Carphone Warehouse 2016 Annual Report Download - page 27

Dixons Carphone plc Annual Report and Accounts 2015/16
Strategic Report
25
Pro forma Headline results
The performance review below refers, unless otherwise stated,
to pro forma Headline information for continuing businesses.
The basis for the preparation of this information is described
on page 24.
Group
Group Headline revenue was up 3% on a local currency basis
but broadly flat in Sterling terms at £9,738 million (2014/15:
£9,750 million). Like-for-like revenue growth was 5%, reflecting
strong growth in our UK & Ireland, Nordic and Greek
businesses. The difference between the total revenue growth
on a local currency basis and like-for-like is predominantly
due to a reduction in stores in the UK during the year and a
decision to reduce low-margin wholesale activity. The Group
has continued to grow market share, despite operating in a
highly competitive marketplace.
Headline EBIT was up 13% to £468 million (2014/15: £413
million) driven by the strong operating performance in the
UK & Ireland and the delivery of synergy benefits related
to the Merger. Headline profit before tax was £447 million
(2014/15: £381 million) reflecting 17% growth from the
improved EBIT and a lower interest charge year-on-year
following the redemption of the bonds previously held by
Dixons Retail in August 2014.
Integration of the two businesses is now largely complete with
a single head office in each of the countries where Carphone
and Dixons overlapped, one logistics and repair centre in the
UK and 276 Carphone Warehouse SWAS now open.
UK & Ireland
Revenue in the UK & Ireland increased by 1% to £6,404 million
(2014/15: £6,314 million). Like-for-like revenue for the year was
up 6% reflecting mobile phone market share gains along with
good growth in electricals. The difference between the total
revenue growth and like-for-like predominantly reflects a
reduction in stores. This revenue growth combined with cost
and synergy savings has resulted in Headline EBIT increasing
20% to £365 million. The business has continued to gain
market share helping to drive sales and EBIT. Our purchase
of Simplifydigital – the UK’s largest and fastest growing
multi-channel switching platform – leaves the business
well-positioned to benefit from growth in the multi-play market.
The electricals business has delivered a very solid result with
growth in the sale of white goods offsetting weaker demand in
computing. Television sales performed well, especially given
the World Cup last year.
The mobile business performed extremely 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 to roll out our
3-in-1 store concept so as to create the store estate of the
future. This will involve merging the remaining PC World and
Currys stores and inserting a Carphone Warehouse in stores
that have not yet got one. This programme will reduce our
store estate by 134 but will significantly improve the store
experience for our customers and colleagues, and we expect
the impact on sales to be neutral or better. Given that the
programme will be implemented during 2016/17, we expect
that the benefit to 2016/17 earnings will be modest, but
thereafter this activity will contribute approximately £30 million
of incremental EBITDA.
At the start of the year the Group launched iD, a new mobile
network focused on providing users with increased contract
flexibility, greater access to free data roaming and
competitively priced 4G tariffs. The performance of iD in the
UK has been very positive and the business now has an active
customer base of over 335,000 subscribers.
Nordics
The Nordic business has performed well in a challenging
economic environment, delivering 6% growth on a local
currency basis. However, revenue in Sterling was down 3% to
£2,632 million (2014/15: £2,709 million) predominantly due to
the devaluation of the Norwegian Krone relative to Sterling.
Like-for-like revenue was up 4% despite the challenging
commercial environment and some aggressive competitive
pricing. The growth in like-for-like revenue was driven by white
goods, mobiles and laptops, offsetting weakness in PCs and
tablets. We have continued to focus on ensuring competitive
pricing against pure players, albeit with some margin impact.
In local currency, our Nordic business delivered record
earnings but, due to the adverse movement in foreign
exchange, both from translation of local currency results
into Sterling, as well as margin pressure due to increased
buying costs, Nordic Headline EBIT was £79 million
(2014/15: £86 million).
The Merger has continued to benefit the Nordics with the
launch of Elkjøp Phonehouse stores in Norway, and the
integration of Phone House Sweden into ElGiganten. The
extension of the Jönköping warehouse to create Europe’s
most advanced small products distribution centre is also
progressing well.
In November 2015 InfoCare, a services and repair business,
was acquired in order to further the Group’s services strategy.
This business has now been successfully integrated into the
wider Nordics business. The Epoq kitchen business also
continues to deliver very encouraging results with strong
revenue growth driving market share and appliance sales.
Southern Europe
Southern Europe had strong underlying results with like-for-like
revenue up 4%, largely driven by the business in Greece which
continues to perform extremely well in the face of a challenging
environment. The Greek business benefited from strong
growth in white goods and tablets, which more than offset
some weakness in TV and laptops following the end of a
government laptop promotion in the prior year. Whilst post-pay
volumes were down in Spain we continue to pivot the model in
line with the market to offer multi-play, sim-only and handset
only, whilst successfully retaining our market share.
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