is a business that now makes money all year round, rather than just at Christmas, and I think that's a good step forward - if only psychologically.
Dixons Retail - Interim Results Presentation - 17th December 2013 Page 4 If I just have a quick canter around the different markets. UK and Ireland had a particularly good year. We showed continued market share gains and we had total sales up 7%, with like for likes up 9% in the first half and 12% in quarter 2. It's worth noting that we have now annualised the Comet exit, which happened just after these numbers closed by chance. Our operating profits in the UK were £31.4m up fivefold in the first half, which I think is an excellent result and we're sitting on a market share now of 23%, which gives us a good deal of strength and power in the market, more relevance to customers and to our suppliers and that is our business model. I'm extremely pleased and Katie and I, I think are both extremely pleased with the way that UK advocacy is going, and particularly in this last month's results we got our highest ever, 83% strong advocacy in store, 95% highly likely, or likely to recommend us and significantly less than 1% either unlikely, or very unlikely to recommend us. These are remarkable results, even in the context of any other retailer in the UK like John Lewis or whatever. A hundred of our stores, double the number from last year, 100 of our stores scored 100% highly likely to recommend us on a random exit poll. And if you think about how nice you have to be for 100% of customers to say I'm highly likely to recommend you I think that's an astonishing result. And unfortunately of course the fact that we can do it in 100 stores makes me wonder why we can't do it in 450 stores - Katie is laughing there, but that's got to be our goal, we've got to be perfect. Lots of new customer initiatives this year that the team have put in place, new customer journeys, we've put across a number of areas, particularly in white goods and those have been successful. Pay and collect we've driven - we now have the whole of our ranges available to pick up in our stores. We deliver very quickly to the store and customers can come in and collect those, whereas before it used to be only the stock that was in the store. White goods repairs, we launched a new service which has done very, very well, where we can now repair white goods, no matter where you bought them from, in your home and we're getting pretty good it. We got very good customer ratings on that service. We extended our next day delivery slots to 9 pm, so you can order a new cooker at 9 pm and have it delivered at 7 am and installed in your home the following morning anywhere in the country, I think that's a pretty remarkable result and indeed in the spine of England we can deliver same day. So these are the sorts of advances that put us in line or ahead of our principal competitors both on the high street and online. Interestingly not many customers want same day delivery, but you've got to show that you can do it; it's a very important trust point. Our business model relies on two things, we recognise that nearly every customer, more than 92% of customers, if they're buying a washing machine, a fridge, a computer, a TV, want to spend part of that journey in store. The problem is although they want the advice, and the support, and the help, and to touch and look, and feel and have these
Dixons Retail - Interim Results Presentation - 17th December 2013 Page 5 products demonstrated to them, they don't want to pay for it. And so we bridge that gap in two ways. The first thing is we must make price a hygiene factor, we have been driving our prices relentlessly down, these are our competitors, below the line means we're cheaper on average and above the line means we are on average more expensive. So these are Argos, John Lewis, AO - the smallish white goods online player and then this is Amazon. But against Amazon for all of our core lines, TVs, computers, white goods, small kitchen appliances we are at, or incredibly close to their prices, and in many cases cheaper. I urge you by the way to check this out, we so believe it in it that we'll be announcing things next year that will help customers to prove it for themselves and they're doing it in store anyway now with their smart phones and we think that's a good thing. So how do we pay for it, well really we are delivering to our suppliers something extraordinary which is customers like shopping with us, the customers like the conversation that we have with them. And for our suppliers that is a fantastic asset for them to use. Because if you imagine a curved OLED TV, if you say well why would I buy a curved TV, I can't think of anything more stupid than buying a curved TV? But when I show it to you and when you see the extraordinary immersive experience that you get looking at this TV, you think - I want that. And this is why suppliers value what we do, why they support us, and why we're able to drive our average revenue per product upwards against a market that is relentlessly
ways in which we pay for our stores. We've also started working much more closely with suppliers in the way we communicate with our customers. So this is - we are the first retailer in the UK to develop an advert with Apple, it's quite different to some of our normal historical
introduce the notion of us as experts with them. Let's just run the video. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Video Played
http://www.dixonsretail.com/media-centre/video-library#video-3206
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Officer So simple, clean, starting to talk about the product - for those of you who are England cricket fans I apologise for reminding you. We're also doing a number of things to continue to evolve our stores, we think that our stores need to get better every year, it is the velocity of motion, rather than where we've got to which drives our competitive advantage going forwards. We are working with Apple on their new in store execution, it's very beautiful, many of the clean lines and wood and stainless steel that you're all so familiar with have stayed, but they're
Dixons Retail - Interim Results Presentation - 17th December 2013 Page 6 thinking about the future and you'll notice there's a TV here, who knows what that means, but we'll be very interested to find out. We've also been thinking very hard about how to tell the laptop, the Windows story more
indeed Google have been telling their stories very effectively Windows have, up until now, not been able to and we again have worked with them really to be global leaders in helping them think through how to do that and this has been a real success. And then next year we're determined we are going to be absolutely the most fantastic place to buy anything to do with the kitchen and this is a mock-up of what our Thurrock store is going to look like roughly and I think it's going to be really terrific, absolutely fresh and modern. We need to keep driving our store experience forward. That doesn't mean spending a lot of money, I'm sure there will be questions later about
looking, modern, these are all words that have historically not been associated with Dixons, but which we are determined will be in the future. And how do we do that? We try and satisfy our customers by focusing on those things that customers care about. So price, I rate the retailer highly. Delivery options, having a store to go back to; if you take out price having a store to go back to is almost one of the most important things that customers value. And there are plenty of areas where I think we are weaker than our online competitors, for instance our website today for a variety of reasons is not as strong as some of our competitor websites, but by god by this time next year it will be. And you can see as you look down these lists of where are we good and where are our pure online competitors good, there are some areas where we have real advantages and we need to talk about that and we need to drive that and we need to push that for our customers. It's what we've been doing and it's what we intend to carry on doing. We don't want to do things at random; we want to focus on those things which really
allocate our resources. So turning now to Northern Europe, we've had an encouraging start actually as I spoke when we did our full year in June, we are having a bit of a skirmish with a local competitor, and I think in that context to have 3% like for like growth in more subdued markets, plus market share gains is a real result. Our first half profits were £45.5m, the Northern European business is incredibly profitable, down a shade on last year, but then you know any battle costs a few quid and actually we think that's a pretty good result. And we're having lots of fun with our new exclusive brands, we've signed a European licence with Pioneer and JVC, and we've launched those in Nordics. And actually the Pioneer telly was one of our most successful TVs within a few days of launch. So we think this is a thing that's got lots of legs and we'll look forward to seeing what we do about it in the UK as well.
Dixons Retail - Interim Results Presentation - 17th December 2013 Page 7 A couple of things we've done this year in Northern Europe, one is we've put in place – happy or not customer buttons. It's been incredibly effective and we've benchmarked it now against what we do in the UK with exit polling and what you get is a lot of real time data, thousands of customers a day - they're telling you what they think of you at the moment they're thinking it. And this has been very, very powerful; it's been rolled out right across the estate in Northern Europe. And I must say when I first saw it I was a doubter and now I'm a believer, I think this is really useful data and in the future I will share this data with you so that you can follow it as I do. And secondly of course as we talked about in the summer we've now rolled out KNOWHOW with the KNOWHOW branding in lots of different ways. Actually I don't know if you can see it live in the store, I can't see it anywhere, but we've rolled this out and that has had exactly the same effect on our value added sales in Scandinavia as it did in the UK, so roughly a doubling. In Greece, I think the management team have done a cracking job. Although like for likes are down quite significantly - total sales down 7%, remember last year we talked about having had a couple of lucky breaks. We had an absolutely scorching summer in Greece last year, whereas this year it was a chilly 30 degrees and also last year we had a digital switchover in Athens which wasn't anniversaried this year. So those two things meant we were up against some pretty tough headwinds and I think the team have done a pretty good job actually of holding our own, in fact growing market share in that space as well. Still a strong focus on costs, and above all a strong focus on cash. I'm hoping that Greece will not be a cash drain this year and will start a relentless march back to profitability over the next two or three years. I'm pretty confident that's going to
and customers really appreciate it and like it and has a very strong, very strong market share. So it's a good time to pause here - if we look at and just try to think about - well what does everything that has happened and everything that we can see in the immediate future, what does that mean for the profitability of our business? And I think this is a useful chart and forgive me if I've shown this to you in one to ones or whatever before. This is simply the picture of our profits, full year profits for last year, for '12/'13. So in the UK we made £113m, I think the market forecasts are and certainly we're on track to make quite a significant improvement in that over the next couple of years. In Northern Europe we're currently making 4.2% return on sales, we think that that's roughly the right sort of level for this business in the two or three year horizon. I would like to see Greece return to profitability over the two or three years. I think that Southern Europe, clearly Turkey and Italy are no longer part of our Group. We have taken action to take PIXmania out of our Group. With a simplified Group we can now look forward to streamlining and reducing our central costs. As the UK property portfolio comes into line we can look forward to this £25m of annual property loss, which is largely UK, reducing quite significantly. And
Dixons Retail - Interim Results Presentation - 17th December 2013 Page 8 finally we're in the slightly surprising position for a company with no net debt of having a nearly £42m finance charge. So as our bonds get repaid, as we begin to normalise our balance sheet that too will come down very significantly. And of course the net impact of all of those things is that we can be extremely confident. So without doing anything clever we're going to see a substantial uplift in our profit before tax. And I think that's a heartening message, because it allows us to say - well if the core business, the core platform is strong, what could we do with it, what could we build on these high and growing profits that we have generated in these businesses? And I wanted to raise this slide again; I know most of you have seen this before - when I started a couple of years ago, I thought there were three things that were incredibly
to align our prices with single channel internet and we had to find a way to pay for that. I think we've made excellent progress on that. It's just the beginning, there's plenty more to do but I think we've made good progress. We had to resolve our strategically weak positions; I think we've more or less done the tidying up that we need to do on that front. And we had to drive Group benefits, where I think we've begun the UK and the Nordics working more closely together to drive some benefits and you've seen our Experts Love and you've seen KNOWHOW and we're beginning to see how we can buy together and how we can share more activities together, and how we can use our shared services together, and how we can develop brands together. I think there is plenty more to go for in that area. And then we have a solid platform. And I've added this last arrow which is future
we're very, very keen to focus our activities on those areas which are doing to really drive shareholder returns. And so if I talk about that in a little bit more detail before passing to Humphrey. If we think about where we are today on the sustainable business model, we've driven
working, we've taken the costs out and we've built what I think is a sustainable model. So that I guess, so far is a tick, there's more to do, but so far is a tick. In terms of leadership we are leaders pretty much everywhere we operate, we are profitable pretty much everywhere we operate and we are growing pretty much everywhere we operate. We think that's a great place to be and I think that's the first step in terms of developing market leadership that's a good place to be. In terms of Group benefits we've done some things this year and I'll talk a little bit more about where else we can go. And we've seen therefore profits growth, strong cash
we've seen working capital come out so we have higher stock turns and we've put in place return on capital employed so that all of us are aligned wholly with the interests of
bit more about that.
Dixons Retail - Interim Results Presentation - 17th December 2013 Page 9 So what's next? How do we take this platform and make something exciting out of it? Remember without doing anything fancy we get that significant uplift in PBT going
terms of a sustainable business model it's time to think about our customers in lifetime terms, time to think about our customers digitally, like companies like Amazon think about them, like modern digital companies think about their customers in terms of their lifetime expectation and how do we serve customers better through their lives. Much better CRM, much better services that we give to customers, much more recurring revenue, we think that's very exciting and there are lots of opportunities there. We need to continue to lead on value and service, we need to drive our market share further and I think we need to think about mobile connectivity in the UK where we are trailers to the market leaders and we've got lots of very interesting thoughts about how we can drive that very significantly in the next couple of years. And that's additional to the plans that you've seen. And then in terms of Group benefits, as I say we think we've just scratched the surface, I think there's lots more to do in terms of sharing processes, in terms of commercial benefits and in terms of exploiting the international brands and we will be certainly be doing those over the next two or three years. And I think therefore we should see
cash will drive our cash generation in the business and again we will be extremely, extremely focused on return on capital employed for our shareholders. So with that I'm going to hand over to Humphrey who's going to go through the numbers in a bit more detail. Many thanks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Performance Humphrey Singer, Group Finance Director So just going through the numbers quickly, as Seb has already talked about we've driven underlying profit before tax of £30.2m, I'm glad to say that's the first interim reported profit in six years and a substantial improvement on where we have been. Group gross margins are down a bit by 60 basis points, broadly evenly between Northern Europe and the UK, and Seb, I think, has already talked predominantly about why that happened, but we can take some questions later. We're on track to deliver the £45m of cost reduction, that's despite actually exiting the businesses that we had, so that's just in the core businesses that we've got remaining. We've driven positive free cash of 59, which I think is a good result, leaving us with net cash of 55 and ROCE up 4 points from where we reported at the end of the year to 15.6%, but also up more than a point on the continuing businesses. So we're improving in the bits that we're retaining. Just to break out the profits in the fashion that Seb did for last year, but for the first half this year, because again I think it shows very clearly the business that we're running and how we're improving it. So UK and Ireland a really great profit result for the first half at
Dixons Retail - Interim Results Presentation - 17th December 2013 Page 10 £31m, nearly a fivefold increase on the prior year. Northern Europe down a little bit at £45.5m but still very strongly profitable. Greece a little bit worse year on year, but we did have those headwinds of the weather and the digital switch over. Central costs about the same as they were last year at £7.5m, but more work to do on that in the future. Property at £15.5m is predominantly the UK, just to set expectations for the year I've talked about a range of 20 to 25, I think this year if all the property deals land that we're expecting we'll be nearer the top end of that £25m range. But as Seb said earlier over time as we get through the restructuring of the UK portfolio we should see that number start to come down. Net finance charges at 17.9 is now predominantly the bonds and a bit on the RCF that we never use and one or two other items like finance leases, but again as we normalise the balance sheet, we should be able to make substantial reductions on that as we go
In terms of the total profit after tax we will see of course some quite significant costs of restructuring and exiting the businesses that we are now exiting. So that really just maps out for you that we start with the £30.2m of underlying profit. I'm glad to say a pretty small number now in the non-underlying category at 7.5, which is almost all to do with the pension charge that we've now put into non-underlying as it's very volatile and to do with market conditions not really how the business is trading. So that gets to a continuing PBT of 22.7. We then have the cost of the exit, which we've anticipated in all the three markets. We haven't actually completed the deal on PIXmania yet, that we hope to do at the end of this month, but in terms of how we account for it we take the estimated charges for all three of them now. And the tax charge, giving a loss of 83.5. In terms of cash generation, again a strong position I think for the first half of the year, so we're delivering underlying PBT of £30m add back depreciation, a small working capital inflow. So if you recall I talked about a £50m timing issue that was predominantly working capital at the end of last year with an extremely strong Easter. So underlying that we continue to drive, particularly in the UK, improvements in stock turn and the way that we're managing working capital, so I'm happy with that result for this first half of the year. Other is the usual - so £20m of the £35m is the usual add back of non-cash property
which are offset on the next chart you'll see a revaluation of the cash balances we have in Northern Europe where the NOK has recently devalued quite substantially. So there's an inflow in this chart and an offsetting outflow in the next chart. Capex at 41.7, so just to give some guidance on that for the year, because we're now a smaller business the number will come down a bit; so depreciation actually for the
this year is to be in the sort of 100 to 105 range, of course it depends exactly how the timing of various projects go. And ongoing we stick to our previous guidance that we
Dixons Retail - Interim Results Presentation - 17th December 2013 Page 11 like to manage capex underneath our ongoing depreciation levels. So there will be for the new Group, the new smaller group a slightly lower capex number, but the same kind
Taxation of £25m is Nordics predominantly, so that cash outflow happened this year in the first half, last year it happened in the second half, but no change overall to the
£59m, which I think is a good result. So that leaves the group I think with a healthy net funds position. So we started with £42m, we've driven those free cash flows that I've just talked about, we've got some cash outflow on the discontinued businesses, so as at the end of October this was predominantly the trading losses on three businesses that we're exiting. Obviously in the second half we're going to have some quite big cheques to write to exit PIXmania and cash that we will be leaving - have left with the Italian business. So there'll be a much more significant outflow for those dowries in the second half of the year. The pension contribution is £10m in the first half; there will be another £10m in the second half, so as previously advised there'll be an additional pension contribution of £20m this year. So overall we get to a net funds position of £55m, which is again a good position. So in summary I think we've had a really encouraging start to the year. We've grown in particular UK profits substantially; we have streamlined the Group very significantly. I think that's happened faster and cheaper than actually Seb and I could have dreamt of really when we look back two years ago. So we're very pleased about that. We've disposed of Turkey and Italy, those are completed, PIXmania we're on track to complete all the elements of the transaction by the end of December. We are driving, as I said before, costs down, that's a non-ending journey, it will continue every year, so we're on track to deliver £45m this year. We've generated good cash as a result; we're in a net cash position for the first time in six years at the half year. It is a tough market out there, so we obviously now have lapped the benefit of Comet leaving the market. But we remain extremely focused on delivering Christmas. We'll try and avoid answering any questions about Christmas trading because it's not quite happened yet and we'll all be back together in a very short months' time in mid-January to talk about that. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Question It is a general one so probably worth asking the group. So pricing, the chart to Amazon hasn't really moved in a while now? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Officer
Dixons Retail - Interim Results Presentation - 17th December 2013 Page 12 No it's moved quite a bit, every point is hard won right now because now we're right down at the sort of short strokes, but the main things that we've done is we move whole categories to be aligned. So this year we moved some of the white goods categories and the small kitchen appliance categories are now in line. And so now for almost all the big stuff that you would choose to go to us to buy you would find that we're absolutely in line. Where it's more difficult is letterbox items, particularly ones that come from Luxemburg where there's a sales tax advantage for no good reason and so on. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Question So I think you've said that there is a plan to address that? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Officer We drive it basis point by basis point; we bring it close every week, every year, every
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assad Malic, Citi Morning guys, it was really a question when you've talked about your position today and future opportunities, you mentioned sort of cost significantly reduced - sort of position today, but I notice it was absent in the future opportunities. How are you thinking about cost reductions looking out over the next couple of years? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Humphrey Singer, Group Finance Director I think as I've just said it's a sort of never ending game, so we still see lots more
through our planning season in sort of January/February time and you know we'll kind of assess the situation and we might come back with another number to talk about. We haven't talked about that yet, but I suspect we probably will. So it doesn't end, it keeps going, we see more opportunity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Officer I think if you come back in ten years and you say - have you still got a cost agenda - absolutely we do. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assad Malic, Citi And just in terms of the second half shape, is there anything we should be mindful of in terms of Easter last year that we should think about? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dixons Retail - Interim Results Presentation - 17th December 2013 Page 13 Humphrey Singer, Group Finance Director It was early and it was wet and it was perfect electrical retailing conditions. It's going to be later and who knows what the weather is going to be like. So it was a stellar Easter so we are quite mindful of that comp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Officer I mean in the grand scheme of things it doesn't make a blind bit of difference, but for the year end, for the half year, coming where it does it can make quite a bit of difference particularly to cash. So if we have a garden centre Easter, which is our worst nightmare, people actually leaving their homes and so on and then that's more difficult for us. If we have a wet and drizzly Easter where people want to cosy up and watch telly then that's good for us. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assad Malic, Citi Thank you. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Geoff Ruddell, Morgan Stanley In the past you've deferred answering questions about the dividend saying that you weren't sure how much it was going to exit your problem children. Now that you've done that when can we expect a dividend? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Humphrey Singer, Group Finance Director Well to be fair we haven't quite completed the third of the three transactions, we haven't yet had this Christmas and I think our message remains at this point in time that we are people that very much want to move this business from the camp of those that aren't paying a dividend into the camp of those that do. But we need, and indeed the Board will make the decision to do that when it's right and when we have really good visibility
to repay. But we are very focused on that question and assessing when the right moment is to recommence a dividend. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Officer We'll do it just as soon as we think it's safe and reasonable to do so. We are - as I say we are a very equity focused management team, we want shareholders to get a return, we don't like the club we're in, we want to be in the other club and we'll do that as soon as we can. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Geoff Ruddell, Morgan Stanley And do you have a view on what the right optimal balance sheet structure is …? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dixons Retail - Interim Results Presentation - 17th December 2013 Page 14 Humphrey Singer, Group Finance Director Yeah, as we've said before we feel that the leverage we have on our - not actually on the balance sheet, but effectively there with all the leases means that it's not right to have the bonds long term that we have, it was right to have it when we needed them and we needed the liquidity. So our plan is to not refinance those bonds, is just to allow them to be paid off. I think we'll end up with some kind of bank facility, but probably headroom only, which is effectively how we've been really since the summer of 2011. And that broadly is the structure that we're looking at. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Geoff Ruddell, Morgan Stanley And thereafter you'd be happy to return most of the cash you generate? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Officer Well unless we have great projects that are exciting, but by and large we don't want to hang onto it for our good health. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Charlie Muir Sands, Deutsche Bank The £15m of property restructuring costs and the guidance of £25m for the year, how much in terms of the UK square metres would we expect that to take it down, it looks like 250,000 square feet came out in the first half alone. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Humphrey Singer, Group Finance Director To be honest I don't have the number on the top of my head what this year's projected number is, there's a real mix of collapsing two superstores into one where obviously you lose quite a lot of square footage, and then also exiting high streets where it's really quite small. But you'll have noticed actually now in the numbers the square footage is starting to come down. If you look in the appendix of the pack we quote those numbers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Officer We had 458 stores this morning in the UK and we've guided I think to 380 to 400 as our target point and we still think that's about right. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Charlie Muir Sands, Deutsche Bank Thank you. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adam Cochrane, UBS
Dixons Retail - Interim Results Presentation - 17th December 2013 Page 15 Two questions, what's the interest cost guidance for this financial year please? And secondly on the Nordics, you mentioned this mystery competitor, can you just give us a bit more detail … . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Officer No mystery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adam Cochrane, UBS No mystery, well un-mystify it for us, what are they doing, which countries are they in, what's going on? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sebastian James, Chief Executive Officer Well I'll give the brief answer but Jaan Ivar is around so he knows it only too well. A local competitor which used to operate in all four territories and was taken over by a private equity firm, they promptly let their Swedish division go bankrupt which was helpful to us obviously in Sweden. And they've taken a more aggressive stance in Norway and Denmark, in particular, which we believe to have been almost entirely unsuccessful, so - but nevertheless every skirmish costs a few quid. We're not beyond hoping that sometime in the next two or three years we might have another Comet moment, but we'll have to see how that goes. But I urge you to chat to Jaan Ivar. And then on the interest question? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Humphrey Singer, Group Finance Director Yes, so I think the market generally or the analysts generally have got the interest charge at around about 40/41, something like that for this year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adam Cochrane, UBS What’s the difference in weighting between H1 and H2 on the interest charge? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Humphrey Singer, Group Finance Director There's not much difference - so a lot of the elements of it are very fixed, like the bond and the RCF that we don't borrow, so that's also a fixed cost. The bit that you can't predict is FX, so there are some more volatile FX numbers that go through that line. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adam Cochrane, UBS Thank you. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dixons Retail - Interim Results Presentation - 17th December 2013 Page 16 END DISCLAIMER This transcription has been derived from a recording of the event. Every possible effort has been made to transcribe this event accurately; however, neither World Television nor the applicable company shall be liable for any inaccuracies, errors or omissions.