Carphone Warehouse 2016 Annual Report Download

Download and view the complete annual report

Please find the complete 2016 Carphone Warehouse annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 160

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160

Annual Report and Accounts
2 0 15 / 16
www.dixonscarphone.com
@DixonsCarphone

Table of contents

  • Page 1
    Annual Report and Accounts 2015/16 www.dixonscarphone.com @DixonsCarphone

  • Page 2
    ...plans this year which include making every one of the former Dixons stores one of the new 3-in-1 shops, introducing a lively and interactive new e-Commerce platform to Carphone Warehouse, opening Europe's most modern distribution centre in Sweden, introducing same-day delivery, rolling out c.150 new...

  • Page 3
    ... Group financial statements Company balance sheet Company statement of changes in equity Notes to the Company financial statements Investor information 150 151 153 154 Five-year record Pro forma information Shareholder and corporate information Glossary and definitions Dixons Carphone plc Annual...

  • Page 4
    Highlights of the year Strategic Report Dixons Carphone plc is Europe's leading specialist electrical and telecommunications retailer and services company, employing over 42,000 people in 11 countries. • Group like-for-like revenue up 5% • UK & Ireland like-for-like revenue up 6% • Nordics ...

  • Page 5
    ... Europe • Kotsovolos is Greece's leading specialist electrical retailer. Currys PC World Carphone Warehouse Dixons Travel Knowhow Geek Squad Simplifydigital PC World Business Elkjøp Elgiganten Gigantti Lefdal Phone House InfoCare Kotsovolos Phone House currys.co.uk currys.ie pcworld.co.uk...

  • Page 6
    ...our mobile business to improve their own. Our Sprint joint venture has had a very good start and we are now well into the second phase, with three to four new stores opening every week in key US locations. Sir Charles Dunstone Chairman 28 June 2016 4 Dixons Carphone plc Annual Report and Accounts...

  • Page 7
    ... to people and physical infrastructure, and we now are a single, fully integrated business with one head office, one repair centre and one warehouse, and an organisational structure that suits the size and scale of the Dixons Carphone plc Annual Report and Accounts 2015/16 5 Strategic Report

  • Page 8
    ...we have a comprehensive - and unique - infrastructure, including technical support, delivery, installation, repair and recycling. This was rewarded this year as we retained our contract through the re-bid process to manage RBS's mobile phone 6 Dixons Carphone plc Annual Report and Accounts 2015/16

  • Page 9
    .... I am constantly amazed and delighted by the passion and commitment of the men and women who make up the Dixons Carphone family, and am very proud to work alongside them. Sebastian James Group Chief Executive 28 June 2016 Dixons Carphone plc Annual Report and Accounts 2015/16 7 Strategic Report

  • Page 10
    ... areas including growth in services Acquisitions of InfoCare and Simplifydigital, bolstering our Nordic services and amplifying UK multi-play capabilities New leadership structure in place Capital Markets Day held in March 2016 Connected World Services ('CWS') Develop the Connected World Services...

  • Page 11
    ... to 13 Strategy and business model pages 14 to 16 Chairman's and Group Chief Executive's Statements on pages 4 to 7 Key Performance Indicators on page 19 Principal risks to achieving the Group's objectives on pages 20 to 23 Dixons Carphone plc Annual Report and Accounts 2015/16 9 Strategic Report

  • Page 12
    ... service led multi-channel operation satisfies both customer and supplier needs while delivering a sustainable business as customer shopping habits continue to evolve. We believe further consolidation will occur in some of our markets. 10 Dixons Carphone plc Annual Report and Accounts 2015/16

  • Page 13
    ... product information as well as price comparability. It is an essential part of the buying process for customers, particularly for large ticket discretionary products. However, the expert advice provided by well-informed sales advisors within stores is highly valued by customers. Larger retailers...

  • Page 14
    ..., and allow us to deliver real value and support to our customers day and night. Once fully executed in all core markets, we expect our services business to provide long-term sustainable revenues in attractive, growing markets. Connected World Services Connected World Services aims to leverage the...

  • Page 15
    ... • Customer journey design and management Unique differentiators • Proven track record of transforming retail for Best Buy Mobile and Sprint • Significant KPI improvements achieved in sales, profitability and customer satisfaction • Expert team with 20+ years of connected retail experience...

  • Page 16
    ... 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 ('CWS'), PC World Business, Elkjøp Business and Carphone Warehouse...

  • Page 17
    ... a third party (for example, our fault&fix computer service), or for business customers. By doing this we can increase the efficiency of using this infrastructure and deliver even better value services to our customers. Dixons Carphone plc Annual Report and Accounts 2015/16 15 Strategic Report

  • Page 18
    ...of service delivered to customers. This, we believe, provides us with a significant competitive advantage in meeting the needs of our customers, as well as a revenue stream not readily available to single channel online and mass market competitors. 16 Dixons Carphone plc Annual Report and Accounts...

  • Page 19
    ... the sales process in store. Our unique training programmes combined with our customer journeys are designed to ensure customers leave our stores with a complete solution that is right for them. Doing this is a key part of our ongoing strategy and delivery of a sustainable business model, as well as...

  • Page 20
    ... Sprint, in connected retailing. In the UK & Ireland we operate through Carphone Warehouse, Currys and PC World brands, in the Nordics through our various Elkjøp group brands, in Greece through Kotsovolos, and in Spain through Phone House. These brands are extremely well established and respected...

  • Page 21
    ... models in a multi-channel world. Like-for-like revenue enables the performance of the Group to be measured on a consistent year-on-year basis. In line with the Group's strategy to be the leading specialist electrical and mobile retailer in Europe, this is an important measure of how well customers...

  • Page 22
    ...and associated cyber risks owing to under-investment in people, systems, and safeguarding processes • Reputational damage • Financial penalties • Reduced revenue and profitability • Deteriorating cash flow • Loss of competitive advantage 20 Dixons Carphone plc Annual Report and Accounts...

  • Page 23
    ... stable over 2015/16 • Strategic and business planning takes into account varying economic scenarios, with ongoing monitoring by finance and senior executives • Close scrutiny of product performance, trading results, competitor activity and market share • Use of customer insight / advocacy...

  • Page 24
    ... Group is subject in a number of areas including the mobile insurance operations of The Carphone Warehouse Limited and the consumer credit activities of DSG Retail Limited • Reputational damage • Financial penalties • Reduced revenues and profitability • Deteriorating cash flow • Customer...

  • Page 25
    ... this risk New risk • Long-term credit facilities in place • Foreign exchange hedging to mitigate impact of currency fluctuation • Long-term contingency planning to address wider regulatory and legislative changes Dixons Carphone plc Annual Report and Accounts 2015/16 23 Strategic Report

  • Page 26
    ... Following the Merger, the Group changed its year end to be the Saturday closest to 30 April. The 2014/15 financial year as disclosed in the 2014/15 annual report and accounts therefore comprised the 13 months to 2 May 2015 for the Carphone Warehouse business. In this Annual Report and Accounts, the...

  • Page 27
    ...well during the year. Post-pay volumes and market share have grown year on year, with the business benefiting from additional SWAS stores, the performance of our iD mobile operations, and market share gains following the closure of Phones 4u in the prior year. In January 2016 we launched a programme...

  • Page 28
    ... rate. Restructuring costs in both the current year and prior year relate to Merger integration costs and primarily reflect employee severance and incentive costs, property costs associated with the integration process and professional fees. 26 Dixons Carphone plc Annual Report and Accounts 2015...

  • Page 29
    ...Dixons Retail at 30 April 2014. Revenue increased 18% to £9,738 million reflecting the inclusion of a full 12 months' earnings from Dixons Retail in the current year (prior period results from 6 August 2014 to 2 May 2015) offset by the additional month trading for the Carphone Warehouse businesses...

  • Page 30
    ...including the pay down of loans and borrowings of Dixons Retail soon after the Merger whilst borrowings have remained relatively flat year-on-year in the current period. Cash inflows from discontinued operations largely relates to consideration on the disposal of Phone House Germany. Goodwill Other...

  • Page 31
    ... recognised that such future assessments are subject to a level of uncertainty and as such, future outcomes cannot be guaranteed or predicted with certainty. Humphrey Singer Group Finance Director 28 June 2016 Dixons Carphone plc Annual Report and Accounts 2015/16 29 Strategic Report

  • Page 32
    ... our strategic priorities. Our approach to corporate responsibility means taking business decisions guided by our values and code of ethics. Engaging our colleagues We know an engaged workforce delivers a great customer experience, which supports strong financial results. This is why our key aim is...

  • Page 33
    ...a formal review twice a year with their manager to discuss their current performance and consider future development and career plans. Across Dixons Carphone over 200,000 learning hours were recorded last year with over 80% of this learning completed digitally. All training is designed to support us...

  • Page 34
    ... 2015, the long-term charity partner of Carphone Warehouse, Get Connected, merged with YouthNet to create the UK's largest support service for young people, The Mix (registered charity number 1048995). Just as Dixons Carphone matches customers with the best equipment and services for their needs...

  • Page 35
    ... responsibilities and limiting the impact of our operations in a way that is both practically and economically feasible. We are working towards best practice sustainability with minimal waste and optimal efficiency. Dixons Carphone plc Annual Report and Accounts 2015/16 33 Strategic Report

  • Page 36
    ... The Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013, Part 7: Disclosures Concerning Greenhouse Gas Emissions. This report covers the international operations of the Group, including the UK & Ireland, the Nordics and Southern Europe. Operational control has been used to...

  • Page 37
    ...-quality raw materials into manufacturing processes preventing the need for further virgin materials to be purchased. Sebastian James Group Chief Executive 28 June 2016 Humphrey Singer Group Finance Director 28 June 2016 Dixons Carphone plc Annual Report and Accounts 2015/16 35 Strategic Report

  • Page 38
    ... an Executive Director of Dixons Carphone on 6 August 2014 following the merger of Dixons Retail with Carphone Warehouse. Graham is Chief Executive of Connected World Services and manages its relationship with Sprint Corporation. He was previously chief executive officer of UK & Ireland for Carphone...

  • Page 39
    ...on 1 August 2014 and a non-executive director of Capital & Counties Properties PLC on 1 March 2015. Dixons Carphone plc Annual Report and Accounts 2015/16 37 Corporate Governance Lord Livingston of Parkhead joined the Board as Deputy Chairman and Non-Executive Director on 16 December 2015. He is...

  • Page 40
    ..., time commitment, the role descriptions of the Chairman, Group Chief Executive and Senior Independent Director, external appointments and external advice are reviewed and refreshed annually. The Board has reviewed and adopted our practices against the 2014 UK Corporate Governance Code (the 'Code...

  • Page 41
    Corporate Governance statement The Board confirms that throughout the year ended 30 April 2016 and as at the date of this Annual Report and Accounts, the Company has, except to the extent stated below, been in compliance with the Code. The Company did not have a Senior Independent Director ('SID') ...

  • Page 42
    ... of the non-executive directors; • ensure constructive relations between the executive and non-executive directors; and • oversee the process of induction, development and performance evaluation and succession planning of the Board. 40 Dixons Carphone plc Annual Report and Accounts 2015/16

  • Page 43
    ... 8 Corporate Governance 8 of 8 6 of 6 6 of 6 Senior Independent Director's ('SID') responsibilities • be available to communicate with shareholders; • appraise the performance of the Chairman annually with the Board; • oversee an orderly succession for the position of Chairman; • support...

  • Page 44
    ...roles, as Deputy Chairman and Senior Independent Director respectively, and also as members of the Nominations and Remuneration committees. The Board receives updates on corporate governance best practice as appropriate throughout the year. 42 Dixons Carphone plc Annual Report and Accounts 2015/16

  • Page 45
    ...Company's share capital and constitution required to be included in this Corporate Governance statement is contained in the Directors' Report on page 48. Such information is incorporated into this Corporate Governance statement by reference and is deemed to be part of it. Dixons Carphone plc Annual...

  • Page 46
    ... reviews covering financial and operational reporting by each business unit which involves comparison of actual results with the original budget and the updating of a full year forecast. • Annual objective setting and performance reviews. 44 Dixons Carphone plc Annual Report and Accounts 2015...

  • Page 47
    ... Executive Committee • Accountable for the implementation of the risk management process and the operation of the internal control environment Supported by Group Director of Risk Internal audit Business unit risk committees and champions Dixons Carphone plc Annual Report and Accounts 2015...

  • Page 48
    ... with the Code, formal notification of the Company's annual general meeting is sent to shareholders at least 20 working days in advance of the meeting. Further financial and business information is available on the Group's corporate website, www.dixonscarphone.com. Dixons Carphone's general risk...

  • Page 49
    .... In line with best practice and the Code, the Company has determined that all directors will retire and offer themselves for election or re-election at the 2016 Annual General Meeting. The Remuneration Report provides details of applicable service agreements for executive directors and terms of...

  • Page 50
    ... are: Name Number of shares Percentage of share capital Information required by Listing Rule 9.8.4R Details of long-term incentive schemes as required by Listing Rule 9.4.3R are located in the Directors' Remuneration Report on pages 57 to 81. Details of dividends waived by shareholders are given on...

  • Page 51
    ...will be proposed at the forthcoming Annual General Meeting. Certain information required to be included in this Directors' Report may be found within the Strategic Report. By Order of the Board Nigel Paterson Company Secretary 28 June 2016 Dixons Carphone plc Annual Report and Accounts 2015/16 49

  • Page 52
    .... New reporting requirements The Committee considered the Group's response to and conformance with the new requirements of the 2014 UK Corporate Governance Code (the 'Code') and the Financial Reporting Council ('FRC') Guidance on Risk Management, Internal Control and Related Financial and Business...

  • Page 53
    ... by acting independently from the executive directors. There is an annual schedule of items which are shared out amongst the meetings during the year to ensure the Committee covers fully those items within its Terms of Dixons Carphone plc Annual Report and Accounts 2015/16 51 Corporate Governance

  • Page 54
    ... control maturity; • the viability statement and its alignment with the business strategy and long-term plan; • financial integration and succession planning; • FCA and regulatory compliance; • data protection and information security; and Corporate Governance • whether the Annual Report...

  • Page 55
    ... of the Annual Report and Accounts 2015/16 is appropriate. The Board was advised accordingly. Viability statement Risk management and internal control The Committee is responsible for reviewing the Group's internal control and risk management systems. In order to discharge its responsibilities in...

  • Page 56
    ...considerably lower than in 2014/15 as a result of one-off, Merger-related fees last year and the new, more restricted policy governing the use of Deloitte LLP for non-audit services. Jock Lennox Chairman of the Audit Committee 28 June 2016 54 Dixons Carphone plc Annual Report and Accounts 2015/16

  • Page 57
    ... for succession planning; • carry out a formal selection process of candidates; • evaluate the skills, knowledge and experience of the Board including reviewing the results of any Board performance evaluation; Dixons Carphone plc Annual Report and Accounts 2015/16 55 Corporate Governance

  • Page 58
    ... Company's diversity policy; • time commitments of the directors; • the external appointments policy; • the Committee's performance and Terms of Reference; and • a review of the role descriptions of the Chairman, Senior Independent Director and the Group Chief Executive. Diversity The Board...

  • Page 59
    ...new plan from shareholders at the AGM in September this year. The current long term plan (the 'Share Plan') has been a key element of the policy to date seeking to incentivise management to deliver superior shareholder returns through the Merger and integration of our two businesses. The performance...

  • Page 60
    ... their terms and conditions of employment in addition to the operation of the Group's share-based employee incentive schemes. The Committee has clearly defined Terms of Reference which are available on the Company's corporate website. 58 Dixons Carphone plc Annual Report and Accounts 2015/16

  • Page 61
    ...of high-performing people. To reflect their skills, experience and importance to the business. • Operation Normally reviewed annually. Corporate Governance The review reflects a range of factors including merit levels, internal relativity, external market data and cost. Our overall policy, having...

  • Page 62
    ... to managers across the Group and in line with our strategy to keep remuneration weighted to variable pay that incentivises outperformance. Defined contribution plans are offered to all employees. A defined benefit pension plan continues in operation for Dixons' longer-serving employees, which...

  • Page 63
    ... turn delivering significant shareholder value. • Operation Discretionary awards of nil-priced options or conditional share awards are granted over Dixons Carphone plc shares. Corporate Governance Awards will be granted annually and will usually vest after three years subject to continued service...

  • Page 64
    ... to the long-term success of the Company. Executive directors are eligible to participate in any all employee share plans operated by the Company which have been approved by shareholders on the same terms as other eligible employees. Currently share options are granted under the Dixons Carphone HMRC...

  • Page 65
    ... previously approved by shareholders under the Dixons Carphone Share Plan or Share Option Plan. Details of these awards for executive directors are set out on page 78. (3) Market-priced options will not be granted to executive directors. Dixons Carphone plc Annual Report and Accounts 2015/16 63

  • Page 66
    ... outcomes may differ depending on share price growth. No awards vest at the minimum performance level. Target performance assumes a vesting of 151% of salary (i.e. 55% of maximum award) and maximum performance vesting of 275% of salary. . 64 Dixons Carphone plc Annual Report and Accounts 2015/16

  • Page 67
    ...its shareholders. The Committee will determine the level of the award, the performance conditions and time horizon that would apply to such awards at the time of award, taking into account the strategy and business circumstances of the Company. Dixons Carphone plc Annual Report and Accounts 2015/16...

  • Page 68
    ... table Area Service contract and incentive plan provisions Feature Notice period Policy Committee may also require the appointee to purchase shares in the Company in accordance with its shareholding policy. With respect to the appointment of a new Chairman or non-executive director, terms of...

  • Page 69
    ...director during the financial year, the circumstances of the departure and the best interests of the Company. Any entitlements under long term incentive schemes operated by the Company shall be determined based on the rules of the relevant scheme. The default position under the Dixons Carphone Share...

  • Page 70
    ... will remain within these limits. Any awards which will be satisfied by market purchase shares are excluded from such calculations. As at 30 April 2016, the Company's headroom position, which remains within the current Guidelines, was 4.9%. 68 Dixons Carphone plc Annual Report and Accounts 2015/16

  • Page 71
    ... were appointed to the Board on 16 December 2015 and on the same date both John Gildersleeve and Roger Taylor stepped down from the Board. More details are set out in the single figure of directors' remuneration tables on pages 74 to 75. Dixons Carphone plc Annual Report and Accounts 2015/16 69

  • Page 72
    ... for the 2014/15 annual bonus and approved the payments; • agreed design of 2015/16 annual bonus including performance measures and targets; • reviewed the current Share Plan and considered a new plan design for 2016/17; • monitored the developments in the corporate governance environment and...

  • Page 73
    ... the Company's website in sufficient time before the AGM for shareholders to review them ahead of voting on the new LTIP. When setting the EPS growth target range the Committee will take into consideration a number of reference points including: the internal business plan, external market consensus...

  • Page 74
    ... 29 March 2010. The FTSE 350 has been used as it is a broad market which includes the Company and a number of its competitors. Total shareholder return Group Chief Executive pay The following table shows, over the same six year period as the performance graph, the Group Chief Executive's single...

  • Page 75
    ... from note 5 to the Group financial statements. (3) The average number of employees for 2014/15 is made up of legacy Carphone Warehouse employees for the full 13 month period and legacy Dixons Retail employees for the period post Merger. Dixons Carphone plc Annual Report and Accounts 2015/16 73

  • Page 76
    ..., of £880,268 relating to a long term incentive scheme of Carphone Warehouse that he took part in prior to him becoming a director of the Company. The scheme vested following the sale of the Best Buy Europe business and awards became exercisable during 2013, but all shares awarded were subject to...

  • Page 77
    ...500 in respect of the period of service in the 2014/15 financial year and in respect of ongoing support up to the announcement of the preliminary results for 2014/15. (7) Roger Taylor continued to receive private medical insurance benefits. Dixons Carphone plc Annual Report and Accounts 2015/16 75

  • Page 78
    ... is an appropriate reflection of overall performance during the year under review. The bonus amounts to be paid to the executive directors in respect of 2015/16 are set out in the single figure of directors' remuneration table on page 74. 76 Dixons Carphone plc Annual Report and Accounts 2015/16

  • Page 79
    ... Senior Independent Director's fee includes membership of the Nominations and Remuneration committees. The Senior Independent Director during 2014/15 was also Deputy Chairman, and received no additional fee for this. Dixons Carphone plc Annual Report and Accounts 2015/16 77 Corporate Governance

  • Page 80
    ... Report Directors' interests in the Share Plan The executive directors previously participated in the Dixons Carphone (formerly Carphone Warehouse Group plc) Share Plan approved by Carphone Warehouse shareholders. Participants acquired at market value participation shares in a subsidiary company...

  • Page 81
    ... face value of awards granted on 25 February 2016 for the executive directors was £1,460 for Humphrey Singer and Katie Bickerstaffe. The exercise price was set at a 20% discount to the mid-market closing share price at 27 January 2016 of £4.71. Dixons Carphone plc Annual Report and Accounts 2015...

  • Page 82
    ... and on 24 August 2015, he sold a further 54,830 shares at £4.084. (7) Date of resignation, if earlier. There were no changes in the directors' restricted or unrestricted share interests between 30 April 2016 and the date of this report. 80 Dixons Carphone plc Annual Report and Accounts 2015/16

  • Page 83
    ... past remuneration. Compliance As required by the Regulations, a resolution to approve this Remuneration Report will be proposed at the AGM to be held on 8 September 2016. Ian Livingston Chairman of the Remuneration Committee 28 June 2016 Dixons Carphone plc Annual Report and Accounts 2015/16 81

  • Page 84
    ... information necessary for shareholders to assess the Group and the Company's performance, business model and strategy. By Order of the Board Sebastian James Group Chief Executive 28 June 2016 Humphrey Singer Group Finance Director 28 June 2016 82 Dixons Carphone plc Annual Report and Accounts...

  • Page 85
    ... on the financial statements of Dixons Carphone plc In our opinion, • the financial statements give a true and fair view of the state of the Group's and of the parent company's affairs as at 30 April 2016 and of the Group's profit for the year then ended; • the Group financial statements have...

  • Page 86
    ... to the CPW Europe and Dixons Retail plc acquisitions in previous years. The Group's assessment of impairment of acquisition related intangible assets is a judgemental process which requires estimates concerning the future cash flows and associated discount rates and growth rates based on management...

  • Page 87
    ...within each part of the Group. Further information in relation to this area is discussed in notes 1o) and 1s) to the Group financial statements. How the scope of our audit responded to the risk We have performed testing of the operating effectiveness of controls around the inventory business cycle...

  • Page 88
    ...the Listing Rules we are also required to review part of the Corporate Governance Statement relating to the Company's compliance with certain provisions of the UK Corporate Governance Code. We have nothing to report arising from our review. Our duty to read other information in the Annual Report and...

  • Page 89
    ... and Ireland). Our audit methodology and tools aim to ensure that our quality control procedures are effective, understood and applied. Our quality controls and systems include our dedicated professional standards review team and independent partner reviews. This report is made solely to the Company...

  • Page 90
    ... amortisation of acquisition intangibles, Merger integration and transaction costs, property rationalisation costs, acquisition related costs, net interest on defined benefit pension schemes and discontinued operations (comprising Virgin Mobile France and Phone House operations in Germany, the...

  • Page 91
    ... income Year ended 30 April 2016 £million 13 months ended 2 May 2015 £million Profit after tax for the period Items that may be reclassified to the income statement in subsequent years: Cash flow hedges Fair value remeasurement losses Gains transferred to carrying amount of inventories Exchange...

  • Page 92
    ... 18 19 21 7 20 (423) (21) (409) (89) (474) (115) (47) (1,578) (4,069) 2,860 1 2,256 1,398 (45) (750) 2,860 22 The financial statements were approved by the directors on 28 June 2016 and signed on their behalf by: Sebastian James, Group Chief Executive Humphrey Singer, Group Finance Director 90

  • Page 93
    ... 2015 Profit for the period Other comprehensive income and expense recognised directly in equity Total comprehensive income and expense for the period Net purchase of own shares Equity dividends Net movement in relation to share schemes Tax on items recognised directly in reserves At 30 April 2016...

  • Page 94
    ... from operating activities Investing activities - continuing operations Interest received Cash acquired on the Merger Net cash outflow arising from acquisition of subsidiaries Proceeds from disposal of property, plant & equipment Proceeds on sale of business and short term investments Acquisition of...

  • Page 95
    ... 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...

  • Page 96
    ...are attributable to the operation. The principal exchange rates against UK Sterling used in these financial statements are as follows: Average 2016 2015 2016 Closing 2015 d) Revenue Revenue comprises sales of goods and services excluding sales taxes. The following accounting policies are applied to...

  • Page 97
    ... on a straight line basis over the vesting period, based on an estimate of the number of shares that will eventually vest. Where share-based payments are subject only to service conditions or internal performance criteria (such as EPS targets), fair value is measured using either a Binomial model or...

  • Page 98
    ... bases: Brands Customer relationships 7% to 20% per annum 13% to 50% per annum Software and licences Software and licences include costs incurred to acquire the assets as well as internal infrastructure and design costs incurred in the development of software in order to bring the assets into use...

  • Page 99
    ... or group of stores, and business indicators exist which could lead to the conclusions that the net book value is not supportable, the recoverable amount of the CGU is determined by calculating its value in use. The value in use is calculated by applying discounted cash flow modelling to management...

  • Page 100
    ... on mobile phone sales depends on customer behaviour after the point of sale. The method of measuring the fair value of the revenue and associated receivables at the date of sale is to estimate all future cash flows that will be received from the network and then discount these based on their timing...

  • Page 101
    ... in relation to the future cash flows associated with acquisition intangibles, and the use of valuation techniques in order to arrive at the fair value of the other non-current assets and liabilities acquired. The assumptions applied were based on the best information available to management and...

  • Page 102
    ... and technology of the Group to provide managed services to third parties looking to develop their own connected world solutions. 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...

  • Page 103
    ... scheme interest £million Total profit / (loss) £million Acquisition related £million UK & Ireland Nordics Southern Europe Connected World Services EBIT before share of results of joint ventures Share of results of joint ventures EBIT Finance income Finance costs Profit / (loss) before tax 365...

  • Page 104
    ... 2 May 2015 Headline profit / (loss) £million Amortisation of acquisition intangibles £million Dixons Retail Merger £million Pension scheme interest £million Total profit / (loss) £million UK & Ireland Nordics Southern Europe Connected World Services Unallocated EBIT before share of results of...

  • Page 105
    ... months ended 2 May 2015 £million Capital expenditure Year ended 30 April 2016 £million 13 months ended 2 May 2015 £million Depreciation/Amortisation Year ended 30 April 2016 £million 13months ended 2 May 2015 £million UK & Ireland Nordics Southern Europe Connected World Services 3,086 1,203...

  • Page 106
    ... to the Group financial statements 3 Revenue and profit / (loss) before interest, taxation and share of results of joint ventures continued Profit / (loss) before interest and taxation for continuing operations is stated after charging / (crediting) the following: Year ended 30 April 2016 £million...

  • Page 107
    ...Mobile France and 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 25. (i) Amortisation of acquisition intangibles: A charge of £40 million arose during the year in relation...

  • Page 108
    Notes to the Group financial statements 4 Non-Headline items continued (ii) Exceptional items - Dixons Retail Merger: Year ended 30 April 2016 £million 13 months ended 2 May 2015 £million Merger transaction costs Merger integration costs Revolving Credit Facility fee write off - (48) (4) (52) ...

  • Page 109
    ... £million Short-term employee benefits Termination benefits Share-based payments 12 - 2 14 15 1 1 17 During the 13 months ended 2 May 2015 and year ended 29 March 2014 loans were advanced to members of key management in relation to the Carphone Warehouse Share Plan. At 30 April 2016, loans to...

  • Page 110
    ... rate of return of 7% on invested capital. The plan is underpinned by a minimum annual compound TSR growth of 5% and outperformance of the median TSR of the FTSE 250. Participants acquired, at market value, participation shares in a subsidiary company that holds the Group's interests in CPW Europe...

  • Page 111
    ... the value saved within six months of the Merger in return for 0.155 Dixons Carphone shares for each Dixons option held. The following table summarises the number and WAEP of share options for these schemes: Year ended 30 April 2016 Number million WAEP £ 13 months ended 2 May 2015 Number million...

  • Page 112
    ... to the Group financial statements 5 Employee costs and share-based payments continued b) Share-based payments continued iv) Fair value model The fair value of options was estimated at the date of grant using a Monte Carlo model. The model combines the market price of a share at the date of grant...

  • Page 113
    6 Net finance costs Year ended 30 April 2016 £million 13 months ended 2 May 2015 £million Unwind of discounts on trade receivables Finance income Interest on bank overdrafts and loans Finance lease interest payable Net interest on defined benefit pension obligations(i) Unwind of discounts on ...

  • Page 114
    Notes to the Group financial statements 7 Tax a) Tax expense The corporation tax charge comprises: Year ended 30 April 2016 £million 13 months ended 2 May 2015 £million Current tax UK corporation tax at 20% (2014/15 20.92%(i)) - Headline - Non-Headline Overseas tax - Headline - Non-Headline ...

  • Page 115
    ...differences £million Total £million At 29 March 2014 Dixons Retail Merger Credited / (charged) directly to income statement Credited to equity At 2 May 2015 Charged directly to income statement Charged to equity Reclassification At 30 April 2016 Deferred tax comprises the following balances: 21...

  • Page 116
    Notes to the Group financial statements 7 Tax continued Analysis of deferred tax relating to items (charged) / credited to equity in the period Year ended 30 April 2016 £million 13 months 2 May 2015 £million Defined benefit pension schemes Share-based payments Other temporary differences (13) ...

  • Page 117
    ... 22.0 7.7 29.7 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...

  • Page 118
    Notes to the Group financial statements 9 Goodwill 30 April 2016 £million 2 May 2015 £million At beginning of period Additions (note 24) Dixons Retail Merger Impairment Foreign exchange At end of period Cost Accumulated impairment 2,989 26 - - 39 3,054 3,054 - 3,054 481 - 2,629 (35) (86) 2,989...

  • Page 119
    ... ongoing capital expenditure required to develop and upgrade the store network in order to maintain and operate the businesses and to compete in their markets. In forming the five-year projections, management draws on past experience as a measure to forecast future performance. Key assumptions used...

  • Page 120
    ... Acquisition intangibles Customer relationships £million Software and licences £million Brands £million Sub-total £million Total £million Balance at 30 March 2014 Dixons Retail Merger Additions Amortisation Impairment Disposal of business Reclassification to held for sale Foreign exchange...

  • Page 121
    ... as recent experience in the location and category of the properties being valued. The valuation of properties was performed by reference to appropriate yield rates and market evidence of recent transactions. Future minimum lease income in respect of the Group's investment properties is set out in...

  • Page 122
    ... all relate to continuing operations. There were no items of other comprehensive income in the period and therefore the share of results represents the Group's share of total comprehensive income. The Group has entered into a joint venture with Sprint Corporation to manage Sprint branded stores in...

  • Page 123
    ...84 148 990 Opening balance Dixons Retail Merger Charged to the income statement Receivables written off as irrecoverable Disposals Transferred to assets held for sale Foreign exchange Closing balance (20) - (11) 11 - - - (20) (20) (19) (8) 16 2 8 1 (20) The Group's trade receivables included the...

  • Page 124
    ... £million Current £million 2 May 2015 Noncurrent £million Deferred consideration 12 21 25 30 April 2016 £million 6 2 May 2015 £million Opening balance Dixons Retail Merger Recognised on acquisition of subsidiary (note 24) Settlements Change in valuation (note 4) Closing balance 31...

  • Page 125
    ... 55 Committed facilities 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. The rate of interest payable on borrowings is...

  • Page 126
    ... the Group financial statements 20 Provisions 30 April 2016 Reorganisation £million Sales £million Property £million Other £million Total £million Reorganisation £million Sales £million Property £million Other £million 2 May 2015 Total £million At beginning of period Dixons Retail Merger...

  • Page 127
    ... of the defined contribution section is offered to eligible employees. In the Nordics division, the Group operates small funded secured defined benefit pension schemes, which are also closed to new entrants, with assets held by a life insurance company as well as an unsecured pension arrangement. In...

  • Page 128
    ... the consolidated statement of comprehensive income: 16 13 Year ended 30 April 2016 £million 13 months ended 2 May 2015 £million Remeasurement of defined benefit obligation - actuarial gains / (losses) arising from: Changes in financial assumptions Experience adjustments Change in demographic...

  • Page 129
    ...April 2016 £million 2 May 2015 £million Opening obligation at 3 May 2015 Dixons Retail Merger Interest cost Remeasurements in other comprehensive income - actuarial losses / (gains) arising from changes in: Financial assumptions Experience Demographic assumptions Benefits paid Closing obligation...

  • Page 130
    Notes to the Group financial statements 21 Retirement and other post-employment benefit obligations continued Analysis of scheme assets: 30 April 2016 £million 2 May 2015 £million Overseas and global equities Diversified growth Multi-asset credit funds Emerging market multi asset funds Private ...

  • Page 131
    ...information. The demerger reserve arose as part of the demerger of the Group from TalkTalk in 2010. 23 Equity dividends 30 April 2016 £million 2 May 2015 £million Amounts recognised as distributions to equity shareholders in the period - on ordinary shares of 0.1p each Final dividend for the year...

  • Page 132
    ...for broadband, digital TV and fixed line telephone contracts. The company was acquired to further the Group's position as the best place for customers to receive independent advice across all their technology, connectivity, media content and service needs. a) Fair value of assets and liabilities The...

  • Page 133
    ...b) Other information Acquisition related costs (included within non-headline expenses) amount to £1 million (note 4). The contribution to revenue and operating profit of acquisitions completed in the year was not material. 2014/15: All-share merger of Dixons and Carphone On 6 August 2014, the Group...

  • Page 134
    ...Group financial statements 25 Discontinued operations and assets held for sale continued 13 months ended 2 May 2015 Virgin Mobile France £million Phone House Germany £million Phone House Netherlands £million Phone House Portugal £million Total £million Revenue Expenses Loss before tax Income...

  • Page 135
    ... as foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Group's treasury function, which operates under treasury policies approved by the Board, uses certain financial instruments to mitigate potentially adverse effects on the Group's financial performance from these...

  • Page 136
    ... flows arising from these financial instruments depend on interest rates and periods agreed at the time of rollover. Group policy permits the use of long term interest rate derivatives in managing the risks associated with movements in interest rates. The effect on the income statement and equity of...

  • Page 137
    ... in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group manages its exposure to liquidity risk by reviewing regularly the long term and short term cash flow projections for the business against the resources...

  • Page 138
    ...interest rate swaps. The Group has designated financial instruments under IAS 39 as follows: Cash flow hedges At 30 April 2016 the Group had forward and swap foreign exchange contracts in place with a notional value of £1,909 million (2015: £1,487 million) and a fair value of £17 million (2014/15...

  • Page 139
    ... above, changes to revenue may be made, where for example, more recent information is available, and any such changes are required to be recognised in the income statement. Changes in relation to network commission receivable for sales originating in previous years totalled £26 million (2014/15...

  • Page 140
    ... to the Group financial statements 27 Notes to the cash flow statement a) Reconciliation of operating profit to net cash inflow from operating activities Year ended 30 April 2016 £million 13 months ended 2 May 2015 £million Profit before interest and tax - continuing operations Depreciation and...

  • Page 141
    ... Revenue for services provided Amounts owed to the Group All transactions entered into with related parties were completed on an arm's length basis. 29 Capital commitments 24 2 8 - 30 April 2016 £million 2 May 2015 £million Contracted for but not provided for in the accounts 30 Operating...

  • Page 142
    ...3 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. At the date of signing these financial statements, some of these warranties remain open and it...

  • Page 143
    ...(1,198) 775 3,453 (1) (409) 3,043 1 2,256 786 3,043 1 2,256 818 3,075 The financial statements of the Company (registered number 07105905) were approved by the Board on 28 June 2016 and signed on its behalf by: Sebastian James, Group Chief Executive Humphrey Singer, Group Finance Director 141

  • Page 144
    Company statement of changes in equity Share capital £million Share premium reserve £million Profit and loss account £million Total equity £million At 29 March 2014 Net profit for the period Other comprehensive income and expense recognised directly in equity Total comprehensive income and ...

  • Page 145
    ... and loss account of the Company is not presented separately. The profit recognised for the year ended 30 April 2016 was £75 million (2014/15: £64 million). Information regarding the audit fees for the Group is provided in note 3 to the Group financial statements. C3 Equity dividends Details of...

  • Page 146
    ... schemes for both companies. Under the terms of the Merger, Dixons shareholders received 0.155 of a new Dixons Carphone Share in exchange for each Dixons share. In accordance with the criteria in IFRS 3 'Business Combinations' it has been determined that Carphone acquired Dixons and accounts for the...

  • Page 147
    ... income 1,061 1 41 84 5 6 1,198 119 5 26 - - 10 160 C7 Provisions 30 April 2016 £million 2 May 2015 £million Opening balance Utilised Closing balance C8 Loans payable Details of loans payable are provided in note 18 to the Group financial statements. 2 (1) 1 2 - 2 C9 Share capital and share...

  • Page 148
    ...Carphone Warehouse Limited The Phone House Spain S.L.U. Ireland England & Wales Ireland Spain Insurance Distribution Distribution Distribution 1 2 3 Dixons Retail plc became a private limited company called Dixons Retail Group Limited after year end. Interest held directly by Dixons Carphone plc...

  • Page 149
    ... listed on the previous page. Name Country of incorporation or registration Share Class(es) Held % Held Adiumentum Oy Carphone Warehouse Ireland Mobile Limited Charterhouse Management Limited Codic GmbH (in liquidation) Connected World Services Distributions Limited Connected World Services Europe...

  • Page 150
    ...AS PC City Spain SA Pelham Limited Petrus Insurance Company Limited Phone House International AB Simplify Digital Limited Simplify Digital Systems Limited TalkM Limited The Carphone Warehouse (Digital) Limited The Carphone Warehouse Resources Limited The Carphone Warehouse UK Limited The Phone House...

  • Page 151
    ...CWIAB Limited DSG Boxmoor Limited DSG Card Handling Services Limited DSG International Retail Properties Limited DSG Ireland Limited The Carphone Warehouse (Digital) Limited The Carphone Warehouse UK Limited The Phone House Holdings (UK) Limited 05738735 07135355 07881879 06585457 05825842 06585719...

  • Page 152
    ... year records presented by Carphone Warehouse in its 2013/14 annual report and accounts on page 97 and by Dixons Retail in its 2013/14 annual report and accounts on page 127, and adjusting for discontinued operations. Investor information 150 Dixons Carphone plc Annual Report and Accounts 2015...

  • Page 153
    ...in the Performance Review on page 24. Following the Merger, the Group changed its year end to be the Saturday closest to 30 April. The 2014/15 financial year as disclosed in the 2014/15 annual report and accounts therefore comprised the 13 months to 2 May 2015 for the Carphone Warehouse business. So...

  • Page 154
    ... schedules which support the Group's 2014/15 financial statements and are excluded from the restated pro forma cash flows. (7) Pro forma cash flow statement as reported in the Performance Review on pages 26 to 27. Investor information 152 Dixons Carphone plc Annual Report and Accounts 2015/16

  • Page 155
    ...co.uk. To register, you will need your shareholder reference number, which can be found on your share certificate, dividend tax voucher or proxy card. Registration and use of the service is free. Financial calendar Ex-dividend date (final dividend 2015/16) Record date (final dividend 2015/16) Annual...

  • Page 156
    ...directors consider that 'Free Cash Flow' provides additional useful information to shareholders in respect of cash generation and is consistent with how business performance is measured internally Earnings EBIT EBITDA EPS ESOT Free Cash Flow 154 Dixons Carphone plc Annual Report and Accounts 2015...

  • Page 157
    ...exclude the results of the additional five weeks trading to ensure an equal length period for comparative purposes Investor information Market position MNO MVNO New CPW Nonâ€'Headline results NPS Old Carphone Warehouse PAT PBT Pro forma Dixons Carphone plc Annual Report and Accounts 2015/16 155

  • Page 158
    .... The calculation is performed on a moving annual total in order to best match the return on assets in a year with the assets in use during the year to generate the return Revolving credit facility Save as you earn share scheme Stores-within-a-store TalkTalk Telecom Group PLC and its subsidiaries...

  • Page 159
    Designed and produced by Whitehouse Associates London Printed in the UK by Pureprint Group This report is printed on Oxygen Offset 100% Recycled board and Soporset paper. Both papers are FSC certified and produced in ISO 9001 and ISO 14001 certified paper mills.

  • Page 160
    Dixons Carphone plc 1 Portal Way London W3 6RS United Kingdom Telephone: +44 (0) 208 617 6002 Email: [email protected] www.dixonscarphone.com