Carphone Warehouse 2015 Annual Report Download - page 7

Dixons Carphone plc Annual Report and Accounts 2014/15
Strategic report
Group Chief Executive’s Statement
5
I am very proud to be reporting on the first year of the newly
merged Dixons Carphone Group. In eleven months we have
established the new organisational structures of the Group,
UK & Ireland, and Sweden, rolled out almost 250 Carphone
Warehouse SWAS, exited retail operations in Germany and the
Netherlands, signed material contracts in Connected World
Services, and launched a new MVNO in the UK under the iD
brand. More importantly, during this time we have also
delivered very strong trading, taken market share in all
territories and delivered record customer satisfaction right
across the business.
The business has also had a strong first year financially. We
have delivered PBT ahead of guidance, increasing pro forma
Headline PBT from £316 million to £381 million, resulting in
an increase in pro forma Headline basic EPS from 20.5p to
25.5p. Pro forma net debt is also lower than expectation at
£260 million.
In the UK & Ireland, like-for-like sales were up 8% (13% in Q4)
and EBIT grew by 26% to £306 million, reflecting strong
performances in both electricals and mobile. In electricals,
white goods and TVs sold particularly well with customers
responding to our range, pricing and - above all - service
initiatives. Our mobile business in the UK & Ireland also saw
very encouraging sales growth. Postpay volumes and market
share continued to grow year-on-year in relatively quiet
markets as the business benefited from the exit of Phones 4u
and successful product launches. We are also - cautiously -
encouraged by the impact on ARPU from higher levels of
data usage.
Also in the UK, we launched our new MVNO, iD, in May.
Enabled by an innovative IT platform, it will target a number
of specific customer segments, with a particular focus on
personalising plans with flexible tariffs and introducing shared
data tariffs, market-leading roaming and the re-introduction of -
already very popular - 12 month contracts. iD will also be
launching in Ireland later in the summer.
Our Nordics business had a good year with like-for-like sales
up 4%. EBIT declined in sterling by 16% to £86 million but this
was largely due to the devaluation of the Norwegian Kroner
(£11 million). We have a very strong business in the Nordics and
continue to gain share in all key markets. We continue to focus
on pricing and new product and service offerings, such as our
‘epoq’ kitchen range and the rollout of KNOWHOW. In Sweden
we are building a cutting edge small box distribution centre to
support the growth of multi-channel throughout the Nordics
and across the region we are expanding our range of private
label products. We believe that these and many other initiatives
will continue to drive profitable growth in the years to come.
Like-for-like sales in Southern Europe were down 5%, but
exited the year up 8% in Q4. EBIT grew 40% to £14 million.
As you are aware, this has been a time of some fluidity in the
political and economic situation in Greece. Nevertheless,
Kotsovolos gained significant market share and exited the year
back in profitability for the first time in 5 years. What the future
holds in the immediate term is necessarily less certain, but with
a really excellent team and a strong market position, we feel
that this situation may end up proving the aphorism that all
crisis leads to opportunity. Meanwhile, the market in Spain
remains tough, but our stores saw improved trading during
the final quarter boosted by the distribution of Movistar quad
play offerings.
In December we announced that we plan to deliver at least our
synergy target of £80 million by financial year 2016/17- one
year ahead of plan. The integration continues to progress well.
During the year we have announced our joint UK head office
and moved into one head office in both Sweden and Ireland,
integrated most support functions, begun consultations on
moving our logistics and our repair centres and opened almost
250 Carphone Warehouse SWAS. We have opened a number
of co-branded Elgiganten Phone House stores in Sweden and
launched the Phone House in Norway. In both cases the
performance of these stores has been very encouraging.
The Connected World Services management team have put in
place a newly-configured organisational structure to deliver on
an already strong pipeline and we now have the sales team to
develop our pipeline. Post the year end we were very pleased
to announce a partnership with Sprint in the US, and subject to
the successful completion of a pilot phase, we will open up to
500 new stores, as well as a separate agreement to provide
services to support their existing retail business. In addition,
following the success of honeyBee in the UK, we are also
preparing for launch in Canada.
Our focus on markets where we have scale and relevance led
to the decision to exit from our retail businesses in Germany
and the Netherlands, whilst retaining long-term contracts for
the provision of insurance services in these markets through
CWS. On 16 July 2015 we also announced plans to dispose
of our operations in Portugal.
A great deal has been achieved this year, but there is still
much to do. Delivery options, IT investment, extending our
free warranty programme, further training for our colleagues,
completion of the integration, building on our MVNO and CWS
businesses, creating a new services business and even
stronger pricing in some territories are just some of the
initiatives in our sights to build on our long-term sustainability
and grow the value of the Company.