Dixons Carphone plc Interim results 2016/17

RNS Number : 7713R

Dixons Carphone PLC

14 December 2016

 

Dixons Carphone plc

A strong half year with Headline profit before tax up 19%*

Highlights: Interim results for the 26 weeks ended 29 October 2016*

•       Group H1 like-for-like revenue⁽³⁾ up 4%; Q2 like-for-like up 4%; statutory revenue for H1 up 11%

•     Market share gains across all markets

•       Group Headline PBT⁽¹⁾ of £144 million (2015/16: £121 million), up 19%

•     Group Headline EBIT⁽¹⁾ of £153 million (2015/16: £135 million)

•     Group Headline basic EPS⁽¹⁾ from continuing operations 10.9p (2015/16: 7.5p)  

•       Statutory profit before tax of £104 million (2015/16: £78 million) after non-Headline charges of £40 million (2015/16: £43 million), statutory basic EPS of 8.1p (2015/16: 4.8p)

•       Interim dividend of 3.5p, payable in January 2017, an increase of 8%

•       Free cash flow⁽⁸⁾ of £65 million (2015/16: £64 million) and net debt of £285 million (2015/16: £378 million)

•       CWS: Announcement of connected home partnership with SSE

				Headline revenue (1)				Headline profit / (loss) (1)
		H1 16/17	H1 15/16		Reported rate	Local currency(2)	Like-for- like (3)		H1 16/17	H1 15/16
	Note	£m	£m		% change	% change	% change		£m	£m
UK & Ireland	(4)	2,988	2,872		4%	3%	5%		109	101
Nordics	(5)	1,474	1,198		23%	5%	2%		34	30
Southern Europe	(6)	309	257		20%	2%	7%		5	1
Connected World Services	(7)	98	67		46%	42%	n/a		5	3
Group		4,869	4,394		11%	5%	4%		153	135
Net finance costs									(9)	(14)
Profit before tax									144	121
Tax									(19)	(35)
Profit after tax									125	86

Headline basic EPS(1)

10.9p

7.5p

Notes:     

-  In the UK & Ireland both like-for-like and total revenue were negatively affected by approximately 1% from refurbishment disruption.

-  In the UK & Ireland, like-for-like revenue improved by approximately 3% as a result of sales transferred from closed stores.

*  See notes on page 3 for an explanation of the basis of preparation and defined terms. This document also uses definitions that are set out in the Group's Annual Report and Accounts for the year ended 30 April 2016 on pages 154 to 156.

Q2 results

		Reported rate % change	Local currency(2) % change	Like-for- like (3) % change
UK & Ireland		5%	4%	6%
Nordics		28%	6%	2%
Southern Europe		17%	(3)%	1%
Connected World Services		48%	42%	n/a
Group		12%	5%	4%

Notes:     

-  In the UK & Ireland both like-for-like and total revenue were negatively affected by approximately 1% from refurbishment disruption.

-  In the UK & Ireland, like-for-like revenue improved by approximately 4% as a result of sales transferred from closed stores.

Seb James, Group Chief Executive, said:

"Two years ago when we combined the businesses of Dixons Retail and Carphone Warehouse, we set out a strategy to create a powerful engine to help our customers navigate an increasingly complex and interconnected world. It is therefore, very encouraging again to be able to report good growth in both sales and profits across all of our businesses.

Overall, it has been a strong start to the year with like-for-like growth of 4% and Headline PBT growth of 19%. The teams across the business have achieved this through the successful execution of a wide array of initiatives. These have varied from an extremely ambitious property programme in the UK and Ireland that is delivering exactly as expected, the commissioning of the most modern small products warehouse in Europe for our Nordic business, the near completion of our merger activities across the Group, the integration of two ancillary businesses including the UK's largest independent reseller of multiplay products, a totally new services proposition in Leeds, and a great many more. Together, these continue to improve the proposition that we put before our customers every single day, and are responsible for the continued growth in both customer satisfaction and market share that we have been enjoying. We are far from being satisfied, however. As we go into our most critical trading period, the teams are drawing up a programme for next year that is every bit as ambitious, innovative and customer-focused. 

Looking forward, we remain optimistic about our ability to continue to gain market share in all our key markets, and, while we have still not seen any effect on consumer demand as a consequence of Brexit, we have been planning for the possibility of more uncertain times ahead. In particular, we have been focusing on reducing our fixed cost base, identifying areas of potential market share growth if the world becomes a tougher place for our competitors, and generally preparing for all eventualities - just in case. We are also planning our offer so that potential currency impacts are minimised for the customer, and are ensuring that next year, as always, everybody can be absolutely sure that they won't get a better deal anywhere.

We continue to make great progress within CWS and I am delighted to be announcing today a new strategic partnership with SSE who will be using our honeyBee software to enable, in time, their 5 million customers to monitor, control and maintain their homes and appliances at the touch of a button. Our leading services brand, Knowhow, will support the partnership with its comprehensive repair and maintenance infrastructure.

Finally, I would like to thank my 42,000 colleagues who make up the great shared enterprise that is Dixons Carphone for their impressive work this year and wish them all - from Miami to Malmö to Manchester - a very happy Christmas and New Year."

Investor and analyst call

There will be a conference call for investors and analysts at 9:00 am today:

Dial-in details - UK/International: [phone]; passcode: 9524 (to be quoted to the operator)

Seven-day replay - UK/International: [phone]; passcode: 4868557 #

Accompanying slides will be available on the company website, www.dixonscarphone.com, at 7:00am

Next announcement

The Group will publish a trading update on 24 January 2017 and will host a management presentation that morning at the Deutsche Bank offices in London

For further information

Kate Ferry	IR, PR & Corporate Affairs Director	[phone]
Mark Reynolds	Head of Investor Relations	[phone]
Hannah Collyer	Head of Media Relations	[phone]
Nick Cosgrove, Helen Smith	Brunswick Group	[phone]
Information on Dixons Carphone plc is available at www.dixonscarphone.com Follow us on Twitter: @dixonscarphone and @DCSebJ

 

About Dixons Carphone: Dixons Carphone plc is Europe's leading specialist electrical and telecommunications retailer and services company, employing over 42,000 people in eleven countries. Focused on helping customers navigate the connected world, Dixons Carphone offers a comprehensive range of electrical and mobile products, connectivity and expert after-sales services from the Geek Squad and Knowhow. Dixons Carphone's primary brands include Carphone Warehouse, CurrysPCWorld and Simplifydigital in the UK & Ireland, Elkjøp, Elkjøp Phonehouse, Elgiganten, Elgiganten Phonehouse, Gigantti and Lefdal in the Nordic countries, Kotsovolos in Greece, Dixons Travel in a number of UK & Ireland airports and Phone House in Spain. Our key service brands include Knowhow in the UK, Ireland and the Nordics, and Geek Squad in the UK, Ireland and Spain. Business-to-business (B2B) services are provided through Connected World Services, PC World Business and Carphone Warehouse Business. Connected World Services aims to leverage the Group's existing expertise, operating processes and technology to provide a range of services to businesses. Dixons Carphone was voted 'Retailer of the Year' at the Retail Week Awards 2016.

Notes

(1)   Headline results exclude amortisation of acquisition intangibles, Merger integration and transformation costs, property rationalisation costs, acquisition related costs, net interest on defined benefit pension schemes and discontinued operations (comprising Phone House operations in Germany, Netherlands and Portugal). Such excluded items are described as 'Non-Headline'. The directors consider 'Headline' performance measures to be a more accurate reflection of the ongoing trading performance of the Group and believe that these measures provide additional useful information for shareholders on the Group's performance and are consistent with how business performance is measured internally. For further details see notes 1 and 3 to the financial information.

(2)   Change in local currency revenue reflects total revenues on a constant currency and period basis.

(3)   Like-for-like revenue is calculated based on Headline store and internet revenue using constant exchange rates. New stores are included where they have been open for a full financial year both at the beginning and end of the financial period. Revenue from franchise stores are excluded and closed stores are excluded for any period of closure during either period. Customer support agreement, insurance and wholesale revenues along with revenue from Connected World Services and other non-retail businesses are excluded from like-for-like calculations. Revenue from Carphone Warehouse SWAS are included in like-for-like. We consider that like-for-like provides useful additional information to reported revenue as this enables performance of the Group to be measured on a consistent year-on-year basis.

(4)   UK & Ireland comprises operations in the UK and Ireland and the Dixons Travel business.

(5)   Nordics comprises operations in Norway, Sweden, Finland, Denmark and Iceland.

(6)   Southern Europe comprises operations in Spain and Greece.

(7)   Connected World Services ("CWS") comprises the Group's B2B operation which leverages the specialist skills, operating processes and technology of the Group to provide managed services to third parties looking to develop their own connected world solutions and the Group's share of results of its joint venture.

(8)   Free Cash Flow comprises cash generated from / (utilised by) continuing operations before special pension contributions, less net finance expense, less income tax paid and net capital expenditure. We consider this useful as it shows cash resources generated for the Group to invest in its future growth and to create shareholder value.

Certain statements made in this announcement are forward-looking. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future events or results referred to in these forward-looking statements. Unless otherwise required by applicable laws, regulations or accounting standards, we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. Information contained on the Dixons Carphone plc website or the Twitter feed does not form part of this announcement and should not be relied on as such.

 

Performance review

The performance review below refers, unless otherwise stated, to Headline information for continuing businesses. The basis for the preparation of this information is described on page 3.

Group

The Group has seen strong growth in the first half, on a local currency basis revenue has increased 5%. Like-for-like revenue increased 4%, with growth across all divisions. Total reported revenue has increased 11% to £4,869 million benefiting from the weakening of the Pound against the Euro and Norwegian Krone following the announcement of the UK's EU Referendum results.

Headline EBIT has increased 13% to £153 million (2015/16: £135 million), ahead of revenue growth, driven by solid trading results and the continued delivery of synergies related to the Merger.

In the first half the Group has successfully integrated the Simplifydigital and InfoCare businesses acquired in the prior year with these businesses contributing revenues of £20 million and £24 million respectively.

UK & Ireland

Revenue in the first half in the UK & Ireland increased by 3% on a local currency basis to £2,988 million (2015/16: £2,872 million). Like-for-like revenue increased 5% with the difference between total revenue and like-for-like revenue growth predominantly due to a reduction in store numbers following the property rationalisation programme, partly offset by revenues related to the Simplifydigital acquisition.

The mobile business continues to see strong performance in the UK postpay market and higher revenues in handset sales, whilst iD Mobile has now surpassed 450,000 customers.

The electricals business has delivered good growth in the first half, driven by white goods, consumer electronics and multiplay partially offset by decreased revenue from computing.

This revenue growth combined with cost savings resulted in Headline EBIT growth of 8% to £109 million (2015/16: £101 million).

The property rationalisation programme, as set out during 2015/16, remains on track.

Nordics

Whilst the Nordic business continues to experience a highly competitive environment, the first half has seen 5% local currency revenue growth and 2% on a like-for-like basis. Reported revenue in the first half was up 23% to £1,474 million (2015/16: £1,198 million) benefiting from the weakening in the Pound.

At the end of November 2015, as part of our services strategy, we acquired InfoCare Workshop, a service and repair business. This business has now been fully integrated delivering revenues of £24 million in the period. 

Nordics Headline EBIT was £34 million (2015/16: £30 million) with the increase reflecting the weakening in the Pound, where in local currency the increase in revenues in the first half and cost saving initiatives was offset by a continued determination to offer competitive prices in the market.

Southern Europe

The strong Southern Europe results in the first half were driven by growth across all major categories in Greece reflecting a more stable economic environment, and in particular air conditioning was boosted by the hot summer temperatures.

Our Spanish business continues to face changes in market trends with post-pay volumes down year on year offset by increases in multiplay and handset only volumes. The business model continues to adapt to these market changes to retain market share and profitability by moving towards a franchise model. Total franchisees increased from 224 to 263 between October 2015 and October 2016.  

Southern Europe Headline EBIT has increased to £5 million (2015/16: £1 million) primarily reflecting the strong performance in Greece and the weakening of the Pound against the Euro.

Connected World Services 

CWS performed strongly in the first half, with revenue up 46% to £98 million (2015/16: £67 million) benefiting from the consultancy agreements with Sprint, licensing of the honeyBee platform and the new distribution agreement with Talk Talk announced in the prior year.

Headline EBIT has increased to £5 million in the period (2015/16: £3 million) reflecting the increased revenue noted above. Headline EBIT of £5 million includes £8 million share of losses from the Sprint joint venture reflecting the continued investment by both partners in the roll out of Sprint branded stores. The Sprint joint venture store rollout remains on track, with a total of 42 stores operational across 7 states as at the end of October 2016.

Today we have also announced a new strategic partnership with SSE. This is an excellent example of how adaptive our honeyBee software is. With SSE we are developing an interactive platform that will enable customers to monitor, control and maintain their homes and appliances at the touch of a button. This will be backed up by Knowhow, who will be providing the repair and support infrastructure necessary to meet all customers' maintenance needs.

Finance costs

Headline net finance costs have decreased from £14 million to £9 million largely as a result of charges relating to the renewed RCF recognised in the prior year. The Non-Headline costs of £8 million (2015/16: £8 million) relate to the interest on the UK defined benefit pension scheme. The total statutory net finance costs have decreased from £22 million to £17 million.

Tax

The Group's Headline effective rate of taxation before one off tax charges / credits for the full year has been estimated at 23% (2015/16: 25%) with this rate being applied to the half year results. The rate is higher than the UK statutory rate of 20% due mainly to higher statutory rates in the Nordics, and certain non-deductible items mainly in the UK. In calculating the total tax charge for the half year, a one-off tax credit of £16 million has been recognised following successful resolution of a prior year tax issue, which results in a total effective rate of taxation on Headline earnings of 13%, with an effective rate of taxation on Non-Headline earnings of 20% The total statutory effective rate of taxation is 11%.

Cash and movement on net debt

Free cash flow

	H1 16/17                         £m	H1 15/16                         £m
Headline EBIT	153	135
Share of results of Joint Venture	8	-
Depreciation and amortisation	75	65
Working capital	16	17
Capital expenditure	(112)	(110)
Taxation	(16)	(12)
Interest	(15)	(19)
Free cash flow before restructuring items	109	76
Restructuring costs	(44)	(12)
Free cash flow - continuing operations	65	64

Free cash flow before restructuring in the first half was an inflow of £109 million (2015/16: £76 million). The Group had a working capital inflow of £16 million, comparable to the prior period.

Capital expenditure in the first half was £112 million comparable to the £110 million in the prior period. Capital expenditure in the current period reflects the continued spend on the integrated retail offering and the capital element of the property rationalisation programme announced in the prior year, investment in IT platforms and continued development in both our retail and Connected World Services businesses.

Taxation paid has increased from £12 million to £16 million largely due to the timing of tax payments and increased taxable profits, offset by a successful resolution of a prior year tax issue resulting in a cash receipt in the period.

The reduction in interest paid is as a result of facility fees that were paid in H1 2015/16 and the Group's new revolving credit facility incurring a lower interest rate. Restructuring costs primarily comprise the cash costs associated with the Merger and transformation activities and property rationalisation programme noted below within Non-Headline items.

A reconciliation of free cash flow to cash flow from operations is presented in note 9 to the financial information.
 

Funding

	H1 16/17 £m	H1 15/16 £m
Free cash flow	65	64
Dividends	(75)	(69)
Acquisitions and disposals including discontinued operations	(2)	(91)
Investment in joint venture	(16)	-
Net issue of new shares and purchase of own shares	-	(7)
Pension contributions	(18)	(18)
Currency translation differences	28	3
Movement in net debt	(18)	(118)
Opening net debt	(267)	(260)
Closing net debt	(285)	(378)

At 29 October 2016 the Group had net debt of £285 million (2015/16: £378 million). A reconciliation of net debt is presented in note 9 to the financial information. Free cash flow was an inflow of £65 million (2015/16: inflow of £64 million) for the reasons described on the previous page.

Of the free cash flow, £75 million was returned to shareholders in the form of dividends for the 2015/16 financial year.

Net outflows associated with acquisitions and disposals in the current period largely relates to deferred consideration payments for Simplifydigital of £10 million, the 'Epoq' kitchen business of £2 million and the acquisition of 10 FONA stores in Denmark of £6 million (2015/16: CPW Europe Acquisition final payment of £26 million).This is offset by cash inflows relating to discontinued operations of £16 million (2015/16: £65 million outflow).

The investment in joint venture of £16 million relates to additional contributions to the Sprint joint venture during the period.

Statutory results

Income statement - continuing operations

	H1 16/17 £m	H1 15/16 £m
Revenue	4,869	4,394
EBIT	121	100
Net finance costs	(17)	(22)
Profit before tax	104	78
Tax	(11)	(23)
Profit after tax	93	55
Basic EPS	8.1p	4.8p
Diluted EPS	8.0p	4.6p

EBIT increased from £100 million to £121 million predominantly reflecting the increased Headline EBIT as discussed above, which has been offset by the non-Headline costs recognised of £32 million (2015/16: £35 million).

Net finance costs have decreased by £5 million to £17 million largely as a result of charges relating to the renewed RCF recognised in the prior year.

The tax charge has been calculated based on the full year forecast effective tax rate of 23%, before the one-off tax charges / credits and has decreased from £23 million to £11 million largely as a result of the recognition of a one-off tax credit of £16 million during H1 2016/17 following the successful resolution of a prior year tax issue.

The increase in statutory basic EPS reflects the improved performance in the period, with no significant changes in the number of shares in issue.

Non-Headline items

Headline profit before tax is reported before Non-Headline charges. These charges are analysed below:

		H1 16/17 £m	H1 15/16 £m
Headline profit before tax - continuing operations		144	121
Merger and transformation related costs		(15)	(15)
Amortisation of acquisition intangibles		(17)	(20)
Net pension interest		(8)	(8)
Profit before tax  - continuing operations		104	78

Costs incurred in relation to the Merger in the first half of 2016/17 relate to integration costs of £9 million (2015/16: £15 million) and functional transformation costs of £6 million (2015/16: £nil). Integration costs primarily reflect professional fees, employee severance and incentive costs associated with the initial integration of the two merged businesses. During the current period functional transformation projects have commenced across the finance, procurement and human resources functions to rationalise shared service centre activities and harmonise policies and procedures across key support functions of the business.

The charge for the amortisation of acquisition intangibles was £17 million (2015/16: £20 million) with the decrease due to some of the acquisition intangibles arising on the CPW Europe Acquisition being fully amortised during the prior period.

Net pension interest was £8 million (2015/16: £8 million) reflecting the charge incurred in relation to the Dixons Retail UK pension scheme. Further details on the pension scheme can be found in the Pensions section later in this performance review.

For further details of Non-Headline items see note 3 to the interim financial information.

Discontinued operations

As previously reported, the Group's retail operations in Germany, the Netherlands and Portugal were treated as discontinued operations following the decision to exit these businesses. The sale of operations in Germany was completed on 5 May 2015, the Netherlands on 30 June 2015 and Portugal on 31 August 2015. A net loss of £9 million was recognised in relation to these businesses in H1 2015/16 (year ended 30 April 2016: £18m loss). No profit or loss relating to discontinued operations has been recognised in the 26 weeks to 29 October 2016.

Balance sheet

	29 October 2016                         £m	30 April 2016                         £m
Goodwill	3,189	3,054
Other fixed assets	971	906
Investment in Joint Venture	12	5
Working capital	(339)	(361)
Net debt	(285)	(267)
Tax, pension & other	(644)	(477)
	2,904	2,860

Goodwill has increased by £135 million to £3,189 million largely as a result of foreign exchange movements for goodwill held relating to the Nordics and Spain, and additions of £3 million relating to the acquisition of 10 FONA stores in Denmark.

The net working capital liability has decreased by £22 million to £339 million, largely as a result of the increase in the carrying value of ongoing network commission receivables. Overall net debt has increased by £18 million as described in the cashflow section above.

Tax, pension and other liabilities have increased by £167 million largely as a result of the increase in the UK defined benefit pension scheme of £174 million, offset by a decrease in deferred consideration of £10 million as a result of payments made during the year.

 

Cash flow statement

	H1 16/17                         £m	H1 15/16                         £m
EBIT	121	100
Depreciation and amortisation	92	85
Working capital	(21)	11
Other operating cash flows	(19)	(22)
Cash flows from operating activities	173	174
Acquisitions	(18)	(26)
Investment in joint venture	(16)	-
Capital expenditure	(112)	(110)
Cash flows from investing activities	(146)	(136)
Dividends paid	(75)	(69)
Other financing cash flows	(29)	56
Cash flows from financing activities	(104)	(13)
Cash flows from continuing operations	(77)	25
Cash flows from discontinued operations	16	(9)
	(61)	16

The statutory EBIT for the Group has increased for the reasons discussed in the performance section above. The statutory EBIT includes the charges of £32 million relating to the 'Non-Headline' items. Depreciation and amortisation charges remained relatively consistent in the period. Working capital movements are largely as a result of timing variances. Acquisitions outflows in the current period of £18 million relate to £10 million deferred consideration payment for the acquisition of Simplifydigital, £2 million in the Nordics in relation to the 'Epoq' kitchen business acquired in 2011/12 and £6 million for the acquisition of 10 FONA stores in Denmark. Investment in joint venture of £16 million relates to further contributions into the Sprint joint venture.

Other financing cash flows of £29 million primarily relate to the repayment and drawdown of cash under the revolving credit facilities.

Comprehensive income / changes in equity

Total equity for the Group has increased from £2,860 million to £2,904 million primarily reflecting the total statutory profit of £93 million in the period, the gain on retranslation of overseas operations of £180 million, the payment of dividends of £75 million and the increase in the IAS19 defined benefit pensions deficit for the UK pension scheme, reflecting the change in discount and inflation rates in the period, resulting in an actuarial loss of £184 million.

Pensions

The IAS 19 accounting deficit of the defined benefit section of the UK pension scheme amounted to £646 million at 29 October 2016 (31 October 2015: £423 million, 30 April 2016: £472 million). Contributions during the period under the terms of the deficit reduction plan amounted to £18 million (2015/16: £18 million).

The deficit has increased during the first half largely as a result of changes in financial assumptions, primarily the discount and inflation rates, which determine liabilities, partially offset by an increase in asset values.

Dividends

The Board has declared an interim dividend of 3.5p per share, up from 3.25p per share last year. The ex-dividend date is 29 December 2016, with a record date of 30 December 2016 and an intended payment date of 27 January 2017.

Financial Information

Consolidated income statement

		26 weeks ended 29 October 2016 Unaudited			26 weeks ended 31 October 2015 Unaudited
	Note	Headline* £m	Non-Headline* £m	Total £m	Headline* £m	Non-Headline* £m	Total £m
Continuing operations
Revenue	2	4,869	-	4,869	4,394	-	4,394
Profit / (loss) from operations before share of results of joint venture		161	(32)	129	135	(35)	100
Share of results of joint venture		(8)	-	(8)	-	-	-
Profit / (loss) before interest and tax	2,3	153	(32)	121	135	(35)	100
Finance income		7	-	7	9	-	9
Finance costs		(16)	(8)	(24)	(23)	(8)	(31)
Net finance costs		(9)	(8)	(17)	(14)	(8)	(22)
Profit / (loss) before tax		144	(40)	104	121	(43)	78
Income tax (expense) / credit	4	(19)	8	(11)	(35)	12	(23)
Profit / (loss) after tax - continuing operations		125	(32)	93	86	(31)	55
Loss after tax - discontinued operations	10	-	-	-	-	(9)	(9)
Profit / (loss) after tax for the period		125	(32)	93	86	(40)	46
Earnings per share (pence)	5
Basic - continuing operations		10.9p		8.1p	7.5p		4.8p
Diluted - continuing operations		10.7p		8.0p	7.2p		4.6p
Basic - total				8.1p			4.0p
Diluted - total				8.0p			3.9p

*    Headline results exclude amortisation of acquisition intangibles, Merger integration and transformation costs, property rationalisation costs, acquisition related costs, net interest on defined benefit pension schemes and discontinued operations (comprising Phone House operations in Germany, Netherlands and Portugal). Such excluded items are described as 'Non-Headline'. For further details see notes 3 and 10.

Consolidated income statement

					Year ended 30 April 2016 Audited
	Note				Headline* £m	Non-Headline* £m	Total £m
Continuing operations
Revenue	2				9,738	-	9,738
Profit / (loss) from operations before share of results of joint venture	2,3				472	(164)	308
Share of results of joint venture					(4)	-	(4)
Profit / (loss) before interest and tax					468	(164)	304
Finance income					17	-	17
Finance costs					(38)	(20)	(58)
Net finance costs					(21)	(20)	(41)
Profit / (loss) before tax					447	(184)	263
Income tax (expense) / credit	4				(110)	26	(84)
Profit / (loss) after tax - continuing operations					337	(158)	179
Loss after tax - discontinued operations	10				-	(18)	(18)
Profit / (loss) after tax for the period					337	(176)	161
Earnings per share (pence)	5
Basic - continuing operations					29.3p		15.6p
Diluted - continuing operations					28.4p		15.1p
Basic - total							14.0p
Diluted - total							13.6p

*    Headline results exclude amortisation of acquisition intangibles, Merger integration and transformation costs, property rationalisation costs, acquisition related costs, net interest on defined benefit pension schemes and discontinued operations (comprising Phone House operations in Germany, Netherlands and Portugal). Such excluded items are described as 'Non-Headline'. For further details see notes 3 and 10.

Consolidated statement of comprehensive income

		26 weeks ended 29 October 2016 Unaudited £m	26 weeks ended 31 October 2015 Unaudited £m	Year ended 30 April  2016 Audited £m
Profit for the period		93	46	161
Items that may be reclassified to the income statement in subsequent years:
Cash flow hedges
Fair value remeasurement gains / (losses)		28	2	(12)
Revaluation of held for sale investments		-	5	-
Exchange gain / (loss) arising on translation of foreign operations		180	(71)	66
Other foreign exchange differences		-	(3)	2
		208	(67)	56
Items that will not be reclassified to the income statement in subsequent years:
Actuarial (losses) / gains on defined benefit pension schemes            - UK		(184)	54	(5)
- Overseas		1	-	2
Deferred tax on actuarial (losses) / gains on defined benefit pension schemes		(5)	(20)	(9)
		(188)	34	(12)
Other comprehensive income / (expense) for the period		20	(33)	44
Total comprehensive income / (expense) for the period		113	13	205

Consolidated balance sheet

	Note	29 October 2016 Unaudited £m	31 October 2015 Unaudited £m	30 April  2016 Audited £m
Non-current assets
Goodwill		3,189	2,928	3,054
Intangible assets		558	503	540
Property, plant & equipment		413	356	366
Interests in joint venture		12	-	5
Trade and other receivables		447	316	408
Deferred tax assets		223	225	234
		4,842	4,328	4,607
Current assets
Inventory		1,348	1,186	958
Trade and other receivables		1,305	1,021	1,131
Short term investments		-	53	-
Cash and cash equivalents		215	182	233
		2,868	2,442	2,322
Total assets		7,710	6,770	6,929
Current liabilities
Trade and other payables		(2,929)	(2,319)	(2,310)
Deferred and contingent consideration		(2)	(2)	(12)
Income tax payable		(82)	(89)	(89)
Loans and other borrowings		(15)	(55)	-
Finance lease obligations		(2)	(2)	(2)
Provisions		(92)	(53)	(78)
		(3,122)	(2,520)	(2,491)
Non-current liabilities
Trade and other payables		(395)	(498)	(423)
Deferred and contingent consideration		(21)	(3)	(21)
Loans and other borrowings		(396)	(415)	(409)
Finance lease obligations		(87)	(88)	(89)
Retirement benefit obligations	7	(649)	(426)	(474)
Deferred tax liabilities		(113)	(93)	(115)
Provisions		(23)	(22)	(47)
		(1,684)	(1,545)	(1,578)
Total liabilities		(4,806)	(4,065)	(4,069)
Net assets		2,904	2,705	2,860
Capital and reserves
Share capital		1	1	1
Share premium reserve		2,256	2,256	2,256
Accumulated profits		1,262	1,385	1,398
Translation reserve		135	(187)	(45)
Demerger reserve		(750)	(750)	(750)
Equity attributable to equity holders of the parent company		2,904	2,705	2,860

Consolidated statement of changes in equity

		Share capital £m	Share premium reserve £m	Accumulated profits £m	Translation reserve £m	Demerger reserve £m	Total equity £m
At 1 May 2016		1	2,256	1,398	(45)	(750)	2,860
Profit for the period		-	-	93	-	-	93
Other comprehensive income and expense recognised directly in equity		-	-	(160)	180	-	20
Total comprehensive income and expense for the period		-	-	(67)	180	-	113
Net purchase of own shares		-	-	-	-	-	-
Equity dividends		-	-	(75)	-	-	(75)
Net movement in relation to share schemes		-	-	6	-	-	6
At 29 October 2016		1	2,256	1,262	135	(750)	2,904

		Share capital £m	Share premium reserve £m	Accumulated profits £m	Translation reserve £m	Demerger reserve £m	Total equity £m
At 2 May 2015		1	2,256	1,369	(113)	(750)	2,763
Profit for the period		-	-	46	-	-	46
Other comprehensive income and expense recognised directly in equity		-	-	41	(74)	-	(33)
Total comprehensive income and expense for the period		-	-	87	(74)	-	13
Net purchase of own shares		-	-	(7)	-	-	(7)
Equity dividends		-	-	(69)	-	-	(69)
Net movement in relation to share schemes		-	-	5	-	-	5
At 31 October 2015		1	2,256	1,385	(187)	(750)	2,705

		Share capital £m	Share premium reserve £m	Accumulated profits £m	Translation reserve £m	Demerger reserve £m	Total equity £m
At 2 May 2015		1	2,256	1,369	(113)	(750)	2,763
Profit for the period		-	-	161	-	-	161
Other comprehensive income and expense recognised directly in equity		-	-	(24)	68	-	44
Total comprehensive income and expense for the period		-	-	137	68	-	205
Net purchase of own shares		-	-	(5)	-	-	(5)
Equity dividends		-	-	(106)	-	-	(106)
Net movement in relation to share schemes		-	-	10	-	-	10
Tax on items recognised directly in reserves		-	-	(7)	-	-	(7)
At 30 April 2016		1	2,256	1,398	(45)	(750)	2,860

Consolidated cash flow statement

		Note	26 weeks ended 29 October 2016 Unaudited £m	26 weeks ended 31 October 2015 Unaudited £m	Year ended 30 April  2016 Audited £m
Operating activities - continuing operations
Cash inflow from operations		9	207	204	485
Special contributions to defined benefit pension scheme			(18)	(18)	(35)
Income tax paid			(16)	(12)	(56)
Net cash flows from operating activities			173	174	394
Investing activities - continuing operations
Acquisition of property, plant & equipment and other intangibles			(112)	(110)	(221)
Net cash outflow arising from acquisitions			(18)	(26)	(50)
Proceeds from disposal of property, plant & equipment			-	-	24
Investment in joint venture			(16)	-	(9)
Net cash flows from investing activities			(146)	(136)	(256)
Financing activities - continuing operations
Interest paid			(11)	(11)	(20)
Facility arrangement fees paid			(3)	(5)	(5)
Repayment of obligations under finance leases			(1)	(4)	(6)
Net purchase of own shares			-	(7)	(5)
Equity dividends paid			(75)	(69)	(106)
(Decrease) / increase in borrowings			(14)	83	25
Net cash flows from financing activities			(104)	(13)	(117)
(Decrease) / increase in cash and cash equivalents
Continuing operations			(77)	25	21
Discontinued operations		10	16	(9)	32
			(61)	16	53
Cash and cash equivalents at beginning of the period			233	163	163
Currency translation differences			28	3	17
Cash and cash equivalents at end of the period			200	182	233

Notes to the financial information

1     Basis of preparation

The interim financial information for the 26 weeks ended 29 October 2016 was approved by the directors on 13 December 2016.  The interim financial information, which is a condensed set of financial statements, has been prepared in accordance with the Listing Rules of the Financial Conduct Authority and International Accounting Standard 34 'Interim Financial Reporting' (IAS 34) as adopted by the European Union and has been prepared on the going concern basis as described further in the section on risks to achieving the Group's objectives.

The accounting policies adopted are those set out in the Group's Annual Report and Accounts for the year ended 30 April 2016 which were prepared in accordance with IFRS as adopted by the European Union. New accounting standards, amendments to standards and IFRIC interpretations which became applicable during the period were either not relevant or had no impact on the Group's net results or net assets.

The interim financial information uses definitions that are set out on pages 154 to 156 of the same document.

The interim financial information is unaudited and does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006, but has been reviewed by the auditor.  The financial information for the year ended 30 April 2016 does not constitute the Company's statutory accounts for that period but has been extracted from those accounts which have been filed with the Registrar of Companies and are also available on the Group's corporate website www.dixonscarphone.com. The auditor has reported on those accounts, their report was unqualified, did not draw attention to any matters by way of emphasis, and did not contain statements under Sections 498 (2) or (3) of the Companies Act 2006.

The Group's income statement and segmental analysis identify separately Headline performance and Non-Headline items.  Headline performance measures reflect adjustments to total performance measures. The directors consider 'Headline' performance measures to be a more accurate reflection of the ongoing trading performance of the Group and believe that these measures provide additional useful information for shareholders on the Group's performance and are consistent with how business performance is measured internally.

Headline results are stated before the results of discontinued operations or exited / to be exited businesses, amortisation of acquisition intangibles, acquisition related costs, any exceptional items considered so one-off and material that they distort underlying performance (such as reorganisation costs, impairment charges, property rationalisation costs and other non-recurring charges) and net pension interest costs. Businesses exited or to be exited are those which the Group has exited or committed to or commenced to exit through disposal or closure but do not meet the definition of discontinued operations as stipulated by IFRS and are material to the results and operations of the Group. 

Non-Headline items in the current and prior periods comprise amortisation of acquisition intangibles, Merger integration and transformation costs, property rationalisation costs, acquisition related costs, net interest on defined benefit pension schemes and discontinued operations. A reconciliation of Headline profit and losses to total profits and losses is shown in note 2. Items excluded from Headline results can evolve from one financial year to the next depending on the nature of exceptional items or one off type activities described above.  Headline performance measures and Non-Headline performance measures may not be directly comparable with other similarly titled measures or "adjusted" revenue or profit measures used by other companies.

2     Segmental analysis

The Group's operating segments reflect the segments routinely reviewed by the Board and which are used to manage performance and allocate resources. This information is predominantly based on geographical areas which are either managed separately or have similar trading characteristics such that they can be aggregated together into one segment.

The Group operates four operating segments as described below. Discontinued operations are excluded from this segmental analysis.

The Group's reportable segments have been identified as follows:

•        UK & Ireland comprises operations in the UK and Ireland and the Dixons Travel business.

•        Nordics operates in Norway, Sweden, Finland, Denmark and Iceland.

•        Southern Europe comprises operations in Spain and Greece.

•        Connected World Services is the Group's B2B operation which leverages the specialist skills, operating processes and technology of the Group to provide managed services to third parties looking to develop their own connected world solutions, and the Group's share of results of the Sprint Connect joint venture.

UK & Ireland, Nordics and Southern Europe are involved in the sale of consumer electronics and mobile technology products and services, primarily through stores or online channels.

Transactions between segments are on an arm's length basis.

2     Segmental analysis (continued)

(a)   Segmental results

						26 weeks ended 29 October 2016
			UK &  Ireland £m	Nordics £m	Southern Europe £m	Connected World Services £m	Eliminations £m	Total  £m
Headline external revenue			2,988	1,474	309	98	-	4,869
Inter-segmental revenue			28	-	-	-	(28)	-
Total Headline revenue			3,016	1,474	309	98	(28)	4,869
Headline EBIT before share of results of joint venture			109	34	5	13	-	161
Share of Headline results of joint venture			-	-	-	(8)	-	(8)
Headline EBIT			109	34	5	5	-	153

Reconciliation of Headline profit to total profit

					26 weeks ended 29 October 2016
			Headline profit / (loss) £m	Amortisation of acquisition intangibles £m	Merger integration and transformation costs £m	Pension scheme interest £m	Total profit / (loss) £m
UK & Ireland			109	(9)	(15)	-	85
Nordics			34	(6)	-	-	28
Southern Europe			5	(1)	-	-	4
Connected World Services			13	(1)	-	-	12
EBIT before share of results of joint venture			161	(17)	(15)	-	129
Share of results of joint venture			(8)	-	-	-	(8)
EBIT			153	(17)	(15)	-	121
Finance income			7	-	-	-	7
Finance costs			(16)	-	-	(8)	(24)
Profit / (loss) before tax			144	(17)	(15)	(8)	104

2     Segmental analysis (continued)

(a)   Segmental results

						26 weeks ended 31 October 2015
			UK &  Ireland £m	Nordics £m	Southern Europe £m	Connected World Services £m	Eliminations £m	Total  £m
Headline external revenue			2,872	1,198	257	67	-	4,394
Inter-segmental revenue			33	-	-	-	(33)	-
Total Headline revenue			2,905	1,198	257	67	(33)	4,394
Headline EBIT before share of results of joint venture			101	30	1	3	-	135
Share of Headline results of joint venture			-	-	-	-	-	-
Headline EBIT			101	30	1	3	-	135

Reconciliation of Headline profit to total profit

					26 weeks ended 31 October 2015
			Headline profit / (loss) £m	Amortisation of acquisition intangibles £m	Dixons Retail Merger £m	Pension scheme interest £m	Total profit / (loss) £m
UK & Ireland			101	(12)	-	-	89
Nordics			30	(6)	-	-	24
Southern Europe			1	(1)	-	-	-
Connected World Services			3	(1)	-	-	2
Unallocated			-	-	(15)	-	(15)
EBIT before share of results of joint venture			135	(20)	(15)	-	100
Share of results of joint venture			-	-	-	-	-
EBIT			135	(20)	(15)	-	100
Finance income			9	-	-	-	9
Finance costs			(23)	-	-	(8)	(31)
Profit / (loss) before tax			121	(20)	(15)	(8)	78

 

2     Segmental analysis (continued)

(a)   Segmental results (continued)

						Year ended 30 April 2016
			UK &  Ireland £m	Nordics £m	Southern Europe £m	Connected World Services £m	Eliminations £m	Total  £m
Headline external revenue			6,404	2,632	550	152	-	9,738
Inter-segmental revenue			60	-	-	-	(60)	-
Total Headline revenue			6,464	2,632	550	152	(60)	9,738
Headline EBIT before share of results of joint venture			365	79	17	11	-	472
Share of Headline results of joint venture			-	-	-	(4)	-	(4)
Headline EBIT			365	79	17	7	-	468

Reconciliation of Headline profit to total profit

					Year ended 30 April 2016
	Headline profit / (loss) £m	Amortisation of acquisition intangibles  £m	Dixons Retail Merger £m	Property rationalisation costs £m	Acquisition related £m	Pension scheme interest £m	Total profit / (loss) £m
UK & Ireland	365	(24)	(37)	(70)	(1)	-	233
Nordics	79	(13)	(5)	-	(5)	-	56
Southern Europe	17	(2)	-	-	-	-	15
Connected World Services	11	(1)	(6)	-	-	-	4
EBIT before share of results of joint venture	472	(40)	(48)	(70)	(6)	-	308
Share of results of joint venture	(4)	-	-	-	-	-	(4)
EBIT	468	(40)	(48)	(70)	(6)	-	304
Finance income	17	-	-	-	-	-	17
Finance costs	(38)	-	(4)	-	-	(16)	(58)
Profit / (loss) before tax	447	(40)	(52)	(70)	(6)	(16)	263

(b)   Seasonality

The Group's business is highly seasonal, with a substantial proportion of its revenue and EBIT generated during its third quarter, which includes the Christmas and New Year season.

 

3     Non-Headline items

	Note	26 weeks ended 29 October 2016 £m	26 weeks ended 31 October 2015 £m	Year ended 30 April  2016 £m
Included in profit / (loss) before interest and tax:
Amortisation of acquisition intangibles	(i)	(17)	(20)	(40)
Merger and transformation related costs	(ii)	(15)	(15)	(48)
Property rationalisation costs	(iii)	-	-	(70)
Acquisition related	(iv)	-	-	(6)
		(32)	(35)	(164)
Included in net finance costs:
Net non-cash finance costs on defined benefit pension schemes	(v)	(8)	(8)	(16)
Merger and transformation related costs	(ii)	-	-	(4)
Total impact on profit / (loss) before tax		(40)	(43)	(184)
Tax on Non-Headline items		8	12	26
Total impact on profit / (loss) after tax		(32)	(31)	(158)

Non-Headline items also include discontinued operations, which comprise the results of the Phone House operations in Germany, the Netherlands and Portugal. The post-tax results of these businesses have been reported separately and are further described in note 10.

(i)    Amortisation of acquisition intangibles:

This relates to acquisition intangibles arising on the CPW Europe Acquisition, the Dixons Retail Merger and Simplifydigital acquisition.

(ii)   Merger and transformation related costs:

        The Merger has given rise to the following costs which have been treated as non-Headline:

·      Merger integration costs of £9 million (2015/16: £15 million, year ended 30 April 2016: £48 million) relate to the reorganisation of the Group following the Merger and primarily comprise professional fees, employee severance and incentive costs associated with the integration process.

·      During the current period, functional transformation projects have commenced across the finance, procurement and human resources functions to rationalise shared service centre activities and harmonise policies and procedures across key support functions of the business. In H1 2015/16, the cost recognised of £6 million primarily relates to consultancy fees.

·      In the year ended 30 April 2016 the Revolving Credit Facility fee write off recognised in finance costs relates to the deferred facility fees written off. The fees incurred were a result of the Merger and the financing required to facilitate the Merger at short notice. No related amounts were recognised in the current half year.

(iii)  Property rationalisation costs:

        Following the Merger it was announced that the Group would launch a major roll out of its fully refurbished 3-in1 store concept in the UK & Ireland. This involves merging the remaining PC World and Currys stores and inserting a Carphone Warehouse, reducing the overall store portfolio by 134. The costs associated with this initiative, being early lease termination premiums, onerous lease provisions, dilapidations and fixed asset impairments, were treated as exceptional items in the year ended 30 April 2016.

(iv)  Acquisition related:

        Acquisition related comprised an increase in the deferred consideration payable on a business acquired by Dixons in the Nordics in 2011/12 (£5 million), which was recorded in the second half of 2015/16, and costs incurred in the acquisition of Simplifydigital and InfoCare incurred in the same period.

(v)   Net non-cash financing costs on defined benefit pension schemes:

        The net interest charge on defined benefit pension schemes represents the non-cash remeasurement calculated by applying the corporate bond yield rates applicable on the last day of the previous financial year to the net defined benefit obligation. As a non-cash remeasurement cost which is unrepresentative of the actual investment gains or losses made or the liabilities paid and payable the accounting effects of this is excluded from Headline earnings.

4     Tax

The Group's Headline effective rate of taxation before one off tax charges / credits for the full year has been estimated at 23% (2015/16: 25%) with this rate being applied to the half year results. The rate is higher than the UK statutory rate of 20% due mainly to higher statutory rates in the Nordics, and certain non-deductible items mainly in the UK. In calculating the total tax charge for the half year, a one-off tax credit of £16 million has been recognised following successful resolution of a prior year tax issue, which results in a total effective rate of taxation on Headline earnings of 13%, with an effective rate of taxation on Non-Headline earnings of 20%. The total statutory effective rate of taxation is 11%.

The UK corporation tax rate for the 26 weeks ended 29 October 2016 was 20% (26 weeks ended 31 October 2015: 20%).

5   Earnings / (loss) per share

		26 weeks ended 29 October 2016 £m	26 weeks ended 31 October 2015 £m	Year ended 30 April  2016 £m
Headline earnings
Continuing operations		125	86	337
Total earnings / (loss)
Continuing operations		93	55	179
Discontinued operations		-	(9)	(18)
Total		93	46	161
		Million	Million	Million
Weighted average number of shares
Average shares in issue		1,152	1,151	1,151
Less average holding by Group ESOT		(1)	(1)	(1)
For basic earnings per share		1,151	1,150	1,150
Dilutive effect of share options and other incentive schemes		12	41	38
For diluted earnings per share		1,163	1,191	1,188
		Pence	Pence	Pence
Basic earnings / (loss) per share
Total (continuing and discontinued operations)		8.1	4.0	14.0
Adjustment in respect of discontinued operations		-	0.8	1.6
Continuing operations		8.1	4.8	15.6
Adjustments for non-Headline items - continuing operations (net of taxation)		2.8	2.7	13.7
Headline basic earnings per share		10.9	7.5	29.3
Diluted earnings / (loss) per share
Total (continuing and discontinued operations)		8.0	3.9	13.6
Adjustment in respect of discontinued operations		-	0.7	1.5
Continuing operations		8.0	4.6	15.1
Adjustments for non-Headline items - continuing operations (net of taxation)		2.7	2.6	13.3
Headline diluted earnings per share		10.7	7.2	28.4

Basic and diluted earnings per share are based on the profit for the period attributable to equity shareholders. Headline earnings per share is presented in order to show the underlying performance of the Group. Adjustments used to determine Headline earnings are described further in note 3.

 

6     Dividends

		26 weeks ended 29 October 2016 £m	26 weeks ended 31 October 2015 £m	Year ended 30 April  2016 £m
Amounts recognised as distributions to equity shareholders in the period - on ordinary shares of 0.1p each
Final dividend for the 13 months ended 2 May 2015 of 6.00p		-	69	69
Interim dividend for the year ended 30 April 2016 of 3.25p		-	-	37
Final dividend for the year ended 30 April 2016 of 6.50p		75	-	-
		75	69	106

The proposed interim dividend for the year ending 29 April 2017 is 3.50p per share. The expected cost of this dividend is £40 million and incorporates the agreement of the Group's Employee Share Ownership Trust to waive its rights to receive dividends.

7     Retirement benefit obligations

			29 October 2016 £m	31 October 2015  £m	30 April 2016 £m
Retirement benefit obligations - UK			646	423	472
- Nordics			3	3	2
Net obligation			649	426	474

The Group operates a number of defined contribution and defined benefit pension schemes. The principal scheme operates in the UK and includes a funded defined benefit section, the assets of which are held in a separate trustee administered fund. The defined benefit section of the scheme was closed to future accrual on 30 April 2010. The net obligations of this scheme, calculated in accordance with IAS 19, are analysed as follows:

			29 October 2016 £m	31 October 2015  £m	30 April 2016 £m
Fair value of plan assets			1,109	913	923
Present value of defined benefit obligations			(1,755)	(1,336)	(1,395)
Net obligation			(646)	(423)	(472)

The value of obligations is particularly sensitive to the discount rate applied to liabilities at the assessment date as well as mortality rates. The value of the plan assets is sensitive to market conditions, particularly equity values. The assumptions used in the valuation of obligations are listed below:

		29 October 2016	31 October 2015	30 April 2016
Rates per annum:
Discount rate		2.75%	3.85%	3.50%
Rate of increase in pensions in payment / deferred pensions	- pre April 2006	3.30%	2.90%	2.90%
	- post April 2006	2.25%	1.90%	2.10%
Inflation		3.40%	3.10%	2.95%

Mortality rates are based on historical experience and standard actuarial tables and include an allowance for future improvements in longevity.

 

8     Financial instruments, loans and other borrowings

The Group holds the following financial instruments at fair value:

			29 October 2016 £m	31 October 2015  £m	30 April 2016 £m
Short-term investments			-	53	-
Net derivative financial instruments			10	5	(24)
Deferred and contingent consideration			(23)	(5)	(33)

The fair value of short-term investments have values determined by 'Level 1' inputs as defined by the fair value hierarchy of IFRS 13 'Fair Value Measurement'. Short-term investments comprised shares held in Drillisch AG, a telecommunications providers and listed stock corporation in Germany, which were received as consideration regarding the disposal of Phone House Germany.

The significant inputs required to fair value the Group's currency contracts and interest rate swaps, are observable and are classified as 'Level 2' in the fair value hierarchy.

Deferred and contingent consideration is categorised as 'Level 3' in the fair value hierarchy as the valuation requires the use of significant unobservable inputs. The fair value of contingent consideration arrangements has been estimated by applying the income approach. A reduction in growth assumptions used in the fair value methodology would result in a reduction in the amount of contingent consideration payable. The movement in deferred and contingent consideration during the period is due to cash payments of the amounts due.

Fair values have been arrived at by discounting future cash flows (where the impact of discounting is material), assuming no early redemption, or by revaluing forward currency contracts and interest rate swaps to period end market rates as appropriate to the instrument.

Network commission receivables are classified as loans and receivables as defined in IAS 39 and are therefore accounted for at amortised cost. The carrying value of such network commission receivables is £961 million (31 October 2015: £716 million, 30 April 2016: £904 million) which is approximately equal to their fair value.

There have been no transfers of assets or liabilities between levels of the fair value hierarchy. For all other financial assets and liabilities, the carrying amount approximates their fair value.

On 8 October 2015 the Group signed a new multi-currency revolving credit facility for £800 million, which matures in October 2020 and replaced the multi-currency term and revolving credit facility which was previously in place. On 7 October 2016 this facility was extended to mature in October 2021.

On 7 October 2016 a further £250 million multi-currency revolving credit facility was signed which matures in 2020. In addition, on 28 October 2016, an additional €50 million term loan facility was also signed, which also matures in 2020.

The main terms and conditions of all these facilities are similar.
 

9     Note to the cash flow statement

	26 weeks ended 29 October 2016 £m	26 weeks ended 31 October 2015 £m	Year ended 30 April  2016 £m
Profit before interest and tax - continuing operations	121	100	304
Depreciation and amortization	92	85	177
Share-based payment charge	6	7	10
Share of results of joint venture	8	-	4
Impairments and other non-cash items	1	1	4
Operating cash flows before movements in working capital	228	193	499
Movements in working capital:
Increase in inventory	(321)	(294)	(18)
Increase in receivables	(157)	(106)	(247)
Increase in payables	471	416	168
(Decrease) / increase in provisions	(14)	(5)	83
	(21)	11	(14)
Cash inflow from operations	207	204	485

Restricted funds, which predominantly comprise funds held under trust to fund potential customer support agreement liabilities and cash held by the Group's insurance business for regulatory reserve requirements, were £58m (31 October 2015: £91 million; 30 April 2016: £67 million).

Reconciliation of cash inflow from operations to free cash flow

	26 weeks ended 29 October 2016 £m	26 weeks ended 31 October 2015 £m	Year ended 30 April  2016 £m
Cash inflow from operations	207	204	485
Taxation	(16)	(12)	(56)
Interest, facility arrangement fees and repayment of finance leases	(15)	(20)	(31)
Capital expenditure	(112)	(110)	(221)
Proceeds from disposal of fixed assets	-	-	24
Other movements	1	2	1
Free cash flow	65	64	202

Reconciliation of Net Debt

	26 weeks ended 29 October 2016 £m	26 weeks ended 31 October 2015 £m	Year ended 30 April  2016 £m
Cash	215	182	233
Loans and other borrowings	(411)	(470)	(409)
Finance lease obligations	(89)	(90)	(91)
	(285)	(378)	(267)

 

10   Discontinued operations and assets held for sale

As previously reported the sale of operations in Germany was completed on 5 May 2015, the Netherlands on 30 June 2015 and Portugal on 31 August 2015. No profit or loss has been recognised in relation to these businesses in the 26 weeks ended 29 October 2016 (31 October 2015: £9 million; 30 April 2016: £18 million).

(a)  Loss after tax - discontinued operations

There was no revenue, expenses or profit / (loss) on disposal of discontinued operations in the 26 weeks ended 29 October 2016. The results of discontinued operations in previous periods are comprised as follows:

				26 weeks ended 31 October 2015
			Phone House Germany £m	Phone House Netherlands £m	Phone House Portugal £m	Total £m
Revenue			-	19	13	32
Expenses			-	(20)	(16)	(36)
			-	(1)	(3)	(4)
(Loss) / profit on disposal			(7)	(2)	4	(5)
			(7)	(3)	1	(9)

				Year ended 30 April 2016
			Phone House Germany £m	Phone House Netherlands £m	Phone House Portugal £m	Total £m
Revenue			-	19	13	32
Expenses			-	(20)	(16)	(36)
			-	(1)	(3)	(4)
(Loss) / profit on disposal			(10)	(6)	2	(14)
			(10)	(7)	(1)	(18)

(b)   Cash flows from discontinued operations

	26 weeks ended 29 October 2016 £m	26 weeks ended 31 October 2015 £m	Year ended 30 April  2016 £m
Operating activities	-	2	2
Investing activities	16	(11)	30
	16	(9)	32

The cash inflow from investing activities relates to the cash receipt of the working capital payment in relation to the disposal of the Group's retail operations in Germany.
 

11   Contingent liabilities

	29 October 2016 £m	31 October 2015 £m	30 April  2016 £m
Contingent liabilities	-	3	-

In addition to the figures shown in the table above, contingent liabilities exist in respect of lease covenants relating to premises assigned to third parties.

In recent years the Group has entered into agreements to dispose of certain operations. As part of these disposal agreements, the Group has provided the acquirer with general and tax related warranties. Some of these warranties remain open and it is possible that claims could arise under these warranties.

Due to the nature of these contingent liabilities, it is not practicable to estimate their  timing or possible financial impact.

12   Related party transactions

Transactions between the Group's subsidiary undertakings, which are related parties, have been eliminated on consolidation and accordingly are not disclosed.

The Group had the following transactions and balances with its associates and joint venture:

	26 weeks ended 29 October 2016 £m	26 weeks ended 31 October 2015 £m	Year ended 30 April  2016 £m
Revenue for services provided	5	8	24
Amounts owed to the Group	5	5	2

All transactions entered into with related parties were completed on an arm's length basis.

Risks to achieving the Group’s objectives

The Board continually reviews and monitors the risks and uncertainties which could have a material effect on its results. The Group's principal risks, and the factors which mitigate them, are set out in the 2015-16 Annual Report and Accounts on pages 20 to 23. These risks remain relevant in the current period and are summarised below:

1.     Dependence on networks and key suppliers in driving profitability, cash flow and market share;

2.     Failure to maintain a sustainable business model in the face of a changing consumer environment could result in a loss of competitive advantage impacting financial performance;

3.     A potential Greek exit from the Euro could lead to a deterioration in consumer confidence impacting the performance of the Greek business, Kotsovolos;

4.     Failure to adequately invest in and integrate the Group's IT systems and infrastructure could result in restricted growth and reputational damage impacting financial performance;

5.     Failure in appropriately safeguarding sensitive information and responding to cyber risks could result in reputational damage, financial penalties and a resultant deterioration in financial performance;

6.     Failure to comply with FCA regulation could result in reputational damage, customer compensation, financial penalties and a resultant deterioration in financial performance;

7.     Failure to attract, develop and retain staff with sufficient talent and capabilities could lead to a loss of competitive advantage impacting financial performance;

8.     Business continuity plans are not effective and major incident response is inadequate resulting in reputational damage and a loss of competitive advantage;

9.     Failure to action appropriate Health and Safety measures resulting in injury could give rise to reputational damage and financial penalties;

10.  Failure to operate an effective fraud control environment may result in the loss of revenue and reputational damage; and

11.  The decision of the UK to leave the European Union could lead to a period of economic uncertainty and a loss of consumer confidence, foreign exchange volatility and long term changes in tax and other regulations which may impact the Group's ability to operate across our European businesses.

In order to provide the Board of directors' greater detail over specific elements of data protection risk, compliance with data protection legislation has now been specified as a separate risk from the information security risk above (risk 5). Failure to comply with data protection legislation may lead to reputational damage and financial penalties, which could lead to a loss of competitive advantage and deteriorating revenues and cash flows. The risk has been considered alongside potential mitigations, which include the Group currently engaging in preparations for the requirements of the EU General Data Protection Regulation ("GDPR"), which becomes effective in May 2018.

The directors have prepared the interim financial information on a going concern basis.  In considering the going concern basis, the directors have considered the above mentioned principal risks and uncertainties, especially in the context of a highly competitive consumer and retail environment as well as the wider macro-economic environment and how these factors might influence the Group's objectives and strategy.

The directors have reviewed the Group's future cash forecasts and profit projections, which are based on market data and past experience. The directors are of the opinion that the Group's forecasts and projections, which take into account reasonably possible changes in trading performance, show that the Group is able to operate within its current facilities and comply with its banking covenants for the foreseeable future. In arriving at their conclusion that the Group has adequate financial resources, the directors were mindful of the level of borrowings and facilities and that the Group has a robust policy towards liquidity and cash flow management.

Accordingly the directors have a reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future and consequently the directors continue to apply the going concern basis in the preparation of the financial statements.

Responsibility Statement

The directors confirm that to the best of their knowledge:

•     the interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union;

•     the financial highlights, performance review and interim financial information include a fair review of the information required by DTR 4.2.7R (indication of important events during the first 26 weeks and description of principal risks and uncertainties for the remaining 26 weeks of the year); and

•     the financial highlights and performance review includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

At the date of this statement, the directors are those listed in the Group's 2015-16 Annual Report and Accounts.

By order of the Board 

Sebastian James Group Chief Executive 13 December 2016

Humphrey Singer Group Finance Director 13 December 2016

 

Independent review report

To Dixons Carphone plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the interim statement for the 26 weeks ended 29 October 2016 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and related notes 1 to 12.  We have read the other information contained in the interim statement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The interim statement, including the condensed set of financial statements contained therein, is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the interim statement in accordance with the Disclosure and Transparency Rules of the UK Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this interim statement has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting" (IAS 34) as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim statement based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the UK.  A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed set of financial statements in the interim statement for the 26 weeks ended 29 October 2016 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the European Union and the Disclosure and Transparency Rules of the UK Financial Conduct Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, UK

13 December 2016

 

Retail Store Data

			29 October 2016				30 April 2016
			Own stores	Franchise stores	Total		Own stores	Franchise stores	Total
UK Dixons			370	-	370		419	-	419
Ireland Dixons			22	-	22		28	-	28
UK Carphone			722	-	722		734	-	734
Ireland Carphone			86	-	86		90	-	90
Total UK & Ireland			1,200	-	1,200		1,271	-	1,271
Norway			80	61	141		80	62	142
Sweden			114	46	160		118	39	157
Denmark			40	-	40		29	-	29
Finland			21	17	38		21	17	38
Other Nordics			-	13	13		-	13	13
Nordics			255	137	392		248	131	379
Greece			68	26	94		68	27	95
Spain			248	263	511		249	249	498
Southern Europe			316	289	605		317	276	593
Total			1,771	426	2,197		1,836	407	2,243

 

END

 

 

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