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Annual Report and Accounts
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5 2014/15
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www.dixonscarphone.com
@DixonsCarphone
“This has been a terrific first year for Dixons Carphone. We have seen excellent increases
in both sales and profitability and we have made very encouraging progress with the
tricky job of integrating these two great companies. At the same time, we have continued
to generate strong customer satisfaction numbers, made significant strides in our
Connected World Services business including our agreement with Sprint, and launched
a brand new mobile network.
The job is far from done. I am acutely aware that there is no room for complacency
in a sector which has seen unprecedented change, bringing both opportunities and
challenges. We have set ourselves ambitious goals, not only financial, but also in terms
of driving customer happiness, building a completely integrated company and delivering
a brand new global services business with CWS. To achieve these, we will need to
exhibit creativity, energy, resilience and toughness of purpose. Nevertheless we are very
optimistic about the road ahead, and Dixons Carphone is lucky to have such a fantastic
team of people – in every part of the business – to deliver these goals. My sincere
thanks to them for everything that has been done so far.”
Sebastian James
Group Chief Executive
16 July 2015
Cautionary statement
Certain statements made in this Annual Report and Accounts 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. Nothing in this Annual Report and Accounts should be regarded as a profit forecast.
Contents
Strategic report
Highlights of the year
Business segments
Chairman’s Statement
2
3
4
5 Group Chief Executive’s Statement
7 Our markets
10 Strategy and business model
13 Our resources
15 Key performance indicators
16 Principal risks to achieving the Group’s objectives
20 Performance review
27 Corporate responsibility
Corporate Governance
36 Board of Directors
38 Corporate Governance report
44 Directors’ report
47 Audit Committee report
52 Nominations Committee report
54 Remuneration report – Remuneration Policy report
65 Remuneration report – Annual Remuneration report
75 Statement of Directors’ responsibilities
Financial statements
76
Independent auditor’s report
82 Consolidated income statement
83 Consolidated statement of comprehensive income
84 Consolidated balance sheet
85 Consolidated statement of changes in equity
86 Consolidated cash flow statement
87 Notes to the Group financial statements
137 Company balance sheet
138 Notes to the Company financial statements
Investor information
145 Five-year record
146 Shareholder and corporate information
147 Glossary and definitions
Dixons Carphone plc Annual Report and Accounts 2014/15
1
Highlights of the year
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Dixons Carphone plc is Europe’s leading specialist electrical and
telecommunications retailer and services company, employing over
40,000 people in 9 countries.
• Group like-for-like revenue up 6%
• UK like-for-like revenue up 8%
• Group pro forma PBT of £381 million, up 21%
• Group pro forma EPS of 25.5p
• Strong balance sheet with year end pro forma net debt of £260 million
• Final dividend of 6.0p proposed, taking total dividends for the year to 8.5p
• Integration progressing well
• Disposals of non-core operations
Pro forma revenue (£million)
Pro forma Headline EBIT (£million)
Headline basic EPS (pence)
9,936
9,752
9,517
1,0000
8,000
6,000
4,000
2,000
0
9,936
414
9,752
9,517
359
310
500
400
300
200
100
0
9,936
29.7
9,752
9,517
18.6
10.9
35
30
25
20
15
10
5
0
2014/15
2013/14
2012/13
2014/15
2013/14
2012/13
2014/15
2013/14
2012/13
Our European store presence
Store numbers
Own
Franchised
Total
UK and Ireland
Nordics
Southern Europe
1,328
257
369
1,954
—
1,328
131
223
388
592
354
2,308
Headline and pro forma performance measures are as defined in the Performance Review. Pro forma results are presented as if the CPW Europe Acquisition and the
Merger had occurred at the start of the comparative period. Headline figures for the year ended 29 March 2014 have been re-presented to exclude the results of
discontinued operations.
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Dixons Carphone plc Annual Report and Accounts 2014/15
Business segments
We operate four segments as follows:
UK & Ireland
• Currys and PC World are the largest specialist electrical retailing
and services operators in the UK & Ireland.
• Carphone Warehouse is the largest independent
telecommunications retailer in the UK & Ireland.
• Dixons Travel operates in major UK airports and Dublin.
• KNOWHOW is our market leading services brand.
Brands
Currys
PC World
Websites
currys.co.uk
currys.ie
pcworld.co.uk
pcworld.ie
Carphone Warehouse
carphonewarehouse.com
carphonewarehouse.ie
Dixons Travel
dixonstravel.com
• Geek Squad is the repairs and support provider for the
KNOWHOW
knowhow.co.uk
Carphone Warehouse.
• PC World Business provides computing products and services
to business to business (B2B) customers.
Geek Squad
geeksquad.co.uk
PC World Business
pcworldbusiness.co.uk
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Nordics
Elkjøp
elkjop.no
• The Elkjøp Group is the leading specialist electrical retailer across
Elgiganten
the Nordics.
• Elkjøp and Lefdal stores operate in Norway, Elgiganten in Sweden
and Denmark and Gigantti in Finland.
• Phone House is a leading independent telecommunications
Gigantti
Lefdal
elgiganten.se
elgiganten.dk
gigantti.fi
lefdal.com
retailer in Sweden.
Phone House
phonehouse.se
• KNOWHOW has now been launched in the Nordic region.
Southern Europe
Kotsovolos
kotsovolos.gr
• Kotsovolos is Greece’s leading specialist electrical retailer.
Phone House
phonehouse.es
• Phone House stores operate in Spain where the Group is the
leading independent telecommunications retailer.
• Geek Squad is the repairs and support provider for the Phone
House in Spain.
Geek Squad
geeksquad.es
Connected World Services
connectedworldservices.com
• The Group has 25 years experience in the mobile industry and
several decades in consumer electronics, and has developed
sophisticated IT systems and operating processes to help
customers navigate through the extensive range of network
package plans and other ancillary products and services. It has
also evolved bespoke customer relationship management tools
which enable services such as upgrade reminders, data storage
and tariff checks.
• Connected World Services is the B2B division that packages the
core systems, expertise and relationships into a range of services
and provides these to other businesses.
• Connected World Services organises its services into five
product towers:
– Connected Retailing
– Services and Support
– Technology Platform
– Product Solutions
– MVNO
Dixons Carphone plc Annual Report and Accounts 2014/15
3
Chairman’s Statement
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I am pleased to be reporting on a very encouraging first year
since the merger of Carphone Warehouse and Dixons Retail.
We have had a strong start, with pro forma Headline profit
before tax rising 21% to £381 million. Progress has been good
across the board and in virtually all territories, with excellent
market share gains in all core countries in all key categories,
and record customer satisfaction numbers. Some important
strategic goals have also been achieved, most notably the
disposals of non-core operations in France, Germany, the
Netherlands and Portugal. In addition, it is good to see real
traction with some key new clients in our Connected World
Services business including our agreement with Sprint. In
short, it has been a good year and the Board is pleased to
recommend a final dividend of 6.0p per share to be paid on
25 September 2015.
At the same time, the team have made really good progress in
bringing our two great companies together. Much has been
achieved on this vital journey and, in particular, It gives me
enormous pleasure to see so many fully-functioning Carphone
Warehouse stores doing so well inside CurrysPCWorld stores
up and down the country. I believe that the team are doing
something that is both hard to do and relatively rare: creating
a genuine merger of equals where the best parts of each
company are preserved.
While this is very encouraging so far, I am also aware that
getting this right is not optional. We brought the businesses
together because we believed that increasingly interconnected
customers were going to require something new from us: a
powerful partner to help them navigate these new technologies.
Over the last year we have started to think about our customer
needs very hard and how we will address them going forward
– not only through the products that we offer, but also through
the services that we believe will bring these products to life.
This is a long-term strategy but I am convinced that it will
bear fruit in the end and it is exciting to be at the forefront
of these developments.
In recent years we have experienced unprecedented changes
in our marketplace, and this year is not shaping up to be an
exception. There is no doubt that technology is evolving,
consumer behaviour is shifting, the supplier landscape is
changing and, of course, in the telecommunications world, that
there are a number of important M&A transactions pending.
We believe that change creates opportunity for us as
consumers turn more and more to those who can offer
genuine impartial advice and service at very competitive prices,
and as suppliers rely more and more on us to tell their stories
fairly and well to their customers. It is our job to make
customers' lives better through technology, and, if we are
successful, this will lead to continued growth and success for
Dixons Carphone.
Finally, I am conscious that all we have achieved – and all of
our future – is down to the skills and commitment of our
people. On behalf of the Board and our shareholders, I would
like to thank them for their hard work and dedication.
Sir Charles Dunstone
Chairman
16 July 2015
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Dixons Carphone plc Annual Report and Accounts 2014/15
Group Chief Executive’s Statement
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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.
Dixons Carphone plc Annual Report and Accounts 2014/15
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Group Chief Executive’s Statement
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The consumer electronics and mobile phone landscapes
are in a constant state of flux – and never more so than today.
This creates challenges of course, but also some exciting
opportunities. The growth of smartphones, tablets and the
speed of internet access both in and out of the home, together
with an increasing number of connected devices, are changing
the way people live their lives, communicate, and use
technology. This has made a number of new markets available
to Dixons Carphone, including wellness, security, content and
home management. We are focused on building strong
positions in these markets in the next few years.
On top of this, the growing complexity and interconnectivity
of products means that customers are increasingly demanding
help and support throughout a product’s lifecycle, from
choosing the right product at the outset through to installation,
connection, and repair. This provides an increasing opportunity
for our Geek Squad and KNOWHOW services, as customers
ask for help in getting their products working – and keeping
them working.
Behind our end-to-end service operation we have a
comprehensive - and unique - infrastructure, including
technical support, delivery, installation, repair and recycling.
We plan to leverage this infrastructure to widen our services
customer base right across our core markets.
Finally, every team and every individual will have been affected
by the many changes that the organisation has navigated this
year. I began by listing some of the many achievements we
have accomplished in the year, but to do all this whilst ensuring
we did not take our eye off the ball is a testament to the
creativity, skill, fortitude and hard work of the very talented
men and women that make up Dixons Carphone. I would like
to take this opportunity to offer my humble and heartfelt thanks
to them.
Sebastian James
Group Chief Executive
16 July 2015
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Dixons Carphone plc Annual Report and Accounts 2014/15
Our markets
The integration of connectivity, products and services was
central to the Merger rationale for Carphone Warehouse and
Dixons Retail into Dixons Carphone, and we operate across
a variety of distinct marketplaces such as mobile; consumer
electronics; and business to business operations via the
Connected World Services division.
In mobile, the Group is well placed, in particular in the UK,
to offer impartial advice on a vast array of propositions. The
markets in which the Group operates are served by mobile
network operators and independent and generalist retailers.
In the UK we have seen a major market withdrawal with the
exit of Phones 4u. As a result our market share improved, in
particular in the higher value post-pay segments. The Group
is positioned to improve this further, as the only nationwide
independent channel with multi-year contracts with all the
major MNOs.
Mobile telephony has evolved rapidly, from simple mobile
devices to sophisticated hardware with advanced computing
functionality. There is a wide choice of operating platforms and
network options for customers, which makes the Group’s
expert and impartial proposition particularly relevant.
MNOs across Western Europe have been investing
significantly in the development of their 4G network
infrastructures. 4G technology facilitates much faster
downloads, providing comparable levels of performance to
many Wi-Fi networks, and providing a much better platform for
streaming than 3G. MNOs have seen significantly increased
levels of data usage, a trend which we see continuing as
network quality improves, and more and more devices become
capable of communicating with one another. MNOs will
continue to roll out their 4G networks, with nationwide
coverage expected in the UK by the end of 2015.
To benefit from 4G services, customers need 4G-enabled
devices and as 4G network coverage improves in Western
Europe, there is an incentive for customers to upgrade their
services, providing a stimulus to the replacement cycle as
penetration of 4G devices and tariffs increase. After several
years of downward pressure on ARPU, increased data usage
provides an exciting opportunity for MNOs.
The internet plays an important part of customers' purchasing
journey for mobile. The majority of customers research online
before making a purchase. Online sales continue to grow as a
proportion of sales and represent between 5% and 20% of
total retail sales for the Group’s markets. Customers continue
to value the advice available within stores, on the many
choices open to them.
The electrical retail market can be split between specialist
electrical retailers, such as Dixons Carphone, and general
retailers which sell certain electrical goods as part of a wider
offering. The market can also be broken down into two distinct
distribution channels: ‘assisted’ and ‘unassisted’. In the
assisted channel, specialist retailers, such as Dixons
Carphone, help customers through the buying process in the
form of product advice, add-on services, delivery and
installation. The unassisted channel, which includes single
channel internet retailers as well as general retailers, tends not
to offer all of these services.
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Specialist electrical retailers are the predominant destination
for customers in the European consumer electrical market.
Buying groups, general merchants and independents also have
a retail presence through stores and / or online. The market is
served by a relatively small number of global manufacturers
supplying goods to local, regional, national and international
electrical retailers.
We have seen some significant shifts in capacity in many of
our markets in recent years with some mass merchandisers
reducing space for electrical products, some single channel
internet operators de-emphasising certain segments, as well
as some specialists exiting the market. These shifts have
helped us to gain market share and it underpins our view that
a strong 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.
The internet has established itself as a fundamental part of the
retail landscape. It brings enhanced product information as
well as price comparability. It is becoming an important part of
the buying process for customers, particularly for large ticket
discretionary products. Larger retailers, with an integrated
multi-channel ‘bricks and clicks’ offer, with scalable distribution
and systems, together with proven after sales service and
support are increasingly attractive to customers. Our
collect@store service, where customers can order on the
internet and collect from a convenient store at a time to suit
them, and our pay&collect service, where customers can
access a wider range of products than is typically available in
their local store for either home delivery or later collection from
the store, are both proving to be increasingly popular.
The UK and Nordic markets have high broadband penetration
and a maturing online sales platform. The increase in online
penetration provides us with the opportunity to increase both
the range of goods on offer and the availability of product
information. Our multi-channel approach is well placed to
exploit synergies between our internet sites and stores.
Innovation brings new products with improved functionality
that drive sales growth. These include 4K Ultra High Definition
and Smart TVs, wearable technology, tablets as well as
converging products that combine the flexibility of a tablet with
a keyboard. Content, such as social media, apps, digital media
and cloud computing, also help to drive hardware innovation
and replacement. Product sales are driven by structural shifts,
such as analogue to digital and standard format through to
Ultra HD television. In addition, innovation drives new service
requirements, including TV installation, data backup, computer
set up and instructional Showhow teach-ins. In this
increasingly complex world we believe our assisted sales
model is best placed to help customers navigate the market
and to help them choose a complete solution that best meets
their needs.
Dixons Carphone plc Annual Report and Accounts 2014/15
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Our markets
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Electrical products, and in particular ‘brown goods’, are
predominantly discretionary purchases. However, increasing
penetration of digital technology in the home drives faster
replacement cycles as these products become less
discretionary. The economic backdrop also determines
whether customers trade up or down. Accordingly, the
electrical market tends to grow at a rate which is at or
exceeding the economy during years of economic growth.
While the opposite can be true during a downturn, this may
be influenced by new innovation and products.
The rapid innovation cycle may lead to price deflation in ‘brown
goods’ and computing, but also drive volume as products
become more affordable and replacement cycles accelerate.
For larger ticket items, the low frequency of purchases limits
the impact of price deflation on total market sales as
consumers typically trade up to higher specification products.
Our ‘Customer Journeys’ are designed to explain the features
and benefits of the latest technology to customers and help
them understand the reasons for trading up to these newer
technologies.
The sale of ‘white goods’ is underpinned by the replacement
cycle. Due to higher costs of repair, it often makes better
economic sense for consumers to replace ‘white goods’
outright rather than to arrange for their repair. The sale of ‘white
goods’ is also driven by the dynamics of the housing market
as new construction, house sales and refurbishment trigger
new purchases.
We are one of the largest specialist electrical retailing and
services companies in Europe with leading market shares in
the UK, Ireland, the Nordic region and Greece. We benefit from
long established and widely recognised brands. In each of our
markets there are varying numbers of specialist retailers who
compete in the assisted market. While we do compete against
general retailers, this is usually limited to certain lower price
categories as these retailers do not offer the full range of
products, assisted sale or the other services we are able
to provide.
Technology and the digitised world increasingly embed
themselves into our customers’ lives through social media,
online gaming, watching movies on the move, sharing pictures
with others, backing up files in the cloud or controlling energy
efficiency. The latest technology allows our customers to do
all this and more with tablets, Smart TVs and apps. The
ecosystems behind the current digital revolution are simplifying
our customers’ lives. Customers come to us not just for the
enabling technology, but to find a solution.
Developments in mobile broadband technology will continue to
transform lives and current industry developments suggest that
everyday objects will increasingly be connected to the internet,
in an ‘Internet of Things’. The 'Internet of Things' means that
people can manage home security or heating, or domestic
electronics through their smartphones. This phenomenon will
not only drive mobile data growth, but also machine-to-
machine data growth. With smartphones at the heart of this
evolution we believe that the Group is well placed.
Selling connected devices requires a range of experience and
processes that many retailers find impossible to emulate. It can
be an expensive, complicated and difficult process. The Group
combines the connectivity and product expertise of the two
former businesses at a crucial stepping-stone in the
development of the ‘Internet of Things’.
Connected World Services aims to leverage the specialist
skills, operating processes and technology of the business to
provide services to third parties looking to develop their own
connected world solutions. CWS already provides managed
services to a number of businesses and is actively exploring
further opportunities. Connected retailing has become one of
the five areas of expertise, along with services and support,
technology platform, product solutions and MVNO.
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Dixons Carphone plc Annual Report and Accounts 2014/15
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CWS is active in five different areas summarised as follows:
Suite of services
Why so complicated?
Example services
Existing clients
Connected
Retailing
Multi-channel
consultancy and support
for connected product
and service propositions,
ranging from specific
managed services
through to full retail
partnerships
Services and
Support
Partner Aviva
Provision of insurance
services, including policy
administration, claims
administration and
fulfilment, and provision
of technical support
solutions for connected
devices
Technology
Platform
Partner
Accenture
Provision of technology
platforms and managed
services to support
complex transactions,
connections to service
providers and customer
relationship management
Product
solutions
MVNO
Leverages Dixons
Carphone’s scale and
commercial relationships,
enabling partner retailers
to source hardware
Leverage Dixons
Carphone’s expertise in
MVNO builds to
aggregate services via
white label
• MNO and supplier
relationships
• Sales processes and
proposition design
Samsung
Sprint
• Complex propositions
• Store format design
• Exposure to fraud
• Complex remuneration
structures
• Need for highly trained
consultants
• Regulation
• Exposure to fraud
• Repairs: manufacturer
accreditation
• Employee blueprint
and reward model
• Customer fulfilment
and loyalty
• Insurance and claim
management
• Trade-ins
• Repairs
• Delivery
• Remote technical
support
BT
RBS
TalkTalk
• Capital intensive in initial
• honeyBee assisted
stages
sales tool
• Requires interfaces to
• Activation services
networks
• Tracking serialised stock
• Credit checking
• Scale is key to buying
power
• Web solutions
• Data security suite
• Customer
relationship
management
• Commercial
relationships
• Short supply of popular
• Scale advantages
devices
• Rapid product cycles
• Purchasing benefits
• Significant upfront
• Virtual mobile
investment in platform
network provision
TalkTalk
The Good Guys
Dixons Carphone plc Annual Report and Accounts 2014/15
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There are four distinct activities that we believe are the key
strengths of our multi-channel, service-based model and which
will support our competitive advantage going forward:
i. Work closely with suppliers to harness benefits available
to our business model: Suppliers want to ensure that
customers not only choose their brands, but also
experience the benefits of the latest products. As a
multi-channel operator we work with our suppliers to
ensure we can explain the benefits of these products and
demonstrate them to customers in our stores and our
suppliers support us in this work in a variety of ways.
ii. Focus on complete solutions for customers: The Pin Point
tool enables the personalisation of the mobile customer
experience. Using tablets in store, we ask customers a few
simple questions to help them find the right deal. The tool
will identify the preferred network via its coverage checker,
handset and operating system, check bundle options
including data requirements and ensure this is future
proofed. In consumer electronics, customers buy products
in order to achieve something, such as washing clothes, or
entertaining the children. This does not just mean buying
the hardware, but increasingly includes delivery,
explanation and peace of mind through product support
and after sales services, as well as accessories and
eventually, recycling. The conversations our colleagues
have in store with customers gives us an opportunity to
explain the benefits of these solutions and sell more of
them than our single-channel competition.
iii. Drive our service proposition: We need to be able to stand
shoulder to shoulder with our customers and for them to
know they can come to our stores and get knowledgeable
advice and great service to help them buy the right
product. They need to be confident that we will solve their
problem quickly and efficiently. Geek Squad and
KNOWHOW in the UK offer customers services and
technical support that can help them with their product
throughout its lifetime.
iv. Reduce costs: The scale of our operations across stores,
ranges, logistics, distribution, repairs and services means
that we can continually improve processes to reduce
costs. We have removed a considerable amount of cost
from the business over the last few years by making the
business simpler, easier to operate and more efficient and
we remain relentlessly focused on managing costs to make
our business more efficient.
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Strategy and business model
The Merger of Carphone and Dixons brought two market
leading businesses together with an unrivalled offer for the
new connected world, as mobile, electricals and connectivity
increasingly integrate. The Group now has a unique
independent position in the UK for mobile telephones, offering
impartial and personal service via the pioneering tablet based
assisted sales tool Pin Point.
Furthermore, as evidenced by recent announcements in
Germany, the Netherlands and Portugal, we continue to be
relentless in managing our business portfolio, focusing on
territories in which we are the market leader and growing
market share.
This enables us to drive the Group forward from a position
of strength with a focus on four strategic priorities. By focusing
on these we can deliver not only a better business for our
customers and colleagues, but also better returns for
shareholders.
The strategic priorities are:
1. Continue to enhance and drive successful
and sustainable retail business models in a
multi-channel world;
2. Complete the integration process and achieve
our synergy targets;
3. Leverage our scale, our knowhow, and our unique
asset base to drive growth in new product areas
including growth in services; and
4. Continue to develop the Connected World
Services model and establish it as a material
contributor to earnings.
Looking at each of these in turn:
1. Continue to enhance and drive successful
and sustainable retail business models in a
multi-channel world
The way in which customers shop continues to evolve.
Our customers tell us that they want advice, to experience
products and services and to ensure they are making the right
choices, particularly as these are often major purchases and, in
the case of ‘white’ and ‘brown goods’, that the customer will
own for several years. The internet empowers customers with
greater access to information including product knowledge
and price transparency. In mobile, we are uniquely positioned
in the UK to provide independent advice, meeting customer
requirements for impartiality, comparability and flexibility, both
online and in-store with the Pin Point tool. In consumer
electronics, single channel internet operators have a different
model whose principal advantage is structurally lower costs
and which have historically been able to offer competitive
prices versus store based operators. By focusing on those
aspects that we, as a multi-channel specialist, can offer
customers and suppliers we can eliminate the cost advantage
that pure play internet operators have historically enjoyed. As
a result we are able to offer customers very competitive prices
against our competitor set and still be more profitable.
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2. Complete the integration process and achieve
4. Continue to develop the Connected World
Services model and establish it as a material
contributor to earnings
We can leverage the specialist skills, operating processes,
technology and infrastructure of the enhanced group to
provide services to third parties to support their connected
world solutions.
The consumer electronics and mobile phone retail landscapes
have evolved significantly over the last few years. In particular,
the growth of smartphones, tablets and the speed of internet
access both in and out of the home, together with an
increasing number of connected devices, are altering the way
people live their lives, communicate and use technology. This
applies to a number of market segments, including health,
security, content and home management. Linked to this
market development will be a need for a raft of new services
that will ensure that these technologies work.
our synergy targets
At our interim results we were pleased to announce that our
synergies plan was firmly on track. We confirmed the total
figure of £80 million and that this would be achieved a year
earlier than anticipated in 2016/17.
We are acutely aware that the bulk of the synergies are to be
realised over the course of the coming two years. Whilst we
have made fantastic progress, including our head office
integrations in the Group / UK, Ireland and Sweden as well as
the rollout of the SWAS programme we continue to implement
our plans to achieve our synergy targets.
3. Leverage our scale, our knowhow, and our unique
infrastructure to drive growth in new product areas
including growth in services
The Merger allows us to expand and strengthen our
proposition to customers, our service capability and our
relationship with suppliers to underpin and drive even greater
advantage in the markets in which we operate.
The Group has many best practices in each of its business
divisions and we are sharing them across the Group, such as
the co-branded Elgiganten / Phone House stores in Sweden,
new store formats, use of Pin Point, supplier relationships and,
to a limited degree, own brands.
Growing complexity and interconnectivity of products means
that customers are increasingly demanding help and support,
not just in choosing the right product, but also installation,
connection, support and repair. Our Geek Squad and
KNOWHOW services are at the forefront of this in the UK and
we have started to roll out our KNOWHOW services across the
Nordics.
We must continue to innovate new services to help customers
and to remain relevant to the way products and connectivity is
evolving. Behind our end-to-end service operation we have a
comprehensive infrastructure, including technical phone
support, delivery, installation, repair and recycling. We can
leverage this infrastructure to widen our customer base either
to customers who bought their products through 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.
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In consumer electronics, own-brand products enable us to
offer customers greater choice and access to a range of
products at competitive prices. We have defined a clear
‘good, better, best’ brand range including: Currys and PC
World Essentials; Logik; iWantit; Advent; Goji; and Sandstrøm
brands. We see particular opportunities in the area of
accessories and essentials with, for example, our own range
of Sandstrøm cables.
After sales services and support
Our customers need help with their products, whether it be
delivery and installation, help keeping their products up and
running or repair should things go wrong. Our business in the
UK & Ireland sets the benchmark for our services infrastructure
under our Geek Squad and KNOWHOW brands, the latter of
which is also available across the Nordics.
We operate the largest network of two-man deliveries in the
UK with an average of 50,000 deliveries per week enabling us
to provide customers with the convenience of next day delivery
in a four hour time slot or the option of a free delivery at a later
date. We repair more than 1 million handsets per year and
provide over 11 million insurance or service agreements, carry
out approximately 500,000 computing set-ups per year and
take 125,000 technical support calls each week.
Our Geek Squad and KNOWHOW teams in stores, in our call
centres as well as field technicians, can provide set-up and
upgrade services and online fix and back up services. Our
market leading range of help and support services ensure a
customer has the backing of expertise and support that keeps
their technology up and running. Our state of the art repair
facility in Newark is able to repair and return a laptop in seven
days. Our network of field technicians offer ‘white goods’
repair in a market we estimate to be worth around £500 million
a year.
Through ownership of the service infrastructure we can ensure
the quality 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.
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Strategy and business model
Business model
Our business model, driven by customer insight, comprises
three pillars underpinned by a low cost operating model.
In order to ensure we understand what products and services
our customers want, how they use the products they buy from
us and what they think of the service they get from us, we use
extensive customer insight. This includes discussions at
customer panels, interviews, home visits and detailed surveys.
We use this information to build our ranges, improve our stores
and services and for other business decisions. This is
supported by mystery shoppers, exit surveys and customer
feedback. During the year our UK and Nordics businesses
made considerable progress in customer satisfaction metrics
as we continue to improve the business.
Taking each of the three pillars in turn, our model can be
described as follows:
Multi-channel
The shopping trip for customers is constantly evolving.
Our objective is to provide our customers with a seamless
and personalised experience where convenience, ease of
navigation and simplicity are key in attracting customers to
shop with us whether it is online, in-store or a combination
of both.
We constantly aim to develop and improve our customer
journey whether via our assisted sales tool Pin Point or by
improving stores, making them easier to shop in, with for
example, improved navigation, better signage, enabling
customers to interact with products before they buy, as well
as good advice on features and benefits from our colleagues.
Our websites are an integral part of the customer shopping
journey. In recognition of how customer trends are evolving we
have made it easier for our colleagues, in particular within our
CurrysPCWorld stores, to access products and extended
ranges in store.
Our training programmes combined with our product learning
centres and customer journeys provide our colleagues with the
right tools to understand customers’ needs and to provide
them with the complete solution to properly meet those needs.
We will continue to improve the training of our colleagues and
the ways in which we can make them experts in the products
we sell. For example they have recently undertaken a new
training programme focusing on selling multi-play.
Products
Combining our customer insight with our market strength we
can make sure we have the right range of products and
services in our stores to suit customers’ needs. Our scale and
relationships with suppliers means that we can work with them
to showcase the latest technology, connectivity and products
in our stores with areas dedicated to key suppliers.
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Dixons Carphone plc Annual Report and Accounts 2014/15
Our resources
• Customers
• People
• Suppliers
To support this we have launched our company values:
• We put the customer first, always
• We stand together as one
• Distribution and logistics
• We act bravely, challenge convention and do the right thing
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• Store portfolio
• Intellectual property
• Energy
• Cash and capital
Customers
We are driven to provide unparalleled expertise and services to
help customers and businesses navigate the new digital era
and one of our key values is: we put the customer first, always.
To deliver on this value and to ensure we continue to respond
to customers’ needs, we must listen and respond effectively
to them. We have comprehensive customer research
programmes spanning a variety of tools including exit surveys,
mystery shoppers and focus groups as well as effective data
gathering through, for example, our ‘Happy or Not’ tools
launched in our Elkjøp business and now introduced to
CurrysPCWorld. Within our Carphone Warehouse stores,
our Each and Every Customer Counts programme and Net
Promoter Scores (NPS) are integral to our internal reward
system. We are pleased that customer satisfaction scores
across the business are at record levels.
Through this research, managed internally and reviewed daily,
weekly and monthly, we have developed a clear and detailed
understanding of what we are doing well and more importantly
of where we can target further improvements. Customers tell
us that they need us to deliver a strong combination of ‘Value,
Choice and Service’ across all our shopping channels and it is
clear from their feedback that more and more, they recognise
that we are doing this. We will continue to deliver easier, more
exciting places to shop for customers whether that be in store,
online or a multi-channel combination of both.
Listening to customers extends into how we approach the
sales process in store. Our unique training programmes
combined with our customer journeys, including Pin Point,
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 enabling us to differentiate our
offer from competitors.
By maintaining our absolute focus on the customer and
delivering what they want in a retail environment that is
constantly evolving, we will continue to attract new
customers and retain existing ones.
People
Dixons Carphone is an organisation spanning Europe, with
over 40,000 colleagues in over 2,300 stores, offices, call
centres and distribution centres and one of our key priorities
following the Merger has been to build one culture, one vision
and one future.
• We know everyone can make a difference
• We believe anything is possible
This supports a ‘culture of discovery’ and faces head on the
changing environment in which we operate and supports us in
cultivating a high performance environment where each
employee performs to the best of their ability, working together
to achieve to their fullest potential. Our people are key to our
success and it is essential that colleagues are innovative and
creative, customer-focused and great at building relationships.
We are focused on improving every possible aspect of the
shopping journey, we want our colleagues to become famous
for service and retain customers for life by having exciting
new stores, the best range at great prices and untangling
the shopping trip. We are making good progress, however,
we must never be satisfied and we can and must make
further improvements to delight customers and to outpace
the competition.
We are focusing on building a career development framework
that rewards customer centric behaviour and instils a sense of
pride in our colleagues. We now provide tailor-made
development programmes and support further education
qualifications for our colleagues throughout the business.
Our development programmes use modules, training
workshops and a dedicated e-learning intranet service that
helps provide the skills colleagues need to succeed at every
level and career stage. We are also launching a dedicated
training academy later in the year.
We use our sophisticated tracking and measuring processes,
including regular mystery shops and exit surveys, to measure
individual and store performance, and to ensure we reward
appropriate behaviours. We also use a balanced scorecard
approach, based on the belief that engaged teams deliver
great service, which, in turn, delivers results for the business.
We measure the people element of our scorecard using a
colleague engagement survey, which runs twice a year.
During the year we launched the first Dixons Carphone
Sharesave scheme giving employees the chance to own
a part of the Company and share in its success.
Suppliers
With our market-leading positions, growing reputation and
being increasingly seen as the ‘go to’ location for all the latest
technology, our relationship with suppliers becomes ever more
important as well as ever stronger. Product sourcing offices
continually monitor current and future product cycles with
existing and potential suppliers.
In a complex multi-channel environment, suppliers trust us
with their new product releases and stock allocations, as they
appreciate the superior service and advice offered by our
stores and indeed our websites, as well as the exciting
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Our resources
environments offered by our transformed stores in which
customers can experience their brands and products.
We work closely with suppliers of all sizes to help them deliver
the right product for customers, through the forecasting and
planning stages to ensure we deliver the right levels of stock
for customers at the right time. Both the mobile and electrical
industries are characterised by a number of large global
manufacturers, who account for a large proportion of our sales.
However, we also source products from a large number of
smaller suppliers. We seek to maintain strong relationships
with all of these suppliers, not just to source the right product
for customers, but also to ensure the Group can purchase
the appropriate level of stock on favourable terms. While we
utilise the Group’s scale and buying power through an
international buying team, we also maintain strong
relationships at a local level.
We continue to refine our own-brand ranges to suit all budgets
and tastes. Our most notable successes have been the launch
of our own Sandstrøm cables brand alongside our Essentials
ranges as key entry level products in our ‘good, better, best’
line-up. These products are sourced by the Group’s teams
based in the UK and Hong Kong in collaboration with
manufacturers in, for example, Asia.
Distribution and logistics
The Group sees distribution as one of the keys to success in
maintaining highly competitive margins and delivering
outstanding, market beating service to customers. We operate
a centralised system of distribution centres for each of the
regions in which we operate. This delivers significant
competitive advantages, including reduced operating costs,
reduced supplier delivery costs, reduced stock volumes in
store, increased flexibility as to where to deliver and when,
and a more efficient home delivery network for both us and
our customers.
While continuing to reduce costs, we are also constantly
raising the bar, both in terms of successful delivery and
installation rates, but also the range and quality of services
we offer customers nationwide. In our Nordic operations
(Jönköping, Sweden) and the UK (Newark), we operate two of
the largest distribution centres of their kind in Europe. In the
UK alone we now make 50,000 deliveries per week, including
some 500,000 installations per year.
Store portfolio
We operate a wide variety of stores to suit the local customer
demographics. We operate many high street locations, small,
very popular outlets in airport locations and ‘megastores’ up to
60,000 sq ft, in out-of-town locations.
We constantly review our store portfolio to ensure we have
the right store for customers in the most competitive locations.
As part of this ongoing review and following the rollout of
Carphone Warehouse SWAS, in the UK & Ireland we are
currently trialling 3-in-1 stores to help determine the end state
property portfolio. Separately we also continue to transition
Currys and PC World stores to a 2-in-1 format in the UK &
Ireland. These stores allow us to offer the best of both worlds
to customers, attracting new footfall and often at a lower cost.
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In the Nordic region as well as Greece and Spain we also
operate a number of franchise stores. This arrangement allows
our brands to be present in a wider range of catchments, while
increasing the volume of purchases and therefore buying
power of the Group.
Intellectual property
Within our Connected World Services division we have
developed our pioneering multi-channel assisted sales tool
Pin Point powered by honeyBee. We are also utilising our
intellectual property to assist third parties, such as Samsung
and now Sprint, in connected retailing.
In the UK & Ireland we operate through Carphone Warehouse,
Currys and PC World brands, in the Nordics through its
various Elkjøp and Phone House brands and in Greece
through Kotsovolos and in Spain through Phone House.
These brands are extremely well-established and respected
in their markets. The Group also has two strong service
businesses, KNOWHOW and Geek Squad, aiming to delight
customers from end to end while generating significant new
business opportunities.
As well as our retail and service brands outlined above, we also
sell a range of own brand products such as Sandstrøm, Goji,
Logik, Essentials and Advent. Each of these brands have
specific target markets defined in conjunction with our
customer research findings.
Energy
Saving energy is good for the business, good for customers
and of course good for the environment. We take energy
efficiency extremely seriously and whilst we have already made
progress in a number of areas, we are investing in a wider
range of initiatives to significantly reduce our consumption
going forward. These include Variable Speed drives to optimise
the efficiency of in-store heating, ventilation and air
conditioning systems and new efficient fluorescent lighting in
a number of stores. Efficient LED lighting has been trialled in
back of house areas which we intend to roll out to further
stores and the 65,000 sq ft Customer Call Centre in Sheffield
has been upgraded to LED lighting throughout.
Cash and capital
It remains the Group’s policy to maintain a strong capital base
so as to maintain investor, creditor and market confidence and
to sustain the future development of the business. Through
careful working capital and balance sheet management, a
focus on cost reduction as well as efficient use of capital,
management is focused on ensuring we deliver a sustainable
business with strong cash generation.
As a Group we need to make the right choices as to how each
division utilises or preserves cash, whether it be in determining
ranges and stock held in store, growing mobile share with
accompanying working capital utilisation or managing returns
and related processes.
Key performance indicators
Financial and operational
Definition
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Performance
2014/15
£9,936m
2013/14†
£9,752m
2014/15
6%
2013/14†
4%
Growth in total Headline sales. The ability to grow sales is an important
measure of a brand’s appeal to customers and its competitive position.
Like-for-like sales are calculated based on Headline store and internet
sales 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. Sales 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.
Total
Headline
sales*
Like-for-
like sales
Market
position
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 are being engaged by the Group’s brands in each market.
Retailing operations should be, or be capable of becoming, the number
one or number two specialist electrical retailer in their market, measured
by market share.
Market leading
positions in:
UK & Ireland
Nordics
Greece
Headline
EBIT*
Continued growth of Headline EBIT enables the Group to invest in its
future and provide a return for shareholders. Targets are set relative to
expected market performance.
Headline
profit before
tax*
Continued growth of Headline profit before tax represents a measure of
Group performance to external investors and shareholders. Targets are
set relative to expected market performance.
Free Cash
Flow*
Return on
Capital
Employed
(ROCE)
The Group defines Free Cash Flow as net cash generated from
operations, less net finance costs, taxation and net capital expenditure
and excluding certain discrete items such as special pension
contributions. The management of cash usage, in particular working
capital employed in the business, optimises resources available for the
Group to invest in its future growth and to generate shareholder value.
The Group calculates ROCE on a pre-tax and lease adjusted basis. The
return is based on Headline EBIT, adjusted to add back the estimated
interest component associated with capitalising operating lease costs.
Capital employed is based on net assets including capitalised leases, but
excluding goodwill, cash, tax and the defined benefit pension obligations.
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.
2014/15
£414m
2014/15
£381m
2014/15
£(112)m
2013/14†
£359m
2013/14†
£316m
2013/14†
£280m
2014/15
20%
2013/14†
N/A
Shareholder
Definition
Headline basic
earnings per
share* (EPS)
The level of growth in EPS provides a suitable measure of the financial
health of the Group and its ability to deliver returns to shareholders
each year. The Group targets growth in EPS commensurate with growth
in earnings.
Total
shareholder
return (TSR)
This metric provides a relative performance measure over the longer term
of the Group’s ability to deliver returns for shareholders. The Group
previously used the FTSE 250 index but in 2015 changed to measure
itself against the FTSE 350 index reflecting the Group’s increased
market capitalisation.
Performance
2014/15
25.5p
2013/14†
20.5p
3 Year Compound Annual Growth
Dixons Carphone plc 44%
12%
FTSE 350 Index
* Headline performance measures are as defined in the Performance Review. These have been reported on a pro forma basis as if the CPW
Europe Acquisition and the Merger had occurred at the start of the comparative period.
† Headline figures for the year ended 29 March 2014 have been re-presented to exclude the results of discontinued operations.
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Principal risks to achieving the Group’s objectives
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The Group recognises that taking risks is an inherent part of doing business and that competitive advantage can be gained
through effectively managing risk. The Group continues to develop robust risk management processes, integrating risk
management into business decision making. Risks have evolved for the Group as a result of the Merger. A comprehensive post
Merger risk assessment has been undertaken resulting in a revised set of principal risks. The principal risks and uncertainties,
together with their potential impacts, are set out in the tables below along with an illustration of what is being done to mitigate
them. The Group’s overall risk environment is relatively unchanged since last year, notwithstanding changes to specific risks.
Specific risks and potential impacts
Principal risk
Specific risks
1. Dependence on
networks and key
suppliers
• The Group is dependent on relationships with key suppliers
to source products on which availability may be limited
• Changes in Mobile Network Operator (MNO) strategies in
relation to the Group, or more generally, and / or their performance,
could materially affect the revenues and profits of the business
Potential impacts
• Reduced revenue and profitability
• Deteriorating cash flow
• Reduced market share
2. Consumer environment
• Failure to respond with a business model that enables the
• Reduced revenue and profitability
and sustainable
business model
business to compete against a broad range of competitors on
service, price and / or range in a changing economy
• Failure to respond effectively to changes in the industry,
• Deteriorating cash flow
• Reduced market share
economic and / or competitor landscape
• Loss of competitive advantage
• Failure to accommodate changes in consumer preferences
and behaviours
• Some markets may not have the scale required to compete
effectively against increased competition, although we are
exiting from some of these
3. Greek Exit from
the Euro
• Possible exit of Greece from the Euro could lead to a deterioration
• Reduced revenue and profitability
in consumer confidence and disposable income resulting in a
significant impact on our Greek business, Kotsovolos
• Deteriorating cash flow
4. IT systems and
infrastructure
• Failure to invest adequately and appropriately in IT systems and
infrastructure, or an inability to effectively integrate IT assets
across the Group constrains the Group’s ability to grow and / or
adapt quickly
• Reduced revenue and profitability
• Deteriorating cash flow
• Loss of competitive advantage
• A key system becomes unavailable for a period of time
• Restricted growth and adaptability
• Reputational damage
5. Information security
• Major loss / breach of customer, colleague, or business
• Reputational damage
sensitive data
• Vulnerability to attack, malware, and associated cyber risks
owing to under investment in people, systems, and
safeguarding processes
• Financial penalties
• Reduced revenue and profitability
• Deteriorating cash flow
• Loss of competitive advantage
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Example mitigating actions and related strategic priorities
Principal risk
Example mitigating actions
Related strategic priorities
1. Dependence on
networks and key
suppliers
• New multi-year commercial agreements with all the major MNOs
have been agreed this year, which closely align interests and
drives value for both of us
• Sustainable retail business model in a
multi-channel world
• Continuing to leverage the scale of operations to strengthen
relationships with key suppliers and maintain a good supply
of scarce products
2. Consumer environment
• Strategic and business planning takes into account varying
• Sustainable retail business model in a
and sustainable
business model
economic scenarios, with ongoing monitoring by finance and
senior executives
multi-channel world
• Close scrutiny of product performance, trading results,
competitor activity and market share
• Use of customer insight / advocacy to monitor success of
initiative and actions
• Continued focus on driving cost improvements through both
merger synergy and “business as usual” cost-efficiency initiatives
• Ongoing evolution of our multi-channel proposition
• Differentiation from competitors through strategic partner
relationships, innovative propositions, and high quality
customer service
• Working to leverage expertise and scale to build partnerships with
other retailers and businesses through Connected World Services
3. Greek Exit from
the Euro
• A number of exit scenarios have been modelled in order
to understand and mitigate the potential impact on the
Group’s business
• Sustainable retail business model in a
multi-channel world
• Review of local funding arrangements including factoring of
debtor receivables
4. IT systems and
infrastructure
• Significant investment being made in IT systems and infrastructure,
• Leverage scale, knowhow and unique
supported by rigorous testing processes
asset base to drive growth
• Individual system recovery plans in place in the event of failure
which are tested regularly, with full recovery infrastructure available
for critical systems
• Long term partnerships with ‘tier 1’ application and infrastructure
providers
5. Information security
• Investment in information security safeguards, monitoring, in-house
• Sustainable retail business model in a
expertise and resources
multi-channel world
• Committee comprising senior management responsible for
oversight, co-ordination and monitoring of information security
policy and risk
• Ongoing training and awareness programmes for employees
Dixons Carphone plc Annual Report and Accounts 2014/15
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Principal risks to achieving the Group’s objectives
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Specific risks and potential impacts
Principal risk
Specific risks
6. FCA Regulation
• Failure to manage the business of the Group in compliance with
Financial Conduct Authority (FCA) regulation to which the Group
is subject in a number of areas including the mobile insurance
operations of The Carphone Warehouse Limited
Potential impacts
• Reputational damage
• Financial penalties
• Reduced revenues and profitability
• Deteriorating cash flow
• Customer compensation
7. Colleague retention
and capability
• The organisational structure and related accountabilities
• Reputational damage
restrict the ability to run the business effectively and adapt
to market change
• Failure to attract, develop and retain quality and depth of
• Reduced revenue and profitability
• Deteriorating cash flow
necessary leadership and management talent
• Loss of competitive advantage
8. Business continuity
plans are not effective
and major incident
response is inadequate
• A major incident impacts the Group’s ability to trade and business
• Reduced revenue and profitability
continuity plans are not effective resulting in an inadequate incident
response
• Deteriorating cash flow
• Reputational damage
• Loss of competitive advantage
9. Health and Safety
• Failure to effectively protect customers and / or colleagues from
• Employee / customer injury or loss of life
injury or loss of life
• Reputational damage
• Financial penalties
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Example mitigating actions and related strategic priorities
Principal risk
Example mitigating actions
Related strategic priorities
6. FCA Regulation
• Senior management perform oversight, co-ordination and monitoring
of governance, ensuring regulatory compliance and adherence to
policy and monitoring of mitigating actions
• Sustainable retail business model in a
multi-channel world
• Internal committees and control structures to manage requirements,
to ensure appropriate compliance (e.g. undertaking quality assurance
procedures for samples of mobile phone sales) and to react swiftly
should issues arise
• Active monitoring of changes in legislation / regulation
7. Colleague retention
and capability
• Ongoing review to ensure appropriate and effective roles,
• Sustainable retail business model in a
responsibilities, and accountabilities
multi-channel world
• Defined and standardised performance management frameworks
in place, with talent and succession plans maintained and reward
aligned to attract and retain the best talent
• Store structures which provide a clear career path for colleagues,
retaining and developing the best retail talent
• Bonus plans which include components relating to both business
and personal performance
• Continued improvements in the quality of training courses
and development programmes with specialist focus on core
business areas
8. Business continuity
plans are not effective
and major incident
response is inadequate
• Business continuity and crisis management plans in place and
• Sustainable retail business model in a
tested for key business locations
multi-channel world
• Disaster recovery plans in place and tested for key IT systems
and data centres
• Crisis team appointed to manage response to significant events
• Major risks insured
9. Health and Safety
• Dedicated team responsible for ensuring health and safety risks
are understood, controlled and monitored against applicable
regulations, who report on a regular basis to senior management
• Sustainable retail business model in a
multi-channel world
• Clear policies and procedures are in place detailing the controls
required to manage health and safety risks across the business
• Quality checks and factory audits for own-brand products
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Performance review
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Highlights: 13 months to 2 May 2015
• Group like-for-like revenue(3) up 6% (UK & Ireland up 8% and Nordics up 4%)
• Strong profit performance:
– Group pro forma Headline PBT(1) of £381 million (2013/14: £316 million), up 21%
– Group pro forma Headline basic EPS(1) (2) 25.5p (2013/14: 20.5p)
– Total statutory profit of £97 million (2013/14: £48 million) after Non-Headline(1) charges of £188 million (2013/14: £55 million)
which include a loss from discontinued operations of £114 million (2013/14: £10 million)
• Strong balance sheet with year end pro forma net debt of £260 million(8)
• Final dividend of 6.0p (2013/14: 4.0p) proposed, taking total dividends for the year to 8.5p (2013/14: 6.0p), up 42%
year-on-year
• Integration progressing well, expecting to deliver at least £80 million of synergies by 2016/17, one year ahead of plan
• Disposals of non-core operations in France, Germany, the Netherlands and Portugal
Pro forma results – continuing business
Headline revenue(1)
Headline profit / (loss)(1)
UK & Ireland
Nordics
Southern Europe
Connected World Services
Group
Net finance costs
Profit before tax
Tax
Profit after tax
See notes on page 21 for basis of preparation
Note
(4)
(5)
(6)
(7)
2014/15
£million
6,451
2,718
637
130
2013/14
£million
6,011
2,895
768
78
9,936
9,752
Local
currency
% change
Like-for-like(3)
% change
8%
4%
(10)%
67%
6%
8%
4%
(5)%
N/A
6%
2014/15
£million
306
86
14
8
414
(33)
381
(88)
293
2013/14
£million
242
102
10
5
359
(43)
316
(80)
236
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Basis of preparation – pro forma information
On 26 June 2013 the Carphone Warehouse Group plc acquired the 50% of CPW Europe which it did not already own from Best Buy Co. Inc.,
and on 6 August 2014 an all share merger of Carphone Warehouse and Dixons Retail plc (the Merger) took place. The information in the
highlights and performance review sections refer, unless otherwise stated, to pro forma Headline(1) information for continuing businesses,
reflecting the results of both Carphone Warehouse and Dixons Retail throughout both the current and comparative periods as if the CPW
Europe Acquisition and the Merger had occurred at the start of the comparative period.
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The Group has changed its year end to be the Saturday closest to 30 April. The current year end therefore comprises the 13 months to 2 May
2015 for the Carphone Warehouse business with a comparative period of the 12 months ended 29 March 2014 in line with previously reported
results. As such the current year includes an additional five weeks of results from the Carphone Warehouse business. The prior period results
of Carphone Warehouse have been restated to exclude the results of its retail operations in France, Germany, the Netherlands and Portugal
which are treated as discontinued operations following the decision to exit these businesses.
Prior year comparatives for Carphone Warehouse have also been restated to reclassify the unwind of discounts for the time value of money
on network commissions receivable from pro forma Headline EBIT to interest, in line with the treatment in the current period and with the
classification in the statutory results. This item had a value of £9 million for the prior year and the reclassification has the impact of reducing
pro forma Headline EBIT.
Current period pro forma results for the Dixons Retail business comprise the 12 months ended 2 May 2015 with a comparative period of the
12 months ended 30 April 2014.
Notes
(1) Headline results exclude amortisation of acquisition intangibles, merger integration and transaction costs, CPW Europe Acquisition related
items, Phone House France operating and closure costs whilst it formed part of the CPW Europe joint venture, net interest on defined
benefit pension schemes and discontinued operations (comprising Virgin Mobile France and Phone House operations in France,
Germany, the Netherlands and Portugal). Such excluded items are described as ‘Non-Headline’. For further details see notes 4 and
24 to the Group financial statements.
(2) Pro forma EPS has been calculated assuming the number of shares existing at 2 May 2015, adjusted for the number of shares held by the
Group ESOT, apply from the start of the current and comparative periods.
(3) Like-for-like sales are calculated based on Headline store and internet sales 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. Sales 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. Like-for-like revenue reflects performance for the Carphone
Warehouse business for the 13 months to 2 May 2015 compared to the 13 months to 3 May 2014 and for the Dixons Retail business for
the 12 months ended 2 May 2015 compared to the 12 months ended 30 April 2014.
(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. Prior to the announced disposals of operations in
Germany and the Netherlands which previously formed part of this segment, it was named Northern Europe.
(6) Southern Europe comprises operations in Spain and Greece. This now excludes the results of Portugal which are presented as
discontinued operations.
(7) Connected World Services 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.
(8) Pro forma net debt reflects the consolidated net debt of the Group at 2 May 2015 including net funds recognised within assets held for sale
of £53 million.
Dixons Carphone plc Annual Report and Accounts 2014/15
21
Our mobile business in the UK & Ireland also performed well.
Postpay volumes and market share continued to grow year-
on-year, driven by the exit of Phones 4u and some very
successful product launches. During the year all the major
networks have moved the majority of their customers onto
4G tariffs. These factors have helped drive a better customer
experience and have led to higher data usage.
In May 2015, 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 initial performance of iD and the customer
response, so far, has been very promising indeed.
Nordics
Nordics revenue, expressed in Sterling was affected by a
significant movement on foreign exchange rates in the region.
As a result pro forma Headline revenue in the Nordics was
down 6% to £2,718 million (2013/14: £2,895 million). Pro forma
Headline revenue on a local currency basis was up 4%.
Nordics pro forma Headline EBIT was £86 million (2013/14:
£102 million) reflecting a negative impact of foreign exchange
of £11 million and the investments noted below.
The Nordics business has had a sound year, continuing to
consolidate and grow its position as market leader in all of the
countries in which it operates. The business has invested in
various areas during the year to strengthen its market position
further and drive customer satisfaction which is at an all-time
high in each of its countries.
The team has launched co-branded Elgiganten Phone House
stores with very positive results. In addition the ‘Epoq’ kitchen
business has provided very encouraging results with strong
revenue growth, driving market share and appliance sales.
We expect that this operation will also provide opportunities
in smart home and integrated products.
The Phone House operations in Sweden encountered tough
trading conditions during the year, but its integration with the
Elgiganten business has been swift, driving synergy savings
and we expect both the businesses to benefit greatly from
the Merger.
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Performance review
Group
Group pro forma Headline revenue was up 2% to
£9,936 million (2013/14: £9,752 million) and up 6% on a
local currency basis, with both including a 2% benefit due to
an extra five weeks of trading from the Carphone Warehouse
business. Like-for-like revenue growth was 6% reflecting
growth in our UK & Ireland, Nordic and Greek businesses,
partially offset by performance in the Spanish market. The
difference between the total revenue growth on a local
currency basis (adjusted for the additional weeks from the
Carphone Warehouse business) and like-for-like is
predominantly due to a reduction in stores.
Despite operating in a highly competitive market place, the
Group has continued to grow market share and maintain stable
gross margin across the year.
Pro forma Headline EBIT was up 15% to £414 million (2013/14:
£359 million) driven by the strong operating performance in
the UK & Ireland. Pro forma Headline profit before tax was
£381 million (2013/14: £316 million) reflecting 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.
As a part of the Merger we carried out a thorough analysis of
the opportunities that combining the two businesses could
bring and, as previously communicated, our stated target of a
minimum £80 million of synergies by 2017/18 has now been
brought forward by one year to 2016/17. Integration of the two
businesses continues to progress well with 244 new Carphone
Warehouse SWAS now open and our head office teams
combined and operating as one. We are also rationalising
down to one single head office location in each of the UK,
Ireland and Sweden and we have announced the integration
of our UK logistics and repair centres to the legacy Dixons
Retail site in Newark.
UK & Ireland
The UK & Ireland had a very strong year with pro forma
revenue up by 7% to £6,451 million (2013/14: £6,011 million)
including a 2% benefit of the additional five weeks of trading
from the Carphone Warehouse business. Like-for-like revenue
for the year was up 8% reflecting strong performances in both
electricals and mobile and the roll-out of the Carphone
Warehouse SWAS which have delivered strong revenue
growth on existing floor space, contributing 1% of the like-for-
like increase. The difference between the total revenue growth
(as adjusted for the additional five weeks of trading from the
Carphone Warehouse business) and like-for-like predominantly
reflects a reduction in stores.
Pro forma Headline EBIT up 26% versus last year, to
£306 million. The business continued to gain market share
with strong sales driving increased profitability.
The electricals business had a very positive year supported by
record advocacy and customer net promoter scores and our
pricing being at its most competitive ever. The peak period,
which now stretches six weeks from ‘Black Friday’ into the
new year, was particularly strong with both small and large
white goods, as well as large screen TVs, selling very well.
22
Dixons Carphone plc Annual Report and Accounts 2014/15
Southern Europe
Connected World Services
Revenue expressed in Sterling was affected by a significant
movement on foreign exchange rates in the region. Pro forma
revenue on a local currency basis was down 10% including
a 3% benefit of the additional five weeks of trading from the
Phone House Spain business. The difference between the
local currency revenue growth and like-for-like predominantly
reflects the closure of stores in Spain explained below.
Connected World Services (CWS) pro forma Headline revenue
was £130 million (2013/14: £78 million) with the increase
predominantly reflecting the revenue from our Samsung
Experience Stores which launched at the end of last year, in
addition to the benefit of the additional five weeks of trading
from the legacy Carphone Warehouse business. Pro forma
Headline EBIT was £8 million (2013/14: £5 million).
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Southern Europe pro forma Headline EBIT was £14 million
(2013/14: £10 million).
The business in Greece delivered strong like-for-like revenue
growth during the year, with most categories performing well,
in particular large screen TVs. The strong performance in this
market saw the business return to profitability during the year.
We do however remain very mindful of the uncertain economic
and political situation in the country and the effect this may
have on our business. The team have been very active in
planning for every contingency.
Our business in Spain continues to operate in a tough
marketplace. Although it has been negatively impacted by
these pressures, we have a strong management team in place,
which continues to innovate and develop the business. During
the year we reached agreement with Telefonica to distribute
the products and services of Movistar in our stores which has
been a positive force. We have also focused the business
model to a greater extent on franchise operations and reduced
our own store portfolio. In total we closed a net 35 stores
during the year reflecting an increase of 20 franchise stores
and a reduction in own stores of 55. These activities resulted
in restructuring costs and the disposal of some non-core
assets all of which have been included within pro forma
Headline results.
The CWS management team has worked hard during the year
to grow its strong pipeline and to build on relationships with
blue-chip partners including Samsung, Aviva, RBS and
TalkTalk. It has also continued to develop its omni-channel
platform, honeyBee.
On 2 July 2015, CWS announced that it had entered into an
agreement with Sprint Corporation, a leading US mobile
network operator, to open and manage Sprint-branded stores
in the US. CWS will supply retail expertise to Sprint who will
initially open around 20 retail stores, and if this trial is
successful, the parties will progress to a second phase which
will involve CWS investing equally with Sprint in a joint venture
to support roll-out plans of up to 500 stores in the US. During
the second phase, Dixons Carphone has agreed to invest up to
$32 million to obtain a 50% interest in the new venture. Dixons
Carphone will also provide support across the whole of the
Sprint estate as part of a wider know-how sharing
arrangement. We believe this is a very exciting opportunity
for the future and provides a platform for the Group to return
to the US marketplace.
Dixons Carphone plc Annual Report and Accounts 2014/15
23
Performance review
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Net finance costs
Non-Headline items
Pro forma Headline net finance costs were £33 million
(2013/14: £43 million). The reduction in financing costs was
primarily due to the redemption of the bonds previously held
by Dixons Retail on 21 August 2014.
Tax
Headline profit before tax is reported before Non-Headline
charges of £89 million (2013/14: £51 million). These charges
are analysed below and are reported on a statutory basis with
the Dixons Retail business only consolidated from completion
of the Merger on 6 August 2014.
The Headline pro forma rate of tax for the full year is 23%
(2013/14: 25%). This rate is higher than the UK statutory rate of
21% predominantly reflecting higher statutory rates in the
Nordics and certain non-deductible costs primarily in the UK.
Statutory results
The explanation of the Group’s results presented above is on a
pro forma basis as if the group structure following the CPW
Europe Acquisition and the Merger had been in place
throughout the current and comparative periods. Group results
as reported in the financial information are prepared on a
statutory basis, consolidating the results of CPW Europe from
26 June 2013 and Dixons Retail from 6 August 2014. These
results are summarised below:
Headline income statement – continuing operations –
statutory basis
Revenue
EBIT
Net finance costs
Profit before tax
Tax
Profit after tax
Basic EPS
Diluted EPS
2014/15
£million
8,255
2013/14(1)
£million
1,943
400
(24)
376
(91)
285
137
(9)
128
(25)
103
29.7p
28.7p
18.6p
18.3p
(1) Results for 2013/14 have been restated to reclassify the results
of the operations in Germany, the Netherlands and Portugal as
discontinued operations.
Headline profit before tax increased from £128 million to
£376 million predominantly reflecting the inclusion of a full
period of earnings from CPW Europe and the inclusion of
Dixons Retail results from 6 August 2014. The tax charge
increased from £25 million to £91 million reflecting the higher
pre-tax earnings described above.
This in turn resulted in an increase in basic Headline EPS from
18.6p to 29.7p for the period. This EPS reflects the growth in
profit after tax explained above but also the fact that the
number of shares in issue approximately doubled following
the Merger.
Headline profit before tax –
continuing operations –
statutory basis
Merger related costs
Amortisation of acquisition intangibles
Share of JVs – France exit
CPW Europe Acquisition
Net pension interest
Total profit before tax – continuing
operations – statutory basis
2014/15
£million
2013/14
£million
376
(41)
(35)
—
—
(13)
287
128
—
(13)
(23)
(15)
—
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Costs incurred in relation to the Merger include transaction
costs of £9 million, predominantly reflecting banking and
professional fees, and merger integration costs of £32 million
primarily being professional fees, employee severance and
property costs associated with the integration process. Further
integration costs will be incurred during 2015/16 as the
integration of the two businesses continues.
The charge for the amortisation of acquisition intangibles was
£35 million (2013/14: £13 million) with the current period
including a full 13 months of amortisation of intangible assets
recognised following the CPW Europe Acquisition and, since
6 August 2014, the amortisation of intangible assets
recognised as a result of the Merger.
Net pension interest was £13 million reflecting the charge
incurred in relation to the Dixons Retail UK pension scheme
following completion of the Merger.
Non-Headline items included within Dixons Retail total
results in the period prior to the Merger comprised £11 million
in respect of the acceleration of share-based payment
charges which vested on the Merger, £12 million of merger
related professional fees and £5 million of merger integration
planning costs committed to prior to completion of the Merger,
£42 million of debt restructuring costs in respect of early
repayment of the bonds previously held by Dixons Retail,
£5 million of provision releases relating to discontinued
operations and £4 million of pension interest costs. As these
items were incurred prior to the Merger they do not form part
of the Group’s consolidated results.
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Discontinued operations
Free Cash Flow – pro forma basis
On 16 May 2014 the Group announced that it had entered into
an agreement to sell its interest in Virgin Mobile France and
completed the disposal on 4 December 2014 for gross
consideration of £104 million and generated a profit of
£87 million.
Following the Merger, the Group put in place a strategy of
focusing on market leadership positions, while engaging in
other markets through partnerships with its Connected World
Services division. The Group carried out detailed strategic
assessments of its Phone House operations, which led to the
decision to exit certain markets.
• On 15 April 2015, the Group announced that it had agreed to
the sale of its operations in Germany to Drillisch AG, a
leading mobile virtual network operator in Germany. The sale
completed on 5 May 2015.
• On 24 April 2015, the Group entered into an agreement to
dispose of a majority stake (83%) in its operations in the
Netherlands to Relevant Holdings BV, a company set up by
the shareholders of Optie1 which has extensive telecom
retailing experience in the Dutch market. The sale completed
on 30 June 2015.
• On 16 July 2015, the Group announced its commitment to
dispose of its operations in Portugal following the
completion of a strategic review during 2014/15.
Discussions, which commenced with potential acquirers
during 2014/15, are advanced and an announcement
confirming details of the disposal is expected in due course.
The closure of the Phone House operations in France, which
was announced in 2013/14, was completed during the year
ended 2 May 2015 and is therefore now treated as a
discontinued operation.
Prior to the Merger, Dixons Retail agreed to sell its
operations in the Czech Republic and Slovakia (Central
Europe). The net assets held for sale associated with this
business were included within the fair value of assets and
liabilities acquired through the Merger and the sale completed
on 11 August 2014.
The above businesses have been treated as discontinued
operations and a net loss of £114 million (2013/14: £10 million)
has been recognised in relation to them. Comparative
information has been restated to reflect this classification.
Cash and movement on net funds
The information provided below is on a pro forma basis and
aggregates the net funds / (debt) and cash flows of the Group,
Dixons Retail and CPW Europe, as though Dixons Retail and
CPW Europe had been 100% owned by the Group throughout
the current and prior periods, to enable a complete
understanding of cash flows.
Headline EBIT
Depreciation and amortisation
Working capital
Capital expenditure
Taxation
Interest
Other items
Free cash flow before restructuring
items – continuing operations
Restructuring costs
Free Cash Flow
2014/15
£million
2013/14
£million
414
141
(366)
(186)
(65)
(47)
13
(96)
(16)
(112)
359
170
5
(142)
(64)
(53)
11
286
(6)
280
Pro forma Free Cash Flow before restructuring was an outflow
of £96 million (2013/14: inflow of £286 million). The Group
experienced a working capital outflow of £366 million (2013/14:
inflow of £5 million) on a pro forma basis with the year-on-year
increase largely reflecting timing issues associated with the
change of year end and the day on which month end fell, as
well as the unwind of certain supplier funding arrangements
previously in place.
Capital expenditure in the period was £186 million on a pro
forma basis (2013/14: £142 million), with the year-on-year
increase reflecting significant capital expenditure on honeyBee
and investment in relation to merging the two businesses.
Restructuring costs in 2014/15 relate to Merger integration
costs and primarily reflect professional fees and employee
severance costs.
Funding – pro forma basis
Free Cash Flow – pro forma basis
Dividends
Merger transaction costs
Acquisitions and disposals including
discontinued operations
Pension contributions
Other items
Movement in net funds / (debt) –
pro forma basis
Opening net funds – pro forma basis(1)
Closing net (debt) / funds – pro forma
2014/15
£million
(112)
(52)
(90)
(41)
(28)
—
(323)
63
2013/14
£million
280
(30)
—
(441)
(20)
(6)
(217)
280
basis(2)
(260)
63
(1) Opening net funds in the current period reflects net funds for
Carphone Warehouse at 29 March 2014 and for Dixons Retail at
30 April 2014. Opening net funds in the prior period reflects net
funds for Carphone Warehouse (including CPW Europe) at
31 March 2013 and for Dixons Retail at 30 April 2013.
(2) Pro forma net debt reflects the consolidated net debt of the Group
at 2 May 2015 including net funds recognised within assets held
for sale of £53 million.
Dixons Carphone plc Annual Report and Accounts 2014/15
25
Dividends
The Board declared an interim dividend of 2.5p per share, up
from 2.0p per share last year. The interim dividend was paid
on 23 January 2015.
We are proposing a final dividend of 6.0p per share, taking the
total dividend for the year to 8.5p per share, a 42% increase on
the previous year (2013/14: 6.0p). The final dividend is subject
to shareholder approval at the Company’s forthcoming Annual
General Meeting. The ex-dividend date is 27 August 2015,
with a record date of 28 August 2015 and an intended final
dividend payment date of 25 September 2015.
Going concern
A review of the Group’s business activities, together with the
factors likely to affect its future development, including
consideration of the continuing uncertainty in Greece,
performance and position, are set out within this Strategic
report, including the risk management section. The financial
position of the Group, its cash flows, liquidity position and
borrowing facilities are shown in the balance sheet, cash
flow statement and accompanying notes to the Group
financial statements.
The directors have reviewed the future cash and profit
forecasts of the Group, which they consider to be based on
prudent assumptions. Based on these forecasts, the directors
consider that it is appropriate to prepare the Group financial
statements on the going concern basis.
Humphrey Singer
Group Finance Director
16 July 2015
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Performance review
At 2 May 2015 the Group had pro forma net debt of
£260 million compared to prior period pro forma closing net
funds of £63 million. Pro forma net debt at the end of April
2014 for both businesses was £181 million.
Free cash flow was an outflow of £112 million (2013/14: inflow
of £280 million) for the reasons described above.
Merger transaction costs reflect professional and banking fees,
the cash cost of share option exercises as a result of the
Merger and the cost of redeeming the bonds previously held
by Dixons Retail.
Net cash outflows from acquisitions and disposals in the
current year were £41 million reflecting the first payment of
deferred consideration for the CPW Europe Acquisition and
cash outflows in discontinued operations. Cash flows in the
prior period were £441 million predominantly reflecting cash
flows associated with the CPW Europe Acquisition, as well as
those associated with discontinued operations.
The Group has a total of £875 million of committed borrowing
facilities comprising: i) a £625 million multi-currency term and
revolving credit facility; and ii) a £250 million revolving credit
facility, both of which mature in April 2017. The £625 million
facility is split into two tranches: a £400 million revolving
tranche and a term loan tranche of £225 million. The term loan
was amortised by £25 million during the period and is due to
reduce by a further £50 million on 30 June 2016. These
facilities mature in 2017 and we expect to complete refinancing
of our facilities during 2015/16.
Goodwill
The goodwill of £2,629 million arising from the Merger reflects
the fact that the value of Dixons Retail is based on its cash
generating potential rather than its existing assets and the fact
that many of its key strengths, such as its scale and expertise,
do not represent intangible assets as defined by IFRS.
Pensions
The IAS 19 accounting deficit of the defined benefit section
of the UK pension scheme of Dixons Retail amounted to
£486 million at 2 May 2015 compared to £429 million at the
date of the Merger on 6 August 2014. The assumptions
used for determining the accounting valuation use a consistent
basis to that adopted within the financial statements of Dixons
Retail for the year ended 30 April 2014 and which build from
the most recent actuarial valuation as at 31 March 2013, which
was completed during the period being reported. Contributions
during the period under the terms of the deficit reduction
plan amounted to £28 million on a pro forma basis
(2013/14: £20 million).
The deficit has increased largely as a result of the changes in
financial assumptions which determine liabilities, partially offset
by an increase in the asset values.
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Dixons Carphone is committed to high standards of
corporate and social responsibility across the Group.
We recognise good sustainability practices make sound
business sense, helping us to achieve our corporate
objectives, fulfil our business plan and minimise costs.
For Dixons Carphone, sustainability is about strengthening our
business by way of meaningful engagement with stakeholders,
reducing our impact on the environment and benefiting the
communities in which we operate. As we grow we will continue
to listen to, and learn from our stakeholders and strive to
reward them with consistently transparent and positive
outcomes and experiences.
What we care about
Our priorities are to:
Our employee benefits packages are regularly reviewed to
remain attractive and conducive to the recruitment and
retention of talented individuals. Colleagues are encouraged
to participate in our SAYE Scheme to build a personal stake
in the business. Our first combined Dixons Carphone SAYE
scheme in the UK and Ireland was launched with 20% of
colleagues electing to join.
We work to achieve high standards in employment practices
and have a comprehensive suite of employment policies and
procedures, which we regularly review. These policies include
guidance on being family friendly through to colleague dispute
management, diversity and equal opportunities.
We have a dedicated Corporate Responsibility function and
are a member of the UK Government’s All-Party Parliamentary
Corporate Responsibility Group.
• Provide a safe and healthy environment for employees,
Our Values
customers and visitors to our sites;
• Engage colleagues through rewarding workplace
environments and careers;
• Continually improve customer service and satisfaction levels;
• Improve operational energy efficiency;
• Reduce our impact on the environment;
Our culture supports the discovery of new and better ways of
working, two-way communication and the speedy resolution of
concerns and queries.
We are cultivating a high performance environment where each
employee performs to the best of their ability, working together
to achieve untold possibilities.
• Cut costs and raise revenue through improved waste
recycling;
Our Dixons Carphone Shared Values are:
We put the customer first, always
• Enhance and promote our customer proposition in relation
• Everything starts with the customer
to product reuse and recycling;
• Monitor and reduce carbon emissions;
• Offer safe and reliable own-brand products achieved as
a result of our expert technical knowledge with products
sourced from manufacturers which are audited against
our ethical requirements; and
• It’s how we start every day, every conversation, every
new idea
• It’s how we win
We stand together as one
• We love to win. It feels great
• Engage stakeholders through the support of community
• We treat everyone on our team as family, our suppliers
activity and charitable causes.
as partners
Our approach to sustainability means taking business
decisions that reflect these priorities, based on our values
and guided by our values and code of business ethics.
People
Good people are pivotal to our success and therefore our
biggest investment. They are both the foundation and face of
our business and key to continued innovation and delivering
excellent service to our customers.
We place a huge emphasis on attracting and retaining the right
people. We listen to, and work with, employees to help them
reach their full potential while building a diverse, rewarding
environment where they feel empowered and inspired to help
us grow and succeed.
We are working to be recognised as an employer of choice
and aim to reward colleagues fairly, providing equal
opportunities, personal development and training.
• We act with humility, respect and kindness
We act bravely, challenge convention and do the right thing
• We embrace the unknown, are pacey, ambitious, but
never reckless
• Never scared to fail, it’s how we learn
• When faced with a difficult decision, we do the right thing
We know everyone can make a difference
• The best ideas come from unexpected sources
• Great people with passion and determination
• Do a great job and you’ll feel you can build an amazing
career at Dixons Carphone
We believe anything is possible
• We make the impossible possible, every day by achieving
the unthinkable
• Opportunities always lie ahead
• We enjoy celebrating success
• We’re never complacent, “Great job… What’s next?”
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The Dixons Carphone Ethical Conduct Policy applies to all
employees and relevant managers are required to sign an
annual statement to confirm their compliance.
Our employees’ performance and engagement is measured via
a balanced scorecard, and alongside our values and strategy,
this scorecard is used to run our business, help us to make the
right decisions and recognise success. This is done at a
company, market and on an individual level.
In the UK & Ireland we are continuing to integrate online
communications channels to provide modern and effective
platforms with an emphasis on collaboration and peer-to-peer
communication. We will continue to produce ‘Connected’, a
hard copy employee magazine, which launched on the day of
the Merger and is a key channel for sharing news and
company progress.
Strengthening Capabilities
One Dixons Carphone Team
One of our key priorities post-Merger is to build one culture,
one vision and one future. A major step towards this is locating
support centre colleagues in one site.
The decision to choose Acton as our main support function
site was made based on a set of criteria which included square
footage, car parking facilities and access to public transport.
We will relocate up to 1,000 colleagues from our Hemel
Hempstead site by November 2015, before the site closes on
31 December 2015.
Our Acton site remains fully functional while refurbishment
work takes place. This is aided by the introduction of Smart
Working - a flexible approach to time spent in the office,
designed to drive greater efficiency and effectiveness as well
as creating a more fluid working environment. We are building
a workplace tailored for the needs of our people.
‘Change Champions’ for each function have been identified
to help the move run smoothly and all colleagues have been
surveyed for their input and are being communicated with
throughout the process.
We are working to achieve the following design principles:
• One Dixons Carphone Team
• Tech Enabled colleagues
• Flexibility and Healthy Work-Life Balance
• Improved facilities
• A vibrant working environment.
Colleague Communications
We run a comprehensive colleague engagement programme
based on our belief that an engaged workforce will deliver a
great customer experience, resulting in strong financial results.
Our key aims for this programme are to fully integrate our
workforce and instil pride in working for Dixons Carphone.
September will see the launch of a colleague engagement
survey across the Group, administered by an external provider.
Colleagues will have the opportunity to say how they feel about
working for Dixons Carphone and this feedback will be used
to develop initiatives to ensure our company is a great place
to work.
To help our people to grow their careers at Dixons Carphone
and develop the skills needed to perform well in their role and
help to grow our business we provide formal training, on the
job experience and management coaching.
We have a learning strategy to support our business strategy
and individuals have regular one-to-ones and a formal review
twice a year with their manager to assess their performance
and set clear goals and development plans for the year ahead.
Across Dixons Carphone around 96,000 learning hours were
recorded last year with over 80% of this learning completed
online. This year, we launched our Retail Academy for all new
store colleagues joining our business. We also run talent and
leadership development programmes to develop high
achievers and to improve leadership skills across our
management population.
Health and Wellbeing
Through the promotion of employee wellbeing, we aim to
create a happier, healthier and more productive workforce,
at the same time as reducing time off through sickness and
ensuring optimum levels of energy and resilience.
Healthy living is encouraged through a number of initiatives
and facilities. On-site gyms are available in many of our main
support centres and a new fitness centre is planned as part of
the refurbishment of our Head Office building in North Acton.
Relaxation rooms where employees can watch TV, play pool,
play video games or take time out are provided in Support
Functions along with on-site restaurants offering a range of
foods, which are reviewed regularly to ensure they offer a
balanced menu.
Our Employee Assistance Programme, which is available 24/7,
is available to all our employees and offers a range of
information about issues such as stress and nutrition.
A number of products and services are also available to
support employees, such as private medical insurance. This is
also available to their close family at subsidised rates. Dental
insurance and a Health Cash Plan are also available at special
corporate rates for employees who wish to participate.
Specific areas of the business also offer support in other ways
too. For example, at our Support Centre in Acton a
physiotherapist comes in regularly and offers treatments to
employees at reduced rates.
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Customers
Every decision we make is driven by our ambition to provide
unparalleled expertise and services to help customers and
businesses navigate the new digital era.
Each and Every Customer Counts programme
Our Each and Every Customer Counts (EECC) programme is
supported by a full suite of customer insight measures, driving
daily, weekly and monthly improvements in our customer
experience. Each employee is accountable on some level for
our lead customer measure. Our NPS features in all our internal
reward schemes and is central to our company balanced
scorecard. We have seen NPS improvements of 9% year
on year to March 2015.
We run a weekly and monthly EECC dash board with key
measures and targets laddering up to NPS and completing our
omni-channel customer journey. Our customer insight
programme collects feedback from over 850,000 customers
per year via each of our channels and touch points. Feedback
mechanisms include mystery shopping, exit surveys and SMS
feedback via text messages immediately following a customer
purchase. This programme allows us to track a further 15
customer KPIs, out of which seven hit or exceeded targets for
the year and a further four showed improvement.
Our governance programme for customer experience sits at
executive and senior level within our business, underlining its
importance to our strategy and day to day thinking. Weekly
Voice of the Customer meetings are used to implement
improvement plans when performance targets are not
being reached.
We want to be the preferred brand and within our key target
market we have seen an 8% improvement year on year for the
three months to April 2015. Our ultimate goal is to drive both
preference and real loyalty with our customers. Improving
customers’ value for money is also critical in a highly
competitive market and again we have seen significant
improvements on value for money ratings across the year
within our key target customers, with a 16% improvement
year on year.
Average to Awesome
This wellbeing initiative focused on twelve employees from
our UK business with the aim of transforming their overall
aptitude to health and fitness. With the help of a dedicated
personal trainer and tailored nutrition plan, we recorded their
combined weight loss at 30.7kg over the 12 week period.
These employees developed a strong bond and have
continued positive changes to their lifestyle habits, resulting
in the easing of conditions such as breathlessness and type
2 diabetes in individuals, while all twelve are enjoying
increased energy levels and enhanced performance. We are
repeating this programme again in 2015 introducing the
latest wearable technology.
Equal Opportunities
The Group is committed to equality of opportunity across all of
its employment practices throughout the Group. We strive to
prevent unlawful discrimination in the workplace on the
grounds of sex, race, disability, sexual orientation, religion or
religious belief, age, marriage and civil partnership, gender
reassignment, pregnancy and maternity. We promote an
honest and open environment and encourage colleagues with
concerns to report issues to us either directly through line
managers or via an independent, confidential integrity line.
Disability
We are committed to providing colleagues with equal
opportunities, from recruitment to training and development.
We encourage applications from individuals with disabilities
who can do the job and candidates will be considered for
each role they apply for. Every effort is made to retain
disabled colleagues in our employment including making
any reasonable readjustments to their jobs, workplace
or environment.
Diversity
We appreciate the benefits a diverse workplace brings,
including, but not restricted to gender diversity and the
importance diversity plays in achieving the right mix of skills,
knowledge and experience our organisation needs to reach
its potential.
Diversity in terms of age and gender remains a key
performance indicator. Statistics for the UK, Ireland and
Nordics are as follows:
All employees
Senior managers
Directors
Number
%
Number
%
Number
%
Male
27,803
Female 11,157
71%
29%
254
99
72%
28%
10
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77%
23%
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Customer retention is another measure we take very seriously,
reflected by beating our target by 6%. Our customer
experience plan has identified key areas for improvement and
we have invested heavily to fix these. We constantly
communicate with customers through dedicated panels and
every new initiative starts with customer insight. This year we
ran over 100 customer focus groups using a combination of
qualitative focus groups and co-creation sessions. Large
quantitative and online surveys are also run for additional data
and customer review sites are tracked and used to inform how
we can continually improve.
We have been recognised by customers and independent third
parties for the customer experience we strive to create for each
and every customer. Our rating on Trust Pilot is now 7.2/10
and is the highest in the mobile industry.
Carphone Warehouse Customer Service Awards include
BT Retail Week Technology Awards: Best Customer
Experience for Pin Point, Mobile Industry Awards: Best
High Street Retailer, Mobile Choice Awards: Best High
Street Retailer, What Mobile Awards: Best Services and
Repairs for Geek Squad.
KNOWHOW
At the KNOWHOW Contact Centre in Sheffield we support
the UK & Ireland retail customer base on behalf of both the
Currys and PC World brands in every step of their journey
with our business.
Prior to purchase our Sales team support with product
selection and advice, post purchase we have teams to support
every step of the way from Delivery enquiries to Technical
advice including our dedicated Careplan Team.
Our team of over 1,300 colleagues support customers seven
days a week, with our Technical homeworking team covering
365 days around the clock for support with PC and
connectivity issues. Across the teams in our busiest week this
year we handled enquiries from over 300,000 customers and
have significantly improved our response times across all
areas of contact, with particular focus on our Social Media
and Email channels.
We offer a great career path across Home Services, with
Apprenticeships in our Technical team, through to a Pathway
programme for all colleagues, giving all of our team an
opportunity to develop their career, through to becoming an
expert colleague, before moving into coaching and line
management roles. Many of our First Line Managers,
Customer Operations Managers and indeed our leadership
team have followed a career in such a way, there are no limits
to a career across our business.
We ask our team to work with a simple three stage process:
1. Understand the customer need or concern
2. Propose a solution product or service
3. Thank you and feedback
We work to ensure we are fair and reasonable in all proposed
solutions for our customers and ask our team to always
consider how we can improve our process to deliver clear and
consistent responses.
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Across our E-Commerce and Insight teams we work with
Reevoo, one of the leading independent Customer Review
sites to share customer reviews of our services and over the
past 6 months we have scored 78% for Customer Service
from over 18,000 customer reviews.
Contact Centres are known for working within a framework
built upon Average Handling Time for a response and within
the KNOWHOW site we have changed the way we look at this
‘AHT’ measure. We coach our colleagues on taking the
Appropriate Handling Time with every customer, allowing us to
train our colleagues to handle customers more personally as
we strive to never leave a customer to fend for themselves.
We also provide SMS surveys to our customers across our
sites to define the Advocacy, Care and Knowledge scores for
our colleagues and use these as critical KPIs to improve
process and performance for the future.
This year KNOWHOW and Carphone Warehouse colleagues
will work closely to understand their strengths and define the
future support modelling for our new business across our
entire Contact Centre Portfolio. We now have over 2,500
Contact Centre colleagues supporting our customers.
Information Security
The Group is committed to protecting both electronic and
physical information from unauthorised access, processing,
modification or destruction. There are a number of pieces of
legislation relevant to information security to which the Group
adheres, including the Data Protection Act 1998 and EU’s Data
Protection Directive 95/46/EC. The Group has a dedicated
information security team. Security controls and awareness
remain an area of significant focus for the Board.
Data protection
The Group has a responsibility to ensure all information is
collected, stored, processed and disposed of in a secure way.
In the UK, we are required to adhere to the UK Data Protection
Act 1998. This legislation was enacted to bring UK law in line
with the EU Data Protection Directive, which is applicable to
the rest of the Group’s European markets. The European
Commission is in the process of implementing a European
Data Protection Regulation which will supersede the Directive.
Ahead of the adoption of the new regulation, the business is
working closely with the Group Data Protection Officer to
prepare for the changes in this area. The Group is committed
to the on-going monitoring of its data protection policies
and procedures, and the implementation of improvements
where necessary.
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Energy Management
Dixons Carphone continues its advanced activities surrounding
energy efficiency. Our portfolio continues to be predominantly
supplied through half hourly metering which allows us to
monitor our sites accurately, minimise wastage, optimise
our efficiency and invest with energy efficiency projects in
targeted areas.
As we move into 2015/16, we are working to extend this
half hourly monitoring programme to over 600 Carphone
Warehouse stores.
To realise immediate benefits, our energy efficiency
programme continues to utilise internal capital expenditure
funding for energy efficiency projects. We continue to explore
new technologies and advanced strategies to assist in our
programme of energy reduction and through 2014/15, a further
£1.4 million has been invested in new energy efficiency
initiatives including:
1. Variable Speed drives have rolled out to a further 80 Currys
and PC World superstores to optimise the efficiency of
their heating, ventilation and air conditioning systems
2. New efficient fluorescent lighting has been fitted in
27 large Currys and PC World superstores.
3. Energy-efficiency projects have been completed in an
additional 26 stores to further optimise our energy usage
which include fine adjustments to temperature set points,
controlled heating and lighting strategies and the
installation of lighting controls.
4. Efficient LED lighting has been trialled in back of house
areas which we intend to roll out to further stores.
5. The 65,000 sq ft Customer Call Centre in Sheffield has
been upgraded to LED lighting throughout.
The resulting reduction in our energy consumption from the
above initiatives will be approximately 7,000 mWh per annum
and will reduce our carbon emissions by over 3,500 tonnes of
CO2 in the next year.
Energy Efficiency Initiative
Dixons Carphone is delighted to have been selected to
participate in the Department of Energy & Climate Change –
EDR (Energy Demand Reduction) pilot scheme. This initiative
is linked to the large scale rollout of energy efficient LED
lighting to one of our 750,000 sq ft National Distribution
Centre buildings in Newark. It represents our largest
investment in a single energy efficiency project to date and
is on schedule to complete by September 2015.
Our water leak detection programme continues through
consumption analysis to highlight irregularities and ensures
optimum efficiency.
Carbon Management
During Phase 2, year 1 of the Carbon Reduction Commitment
(CRC) energy efficiency scheme, Dixons Carphone combined
reported emissions show a reduction against 2013/14 of
approximately 7% which represents a reduction in excess of
9,000 tonnes of CO2.
Dixons Carphone will merge its reporting against the Carbon
Reduction Commitment (CRC) energy efficiency scheme for
2015/16. Reporting for 2014/15 will be completed in line with
previous years under Dixons Retail plc (CRC registration
number 8584817) and Carphone Warehouse Group plc
(CRC registration number 6030144).
Green Energy in the Nordics
We have made the decision to implement the exclusive
use of ‘Green Energy’ produced by hydropower and wind
turbines across our sites in the Nordics. At present, energy is
derived from nuclear and oil (fossil) sources which generate a
CO2 output of 42,604 tonnes per annum. This initiative will
dramatically reduce this figure. Each store will receive a
certificate as proof of the environmental contribution and we
will use this in national, regional and local media to promote
our green profile.
Carbon Disclosure Project (CDP) – due to the merger and the
associated challenges of identifying a complete baseline year,
the Group will not be participating in the Carbon Disclosure
Project for 2014/15. We are currently considering whether to
respond to the CDP Climate Change Information Disclosure
questionnaire and the CDP Road to Paris 2015 Commitments
in 2015/16.
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Mandatory Greenhouse Gas (GHG) Reporting
This section provides the emission data and supporting
information required by 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; Nordics and Southern Europe.
Operational control has been used to determine organisational
boundary. All scope one and two emissions are included
except where noted.
The GHG emissions for the Dixons Retail business are:
2014/15
Tonnes of
CO2
emitted(1)
Increase /
(decrease)
%
2013/14
Tonnes of
CO2
emitted(1)
Category / source of emissions
Emissions from
combustion of fuel(3)
18,019
18.2%
15,239
Emissions from operation
of any facility
3,132
74.7%
1,793
Emissions from purchase
of electricity
97,129
(4.5)% 101,757
interests in Germany and the Netherlands have been included
in this 2014/15 GHG reporting, however will be excluded from
future reporting.
(2) Emissions generated within properties occupied by the Group
but operated by the relevant landlord and refrigerant data from
Nordics are excluded as data was not available (although this
is estimated to be approximately 1% of total emissions for
the Group).
(3) Emissions from the combustion of fuel comprises an increased
data set due to identified wider scope from 2013/14.
(4) Overall floor area of the Dixons Retail business is estimated to be
16,845,934 sq ft (2013/14: 17,052,000 sq ft) and the calculations
use the methodology set out in DEFRA’s updated greenhouse gas
reporting guidance, Environmental Reporting Guidelines (ref. PB
13944), issued in June 2013.
(5) We have synchronised the emissions intensity measure for the
Carphone Warehouse portfolio to tonnes CO2 emitted per
1,000 sq ft of floor area for this reporting year. As such,
an intensity measure comparison against last year would be
difficult, however, this will allow data to be merged in future.
Overall floor area of the Carphone Warehouse business is
estimated to be 2,106,753 sq ft and as with Dixons Retail, the
calculations use the methodology set out in DEFRA’s updated
greenhouse gas reporting guidance, Environmental Reporting
Guidelines (ref. PB 13944), issued in June 2013.
(6) 2014/15 Carphone Warehouse GHG reporting includes emissions
from directly owned and leased vehicles, company cars, and
delivery fleets which were not included in 2013/14.
118,280
(0.4)% 118,789
Waste and recycling
2014/15
2013/14
Tonnes
of CO2
emitted per
1,000 sq ft
of floor
area(4)
7.02
Tonnes
of CO2
emitted per
1,000 sq ft
of floor
area(4)
6.97
Intensity measure
The GHG emissions for the Carphone Warehouse business
are:
2014/15
Tonnes of
CO2
emitted(1)
Increase /
(decrease)
%
2013/14
Tonnes of
CO2
emitted(1)
Category / source of emissions
Emissions from combustion
of fuel
3,058
33.6%
2,289
Emissions from operation of
any facility
548
7.2%
511
Emissions from purchase of
electricity
33,690
37,296
0.8%
33,408
3.0%
36,208
2014/15
2013/14
Tonnes
of CO2
emitted per
1,000 sq ft
of floor
area(5)
Tonnes
of CO2
emitted per
1,000 sq ft
of floor
area(5)
17.70
Data
unavailable(5)
Intensity measure
(1) Exclusions comprise: Franchises as they do not fall directly under
the Group’s operational control. Emissions from Carphone
Warehouse’s retail operations in France have been excluded as an
agreement in principle has been reached for the sale of Dixons
Carphone’s operations in this territory. Following Dixons
Carphone’s announcements on 15 April and 24 April, business
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We have driven sustainability and efficiencies through refuse
and recycling across the Group. In the last year, 75% of
material generated by our stores now goes to recycling
schemes and not into landfill.
We now backhaul our recyclables from 386 CurrysPCWorld
stores, an increase of 239 stores year on year, to our recycling
machinery in Newark. Stores return these recyclable materials
via the return leg of the delivery vehicles. In addition to
cardboard, polythene and expanded polystyrene we recycled
from our stores last year, we have extended the programme to
include paper recycling. As a group we are now one of the
UK’s single biggest recyclers of expanded polystyrene.
We have increased the volume of card, expended polystyrene
and polythene recyclate processed from our customer service
centres and Newark sites by 25% or 1,347 tonnes.
In the Nordics we participate in national take-back schemes,
in addition to handling waste at store and home deliveries.
There are also strict procedures in place for sorting and
reporting in all markets.
Waste Electrical and Electronic Equipment (WEEE)
Over 66,000 tonnes of WEEE was recycled in 2014/15, which
is an increase of 5,000 tonnes (8%) on 2013/14. Our volume
represents over 15% of the total UK WEEE market. We
recycled over 1.2 million white goods last year and backfilled
over 10,000 trailers that would have returned to base empty.
We have allowed a wide range of re-use companies and FRN
charities access to all 16 of our CSC depots to select white
goods units they feel are reuseable resulting in over 60,000
units last year being diverted from a scrap yard for destruction
to be cleaned, refurbished and reused, for example, by low
income families in many different regions of the UK. Not only
is there a social benefit to reuse, it also has an environmental
benefit and saved around 6,000 tonnes of carbon.
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The Group processed 16,381 handsets and 248 non-mobile
items, with the proceeds paid into the CPW Foundation to
support charitable activity.
The total WEEE collected in the Nordics is 93,606 tonnes with
a recovery rate of 77% material, 22% thermic / incineration
and 1% landfill.
Transport and Delivery
Our Home Delivery Fleet continues to grow in response to
increasing demand. We carried out 1,426,577 deliveries in
2014/15 by our operated fleet compared to 957,630 in
2013/14. The fleet covered 19,871,184 km which is an increase
of 32.6% year on year, with CO2 emissions at 9,311 tonnes, an
increase of 44% on last year. These increases are due mainly
to the higher proportion of deliveries carried out on our own
operated fleet versus fleet operated by our franchises, in
comparison to last year.
We took delivery of a further fifty 7.5 tonne Euro 5 vehicles –
the last batch we will procure before switching to the new Euro
6 vehicles in line with new emissions legislation. These vehicles
have been fitted with forward facing cameras and tracking
which has also been rolled out to our white goods repair vans
to help us with accident reduction initiatives. Also this year, we
consolidated the Carphone Warehouse branch delivery fleet
with a specific element of the Currys and PC World branch
delivery network utilising the existing fleet, enabling us to
realise some of the benefits of the combined network.
Combined DHL Fleet
Although our carbon emissions are up year on year, we have
driven efficiencies on the combined DHL fleet.
Fleet emissions are at 16,311 tonnes for 2014/15, this is an
increase of 11% year on year with miles driven also up 11%
at 14,041,859. Transported volume is up by 12% year on year
and 31% over two years. Cube delivered per mile driven has
decreased by 1.14%. Overall combined trailer fill is up by
1.03m3 per vehicle year on year or 1.79%. This efficiency has
saved an additional 500 road trips.
For 2015/16, we will look to capitalise on year on year and two
year performances and progress. A complete review of the
existing tractor and trailer fleet has been undertaken and we
will remove and replace older trailers. We will also introduce
more premium cube trailers into the network with a greater
carrying capacity and are involved in on-going discussions
in relation to tractor units. As part of our on-going Network
Design review for 2015/16, strategic locations will be
introduced to allow us to reduce our stem mileage from
the central distribution point in Newark.
In the Nordics, the number of kilometres driven from our
Nordic Distribution centre to stores is 11.85 million which
is up 2.5%.
Supplier relationships
We are committed to upholding and respecting human
rights. While we do not operate a separate human rights policy,
these values are reflected in our equal opportunity practices
throughout the Group and in our ethical policies and
processes. We expect all our suppliers to operate in a fair
and honest way towards their employees and those with
whom they do business.
Charity and Community
We aim to be a responsible member of every community
we do business in, whether it’s by match-funding employee
fundraising, community initiatives or charity partnerships, we
will implement new ideas to make a positive impact locally.
The business contributed a total of £935,000 to charitable
causes in the UK & Ireland and a further NOK 1.9 million
(£154,000) in the Nordics.
Get Connected
Dixons Carphone continued Carphone Warehouse’s long term
support of Get Connected. This registered charity is the UK’s
only free, confidential helpline for under 25s who need help
with any issue, providing support and counselling for those
experiencing problems with mental and emotional health.
Young people can access Get Connected by phone, email,
web-chat or text. They may also use WebHelp 24/7, the online
help directory.
Last year we raised £323,000 for Get Connected through
activities such as Carphone Warehouse Race to the Stones,
a supplier quiz, Give As You Earn and individual colleague
fundraising. The majority of these funds were raised through
the Dixons Carphone Charity Dinner and Auction.
In 2014/15 Dixons Carphone also contributed £160,000
to accommodate the Get Connected helpline service in
office space.
We have worked closely with Get Connected to reduce their
dependency on our business. As a result, the charity has
secured funding from The Cabinet Office and The Department
of Education and continues to grow its trading income.
In response to business demand, Get Connected now offer
remote helpline volunteering opportunities for local
communities and employees, including those with mobility
restrictions who are prevented from participating in many
traditional forms of volunteering.
In 2014/15, Get Connected helped 250,000 children and young
people in crisis which is an increase of 100,000 year on year.
Dixons Carphone Foundation Charity Dinner and Auction
March 2015 saw our first joint fundraising event in aid of our
new Dixons Carphone Foundation. This event was supported
and attended by suppliers and partners from across the
business, raising a record breaking net total of £427,000.
This figure includes a donation of £213,000 by Dixons
Carphone after we pledged to triple the income taken
during the live Auction.
From these proceeds, Get Connected received £214,000,
Tablets for Schools will receive £200,000 with £14,000 being
paid into the Foundation to support causes that leverage
technology to address social issues.
Dixons Carphone plc Annual Report and Accounts 2014/15
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Corporate responsibility
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Tablets for Schools
We believe the use of technology in education can inspire
children with a lifelong love of learning, motivate them to know
more and empower independent thinking. Tablets for Schools
is a registered charity behind the largest independent research
programme in the world into the use of 1:1 technology to
transform education.
The real benefits have been defined, the major issues for
schools uncovered and robust data around pedagogy,
attainment, cost savings and the impact on behaviour /
attendance is being gathered.
In 2014/15 Dixons Carphone continued its support of the work
of this charity, donating a total of £210,000. The Company also
made the charity a loan of £150,000 in lieu of income from our
Charity Dinner and Auction.
In January 2015, Tablets for Schools relaunched as
Techknowledge for Schools with the aim of helping schools
by providing a united vision and blueprint for the successful
deployment of technology in education to transform
learning outcomes.
The Dixons Carphone Foundation
The DSG international Foundation
The DSG international Foundation is a charity in its own right,
registered with the Charities Commission. For the time being
we will continue to operate charitable activities through our
new CAF account Dixons Carphone Foundation.
During 2014/15, a total of £73,000 was transacted through the
DSG international Foundation for Children in Need. The
balance of this account stands at £18,000.
Give As You Earn
We encourage employees to contribute to charities of their
choosing through our payroll giving scheme. In 2014/15 Dixons
Carphone employees donated a combined total of £49,000
benefitting a wide range of causes.
Other charitable support
Dixons continued their support of Children in Need enabling
colleagues across our store, service and logistics networks
to get behind fundraising efforts for a nationally branded
fundraising event that supports causes across the UK and
local to their places of work. As a result of a number of
activities, total fundraising and donations to Children in
Need were £75,000.
The Foundation is a fundraising account established under the
Charities Aid Foundation (registered charity number: 268369)
for the benefit of the charity or charities selected by Dixons
Carphone and approved by the Charities Aid Foundation.
Senior Dixons Carphone executives took to the tennis courts
for a charity tennis tournament at The Queens Club raising
£50,000 for the Dallaglio Foundation and their work to inspire
and change the lives of young people through sport.
This account was set up in March 2015 to deliver our ambition
of making lives better through technology. The Dixons
Carphone Foundation will also facilitate employee match-
funding applications and one off donations to emergencies and
disaster funds.
Through the Dixons Carphone Foundation, employees can
apply for support with sponsorship. The Foundation will match
the amount an employee has raised for their chosen charity by
up to £100 or £300 for a team fundraising for the same event.
In 2013/14 we donated £36,000 to a variety of causes through
the CPW Foundation.
We are in the process of closing the CPW Foundation and
transferring the balance of £41,000 to the new Dixons
Carphone Charities Aid Foundation (CAF) Account.
Our Sheffield Contact Centre supported the live Comic Relief
television appeal by taking donation calls. 150 colleagues,
friends and family gave up their free time to take £62,000
in pledges.
The Company responded to the Ebola Crisis at the request of
the World Health Organisation (WHO) through the provision
of 200 fully functioning smartphones, allowing WHO field
operatives to collect key data in real time in Sierra Leone,
Guinea and Liberia. The gift in kind value to our business
was £20,000.
Carphone Warehouse Race to the Stones
On 19 and 20 July 2014 over 1,600 public participants ran,
trekked or walked 100km from Chinnor in Oxfordshire along
the Ridgeway to the ancient stone circle in Avebury. This was
the first time Carphone Warehouse sponsored a charity
sporting event and over 130 employees signed up to get fit
and raise over £45,000 for our charity partner, Get
Connected. Sponsorship of this event continues for 2015
as the Dixons Carphone Race to the Stones. Over 250
employees from across Dixons Carphone will take part,
many of them trialling wearable technology for training.
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Spring Online
This initiative run by the charity Digital Unite, aims to help the
6.4 million people who are digitally excluded in the UK.
Carphone Warehouse’s sponsorship in 2014 enabled this work
to continue and amplified the work of the charity resulting in
a 426% increase (32,800 views) in traffic to our branded
smartphone and tablets area of the Digital Unite website.
We saw a five-fold increase in store participation year on year
providing us with the opportunity to engage with the over 50’s
and establish trust in a rapidly expanding market with no
previous brand loyalty. The Spring Online taster sessions
created a unique way in which to show prospective customers
how to use products through employee engagement and
initiated an advocacy through staff, attendees, event holders
and communities across the UK.
Outside the UK
Elkjøp continues to support the Red Cross Water for Life
(Vann for Livet) project and donated approximately NOK
1.9 million (£154,000) to the Red Cross Water for Life Project
during 2014/15.
Key Performance Indicators
The performance criteria reported above are largely focused
on the Group’s UK & Ireland and the Nordics businesses which
represent 92% of the Group revenues from continuing
operations in the period.
This strategic report was approved by the Board and signed
on its behalf by:
Sebastian James
Group Chief Executive
16 July 2015
Humphrey Singer
Group Finance Director
16 July 2015
Dixons Carphone plc Annual Report and Accounts 2014/15
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Board of directors
Sir Charles Dunstone – Chairman
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Andrew Harrison – Deputy Chief Executive
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Sir Charles Dunstone is the Chairman of Dixons Carphone and
the Nominations Committee. He is the founder of Carphone
Warehouse and was chairman of Carphone Warehouse since
28 January 2010. He was chief executive officer of Old
Carphone Warehouse from 1989 to 2010 where he led its
growth to become one of Europe’s largest independent
telecommunications retailers. Sir Charles was also appointed
chairman of TalkTalk in 2010. He was a non-executive director
of Daily Mail and General Trust plc from 2001 until 2012 and a
non-executive director of Independent Media Distribution Plc
(now Independent Media Distribution Limited) from 2002 until
2011. Sir Charles has been chairman of The Prince’s Trust
since 2009 and a member of its Council since 2000. Sir
Charles is a partner in Freston Road Investments LLP and
also chairman of Royal Museums Greenwich.
Roger Taylor – Deputy Chairman
R
Roger Taylor is the Deputy Chairman of Dixons Carphone and
was appointed deputy chairman of Carphone Warehouse on
24 July 2013. From 28 January 2010 to 24 July 2013 he was
chief executive officer of Carphone Warehouse. During this
time he was responsible for new business development,
strategic initiatives and investor relations. He was chief
financial officer of Old Carphone Warehouse from 2000 to
2010 where he played a key role in the growth of Old
Carphone Warehouse across Europe and the construction and
completion of the transactions with Best Buy. He was also a
director of Virgin Mobile France until its sale in 2014 and non-
executive deputy chairman of TalkTalk from 2010 until 2012.
In addition Roger is a partner in Freston Road Investments LLP
which invests in a number of private businesses including
Student Castle Ltd, Five Guys UK Ltd and Housesimple Ltd
amongst others.
Sebastian James – Group Chief Executive
Sebastian James was appointed Group Chief Executive of
Dixons Carphone on 6 August 2014 following the merger of
Dixons Retail with Carphone Warehouse. He joined Dixons in
April 2008 and held various roles, including group operations
director prior to his appointment as group chief executive in
February 2012. Before joining the Dixons Group, Sebastian
was CEO of Synergy Insurance Services Limited and gained
wide retail experience as strategy director responsible for
developing and implementing the turnaround strategy at
Mothercare. He started his career at The Boston Consulting
Group. Sebastian is also a non-executive director of Direct Line
Insurance Group plc and trustee of the charities Save the
Children and Techknowledge for schools.
Andrew Harrison was appointed Deputy Chief Executive of
Dixons Carphone on 6 August 2014. Before this, Andrew had
been with Carphone Warehouse since 1995 and became a plc
board member in 2006, a role he held until the formation of the
joint venture with Best Buy in 2008. Andrew played key roles in
establishing the TalkTalk business and in expanding the highly
successful Best Buy Mobile operation in the US. He also
retained responsibility for both the Carphone Warehouse
and Phone House operations and, in 2010 he was appointed
Chief Executive Officer of the Best Buy Europe joint venture.
Following the ending of the joint venture in 2013, Andrew
became Group Chief Executive of Carphone Warehouse plc.
Andrew is a trustee of both Techknowledge for Schools and
Get Connected.
Humphrey Singer – Group Finance Director
Humphrey Singer was appointed Group Finance Director of
Dixons Carphone on 6 August 2014, upon completion of the
merger of Dixons Retail and Carphone Warehouse. He was
appointed group finance director of Dixons Retail in July 2011
and joined the Dixons board in September 2011. Since joining
the Dixons Group in 2007, he has held a number of finance
roles, namely finance director of Currys, group financial
controller and finance director of the UK & Ireland division.
Prior to joining the Dixons Group, he was finance director of
Coca Cola Enterprises (UK) Ltd and prior to that also held a
number of finance roles at Coca Cola Enterprises (UK) Ltd
and Cadbury Schweppes plc.
Katie Bickerstaffe – Chief Executive UK & Ireland
Katie Bickerstaffe was appointed an executive director of
Dixons Carphone on 6 August 2014, upon completion of the
merger of Dixons Retail and Carphone Warehouse. She
retained her responsibilities as chief executive of UK & Ireland
for the Dixons business on merger and from 1 May 2015
assumed responsibility for the whole UK and Ireland business.
Katie joined the Dixons Retail plc board on 20 February 2012
and was the chief executive of UK & Ireland for the Dixons
Group. She joined the Dixons Group as director of marketing,
people and property in June 2008. In addition to her executive
position she is also non-executive director of Scottish and
Southern Energy plc. Previously, Katie was managing director
of Kwik Save Ltd and group retail director and group HR
director at Somerfield plc. Her earlier career included roles at
Dyson Ltd, PepsiCo Inc. and Unilever plc.
Graham Stapleton – Chief Executive Carphone Warehouse
UK & Ireland
Graham Stapleton was appointed an executive director of
Dixons Carphone on 6 August 2014, upon completion of the
merger of Dixons Retail and Carphone Warehouse. He has
retained his responsibilities as chief executive officer of UK &
Ireland for Carphone Warehouse. He joined the Carphone
Group in 2005 and has held a variety of board positions in both
the UK and Europe. Graham is also a Trustee at the children's
charity Make a Wish. Previously Graham worked for Kingfisher
plc and Marks and Spencer plc.
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Dixons Carphone plc Annual Report and Accounts 2014/15
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John Gildersleeve
Jock Lennox
Independent non-executive director
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Independent non-executive director
A
John Gildersleeve is non-executive director of Dixons
Carphone and is Chair of the Remuneration Committee. He
joined the Carphone Warehouse board on 28 January 2010
and was non-executive deputy chairman until July 2013. He
was a director of Old Carphone Warehouse until 2010 and
non-executive chairman from 2005. He was appointed as a
non-executive director of the British Land Company PLC in
September 2008 and became chairman in January 2013. He
has been a non-executive director of TalkTalk since January
2010 (Deputy Chairman since 16 May 2013) and was
previously an executive director of Tesco plc until he retired
in February 2004. He is also a non-executive director of
Pick n Pay Stores Limited, which is listed on the Johannesburg
Stock Exchange in South Africa. John is also non-executive
deputy chairman and senior independent director of Spire
Healthcare Group plc.
Andrea Gisle Joosen
Independent non-executive director
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Andrea Gisle Joosen was appointed as a non-executive
director of Dixons Carphone on 6 August 2014, upon the
completion of the merger of Dixons Retail and Carphone
Warehouse. Andrea joined Dixons Retail plc as a non-
executive director on 1 March 2013. She is currently chairman
of Teknikmagasinet, a non-executive director of ICA Gruppen
AB, James Hardie Industries plc, Mr Green & Co plc and
BillerudKorsnäs AB. Former roles include non-executive
director of Lighthouse Group, chief executive of Boxer TV
Access AB in Sweden and managing director (Nordic region) of
Panasonic, Chantelle AB and Twentieth Century Fox. Her early
career involved several senior marketing roles with Procter &
Gamble and Johnson & Johnson.
Tim How
Independent non-executive director
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Tim How was appointed as a non-executive director of Dixons
Carphone on 6 August 2014, upon completion of the merger of
Dixons Retail and Carphone Warehouse. Tim joined Dixons
Retail plc as a non-executive director on 8 September 2009
and became senior independent director on 9 May 2012. He
holds a variety of external board positions, including chairman
of Woburn Enterprises Limited, senior independent director of
Henderson Group plc and the Norfolk and Norwich University
Hospitals NHS Foundation Trust and Chairman of Roys
(Wroxham) Limited. Former roles include chairman of Rayner
and Keeler Limited and Enotria Wine Group, and non-executive
director of Peabody Capital plc. Tim served as chief executive
of Majestic Wine plc, where he led the management buy-out of
the business and subsequent Alternative Investment Market
(AIM) flotation. Prior to this, he was managing director of
Bejam Group plc.
Jock Lennox was appointed as a non-executive director of
Dixons Carphone on 6 August 2014, upon completion of the
merger of Dixons Retail and Carphone Warehouse and is Chair
of the Audit Committee. Jock joined Dixons Retail plc as a
non-executive director on 10 January 2012. He is a Chartered
Accountant and has extensive accounting and finance
experience having worked for over 30 years (20 years as a
partner) for EY (formerly Ernst & Young) where he led a number
of relationships with international clients and held a number of
leadership positions in the UK and globally. He retired from EY
in 2009 and has subsequently acted as a non-executive
director of a number of companies. He was also a council
member of the Institute of Chartered Accountants of Scotland.
He is currently a trustee of the Tall Ships Youth Trust and non-
executive director of A&J Mucklow Group plc, Enquest plc and
Hill and Smith Holdings plc. He is senior independent director
of Oxford Instruments plc.
Baroness Morgan of Huyton
Independent non-executive director
A
Baroness Morgan of Huyton is a non-executive director of
Dixons Carphone and joined the Carphone Board as a non-
executive director on 28 January 2010. She was a non-
executive director of Old Carphone Warehouse from 2005 to
2010. From 2001 to 2005, she was director of government
relations at 10 Downing Street. Prior to this, Baroness Morgan
was political secretary to the Prime Minister from 1997 to 2001
and was appointed Minister for Women and Equalities in 2001.
In 2006, she was appointed as a board member of the Olympic
Delivery Authority. She is an advisor to the board of the
children’s charity ARK and a member of the advisory
committee of Virgin Group Holdings Limited. She was
previously chair of Ofsted.
Gerry Murphy
Independent non-executive director
A
Gerry Murphy is a non-executive director of Dixons Carphone
and joined the Carphone Board as a non-executive director on
2 April 2014. He is a former Deloitte LLP partner and was
leader of its Professional Practices Group with direct industry
experience in consumer business, retail and technology, media
and telecommunications. He was a member of the Deloitte
board and chairman of its audit committee for a number of
years and also chairman of the Audit & Assurance Faculty of
the Institute of Chartered Accountants in England and Wales.
Gerry was appointed as a non-executive board member of the
Department of Health on 1 August 2014 and a non-executive
director of Capital & Counties Properties plc on 1 March 2015.
Key:
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Nominations Committee
Audit Committee
Remuneration Committee
Dixons Carphone plc Annual Report and Accounts 2014/15
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Corporate Governance report
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Chairman’s introduction
It is with great pleasure that I present to you my introduction
to the Corporate Governance section of the first Annual Report
and Accounts as Dixons Carphone plc. The bringing together
and alignment of two great businesses with a joint strategy and
direction is truly exciting but it is never more important than
now, in this time of change, that our corporate governance
practices and procedures are well designed and implemented.
It is my intention to set out how the Company has embraced
good corporate governance practice and how we will use
this to form a stable foundation to the building of
shareholder value.
Corporate Governance
Good corporate governance is at the heart of any well-run
business. We receive a corporate governance update at every
other board meeting from our internal experts and have
reviewed and updated our policies and procedures, following
the Merger, to comply with the latest best practice standards.
We have clearly differentiated the roles of Group Chief
Executive (to run the business) and Chairman (to run the
Board). Our role descriptions (including that of the Senior
Independent Director) and our other board policies, such as
diversity, time commitment, external appointments and
external advice have all been renewed and refreshed. The
Board will look to adopt the 2014 version of the UK Corporate
Governance Code and will report against it in its 2015/16
annual report and accounts. The Board, in conjunction
with the Audit Committee, is considering the business
viability statement.
Board composition and role
The members of the Board were announced at the time of the
Merger and remain the same except for the departure of John
Allan. Consideration is currently being given to replacement for
John Allan as Senior Independent Director and the Board will
update shareholders once a decision has been taken. The
resignation of the Senior Independent Director (SID), coming
swiftly as it did following the Merger, has illustrated the need
for succession planning which will have an increased focus
over the next year.
The Nominations Committee reviews each year the
composition of the Board, including the independence and
commitment to the Company shown by the non-executive
directors during the year. That review also includes gender,
professional and international diversity. The Board has three
female directors, one of whom is based out of the UK and
provides strong support on matters relating to the European
business. Following this year’s review it was concluded that
the Board had all necessary skills and experience to discharge
its duties fully and to challenge management effectively
where necessary.
The Board and Committee Structure
As part of the annual reviews, the non-executive directors were
asked to confirm that they continue to have enough time to
dedicate to company business and all have formally done so.
As a unitary board the directors acknowledge their joint
responsibility for our success. We have clearly differentiated
the roles between executive management running the business
and our non-executives, who provide the appropriate level of
scrutiny. In this way, the Board works together to challenge
and interrogate as well as support each other with the aim
being effective decision making, leadership and accountability
for all aspects of the business.
Induction
Following the Merger, each director was given the opportunity
to get to know each side of the business, through a
combination of formal presentations, store visits and informal
discussions. The Audit Committee had its own induction
process including access to auditor’s reports and full
supporting documentation for both sides of the business which
provided an excellent understanding of the inherited position.
Board evaluation
The Board agreed that an internal review would be appropriate
for the Board evaluation this year. It was conducted by the
Company Secretary and took the form of a questionnaire
completed by all Directors on several aspects of the Board and
its organisation. The main finding was that the Board had
come together well in support of the business and that there
was an atmosphere of openness enabling effective challenge
and debate. In 2016 the external board evaluation is due for
Dixons Carphone. This timing will provide the newly merged
Board and its procedures ample time and opportunity to
embed fully, with the next evaluation process providing
valuable insight and results which will be reported to
shareholders in the 2015/16 annual report and accounts.
Committee structure
The main board committees are the Audit, Nominations and
Remuneration Committees, and a section of this report is
dedicated to each of them. Beneath Board level there are
further management level committees which report back to
the Board as necessary.
Conclusion
We have a strong, balanced board supported by sound
policies and procedures and I believe it is well placed to
take the opportunities that the future will bring. I look
forward to meeting you, along with my fellow directors,
at this year’s Annual General Meeting.
Sir Charles Dunstone
Chairman
16 July 2015
Dixons Carphone plc Board
Audit Committee (page 47)
Nominations Committee (page 52)
Remuneration Committee (page 54)
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Dixons Carphone plc Annual Report and Accounts 2014/15
Corporate Governance statement
The Board confirms that during the period ended 2 May 2015
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 2012 UK Corporate Governance Code
(the Code).
It is noted that the Company has not had a named director
operating as Senior Independent Director (SID) since the
resignation of John Allan. During that time the remaining
independent directors have all been available to discuss items
with the Chairman as necessary and to discuss matters with
shareholders should this be required. The Company is
currently considering the replacement for John Allan and
will update shareholders once the ongoing exercise has
been completed.
This report, together with the Directors’ report and the reports
from the Audit, Nominations and Remuneration Committees
together provide details of how the Company has applied the
principles and complied with the provisions of the Code during
the year. The Code can be obtained from the Financial
Reporting Council’s website, www.frc.org.uk.
Board responsibilities
The overriding responsibility of the Board is to provide clear,
entrepreneurial and responsible leadership to the Group within
a framework of efficient and effective controls so as to allow
the key issues and risks facing the business to be assessed
and managed.
Composition of the Board
The Board has 13 members, six of whom are considered by
the Company to be independent non‑executive directors.
These directors are John Gildersleeve, Andrea Gisle Joosen,
Tim How, Jock Lennox, Baroness Morgan of Huyton and Gerry
Murphy. Half the directors excluding the Chairman are
therefore considered to be independent in accordance
with the Code.
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It is noted that John Gildersleeve was a non-executive director
of Old Carphone Warehouse for more than nine years but the
Board does not believe this affects his independence having
given detailed consideration to his performance and the extent
to which he has shown himself to be independent of
management in thought and action during the period under
review. As a result, the Company confirms that John
Gildersleeve continues to show independence in his
scrutiny and challenge to the Company and directors and
therefore continues to be classified as an independent non-
executive director.
Each of the directors will stand for election / re-election at the
Company’s Annual General Meeting. Biographical information
is shown on pages 36 and 37.
The division of responsibility between the Chairman and the
Group Chief Executive is formally defined, set out in writing
and is reviewed by the Board on an annual basis, as it was on
9 March 2015. The Chairman is responsible for the overall
operation, leadership and governance of the Board. The Group
Chief Executive is responsible for the executive management
of the Group’s business and for implementing the Group’s
strategic and commercial objectives.
The role of the SID is to support the Chairman and be available
for approach or representation from shareholders who feel they
are unable to raise issues with the Chairman directly. Since the
resignation of John Allan the Board has operated without a
SID. The Board has a strong line up of independent non-
executive directors who have all been available for the
shareholders to contact in absence of a formal SID. Under the
role of the SID, which is clearly defined, set out in writing and
reviewed annually by the Board, the SID also discusses, with
the Chairman the results of his performance review. This role
was undertaken by Jock Lennox for the 2015 review.
Dixons Carphone plc Annual Report and Accounts 2014/15
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Corporate Governance report
Reserved matters
There are documented schedules of matters reserved to the
Board and matters delegated to Committees of the Board.
Such reserved matters include:
• approval of published financial statements and
dividend policy;
• declaration of interim and recommendation of
final dividends;
• approval of budget and strategy;
• appointment and remuneration of directors, company
secretary and other senior executives;
• approval of major acquisitions and disposals;
• approval of authority levels for expenditure;
• approval of Group policies; and
• approval of treasury / internal control and risk
management policies.
Board attendance
The Board held two strategy sessions in addition to meeting on
ten scheduled occasions during the period under review:
Member
Appointed
Resigned Attendance
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Charles Dunstone
Roger Taylor
Sebastian James
6 Aug 2014
Andrew Harrison
Humphrey Singer
6 Aug 2014
Katie Bickerstaffe
6 Aug 2014
Graham Stapleton
6 Aug 2014
John Gildersleeve
Andrea Gisle Joosen 6 Aug 2014
Tim How
Jock Lennox
6 Aug 2014
6 Aug 2014
Baroness Morgan
of Huyton(1)
Gerry Murphy
Former Directors
John Allwood(2)
10 of 10
10 of 10
7 of 7
10 of 10
7 of 7
7 of 7
7 of 7
10 of 10
7 of 7
7 of 7
7 of 7
9 of 10
10 of 10
3 of 3
6 of 6
3 of 3
John Allan(2)
6 Aug 2014 17 Feb 2015
Nigel Langstaff
6 Aug 2014
6 Aug 2014
(1) Baroness Morgan of Huyton missed one scheduled meeting due
to a prior commitment that had been arranged before the Merger
and the subsequent change of Board dates.
(2) John Allwood was the Senior Independent Director until his
resignation when John Allan took on this role until his resignation
on 17 February 2015.
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Dixons Carphone plc Annual Report and Accounts 2014/15
Committee members
There are three main Board Committees: Audit, Nominations and Remuneration. The Committees are provided with sufficient
resources via the Company Secretary and, where necessary, have direct access to independent professional advisors to
undertake their duties.
Sir Charles Dunstone
John Gildersleeve
Andrea Gisle Joosen
Tim How
Jock Lennox
Gerry Murphy
Baroness Morgan of Huyton
Roger Taylor
Former Directors
John Allwood (resigned 6 August 2014)
John Allan (resigned 17 February 2015)
C – Chair M – Member
Board governance matters
The Chairman is responsible for ensuring that all directors are
properly briefed on issues arising at Board meetings and that
they have full and timely access to relevant information. The
Company uses an electronic board paper system which
enables the fast dissemination of quality information in a safe
and secure manner. All Board papers are sent out on a timely
basis with sufficient information for the directors to be able to
discharge their duties. Formal minutes of the Board and
Committee meetings are prepared by the Company Secretary
and approved by the Board / Committees at their next meeting.
The Chairman meets regularly with all the non-executive
directors, usually on an evening prior to a Board meeting when
board dinners are held. This provides the opportunity to
discuss amongst other matters, corporate strategy and
business performance.
The Board holds meetings at a variety of the Group’s locations
to help all Board members gain a deeper understanding of the
business. This also provides senior management from across
the Group with the opportunity to meet the Board. Whilst no
visits took place for the period under review, in May 2015, the
Board held a meeting at its distribution centre in Newark and in
June 2015 held another meeting at its headquarters in Norway.
This enabled the Board to meet members of the team and
senior management and to visit stores and other elements of
the Group’s business.
New directors appointed to the Board receive a tailored
induction programme, together with guidance and training
appropriate to their level of previous experience. Each director
is given the opportunity to meet with senior management and
store colleagues and to visit the Group’s sites both in the UK
and overseas. This enables familiarisation with the businesses,
operations, systems and markets in which the Group operates.
New directors are also encouraged to meet with the Group’s
auditor and advisors.
Audit
(page 47)
Nominations
(page 52)
Remuneration
(page 54)
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The Board receives an update on corporate governance best
practice at every other meeting.
Performance evaluation
The internal annual review of Board effectiveness and the
balance of skills, knowledge and experience of the directors
was conducted as usual during the period under review. In
addition, the Code recommends that the performance of the
Board be reviewed externally every three years. The last
external review of the Company was carried out by NJMD
Corporate Services in May 2013; therefore the next external
evaluation is due in 2016.
The internal review this year involved:
• individual directors responding to separate questionnaires
which were collated by the Company Secretary. The results
were then presented to and discussed by the Board and a
plan of action established to address any areas of
improvement. The areas covered included, but were not
limited to, the roles of the executive and non-executive
directors, the Board, Board Committees, the Chairman,
preparation for and performance at meetings, the
effectiveness of each director, leadership, culture and
corporate governance. As part of this evaluation, the
Chairman discussed any personal development needs
that were identified with each director;
• In the absence of a SID at the time of the performance
evaluation, Jock Lennox reviewed the results of the
performance evaluation questionnaire completed by all of
the directors apart from the Chairman on the Chairman’s
performance. He then discussed the results of that review
with the Chairman and an action plan was prepared. The
Board is of the opinion that the Chairman had no other
significant commitments during the year that adversely
affected his performance in his role and that he continues to
lead the Board effectively whilst creating an atmosphere of
Dixons Carphone plc Annual Report and Accounts 2014/15
41
Corporate Governance report
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open discussion where challenge and debate is welcomed;
and
• The Committees each performed a self-evaluation of their
obligations on the basis of a detailed questionnaire relating
to each area of responsibility. No major areas for action were
identified.
Following the results of the evaluation, the Board confirms that
all directors continue to be effective and demonstrate a
commitment to the role, including having time to attend all
necessary meetings and to carry out other appropriate duties.
It was noted that one area for greater emphasis coming out of
this review was succession planning. At the time of the Merger
careful consideration was given to what skills were needed to
best lead the Group during this period of integration. The
Board was appointed accordingly. With the integration well
underway, the evaluation found that more emphasis now
needs to be placed on succession planning for these critical
board roles.
Capital and constitutional disclosures
Information on the Company’s share capital and constitution
required to be included in this Corporate Governance
statement are contained on page 45 of this report. Such
information is incorporated into this Corporate Governance
statement by reference and is deemed to be part of it.
Risk and internal controls
Risk management
The Group has established a risk management programme
that assists management to identify, assess and mitigate
business, financial, operational and compliance risks. The
Board views risk management as integral to good business
practice and protecting the best interests of shareholders.
Executive management of the Group has direct responsibility
for the risk management programmes of their businesses. The
Board’s focus is primarily on reviewing the effectiveness of
these processes, rather than involving itself in the processes
themselves. Specific controls and processes are detailed
further below.
The Group’s risk management framework aims to:
• assist management to implement effective means of risk
identification, assessment and mitigation;
• instil a risk-based approach and awareness into the Group’s
culture;
• encourage accountability for identifying and managing the
risks specific to line managers’ respective areas of the
business; and
• create and implement risk management strategies which
address all types of risks.
The Group maintains a risk register the principal risks of which
are set out on pages 16 to 19. Senior managers within the
business are responsible for managing and monitoring the
risks identified within their areas, and identifying new risks as
they arise. Each risk identified is ranked according to a score
based on the likelihood of an event occurring and its impact
on the business should it occur due to either failure or absence
of mitigating controls. Mitigating controls in place are also
documented.
Internal control
As in any business, the Group faces a number of risks and
uncertainties on a daily basis, and a detailed internal control
framework exists so as to mitigate these risks and protect the
interests of shareholders. The directors have overall
responsibility for the Group’s systems of internal control and
for reviewing effectiveness, and they discharge this
responsibility by performing the following:
• determining the Group’s risk appetite and tolerance;
• overseeing the risk management strategy; and
• ensuring that management implements effective systems
of risk identification, assessment and mitigation.
The Board delegates to executive management the
responsibility for designing, operating and monitoring these
systems. The systems are based on a process of identifying,
evaluating and managing significant risks and include the risk
management processes set out above.
The systems of internal control described in this report were in
place throughout the period under review and up to the date of
approval of the annual report and financial statements. The
effectiveness of these systems is periodically reviewed by the
Audit Committee in accordance with the Code, and the other
good practice guidance issued by the FRC in relation to
internal control. These systems are also refined as necessary
to meet changes in the Group’s business and associated risks.
They can only provide reasonable and not absolute assurance
against material errors, losses, fraud or breaches of laws
and regulations.
The Company has conducted an annual review of the
effectiveness of the systems of risk management and internal
control in operation during the year and up to the date of the
approval of the Annual Report and Accounts which was
approved by the Audit Committee and the Board.
At each of its meetings the Audit Committee reviewed and
considered reports on the status of the Group’s risk
management systems, findings from reviews of internal
controls and reports on the status of any weaknesses in
internal controls identified by the internal or external auditors.
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Dixons Carphone plc Annual Report and Accounts 2014/15
Internal audit
The Group has an internal audit department which conducts
reviews of selected business processes each year. The internal
audit programme for 2014/15 consisted of reviews across a
range of areas documented and prioritised in the Group’s
internal audit plan, which was prepared and approved with
input from management and the Audit Committee. The plan is
designed each year to test the robustness of mitigating
controls and procedures are designed to identify any areas of
improvement. Part of the approval process of this plan involves
the Audit Committee’s consideration of alignment of the plan
with the principal risks faced by the Group. As such this plan
was revised and re-presented to the Audit Committee again
following the Merger to capture the key risks of the
combined Group.
The Audit Committee Chairman receives and reviews all
reports from the internal audit department detailing its material
findings from testing performed and any recommendations for
improvement. The Audit Committee receives a summary of
these reports at each meeting, with the full reports available to
all members on request. The progress and implementation of
ensuing action plans are tracked to completion by the internal
audit department, and follow up procedures performed where
additional controls have been put in place to ensure that the
new controls have been implemented effectively.
The Audit Committee considered the effectiveness of the
internal audit department through holding discussions with
management, considering the quality of reports submitted to
the Committee, the timeliness of the clearance of action points,
and the perceived impartiality of the audit team itself. The
Committee concluded that the internal audit department has in
all respects been effective during the period under review.
Authorisation of conflicts of interest
The Company has procedures in place to identify, authorise
and manage conflicts of interest which have operated
effectively. Potential conflicts are approved by the Board or
two independent directors where authorisation is needed
quickly and then reported to the main Board at its next
meeting. A register of directors’ conflicts is maintained.
Communication with investors
The Board supports the initiatives set out in the Code and
the Stewardship Code and actively encourages engagement
with major institutional investors and other stakeholders. It
believes that it is important to explain business developments
and financial results to the Company’s shareholders and
to understand shareholder concerns. The principal
communication media used to impart information to
shareholders are news releases (including results
announcements), investor presentations and
company publications.
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The Group Chief Executive has lead responsibility for investor
relations. He is supported by a dedicated investor relations
department that, amongst other matters, organises
presentations for analysts and institutional investors. There
is a full programme of regular dialogue with major institutional
shareholders and potential shareholders as well as sell-side
analysts. In all such dialogue, care is taken to ensure that no
price sensitive information is released.
The Chairman ensures that the Board receives regular updates
at Board meetings on investor relations matters. The Board
also receives periodic reports on investors’ views of the
performance of the Company. The Chairman and non-
executive directors, are available to meet with major
shareholders, if such meetings are required and the Chairman
of the Remuneration Committee communicates with major
shareholders on matters of remuneration and has conducted
various remuneration consultations during the period under
review. For more information on the remuneration
consultations, please refer to the Remuneration report
on pages 54 to 74.
The Company is committed to communication with all of its
members, whether institutional investors, private or employee
shareholders. The Company reports formally to its members
when its full year and half year results are published. These
results are posted on the investor relations part of the
corporate website in addition to other external announcements
and press releases.
The Company also communicates with shareholders through
the annual general meeting, at which an account of the
progress of the business over the last year is given in addition
to a review of current issues. This also provides the opportunity
for shareholders to ask questions. The directors, including the
chairmen of the Audit, Nominations and Remuneration
Committees attend the annual general meeting. In accordance
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.
Sir Charles Dunstone
Chairman
16 July 2015
Dixons Carphone plc Annual Report and Accounts 2014/15
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Directors’ report
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Corporate Governance statement
The Corporate Governance statement as required by Rule
7.2.1 of the UKLA’s Disclosure and Transparency Rules (DTRs)
is set out on page 39 of this Annual Report and Accounts. All
information detailed in the Corporate Governance statement is
incorporated by reference into this Directors’ report and is
deemed to form part of this Directors’ report.
FCA’s Disclosure and Transparency Rules
For the purposes of DTR 4.1.5R (2) and DTR 4.1.8, this
Directors’ report and the Strategic report on pages 2 to 35
comprise the management report.
Employee involvement
The Group places significant emphasis on its employees’
involvement in the business at all levels. Managers are
remunerated according to results wherever possible and
employees are kept informed of issues affecting the Group
through formal and informal meetings and through the Group’s
internal publications. The management team regularly
communicates matters of current interest and concern with
employees. Further information on employee engagement is
included in the report on corporate responsibility on pages 27
to 29. Details of the Group’s employee share plans are
contained in the Remuneration report.
Employment of disabled people
It is the Group’s policy to encourage application for
employment from disabled people and to assist with their
training and career development, having regard to particular
aptitudes and abilities. Every endeavour is made to find
suitable alternative employment and to retrain any employee
who becomes disabled while serving the Group.
Information on greenhouse gas emissions
The information on greenhouse gas emissions that the
Company is required to disclose is set out on page 32 of this
Annual Report and Accounts. This information is incorporated
into this Directors’ report by reference and is deemed to form
part of this report.
Donations
No political donations were made during the period by
the Group.
Change of name
On 6 August 2014 the Company changed its name from
Carphone Warehouse Group Public Limited Company to
Dixons Carphone plc.
Directors
The names, biographies and dates of appointment of the
current Board of directors are provided on pages 36 and 37.
Former directors include John Allan (appointed 6 August 2014
and resigned 17 February 2015), John Allwood (resigned
6 August 2014) and Nigel Langstaff (resigned 6 August 2014).
With regard to the appointment and replacement of directors,
the Company is governed by its Articles of Association, the
Code, the Companies Act and related legislation. The Articles
themselves may be amended by special resolution of the
shareholders. The Board has the power to appoint new
directors to fill a vacancy as long as the total number of
Directors shall not exceed the maximum of 15 as set out in the
Articles. Any director appointed by the Board will be appointed
until the next annual general meeting where they shall stand for
re-election by shareholders.
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 2015 Annual General Meeting.
The Remuneration report provides details of applicable service
agreements for executive directors and terms of appointment
for non-executive directors. Each of the directors proposed
for re-election are being unanimously recommended for
re-election / election by the Board by virtue of their skills,
experience and contribution to the Board. This
recommendation follows a performance evaluation of the
Board and the contribution of individual directors.
During the year, no director had any material interest in any
contract of significance to the Group’s business. Their
interests, including those of any connected persons, in
the shares of the Company are outlined in the Annual
Remuneration report.
Subject to the Company’s Articles of Association, the
Companies Act and any directions given by the Company
by special resolution, the business of the Company will be
managed by the Board who may exercise all the powers of the
Company, whether relating to the management of the business
of the Company or not. The matters reserved for the Board are
detailed in a specific schedule, which is reviewed annually and
details are provided in the Corporate Governance report.
Directors’ indemnities and insurance
The Company has made qualifying third party indemnity
provisions (as defined in the Companies Act 2006) for the
benefit of its directors during the year; these provisions remain
in force at the date of this report.
In accordance with the Company’s Articles of Association, and
to the extent permitted by law, the Company may indemnify its
directors out of its own funds to cover liabilities incurred as a
result of their office. The Group holds Directors’ and Officers’
Liability Insurance cover for any claim brought against directors
or officers for wrongful acts in connection with their positions.
The insurance provided does not extend to claims arising from
fraud or dishonesty.
Information required by Listing Rule 9.8.4R
There is no information required to be disclosed under Listing
Rule 9.8.4R.
Directors’ responsibilities
The directors’ responsibilities for the financial statements
contained within this Annual Report and Accounts and the
directors’ confirmations required under Disclosure and
Transparency Rule 4.1.12 are set out on page 75.
44
Dixons Carphone plc Annual Report and Accounts 2014/15
Capital structure
Dividend
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The Board has proposed a final dividend for the year ended
2 May 2015. Details of this and other dividends paid for the
year are as follows:
Interim dividend
Final dividend
Total ordinary
13 months
ended
2 May 2015
Year
ended
29 Mar 2014
2.5p
6.0p
8.5p
2.0p
4.0p
6.0p
The right to receive any dividend has been waived in part by
the Trustees of the Company’s Employee Share Ownership
Trusts over a combined holding of 942,929 shares.
Issue of shares
In accordance with section 551 of the Companies Act 2006,
shareholders can authorise the directors to allot shares in the
Company up to one third of the issued share capital of the
Company. Accordingly, at the 2014 annual general meeting
shareholders approved a resolution to give the directors
authority to allot shares up to an aggregate nominal value of
£192,022.59. The directors were also authorised to allot shares
in relation to the Merger up to an aggregate nominal amount
of £576,067.77.
The directors have no present intention to issue ordinary
shares, other than pursuant to obligations under employee
share schemes. This resolution remains valid until the
conclusion of this year’s Annual General Meeting when
a resolution will be proposed to renew the authority.
Authority was given by the shareholders at the 2014 annual
general meeting to purchase a maximum of 57,606,776 shares,
such authority remaining valid for 15 months or until the
conclusion of the Company’s 2015 Annual General Meeting.
The authority was not exercised during the period or prior to
the date of this report. The Company will seek the usual
renewal of this authority at the forthcoming Annual General
Meeting but has no current intention to make such purchases.
The Company’s only class of share is ordinary shares. Details
of the movements in issued share capital during the year are
provided in note 21 to the Group financial statements. The
voting rights of Dixons Carphone plc shares are identical with
each share carrying the right to one vote. Dixons Carphone plc
holds no shares in treasury and did not make any market
purchases of its own shares during the year under review.
Details of employee share schemes are provided in note 5 to
the Group financial statements. The Carphone Warehouse
ESOT held 791,100 shares on 2 May 2015 (2014: 4.9 million
shares) and the Dixons Retail plc ESOT held 151,829 shares.
Both ESOTs have waived their right to receive dividends.
Restrictions on transfer of securities of the Company
There are no specific restrictions on the size of a holding nor
on the transfer of shares, which are both governed by the
general provisions of the Articles of Association and prevailing
legislation. The directors are not aware of any agreements
between holders of the Company’s shares that may result in
restrictions on the transfer of securities or on voting rights.
No person has any special rights of control over the
Company’s share capital and all issued shares are fully paid.
Change of control – significant agreements
The Company does not have any significant agreements which
contain change of control clauses other than for its borrowings.
Further details are disclosed in note 17 to the Group financial
statements. Such information is incorporated into this Directors’
report by reference and is deemed to form part of this report.
In addition, provisions under the rules of the Company’s share
incentive schemes may cause options and awards granted
under these schemes to vest and become exercisable in the
event of a change of control.
Significant shareholdings
At 2 May 2015, the Company had been notified, in accordance
with Chapter 5 of the Disclosure and Transparency Rules of
the UK Financial Conduct Authority, of the following interests
of over 3% in the voting rights of the Company:
Name
BlackRock, Inc.
Standard Life Investments
D P J Ross
Number of
shares
Percentage of
share capital
64,226,251
57,001,657
56,388,699
5.58%
4.95%
4.89%
At 16 July 2015 no change in these shareholdings had
been notified.
Directors’ interests in the Company’s shares and the
movements thereon are detailed in the Remuneration
report on pages 71 to 73.
Dixons Carphone plc Annual Report and Accounts 2014/15
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Use of financial instruments
Information about the use of financial instruments is given
in note 25 to the Group financial statements.
Auditor
Each director at the date of approval of this Annual Report and
Accounts confirms that:
•
•
so far as the director is aware, there is no relevant audit
information of which the Company’s auditor is unaware;
and
the director has taken all the steps that he / she ought to
have taken as a director in order to make himself / herself
aware of any relevant audit information and to establish
that the Company’s auditor is aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the
Companies Act 2006.
Deloitte LLP have expressed their willingness to continue in
office as auditor and a resolution to re-appoint them 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
16 July 2015
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Dixons Carphone plc Annual Report and Accounts 2014/15
Audit Committee report
Chairman’s statement
Introduction
I present to you the report of the Audit Committee, the first of
the merged Carphone Warehouse and Dixons Retail. In this
covering letter I have set out our key areas of activity within
our overarching objective of ensuring that the systems and
controls relating to the financial management and reporting
of Dixons Carphone plc are appropriate.
The Merger has been a significant undertaking. The activities of
integration to create the new organisation have had a major
bearing on our work. We have focused on ensuring that,
notwithstanding the significant change that has been taking
place, the Group has the appropriate internal control and risk
management systems in place to satisfy the financial reporting
and management requirements. We are grateful to our financial
management and internal and external auditors for the
unstinting efforts they have made in this regard.
Merger and induction
All members of the Audit Committee were previously members
of the Carphone Warehouse or Dixons Retail audit committees.
We have therefore had the benefit of significant experience of
the legacy businesses.
We recognised that we needed to inform the committee
members about the entire merged group so embarked upon
an early induction process. This involved sharing papers on
key judgements and significant accounting policies in the
legacy businesses; arranging briefings with management on
topics relating to ‘the other side’; and participating in broader
induction activities on strategy, store visits and the like. Each
committee member was encouraged to request any further
induction information that they required.
Key activities
In addition to assimilating the various sources of information on
the Group, the Audit Committee’s work included the following:
• considered reports by management on how the financial
organisation would be structured and how the financial
reporting would be prepared in the short and longer term;
• debated the accounting and financial reporting for the
Merger, receiving reports from financial management and
the external auditor to support the conclusions reached;
• approved the formation of the merged internal audit group
and the plan of work;
• requested and considered a review by internal audit,
supported by the appropriate commercial management,
on the supplier rebate terms and processes across the
Group; the review concluded that the accounting being
adopted is satisfactory;
• received presentations from management on topics from
the risk agenda including IT strategy (including security and
control) and HR; and
• considered the various corporate transactions that have
taken place in addition to the Merger, the accounting for
these and overall that the financial reporting for the Group
is fair, balanced and understandable.
Looking ahead
It has been a busy year for the Group with much of the
financial reporting priority being on the Merger itself and the
need to maintain a controlled environment across the legacy
businesses.
The Group’s activity will now turn to building the longer term
systems, processes and organisation as well as conforming
with the new requirements of the 2014 UK Corporate
Governance Code and the FRC Guidance on Risk
Management, Internal Control and Related Financial and
Business Reporting. This will include adopting the longer term
viability statement for the first time. The development of the IT
strategy and control framework will remain an area of focus for
the committee in the year ahead.
I will be in attendance at the Annual General Meeting and will
be available to talk to you then. In the meantime if you have
any questions please do get in touch.
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Jock Lennox
Chairman of the Audit Committee
16 July 2015
Dixons Carphone plc Annual Report and Accounts 2014/15
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Audit Committee report
Members
In compliance with the Code, the Committee comprises
exclusively non-executive directors, who, along with their
attendance at scheduled meetings, are set out in the table
below.
Meetings
The Committee met three scheduled times with one
additional ad-hoc meeting called during the period. Since
the year end there have been two further Committee
meetings. All eligible members attended each of the
meetings during which they were a member of the
Committee, except as outlined below. The Group Chief
Executive, Group Finance Director, Group Director of
Internal Audit, other senior management and
representatives of the Company’s external auditor (Deloitte
LLP) attended the Audit Committee meetings by invitation.
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Current members
Jock Lennox(1)
Baroness Morgan of Huyton(2)
Gerry Murphy
Former members
John Allan(1) (3)
John Allwood (4)
John Gildersleeve(5)
Scheduled
Meetings
2 of 2
2 of 3
3 of 3
2 of 2
1 of 1
1 of 1
(1) Appointed 6 August 2014.
(2) Baroness Morgan of Huyton missed one scheduled meeting
due to a prior commitment that had been arranged before the
Merger and the subsequent change of committee dates.
(3) Resigned 17 February 2015.
(4) Resigned 6 August 2014.
(5) Resigned from the Committee – 6 August 2014.
The Board is satisfied that the Chairman of the Committee, a
member of the Institute of Chartered Accountants of Scotland,
meets the requirement for recent and relevant financial
experience. The Company Secretary acts as Secretary to the
Committee and attends all meetings. The Committee’s
deliberations are reported by its Chairman to the following
Board meeting and the minutes of each meeting are circulated
to all members of the Board following approval.
At each meeting there may be a discussion between the
Committee members and the external auditor without the
presence of management in order to allow discussion of
private matters which the auditor may wish to raise.
Occasionally a discussion may be held between Committee
members, the external auditor and the Group Director of
Internal Audit if appropriate.
In undertaking its duties the Committee has access to the
services of the Group Finance Director, his team and the
Company Secretary, as well as external professional advice
as necessary. In addition the Chairman meets with the
external auditor outside of formal meetings and without
management present.
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Dixons Carphone plc Annual Report and Accounts 2014/15
External advice
The Board makes funds available to the Committee to enable it
to take independent legal, accounting or other advice when the
Committee believes it necessary to do so.
Responsibilities
The Committee assists the Board to fulfil its oversight
responsibilities by acting independently from the executive
directors. There is an annual schedule of items which are
shared across the meetings during the year to ensure the
Committee covers fully those items within its terms of
reference. These items are supplemented throughout the year
as key matters arise.
The Committee has the following principal duties:
• monitoring the integrity of the half year and full year financial
statements and any formal announcements relating to the
Group’s financial performance;
• review the results and conclusions of work performed by the
external auditor;
• advising the Board on whether, as a whole, the Annual
Report and Accounts is fair, balanced and understandable;
• reviewing significant financial reporting judgements;
• reviewing the Group’s financial controls and internal control
and risk management systems;
• monitoring and reviewing the effectiveness of the
Company’s internal audit function;
• making recommendations to the Board in relation to the
appointment of the external auditor;
• reviewing and monitoring the relationship with the external
auditors, including their independence, objectivity,
effectiveness, remuneration and terms of engagement;
• considering whistleblowing arrangements by which
employees may raise concerns about possible improprieties
in matters of financial reporting or other matters;
• any specific topics as defined by the Board; and
• referring matters to the Board which, in its opinion, should
be addressed at a meeting of the Board.
The terms of reference of the Audit Committee are reviewed
annually by the Board and are available on the Group’s
corporate website (www.dixonscarphone.com).
Key matters considered during the year
Accounting and financial reporting matters
The Committee is responsible for monitoring the integrity of the
half year and annual financial statements in conjunction with
both senior management and the external auditor. Following
the Merger, management presented the Committee with the
accounting policies and practices of both legacy businesses.
These were then debated and a combined set of policies and
practices agreed with no significant adjustments required in
respect of either business. During the period ended 2 May
2015 consideration was given to the following matters:
• the suitability of the Group’s accounting policies and
practices;
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• compliance with financial reporting and governance
standards;
• areas where significant levels of judgement have been
applied or items which have been discussed with the
external auditor;
• updated accounting and corporate governance regulations;
and
• whether the Annual Report and Accounts, taken as a whole,
is fair, balanced and understandable and provides sufficient
information necessary for shareholders and other users of
the accounts to assess the Group’s performance, business
model and strategy. To assist with discharging these
responsibilities, the Committee considers documents
prepared by management and reports received from the
external auditor on the outcomes of their annual and half
year audit procedures.
The Committee received reports and recommendations from management and the external auditor setting out the significant
accounting issues and judgements applicable to the following key areas. These were discussed and challenged, where
appropriate, by the Committee. Following debate, the Committee concurred with management’s conclusions:
Matters of significance and
areas of judgement
Revenue recognition
Accounting for the Merger
Disposal accounting
Supplier funding
How the issue was addressed by the Committee
Revenue recognition is considered to be a critical accounting policy and the judgements are set out in
note 1 u) of the Group financial statements. Key components of judgement are in relation to the
recognition of network commission receivable and also in relation to customer support agreements.
The Committee reviewed management’s assessment of these policies with reference to contractual
terms, the Group’s historical experience of customer behaviour and information received from third
parties as well as historical claims data in respect of customer support agreements.
The Committee discussed, challenged and assessed the assumptions made in relation to valuing the
assets and liabilities acquired as part of the Merger which concluded in net liabilities acquired of
£647 million. In addition, the Committee reviewed the consideration for the Merger transaction and the
allocation of goodwill between the different Cash Generated Units acquired.
This valuation exercise included external as well as internal valuations which incorporated management
judgement. The Committee reviewed and, where relevant, challenged the methodologies used in
calculating the fair values which have been recognised as set out in note 23 to the Group financial
statements.
The Committee reviewed the judgements taken in the calculation of gains and losses made in respect of
the disposal transactions of Virgin Mobile France as well as the operations in Germany, the Netherlands
and Portugal. The Committee also assessed the appropriateness of their treatment as assets held for
sale then further as discontinued operations as concluded by management, as set out in note 24 to the
Group financial statements.
A number of arrangements exist relating to supplier funding across the Group, including promotional
support and volume rebates. This topic received increased focus by management which culminated in
a presentation to the Committee from the Group Director of Internal Audit. Additional testing in this area
was also carried out by the external auditor. The Committee challenged and debated with management
its approach to supplier funding and its recognition and accounting treatment and no major issues were
noted. Further information in relation to supplier funding can be found in note 1 u) to the Group financial
statements.
Inventory provisioning
Inventory is a significant balance for the Group, as set out in note 12 to the Group financial statements
and contains managerial judgement for such items as obsolescence and shrinkage. As part of the
general committee procedures managerial judgement was assessed and no major issues noted.
Impairment testing of goodwill and
intangible assets
Significant goodwill and acquisition intangibles were recognised as part of the accounting for the Merger
which comprised goodwill of £2,629 million and acquisition intangibles of £373 million. The Committee
considered the judgements which had been made in relation to the values held in the balance sheet, in
addition to the methodology used in assessing the supportability of the year end goodwill balance and
assessing for any potential impairment. A sensitivity analysis was then reviewed regarding the impact
of a reasonably possible change in the key assumptions. These assumptions are set out in note 9 to the
Group financial statements.
Dixons Carphone plc Annual Report and Accounts 2014/15
49
Audit Committee report
Matters of significance and
areas of judgement
Fair, balanced and understandable
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Taxation
Going concern
How the issue was addressed by the Committee
As part of this assessment, as well as evaluating the narrative reporting attributable to the Headline
results and financial position of the Group, the Committee reviewed the key judgement concerning the
classification of items between Headline and Non-Headline, including consideration of the £89 million
pre-tax Non-Headline charges. This assessment considered whether items fell within the Group’s
definition of Non-Headline as well as the consistency of treatment of such items year on year.
This assessment was central to the Committee’s consideration of the integrity and sufficiency of
information disclosed in the Annual Report and Accounts along with other salient matters to ensure that,
taken as a whole, it is fair, balanced and understandable and explains the Group’s performance,
business model and strategy. This included an assessment of narrative reporting to ensure consistency
with the financial reporting section.
The Group operates across multiple tax jurisdictions. The complex nature of tax legislation in certain
jurisdictions can necessitate the use of judgement. In addition, management also uses assumptions and
judgements to assess the likelihood of utilisation of available tax losses.
The Committee also reviewed judgements and assumptions concerning any significant provisions,
including progress made on matters being discussed with tax authorities and where applicable advice
provided by external advisors.
The Committee was presented with an assessment of the Group’s future cash forecasts and profit
projections, available facilities, facility headroom, banking covenants and the results of a sensitivity
analysis performed, including having regard to the current uncertainties in the Greek economy. The
Committee discussed this with management in addition to management’s analysis which was performed
with reference to budgeted revenue and earnings levels for the coming years. The Committee was
satisfied that the going concern basis of preparation continues to be appropriate for the Group.
Internal control and risk management
The Committee is responsible for reviewing the Group’s
internal control and risk management systems. In order to
discharge its responsibilities in this area, in addition to its other
responsibilities, the Committee reviewed the following key
items:
• the annual Audit Committee agenda;
• common control themes identified throughout the business,
including key management dependencies. Where this was
identified subsequent action has been taken to minimise
the risk;
• the assessment of the Group’s response to information
security and data protection risks;
• the combined Group’s responsibilities relating to those
aspects of the Group that are regulated;
• the financial controls framework and its subsequent
assessment by internal audit; and
• the new governance and risk management framework put
in place throughout the merged Group.
Internal audit
The Committee is also responsible for monitoring and
reviewing the effectiveness of its internal audit function. During
the period the following significant risk areas of the business
were included within internal audit reviews:
• information security and data protection;
• IT governance and IT risk management; and
• business continuity.
In addition, as part of a three year rolling programme, audits
were performed over the following financial processes to
provide assurance to the Audit Committee that controls were
operating within these areas:
• supplier funding;
• payroll;
• procurement and purchase to pay.
In addition to considering any significant issues arising from
the results of the audits shown above, the Committee also
formally reviewed the effectiveness of internal audit and the
adequacy of its resources.
External audit
The external auditor is appointed by shareholders to provide
an opinion on the financial statements and certain disclosures
prepared by Group management. Deloitte LLP acted as the
external auditor to the Group throughout the year. The
Committee is responsible for oversight of the external auditor,
including approving the annual audit plan and all associated
audit fees.
The key matters in relation to external audit that were
considered by the Committee were:
• the annual audit plan;
• the annual audit fee and fees for non-audit services which
are set out in note 3 to the Group financial statements, with
due regard to the balance between audit and non-audit fees
and the policy for approval of non-audit fees paid to the
Group’s auditor;
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Dixons Carphone plc Annual Report and Accounts 2014/15
Due to the change in the auditor independence policy
detailed above, and following the completion of the Merger,
non-audit fees incurred by the Group are expected to reduce
in the future.
Consideration of auditor appointment and independence
On an ongoing basis the Committee considers the
appropriateness of the re-appointment of the external auditor,
including rotation of the audit partner. Deloitte LLP has been
the external auditor since the Group’s formation in 2010
(following the demerger of TalkTalk Group). Deloitte LLP was
also the external auditor of Dixons Retail. The current lead
audit partner has been in place for four years (partner rotation
is required on a five yearly basis).
The Committee will continue to consider the requirements
of the Code and also the recent Competition & Markets
Authority’s Final Order which is now designed to align with the
new European Union Regulation 547/2014 (which allows
companies greater flexibility) on audit tendering and rotation
timings. Under current guidance Deloitte can continue to be
reappointed for year ends beginning before June 2023, at
which point we would be required to change. A tender process
would then be undertaken and a proposal made accordingly.
In addition to this, the Group will consider retendering the
external audit at each partner rotation.
In light of the assessments and review undertaken, the Audit
Committee recommended to the Board that Deloitte LLP be
retained as auditors of the Company. This recommendation
was endorsed by the Board.
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Jock Lennox
Chairman of the Audit Committee
16 July 2015
• the effectiveness of the external auditor. Feedback on the
effectiveness of the audit process in addressing areas of
key audit risk was obtained from members of the Audit
Committee and regular attendees, members of the finance
team and senior management within the businesses via a
specifically designed questionnaire. The responses were
then considered by the Committee in conjunction with the
outputs received and responsiveness of the auditor during
the audit process. The results showed a positive view of the
audit process and of Deloitte as the external auditor,
specifically in relation to the high quality and integrity of the
team, the constructive relationship and effectiveness of the
communication. Following due consideration the Committee
continues to be satisfied with the quality and effectiveness
of the audit; and
• significant issues and areas of judgement arising from
reports from the external auditor, which in addition to those
matters referred to above, included IT controls and risks.
These areas were set out in the reports from the external
auditor and were discussed with the Committee. The
Committee concluded that the judgements taken and
assumptions made were all fair and reasonable.
Provision of non-audit services provided by the
external auditor
The Committee has a formal policy on auditor independence
which specifies the types of work from which the external
auditor is excluded and those which the auditor may perform.
In July 2015 the Audit Committee approved a change to this
policy, further restricting non-audit services, so that after a
short transitional period the only services permitted by the
external auditor will be audit services and certain other audit
related services (primarily those related to the role of reporting
accountant and or audit reports on financial information
provided by the Group). All non-audit fee proposals are subject
to pre-approval and must be submitted to the Group Financial
Controller. Where assignments are expected to generate fees
of over £100,000, approval must be obtained from the Audit
Committee in advance.
During the period under review, the non-audit services
performed by the external auditor primarily related to activities
in relation to the Merger, assignments which were closely
related to the annual audit or work of such a nature that a
detailed understanding of the Group was necessary. The Audit
Committee reviewed the services performed by the external
auditor during the year and are satisfied that these services did
not prejudice the external auditor’s independence and that it
was appropriate for them to perform these services.
The level of non-audit fees paid to the external auditor, which
was approved by the Committee is set out in note 3 to the
Group financial statements and amounted to £1.9 million
compared to £2.0 million of audit fees. Excluding the effect of
acting as reporting accountants for the Merger, the proportion
of non-audit fees vs audit fees was 28%.
Dixons Carphone plc Annual Report and Accounts 2014/15
51
Nominations Committee report
Chairman’s overview
Responsibilities
The Nominations Committee has an important role in the
Dixons Carphone plc structure, evaluating the skills required to
lead the business effectively and ensuring the right talent and
experience is available. In order to ensure continuity of purpose
and effective leadership it is important to ensure succession
planning obligations are met. Since the Merger the Committee
has met once to perform a thorough review of the balance of
the Board and its Committees and other governance
obligations.
At Merger a thorough review of the Board structure and
membership was performed. Also at the year end the
Committee performed a further review of the skills required to
successfully lead the Company and matched those skills to the
current Board membership. No further need for appointments
were identified other than an appointment of a Senior
Independent Director. More about this process is shown below
along with further details on the Nominations Committee and
its position in the Company’s governance framework.
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Sir Charles Dunstone
Chairman of the Nominations Committee
16 July 2015
Meetings
The principal duties of the Nominations Committee are to:
• review the structure, size, composition of the Board and
to recommend changes as necessary;
• identify, evaluate and nominate candidates to fill vacancies
on the Board;
• review the leadership needs with a view to ensuring the
continued ability of the organisation to compete effectively
and be responsible for succession planning;
• consider other commitments of directors relative to the time
required for them to fulfil their duties;
• evaluate the skills, knowledge and experience of the Board;
and
• make recommendations to the Board regarding the
continuation in office of a director upon the expiry of any
specified terms of appointment.
The terms of reference of the Nominations Committee are
reviewed annually and a recommendation made to be Board
accordingly. The current terms of reference are available on the
Group’s corporate website (www.dixonscarphone.com).
Key matters considered
In addition to the principal duties noted above, the Committee
also considered the following:
• an evaluation of the size, composition and structure of the
• The Nominations Committee meets as and when required
and at least once a year.
Board and its Committees;
• the Company’s diversity policy;
• The Nominations Committee met once during the period
• the external appointments policy;
under review.
Committee membership and attendance
The members of the Nominations Committee are shown in
the table below along with their attendance at scheduled
meetings for the period under review.
• 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 in the
light of the newly merged entity.
Appointments to the Board
Sir Charles Dunstone
John Gildersleeve
Andrea Gisle Joosen
Scheduled meetings
1 of 1
1 of 1
1 of 1
The Committee has a formal, rigorous and transparent
procedure for the appointment of new directors. Appointments
are made to the Board on merit, against objective criteria and
with due regard to the benefits of diversity and the leadership
needs of the Company.
The majority of the members are independent NEDs as
required by the Code. Other members of the Board or
senior management may be invited to attend meetings at
the request of the Chairman.
The Company Secretary acts as Secretary to the Committee.
The Committee’s deliberations are reported by its Chairman to
the following board meeting and the minutes of each meeting
are circulated to all members of the Board.
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Dixons Carphone plc Annual Report and Accounts 2014/15
Succession planning
At the time of the Merger consideration was given to creating
a talented board with appropriate experience and expertise
to lead the Company in its strategy. The Board has been
successful in coming together but over the next year or so
emphasis will be placed on ensuring that a full succession
planning exercise is performed to ensure continuity.
Diversity
The Board recognises the importance of diversity, including
but not limited to gender, in achieving the right mix of skills,
knowledge and experience in order to help the organisation
reach its potential. Currently 23% of the Board and 25% of
the Group Executive team are female.
The Board does not set out a target on gender balance as it
believes that candidates should be appointed on merit. The
Board will take opportunities to increase diversity as suitable
candidates present themselves. For more information on
employee diversity see page 29.
In performing its annual review the Board also looks at other
aspects of diversity relevant to the Group. For example, with
a large proportion of the business in the Nordics, we have a
Swedish non-executive director on the Board to provide
knowledge of these international markets.
Re-election
All directors will present themselves for election or re-election
at the Annual General Meeting. Each of the directors are being
unanimously recommended by the other members of the
Board due to their experience, knowledge and wider
management and industry experience, continued effectiveness
and commitment to their role.
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Dixons Carphone plc Annual Report and Accounts 2014/15
53
Due to the changes made to the components of the
remuneration packages of the executive directors at the time
of the Merger, no further changes are proposed to base
salaries as part of the annual pay review process this year.
Bonus payments this year will reflect the positive business
performance and will be paid at 125% of base salary. No
LTIPs vested during the year for executive directors serving
on the Board.
We are also acutely aware that our success is largely down to
the dedication and hard work of all our employees and that it is
vital that they continue to feel fairly and appropriately rewarded
and that they are able to share in the success of the business.
We are therefore very pleased this year to have been able to
launch a combined Dixons Carphone plc Sharesave plan for
all UK and Ireland employees, which has enjoyed a take-up
rate of approximately 20% of the combined UK and
Ireland workforce.
The proposed Remuneration policy set out in this Annual
Report and Accounts will be put to shareholders for approval in
a binding vote at the Annual General Meeting on 10 September
2015 where they will be asked to approve the policy for a
period of three years.
John Gildersleeve
Chairman of the Remuneration Committee
16 July 2015
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Remuneration report
Chairman’s statement
The period since we last reported has seen significant change
especially in relation to the Merger. The Prospectus and
Circular have already set out details in respect of the existing
incentive schemes of Carphone Warehouse Group plc and
Dixons Retail plc and how these were impacted by the Merger.
This Remuneration report sets out the Group’s proposed future
Remuneration policy of the new combined Company which is
broadly in line with the Remuneration policy approved by
shareholders in 2014.
We have used the opportunity of the Merger to review our
approach to remuneration to ensure it is aligned to our
strategic direction, appropriate for a FTSE 100 company and
focused on driving superior shareholder returns.
After careful consideration we have decided to continue to
align our executive pay structure for the combined Group to a
more leveraged approach focused on creating shareholder
value. This is reflected in our long term incentive plans (LTIPs)
and our shareholding policy, which was strengthened to
require executive directors to hold 200% of their base salary
in the Company’s shares.
We have also maintained our approach of providing a strong
link between our levels of annual bonus with the performance
and delivery of our strategic priorities. When setting targets for
our annual bonus and our LTIPs, we start with the strategy of
the business and the behaviours we want to encourage and
design metrics around them. In order to keep overall
remuneration weighted towards variable pay that incentivises
outperformance we are providing a modest level of benefits.
In order to harmonise we have had to adjust some elements of
pay for all executive directors, such as reducing the annual
bonus which existed previously within Carphone from 200% of
base salary to 125% and reducing pension contributions for
the former Dixons executive directors from 20% to 10%.
At the time of the Merger we gained, by special resolution,
shareholder agreement to make adjustments to existing
awards and grant additional awards under our long term
incentive plans. This was to ensure the existing participants
were no better or worse off following the Merger and to make
awards to the new executive directors and other senior
leaders. These plans align the interests of our management
with our shareholders, providing the opportunity for them to
earn significant value but only if superior shareholder returns
are delivered.
We have also responded to the feedback received on the
policy during 2014 and have excluded the executive directors
from being eligible to participate in the mid term incentive plan
introduced following the Merger.
Although no substantial changes have been made to the
remuneration policy following the Merger, we have taken the
opportunity to make some administrative changes, such as
updating the provisions in our LTIPs to include the ability for
the Remuneration Committee to apply malus and clawback
conditions in certain specified circumstances.
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Dixons Carphone plc Annual Report and Accounts 2014/15
Remuneration report – Remuneration Policy report
Introduction
Remuneration policy report – unaudited information
The purpose of these reports is to inform shareholders of the
Company’s directors’ remuneration for the period ended 2 May
2015 and the Remuneration policy for subsequent years. This
report is divided into two sections:
• the Remuneration Policy report; and
• the Annual Remuneration report
The remuneration policy set out will be put to shareholders
for approval in a binding vote at the Annual General Meeting on
10 September 2015 and the policy will be effective from that
date. Shareholders will be asked to approve the policy for a
period of three years starting from the effective date. The
Annual Remuneration report will also be put to an advisory
vote at the Annual General Meeting.
The role of the Remuneration Committee (the Committee) is to
determine on behalf of the Board a remuneration policy for
executive directors and senior management in order to attract
and retain executives who have the ability, experience and
dedication to deliver outstanding returns for our shareholders.
The Committee has adopted the principles of good
governance relating to directors’ remuneration as enshrined in
section D of the Code and has complied with those principles
in the year under review unless otherwise noted.
These reports have been prepared by the Committee on behalf
of the Board in accordance with the Companies Act 2006,
Schedule 8 to the Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations 2008 (as
amended) and the Listing Rules of the Financial Conduct
Authority. The Remuneration Policy report (which is not subject
to audit) details the role of the Committee, the principles of
remuneration and other matters. The Annual Remuneration
report (elements of which are audited) details the directors’ and
former directors’ fixed and variable pay, share awards, share
options and pension arrangements.
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Remuneration Committee objectives
The Board has delegated to the Committee responsibility for
determining policy in relation to the remuneration packages
for executive directors and other senior management. This
delegation includes 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.
Remuneration strategy
Put simply, our aim is to generate superior returns for our
shareholders and the key to achieving this is our people. Our
remuneration strategy is therefore designed to motivate high
performing people to deliver our business strategy.
The objectives of our Remuneration strategy are to:
• attract, motivate and retain high quality talent;
• be transparent and align the interests of senior management
and executive directors with shareholders, by encouraging
management to have a significant personal stake in the long
term success of the business;
• weight remuneration to variable pay that incentivises
outperformance over the short and long term whilst
discouraging inappropriate risk taking;
• ensure that superior rewards are only paid for exceptional
performance against challenging targets;
• apply policies consistently across the Group to promote
alignment and teamwork;
• recognise the importance of delivering across a balanced set
of metrics to ensure the right behaviours are adopted and
the long term health of the business is protected; and
• avoid rewarding failure.
In developing its policy the Committee has regard to:
• the performance, roles and responsibilities of each executive
director or member of senior management;
• arrangements which apply below senior management levels,
including average base salary increases;
• information and surveys from internal and independent
sources;
• the economic environment and financial performance of the
Company; and
• corporate governance good practice.
Guidelines on responsible investment disclosure
In line with the Investment Association Guidelines on
responsible investment disclosure, the Committee is satisfied
that the incentive structure and targets for executive directors
do not raise any environmental, social or governance risks by
inadvertently motivating irresponsible or reckless behaviour.
The Committee considers that no element of the remuneration
package will encourage inappropriate risk taking by any
member of senior management.
Dixons Carphone plc Annual Report and Accounts 2014/15
55
Remuneration Policy report
Remuneration policy table
The individual elements of the remuneration packages offered to executive directors are summarised in the following table:
Base Salary (fixed pay)
• Purpose and link to strategy
To aid the recruitment, retention and motivation of high-performing people.
To reflect their experience and importance to the business.
• Operation
Reviewed annually.
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• Maximum opportunity
The review reflects a range of factors including merit levels, internal relativity and cost.
Our overall policy, having due regard to the factors noted, is normally to target salaries
up to the median level.
Salaries for new appointments as executive directors will be set in accordance with the
Recruitment Policy set out on page 63 of this Remuneration Policy report.
The Committee takes into consideration the impact of base salary increases on the
package as a whole, as bonuses as well as some other elements of pay (such as
pension contributions) are generally worked out based on a percentage of salary.
Ordinarily, increases for executive directors will be in line with increases across the
Group. Increases beyond those granted across the Group may be awarded in certain
circumstances such as changes in responsibilities, progression in the role and significant
increases in the size, complexity or value of the Group.
Salary levels for current directors are shown in the Annual Remuneration report.
• Performance assessment / targets Salaries are reviewed annually by the Committee at the appropriate meeting having due
regard to the individual’s experience, performance and added value to the business.
Benefits (fixed pay)
• Purpose and link to strategy
In line with the Company’s strategy to keep remuneration weighted to variable pay that
incentivises outperformance, a modest range of benefits is provided.
Benefits may vary based on the personal choices of the director.
Provision of relocation or other related assistance may be provided to support the
appointment or relocation of a director.
• Operation
Executive directors are entitled to a combination of benefits which include, but are not
limited to:
• car allowance;
• private medical cover;
• long term incapacity cover;
• life assurance;
• holiday and sick pay; and
• a range of voluntary benefits including the purchase of additional holidays.
Should an executive director be recruited from or be based in a non-UK location,
benefits may be determined by those typically provided in the normal country of
residence.
Relocation or other related assistance could include, but is not limited to, removal and
other relocation costs, tax equalisation, tax advice and accommodation costs.
• Maximum opportunity
The cost to the Group of providing such benefits will vary from year to year in
accordance with the cost of providing such benefits, which is kept under regular review.
• Performance assessment / targets Not applicable.
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Dixons Carphone plc Annual Report and Accounts 2014/15
Pension (fixed pay)
• Purpose and link to strategy
• Operation
A pension is provided which is consistent with that provided 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 is now closed to
new participants and future accrual.
Executive directors may choose to receive a cash allowance in lieu of pension
contributions.
• Maximum opportunity
Company pension contribution of up to 10% of base salary, which can be taken in
whole or in part as a cash allowance in lieu of pension. However a greater contribution of
up to 20% may be made where necessary to recruit or retain an executive director.
• Performance assessment / targets Not applicable.
Annual performance bonus (variable pay)
• Purpose and link to strategy
Annual performance bonuses are in place to incentivise the delivery of stretching, near
term business targets based on our business strategy.
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These bonuses provide a strong link between reward and performance and drive the
creation of further shareholder value.
The principles and approach are consistently applied across the Group ensuring
alignment to a common vision and strategy.
They are based on a balanced approach ensuring appropriate behaviours are adopted
and encouraging a longer term focus.
• Operation
Bonus payments are determined after the year end and subject to a minimum profit
threshold being achieved before payment is due.
For threshold level of performance a bonus of 25% of base salary is payable. A sliding
scale determines payment between the minimum and maximum bonus payable.
The annual bonus is typically paid in July / August in cash and is non-pensionable,
based on the audited performance over the previous financial year.
The annual bonus can instead be settled in shares or a mixture of cash and shares
which could be deferred, at the discretion of the Remuneration Committee.
Performance is reviewed by the Committee using its judgement where necessary to
assess the achievement of targets. The Committee retains the discretion to adjust
downwards bonus payments where achievement of targets would result in a payment
of a bonus at a level which would not be consistent with the interests of the Company
and its shareholders.
Clawback and malus provisions apply for material misstatement, misconduct and
reputational damage enabling performance adjustments and / or recovery of sums
already paid.
• Maximum opportunity
Maximum annual bonus potential for all executive directors is 125% of base salary.
No bonus is payable if the minimum profit threshold is not achieved.
• Performance assessment / targets All measures and targets are reviewed and set by the Committee at the beginning of
the financial year with a view to supporting the achievement of the Group strategy.
The bonus scheme has targets based on a balanced scorecard. The balanced
scorecard may include both financial and non-financial measures, such as employee,
customer and strategic measures. The weighting of measures will be determined by the
Committee each year. Financial measures (such as profit and cash) will represent the
majority of the bonus, with other measures representing the balance.
Dixons Carphone plc Annual Report and Accounts 2014/15
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Remuneration Policy report
Long term incentive schemes (variable pay): Share Plan
• Purpose and link to strategy
Long term incentive schemes are transparent and demonstrably aligned with the
interests of shareholders over the long term.
• Operation
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The Share Plan is designed to reward and retain executives over the longer term whilst
aligning an individual’s interests with those of shareholders and in turn delivering
significant shareholder value.
The executive directors participate in the Dixons Carphone (formerly Carphone
Warehouse Group plc) Share Plan approved by Carphone Warehouse shareholders.
The intention is to use this plan for the most senior management of the Company.
New executive directors appointed from time to time may participate in the Dixons
Carphone Share Plan or the Share Option Plan described on page 59.
Participants acquire at market value participation shares in a subsidiary company that
holds the Company’s interests in the Group’s main operating businesses. The Group
grants loans to participants at a commercial rate of interest to acquire the shares.
Loans are ordinarily repayable in full if performance conditions are met.
The performance of the plan will ordinarily be measured at the end of the performance
period (in or around July 2017 for the current participants), when 60% of the shares vest,
with 40% deferred for a further year. When the awards vest, the value of the shares held
by participants will be based on the incremental value (if any) of Dixons Carphone plc in
excess of the opening valuation together with the minimum return on invested capital.
These shares will then be purchased by the Company for cash and / or the Company’s
ordinary shares.
A ‘bad leaver’ will be required to transfer the participation shares to such party as the
Company designates for an amount equal to the total amount outstanding under the
loan (and any accrued interest). If the market value of the shares is less than the amount
of the outstanding loan (and any accrued interest) then the participant may be required
to repay up to 20% of the shortfall out of their own resources.
A participant shall only be a ‘good leaver’ at the sole discretion of the Committee
and may be permitted to retain an award notwithstanding the termination of their
employment.
The Committee has the ability to apply malus and clawback provisions to any awards
made after March 2015.
The mechanics of the plan may be varied by the Committee if necessary to ensure that
participants are neither advantaged nor disadvantaged by a variation of the share capital
of the Company, bona fide merger, reconstruction or similar reorganisation.
Further details on the operation of the Share Plan following the Merger are provided
in note (1) below this policy table.
• Maximum opportunity
The total pool for distribution to participants is subject to a cap of 4% of the total issued
share capital of the Company on the measurement date.
Under the Share Plan there are now two pools, one for the original grant in December
2013 and one for the second grant in September 2014, each being subject to a cap of
2% of the total issued share capital of the Company.
The allocation for the Group Chief Executive is 11% of the pool created by the second
set of awards.
The allocations for other executive directors are set out in the Annual Remuneration
report.
• Performance assessment / targets The Share Plan is designed to share 10% of the incremental value created in Dixons
Carphone in excess of an opening valuation (assessed over an appropriate period) and
beyond an annual rate of return of 7% on invested capital. The plan is also underpinned
by a minimum annual compound TSR growth of 5% and outperformance of the median
TSR of the FTSE 250.
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Dixons Carphone plc Annual Report and Accounts 2014/15
Long term incentive schemes (variable pay): Share Option Plan
• Purpose and link to strategy
Long term incentive schemes are transparent and demonstrably aligned with the
interests of shareholders over the long term.
The Share Option Plan is designed to reward and retain executives over the longer term
whilst aligning an individual’s interests with those of shareholders and in turn delivering
significant shareholder value.
• Operation
Discretionary awards of either nil-priced or market priced options are granted over
Dixons Carphone plc shares. Approved options may be granted subject to HMRC limits.
The current strategy is to grant a single award of share options with phased vesting
rather than annual grants, but the Committee reserves the right to change this approach.
The level of vesting is dependent on achievement of performance targets, usually over
a three year period from the date of grant.
Awards do not vest until the third anniversary of the date of grant and may have a
deferral element.
The Committee has applied malus and clawback provisions to awards made after
March 2015.
If employment ceases during the vesting period, awards will ordinarily lapse in full,
unless the Committee exercises its discretion.
No executive director currently holds any interest in the share option plan.
There is currently no intention to grant any options under this plan to executive directors
whilst they participate in the Share Plan, but the share option plan may be used for
recruitment purposes for any executive directors should this be necessary or desirable.
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• Maximum opportunity
Grants under the Dixons Carphone Share Option Plan are subject to overall
dilution limits.
The maximum grant per participant in any financial year is a market value of 200% of
base salary. However in exceptional circumstances an award of up to 300% of salary
may be granted.
• Performance assessment / targets Performance targets are reviewed by the Committee prior to each grant.
The Committee determines the targets from a range of measures, including but not
limited to absolute TSR and TSR relative to an appropriate comparator group.
The current metrics in use are a combination of absolute TSR performance and relative
TSR performance against either the FTSE 250 or the FTSE 350.
All Employee Share Plans including SAYE
• Purpose and link to strategy
Encourages employees to make a long term investment in the Company’s shares and
therefore be aligned to the long term success of the Company.
• Operation
Executive directors are eligible to participate in any all employee share plans operated
by the Company which have been approved by shareholders.
• Maximum opportunity
A new grant under the Dixons Carphone HMRC approved SAYE scheme was made
in the UK and Ireland in February 2015.
Participants can save up to £500 per month for either three or five years, and in return
receive a share option granted at up to 20% discount to the market price at the time of
the invitation.
The Committee reserves the right to increase this savings limit for future schemes in
accordance with the statutory limits in place from time to time.
• Performance assessment / targets The performance of the scheme will be determined by the share price of the Company
at the end of the relevant savings period.
Dixons Carphone plc Annual Report and Accounts 2014/15
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Remuneration Policy report
Share ownership guidelines
• Purpose and link to strategy
Provides close alignment between the longer term interests of executive directors and
shareholders in terms of the Company’s growth and performance.
• Operation
The Company requires executive directors to retain a certain percentage of base salary
in the Company’s shares. Directors have a five year period to reach these limits.
The shares which count towards this requirement are unfettered, beneficially owned
shares only.
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• Maximum opportunity
Not applicable.
• Performance assessment / targets The Company requires all executive directors to retain 200% of base salary in the
Company’s shares.
Non-Executive Directors and Chairman / Deputy Chairman fees.
• Purpose and link to strategy
To provide a competitive fee for the performance of non-executive director duties,
sufficient to attract high calibre individuals to the role.
• Operation
The fees are set to align with the duties undertaken, taking into account market rates,
and are reviewed on an annual basis. Factors taken into consideration include the
required time commitment and specific experience.
Additional fees are payable for acting as Chair of any Board committee, or for acting as
the Senior Independent Director.
Non-executive directors do not participate in the annual performance bonus or the long
term incentive plans, however, a historical arrangement exists for Roger Taylor who
continues to receive private medical insurance.
• Maximum opportunity
Aggregate annual limit of £2,000,000 imposed by the Articles of Association for
directors’ fees (not including fees in relation to any executive office or Chairman,
Committee Chair or Senior Independent Director fees).
• Performance assessment / targets Not applicable.
Notes:
(1) Long term incentives - Share Plan: The first awards under the Share Plan were made in December 2013 and further awards were made in
September 2014 after the Merger. At the same time adjustments were made to the first awards to ensure participants were no better or
worse off as a result of the Merger. The two sets of awards have different opening valuations reflecting the value of the Company at
appropriate times prior to the grants. Each set of awards has its own pool, which are each subject to a cap of 2% of the total issued share
capital of Dixons Carphone. The total pool for distribution to all of the participants remains subject to an overall cap of 4% of the total issued
share capital of the Company on the measurement date.
There are no plans to issue further awards under this Share Plan until such time as these awards vest when the Committee will review the
programme of long term incentives for the Group.
(2) The following changes have been made to the Remuneration Policy in order to align the pay of executive directors following the Merger and
to reflect the remuneration strategy of the new combined Group:
• reducing the annual bonus which existed previously within Carphone from a maximum of 200% of base salary to 125% of base salary;
• reducing the pension contributions for the Dixons executive directors from 20% to 10% of base salary;
• strengthening our shareholding policy to require executive directors to hold 200% of their base salary in the Company’s shares;
• excluding the executive directors from being eligible to participate in the mid term incentive plan introduced following the Merger; and
• including the ability for the Remuneration Committee to apply malus and clawback conditions in certain specified circumstances.
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Dixons Carphone plc Annual Report and Accounts 2014/15
Illustration of remuneration policy
The remuneration policy scenario chart below illustrates the level and mix of potential total remuneration the current executive
directors could receive under the remuneration policy at four levels of performance including an annualised potential payout for
the Share Plan. As described in the policy table above, our long term incentive arrangements are designed to align executives’
interests with those of shareholders and incentivise and reward for the delivery of significant shareholder value. Our
arrangements are intentionally more leveraged than a standard UK performance share plan: no payouts would be due at a
threshold level of performance and the higher payout levels would result only where significant shareholder value had been
created (for example, £1.6 billion of incremental shareholder returns at the Maximum level).
Remuneration policy scenario chart
Sebastian
James
Andrew
Harrison
Humphrey
Singer
Katie
Bickerstaffe
Graham
Stapleton
Minimum
Threshold
Super stretch
Maximum
Minimum
Threshold
Super stretch
Maximum
Minimum
Threshold
Super stretch
Maximum
Minimum
Threshold
Super stretch
Maximum
Minimum
Threshold
Super stretch
Maximum
0
1,000
2,000
£‘000
3,000
4,000
5,000
100%
82%
32%
19%
18%
22%
21%
46%
60%
100%
81%
28%
19%
100%
82%
31%
18%
100%
82%
32%
18%
100%
81%
29%
21%
19%
19%
22%
53%
59%
18%
21%
20%
48%
62%
18%
21%
47%
20%
62%
19%
20%
51%
24%
55%
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Total
915
1,120
2,820
4,915
591
728
2,145
3,057
536
654
1,712
3,024
560
685
1,755
3,080
496
611
1,737
2,403
Fixed pay Annual variable Long term incentive
The assumptions underlying the chart in respect of the percentage of maximum opportunity payable are set out below:
Notes:
(1) Fixed pay comprises basic salary, taxable benefits and pension contributions.
(2) Annual variable pay represents the annual bonus entitlement. No bonus is assumed at the minimum performance level. Threshold
performance assumes a payment of 25% of base salary, super stretch performance a payment of 75% of base salary and maximum
performance a payment of 125% of base salary.
(3) Long term incentives relate to the Share Plan, in which the executive directors participate. These are illustrative amounts and the actual
outcomes may differ depending on share price growth.
(4) The Share Plan vests partly in 2017 and partly in 2018 and therefore the total value of the scheme has been annualised over the
performance period which is five years for the first set of awards, and four years for the second set of awards made following the Merger.
For Sebastian James, Humphrey Singer and Katie Bickerstaffe the Share Plan has been annualised over four years. Andrew Harrison and
Graham Stapleton were granted a second set of awards to align their overall awards with other Dixons participants and therefore the Share
Plan has been partially annualised over five years and partially over four years.
(5) No Share Plan payout is assumed at the minimum performance level. Threshold performance for the Share Plan is an annual rate of return
of 7% on invested capital and therefore there will be no payout at threshold. Super stretch performance reflects the generation of £1 billion
of incremental shareholder returns over the term of the scheme. Maximum performance is fixed at the point at which the overall dilution
cap of 4% is expected to apply (each set of awards being subject to a 2% dilution cap), representing £1.6 billion of incremental
shareholder returns.
(6) The value of the Share Plan at vesting has been reduced by the value of the loan outstanding (excluding interest payments).
Dixons Carphone plc Annual Report and Accounts 2014/15
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Remuneration Policy report
Remuneration Committee discretions
The Committee retains discretion consistent with market
practice over a number of areas relating to the operation and
administration of the bonus plans and long term incentive
share plans. These include but are not limited to:
Discretionary share plans are extended to both senior
management and other key members of the workforce,
as the Company feels that it is important to incentivise and
retain these employees in order for the Company to continue
to grow.
The Group’s UK and Irish employees who meet the eligibility
criteria are also invited to join the Company’s UK and Ireland
approved SAYE.
Recruitment or promotion policy
On appointment or promotion, base salary levels will be set
taking into account a range of factors including market levels,
experience, internal relativities and cost. If an individual is
appointed on a base salary below the desired market
positioning, the Committee retains the discretion to re-align
base salary over one to three years, contingent on individual
performance, which may result in an exceptional rate of
annualised increase above ordinary levels. If the Committee
intends to rely on this discretion, it will be noted in the first
remuneration report following an individual’s appointment.
Other elements of annual remuneration will be in line with the
policy set out in the Policy Table. As such, short term variable
remuneration will be capped as set out in the Policy Table.
The following exceptions will apply:
• in the event that an internal appointment is made or an
executive director joins as a result of a transfer of an
undertaking, merger, reconstruction or similar
reorganisation, the Committee retains the discretion to
continue with existing remuneration provisions, including
pension contributions and the provision of benefits;
• as deemed necessary and appropriate to secure an
appointment, the Committee retains the discretion to make
additional payments linked to relocation; and
• the Committee retains the discretion to provide an
immediate interest in Company performance by making a
long term incentive award on recruitment in accordance with
the Policy Table under its existing long term incentive
schemes or such future schemes as may be introduced by
the Company with the approval of 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.
Service contracts will be entered into on terms similar to those
for the existing executive directors, summarised in the
Recruitment table. However, the Committee may authorise the
payment of a relocation and / or repatriation allowance, as well
as other associated international mobility terms and benefits,
such as tax equalisation and tax advice.
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• entitlement to participate in the plan;
• when awards or payments are to be made;
• size of award and / or payment (within the rules of the plans);
• determination of a good leaver for incentive plan purposes
and the appropriate treatment based on the rules of each
plan;
• discretion as to the measurement of performance conditions
and pro-rating in the event of a change of control;
• any adjustment to awards or performance conditions for
significant events or exceptional circumstances; and
• the application of clawback and malus provisions.
Shareholder and employee consultation
The Committee has a policy to consult with its major
shareholders when making any significant changes to the
remuneration policy of the Company. Any feedback received is
taken into consideration when determining future policy. For
example, in contemplation of the Merger in 2014 a consultation
took place with major shareholders on various amendments to
the remuneration policy. As a direct result of that consultation,
the executive directors were removed from the mid term
incentive plan. Prior to this, in 2013 an extensive consultation
exercise took place with the shareholders to seek their views
on the Carphone Warehouse Share Plan and as a result a
number of changes were made to the scheme design,
including the introduction of a cap.
The Committee also takes into consideration remuneration
guidance issued by large investor bodies in addition to the
principles of good governance relating to directors’
remuneration as set out in the Code.
Whilst employees are not formally consulted on executive
remuneration a number of them are shareholders and as such
are able to exercise their influence. We also monitor our
employee discussion boards and employee forums to ensure
employee feedback in general is considered in all our strategy
execution. The Company also conducts regular employee
surveys throughout the business.
Remuneration policy for the wider workforce
Dixons Carphone employs a large number of people across
different countries. Our reward framework is structured around
a set of common principles with adjustments made to suit the
needs of the different businesses and employee groups.
Reward packages differ for a variety of reasons including the
impact on the business, local practice, custom and legislation.
In determining salary increases to apply across the wider
workforce, the Company takes into consideration company
performance and other market metrics as necessary. When
setting the policy for executive directors the Committee takes
into consideration salary increases throughout the Company
as a whole.
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Dixons Carphone plc Annual Report and Accounts 2014/15
In addition to the annual remuneration elements noted above,
the Committee may consider buying out on a like-for-like basis
bonuses and / or incentive awards that an individual forfeits in
accepting the appointment. The Committee will have the
authority to rely on Listing Rule 9.4.2(2) or exceptional limits
within the existing shareholder approved Share and Share
Option Plans to make awards. If made, the Committee will be
informed by the structure, time horizons, value and
performance targets associated with any forfeited awards
while retaining the discretion to make any payment or award
deemed necessary and appropriate. The 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 appointment will be consistent
with those currently adopted. Variable pay will not be
considered and as such no maximum applies. With respect
to non-executive directors, fees will be consistent with the
policy at the time of appointment. If necessary, to secure
the appointment of a new Chairman not based in the UK,
payments relating to relocation and / or housing can
be considered.
Elements of remuneration on appointment are set out in
the Recruitment table.
A timely announcement with respect to any director’s
appointment and remuneration will be made to the
regulatory news services and posted on the Company’s
corporate website.
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Recruitment table
Area
Feature
Policy
Service contract and
incentive plan
provisions
Notice period
• Up to 12 months from either side.
Entitlements on termination • As summarised in the Policy on loss of office.
Restrictive covenants
• Provisions for mitigation and payment in lieu of notice.
• Gardening leave provisions.
• Non-compete, non-solicitation, non-dealing and confidentiality
provisions.
Variable elements
• The Committee has the discretion to determine whether an individual
shall participate in any incentive in the year of appointment.
• The Committee shall have the discretion to determine appropriate bonus
performance targets if participating in the year of appointment.
Annual remuneration Salary
• To be determined on appointment, taking into account factors including
Salary progression
Benefits and allowances
market levels, experience, internal relativities and cost.
• If appointed at below market levels, salary may be re-aligned over the
subsequent one to three years subject to performance in role. In this
situation, the Committee reserves the discretion to make increases
above ordinary levels.
• This initial market positioning and intention to increase pay above the
standard rate of increase in the Policy table (subject to performance) will
be disclosed in the first remuneration report following appointment.
• The Committee retains the discretion to provide additional benefits as
reasonably required. These may include, but are not restricted to,
relocation payments, housing allowances and cost of living allowances.
Policy on loss of office
Service contracts contain neither a liquidated damages nor
a change of control clause.
The Company shall have a right to make a payment in lieu of
notice in respect of basic salary, benefits including car
allowance and pension contributions only for the director’s
contractual period of notice or, if termination is part way
through the notice period, the amount relating to any unexpired
notice to the date of termination. There is an obligation on
directors to mitigate any loss which they may suffer if the
Company terminates their service contract. The Committee will
take such mitigation obligation into account when determining
the amount and timing of any compensation payable to any
departing director.
A director shall also be entitled to a payment in respect of
accrued but untaken holiday and any statutory entitlements on
termination. No compensation is paid for dismissal, save for
statutory entitlements.
A director shall be entitled to receive a redundancy payment in
circumstances where in the judgement of the Committee they
satisfy the statutory tests governing redundancy payments.
Any redundancy payment shall be calculated by reference to
the redundancy payment policy in force for all employees in
the relevant country at the time of the redundancy.
Dixons Carphone plc Annual Report and Accounts 2014/15
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Letters of appointment
Each of the non-executive directors has a letter of
appointment. The Company has no age limit for directors.
Non-executive directors derive no other benefit from their
office, except that the Committee retains the discretion to
continue with existing remuneration provisions, including
pension contributions and the provision of benefits, where an
executive director becomes a non-executive director. It is
Company policy not to grant share options or share awards to
non-executive directors. The Chairman, Deputy Chairman and
the other non-executive directors have a notice period of three
months from either party.
Appointments are reviewed annually by the Nominations
Committee and recommendations made to the Board
accordingly.
External appointments
The Board supports executive directors taking non-executive
directorships as a part of their continuing development, and
has agreed that the executive directors may retain their fees
from one such appointment. Further details on current external
directorships and fees can be found in the Annual
Remuneration report.
Availability for inspection
The service agreements for the executive directors and the
letters of appointments for the non-executive directors are
available for inspection at the Company’s registered office and
at the venue for the Annual General Meeting, 15 minutes prior
to and during the meeting.
Legacy arrangements
For the avoidance of doubt, in approving the Remuneration
Policy report, authority is given to the Company to honour
any commitments previously entered into with the current or
former directors which have been disclosed previously to
shareholders.
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Remuneration Policy report
If a director’s employment terminates prior to the relevant
annual bonus payment date, ordinarily no bonus is payable for
that financial year. The Committee shall retain discretion to
make a pro-rated bonus payment and / or payment of a
retention bonus in circumstances where it would be
appropriate to do so having regard to the contribution of the
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 Plan is that awards will lapse on the
termination of employment unless the Committee exercises the
discretion set out in the scheme rules. The Committee retains
the discretion to prevent awards from lapsing depending on
the circumstances of the departure and the best interests of
the Company.
The Committee shall be entitled to exercise its judgement with
regard to settlement of potential claims, including but not
limited to wrongful dismissal, unfair dismissal, breach of
contract and discrimination, where it is appropriate to do so in
the interests of the Company and its shareholders.
In the event that any payment is made in relation to termination
for an executive director, this will be fully disclosed in the
following Annual Remuneration report.
A timely announcement with respect to the termination of any
director’s appointment will be made to the regulatory news
service and posted on the Company’s corporate website.
Service agreements
Service agreements for executive directors
Each of the executive directors’ service agreements
provides for:
• the reimbursement of expenses incurred by the executive
director in performance of their duties;
• 25 days paid holiday each year for Sebastian James,
Humphrey Singer and Katie Bickerstaffe (full time
equivalent); 27 days for Andrew Harrison and Graham
Stapleton;
• sick pay; and
• notice periods whereby Sebastian James, Humphrey Singer
and Katie Bickerstaffe each have a notice period of
12 months from the Company and six months from the
director. Andrew Harrison has a notice period of 12 months
and Graham Stapleton six months from either party.
In situations where an executive director is dismissed, the
Committee reserves the right to make additional exit payments
where such payments are made in good faith, such as:
• in discharge of a legal obligation; and
• by way of settlement or compromise of any claim arising in
connection with the termination of the director’s office and
employment.
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Dixons Carphone plc Annual Report and Accounts 2014/15
Remuneration report – Annual Remuneration report
Introduction
This part of the report has been prepared in accordance with
Part 3 of Schedule 8 to the Large and Medium-Sized
Companies and Groups (Accounts and Reports) Regulations
2008 (as amended), and contain those elements required by
section 9.8.6R and stipulated in 9.8.8 of the Listing Rules. This
Annual Remuneration report will be put to an advisory vote at
the Company’s 2015 Annual General Meeting.
The following sections set out how the Remuneration Policy
was implemented during 2014/15 and how it will be
implemented for the following year.
Service Agreements
Service contracts
The following table summarises key terms of the service
contracts in place with the executive directors:
Remuneration committee membership and attendance
Members
Membership of the Committee comprises four non-
executive directors, their names and attendance record are
set out in the table below and their biographies and
qualifications are set out on pages 36 and 37. The
Company’s Deputy Chairman is a member of the
Committee but is not its Chair. The Committee’s terms of
reference are available on the Company’s corporate
website.
Meetings
The Remuneration Committee met four scheduled times
during the period under review and since the year end there
have been a further three meetings.
Scheduled meetings
Date of contract
Members during the year
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John Gildersleeve (Chairman)
Andrea Gisle Joosen(1)
Tim How(1)
Roger Taylor(1)
Former members
John Allwood(2)
Baroness Morgan of Huyton(3)
Gerry Murphy(3)
4 of 4
3 of 3
3 of 3
3 of 3(4)
1 of 1
1 of 1
1 of 1
(1) Appointed to the Committee 6 August 2014.
(2) Resigned 6 August 2014.
(3) Resigned from the Committee on 6 August 2014.
(4) Roger Taylor also attended the fourth meeting but by invitation
not as a member.
Sebastian James
Andrew Harrison
Humphrey Singer
Katie Bickerstaffe
Graham Stapleton
29 Mar 12
29 Oct 13
2 Sep 11
29 Mar 12
5 Oct 11
With the exception of Andrew Harrison, all the above executive
directors were appointed to the Board on 6 August 2014.
Nigel Langstaff resigned from the Board as executive director
on 6 August 2014. More details are set out in the Directors’
remuneration tables on page 68 and 69.
Letter of appointment
Non-executive directors are normally appointed for three year
terms, although appointments may vary depending on length
of service and succession planning considerations.
Appointments are reviewed annually by the Nominations
Committee and recommendations made to the Board
accordingly. The date of the letters of appointment and expiry
of current terms are shown below.
Letters of
appointment
Expiry of
current term
Sir Charles Dunstone
17 Jun 14
16 Jun 17
John Gildersleeve
17 Jun 14
16 Jun 17
Andrea Gisle Joosen
17 Jun 14
16 Jun 17
Tim How
Jock Lennox
17 Jun 14
16 Jun 17
17 Jun 14
16 Jun 17
Baroness Morgan of Huyton
17 Jun 14
16 Jun 17
Gerry Murphy
Roger Taylor
17 Jun 14
16 Jun 17
17 Jun 14
16 Jun 17
Tim How, Jock Lennox and Andrea Gisle Joosen were
appointed to the Board on 6 August 2014 and at the same
date John Allwood resigned from the Board. John Allan was
appointed to the Board on 6 August 2014 and resigned on
17 February 2015. More details are set out in the single figure
of total Directors’ remuneration tables on pages 68 and 69.
Dixons Carphone plc Annual Report and Accounts 2014/15
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Annual Remuneration report
Only members of the Committee are entitled to attend
Committee meetings but the Group Chief Executive and
Group Finance Director (or other senior management)
may attend meetings by invitation and in an advisory
capacity only. Meetings are also regularly attended by the
Company Secretary (who acts as Committee secretary),
Deputy Company Secretary and the Group Human
Resources Director.
No director participates in discussions about their own
remuneration.
Responsibilities
Responsibility for the establishment of an overall remuneration
policy for the Group lies with the Board. The Remuneration
Committee has the following principal duties:
• making recommendations to the Board on the Company’s
framework of executive remuneration;
• determining the fees of the Chairman and Deputy Chairman;
• considering and making recommendations to the Board on
the remuneration of the executive directors and senior
management relative to performance and market data;
• approving contracts of employment which exceed defined
thresholds of total remuneration or have unusual terms or
termination periods;
• considering and agreeing changes to remuneration policy
or major changes to employee benefit structures; and
• approving and operating employee share based incentive
schemes and associated performance conditions
and targets.
Advice
The Committee retained Towers Watson throughout 2014/15
as independent advisors. Towers Watson is engaged to
provide advice to the Committee and to work with the directors
on matters relating to the Group’s executive remuneration and
its long term incentives. Towers Watson is a member of the
Remuneration Consultants Group and operates under its code
of conduct in relation to the provision of executive
remuneration advice in the UK. Towers Watson has confirmed
that it adhered to the Code throughout 2014/15 for all
remuneration services provided to the Group. Towers Watson
received fees of £82,000 (2013/14: £84,000) in relation to the
provision of those services. Towers Watson also provided
actuarial services on behalf of the defined benefit pension
scheme; however, the Committee has satisfied itself that
Towers Watson’s advice was objective and independent.
The Committee may also take external legal advice, where
required, to assist it in carrying out its duties.
External directorships
The policy relating to external directorships is outlined in the
Remuneration Policy report. For 2014/15, the following external
directorships were undertaken and the fees retained by the
executive directors:
• Sebastian James was appointed a non-executive director of
Direct Line Insurance Group plc on 28 August 2014 and was
paid a fee of £53,000 from appointment to 2 May 2015.
66
Dixons Carphone plc Annual Report and Accounts 2014/15
• Katie Bickerstaffe has been a non-executive director of
Scottish and Southern Energy plc during 2014/15 and was
paid a fee of £57,000 for the period to 2 May 2015.
How the remuneration policy will be applied in 2015/16
Executive directors
i) Base Salary
The Committee reviewed the executive directors’ salaries in
2014 as part of the Merger. Where individuals were appointed
to new roles, in line with our recruitment policy, base salary
levels were set taking into account a range of factors including
market levels, experience and internal relativities.
Due to the changes in base pay at Merger, no changes are
proposed to the base salaries of the executive directors
during 2015/16.
Salary at
2 May
2015
£’000
Increase in
Salary at
7 August
2014
£’000
Salary at
30 March
2014(1)
£’000
820
—
550 15.8%
475
500
460
—
—
—
820
475
475
500
460
Current directors
Sebastian James(2)
Andrew Harrison
Humphrey Singer(2)
Katie Bickerstaffe(2)
Graham Stapleton(2)
(1) Date of appointment, if later.
(2) Appointed 6 August 2014.
ii) Pension Contributions
Company Contributions or allowance in lieu will continue in
2015/16 at their current levels of 10% for Sebastian James,
Humphrey Singer and Katie Bickerstaffe and 5% Andrew
Harrison and Graham Stapleton.
iii) STIP (Annual performance bonus)
The maximum annual bonus for 2015/16 will be 125% of base
salary and will operate on a similar basis as for the previous
year. That is, the measures have been selected to reflect our
key strategic objectives and are aligned to our Group balanced
scorecard, with a minimum profit gate that must be achieved
before any bonus is paid out. The proposed target levels for
the year have been set to be challenging relative to the
business plan. The Committee feels that specific targets
relating to the 2015/16 bonus scheme are currently
commercially sensitive and as such will not be disclosed.
However, retrospective disclosure of the targets and
performance against them will be provided in next year’s
Remuneration report to the extent that they do not remain
commercially sensitive at that time.
The performance metrics and their weightings for 2015/16 are
shown in the table below:
EBIT
Net Debt
ROCE
Customer net promoter score
Employee engagement
Weighting (as a percentage of
maximum bonus
opportunity)
60%
10%
10%
10%
10%
iv) LTIP
There will be no further LTIP grants for executive directors
during 2015/16.
Year
Remuneration details for 2014/15
Performance graph
The graph below shows the Group’s performance measured
through TSR on a holding of £100 in the Company’s shares,
compared with the FTSE 350 Index, since 29 March 2010
when the Company was first admitted to the London Stock
Exchange. The FTSE 350 has been used as it is a broad
market which includes the Company and a number of its
competitors. The Company’s performance up until the period
ended 29 March 2014, which was prior to the Merger, relates
to Carphone Warehouse plc. After the Merger on 6 August
2014, the Company was renamed Dixons Carphone plc.
Total shareholder return
Source: Datastream
Value
(£)
700
600
500
400
300
200
100
0
29 March
2010
31 March
2011
31 March
2012
31 March
2013
29 March
2014
2 May
2015
Dixons Carphone plc
FTSE 350 Index
Group Chief Executive pay
The following table shows, over the same five year period as
the performance graph above, the Group Chief Executive’s
single total figure of remuneration, the amount of bonus
earned as a percentage of the maximum remuneration
possible, and the vesting of long term awards as a percentage
of the maximum number of shares that could have vested
where applicable.
CEO single
figure of
remuneration(1)
£000
1,687
420
2,107
679
159
838
958
474
Annual
bonus
payout
against
maximum
%
100
100
54%
n/a
55%
0%(2)
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Long term
incentive
vesting
rates
against
maximum
opportunity
%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Sebastian James
Andrew Harrison
2015 Total
Andrew Harrison
Roger Taylor
2014 Total
2013 Roger Taylor
2012 Roger Taylor
2011 Roger Taylor
1,193
82%
(1) Excludes remuneration received from long term incentive schemes
established by Old Carphone Warehouse prior to the demerger
from TalkTalk because that company is not part of the current
Group. Details of remuneration associated with Old Carphone
Warehouse incentive schemes were provided in the company’s
annual report for the year ended 31 March 2012. Future reports
will include long term incentives operated by the current Group
when they have vested.
(2) Roger Taylor waived a bonus of 25% maximum potential and
instead chose for it to be paid directly to charity.
Dixons Carphone plc Annual Report and Accounts 2014/15
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Annual Remuneration report
Audited information
Single figure of Directors’ remuneration for the period ended 2 May 2015
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Executive
Current directors
Sebastian James(1)
Andrew Harrison
Humphrey Singer(1)
Katie Bickerstaffe(1)
Graham Stapleton(1)
Former director
Nigel Langstaff(1)
Non-executive
Current directors
Sir Charles Dunstone
Roger Taylor
Andrea Gisle Joosen(1)
John Gildersleeve
Tim How(1)
Baroness Morgan of Huyton
Jock Lennox(1)
Gerry Murphy
Former directors
John Allan(1)
John Allwood(1)
Basic
salary and
fees
£’000
Pension
contributions(2)
£’000
Annual
bonus(3)
£’000
Taxable
benefits(4)
’000
Total
emoluments
£’000
LTIP
payments(5)
£’000
Total
remuneration
£’000
2014/15
590
570
342
360
343
59
28
34
36
17
1,025
745
594
625
623
117(6))
2,322
6
—
180
3,612
290
179
50
87
47
70
54
67
75
28
947
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
13
14
13
12
10
4
66
—
1(7)
—
—
—
—
—
—
—
—
1
1,687
1,357
983
1,033
993
127
6,180
290
180
50
87
47
70
54
67
75
28
948
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,687
1,357
983
1,033
993
127
6,180
290
180
50
87
47
70
54
67
75
28
948
3,269
180
3,612
67
7,128
—
7,128
(1) Remuneration is shown for the period served on the Board. The following directors were appointed on 6 August 2014: Sebastian James,
Humphrey Singer, Katie Bickerstaffe, Graham Stapleton, Andrea Gisle Joosen, Tim How and Jock Lennox. Remuneration / fees for these
directors is shown from appointment to 2 May 2015. John Allan was appointed to the Board on 6 August 2014 and resigned on 17 February
2015 and the fees shown are for this period. Nigel Langstaff and John Allwood resigned from the Board on 6 August 2014 and remuneration
/ fees are from 1 April 2014 to date of leaving.
(2) Pension contributions comprise the Company’s contribution or allowance in lieu together with the salary supplement which is based on the
difference between basic salary and the scheme earnings cap set by the Company. This additional amount was 10% for Sebastian James,
Humphrey Singer and Katie Bickerstaffe and 5% for Andrew Harrison, Nigel Langstaff and Graham Stapleton.
(3) Annual bonus for Graham Stapleton and base salary and annual bonus for Andrew Harrison represents the amount earned over 13 months
following the alignment of the financial year end. Annual bonuses for Sebastian James, Humphrey Singer and Katie Bickerstaffe represent
the amount earned over the 12 months to 2 May 2015, which includes the period prior to the Merger. All bonuses are calculated based on
the directors’ annual salary as at 2 May 2015.
(4) Taxable benefits include private medical insurance, car allowance and Sharesave gains of £4,000 for Sebastian James, Humphrey Singer
and Katie Bickerstaffe in respect of options granted on 26 February 2015 as set out in the table on page 72.
(5) LTIP payments would comprise amounts under the Share Plan, however, the vesting periods end in July 2017 and July 2018.
(6)
In addition to the above remuneration and subsequent to resigning from the Board on 6 August 2014, Nigel Langstaff received a
redundancy payment of £247,000 upon leaving the business in December 2014. Nigel also received £350,000 as a payment in lieu of notice
in respect of basic salary, £19,700 in respect of benefits (including car allowance, permanent health insurance and life cover) and £17,500 in
respect of pension contributions. There was no payment for accrued holiday untaken. These amounts were in line with contractual
entitlements and the Group’s redundancy payments policy and no discretion was applied in their determination. The Committee determined
to apply discretion to pay a bonus of £437,500 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 continues to receive private medical insurance benefits.
68
Dixons Carphone plc Annual Report and Accounts 2014/15
Single figure of Directors’ remuneration 2013/14
Executive
Andrew Harrison(3)
Nigel Langstaff
Non-executive
Sir Charles Dunstone(4)
Roger Taylor(4) (5)
John Allwood
John Gildersleeve
Baroness Morgan of Huyton
Gerry Murphy
Basic salary
Pension
and fees(6)
£’000
contributions(1)
£’000
Annual
bonus
£’000
Taxable
benefits
£’000
Total
emoluments
£’000
LTIP
payments(2)
£’000
Total
remuneration
£’000
2013/14
317
325
1,175
240
293
74
81
60
—
215
15
16
38
—
7
—
—
—
—
—
339
375
714
—
—
—
—
—
—
—
8
10
23
—
5
—
—
—
—
—
679
726
1,950
240
305
74
81
60
—
215
—
—
—
—
—
—
—
—
—
—
679
726
1,950
240
305
74
81
60
—
215
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1,390
38
714
23
2,165
—
2,165
(1) Pension contributions comprise the Company’s contribution to a defined contribution pension scheme or allowance in lieu of contribution to
a pension scheme. This additional amount was 5%.
(2) LTIP payments would comprise amounts under the Share Plan, however, the vesting periods end in July 2017 and July 2018.
(3) Andrew Harrison joined the Board on 24 July 2013 and the remuneration shown is for the period he was a director.
(4) Sir Charles Dunstone and Roger Taylor were employed by the Company during this period and their pay was reviewed by the Remuneration
Committee.
(5) Roger Taylor’s remuneration relates to his tenure both as an executive director until 24 July 2013 and subsequently as Deputy Chairman.
(6) No payments were made to former directors and no payment for loss of office were made during the year.
Long term incentive plans (LTIP)
The Share Plan awards made during 2014/15 vest in July 2017 (60%) and July 2018 (40%).
Details of the awards made and the loans granted to the directors to enable them to subscribe for shares under the Share Plan
are detailed later in this report.
No LTIPs have vested during the year for the directors whilst serving on the Board. Nigel Langstaff’s share entitlements under
the Share Plan lapsed on leaving the Group.
Annual bonus for 2014/15
During the year the maximum bonus opportunity for all executive directors was aligned to 125% of base salary. In addition, due
to the Merger and the change to the financial year end the annual bonus measures and targets were reset (as shown below) to
reflect the new merged business. All targets are expressed and will be measured on a pro forma basis, as though the Merger
had occurred at the beginning of the financial year, and reflecting the respective 12 and 13 month periods for Dixons and
Carphone, respectively.
The Committee determined at the beginning of the year that the disclosure of performance targets were commercially sensitive
and these were therefore not disclosed. This was because targets were set within the context of a longer term business plan and
this disclosure could give information to competitors to the detriment of business performance. The Committee has however
disclosed in the table below the targets on a retrospective basis and the actual performance against these.
Bonus payments will be at maximum levels and will be paid at 125% of base salary. The bonus amounts to be paid to the
executive directors in respect of 2014/15 are set out in the directors’ remuneration table on page 68.
Dixons Carphone plc Annual Report and Accounts 2014/15
69
Annual Remuneration report
Annual bonus for 2014/15
Measure
As a percentage
of maximum
bonus
opportunity
Threshold
Target
Maximum
Actual
Pro forma Headline EBIT
55%
n/a £385 million £405 million £414 million
Pro forma average net (debt) / funds –
variance vs budget
25% £(50) million
Budget
£50 million
£80 million
Return on Capital Employed (ROCE)
20%
15.4%
15.9%
16.4%
20.0%
Payout
55%
25%
20%
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The maximum annual bonus of 125% of base salary is payable at the maximum level of performance and 75% of base salary
on achievement of target performance.
Non-executive directors’ and chairman’s fees
The fees for the independent non-executive directors are determined by the Board (excluding non-executive directors) after
considering external market research and are reviewed on an annual basis. Factors taken into consideration include the required
time commitment, specific experience and / or qualifications. A base fee is payable and additional fees are paid for chairing and
membership of committees. The Chairman is not involved in the setting of his own salary which is dealt with by the
Remuneration Committee annually. The Deputy Chairman’s fee is set by the Remuneration Committee with the Deputy
Chairman being absent. Non-executive directors receive no variable pay and receive no additional benefits, except in situations
where an executive director becomes a non-executive director and benefit and pension arrangements continue.
For 2015/16, independent non-executive directors will receive a basic fee of £60,000 (2014/15: £45,000) and additional fees as
set out in the table below for chairing or membership of committees. The increase in fees paid to non-executive directors reflects
the increased size and complexity of the Group following the Merger.
Chair of Audit Committee
Member of Audit Committee
Chair of Nomination Committee(1)
Member of Nomination Committee
Chair of Remuneration Committee
Member of Remuneration Committee
Chair of Consumer Regulatory and Compliance Committee(2)
(1) The Chairman has chaired the Nominations Committee since 7 August 2014 and receives no further fee.
(2) This Committee ceased to operate as a Board Committee on 13 November 2014.
2014/15
£000
2013/14
£’000
15
5
8
5
15
5
—
15
5
8
5
10
5
3
Percentage change in remuneration (not audited)
Increase percentage figures have not been given for the role of Group Chief Executive as, due to the Merger and change in
incumbent, the figures are not directly comparable. The relevant figures for 2015/16 will be shown in next year’s Remuneration
report. We have however, set out below, the percentage change for all UK head office based employees as this Group provides
the best like-for-like comparison. Changes in salary relating to changes in roles and / or responsibilities have been excluded from
the increase presented for the wider group.
Salary and fees
Taxable benefits(1)
Annual bonuses
Group Chief
Executive
N/A
N/A
N/A
UK head
office
employees
2.5%
0%
0%
(1) Taxable benefits have not been separately measured since there have been no material changes in Group benefits year on year.
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Relative importance of spend on pay
The following table sets out both the total cost of remuneration for the Group compared with pro forma Headline EBIT and
profits distributed for 2014/15 and the prior year.
Dividends paid(1)
Total staff costs – continuing operations(2)
Employee numbers – continuing operations(2), (3)
(1) Extracted from note 22 to the Group financial statements.
(2) Extracted from note 5 to the Group financial statements.
(3) The average number of employees has been provided for context.
2014/15
£million
2013/14
£million Change (%)
52
900
30
230
73%
291%
Number
Number Change (%)
32,834
6,980
370%
Directors’ interests in shares
Share ownership guidelines
The Company has a policy of encouraging executive directors to build shareholdings in the Company. Following the Merger the
Committee reviewed the shareholding policy and as a result all executive directors are required within five years to build up
200% of their salary as a holding in the Company. Other key senior management roles are required to build up 100% of salary.
The actual shareholdings of the executive directors are set out in the Directors’ shareholding table below.
Directors’ interests in the Share Plan
The table below shows the allocation to the executive directors of participation shares in the subsidiary, New CPW Limited, in
relation to the Share Plan, together with details of the loans issued to enable the directors to subscribe to the participation
shares. As set out in the policy table there are two pools under the share plan, one for the original grant in December 2013 and
one for the second grant post Merger. The calculation of the pools is set out on pages 58 and 60 of the Policy Table and in
particular the performance period ends in July 2017, when 60% of the shares vests with 40% being deferred for a further year.
Current directors
Sebastian James
Andrew Harrison
Humphrey Singer
Katie Bickerstaffe
Graham Stapleton
Former director
Nigel Langstaff(4)
A Shares in
subsidiary
allocated as
at 29 March
2014(1),(2)
A Shares in
subsidiary
allocated
as at 2 May
2015(2)
B Shares in
subsidiary
allocated
as at 2 May
2015(3)
Number
Number
Number
Allocation of
A pool as at
29 March
2014(1),(2)
(%)
Allocation of
A pool
as at
2 May
2015(1),(2)
(%)
Allocation
of B pool
as at
2 May
2015(3)
(%)
Loan
outstanding
as at
29 March
2014
£’000
Loan
outstanding
as at
2 May
2015
£’000
—
700
—
—
600
—
700
—
—
600
1,100
200
700
700
100
—
7%
—
—
6%
—
7%
—
—
6%
11%
2%
7%
7%
1%
—
389
—
—
334
2,239
810
1,425
1,425
549
600
600
—
6%
—
—
334
—
(1) Date of appointment, if later.
(2) Allocation relates to the pre Merger pool in respect of A ordinary shares. Face value is not included as due to the structure of the Share Plan
it is not considered a representative figure. Further details of the operation of the Share Plan, including performance conditions for vesting
are set out on page 58.
(3) Allocation relates to the post Merger pool in respect of B ordinary shares. Face value is not included as due to the structure of the Share
Plan it is not considered a representative figure. Further details of the operation of the Share Plan, including performance conditions for
vesting are set out on page 58.
(4) Nigel Langstaff’s share entitlements under the Share Plan remained on resignation from the Board but lapsed on leaving the Group.
Dixons Carphone plc Annual Report and Accounts 2014/15
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Annual Remuneration report
Directors’ Share Options
As part of the Merger participants of the Dixons Retail Sharesave Plan were offered the opportunity to roll over their sharesave
awards into options over Dixons Carphone plc. Those awards rolled over by the directors, in addition to other options owned by
the directors over the Company are shown in the table below:
Date of grant
Exercise
price (p)
At
30 March
2014(2)
Awarded
in the
period
Lapsed or
forfeited
in the
period
Exercised
in period
At
2 May
2015
Date from which
first exercisable
Expiry of the
exercise period
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Sebastian James
Sharesave
23 Jul 2013(1) 209.35
601
—
26 Feb 2015(4) 344.00
—
4,866
601
4,866
Andrew Harrison
Sharesave
10 Jan 2014 224.00
4,017
Humphrey Singer
Sharesave
22 Jul 2011(1)
83.93
1,505
4,017
23 Jul 2012(1)
91.48
1,377
23 Jul 2013(1) 209.35
601
—
—
—
—
—
26 Feb 2015(4) 344.00
—
4,500
3,483
4,500
Katie Bickerstaffe
Sharesave
22 Jul 2011(1)
83.93
1,505
23 Jul 2012(1)
91.48
1,377
23 Jul 2013(1) 209.35
601
—
—
26 Feb 2015(4) 344.00
—
4,500
3,483
4,500
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
601
1 Oct 2016 31 Mar 2017
4,866
1 Apr 2018 30 Sep 2018
5,467
4,017
1 Mar 2017 31 Aug 2017
4,017
(1,505)(3)
—
1 Oct 2014 31 Mar 2015
—
—
—
1,377
1 Oct 2015 31 Mar 2016
601
1 Oct 2016 31 Mar 2017
4,500
1 Apr 2018 30 Sep 2018
(1,505)
6,478
(1,505)(3)
—
1 Oct 2014 31 Mar 2015
—
—
—
1,377
1 Oct 2015 31 Mar 2016
601
1 Oct 2016 31 Mar 2017
4,500
1 Apr 2018 30 Sep 2018
(1,505)
6,478
(1) Share options that were granted under the Dixons Retail Sharesave Plan and rolled over into options over Dixons Carphone plc shares.
The exercise price shown is the roll over price over Dixons Carphone plc shares.
(2) Date of appointment, if later.
(3) The options exercised by Katie Bickerstaffe and Humphrey Singer on 7 October 2014 had a market price of £3.685 on the date of exercise.
(4) The face value of awards granted on 26 February 2015 for the executive directors was £16,739 for Sebastian James and £15,480 for
Humphrey Singer and Katie Bickerstaffe.
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Directors’ shareholding
Details of directors’ interests in shares of the Company are shown in the following table:
Beneficially Owned
Restricted interests in share plans
2 May
2015(5)
29 March
2014(1)
Share Plan(2)
as at
2 May 2015(5)
Share Plan(3)
as at
2 May 2015
Sharesave
as at
2 May 2015
Total
beneficial
interests
under share
ownership
guidelines
2 May 2015
Total
beneficial
share
interests
as a
% of salary(4)
2 May 2015
Exercised
during
2014/15
Executive directors
Current directors
Sebastian James
Andrew Harrison
Humphrey Singer
Katie Bickerstaffe
Graham Stapleton
Former director
Nigel Langstaff
908,234
908,234
—
1,100
5,467
908,234
475%
5,000,000
5,000,000
617,770
657,590
880,034
616,265
656,085
880,034
700
—
—
600
200
700
700
100
8,883 5,000,000 3,902%
6,478
617,770
6,478
657,590
—
880,034
558%
564%
821%
3,654,180
3,654,180
600
—
—
N/A
N/A
Non-executive directors
Current directors
Sir Charles Dunstone(6)
134,758,481 135,083,481
Roger Taylor
John Gildersleeve
Andrea Gisle Joosen
Tim How
Jock Lennox
Baroness Morgan of Huyton
Gerry Murphy
Former directors
John Allan
John Allwood
9,808,554
9,808,554
122,568
122,568
6,076
12,400
11,625
991
20,000
6,076
12,400
11,625
991
—
183,026
183,026
10,000
10,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
N/A
N/A
N/A
N/A
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a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
—
—
1,505
1,505
—
—
—
—
—
—
—
—
—
—
—
—
(1) Date of appointment, if later.
(2) The shares listed here are in ‘A’ ordinary shares New CPW Limited as part of the shares purchased in relation to the Share Plan. These have
been subscribed for by the Directors. ‘A’ ordinary shares have a different opening valuation to ‘B’ ordinary shares, as described in note (3),
reflecting the value of the Company at appropriate times prior to the grants.
(3) The shares listed here are in ‘B’ ordinary shares New CPW Limited as part of the shares purchased in relation to the Share Plan. These have
been subscribed for by the Directors. ‘B’ ordinary shares have a different opening valuation to ‘A’ ordinary shares, as described in note (2),
reflecting the value of the Company at appropriate times prior to the grants.
(4) Not including the Share Plan participation shares or sharesave options. Based on basic salary as at 3 May 2015 and an average share price
over the month to 2 May 2015 of £4.292.
(5) Date of resignation, if earlier.
(6) On 22 January 2015 Sir Charles Dunstone transferred 325,000 ordinary shares for nil consideration to the Charles Dunstone Charitable
Trust. He is not a trustee or beneficiary of this trust.
There were no changes in the directors’ restricted or unrestricted share interests between 2 May 2015 and the date of this report.
Dixons Carphone plc Annual Report and Accounts 2014/15
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Annual Remuneration report
Statement of voting at shareholder meetings (not audited)
The Company is committed to ongoing shareholder dialogue in respect of directors’ remuneration, and takes an active interest
in voting outcomes and in particular we have consulted with our shareholders on the remuneration policy being put to the vote
at the Annual General Meeting. Where there are substantial votes against resolutions, explanatory reasons will be sought, and
any actions in response will be communicated to shareholders.
The following tables set out the voting results in relation to the resolutions put to the 2014 annual general meeting:
Resolution
Votes for
%
Votes against
%
Withheld
Approval of Remuneration Policy
457,425,221
90.66 47,152,293
9.34
2,127,987
Approval of Annual Remuneration report
418,120,856
91.40 39,357,141
8.60 49,227,504
Following feedback received on the policy during 2014 the Company has reduced the level of annual bonus for executive
directors and has excluded them from being eligible to participate in the mid term incentive plan introduced following
the Merger.
Compliance
As required by the Regulations, a resolution to approve this Remuneration report will be proposed at the Annual General Meeting
to be held on 10 September 2015.
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Chairman of the Remuneration Committee
16 July 2015
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Dixons Carphone plc Annual Report and Accounts 2014/15
Statement of Directors’ responsibilities
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law
and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are
required to prepare the consolidated financial statements in accordance with IFRS and Article 4 of the IAS Regulation and have
elected to prepare the Company financial statements in accordance with UK GAAP. Under company law the directors must not
approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the
Group and of the profit or loss of the Company and the Group for that period.
In preparing the Company financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable UK GAAP has been followed, subject to any material departures disclosed and explained in the
financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will
continue in business.
In preparing the consolidated financial statements, IAS 1 ‘Presentation of Financial Statements’ requires that directors:
• properly select and apply accounting policies;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
• provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to
understand the impact of particular transactions, other events and conditions on the Group’s financial position and financial
performance; and
• make an assessment of the Group’s ability to continue as a going concern.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable
them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation
taken as a whole;
• the Strategic report includes a fair review of the development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal
risks and uncertainties that they face; and
• the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the
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
16 July 2015
Humphrey Singer
Group Finance Director
16 July 2015
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Opinion 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 2 May
2015 and of the Group's profit for the period then ended;
• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (UK GAAP); and
• the Group financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS Regulation.
The financial statements comprise 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 the
related notes 1 to 30, and the parent Company balance sheet and the related notes C1 to C12. The financial reporting framework
that has been applied in the preparation of the Group financial statements is applicable law and IFRSs as adopted by the
European Union. The financial reporting framework that has been applied in the preparation of the parent Company financial
statements is applicable law and United Kingdom Accounting Standards (UK GAAP).
Separate opinion in relation to IFRSs as issued by the IASB
As explained in note 1 to the Group financial statements, in addition to complying with its legal obligation to apply IFRSs as
adopted by the European Union, the Group has also applied IFRSs as issued by the International Accounting Standards Board
(IASB).
In our opinion the Group financial statements comply with IFRSs as issued by the IASB.
Going concern
As required by the Listing Rules we have reviewed the Directors’ statement contained on page 26 that the Group is a going
concern. We confirm that:
• we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial
statements is appropriate; and
• we have not identified any material uncertainties that may cast significant doubt on the group's ability to continue as a going
concern.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability
to continue as a going concern.
Our assessment of risks and material misstatement
The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the
allocation of resources in the audit and directing the efforts of the engagement team. The key risks we identified are:
• Acquisition accounting;
• Impairment of goodwill and other intangible assets;
• Assets held for sale, discontinued operations and disposal accounting;
• Revenue recognition - network commissions;
• Supplier funding;
• Inventory provisioning; and
• Taxation.
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Dixons Carphone plc Annual Report and Accounts 2014/15
Risk
Acquisition accounting
The identification and determination of the fair value of
intangible assets arising from the acquisition of Dixons
Retail plc and the recognition of fair value adjustments
through the associated purchase price allocation
process involves complex accounting considerations.
Management engaged external valuation experts in
relation to this process. £3,002 million of intangible
assets, including brand names of £365 million, customer
relationships of £8 million and goodwill of £2,629 million
have been recognised in the period. The intangible asset
identification and valuation process requires
management judgement in respect of estimates of future
cash flows and associated discount rates in addition to
economic lives.
Fair value adjustments, in particular those arising from
property, plant & equipment, pre-existing intangible
assets and property operating leases, require significant
judgement in relation to fair value at the date of
acquisition, for which management also engaged
external valuation experts.
Further information in relation to this area is discussed in
notes 1u) and 23 to the Group financial statements.
Impairment of goodwill and other intangible assets
The Group has significant acquisition related intangible
assets, including goodwill, (£3,351 million at 2 May 2015
including £2,989 million of goodwill and £362 million of
acquisition intangibles, related to the CPW Europe
Acquisition in the prior year and in the current year the
acquisition of Dixons Retail plc). The Group’s
assessment of impairment of acquisition related
intangible assets, primarily arising from the CPW Europe
and Dixons Retail plc acquisitions, is a judgemental
process which requires estimates concerning the future
cash flows and associated discount rates and growth
rates based on management’s projections of future
business performance and prospects. The key
judgements and estimates involved are described in
more detail in notes 1l), 1m) and 1u) to the Group
financial statements.
Assets held for sale, discontinued operations and
disposal accounting
The classification and valuation of net assets in the
Phone House operations in the Netherlands, Germany
and Portugal as held for sale at the balance sheet date is
a key area of management judgement. In addition, the
classification of these businesses as discontinued
operations must be carefully considered in line with the
relevant accounting standard. Further information is
included in note 24 to the Group financial statements.
How the scope of our audit responded to the risk
We tested the design and implementation of the controls around
management’s process for both the identification and valuation of
intangible assets and fair value adjustments. We used our internal
valuation specialists to consider and evaluate the appropriateness of
the methodologies applied and to test the inputs to the valuation
models used to determine the value of the intangible assets, including
the discount rates, growth rates and useful economic lives, through
comparing these against industry benchmarks on similar assets and
our understanding of the future prospects of the business. We also
tested the appropriateness of the cash flow projections used in
the valuations.
For the other significant fair value adjustments, we obtained
appropriate support for the adjustments, reviewed any assumptions
against relevant industry and company data to assess the
appropriateness of the adjustments, and utilised internal valuation
specialists where appropriate.
We assessed the assumptions used by management in the
impairment models for goodwill and acquisition related intangible
assets, including the allocation to cash generating units described in
note 9 to the Group financial statements, and more specifically the
cash flow projections, discount rates (utilising the assistance of our
valuation specialists), and long term growth rates used against
historical performance, our understanding of the future prospects of
the business and comparison against market rates and the prevailing
Group cost of capital at the year end. We have audited the mechanics
of the impairment models prepared by management.
We tested the design and implementation of controls which
management have in place around planned and completed
disposal activities.
We challenged management’s judgement on the classification and
valuation of assets held for sale through understanding the status of
the sales process and reviewing correspondence from purchasers and
prospective purchasers. This included consideration of any relevant
disposal provisions with reference to the sales agreements and
supporting documentation. We also assessed the classification of
disposed businesses and other assets held for sale as discontinued
operations against the relevant criteria in the accounting standard.
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Independent Auditor’s report
Risk
How the scope of our audit responded to the risk
Revenue recognition – network commissions
Commission receivable on sales, being commission
which is contractually committed, and for which there
are no ongoing performance obligations, is dependent
on customer behaviour beyond the point of sale.
Management is therefore required to exercise
judgement in respect of the level of customer default
within the contract period, expected levels of customer
spend and customer behaviour beyond the initial
contract period. The key judgements and estimates
involved are described in more detail in notes 1d) and
1u) to the Group financial statements.
Supplier funding
The Group holds a number of significant funding
arrangements with suppliers. Agreements in relation to
supplier funding are based predominantly on volume-
related targets, for both purchases and sales, and are
most commonly agreed as a fixed percentage of targets
upfront. These targets are generally a mix of quarterly
and annual targets and are mostly coterminous with the
Group’s year end. The timing of recognition of this
income is sometimes judgemental, in particular where
the target period for measuring achievements spans the
year end and it is necessary to ensure there is sufficient
formal documentation justifying recognition. As a result,
and given the increased focus on this area by
management and investors, we have elevated the
treatment of supplier funding to be a significant risk
area this year. The key judgements and estimates
involved are described in more detail in note 1u) to the
Group financial statements.
Inventory provisioning
Inventory is a significant balance for the Group
(£920 million at 2 May 2015) and there are a number
of judgemental areas including obsolescence and
shrinkage provisioning. This risk has a significant effect
on our audit strategy, the allocation of resources in the
audit and directing the efforts of the engagement team
in the legacy Dixons side of the business only, given the
nature and relative significance of the inventory balances
within each part of the Group. Further information in
relation to this area is discussed in notes 1q) and 1u)
to the Group financial statements.
Taxation
The Group operates in a number of different tax
jurisdictions. The nature of the Group’s operations and
related transactions can give rise to uncertain tax
treatments, including with respect to transfer pricing,
thereby requiring the use of estimates and assumptions
which may be subsequently challenged by the relevant
tax authorities.
Further information in relation to this area is discussed
in notes 1k) and 1u) to the Group financial statements.
We evaluated the design and implementation of both the manual and
automated controls over the revenue recognition process in respect
of commissions receivable, utilising IT specialists to assist with testing
of automated controls. In addition we tested that these controls were
operating effectively throughout the period.
We have tested the valuation of revenue recognised through review
of the Group’s contractual arrangements, substantive testing of
management assumptions including tenure, line rental, and churn to
third party network data and testing of subsequent cash receipts.
We have also assessed any changes in estimate in comparison to the
prior year and reviewed year on year movement in key assumptions.
We obtained an understanding of the key supplier funding
arrangements across the Group. As part of this, we met with the key
commercial and finance process owners, we tested the design and
implementation of the Group’s key controls in operation, principally
focused on those that determine the appropriate timing of recognition
for supplier funding balances, and we performed an analytical
assessment of movements in supplier funding throughout the
current year to historical trends.
To ensure there is sufficient evidence to support the recognition
of supplier funding, we substantively tested and recalculated a
sample of amounts with reference to third party contracts. We
also obtained confirmations received following circularisation of
a sample of suppliers.
We have performed testing of the operating effectiveness of controls
around the inventory business cycle and attended a sample of
inventory counts at 31 stores and distribution centres across the UK
and Nordics, including visiting the Group’s main distribution centre in
Newark on five separate occasions, which enables us to assess
management’s processes for monitoring inventory. We performed
audit tests to assess whether inventory is valued at the lower of cost
and net realisable value. We reviewed, recalculated and assessed the
inventory ageing and provisioning for reasonableness, including
challenging the appropriateness of provisioning with reference to both
historical and post year end performance and a review of the provision
as a percentage of gross stock year on year. We have also considered
the impact of range changes and other specific known areas of over-
stock on the required provision calculation.
We used our internal tax specialists to evaluate and test
management’s assumptions in respect of tax related provisions,
including assessment against local tax legislation and review of
supporting documentation.
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Dixons Carphone plc Annual Report and Accounts 2014/15
Last year our report included one other risk which is not included in our report this year and related to the Group’s
announcement of its planned exit from the French retail market in April 2013. The Dixons Retail plc audit report also included
risks related to non-underlying items, defined benefit pension assumptions and customer support agreement revenue
recognition. In the new enlarged Group, these risks do not represent areas that had the greatest effect on our audit strategy,
the allocation of resources in the audit and directing the efforts of the engagement team.
The description of risks above should be read in conjunction with the significant issues considered by the Audit Committee
discussed on page 49 and 50.
Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole,
and not to express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with
respect to any of the risks described above, and we do not express an opinion on these individual matters.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope
of our audit work and in evaluating the results of our work.
We determined materiality for the group to be £14.0 million, which is below 5% of adjusted Headline profit before tax, and below
1% of equity. In using adjusted headline profit before tax, we have followed the Group’s definition of Headline results in note 1a)
and adjusted this to include the impact of the amortisation of acquisition intangibles and pension finance costs due to their
recurring nature. We have assessed the use of a Headline measure to be appropriate as this continues to be a key driver of
business value, is a critical component of the financial statements and the main measure which management uses to monitor
the performance of the business and communicate this to shareholders.
In 2013/14 materiality was £6.0 million, below 5% of Headline profit before tax and below 2% of equity.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £500,000
(2013/14: £120,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the
financial statements.
An overview of the scope of our audit
We have reassessed our group audit scope following the acquisition of Dixons Retail plc and accordingly have no longer
performed full scope audits in Portugal or Ireland.
Our group audit was scoped by obtaining an understanding of the Group and its environment, including group-wide controls,
and assessing the risks of material misstatement at the group level. Based on that assessment, we focused our group audit
scope primarily on the audit work of the retail operations operating under the Dixons and Carphone brands in the UK, and those
operations in the Nordics, Germany, Spain and the Netherlands. Each of these components requires a local statutory audit.
These locations represent the principal business units and account for approximately 93% of the Group’s revenue arising from
continuing operations (2013/14: 95%). In addition, an audit of specified account balances was performed in Greece. Each
location was selected to provide an appropriate basis for undertaking audit work to address the risks of material misstatement
identified above. Our audit work at these locations was executed at a level of materiality applicable to each individual entity
which was lower than group materiality and ranged from £1.0 million to £8.0 million.
At the Dixons Carphone plc parent entity level we also tested the consolidation process and carried out analytical procedures to
confirm our conclusion that there were no significant risks of material misstatement of the aggregated financial information of the
remaining components not subject to audit or audit of specified account balances.
The Group audit team is closely involved in the audit of the two UK components, being the largest part of the Group, throughout
the year including attendance at key audit planning and closing meetings. In addition, the Group audit team continued to follow a
programme of planned visits to overseas components that has been designed so that a senior member of the Group audit team
visits the most significant locations each year. For the period ended 2 May 2015, a senior member of the Group audit team
visited Norway, Spain, and Germany. In years when we do not visit a particular significant component we will include the
component audit team in our team briefing, discuss their risk assessment, and review documentation of the findings from
their work.
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Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
• the part of the Directors' Remuneration report to be audited has been properly prepared in accordance with the Companies
Act 2006; and
• the information given in the Strategic report and the Directors' report for the financial year for which the financial statements
are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration
have not been made or the part of the Directors’ Remuneration report to be audited is not in agreement with the accounting
records and returns. We have nothing to report arising from these matters.
Corporate Governance statement
Under the Listing Rules we are also required to review the part of the Corporate Governance statement relating to the company’s
compliance with 10 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 Accounts
Under International Standards on Auditing (UK and Ireland), we are required to report to you if, in our opinion, information in the
Annual Report and Accounts is:
• materially inconsistent with the information in the audited financial statements; or
• apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired in the course
of performing our audit; or
• otherwise misleading.
In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired
during the audit and the directors’ statement that they consider the annual report is fair, balanced and understandable
and whether the Annual Report and Accounts appropriately discloses those matters that we communicated to the Audit
Committee which we consider should have been disclosed. We confirm that we have not identified any such inconsistencies
or misleading statements.
Respective responsibilities of directors and auditor
As explained more fully in the Statement of Directors’ responsibilities, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. We also comply with
International Standard on Quality Control 1 (UK 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’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to
state to them in an auditor’s 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 and the company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
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Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the Group’s and the parent Company’s circumstances and
have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the
directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial
information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any
information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the
course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies, we consider
the implications for our report.
John Adam (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditors
London, United Kingdom
16 July 2015
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Consolidated income statement
Continuing operations
Revenue
13 months ended 2 May 2015
Note
Headline*
£million
Non-
Headline*
£million
Total
£million
Headline*
£million
Restated†
Year ended 29 March 2014
Non-
Headline*
£million
Total
£million
2
8,255
—
8,255
1,943
—
1,943
Profit / (loss) from operations before share of
results of joint ventures
Share of results of joint ventures
Profit / (loss) before interest and tax
23
2,3
Finance income
Finance costs
Net finance costs
400
—
400
15
(39)
(24)
(76)
—
(76)
—
(13)
(13)
324
—
324
15
(52)
(37)
134
3
137
8
(17)
(9)
(28)
(23)
(51)
—
—
—
106
(20)
86
8
(17)
(9)
Profit / (loss) before tax
376
(89)
287
128
(51)
77
Income tax (expense) / credit
Profit / (loss) after tax – continuing operations
7
(91)
285
15
(74)
(76)
211
(25)
103
6
(45)
(19)
58
Loss after tax – discontinued operations
24
—
(114)
(114)
—
(10)
(10)
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a
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s
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Profit / (loss) after tax for the period
285
(188)
97
103
(55)
48
Earnings per share (pence)
Basic – continuing operations
Diluted – continuing operations
Basic – total
Diluted – total
8
29.7p
28.7p
18.6p
18.3p
22.0p
21.2p
10.1p
9.8p
10.4p
10.3p
8.6p
8.5p
* Headline results exclude amortisation of acquisition intangibles, Merger integration and transaction costs, CPW Europe Acquisition related
items, Phone House France operating and closure costs whilst it formed part of the CPW Europe joint venture, net interest on defined
benefit pension schemes and discontinued operations (comprising Virgin Mobile France and Phone House operations in France, Germany,
Netherlands and Portugal). Such excluded items are described as ‘Non-Headline’. For further details see notes 4 and 24 to the financial
information.
† The results for the year ended 29 March 2014 have been restated to recognise the results of the operations in France, Germany,
Netherlands and Portugal as discontinued operations.
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Consolidated statement of comprehensive income
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
Movements in relation to interest rate hedges
Exchange differences arising on translation of foreign operations
Other foreign exchange differences
Items that will not be reclassified to the income statement in subsequent years:
Actuarial losses on defined benefit pension schemes
– UK
Deferred tax on actuarial losses on defined benefit pension schemes
Foreign exchange movements
– Overseas
Other comprehensive expense for the period (taken to equity)
13 months
ended
2 May
2015
£million
Year
ended
29 March
2014
£million
97
48
(14)
4
—
(107)
3
(114)
(72)
(1)
15
(1)
(59)
(173)
—
—
2
(8)
(3)
(9)
—
—
—
—
—
(9)
Total comprehensive (expense) / income for the period
(76)
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Consolidated balance sheet
2 May
2015
£million
29 March
2014
£million
Note
Non-current assets
Goodwill
Intangible assets
Property, plant & equipment
Trade and other receivables
Deferred tax assets
Current assets
Inventory
Trade and other receivables
Cash and cash equivalents
Assets held for sale
Total assets
Current liabilities
Trade and other payables
Deferred consideration
Income tax payable
Loans and other borrowings
Finance lease obligations
Provisions
Liabilities associated with assets held for sale
Non-current liabilities
Trade and other payables
Deferred consideration
Loans and other borrowings
Finance lease obligations
Retirement benefit obligations
Deferred tax liabilities
Provisions
Total liabilities
Net assets
Capital and reserves
Share capital
Share premium reserve
Accumulated profits
Translation reserve
Demerger reserve
9
10
11
13
7
12
13
14
24
15
16
18
19
24
15
16
17
18
20
7
19
21
Equity attributable to equity holders of the parent company
The financial statements were approved by the directors on 16 July 2015 and signed on their behalf by:
Sebastian James,
Group Chief Executive
Humphrey Singer,
Group Finance Director
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2,989
525
327
318
263
4,422
920
907
163
481
136
90
191
54
952
240
821
283
1,990
1,344
137
11
6,549
2,307
(1,961)
(869)
(25)
(89)
(55)
(2)
(54)
(2,186)
(68)
(25)
(36)
—
(1)
(50)
(981)
—
(2,254)
(981)
(496)
(6)
(330)
(89)
(489)
(101)
(21)
(113)
(25)
(290)
—
—
(18)
—
(1,532)
(446)
(3,786)
(1,427)
2,763
880
1
2,256
1,369
(113)
(750)
2,763
1
283
1,355
(9)
(750)
880
Consolidated statement of changes in equity
At 1 April 2013
Profit for the period
Other comprehensive income and expense
recognised directly in equity
Total comprehensive income and expense
for the period
Ordinary shares issued
Net purchase of own shares
Equity dividends
Tax on items recognised directly through reserves
At 29 March 2014
Profit for the period
Other comprehensive income and expense
recognised directly in equity
Total comprehensive income and expense
for the period
Ordinary shares issued
Equity dividends
Net movement in relation to share schemes
Tax on items recognised directly in reserves
At 2 May 2015
Share
capital
£million
Share
premium
reserve
£million
Note
Accumulated
profits
£million
Translation
reserve
£million
Demerger
reserve
£million
Total
equity
£million
1
170
1,238
2
(750)
661
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
1
—
—
—
113
—
—
—
48
2
50
103
(12)
(30)
6
—
(11)
(11)
—
—
—
—
—
—
—
—
—
—
—
283
1,355
(9)
(750)
—
—
—
1,973
—
—
—
97
—
(69)
(104)
28
(104)
—
(52)
21
17
—
—
—
—
—
—
—
—
—
—
—
48
(9)
39
216
(12)
(30)
6
880
97
(173)
(76)
1,973
(52)
21
17
2,256
1,369
(113)
(750)
2,763
22
21
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Consolidated cash flow statement
Operating activities – continuing operations
Cash generated from operations
Special contributions to defined benefit pension scheme
Income tax paid
Net cash flows from operating activities
Investing activities – continuing operations
Interest received
Net cash outflow arising from CPW Europe Acquisition
Cash acquired on the Merger
Proceeds from disposal of property, plant & equipment
Proceeds on sale of business and short term investments
Acquisition of property, plant & equipment and other intangibles
Net receipts from joint ventures
Net cash flows from investing activities
Financing activities – continuing operations
Settlement of financial instruments
Interest paid
Repayment of obligations under finance leases
Issue of shares
Net purchase of own shares
Equity dividends paid
(Decrease) / increase in borrowings
Bond redemption premium
Facility arrangement fees paid
Net cash flows from financing activities
(Decrease) / increase in cash and cash equivalents
Continuing operations
Discontinued operations
Cash and cash equivalents at beginning of the period
Currency translation differences
Cash and cash equivalents at end of the period
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13 months
ended
2 May
2015
£million
Restated
Year
ended
29 March
2014
£million
110
(28)
(39)
43
1
(25)
347
11
8
(166)
—
176
—
(30)
(7)
—
—
(52)
(211)
(38)
(4)
(342)
(123)
3
(120)
283
—
163
413
—
(15)
398
2
(317)
—
10
5
(57)
2
(355)
3
(14)
(2)
124
(12)
(30)
19
—
(6)
82
125
41
166
117
—
283
Note
26
24
26
Notes to the Group financial statements
1 Accounting policies
a) Basis of preparation
The consolidated financial statements have been prepared on
a going concern basis in accordance with IFRS as adopted
by the EU, IFRS issued by the International Accounting
Standards Board, those parts of the Companies Act 2006
applicable to those companies reporting under IFRS and
Article 4 of the IAS Regulation.
The financial statements have been presented in UK Sterling,
the functional currency of the Company, and on the historical
cost basis except for the revaluation of certain financial
instruments, as explained below. All amounts have been
rounded to the nearest £1 million, unless otherwise stated.
The principal accounting policies adopted are set out below.
As described in note 23, on 6 August 2014, the Group
completed the merger of Dixons and Carphone, which was
implemented by way of a scheme of arrangement of Dixons.
The Company has been renamed Dixons Carphone plc. 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 set out in IFRS 3
‘Business Combinations’ it has been determined that
Carphone acquired Dixons.
Certain line item descriptions within the income statement and
balance sheet have been adapted to better represent the
newly merged group and are intended to be presented on this
basis going forwards.
Historically, the Group prepared its financial statements to the
Saturday closest to its accounting reference date of 31 March.
Following the Merger, the Group changed its accounting
reference date to 30 April which was the accounting reference
date of Dixons, but will continue to draw up accounts to the
nearest Saturday. Accordingly the current financial period is for
the 13 months ended 2 May 2015 whilst the comparative
period is for the 12 month period ended 29 March 2014.
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, any exceptional items considered so
one off and material that they distort underlying performance
(such as reorganisation costs, impairment charges 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 year comprise
amortisation of acquisition intangibles, Merger integration and
transaction costs, CPW Europe Acquisition related items,
Phone House France operating and closure costs whilst it
formed part of the CPW Europe joint venture, net interest on
defined benefit pension schemes and discontinued operations
(comprising Virgin Mobile France and Phone House operations
in France, Germany, Netherlands and Portugal). 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 and the exclusion of pension
interest is such an item applicable to the 13 months ended
2 May 2015. 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.
The results for the year ended 29 March 2014 have been
restated to recognise the results of the operations in France,
Germany, Netherlands and Portugal as discontinued
operations. Therefore financial information in the income
statement, cash flows statement and associated notes have
been restated to reflect this classification.
Gains on disposal of non-core businesses in Southern Europe
have been included in Headline results net of restructuring
costs. The net impact of these activities totalled £5 million.
Since the period ended 2 November 2014, the Group applied
adjustments to the fair values of assets and liabilities acquired
through the Merger. These adjustments resulted in the fair
value of identifiable net liabilities acquired reducing from
£656 million to £647 million resulting in a reduction in the
goodwill recognised from £2,638 million to £2,629 million.
Going concern
The Group’s funding arrangements and processes for
managing its exposure to liquidity risk are set out in notes
17 and 25.
In their consideration of going concern, the directors have
reviewed the Group’s future cash forecasts and profit
projections, which are based on market data and past
experience. This review considered the implications of the
Merger and the continuing uncertainty in Greece, including the
effect on forecast cash flows and changes to the Group’s
financing facilities. 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 as set out in note 17 to the Group
financial statements and that the Group has a robust policy
towards liquidity and cash flow management.
Accordingly the directors have a reasonable expectation that
the Company and the Group have 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.
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Notes to the Group financial statements
The principal accounting policies are set out below:
b) Accounting convention and basis of consolidation
rates against UK Sterling used in these financial statements are
as follows:
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the
Company (its subsidiaries). Control is achieved where the
Company has the power over the investee; is exposed, or has
rights, to variable return from its involvement with the investee;
and has the ability to use its power to affects its returns.
The results of subsidiaries and joint ventures acquired or sold
during the year are included in the consolidated income
statement from the effective date of acquisition or up to the
effective date of disposal as appropriate, which is the date
from which the power to control passes. Where necessary,
adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with
those used by the Group. All intercompany transactions and
balances are eliminated on consolidation.
c) Foreign currency translation and transactions
Material transactions in foreign currencies are hedged using
forward purchases or sales of the relevant currencies and are
recognised in the financial statements at the exchange rates
thus obtained. Unhedged transactions are recorded at the
exchange rate on the date of the transaction. Material
monetary assets and liabilities denominated in foreign
currencies are hedged, mainly using forward foreign exchange
contracts to create matching liabilities and assets, and are
retranslated at each balance sheet date. Hedge accounting
as defined by IAS 39 ‘Financial Instruments: Recognition and
Measurement’ has been applied by marking to market the
relevant financial instruments at the balance sheet date and
recognising the gain or loss in reserves in respect of cash
flow hedges, and through profit or loss in respect of fair
value hedges.
The results of overseas operations are translated at the
average foreign exchange rates for the year, and their balance
sheets are translated at the rates prevailing at the balance
sheet date. Goodwill is held in the currency of the operation to
which it relates. Exchange differences arising on the translation
of net assets, goodwill and results of overseas operations are
recognised in the translation reserve. All other exchange
differences are included in profit or loss in the year in which
they arise except where the Group designates financial
instruments held for the purpose of hedging the foreign
currency exposures that result from material transactions
undertaken in foreign currencies as cash flow hedges, hedge
accounting as defined by IAS 39 ‘Financial Instruments:
Recognition and Measurement’ is applied. The effective
portion of changes in the fair value of financial instruments
that are designated as cash flow hedges is recognised in
other comprehensive income. The gain or loss relating to the
ineffective portion is recognised in profit or loss. Amounts
previously recognised in equity are reclassified to profit or
loss in the periods when the hedged item is recognised in
profit or loss.
Where a foreign operation is disposed of, the gain or loss on
disposal recognised in profit or loss is determined after taking
into account the cumulative currency translation differences
that are attributable to the operation. The principal exchange
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2015
1.28
10.86
11.85
Average
2014
1.19
—
10.36
2015
1.35
11.51
12.72
Closing
2014
1.21
—
10.82
Euro
Norwegian Krone
Swedish Krona
d) Revenue
Revenue comprises sales of goods and services excluding
sales taxes. The following accounting policies are applied to
the principal revenue generating activities in which the Group
is engaged:
• revenue from the sale of goods is recognised at the point of
sale or, where later, upon delivery to the customer and is
stated net of returns;
• revenue earned from customer support agreements is
recognised over the life of the agreement by reference to the
stage of completion of the transaction at the balance sheet
date;
• revenue arising on services is recognised when the relevant
services are provided;
• commission receivable on sales, being commission which is
contractually committed, and for which there are no ongoing
performance obligations, is recognised when the sales to
which the commission relates are made, net of any provision
for promotional offers and network operator performance
penalties. Commission includes a share of customer airtime
spend, to the extent that it can be reliably measured and
there are no ongoing service obligations. Where the time
value of money has a material impact, an appropriate
discount is applied such that revenue is recognised at an
amount equal to the present value of the future
consideration to be received;
• other ongoing revenue is recognised as it is earned over the
lives of the relevant customers;
• volume bonuses receivable from network operators are
recognised when the conditions on which they are earned
have been met;
• insurance premiums are typically paid either monthly or
quarterly in advance. Sales commission paid by third parties
is recognised when the insurance policies to which it relates
are sold, to the extent that it can be reliably measured and
there are no ongoing service obligations. Insurance premium
income for the provision of ongoing insurance services is
recognised over the lives of the relevant policies;
• revenue from the sale of prepaid credits is deferred until the
customer uses the airtime or the credit expires; and
• revenue generated from the provision of fixed and mobile
network services is recognised as it is earned over the lives
of the relevant customers.
e) Other income, including non-operating income
Other income, which is incidental to the Group’s principal
activities of selling goods and services and accordingly is not
recorded as part of revenue, is recognised when the Group
obtains the right to consideration by performance of its
contractual obligations. Interest income is accrued on a time
basis, by reference to the principal outstanding and at the
effective interest rate applicable.
f) Discontinued operations and assets and liabilities
held for sale
A discontinued operation is a component of the Group which
represents a significant separate line of business, either
through its activity or geographical area of operation, which
has been sold, is held for sale or has been closed.
Where the sale of a component of the Group is considered
highly probable and the business is available for immediate
sale in its present condition, it is classified as held for sale.
Such classification assumes the expectation that the sale will
complete within one year from the date of classification. Assets
and liabilities held for sale are measured at the lower of
carrying amount and fair value less costs to sell. Once
classified as held for sale, intangible assets and property,
plant & equipment are no longer amortised or depreciated.
g) Share-based payments
Equity settled share-based payments are measured at fair
value at the date of grant, and expensed 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 a Black Scholes model. Where share-based payments have
external performance criteria (such as TSR targets) a Monte
Carlo model is used to measure fair value.
For all schemes, the number of options expected to vest is
recalculated at each balance sheet date, based on
expectations of leavers prior to vesting. For schemes with
internal performance criteria, the number of options expected
to vest is also adjusted based on expectations of performance
against target. No adjustment is made for expected
performance against external performance criteria. The
movement in cumulative expense since the previous balance
sheet date is recognised in the income statement, with a
corresponding entry in reserves.
If a share-based payment scheme is cancelled, any remaining
part of the fair value of the scheme is expensed through the
income statement. If a share-based payment scheme is
forfeited, no further expense is recognised and any charges
previously recognised through the income statement
are reversed.
Charges also arise on loans that are provided to employees to
fund the purchase of shares as part of long term incentive
plans. To the extent to which the loans are not, in certain
circumstances, repayable, the cost of the relevant part of
such loans is expensed over the course of the relevant
incentive plans.
h) Retirement benefit obligations
Company contributions to defined contribution pension
schemes and contributions made to state pension schemes
for certain overseas employees are charged to the income
statement on an accruals basis when employees have
rendered service entitling them to the contributions.
For defined benefit pension schemes, the difference between
the market value of the assets and the present value of the
accrued pension liabilities is shown as an asset or liability in the
consolidated balance sheet. The calculation of the present
value is determined using the projected unit credit method.
Actuarial gains and losses arising from changes in actuarial
assumptions together with experience adjustments and actual
return on assets are recognised in the consolidated statement
of comprehensive income and expense as they arise. Such
amounts are not reclassified to the income statement in
subsequent years.
Defined benefit costs recognised in the income statement
comprise mainly net interest expense or income with such
interest being recognised within finance costs. Net interest is
calculated by applying the discount rate to the net defined
benefit liability or asset taking into account any changes in the
net defined benefit obligation during the year as a result of
contribution or benefit payments.
i) Dividends
Interim dividends are recognised in the year in which they are
paid. Final dividends are recognised as a liability in the year in
which they are approved by shareholders.
j) Leases
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. The determination of the classification
of property leases is made by reference to the land and
buildings elements separately. All leases not classified as
finance leases are classified as operating leases.
The Group as a lessor
Rental income from operating leases is recognised on a
straight-line basis over the term of the relevant lease. Initial
direct costs incurred in negotiating and arranging an operating
lease are added to the carrying amount of the leased asset and
recognised on a straight-line basis over the lease term.
The Group as a lessee
Finance leases
Assets held under finance leases are capitalised at their fair
value on acquisition or, if lower, at the present value of the
minimum lease payments, each determined at the inception of
the lease and depreciated over their estimated useful lives or
the lease term if shorter. The corresponding obligation to the
lessor is included in the balance sheet as a liability. Lease
payments are apportioned between finance charges and
reduction of the lease obligation. Finance charges are
charged to the income statement over the term of the lease
in proportion to the capital element outstanding.
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Operating leases
Rental payments under operating leases are charged to the
income statement on a straight-line basis over the period of
the lease. Contingent rentals arising under operating leases
are recognised as an expense in the period in which they
are incurred.
Benefits received and receivable as an incentive to enter into
operating leases are amortised through the income statement
over the period of the lease.
k) Taxation
Current tax
Current tax, is provided at amounts expected to be paid or
recovered using the prevailing tax rates and laws that have
been enacted or substantially enacted by the balance
sheet date and adjusted for any tax payable in respect of
previous years.
Deferred tax
Deferred tax liabilities are recognised for all temporary
differences between the carrying amount of an asset or liability
in the balance sheet and the tax base value and represent tax
payable in future periods. Deferred tax assets are recognised
to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can
be utilised.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, except
where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future. No
provision is made for tax which would have been payable on
the distribution of retained profits of overseas subsidiaries or
associated undertakings where it has been determined that
these profits will not be distributed in the foreseeable future.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Current and deferred tax is
recognised in the income statement except where it relates to
an item recognised directly in reserves, in which case it is
recognised directly in reserves.
Deferred tax is measured at the average tax rates that are
expected to apply in the years in which the timing differences
are expected to reverse, based on tax rates and laws that
have been enacted, or substantially enacted by the balance
sheet date.
Deferred tax assets and liabilities are offset against each other
when they relate to income taxes levied by the same tax
jurisdiction and when the Group intends to settle its current tax
assets and liabilities on a net basis. Deferred tax balances are
not discounted.
l) Goodwill
On acquisition of a subsidiary or associate, the fair value of the
consideration is allocated between the identifiable net tangible
and intangible assets and liabilities on a fair value basis, with
any excess consideration representing goodwill. At the
acquisition date, goodwill is allocated to each Cash Generating
Unit (CGU) expected to benefit from the combination and held
in the currency of the operations to which the goodwill relates.
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Goodwill is not amortised, but is reviewed annually for
impairment, or more frequently where there is an indication
that goodwill may be impaired. Impairment is assessed by
measuring the future cash flows of the CGUs to which the
goodwill relates. Where the future cash flows are less than the
carrying value of goodwill, an impairment charge is recognised
in the income statement.
On disposal of subsidiary undertakings and businesses, the
relevant goodwill is included in the calculation of the profit or
loss on disposal.
m) Intangible assets
Acquisition intangibles
Acquisition intangibles comprise brand names and customer
relationships purchased as part of acquisitions of businesses
and are capitalised and amortised over their useful economic
lives on a straight line basis. These intangible assets are stated
at cost less accumulated amortisation and, where appropriate,
provision for impairment in value or estimated loss on disposal.
In respect of customer relationships, the value attributed is
based on the future economic benefit that is expected to be
derived from them, calculated as the present value of future
cash flows after a deduction for contributory assets.
Amortisation is provided to write off the cost of assets on
a straight line basis on the following bases:
Brands
7% to 20% per annum
Customer relationships
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.
Internally generated software is recognised as an intangible
asset only if it can be separately identified, it is probable that
the asset will generate future economic benefits which exceed
one year, and the development cost can be measured reliably.
Where these conditions are not met, development expenditure
is recognised as an expense in the year in which it is incurred.
Costs associated with developing or maintaining computer
software are recognised as an expense as incurred unless they
increase the future economic benefits of the asset, in which
case they are capitalised.
The expenditure capitalised includes the cost of materials,
direct labour and an appropriate proportion of overheads.
Subsequent expenditure is capitalised only when it increases
the future economic benefits embodied in the specific asset to
which it relates.
Software is stated at cost less accumulated amortisation and,
where appropriate, provision for impairment in value or
estimated loss on disposal. Amortisation is provided to write
off the cost of assets on a straight line basis between three and
eight years.
n) Property, plant & equipment
p) Interests in joint ventures
Property, plant & equipment are stated at cost less
accumulated depreciation and any accumulated impairment
losses.
With the exception of land, depreciation is provided to write off
the cost of the assets over their expected useful lives from the
date the asset was brought into use or capable of being used.
Rates applied to different classes of property, plant &
equipment are as follows:
Land and buildings
1⅔% – 4% per annum
Fixtures, fittings and equipment
10 – 33⅓% per annum
Assets capitalised as finance leases are depreciated over the
term of the lease.
Property, plant & equipment are assessed on an ongoing basis
to determine whether circumstances exist that could lead to
the conclusion that the net book value is not supportable.
Where assets are to be taken out of use, an impairment charge
is levied. Where the property, plant & equipment form part of a
separate CGU, such as a store 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’s projection of future
profitability and any impairment is determined by comparing
the net book value with the value in use.
Interests in joint ventures are accounted for using the equity
method. The consolidated income statement includes the
Group’s share of the post-tax profits or losses of the joint
ventures based on their financial statements for the year. In the
consolidated balance sheet, the Group’s interests in joint
ventures are shown as a non-current asset in the balance
sheet, representing the Group’s investment in the share capital
of the joint ventures, as adjusted by post-acquisition changes
in the Group’s share of the net assets or liabilities less
provision for any impairment. Any associated goodwill is
included within the carrying value of the investment and is
assessed for impairment as part of that investment.
Where a joint venture has net liabilities, any loans advanced to
it are included in the Group’s equity accounted investment in it.
Where a joint venture has net assets, any loans advanced to it
are shown separately in the balance sheet, as a receivable to
the Group.
q) Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost incorporates any attributable discounts and
bonuses received from suppliers in respect of that inventory.
Cost comprises direct purchase cost and those overheads that
have been incurred in bringing the inventories to their present
location and condition. Net realisable value is based on
estimated selling price, less further costs expected to be
incurred to disposal. Provision is made for obsolete, slow
moving or defective items where appropriate.
o) Financial assets and investments
r) Cash and cash equivalents
The Group’s financial assets comprise cash and cash
equivalents, and those receivables which involve a contractual
right to receive cash from external parties. Financial assets
comprise all items shown in notes 13 and 14 with the
exception of prepayments. Under the classifications stipulated
by IAS 39, cash and cash equivalents and derivative financial
instruments, which are further described in notes 1r) and 25,
are classified as ‘loans and receivables’ and ‘held for trading
unless designated in a hedge relationship’, respectively. Trade
and other receivables (excluding derivative financial assets) are
classified as ‘loans and receivables’.
Investments, other than subsidiaries and joint ventures, are
initially recognised at cost, being the fair value of the
consideration given plus any transaction costs associated with
the acquisition. Investments are categorised as available-for-
sale and are then recorded at fair value. Changes in fair value,
together with any related taxation, are taken directly to
reserves, and recycled to the income statement when the
investment is sold or determined to be impaired.
Cash and cash equivalents comprise cash at bank and in
hand, bank overdrafts and short term highly liquid deposits
with a maturity of three months or less and which are subject
to an insignificant risk of changes in value. Bank overdrafts,
which form part of cash and cash equivalents for the purpose
of the cash flow statement, are shown under current liabilities.
s) Borrowings and other financial liabilities
The Group’s financial liabilities are those which involve a
contractual obligation to deliver cash to external parties at a
future date. Financial liabilities comprise all items shown in
notes 15 to 18 with the exception of other taxation and social
security, deferred income and other non-financial creditors.
Borrowings
Borrowings in the Group's balance sheet represent committed
and uncommitted bank loans. Borrowings are initially recorded
at the consideration received less directly attributable
transaction costs. Transaction fees such as bank fees and
legal costs associated with the securing of financing are
capitalised and amortised through the income statement over
the term of the relevant facility. All other borrowing costs are
recognised in the income statement in the period in which they
are incurred.
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Notes to the Group financial statements
Under the classifications stipulated by IAS 39, borrowings,
finance lease obligations and trade and other payables
(excluding derivative financial liabilities) are classified as
‘financial liabilities measured at amortised cost’. Derivative
financial instruments, which are described further in note 25,
are classified as ‘held for trading unless designated in a
hedge relationship’.
Trade and other payables
Trade and other payables (excluding derivative financial
liabilities) are recorded at cost. Derivative financial instruments,
are initially recorded at fair value and then subsequently
remeasured to fair value at each balance sheet date and are
held within assets or liabilities as appropriate. Gains and losses
arising from revaluation at the balance sheet date are
recognised in the income statement unless the derivatives
are designated as hedges and such hedges are proved to
be effective.
t) Provisions
Provisions are recognised when a legal or constructive
obligation exists as a result of past events and it is probable
that an outflow of resources will be required to settle the
obligation and a reliable estimate can be made of the amount
of the obligation. Provisions are discounted where the time
value of money is considered to be material.
Provisions fall into the following categories:
Reorganisation
Reorganisation provisions relate principally to the costs
of onerous leases, redundancy costs and other onerous
contracts, and are only recognised where plans are
demonstrably committed and where appropriate
communication to those affected has been undertaken
at the balance sheet date.
Sales
Sales provisions relate to ‘cash-back’ and similar promotions,
product warranties, product returns, and network operator
performance penalties. The anticipated costs of these items
are assessed by reference to historical trends and any other
information that is considered to be relevant.
Other
Other provisions relate mainly to warranties provided in relation
to business disposals and provisions in respect of the
expected costs of insurance claims, contingent liabilities
recognised through business combinations and costs
associated with onerous contracts.
All provisions are assessed by reference to the best available
information at the balance sheet date.
u) Critical accounting judgements and key sources of
estimation uncertainty
Critical accounting estimates and assumptions used in the
preparation of the financial statements are continually reviewed
and revised as necessary.
Whilst every effort is made to ensure that such estimates and
assumptions are reasonable, by their nature they are uncertain,
and as such changes in estimates and assumptions may have
a material impact. The principal items subject to such
estimates and assumptions are as follows:
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Revenue recognition
Commission receivable on mobile phone sales depends for
certain transactions on customer behaviour after the point of
sale. Assumptions are therefore required, particularly in relation
to levels of customer default within the contract period,
expected levels of customer spend, and customer behaviour
beyond the initial contract period. Such assumptions are based
on extensive historical evidence, and provision is made for the
risk of potential changes in customer behaviour. Changes in
estimates recognised as an increase to revenue may be made,
where for example more reliable information is available, and
any such changes are required to be recognised in the income
statement. Changes of estimates in relation to commission
receivable after the initial contract term for sales originating in
previous years totalled £33 million (2013/14: £18 million). The
total value of ongoing revenues receivable was £629 million
(2013/14: £525 million).
Revenue earned from the sale of customer support agreements
is recognised over the term of the contracts when the Group
obtains the right to consideration as a result of performance of
its contractual obligations. Revenue in any one year is
recognised to match the proportion of the expected costs of
fulfilling the Group’s total obligations under the agreements.
An estimate of the degree of performance of these contractual
obligations is determined by reference to extensive historical
claims data.
For both commission receivable on mobile phone sales and
revenue from customer support agreements, reliance on
historical data assumes that current and future experience will
follow past trends. The directors consider that the quantity and
quality of data available provides an appropriate proxy for
current trends.
Income received from suppliers such as volume rebates
The Group has provided enhanced disclosure on supplier
funding following guidance issued by the Financial Reporting
Council in December 2014. This disclosure is aimed at assisting
the users of the financial statements in understanding the
judgements and estimates made in the recognition of supplier
funding in the Group’s financial statements.
The Group’s agreements with suppliers contain a price for units
purchased as well as other rebates and discounts which are
summarised below:
Volume Rebates: This income is linked to purchases made from
suppliers and is recognised as a reduction to cost of goods sold
as inventory is sold. Unearned rebates that relate to inventory
not sold are recognised within the value of inventory at the
period end. Where an agreement spans period ends, judgement
is required regarding amounts to be recognised. Forecasts are
used as well as historical data in the estimation of the level of
income recognised. Amounts are only recognised where the
Group has a clear entitlement to the receipt of the rebate and a
reliable estimate can be made.
Discounts: This income is received from suppliers on a price per
unit basis. The level of estimation is minimal as amounts are
recognised as a reduction to cost of goods sold based on the
agreement terms and only once the item is sold.
Marketing income: This income is received in relation to
marketing activities that are performed on behalf of suppliers.
Taxation
Tax laws that apply to the Group’s businesses may be
amended by the relevant authorities, for example as a result of
changes in fiscal circumstances or priorities. Such potential
amendments and their application to the Group are monitored
regularly and the requirement for recognition of any liabilities
assessed where necessary. The Group is subject to income
taxes in a number of different jurisdictions and judgement is
required in determining the appropriate provision for
transactions where the ultimate tax determination is uncertain.
In such circumstances, the Group recognises liabilities for
anticipated taxes due based on best information available and
where the anticipated liability is probable and estimable. Where
the final outcome of such matters differs from the amounts
initially recorded, any differences will impact the income tax
and deferred tax provisions in the year to which such
determination is made. Where the potential liabilities are not
considered probable, the amount at risk is disclosed unless an
adverse outcome is considered remote.
Deferred tax is recognised on taxable losses based on the
expected ability to utilise such losses. This ability takes
account of the business plans for the relevant companies,
potential uncertainties around the longer term aspects of these
business plans, any expiry of taxable benefits and potential
future volatility in the local tax regimes.
Provisions
The Group’s provisions are based on the best information
available to management at the balance sheet date. However,
the future costs assumed are inevitably only estimates, which
may differ from those ultimately incurred.
Defined benefit pension schemes
The surplus or deficit in the UK defined benefit pension
scheme that is recognised through the consolidated statement
of comprehensive income and expense is subject to a number
of assumptions and uncertainties. The calculated liabilities of
the scheme are based on assumptions regarding salary
increases, inflation rates, discount rates and member longevity.
Such assumptions are based on actuarial advice and are
benchmarked against similar pension schemes.
Judgement is required to ensure that income is only recognised
when all performance obligations within the contract have been
fulfilled and the income is expected to be collected.
Supplier funding amounts that have been recognised and
not invoiced are shown within accrued income on the
balance sheet.
Inventory valuation
Inventories are valued at the lower cost and net realisable
value. Cost comprises direct purchase cost and those
overheads that have been incurred in bringing the inventories
to their present location and condition. Net realisable value
represents the estimated selling price less all estimated and
directly attributable costs of completion and costs to be
incurred in marketing, selling and distribution. Net realisable
value includes, where necessary, provisions for slow moving
and damaged inventory. The provision represents the
difference between the cost of stock and its estimated net
realisable value, based on ageing and other factors.
Calculation of these provisions requires judgements to be
made which include forecast consumer demand, the
promotional, competitive and economic environment and
inventory loss trends.
Recoverable amount of non-current assets
All non-current assets, including goodwill and other intangible
assets, are reviewed for potential impairment using estimates
of the future economic benefits attributable to them. Any
estimates of future economic benefits made in relation to non-
current assets may differ from the benefits that ultimately arise
and materially affect the recoverable value of the asset. The
methodology used in assessing the carrying value of goodwill
is set out in note 9 and in respect of intangible assets and
property, plant & equipment in note 1n).
Acquisition accounting
Accounting for the Merger (2013/14: the CPW Europe
Acquisition) involved the use of assumptions 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 valuation techniques were
supported by third party valuation experts. Nevertheless, the
actual performance of these assets and liabilities may differ
from the valuations derived through this exercise.
Discontinued operations and assets held for sale
The disposal of businesses and the recognition of assets held
for sale at the lower of cost and fair value less costs to sell will
often require judgement and estimation in relation to the value
of expected future consideration and costs associated with the
disposal. Such estimation will be based on the best information
available up to the approval of the financial statements, but
nevertheless the final outcomes may vary from that assumed.
Trade and other receivables
Provisions for irrecoverable receivables are based on extensive
historical evidence and the best available information in
relation to specific issues, but are unavoidably dependent
on future events.
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Notes to the Group financial statements
v) Recent accounting developments
The Group adopted the following standards during the year,
none of which have had a material impact on the disclosures or
amounts reported in the financial statements:
• IFRS 10 ‘Consolidated Financial Statements’
• IFRS 11 ‘Joint Arrangements’
• IFRS 12 ‘Disclosure of Interests in Other Entities’
• IAS 27 ‘Separate Financial Statements’
• IAS 28 ‘Investments in Associates and Joint Ventures’
The following new standards, which are applicable to the
Group, have been published but are not yet effective and have
not yet been adopted by the EU:
• IFRS 9 'Financial Instruments'. This standard is the first step
in the process to replace IAS 39 'Financial Instruments:
Recognition and Measurement'. IFRS 9 introduces new
requirements for classifying and measuring financial assets
and affects the accounting for financial assets.
• IFRS 15 'Revenue from Contracts with Customers' provides
guidance on the recognition, timing and measurement of
revenue.
IFRS 9 will affect both the measurement and disclosure of
financial instruments and IFRS 15 may change revenue
recognition and related disclosures. It is not practicable to
provide a reasonable estimate of the effect of IFRS 9 and IFRS
15 until a detailed review has been completed.
Certain other new accounting standards, amendments to
existing accounting standards and interpretations which are in
issue but not yet effective, either do not apply to the Group or
are not expected to have any material impact on the Group's
net results or net assets.
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.
Following the Merger, the Group operates four operating
segments as described below. Comparative periods have been
restated to reflect this change.
As explained in note 24, Virgin Mobile France, the Phone
House operations in Germany, the Netherlands, Portugal and
France as well as Dixons’ operations in Czech Republic and
Slovakia have been treated as discontinued operations and are
therefore excluded from this segmental analysis.
The Group’s reportable segments have been identified
as follows:
• UK & Ireland comprises operations in the UK and Ireland as
well as operations in airports in UK and Ireland.
• 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.
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.
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2 Segmental analysis continued
(a) Segmental results
Headline external revenue
Inter-segmental revenue
Total Headline revenue
Headline EBIT before share of results of
joint ventures
Share of Headline results of joint ventures
(post-tax)
Headline EBIT
13 months ended 2 May 2015
UK &
Ireland
£million
Nordics
£million
Southern
Europe
£million
Connected
World
Services
£million
Joint
ventures
£million
Eliminations
£million
5,506
2,055
64
—
5,570
2,055
313
—
313
60
—
60
564
—
564
20
—
20
130
—
130
7
—
7
—
—
—
—
—
—
—
(64)
(64)
—
—
—
Total
£million
8,255
—
8,255
400
—
400
During the 13 months ended 2 May 2015, there were no customers which represent more than 10% of the Group’s revenue.
Reconciliation of Headline profit to total profit
UK & Ireland
Nordics
Southern Europe
Connected World Services
Unallocated
EBIT before share of results of joint ventures
Share of results of joint ventures
EBIT
Finance income
Finance costs
Profit / (loss) before tax
13 months ended 2 May 2015
Headline
profit /
(loss)
£million
Amortisation
of acquisition
intangibles
£million
CPW Europe
Acquisition
£million
Dixons
Retail
Merger
£million
France
closure
£million
Pension
scheme
£million
313
60
20
7
—
400
—
400
15
(39)
376
(22)
(10)
(2)
(1)
—
(35)
—
(35)
—
—
(35)
—
—
—
—
—
—
—
—
—
—
—
(13)
(4)
—
—
(24)
(41)
—
(41)
—
—
(41)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(13)
(13)
Total
profit /
(loss)
£million
278
46
18
6
(24)
324
—
324
15
(52)
287
Unallocated Merger related costs comprise those that are not directly attributable to a specific segment.
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Notes to the Group financial statements
2 Segmental analysis continued
(a) Segmental results continued
Headline external revenue
Inter-segmental revenue
Total Headline revenue
Headline EBIT before share of results of
joint ventures
Share of Headline results of joint ventures
(post-tax)
Headline EBIT
Restated
Year ended 29 March 2014
UK &
Ireland
£million
1,427
—
1,427
114
—
114
Nordics
£million
Southern
Europe
£million
Connected
World
Services
£million
Joint
ventures
£million
Eliminations
£million
81
—
81
(2)
—
(2)
378
—
378
18
—
18
57
—
57
4
—
4
—
—
–
—
3
3
—
—
—
—
—
—
Total
£million
1,943
—
1,943
134
3
137
Included within total revenue is income from two MNOs of approximately £450 million and £400 million, respectively. No other
customers or MNOs represent more than 10% of the Group’s revenue.
Reconciliation of Headline profit to total profit
UK & Ireland
Nordics
Southern Europe
Connected World Services
Unallocated
EBIT before share of results of joint ventures
Share of results of joint ventures
EBIT
Finance income
Finance costs
Profit / (loss) before tax
Restated
Year ended 29 March 2014
Headline
profit /
(loss)
£million
Amortisation
of acquisition
intangibles
£million
CPW Europe
Acquisition
£million
Dixons
Retail
Merger
£million
France
closure
£million
Pension
scheme
£million
114
(2)
18
4
—
134
3
137
8
(17)
128
(8)
(1)
(4)
—
—
(13)
—
(13)
—
—
(13)
—
—
—
—
(15)
(15)
—
(15)
—
—
(15)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(23)
(23)
—
—
(23)
—
—
—
—
—
—
—
—
—
—
—
Total
profit /
(loss)
£million
106
(3)
14
4
(15)
106
(20)
86
8
(17)
77
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2 Segmental analysis continued
b) Geographical information
Revenues are allocated to countries according to the entity’s country of domicile. Revenue by destination is not materially
different to that shown by domicile.
c) Other information
UK & Ireland
Nordics
Southern Europe
Connected World Services
Non-current assets*
Capital expenditure Depreciation/Amortisation
13 months
ended
2 May
2015
£million
Restated
Year
ended
29 March
2014
£million
13 months
ended
2 May
2015
£million
Restated
Year
ended
29 March
2014
£million
13 months
ended
2 May
2015
£million
Restated
Year
ended
29 March
2014
£million
2,916
1,152
86
5
744
2
80
—
127
30
4
5
4,159
826
166
52
1
4
—
57
106
32
9
2
149
36
2
7
—
45
*Non-current assets above exclude deferred tax assets and assets related to discontinued operations.
3 Revenue and profit / (loss) before interest and taxation before share of results of joint ventures
Revenue
Cost of sales
Gross profit
Operating expenses
Profit / (loss) before interest and taxation
Revenue can be further analysed as follows:
Sale of goods
Revenue from services
13 months ended 2 May 2015
Restated
Year ended 29 March 2014
Headline
£million
8,255
(6,118)
2,137
(1,737)
400
Non-
Headline
£million
—
—
—
(76)
(76)
Total
£million
Headline
£million
8,255
1,943
(6,118)
(1,392)
2,137
(1,813)
324
551
(417)
134
Non-
Headline
£million
—
—
—
(28)
(28)
Total
£million
1,943
(1,392)
551
(445)
106
13 months ended 2 May 2015
Headline
£million
5,641
2,614
8,255
Non-
Headline
£million
Total
£million
Headline
£million
—
—
—
5,641
2,614
8,255
394
1,549
1,943
Restated
Year ended 29 March 2014
Non-
Headline
£million
—
—
—
Total
£million
394
1,549
1,943
Revenue from services predominantly comprises those relating to commissions from MNOs, insurance, customer support
agreements, delivery and installation, product repairs and product support.
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3 Revenue and profit / (loss) before interest and taxation before share of results of joint ventures continued
Profit / (loss) before interest and taxation for continuing operations is stated after charging / (crediting) the following:
Depreciation of property, plant & equipment
Amortisation of acquisition intangibles
Amortisation of other intangibles
Impairment of trade receivables
Impairment of inventory
Loss on disposal of property, plant & equipment
Cost of inventory recognised as an expense
Rentals paid under operating leases:
Non-contingent rent
Contingent rent
Rentals received under operating leases – subleases
Investment property rental income
Net foreign exchange losses
Share-based payments expense
Other employee costs (see note 5)
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Auditor’s remuneration comprises the following:
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
Fees payable to the Company’s auditor and its associates for their audit of the Company’s subsidiaries
Total audit fees
Tax advisory services
Tax compliance services
Other assurance services
Other services
13 months
ended
2 May
2015
£million
Restated
Year
ended
29 March
2014
£million
83
35
31
8
68
5
17
13
15
14
26
—
6,069
1,447
304
22
(5)
(1)
1
10
71
—
(1)
(2)
—
4
890
226
13 months
ended
2 May
2015
£million
Year
ended
29 March
2014
£million
0.1
1.9
2.0
0.2
0.2
1.3
0.2
3.9
0.1
1.3
1.4
0.5
0.2
0.6
—
2.7
The Group’s share of audit fees in the year for joint ventures was £nil (2013/14: £0.1 million) and the Group’s share of fees for
their tax and other services was £nil (2013/14: £0.1 million). Other assurance services relate primarily to the Merger in respect
of which the external auditor acted as reporting accountant whilst 2013/14 related primarily to the CPW Europe Acquisition,
in respect of which the external auditor acted as reporting accountant.
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Dixons Carphone plc Annual Report and Accounts 2014/15
4 Non-Headline items
Included in profit / (loss) before interest and tax:
Amortisation of acquisition intangibles
Exceptional items
– CPW Europe Acquisition
Share of results of joint ventures exited (post-tax)
– Dixons Retail Merger
13 months
ended
2 May
2015
£million
Restated
Year
ended
29 March
2014
£million
(35)
—
(41)
—
(76)
(13)
(15)
—
(23)
(51)
Note
(i)
(ii)
(iii)
(iv)
Included in net finance costs:
Net non-cash finance costs on defined benefit pension schemes
(v)
(13)
—
Total impact on profit / (loss) before tax
Tax on Non-Headline items
Total impact on profit / (loss) after tax
(89)
(51)
15
(74)
6
(45)
Non-Headline items also include discontinued operations, which comprise the results of Virgin Mobile France; the Phone House
operations in Germany, the Netherlands, Portugal and France; and Electroworld in the Czech Republic and Slovakia (which had
previously formed part of the discontinued operations of Dixons). The post-tax results of these businesses have been reported
separately and are further described in note 24.
(i) Amortisation of acquisition intangibles:
A charge of £35 million arose during the year in relation to acquisition intangibles arising on the CPW Europe Acquisition and
the Dixons Retail Merger.
(ii) Exceptional items – CPW Europe Acquisition:
CPW Europe Acquisition
13 months
ended
2 May
2015
£million
Year
ended
29 March
2014
£million
—
(15)
The CPW Europe Acquisition which occurred on 26 June 2013 gave rise to the following exceptional items in the year ended
29 March 2014:
• Professional fees of £7 million, costs of £11 million associated with the early vesting of incentive schemes (of which
£8 million were cash in nature) and a tax credit of £3 million was recognised in respect of these costs.
• A gain of £1 million resulting from the requirement of the Group to fair value its existing 50% interest in CPW Europe,
which was considered to be equal to the £500 million gross consideration for Best Buy’s 50% interest.
• Arrangements with Best Buy allowed the Group to manage the disposal of the Consideration Shares issued to Best Buy,
and to benefit from any gain on disposal above a share price of £1.90. The Consideration Shares were placed at a price of
£2.44, resulting in a net cash gain of £23 million for the Group. The gain implied by comparing the share price at
completion, being £2.38 and £1.90, was treated as an adjustment to consideration and the remaining gain of £2 million
was recorded in the income statement.
Dixons Carphone plc Annual Report and Accounts 2014/15
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Notes to the Group financial statements
4 Non-Headline items continued
(iii) Exceptional items – Dixons Retail Merger:
Merger transaction costs
Merger integration costs
13 months
ended
2 May
2015
£million
Year
ended
29 March
2014
£million
(9)
(32)
(41)
—
—
—
The Dixons Retail Merger is described further in notes 1 and 23. The Merger has given rise to the following costs which have
been treated as exceptional items:
• Merger costs comprise banking and professional fees in relation to the transaction.
• Merger integration costs relate to the reorganisation of the Group following the Merger and comprise the rationalisation of
certain operational and support functions. These costs mainly comprise professional fees, employee severance and
property costs associated with the integration process.
(iv) Share of joint ventures exited – Businesses exited:
In light of an increasingly challenging market, the closure of the Phone House France operations was announced in April
2013. Prior to the CPW Europe Acquisition, when the French operations were part of the CPW Europe joint venture,
operating losses of £10 million were incurred and restructuring items comprised asset write-downs of £8 million and
provisions for exit costs of £32 million principally covering redundancies and lease exit costs. A tax credit of £3 million was
recognised against these items. The Group’s post-tax share of these losses, asset impairments and restructuring costs was
£23 million. The results of the Phone House France following the CPW Europe Acquisition on 26 June 2013 have been
classified as discontinued operations following the completion of the closure during the 13 months ended 2 May 2015.
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(v) Net non-cash financing costs on defined benefit pension schemes:
Under IAS 19 ‘Employee Benefits’, the net interest charge on defined benefit pension schemes is calculated by applying the
corporate bond yield rates applicable on the last day of the previous financial year to the net defined benefit obligation.
Corporate bond yield rates vary over time which in turn creates volatility in the income statement and balance sheet and
results in a non-cash remeasurement cost which can be volatile due to corporate bond yield rates prevailing on a particular
day and is also unrepresentative of the actual investment gains or losses made or the liabilities paid and payable. Consistent
with a number of other companies, the accounting effects of these non-cash revaluations of net defined benefit pension
liabilities have been excluded from Headline earnings.
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5 Employee costs and share-based payments
a) Employee costs
The aggregate remuneration recognised in the income statement for continuing operations is as follows:
Salaries and performance bonuses
Social security costs
Other pension costs
Share-based payments
13 months
ended
2 May
2015
£million
Restated
Year
ended
29 March
2014
£million
781
89
20
890
10
900
197
27
2
226
4
230
Aggregate remuneration for discontinued operations are salaries and performance bonuses of £46 million (2013/14: £49 million),
social security costs of £8 million (2013/14: £8 million) and other pension costs of £1 million (2013/14: £2 million).
The average number of employees for continuing operation is:
UK & Ireland
Nordics
Southern Europe
Connected World Services
13 months
ended
2 May
2015
Number
Restated
Year
ended
29 March
2014
Number
23,582
5,332
6,492
2,675
85
286
1,298
64
32,834
6,980
The average number of employees for discontinued operations is 2,127 (2013/14: 1,727).
Compensation earned by key management, comprising the Board of directors and senior executives, is as follows:
Short term employee benefits
Termination benefits
Share-based payments
13 months
ended
2 May
2015
£million
Year
ended
29 March
2014
£million
15
1
1
17
8
—
1
9
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. In addition, during the year ended 29 March 2014 loans were advanced to
key management to cover the tax arising on the exercise of share options that vested as part of the CPW Europe Acquisition.
At 2 May 2015, loans to key management in relation to these schemes totalled £16 million (2014: £10 million). Interest is charged
on loans at market rates and interest of £0.4 million has been recognised during the period (2013/14: £0.3 million).
Further information about individual directors’ remuneration, share interests, share options, pensions and other entitlements,
which form part of these financial statements, is provided in the Remuneration report.
Dixons Carphone plc Annual Report and Accounts 2014/15
101
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Notes to the Group financial statements
5 Employee costs and share-based payments continued
b) Share-based payments
i) Share Plan
During the year ended 29 March 2014, the Group introduced the Share Plan which allows participants to share 10% of the
incremental value created in the Group in excess of an opening value (assessed on the value of CPW over a three month period
prior to approval of the plan by shareholders in June 2013 and, for new entrants during the 13 months ended 2 May 2015,
assessed on the aggregated value of CPW and Dixons Retail over a three month period prior to the announcement of preliminary
merger discussions in February 2014) and beyond an annual 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 and, since the Merger, Dixons Retail. The Group granted loans to participants at a commercial rate of interest to acquire
the shares. Loans are ordinarily repayable in full if performance conditions are met.
The performance of the scheme will ordinarily be measured on or around June 2017, when 60% of the shares vest, with 40%
deferred for a further year. When the awards vest, the value of the shares held by participants will be based on the incremental
value (if any) of Dixons Carphone in excess of the opening valuation together with the minimum return on invested capital. These
shares will then be purchased by the Company for cash and / or the Company’s ordinary shares.
A ‘bad leaver’ will be required to transfer the participation shares to such party as the Company designates for an amount equal
to the total amount outstanding under the loan. If the market value of the shares is less than the amount of the outstanding loan
(and any accrued interest) then the participant may be required to repay 20% of the shortfall out of their own resources.
A participant shall be a ‘good leaver’ at the sole discretion of the Remuneration Committee and may be permitted to retain an
award notwithstanding the termination of their employment.
The mechanics of the plan may be varied by the Remuneration Committee if necessary to ensure that participants are neither
advantaged nor disadvantaged by a variation of the share capital of the Company, bona fide merger, reconstruction or similar
reorganisation.
ii) Share option schemes
During the year ended 29 March 2014, the Group introduced a share option scheme which allows nil-priced options to be
offered to senior employees who are not participants in the Share Plan.
Options were first granted under the scheme in January 2014. The options are subject to continuing employment and are subject
to performance conditions based on a combination of absolute TSR performance and relative TSR performance against the
FTSE 250 or FTSE 350.
Following the Merger with Dixons Retail plc on 6 August 2014, the Company assumed the obligation to satisfy outstanding
Dixons share options awarded under the Retail Employee Share Option Scheme and Executive Share Option Plan, with
employees eligible to acquire 0.155 Dixons Carphone shares for each Dixons option held. All outstanding Dixons awards had
vested before the Merger, and were exercisable within six months post Merger.
Prior to the CPW Europe Acquisition, CPW Europe had a share option scheme, under which participants received options over
A shares in New CPW and each of Best Buy and the Company had an obligation to acquire 50% of these shares at a value
based on the Headline PBT of CPW Europe over the vesting period. The pool was based on earnings in excess of minimum
growth targets, against the earnings for the year ended 31 March 2009. The Company and Best Buy agreed a minimum value
of the pool, in recognition of the value that had already accrued in the scheme in relation to Best Buy Mobile.
In order to align the interests of participants with those of the Company, the value of the A shares in New CPW were assessed at
defined points during the vesting period, and nil-priced options over shares in the Company were granted to participants through
the Participation Plan to match this value, so that participants benefited from any growth in the market capitalisation of the
Company during the vesting period.
Further to the CPW Europe Acquisition the Remuneration Committee allowed the scheme to vest based on performance
achieved to 31 March 2013. In addition to the Group’s obligations under the scheme the Group also agreed to satisfy Best
Buy’s obligations under the scheme. During the year ended 29 March 2014, the Company issued 14 million shares in relation
to these obligations.
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Dixons Carphone plc Annual Report and Accounts 2014/15
5 Employee costs and share-based payments continued
b) Share-based payments continued
ii) Share option schemes continued
The following table summarises the number and weighted average exercise price of share options for these schemes:
Outstanding at the beginning of the year
Dixons options assumed on Merger
Granted during the year
Lapsed during the year
Exercised during the year
Outstanding at the end of the year
Exercisable at the end of the year
Weighted average market price of options exercised in the period
Weighted average remaining contractual life of awards outstanding
Exercise price for options outstanding
iii) SAYE scheme
13 months ended
2 May 2015
Year ended
29 March 2014
Number
million
WAEP
£
Number
million
WAEP
£
9
1
11
(3)
(1)
17
—
—
—
—
—
—
—
—
5
—
18
—
(14)
9
—
—
—
—
—
—
—
—
13 months
ended
2 May
2015
Year
ended
29 March
2014
£4.18
£2.48
9.1 yrs
9.8 yrs
£nil
£nil
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During the year ended 29 March 2014, the Group introduced a SAYE scheme which allows participants to save up to £500 per
month for either three or five years. At the end of the savings period participants can purchase shares in the Company based on
a discounted share price determined at the commencement of the scheme.
Participants in the Dixons Retail plc SAYE scheme had the opportunity to rollover their awards into options over shares in the
merged entity, Dixons Carphone, on completion of the Merger. Employees who chose to rollover received 0.155 options in
Dixons Carphone in exchange for each Dixons option held. The savings period and exercise date of these options remains
unchanged. If employees chose not to rollover their options, they could exercise 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:
Outstanding at the beginning of the period
Dixons options assumed on Merger
Granted during the period
Exercised during the period
Lapsed during period
Outstanding at the end of the period
Exercisable at the end of the period
Weighted average market price of options exercised in the period
Weighted average remaining contractual life of awards outstanding
Range of exercise prices for options outstanding
13 months ended
2 May 2015
Year ended
29 March 2014
Number
million
3
6
7
(2)
(1)
13
—
WAEP
£
2.24
1.20
3.44
2.24
1.76
2.71
—
Number
million
—
—
3
—
3
—
WAEP
£
—
—
2.24
—
2.24
—
13 months
ended
2 May
2015
£3.82
Year
ended
29 March
2014
n/a
2.8 yrs
3.9 yrs
£0.92 –
£3.44
£2.24
Dixons Carphone plc Annual Report and Accounts 2014/15
103
Notes to the Group financial statements
5 Employee costs and share-based payments continued
b) Share-based payments continued
iv) Joint venture incentive schemes
Virgin Mobile France issued market-priced and nil-priced share options in Virgin Mobile France to certain employees of the
business. These options vested over periods of two to four years. Prior to completion of the disposal of Virgin Mobile France
on 4 December 2014, these share options were exercised.
v) Fair value model
The fair value of options with external performance targets 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 with the probability of meeting performance criteria, based
on the historical performance of Carphone Warehouse and Old Carphone Warehouse shares and, for options issued subsequent
to the Merger on 6 August 2014, the historical performance of Dixons.
The weighted average fair value of options granted during the period was £1.62 (2013/14: £0.84). The following table lists the
inputs to the model:
Exercise price
Dividend yield
Historical and expected volatility
Risk-free interest rate
Expected option life
Weighted average share price
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13 months
ended
2 May
2015
Year
ended
29 March
2014
£nil
£nil
2.2%
2.0%
33.7%
32.0%
2.8%
3.5%
10 yrs
10 yrs
£3.75
£2.71
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vi) Charge to the income statement and entries in reserves
During the 13 months ended 2 May 2015, the Group recognised a non-cash accounting charge to profit and loss of £10 million
(2013/14: £4 million) in respect of equity settled share-based payments, which is offset by an entry through reserves. This entry
is offset in reserves by the non-recourse element of loans provided to participants in the Carphone Warehouse Share Plan.
c) Employee Share Ownership Trust (ESOT)
Investment in own shares
Maximum number of shares held during the period
2 May 2015
29 March 2014
Market
value
£million
Nominal
value
£million
4
18
—
—
Number
million
0.9
5.2
Market
value
£million
Nominal
value
£million
16
16
—
—
Number
million
4.9
4.9
The Group has an ESOT for the purposes of satisfying potential awards to employees under the Group’s share plans. The
number of shares held by the Trust, which are shown in the table above, remain held for potential awards under outstanding
plans. The costs of funding and administering the Trust are charged to the income statement in the year to which they relate.
Shareholders’ funds are reduced by the net book value of shares held in the Trust.
The ESOT has waived its rights to receive dividends and its shares have not been allocated to specific schemes.
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Dixons Carphone plc Annual Report and Accounts 2014/15
6 Net finance costs
Interest on cash and cash equivalents
Interest and other finance income from joint ventures
Unwind of discounts on trade receivables
Finance income
Interest on bank overdrafts and loans
Interest on deferred consideration
Finance lease interest payable
Net interest on defined benefit pension obligations
Unwind of discounts on liabilities
Amortisation of facility fees
Other interest expense
Finance costs
Total net finance costs
Headline total net finance costs
Headline finance costs exclude net interest on defined benefit pension obligations (see note 4).
13 months
ended
2 May
2015
£million
Year
ended
29 March
2014
£million
—
—
15
15
(17)
(1)
(4)
(13)
(11)
(3)
(3)
(52)
(37)
(24)
1
1
6
8
(11)
(1)
—
—
(2)
(1)
(2)
(17)
(9)
(9)
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Dixons Carphone plc Annual Report and Accounts 2014/15
105
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Notes to the Group financial statements
7 Tax
a) Tax expense
The corporation tax charge comprises:
Current tax
UK corporation tax at 20.92%(i) (2013/14 23%) – Headline
Overseas tax
– Non-Headline
– Headline
– Non-Headline
Adjustments made in respect of prior years:
UK corporation tax
Overseas tax
Total current tax
Deferred tax
UK Tax
Overseas tax
Adjustments in respect of prior years:
UK Corporation tax
Overseas tax
Total deferred tax
Total tax charge
Headline tax charge(ii)
– Headline
– Non-Headline
– Headline
– Non-Headline
– Headline
– Non-Headline
– Headline
– Non-Headline
*
*
*
*
*
*
13 months
ended
2 May
2015
£million
Year
ended
29 March
2014
£million
61
(12)
25
(3)
71
6
(2)
4
75
10
2
(2)
(3)
7
(8)
1
1
—
(6)
1
76
91
10
—
3
—
13
1
(6)
(5)
8
19
(2)
2
(1)
18
(4)
(3)
—
—
(7)
11
19
25
(i) The UK corporation tax rate for the 13 months ended 2 May 2015 was 21% for the 12 months to 31 March 2015 and 20% thereafter
(2013/14: 23% for the year ended 29 March 2014).
(ii) The Headline tax charge excludes those items marked *.
Tax related to discontinued operations is included in the figures set out in note 24.
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7 Tax continued
b) Reconciliation of notional to actual (effective) tax rate
The principal differences between the total tax charge shown above and the amount calculated by applying the standard rate
of UK corporation tax to profit / (loss) before taxation are as follows:
Profit / (loss) before taxation
Tax at UK statutory rate of 20.92% (2013/14: 23%)
Differences in effective overseas tax rates
Adjustments in respect of prior years
Items attracting no tax relief or liability
Movement in unprovided deferred tax
Exceptional write-off of tax assets and liabilities
Effect of change in statutory tax rate
Other differences
Total tax charge (credit)
13 months ended 2 May 2015
Headline
£million
Non-
Headline
£million
Statutory
£million
Headline
£million
Restated
Year ended 29 March 2014
Non-
Headline
£million
Statutory
£million
376
(89)
287
128
(51)
77
79
7
(2)
11
(5)
—
—
1
91
(19)
(1)
—
5
—
—
—
—
(15)
60
6
(2)
16
(5)
—
—
1
76
29
—
(9)
2
(1)
—
4
—
25
(12)
—
(3)
9
—
1
(1)
—
(6)
17
—
(12)
11
(1)
1
3
—
19
The effective tax rate on Headline earnings of 24% (2013/14: 20%) has increased compared to the prior year due mainly to an
increase in the proportion of taxable profits arising in higher rate jurisdictions, predominantly the Nordics.
Items attracting no tax relief or liability relate primarily to non-deductible lease exit costs (2013/14: related primarily to French
operations).
c) Deferred tax
At 1 April 2013
CPW Europe Acquisition
Charged directly to income statement
Credited to equity
At 29 March 2014
Dixons Retail Merger
Credited / (charged) directly to income statement
Credited to equity
At 2 May 2015
Deferred tax comprises the following balances:
Deferred tax assets
Deferred tax liabilities
Accelerated
capital
allowances
£million
Retirement
benefit
obligations
£million
Losses
carried
forward
£million
Other
temporary
differences
£million
Total
£million
—
27
(6)
—
21
(41)
3
—
(17)
—
—
—
—
—
83
—
15
98
—
3
—
—
3
—
1
—
4
1
14
(5)
2
12
58
(5)
12
77
1
44
(11)
2
36
100
(1)
27
162
2 May
2015
£million
29 March
2014
£million
263
(101)
162
54
(18)
36
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107
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Notes to the Group financial statements
7 Tax continued
Analysis of deferred tax relating to items (charged) / credited to equity in the period
Actuarial losses on defined benefit pension schemes
Credited to comprehensive income
Share-based payments
13 months
ended
2 May
2015
£million
Year
ended
29 March
2014
£million
15
15
12
27
—
—
2
2
The Group has total unrecognised deferred tax assets relating to tax losses of £1,444 million (2013/14: £69 million). No
deferred tax asset has been recognised in respect of the losses due to the lack of certainty regarding the availability of future
taxable profits.
There were no temporary differences associated with undistributable earnings of subsidiaries for which deferred tax liabilities
had not been recognised at the end of either year.
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8 Earnings per share
Headline earnings
Continuing operations
Total earnings / (loss)
Continuing operations
Discontinued operations
Total
Weighted average number of shares
Average shares in issue
Less average holding by Group ESOT
For basic earnings per share
Dilutive effect of share options and other incentive schemes
For diluted earnings per share
Basic earnings per share
Total (continuing and discontinued operations)
Adjustment in respect of discontinued operations
Continuing operations
Adjustments for Non-Headline – continuing operations (net of taxation)
Headline basic earnings per share
Diluted earnings per share
Total (continuing and discontinued operations)
Adjustment in respect of discontinued operations
Continuing operations
Adjustments for Non-Headline – continuing operations (net of taxation)
Headline diluted earnings per share
13 months
ended
2 May
2015
£million
Restated
Year
ended
29 March
2014
£million
285
103
211
(114)
97
58
(10)
48
Million
Million
964
(3)
961
32
993
558
(3)
555
7
562
Pence
Pence
10.1
11.9
22.0
7.7
29.7
9.8
11.4
21.2
7.5
28.7
8.6
1.8
10.4
8.2
18.6
8.5
1.8
10.3
8.0
18.3
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 4.
Dixons Carphone plc Annual Report and Accounts 2014/15
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a
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Notes to the Group financial statements
9 Goodwill
At beginning of year
CPW Europe Acquisition (note 23)
Dixons Retail Merger (note 23)
Impairment
Foreign exchange
At end of year
Cost
Accumulated impairment
a) Carrying value of goodwill
The components of goodwill comprise the following businesses:
UK & Ireland – Dixons
UK – Carphone Warehouse
Ireland – Carphone Warehouse
Nordics
Spain
Netherlands
2 May
2015
£million
29 March
2014
£million
481
—
2,629
(35)
(86)
2,989
2,989
—
2,989
—
484
—
—
(3)
481
481
—
481
2 May
2015
£million
1,633
406
6
916
28
—
29 March
2014
£million
—
406
8
—
31
36
2,989
481
The goodwill arising on the Dixons Retail Merger was allocated to the CGUs which were expected to benefit from the acquisition,
based on value in use calculations. The Non-Headline impairment charge relates to the operations in the Netherlands as
described in note 24.
110
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9 Goodwill continued
b) Goodwill impairment testing
As required by IAS 36, goodwill is subject to annual impairment reviews. These reviews are carried out using the following
criteria:
• business acquisitions generate an attributed amount of goodwill;
• the manner in which these businesses are run and managed is used to determine the CGU grouping as defined in IAS 36
‘Impairment of Assets’;
• the recoverable amount of each CGU group is determined based on calculating its value in use (VIU);
• the VIU is calculated by applying discounted cash flow modelling to management’s own projections covering a five year
period;
• cash flows beyond the five year period are extrapolated using a long term growth rate equivalent to long term forecasts of
Gross Domestic Product (GDP) growth rates for the relevant market; and
• the VIU is then compared to the carrying amount in order to determine whether impairment has occurred.
The key assumptions used in calculating value in use are:
• management’s projections;
• the growth rate beyond five years; and
• the pre-tax discount rate.
The long term projections, which have been approved by management, have been prepared using three year strategic plans as
a base extrapolated to five years and which have regard to the relative performance of competitors and knowledge of the current
market together with management’s views on the future achievable growth in market share and impact of the committed
initiatives. The cash flows which derive from these five year projections include 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 in determining the five year projections comprise the growth in sales and costs over this period. The
compound annual growth rate in sales and costs can rise as well as fall year on year depending not only on the year five targets,
but also on the current financial year base. These targets, when combined, accordingly drive the resulting profit margins and the
profit in year five of the projections which is in turn used to calculate the terminal value in the VIU calculation. Historical amounts
for the businesses under impairment review as well as from other parts of the Group are used to generate the values attributed
to these assumptions.
The value attributed to these assumptions for the most significant components of goodwill are as follows:
2 May 2015
29 March 2014
Compound
annual
growth
in sales
Compound
annual
growth
in costs
Growth rate
beyond
five years
Pre-tax
discount
rate
Compound
annual
growth
in sales
Compound
annual
growth
in costs
Growth rate
beyond
five years
Pre-tax
discount rate
UK – Carphone Warehouse
UK & Ireland – Dixons
Nordics
3.2%
2.3%
4.9%
2.5%
2.0%
4.8%
2.9%
2.9%
2.2%
9.5%
9.5%
8.5%
1.9%
1.2%
1.9%
10.1%
—
—
—
—
—
—
—
—
Growth rates used were determined based on third party long term growth rate forecasts and are based on the GDP growth rate
for the territories in which the businesses operate. The pre-tax discount rates applied to the forecast cash flows reflect current
market assessments of the time value of money and the risks specific to the CGUs.
c) Goodwill impairment sensitivity analysis
A sensitivity analysis has been performed on each of the base case assumptions used for assessing the goodwill with other
variables held constant. Consideration of sensitivities to key assumptions can evolve from one financial year to the next.
The directors have concluded that there are no reasonably likely changes in key assumptions which would cause the carrying
amount of goodwill to exceed its value in use.
Dixons Carphone plc Annual Report and Accounts 2014/15
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Notes to the Group financial statements
10 Intangible assets
Balance at 30 March 2014
Dixons Retail Merger
Additions
Amortisation
Impairment
Disposal of business
Reclassification to held for sale
Foreign exchange
Balance at 2 May 2015
Cost
Accumulated amortisation and impairment losses
Balance at 2 May 2015
Balance at 1 April 2013
CPW Europe Acquisition
Additions
Amortisation
Balance at 29 March 2014
Cost
Accumulated amortisation and impairment losses
Balance at 29 March 2014
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n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
Acquisition intangibles
Brands
£million
Customer
relationships
£million
Sub-total
£million
Software
and
licences
£million
86
30
86
50
373
2
(38)
(32)
(7)
(1)
—
(17)
362
411
(49)
362
(3)
—
(2)
(2)
163
209
(46)
163
Total
£million
136
403
88
(70)
(10)
(1)
(2)
(19)
525
620
(95)
525
8
365
—
(21)
(1)
—
—
(15)
336
357
(21)
336
42
8
2
(17)
(6)
(1)
—
(2)
26
54
(28)
26
Acquisition intangibles
Brands
£million
Customer
relationships
£million
Sub-total
£million
Software
and
licences
£million
Total
£million
—
10
—
(2)
8
10
(2)
8
—
56
—
(14)
42
56
(14)
42
—
66
—
(16)
50
66
(16)
50
—
54
48
(16)
86
102
(16)
86
—
120
48
(32)
136
168
(32)
136
Software and licences include assets with a cost of £35 million (2014: £14 million) on which amortisation has not been charged
as the assets have not yet been brought into use.
Intangibles acquired as part of the Dixons Retail Merger
Acquisition intangibles included customer relationships and brands. Each class of intangible asset was independently valued by
independent experts using appropriate valuation techniques. The primary intangible assets, their net book values and
amortisation periods are as follows:
CurrysPCWorld
Elgiganten
Elkjøp
Gigantti
Software and licences were independently valued using an amortised replacement cost method.
Net book
value
£million
Amortisation
period
Years
163
66
54
32
15
15
15
15
112
Dixons Carphone plc Annual Report and Accounts 2014/15
11 Property, plant & equipment
Balance at 30 March 2014
Dixons Retail Merger
Additions
Depreciation
Disposals
Transferred to assets held for sale
Impairment
Foreign exchange
Balance as at 2 May 2015
Cost
Accumulated depreciation
Balance as at 2 May 2015
Included in net book value as at 2 May 2015
Land not depreciated
Assets in the course of construction
Assets held under finance leases
Balance at 1 April 2013
CPW Europe Acquisition
Additions
Depreciation
Disposals
Foreign exchange
Balance at 29 March 2014
Cost
Accumulated depreciation
Balance as at 29 March 2014
Included in net book value as at 29 March 2014
Land not depreciated
Assets in the course of construction
Assets held under finance leases
Fixtures,
fittings and
other
equipment
£million
Land and
buildings
£million
Total
£million
40
70
4
(8)
(9)
(2)
(1)
(1)
50
196
81
(75)
(5)
(2)
(2)
(9)
93
234
104
(11)
93
319
(85)
234
8
—
65
—
16
2
90
266
85
(83)
(14)
(4)
(3)
(10)
327
423
(96)
327
8
16
67
Fixtures,
fittings and
other
equipment
£million
Land and
buildings
£million
Total
£million
27
27
2
(6)
(10)
—
40
47
(7)
40
5
1
—
—
45
18
(12)
—
(1)
50
62
(12)
50
—
7
3
27
72
20
(18)
(10)
(1)
90
109
(19)
90
5
8
3
Freehold land and buildings predominantly comprise the Group’s investment property. The fair value of investment property was
determined by an external, independent property valuation expert as £14 million (2014: £22 million). The valuation expert has
appropriate recognised professional qualifications as well 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 are set out in note 29.
Dixons Carphone plc Annual Report and Accounts 2014/15
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a
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Notes to the Group financial statements
12 Inventory
Finished goods and goods for resale
13 Trade and other receivables
Trade receivables
Less provision for bad and doubtful debts
Prepayments
Other receivables
Accrued income
Derivative financial assets
Non-current
Current
2 May
2015
£million
29 March
2014
£million
920
240
2 May
2015
£million
1,010
(20)
990
124
74
22
15
29 March
2014
£million
935
(20)
915
35
55
5
2
1,225
1,012
318
907
191
821
1,225
1,012
The majority of trade and other receivables are non-interest bearing. Non-current receivables mainly comprise commission
receivable on sales. Where the effect is material, trade and other receivables are discounted using discount rates which reflect
the relevant costs of financing. The carrying amount of trade and other receivables approximates fair value.
Ageing of gross trade receivables and provisions:
Not yet due
Past due:
Under two months
Two to four months
Over four months
2 May 2015
29 March 2014
Gross trade
receivables
£million
Provision
£million
Net trade
receivables
£million
Gross trade
receivables
£million
Provision
£million
Net trade
receivables
£million
848
(6)
842
795
(2)
793
52
17
93
162
(5)
—
(9)
(14)
47
17
84
49
39
52
148
140
(3)
(1)
(14)
(18)
46
38
38
122
1,010
(20)
990
935
(20)
915
114
Dixons Carphone plc Annual Report and Accounts 2014/15
13 Trade and other receivables continued
Movements in the provision for impairment of trade receivables is as follows:
Opening balance
Dixons Retail Merger
CPW Europe Acquisition
Charged to the income statement
Receivables written off as irrecoverable
Disposals
Transferred to assets held for sell
Foreign exchange
Closing balance
2 May
2015
£million
29 March
2014
£million
(20)
(19)
—
(8)
16
2
8
1
(20)
—
—
(23)
(19)
22
—
—
—
(20)
The Group’s trade receivables included the following amounts which were past due, but for which the Group has made no
provision based on historical rates of recoverability.
Under two months
Two to four months
Over four months
14 Cash and cash equivalents
Cash at bank and on deposit
2 May
2015
£million
29 March
2014
£million
47
17
84
46
38
38
148
122
2 May
2015
£million
29 March
2014
£million
163
283
Cash at bank and on deposit includes short term bank deposits which are available on demand. Within cash and cash
equivalents, £92 million (2014: £26 million) is restricted and predominantly comprises funds held under trust to fund potential
customer support agreement liabilities as well as by the Group’s insurance businesses to cover regulatory reserve requirements.
These funds are not available to offset group borrowings.
Dixons Carphone plc Annual Report and Accounts 2014/15
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Notes to the Group financial statements
15 Trade and other payables
Trade payables
Other taxes and social security
Derivative financial instruments
Other creditors
Accruals
Deferred income
2 May 2015
29 March 2014
Current
£million
1,097
205
26
103
384
146
1,961
Non-
current
£million
Current
£million
—
—
—
277
72
147
496
565
127
—
—
166
11
869
Non-
current
£million
113
—
—
—
—
—
113
Non-current trade and other payables relate principally to property leases that are deemed to be over-rented. These liabilities are
unwound over the period of the relevant lease, of up to 22 years. The carrying amount of trade and other payables approximates
their fair value.
16 Deferred consideration
Deferred consideration
2 May 2015
29 March 2014
Current
£million
25
Non-
current
£million
6
Current
£million
25
Non-
current
£million
25
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m
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t
a
t
s
Deferred consideration primarily relates to the CPW Europe Acquisition with £25 million payable to Best Buy in June 2015
(2014: payable to Best Buy in equal instalments in June 2014 and June 2015). The amount bears interest at 2.5% per annum.
l
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17 Loans and other borrowings
Non-current liabilities
Loans and other borrowings
2 May
2015
£million
29 March
2014
£million
330
330
290
290
Committed facilities
Until the Merger, the Group had a £650 million multi-currency term and revolving credit facility which matured in April 2017. This
facility was split into two tranches: a £400 million revolving tranche and a term loan tranche of £250 million. The term loan facility
reduced by £25 million during the year ended 2 May 2015 and amortises by a further £50 million on 30 June 2016.
These facilities were amended on completion of the Merger for specific requirements of Dixons, a temporary loosening of certain
covenants and some other provisions specific to the Merger, but which otherwise remained on the same terms as previously
agreed and will still mature in April 2017. In addition, the Company arranged a new £250 million revolving credit facility maturing
on 29 April 2017.
The rate of interest payable on borrowings is a margin of 1.5% to 2.25% per annum over LIBOR or EURIBOR.
The facilities require guarantees to be provided by certain Group entities under the facilities.
Bank overdraft and other uncommitted facilities
The Group has overdraft and uncommitted money market facilities totalling approximately £157 million (2014: £95 million).
18 Finance lease obligations
Amounts due:
Within one year
In more than one year and not more than five years
In more than five years
Less future finance charges
Present value of lease obligations
Less amounts due within one year
Amounts due after more than one year
2 May 2015
29 March 2014
Present
value of
minimum
lease
payments
£million
Minimum
lease
payments
£million
Present
value of
minimum
lease
payments
£million
Minimum
lease
payments
£million
8
33
114
155
(64)
91
(2)
89
8
26
57
91
—
91
(2)
89
1
—
—
1
—
1
(1)
—
1
—
—
1
—
1
(1)
—
The majority of finance leases relate to properties in the UK which were acquired as part of the Merger where obligations are
denominated in Sterling and remaining lease terms vary between 10 and 21 years. The effective borrowing rate on individual
leases ranged between 5.51% and 8.15% (2014: 6.1%). Interest rates are fixed at the contract date. All leases are on a fixed
repayment basis and no arrangements have been entered into for contingent rental payments.
The fair value of the Group’s lease obligations approximates their carrying amount.
Dixons Carphone plc Annual Report and Accounts 2014/15
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Notes to the Group financial statements
19 Provisions
At beginning of period
CPW Europe Acquisition
Merger
Additions
Released in the period
Utilised in the period
Reclassification to held for sale
Disposal of business
Foreign exchange
At end of period
Analysed as:
Current
Non-current
Reorganisation
£million
Sales
£million
Other
£million
Total
£million
Reorganisation
£million
Sales
£million
Other
£million
Total
£million
2 May 2015
29 March 2014
22
—
31
39
(4)
(63)
(1)
—
(1)
23
20
3
23
10
—
—
2
—
(5)
—
—
(1)
6
6
—
6
18
—
27
7
—
(4)
(1)
(1)
—
46
28
18
46
50
—
58
48
(4)
(72)
(2)
(1)
(2)
75
54
21
75
—
35
—
—
—
(13)
—
—
—
22
22
—
22
—
11
—
3
—
(4)
—
—
—
10
10
—
10
7
17
—
4
(3)
(7)
—
—
—
18
18
—
18
7
63
—
7
(3)
(24)
—
—
—
50
50
—
50
A description of each provision is included in note 1.
Provisions recognised as part of the Merger primarily comprise provisions for onerous property lease contracts (within other) and
Merger related costs (within reorganisation).
Additions during the year ended 2 May 2015 relate to restructuring charges arising from the Merger, restructuring provisions
recognised by the businesses in Germany and the Netherlands prior to becoming discontinued operations held for sale and
provisions recognised by the Group relating to the disposal of discontinued operations.
Other provisions include £25 million in relation to onerous property lease contracts at 2 May 2015.
Non-current provisions are expected to be utilised over a period up to ten years.
118
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20 Retirement and other post-employment benefit obligations
Retirement benefit obligations – UK
– Nordics
2 May
2015
£million
29 March
2014
£million
486
3
489
—
—
—
The Group operates a defined benefit and a number of defined contribution schemes which were acquired as part of the Dixons
Retail Merger.
The principal scheme which operates in the UK includes a funded defined benefit section whose assets are held in a separate
trustee administered fund. The scheme is valued by a qualified actuary at least every three years and contributions are assessed
in accordance with the actuary’s advice. Since 1 September 2002, the defined benefit section of the scheme has been closed to
new entrants and on 30 April 2010 was closed to future accrual with automatic entry into the defined contribution section being
offered to those active members of the defined benefit section at that time. Membership 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 addition,
contributions are made to state pension schemes with defined benefit characteristics. There has been a net movement in
the obligation since the Merger and this principally relates to an actuarial loss of £1 million.
a) Defined contribution pension schemes
The pension charge in respect of defined contribution schemes was £20 million (2013/14: £4 million).
b) UK Defined benefit pension scheme – actuarial valuation and assumptions
A full actuarial valuation of the scheme was last carried out as at 31 March 2013 and showed a shortfall of assets compared with
liabilities of £373 million. A ‘recovery plan’ based on this valuation was agreed with the Trustee post the Dixons Retail Merger
such that contributions in respect of the scheme year end of 31 March of £25 million were made in 2014/15, rising to £35 million
for 2015/16. Contributions rise to £47 million by 2024/25. The next triennial valuation will be as at 31 March 2016.
The principal actuarial assumptions as at 31 March 2013 were:
Discount rate for accrued benefits†
– Growth portfolio
– Matching portfolio
Rate of increase to pensions
Inflation
Rate per annum
5.9%
3.8%
0% – 3.8%
3.4%
† The discount rate is based on a linear de-risking methodology which assumes the Scheme’s investment strategy switches investments from
growth assets (such as equities) to matching assets (such as bonds) over a period of 30 years from 2013 to 2043 so that in 30 years’ time
the asset portfolio is projected to be 80% invested in matching assets.
At 31 March 2013, the market value of the scheme’s investments was £812 million and, based on the above assumptions,
the value of the assets was sufficient to cover 69% of the benefits accrued to members with the liabilities amounting to
£1,185 million.
Dixons Carphone plc Annual Report and Accounts 2014/15
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Notes to the Group financial statements
20 Retirement and other post-employment benefit obligations continued
c) UK Defined benefit pension scheme – IAS 19
The following summarises the components of net defined benefit expense recognised in the consolidated income statement,
the funded status and amounts recognised in the consolidated balance sheet and other amounts recognised in the statement
of comprehensive income. The methodologies set out in IAS 19 are different from those used by the scheme actuaries in
determining funding arrangements.
(i) Principal assumptions adopted
The assumptions used in calculating the expenses and obligations are set by the directors after consultation with the
independent actuaries.
Rates per annum
Discount rate
Rate of increase in pensions in payment /
deferred pensions (pre / post April 2006 accrual)
Inflation
2 May
2015
£million
29 March
2014
£million
3.5%
2.9% /
1.9%
3.1%
—
—
—
The Group uses demographic assumptions underlying the last formal actuarial valuation of the scheme as at 31 March 2013.
In particular, post retirement mortality has been assumed to follow the standard mortality tables ‘S1’ All Pensioners tables
published by the CMI, based on the experience of Self-Administered Pension Schemes (SAPS) with multipliers of 100% for
males and 105% for females. In addition, an allowance has been made for future improvements in longevity from 2003 by using
the new CMI 2013 Core projections with a long term rate of improvement of 1.5% per annum for men and 1.25% per annum for
women. Applying such tables results in an average expected longevity of between 87.1 years and 88.8 years for men and
between 88.8 years and 90.2 years for women for those reaching 65 over the next 15 years.
(ii) Amounts recognised in consolidated income statement
Net interest expense on defined benefit obligation
(iii) Amounts recognised in the consolidated statement of comprehensive income and expense:
Remeasurement of defined benefit obligation – actuarial gains / (losses) arising from:
changes in financial assumptions
experience adjustments
change in demographic assumptions
Remeasurement of scheme assets:
Actual return on plan assets (excluding amounts included in net interest expense)
Cumulative actuarial loss
13 months
ended
2 May
2015
£million
Year
ended
29 March
2014
£million
13
—
13 months
ended
2 May
2015
£million
Year
ended
29 March
2014
£million
(168)
19
(9)
86
(72)
—
—
—
—
—
120
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20 Retirement and other post-employment benefit obligations continued
(iv) Amounts recognised in the consolidated balance sheet
Present value of defined benefit obligations
Fair value of plan assets
Net obligation
Changes in the present value of the defined benefit obligation:
Opening obligation at date of 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
The weighted average maturity profile of the defined benefit obligation at the end of the year is 21 years.
Changes in the fair value of the scheme assets:
Opening fair value at date of Dixons Retail Merger
Interest income
Employer special contributions
Remeasurements in other comprehensive income:
Actual return on plan assets (excluding interest income)
Benefits paid
Closing fair value
Analysis of scheme assets:
Overseas and global equities
Diversified growth
Multi-asset credit funds
– Listed
– Listed
– Unlisted
– Listed
– Unlisted
Emerging market multi asset funds
– Listed
Private equity
Property
Index-linked gilts
Corporate bonds
Liability driven investments (LDI)
Cash and cash instruments
Other
– Unlisted
– Unlisted
– Unlisted
– Listed
– Listed
– Listed
– Unlisted
– Unlisted
2 May
2015
£million
(1,431)
945
(486)
29 March
2014
£million
—
—
—
2 May
2015
£million
1,259
38
168
(19)
9
(24)
1,431
29 March
2014
£million
—
—
—
—
—
—
—
2 May
2015
£million
29 March
2014
£million
830
25
28
86
(24)
945
—
—
—
—
—
—
2 May
2015
£million
29 March
2014
£million
286
182
10
29
23
49
3
47
15
101
79
69
51
1
945
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Dixons Carphone plc Annual Report and Accounts 2014/15
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Notes to the Group financial statements
20 Retirement and other post-employment benefit obligations continued
The investment strategy of the scheme is determined by the independent Trustee through advice provided by an independent
investment consultant. The scheme invests in a diverse range of asset classes as set out above with matching assets primarily
comprising holdings in inflation linked gilts and corporate bonds.
Actual return on the scheme assets was a gain of £111 million (2013/14: £nil).
v) Sensitivities
The value of the UK defined benefit pension scheme assets are sensitive to market conditions, particularly equity values which
comprise approximately 67% of the scheme’s assets. Changes in assumptions used for determining retirement benefit costs
and liabilities may have a material impact on the 2015/16 income statement and the balance sheet. The main assumptions are
the discount rate, the rate of inflation and the assumed mortality rate. The following table provides an estimate of the potential
impacts of each of these variables if applied to the current year consolidated income statement and balance sheet.
Positive / (negative) effect
Discount rate: 0.25% increase
Inflation rate: 0.25% increase†
Mortality rate: 1 year increase
Net finance costs
Net deficit
13 months
ended
2 May
2015
£million
Year
ended
29 March
2014
£million
2 May
2015
£million
29 March
2014
£million
2
(2)
(2)
—
—
—
73
(57)
(42)
—
—
—
s
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m
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t
a
t
s
† The increase in scheme benefits provided to members on retirement is subject to an inflation cap.
d) Other post-employment benefits – IAS 19
l
i
a
c
n
a
n
F
i
The Group offers other post-employment benefits to employees in overseas territories, in particular in Greece. These benefits are
unfunded. At 2 May 2015 the net obligation in relation to these benefits was £3 million (2014: £nil). The net movement in the
obligation (since the Merger) is not significant.
122
Dixons Carphone plc Annual Report and Accounts 2014/15
21 Share capital, retained earnings and reserves
a) Share capital
Allotted, called-up and fully paid ordinary shares of 0.1p each
Ordinary shares of 0.1p each in issue at the beginning of the period
Issued as consideration to Dixons shareholders
Issued for cash
Issue of Consideration Shares
Exercise of share options
Note
(i)
(ii)
(iii)
2 May
2015
million
1,151
29 March
2014
million
576
2 May
2015
£million
29 March
2014
£million
1
1
2 May
2015
million
29 March
2014
million
2 May
2015
£million
29 March
2014
£million
576
575
—
—
—
473
—
47
42
14
1
—
—
—
—
1
1
—
—
—
—
1
Ordinary shares of 0.1p each in issue at the end of the period
1,151
576
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a
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F
i
(i) During the year, 574.7 million shares with a mid-market price of £3.432 were issued as part of the all share merger with Dixons as described
in note 23.
(ii) On 30 April 2013 the Group placed 47.2 million ordinary shares at £2.22 per share, raising net proceeds of £103 million which were used to
fund part of the consideration for the CPW Europe Acquisition.
(iii) On 25 June 2013 the Group issued 42.1 million Consideration Shares to Best Buy. Best Buy agreed to waive rights to dividends payable on
these shares for the period in which they were in their ownership. The Consideration Shares were placed by the Group in July 2013 and
from this point held the same rights as other ordinary shares.
b) Retained earnings and reserves
Movement in retained earnings and reserves during the reported periods are presented in the consolidated statement of changes
in equity. The demerger reserve arose as part of the demerger of the Group from TalkTalk in 2010.
22 Equity dividends
Amounts recognised as distributions to equity shareholders in the period
– on ordinary shares of 0.1p each
Final dividend for the year ended 31 March 2013 of 3.25p per ordinary share
Interim dividend for the year ended 29 March 2014 of 2.00p per ordinary share
Final dividend for the year ended 29 March 2014 of 4.00p per ordinary share
Interim dividend for the 13 months ended 2 May 2015 of 2.50p per ordinary share
2 May
2015
£million
29 March
2014
£million
—
—
23
29
52
19
11
—
—
30
The following distribution is proposed but had not been effected at 2 May 2015 and is subject to shareholders’ approval at the
forthcoming Annual General Meeting:
Final dividend for the 13 months ended 2 May 2015 of 6.0p per ordinary share
£million
69
Dixons Carphone plc Annual Report and Accounts 2014/15
123
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Notes to the Group financial statements
23 Merger and acquisition
2014/15: All-share merger of Dixons and Carphone
On 6 August 2014, the Group completed an all-share merger of Dixons and Carphone after which the shareholders of Dixons
and Carphone each held 50% of Dixons Carphone on a fully diluted basis taking into account existing share options and award
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.
The merged entity creates a leader in European consumer electricals, mobiles, connectivity and related services. The directors
believe that the Merger will deliver significant value to shareholders through a combination of enhanced commercial
opportunities, operating synergies and growth opportunities. The integration of the two businesses is being managed by a
dedicated integration team, bringing together the best relevant capabilities of both businesses, with the aim of facilitating a
smooth integration.
a) Fair value of assets and liabilities
The provisional fair values of identifiable assets and liabilities of Dixons as at the acquisition date were as follows:
Note
£million
(i)
(ii)
(iii)
403
266
305
190
789
20
1
339
30
2,343
(289)
(93)
(432)
(1,949)
(49)
(58)
(90)
(30)
(2,990)
(iv)
(v)
(vi)
(647)
2,629
1,982
Assets
Intangible assets
Property, plant & equipment
Trade and other receivables
Deferred tax assets
Inventory
Income tax receivable
Short term investments
Cash and cash equivalents
Assets held for sale
Total assets
Liabilities
Loans and other borrowings
Finance lease obligations
Retirement benefit obligations
Trade and other payables
Income tax payable
Provisions
Deferred tax liabilities
Liabilities directly associated with assets classified as held for sale
Total liabilities
Total fair value of identifiable net liabilities acquired
Provisional goodwill
Total consideration – fair value of ordinary shares issued
124
Dixons Carphone plc Annual Report and Accounts 2014/15
23 Merger and acquisition continued
2014/15: All-share merger of Dixons and Carphone continued
(i) The fair value of trade and other receivables represents gross trade receivables of £324 million less amounts not considered collectible of
£19 million.
(ii) Assets held for sale included cash and cash equivalents of £8 million.
(iii) Provisions include the recognition of contingent liabilities of £7 million mainly in relation to lease covenants relating to premises assigned or
sublet to third parties and legal claims. It is anticipated that the majority of any utilisation associated with these contingent liabilities will be
incurred over the next five years. No utilisation of these provisions has occurred between the acquisition date and 2 May 2015.
(iv) The finalisation of the fair value of the acquired assets and liabilities will be completed within 12 months of the acquisition and therefore
remains provisional until 5 August 2015 owing to the extensive nature of the valuation process as well as the requirement to re-assess
the status of contingent liabilities which have been provided for. It is therefore possible that adjustments to goodwill could arise up until
5 August 2015.
(v) The goodwill arising on acquisition is not deductible for income tax purposes. The provisional goodwill of £2,629 million reflects the fact that
Dixons’ value is based on its cash generating potential rather than its existing assets and the fact that many of its key strengths, such as its
scale and expertise, do not represent intangible assets as defined by IFRS. The goodwill furthermore reflects the main reasons the directors
of Dixons and Carphone proposed the Merger, being:
• The markets in which Carphone and Dixons operate are converging and the combination of the two complementary businesses will create
the opportunity for compelling end-to-end propositions and long term relationships with customers;
• The Group will have improved scale and reach;
• Significant synergies will arise with operating synergies of at least £80 million on a recurring basis expected to be delivered in full by
2016/17; and
• The Merger will provide a stronger platform for growth through the provision of services to customers and businesses.
(vi) On 6 August 2014 the Company issued 574,723,226 shares with a mid-market share price of £3.432 as consideration to Dixons
shareholders, resulting in an increase to share capital and share premium of £1,972 million. In addition, the Company assumed the
obligation to satisfy outstanding share options within the Dixons Carphone business for which a fair value of £11 million has been
included as part of the consideration. This has been partially offset by shares with a value of £1 million included within Dixons Retail
Employee Share Trust.
b) Other information
Transaction related charges of £9 million incurred by the Group in respect of the Merger have been included in Non-Headline
operating expenses as set out in note 4.
The results of Dixons have been consolidated from 6 August 2014, contributing £5,586 million of revenue and profit after tax
of £200 million in the period to 2 May 2015. If the acquisition had completed at the beginning of Dixons’ financial year, being
1 May 2014, the Group’s revenue would have been £9,936 million and the Group’s Headline profit after tax would have been
£293 million. Non-Headline items included within Dixons results in the period prior to the Merger comprised £11 million in
respect of the acceleration of share-based payment charges which vested on the Merger, £12 million of merger related
professional fees, £5 million of merger integration costs, £42 million of debt restructuring costs, £5 million of provision releases
relating to discontinued operations and £4 million of pension interest costs. A tax credit of £11 million was recognised against
these charges.
Dixons Carphone plc Annual Report and Accounts 2014/15
125
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Notes to the Group financial statements
23 Merger and acquisition continued
2013/14 CPW Europe Acquisition
On 26 June 2013 the Group completed the CPW Europe Acquisition for a gross consideration of £500 million, bringing the
Group’s ownership interest to 100%. CPW Europe is one of the largest independent telecommunications specialists in Europe,
operating retail stores, principally under the Carphone Warehouse and Phone House brands, together with well-developed online
propositions. CPW Europe is also increasingly focused on leveraging its assets and expertise to provide services to third parties
through its Connected World Services business.
The primary reasons for the acquisition were to bring a simplified ownership structure, making day-to-day management easier
and the strategic decision-making process more streamlined, and enabling the Group to better leverage CPW Europe’s asset
base and know-how.
c) Fair value of assets and liabilities
The fair values of identifiable assets and liabilities of CPW Europe as at the acquisition date were as follows:
Notes
£million
120
72
44
343
(i)
1,112
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(vii)
53
5
(836)
(48)
(63)
(271)
(3)
528
484
1,012
500
370
50
113
(21)
1,012
370
(53)
317
Intangible assets
Property, plant and equipment
Deferred tax assets
Stock
Trade and other receivables
Net cash and cash equivalents
Current asset investments
Trade and other payables
Corporation tax liabilities
Provisions
Loans and other borrowings
Finance lease obligations
Identifiable net assets
Goodwill
Total consideration
Satisfied by:
Fair value of existing joint venture investment
Cash
Deferred consideration
Equity
Derivative asset
Net cash outflow arising on acquisition:
Cash consideration
Less net cash and cash equivalents acquired
126
Dixons Carphone plc Annual Report and Accounts 2014/15
23 Merger and acquisition continued
2013/14 CPW Europe Acquisition continued
(i) The fair value of trade and other receivables represents gross contractual amounts receivable of £1,135 million, less amounts not
considered collectable of £23 million.
(ii) Provisions include the recognition of contingent liabilities of £8 million in relation to legal claims and other potential exposures. It is expected
that any costs associated with these contingent liabilities will be incurred over the next four years.
(iii) The goodwill of £484 million arising on the acquisition reflects the fact that CPW Europe’s value is based on its cash generating potential
rather than its existing assets, and the fact that many of its key strengths, such as its scale and expertise, do not represent intangible assets
as defined by IFRS. None of the goodwill is expected to be deductible for income tax purposes.
(iv) IFRS 3 ‘Business Combinations’ requires that the Group’s existing 50% interest in CPW Europe be revalued to its fair value as part of the
acquisition accounting process. The fair value of this interest is considered to be equal to the gross consideration of £500 million paid by the
Group to acquire Best Buy’s 50% interest in CPW Europe. As the carrying value of the Group’s investment in CPW Europe was £499 million
at the acquisition date, a gain of £1 million was recognised in Non-Headline operating expenses in respect of this revaluation.
(v) Gross cash consideration of £370 million was settled on completion, offset by payments from Best Buy of £29 million in respect of the
prepayment or termination of the Group’s other interests with Best Buy.
(vi) The £50 million of deferred cash consideration, which bears interest at 2.5% per annum, is payable to Best Buy in two equal instalments of
£25 million in June 2014 and June 2015.
(vii) A further £80 million of consideration was provided through the issue on completion of 42.1 million shares to Best Buy, at a price of £1.90
per share. The Group had the right to place the Consideration Shares on Best Buy’s behalf during the 12 month period to June 2014, and to
retain any upside on disposal. The value of the Consideration Shares on completion was £101 million, based on a share price at that date of
£2.38, and this value is recorded as consideration, with the value associated with the right to place the Consideration Shares recognised as
a derivative financial asset of £21 million. The Consideration Shares were placed in July 2013 at an average price of £2.44, resulting in a net
cash gain of £23 million for the Group. The difference between the disposal proceeds and the value of the derivative financial asset has
been recognised as a gain of £2 million in Non-Headline operating expenses.
As part of the transaction, the Group agreed to satisfy Best Buy’s obligations in relation to certain incentive schemes. Shares
with a value of £12 million were issued in respect of Best Buy’s obligations and have been included in consideration.
d) Other information
The results of CPW Europe have been consolidated into the Group’s income statement from 26 June 2013, contributing
£2,561 million of revenue and a profit before tax of £61 million in the period to 29 March 2014. If the acquisition had completed
on 1 April 2013, being the first day of the financial year, the Group’s revenue would have been £3,402 million and the Group’s
profit before tax would have been £46 million.
Transaction-related charges of £18 million, comprising banking and professional fees of £7 million and cash and non-cash
charges relating to incentive schemes of £11 million have been included in Non-Headline operating expenses. A tax credit of
£3 million was also recognised in respect of these costs.
e) Share of results from joint ventures
The Group’s share of results of joint ventures within continuing operations relate to CPW Europe prior to its acquisition on
26 June 2013 and is analysed as follows:
Headline revenue
Headline EBIT†
Net finance costs
Taxation on Headline results
Headline profit after taxation
Group share of Headline profit after taxation
Group share of French operations (in process of closure) (post-tax)
Group share of loss after taxation
29 March
2014
£million
777
12
(2)
(5)
5
3
(23)
(20)
† Headline EBIT includes the unwinding of discounting for the time value of money on network commissions receivable over the life of the
customer. This unwinding had a value of £3 million for the period to 26 June 2013 and is treated as finance income in the joint venture’s
statutory results.
Dixons Carphone plc Annual Report and Accounts 2014/15
127
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Notes to the Group financial statements
24 Discontinued operations and assets held for sale
On 16 May 2014 the Group announced that it had entered into an agreement to sell its interest in Virgin Mobile France
and completed the disposal on 4 December 2014 for gross consideration of £104 million and generated a profit of
£87 million.
Following the Merger, the Group put in place a strategy of focusing on market leadership positions while engaging in
other markets through partnerships with its Connected World Services division. This led the Group to carry out detailed
strategic assessments of its Phone House operations which concluded in the decision to exit certain markets.
• On 15 April 2015 the Group announced that it had agreed the sale of its operations in Germany to Drillisch AG, a leading
mobile virtual network operator in Germany. The sale completed on 5 May 2015.
• On 24 April 2015 the Group entered into an agreement to dispose of a majority 83% stake in its operations in the Netherlands
to Relevant Holdings BV, a company set up by the shareholders of Optie1 which has extensive telecom retailing experience in
the Dutch market. The sale completed on 30 June 2015.
• On 16 July 2015 the Group announced its commitment to dispose of its operations in Portugal following the completion of a
strategic review in 2014/15. Discussions which commenced with potential acquirers during 2014/15 are advanced and an
announcement confirming details of the disposal is expected in due course.
The closure of the Phone House operations in France, which was announced in 2013/14, was completed during the year
ended 2 May 2015 and is therefore now treated as a discontinued operation.
Prior to the Merger, Dixons agreed to sell its operations in the Czech Republic and Slovakia. The net assets held for sale
associated with this business were included within the fair value of assets and liabilities acquired through the Merger and
the sale completed on 11 August 2014.
All businesses noted above have been presented within discontinued operations and the assets and liabilities associated
with Germany, Netherlands and Portugal have been recognised as held for sale at 2 May 2015. The results of the Phone
House Germany, Netherlands and Portugal prior to the CPW Europe Acquisition continue to be reported in results of joint
ventures within Headline continuing operations. The Group’s interest in Virgin Mobile France was presented as an asset
held for sale as at 29 March 2014 and equity accounting was ceased from this date.
a) Loss after tax – discontinued operations
The results of discontinued operations are comprised as follows:
Revenue
Expenses
Loss before tax
Income tax
Profit on disposal
Impairment losses recognised on classification as held for
sale
Virgin
Mobile
France
£million
Phone
House
France
£million
Phone
House
Germany
£million
Phone
House
Netherlands
£million
Phone
House
Portugal
£million
Total
£million
13 months ended 2 May 2015
—
—
—
—
—
87
—
87
—
—
—
—
—
—
—
—
323
(364)
(41)
—
(41)
—
(16)
(57)
159
(239)
(80)
—
(80)
—
(43)
(123)
47
(55)
(8)
—
(8)
—
(13)
(21)
529
(658)
(129)
—
(129)
87
(72)
(114)
The profit on disposal of Virgin Mobile France comprises consideration of £104 million, £4 million of costs and £13 million of net
assets disposed. The loss before tax of the operations in Germany, the Netherlands and Portugal include restructuring costs and
asset impairment charges from reorganisations carried out prior to the businesses being classified as held for sale. Such costs
include the Non-Headline exceptional restructuring charges of £67 million, of which £35 million relates to goodwill impairment,
recognised in relation to the Phone House Germany and Netherlands. The impairment losses recognised on classification as
held for sale on all other businesses reflects the difference between the consideration expected to be received and the net
assets held for sale including any impairment of assets to their anticipated net realisable value on completion less any accrued
costs to sell.
128
Dixons Carphone plc Annual Report and Accounts 2014/15
24 Discontinued operations and assets held for sale continued
Revenue
Expenses
Loss before tax
Income tax
Loss after tax from discontinued operations
b) Assets held for sale
Restated
12 months ended 29 March 2014
Virgin
Mobile
France
£million
Phone
House
France
£million
Phone
House
Germany
£million
Phone
House
Netherlands
£million
Phone
House
Portugal
£million
—
—
—
—
—
71
(77)
(6)
—
(6)
395
(396)
(1)
—
(1)
122
(124)
(2)
—
(2)
45
(46)
(1)
—
(1)
Total
£million
633
(643)
(10)
—
(10)
The Group’s assets held for sale and associated liabilities are analysed as follows:
Investments in joint ventures
Inventory
Receivables
Cash and cash equivalents
Assets held for sale
Liabilities associated with assets held for sale - current liabilities
Net assets held for sale
c) Cash flows from discontinued operations
Operating activities
Investing activities
2 May
2015
£million
29 March
2014
£million
—
16
66
55
137
(68)
69
11
—
—
—
11
—
11
13 months
ended
2 May
2015
£million
Restated
Year
ended
29 March
2014
£million
(78)
81
3
44
(3)
41
Dixons Carphone plc Annual Report and Accounts 2014/15
129
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Notes to the Group financial statements
25 Financial risk management and derivative financial instruments
Financial instruments that are measured at fair value in the financial statements require disclosure of fair value measurements
by level based on the following fair value measurement hierarchy:
• Level 1 – quoted prices (unadjusted) in active markets for identical assets and liabilities;
• Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly
(that is, as prices) or indirectly (that is, derived from prices); and
• Level 3 – inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
The significant inputs required to fair value all of the Group’s financial instruments are observable. The Group only holds Level 2
financial instruments. There have also been no transfers of assets or liabilities between levels of the fair value hierarchy.
Fair values have been arrived at by discounting future cash flows, assuming no early redemption, or by revaluing forward
currency contracts and interest rate swaps to period end market rates as appropriate to the instrument.
The directors consider that the book value of financial assets and liabilities recorded at amortised cost and their fair value are
approximately equal.
The book value and fair value of the Group’s financial assets, liabilities and derivative financial instruments are as follows:
Cash and cash equivalents
Trade and other receivables excluding derivative financial assets
Derivative financial (liabilities) / assets
Loans to Virgin Mobile France (see note 24)
Trade and other payables
Finance leases
Deferred consideration
Loans and other borrowings
a) Financial risk management policies
2 May
2015
£million
163
1,086
(11)
—
29 March
2014
£million
283
975
2
18
(1,933)
(844)
(91)
(31)
(1)
(50)
(385)
(290)
The Group’s activities expose it to certain financial risks including market risk (such 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 risks.
These financial instruments consist of bank loans and deposits, spot and forward foreign exchange contracts, foreign exchange
swaps and interest rate swaps.
Throughout the period under review, in accordance with Group policy, no speculative use of derivatives, foreign exchange or
other instruments was permitted. No contracts with embedded derivatives have been identified and, accordingly, no such
derivatives have been accounted for separately.
130
Dixons Carphone plc Annual Report and Accounts 2014/15
25 Financial risk management and derivative financial instruments continued
b) Foreign exchange risk
The Group undertakes certain transactions that are denominated in foreign currencies and as a consequence has exposure to
exchange rate fluctuations. These exposures primarily arise from inventory purchases, with most of the Group’s exposure being
to US Dollar and Euro fluctuations. The Group uses spot and forward currency contracts to mitigate these exposures, with such
contracts designed to cover exposures ranging from one month to one year.
The translation risk on converting overseas currency profits or losses is not hedged and such profits or losses are converted into
Sterling at average exchange rates throughout the year. The Group’s principal translation currency exposures are the Euro and
Norwegian Krone.
At 2 May 2015, the total notional principal amount of outstanding currency contracts was £1,540 million (2014: £68 million).
Monetary assets and liabilities and foreign exchange contracts are sensitive to movements in foreign exchange rates. This
sensitivity can be analysed in comparison to year-end rates (assuming all other variables remain constant) as follows:
10% movement in the US dollar exchange rate
10% movement in the Euro exchange rate
10% movement in the Swedish Krona exchange rate
10% movement in the Danish Krone exchange rate
10% movement in the Norwegian Krone exchange rate
c) Interest rate risk
13 months ended
2 May 2015
Year ended
29 March 2014
Effect on
Headline
profit
before tax
increase /
(decrease)
£million
Effect on
total equity
increase /
(decrease)
£million
Effect on
Headline
profit before
tax increase
/ (decrease)
£million
Effect on
total equity
increase /
(decrease)
£million
—
—
—
—
—
5
57
4
3
3
—
—
—
—
—
—
—
—
—
—
The Group’s interest rate risk arises primarily on cash, cash equivalents and loans and other borrowings, all of which are at
floating rates of interest and which therefore expose the Group to cash flow interest rate risk. These floating rates are linked to
LIBOR and other interest rate bases as appropriate to the instrument and currency. Future cash 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 1% movements in the interest rate for the currencies in which most Group
cash, cash equivalents, loans and other borrowings are denominated and on which the valuation of most derivative financial
instruments is based is as follows, assuming that the year-end positions prevail throughout the year:
1% increase in the Sterling interest rate
13 months ended
2 May 2015
Year ended
29 March 2014
Effect on
Headline
profit
before tax
increase /
(decrease)
£million
Effect on
total equity
increase /
(decrease)
£million
Effect on
Headline
profit before
tax increase
/ (decrease)
£million
Effect on
total equity
increase /
(decrease)
£million
—
4
—
4
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Notes to the Group financial statements
25 Financial risk management and derivative financial instruments continued
d) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty 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 available to it.
In order to ensure that sufficient funds are available for ongoing and future developments, the Group has committed bank
facilities, excluding overdrafts repayable on demand, totalling £875 million (2014: £650 million). Further details of committed
borrowing facilities are shown in note 17.
The table below analyses the Group’s financial liabilities and derivative assets and liabilities into relevant maturity groupings.
The amounts disclosed in the table are the contractual undiscounted cash flows, including both principal and interest flows,
assuming that interest rates remain constant and that borrowings are paid in full in the year of maturity.
In more
than one
year but
not more
than five
years
£million
Within
one year
£million
In more
than five
years
£million
Total
£million
(8)
(33)
(114)
(155)
(1,540)
(2)
1,530
(64)
(25)
—
(2)
—
(337)
(6)
(1,584)
(349)
In more
than one
year but
not more
than five
years
£million
Within
one year
£million
(1)
(68)
(1)
68
—
(8)
(25)
(869)
—
—
—
—
4
(303)
(25)
—
—
—
—
—
—
—
(1,540)
(4)
1,530
(401)
(31)
(1,933)
In more
than five
years
£million
Total
£million
—
—
—
—
—
—
—
—
(1)
(68)
(1)
68
4
(311)
(50)
(869)
2 May 2015
Finance leases
Derivative financial instruments – payable:
Forward foreign exchange contracts
Interest rate swaps
Derivative financial instruments – receivable:
Forward foreign exchange contracts
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Loans and other borrowings
Deferred consideration
Trade and other payables
29 March 2014
Finance leases
Derivative financial instruments – payable:
Forward foreign exchange contracts
Interest rate swaps
Derivative financial instruments – receivable:
Forward foreign exchange contracts
Interest rate swaps
Loans and other borrowings
Deferred consideration
Trade and other payables
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25 Financial risk management and derivative financial instruments continued
e) Credit risk
Credit risk is the risk of financial loss to the Group if a bank fails to meet its contractual obligations, and arises principally from
the Group’s receivables from customers. The Group’s exposure to credit risk is regularly monitored and the Group’s policy is
updated as appropriate.
The majority of the Group’s trade receivables are balances due from MNOs, which are generally major multi-national enterprises
with whom the Group has well-established relationships and are consequently not considered to add significantly to the Group’s
credit risk exposure. The Group's trade receivables also include balances due from equipment manufacturers, dealers and
Connected World Services customers, business to business customers and consumer credit receivables. Where it is considered
appropriate, the Group obtains credit insurance on accounts receivable. Provision is made for any receivables that are
considered to be irrecoverable. Details of trade receivables which are past due but not impaired are provided in note 13.
The credit risks on cash and cash equivalents and derivative financial instruments are closely monitored and credit ratings are
used in determining maximum counterparty credit risk.
The Group’s funding is reliant on its £875 million bank facilities, which are provided by nine banks; these institutions are
considered to be adequately capitalised to continue to meet their obligations under the facility.
The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the
Group's maximum exposure to credit risk.
f) Capital risk
The Group manages its capital to ensure that entities within the Group will be able to continue as going concerns, whilst
maximising the return to shareholders through a suitable mix of debt and equity. The capital structure of the Group consists of
cash and cash equivalents, loans and other borrowings and equity attributable to equity holders of the Company, comprising
issued capital, reserves and accumulated profits. Except in relation to minimum capital requirements in its insurance business,
the Group is not subject to any externally imposed capital requirements. The Group monitors its capital structure on an ongoing
basis, including assessing the risks associated with each class of capital.
g) Derivatives
Derivative financial instruments comprise forward foreign exchange contracts, foreign exchange swaps and interest rate swaps.
The Group has designated financial instruments under IAS 39 as follows:
Cash flow hedges
At 2 May 2015 the Group had forward and swap foreign exchange contracts in place with a notional value of £1,487 million
(2014: £nil) that were designated and effective as cash flow hedges. These contracts are expected to cover exposures ranging
from one month to one year.
Interest rate swaps
The Group also held interest rate swaps with a notional value of £280 million (2014: £280 million) whereby the Group receives
a floating rate of interest based on LIBOR and pays a fixed interest rate. This contract matures in April 2017.
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Notes to the Group financial statements
26 Notes to the cash flow statement
a) Reconciliation of operating loss to net cash inflow from operating activities
Profit / (loss) before interest and tax – continuing operations
Depreciation and amortisation
Share-based payment charge
Non-cash movements on joint ventures
Impairments and other non-cash items
Operating cash flows before movements in working capital
Movements in working capital:
Decrease in inventory
(Increase) / decrease in receivables
(Decrease) / increase in payables
Decrease in provisions
13 months
ended
2 May
2015
£million
Year
ended
29 March
2014
£million
324
149
10
—
4
487
6
(89)
(289)
(5)
(377)
86
40
4
19
—
149
81
114
89
(20)
264
Cash generated from operations – continuing operations
110
413
b) Analysis of net debt
Cash and cash equivalents
Short-term investments
Borrowings due within one year
Borrowings due after more than one year
Obligations under finance leases
30 March
2014
£million
Cash flow
£million
Merger
£million
Other
non-cash
movements
£million
Currency
translation
£million
2 May
2015
£million
283
—
283
—
(290)
(1)
(291)
(120)
—
(120)
(55)
249
7
201
—
—
—
—
(289)
(93)
(382)
—
—
—
—
—
(4)
(4)
—
—
—
—
—
—
—
163
—
163
(55)
(330)
(91)
(476)
Net (debt) / funds
(8)
81
(382)
(4)
—
(313)
Cash and cash equivalents
Borrowings due within one year
Borrowings due after more than one year
Obligations under finance leases
1 April
2013
£million
117
Cash flow
£million
Acquisitions
£million
166
—
—
—
—
—
—
(19)
2
(17)
—
(271)
(3)
(274)
Net funds / (debt)
117
149
(274)
Other
non-cash
movements
£million
Currency
translation
£million
—
—
—
—
—
—
—
—
—
—
—
—
29 March
2014
£million
283
—
(290)
(1)
(291)
(8)
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27 Related party transactions
Transactions between the Group’s subsidiary undertakings, which are related parties, have been eliminated on consolidation and
accordingly are not disclosed. Transactions between Group undertakings and associates comprised sales of goods of £8 million
(2013/14: £nil).
The Group had the following transactions and balances with its joint venture, Virgin Mobile France (see also note 24):
Revenue for services provided
Net interest and other finance income
Loans owed to the Group
2 May
2015
£million
29 March
2014
£million
—
—
—
1
1
18
Revenue for services provided to Virgin Mobile France in the prior year related to commissions on sales of Virgin Mobile France
connections by the Group’s wholly owned operations in France.
All transactions entered into with related parties were completed on an arm’s length basis.
28 Capital commitments
Contracted for but not provided for in the accounts
2 May
2015
£million
55
29 March
2014
£million
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Notes to the Group financial statements
29 Operating lease arrangements
a) The Group as a lessee
Total undiscounted future committed payments due for continuing operations are as follows:
Total undiscounted future committed payments due:
Within one year
Between two and five years
After five years
Land and
buildings
£million
2015
Other
assets
£million
Land and
buildings
£million
2014
Other
assets
£million
361
1,227
1,001
2,589
7
14
1
22
93
249
130
472
—
—
—
—
Operating lease commitments represent rentals payable for retail, distribution and office properties, as well as vehicles,
equipment and office equipment. Contingent rentals are payable on certain retail store leases based on store revenues and
figures shown include only the minimum rental component.
The above figures include committed payments under onerous lease contracts for which provisions or accruals exist on the
balance sheet, including those for businesses exited.
The future minimum sub-lease payments expected to be received under non-cancellable sub-leases is £42 million
(2014: £33 million).
b) The Group as a lessor
The Group has investment properties which are let to third parties on long term leases for which the minimum future income
is as follows:
Total undiscounted future minimum lease income receivable:
Within one year
In two to five years
After five years
30 Contingent liabilities
2 May
2015
£million
29 March
2014
£million
1
5
6
12
2
8
12
22
2 May
2015
£million
29 March
2014
£million
3
—
In addition to the figures shown in the table above, contingent liabilities also exist in respect of lease covenants relating to
premises assigned to third parties.
136
Dixons Carphone plc Annual Report and Accounts 2014/15
Company balance sheet
Fixed assets
Investments
Current assets
Cash and cash equivalents
Debtors: due within one year
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Provisions
Loans payable
Net assets
Equity
Share capital
Share premium reserve
Profit and loss account
2 May
2015
£million
29 March
2014
£million
Notes
C4
2,678
753
C5
C6
C7
C8
C9
C9
C9
666
223
889
(160)
729
28
644
672
(54)
618
3,407
1,371
(2)
(330)
(2)
(290)
3,075
1,079
1
2,256
818
1
283
795
3,075
1,079
The financial statements of the Company were approved by the Board on 16 July 2015 and signed on its behalf by:
Sebastian James,
Group Chief Executive
Humphrey Singer,
Group Finance Director
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Notes to the Company financial statements
C1 Accounting policies
a) Basis of preparation
The Company is incorporated in the United Kingdom. The financial statements have been prepared on a going concern basis
(see note 1 to the Group financial statements) and in accordance with applicable United Kingdom accounting standards under
the historical cost convention, as modified by FRS 26 ‘Financial Instruments: Measurement’.
Historically, the Company has prepared its financial statements to the Saturday closest to its accounting reference date of
31 March. Following the Dixons Retail Merger, which is described further in note 23 to the Group financial statements, the
Company has changed its accounting reference date to 30 April which was the pre-existing accounting reference date of Dixons
Retail plc, but will continue to draw up accounts to the nearest Saturday and accordingly the financial period is for the 13 months
ended 2 May 2015. The comparative period is for the year ended 29 March 2014.
The Company has applied the exemption available in FRS 1 ‘Cash Flow Statements’ not to present its own cash flow statement.
The following principal accounting policies have been applied consistently throughout both financial periods.
b) Investments
Investments held in subsidiaries and joint ventures are recognised at cost, being the fair value of consideration, acquisition
charges associated with the investment and capital contributions by way of share-based payments, less any provision for
permanent diminution in value.
Investments where the Company does not have control or significant influence are treated as available-for-sale and recorded at
fair value. Changes in fair value, together with any related deferred taxation, are taken directly to reserves, and recycled to the
profit and loss account when the investment is sold or is determined to be impaired.
c) Share-based payments
Equity settled share-based payments are measured at fair value at the date of grant and expensed over the vesting period,
based on an estimate of the number of shares that will eventually vest.
Fair value is measured by use of a Binomial model for share-based payments with internal performance criteria (such as EPS
targets) and a Monte Carlo model for those with external performance criteria (such as TSR targets).
For schemes with internal performance criteria, the number of options expected to vest is recalculated at each balance sheet
date, based on expectations of performance against target and of leavers prior to vesting. The movement in cumulative expense
since the previous balance sheet date is recognised in the profit and loss account, with a corresponding entry in reserves.
For schemes with external performance criteria, the number of options expected to vest is adjusted only for expectations of
leavers prior to vesting. The movement in cumulative expense since the previous balance sheet date is recognised in the profit
and loss account, with a corresponding entry in reserves.
If a share-based payment scheme is cancelled, any remaining part of the fair value of the scheme is expensed through the profit
and loss account. If a share-based payment scheme is forfeited, no further expense is recognised and any charges previously
recognised through the profit and loss account are reversed.
Charges also arise on loans that are provided to employees to fund the purchase of shares in the Group as part of long term
incentive plans, to the extent to which the loans are not, in certain circumstances, repayable; the cost of the relevant part of such
loans is expensed over the course of the relevant incentive plans.
d) Dividends
Dividends receivable from the Company’s subsidiaries are recognised only when they are approved by shareholders.
Final dividend distributions to the Company’s shareholders are recognised as a liability in the financial statements in the year in
which they are approved by the Company’s shareholders. Interim and other dividends are recognised in the year in which they
are paid.
e) Foreign currency translation
Material transactions in foreign currencies are hedged using forward purchases or sales of the relevant currencies and are
recognised in the financial statements at the exchange rates thus obtained. Unhedged transactions are recorded at the
exchange rate on the date of the transaction. Material monetary assets and liabilities denominated in foreign currencies are
hedged, mainly using forward foreign exchange contracts to create matching liabilities and assets, and are retranslated at each
balance sheet date. Hedge accounting as defined by FRS 26 has been applied in the both years.
f) Loans and other borrowings
Bank fees and legal costs associated with the securing of external financing are capitalised and amortised over the term of the
relevant facility. All other borrowing costs are recognised in the profit and loss account in the period in which they are incurred.
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C1 Accounting policies continued
g) Provisions
Provisions are recognised when a legal or constructive obligation exists as a result of past events and it is probable that an
outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Provisions are discounted where the time value of money is considered to be material.
C2 Profit and loss account
In accordance with the exemption permitted by section 408 of the Companies Act 2006, the profit and loss account of the
Company is not presented separately. The profit recognised for the 13 months ended 2 May 2015 was £64 million (2013/14:
£19 million). Information regarding the audit fees for the Group is provided in note 3 to the Group financial statements.
C3 Equity dividends
Amounts recognised as distributions to equity shareholders in the period
– on ordinary shares of 0.1p each
Final dividend for the year ended 31 March 2013 of 3.25p per ordinary share
Interim dividend for the year ended 29 March 2014 of 2.00p per ordinary share
Final dividend for the year ended 29 March 2014 of 4.00p per ordinary share
Interim dividend for the 13 months ended 2 May 2015 of 2.50p per ordinary share
2 May
2015
£million
29 March
2014
£million
—
—
23
29
52
19
11
—
—
30
The following distribution is proposed but had not been effected at 2 May 2015 and is subject to shareholders’ approval at the
forthcoming Annual General Meeting:
Final dividend for the 13 months ended 2 May 2015 of 6.0p per ordinary share
C4 Fixed asset investments
Opening balance
Additions
Disposals
Closing balance
Cost
Accumulated impairments
Net carrying amount
£million
69
29 March
2014
£million
741
12
—
753
851
(98)
753
2 May
2015
£million
753
3,965
(2,040)
2,678
2,776
(98)
2,678
Fixed asset investments comprise investments in subsidiary undertakings, joint venture investments and other minority
investments. Details of the Company’s investments in subsidiary undertakings are provided in note C12.
2014/15:
On 6 August 2014, the Group completed an all-share merger of Dixons and Carphone after which the shareholders of Dixons
and Carphone each held 50% of Dixons Carphone on a fully diluted basis taking into account existing share options and award
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 majority of the additions listed. Immediately following the Merger, the shareholding in Dixons was
transferred down to the Company’s immediate subsidiary, New CPW Limited, and this transaction accounts for the majority of
the disposals.
2013/14:
Additions reflected the cost of shares issued to satisfy Best Buy’s obligations in relation to incentive schemes (see note 23 to the
Group financial statements).
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C5 Debtors: amounts falling due within one year
Amounts owed by Group undertakings
Loans to joint ventures
Deferred tax asset
Prepayments
Other debtors
2 May
2015
£million
29 March
2014
£million
194
—
3
5
21
223
614
18
2
5
5
644
Amounts owed by Group undertakings are repayable within 12 months of the balance sheet date.
Other debtors include loans of £nil (2014: £1 million) to senior employees of the Group in relation to the Carphone Warehouse
Share Plan as explained in note 5 b) to the Group financial statements.
C6 Creditors: Amounts falling due within one year
2 May
2015
£million
29 March
2014
£million
119
31
10
160
21
5
28
54
2 May
2015
£million
29 March
2014
£million
2
—
2
6
(4)
2
Amounts owed to Group undertakings
Other creditors
Accruals and deferred income
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Opening balance
Utilised in the period / year
Closing balance
C8 Loans payable
Details of loans payable are provided in note 17 to the Group financial statements.
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C9 Share capital, reserves and accumulated profits
Share capital
Allotted, called-up and fully paid ordinary shares of 0.1p each
1,151
576
1
1
During the year, 0.7 million shares were issued in respect of options issued under employee share option plans. In addition,
574.7 million shares were issued as part of the Merger as described further in note 23 to the Group financial statements.
2 May
2015
million
29 March
2014
million
2 May
2015
£million
29 March
2014
£million
At 1 April 2013
Net profit for the year
Other comprehensive income
Issue of shares
Equity dividends
Net movement in relation to share schemes
At 29 March 2014
Net profit for the year
Other comprehensive income
Issue of shares
Equity dividends
Net movement in relation to share schemes
At 2 May 2015
Share
capital
£million
Share
premium
reserve
£million
Profit
and loss
account
£million
Capital
redemption
reserve
£million
1
—
—
—
—
—
1
—
—
—
—
—
1
170
—
—
113
—
—
283
—
—
1,973
—
—
705
19
2
103
(30)
(4)
795
64
(3)
—
(52)
14
2,256
818
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
£million
876
19
2
216
(30)
(4)
1,079
64
(3)
1,973
(52)
14
3,075
Note 21 to the Group financial statements provides further details in respect of the issue of shares.
For details of the Company’s equity dividends see note C3.
C10 Financial instruments
The Company has applied the exemption under FRS 25 ‘Financial Instruments: Presentation’ not to disclose details of financial
instruments held by the Company. Full disclosure of the Group’s financial instruments under FRS 29 (IFRS 7) ‘Financial
Instruments: Disclosures’ and IAS 39 ‘Financial Instruments: Recognition and Measurement’ is provided in note 25 to the
Group financial statements.
C11 Related party transactions
The Company has taken advantage of the exemption under FRS 8 ‘Related Party Disclosures’ not to provide details of related
party transactions with other Group companies.
The Company entered into transactions, in the ordinary course of business, with other related parties as follows:
Net interest and other finance income
Loans owed to the Company
2 May 2015
29 March 2014
CPW
Europe
£million
—
—
Virgin
Mobile
France
£million
—
—
CPW
Europe
£million
—
—
Virgin
Mobile
France
£million
1
18
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C12 Subsidiary undertakings
a) Principal subsidiaries
The Company has investments in the following principal subsidiary undertakings. All holdings are in equity share capital and give
the Group an effective holding of 100% on consolidation.
Name
Country of incorporation or registration
Nature of business
The Carphone Warehouse Limited
The Phone House Spain S.L.U.
The Phone House Deutschland GmbH
The Phone House Telecom GmbH
The Phone House Netherlands B.V.
GEAB The Phone House AB
The Carphone Warehouse Limited
The Phone House Comercio e Aluguer de bens e Serviços Lda
New Technology Insurance
Dixons Retail plc
DSG international Holdings Limited
DSG Retail Limited
DSG Retail Ireland Limited
Dixons South East Europe A.E.V.E
El-Giganten AS
El-Giganten AB
Elkjøp Nordic AS
Gigantti OY
ISE-Net Solutions Limited
New CPW Limited*
Carphone Warehouse Europe Limited
* Held directly by the Company.
b) Other subsidiary undertakings
England and Wales
Spain
Germany
Germany
Netherlands
Sweden
Ireland
Portugal
Ireland
Distribution
Distribution
Distribution
Distribution
Distribution
Distribution
Distribution
Distribution
Insurance
England and Wales
Holding Company
England and Wales
Holding Company
England and Wales
Ireland
Greece
Denmark
Sweden
Norway
Finland
England and Wales
Retail
Retail
Retail
Retail
Retail
Retail
Retail
IT
England and Wales
Holding company
England and Wales
Holding company
The following are the other subsidiary undertakings of the Group, all of which are wholly owned unless otherwise indicated. All
these companies are either holding companies or provide general support to the principal subsidiaries listed above.
Name
Adiumentum OY
Codic GmbH
Country of
incorporation or
registration
Name
Country of
incorporation or
registration
Finland
DSG European Investments Limited
England & Wales
Germany
DSG Fleet Management Limited
England & Wales
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Coverplan Insurance Services Limited
England & Wales
DSG Hong Kong Sourcing Limited
Currys Group Limited
England & Wales
DSG international BVBA
DISL 2 Limited
DISL UK Limited
Dixagon SA
Dixons Group Limited
Dixons Pension Trust Ireland Limited
Dixons Properties SA
Dixons Retail SSC s.r.o.
Dixons Sourcing Limited
Dixons Travel srl
DSG Boxmoor Limited
Isle of Man
DSG international Insurance
England & Wales
Switzerland
England & Wales
Ireland
Belgium
Services Limited
DSG international Retail
Properties Limited
Dixons Retail SSC s.r.o.
DSG international Treasury
Management Limited
Czech Republic
DSG Ireland Limited
Hong Kong
DSG KHI Limited
England & Wales
DSG Retail Norway AS
DSG Card Handling Services Limited
England & Wales
Electroworld Sverige AB
DSG Corporate Services Limited
England & Wales
Elgiganten Logistik AB
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Dixons Carphone plc Annual Report and Accounts 2014/15
Italy
DSG Overseas Investments Limited
England & Wales
Hong Kong
Belgium
Isle of Man
England & Wales
Czech Republic
England & Wales
England & Wales
England & Wales
Norway
Sweden
Sweden
C12 Subsidiary undertakings continued
b) Other subsidiary undertakings continued
Name
Elkjøp Kleverenga AS
Elkjøp Norge AS
Epoq Holding AB
Epoq Logistic DC k.s.
Kereru Limited
Lefdal Electromarked AS
Country of
incorporation or
registration
Norway
Norway
Sweden
Name
FM Corporate Communications BV
FM Development BV
FM Investments BV
Czech Republic
FM Wholesale BV
England & Wales
ID Mobile Limited
Norway
MTIS Limited
Leverstock Investments Limited
England & Wales
Osfone – comercio de Aparelhos de
Finland
Telecomunicacoes LDA
Markantalo OY
Mastercare Service and
Distribution Limited
Mohua Limited
NSS Financials AS
PC City (France) SNC
PC City Norge AS
PC City Spain SAU
Petrus Insurance Company Limited
Thylin & Ronnlund AB
Carphone Warehouse Ireland
Mobile Limited
Charterhouse Management Limited
Compro-Telematics BV
Connected World Services
Distributions Limited
Connected World Services
Europe SL
Connected World Services
Netherlands BV
Connected World Services SAS
Connected World Services LLC
CPW Acton Five Limited
CPW Acton One Limited
CPW Brands 2 Limited
CPW Consultancy Limited
CPW CP Limited
CPW GC Holdings BV
CPW Irlam Limited
CPW Tulketh Mill Limited
CWIAB Limited
England & Wales
England & Wales
Denmark
France
Norway
Spain
Gibraltar
Sweden
England & Wales
Isle of Man
Netherlands
England & Wales
Spain
Netherlands
France
USA
Osfone Negocios – Comercio de
Aparelhos de Telecomunicacoes LTA
Pelham Limited
Phone House International AB
Provital Groothandel BV
SG The Phone House AB
Sociedede Gestora de Participcoes
Socias SA
Talkm Limited
The Carphone Warehouse (Digital)
Limited
The Carphone Warehouse
Resources Limited
The Phone House Holdings (UK)
Limited
The Phone House Netherlands
Business Centres BV
The Phone House Netherlands
Franchise BV
The Phone House Netherlands
Retail BV
England & Wales
The Phone House Netherlands Retail
Isle of Man
England & Wales
England & Wales
England & Wales
Netherlands
England & Wales
England & Wales
England & Wales
Regio Midden BV
The Phone House Netherlands Retail
Regio Zuid BV
The Phone House Netherlands
Services BV
The Phone House Services GmbH
The Phone House Shop
Management GmbH
Typhone e-concepts BV
Country of
incorporation or
registration
Netherlands
Netherlands
Netherlands
Netherlands
England & Wales
Ireland
Portugal
Portugal
Isle of Man
Sweden
Netherlands
Sweden
Spain
England & Wales
England & Wales
Isle of Man
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Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Germany
Germany
Netherlands
The Carphone Warehouse UK Limited
England & Wales
Dixons Carphone plc Annual Report and Accounts 2014/15
143
Notes to the Company financial statements
C12 Subsidiary undertakings continued
c) Subsidiary undertakings exempt from audit
The following subsidiaries, all of which are incorporated in England and Wales and are all included with section b) above, are
exempt from the requirements of the UK Companies Act 2006 relating to the audit of individual accounts by virtue of section
479A of that Act:
Name
CPW Tulketh Mill Limited
CPW Irlam Limited
CPW Brands 2 Limited
The Carphone Warehouse (Digital) Limited
CPW Acton Five Limited
CPW Consultancy Limited
CWIAB Limited
The Carphone Warehouse UK Limited
CPW CP Limited
DSG Boxmoor Limited
DSG Card Handling Services Limited
DSG international Retail Properties Limited
DSG Ireland Limited
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Company registration number
06585719
05825842
07135355
03966947
05738735
07881879
02441554
03827277
06585457
05430014
04185110
00476440
00240621
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Dixons Carphone plc Annual Report and Accounts 2014/15
Five-year record (unaudited)
Headline results – continuing operations
Group
Revenue
Share of results of CPW Europe
Other
Net profit
Earnings per share
– Basic
– Diluted
Pro forma Headline results(1)
Revenue
EBIT
Interest
Profit before taxation
2014/15
£million
2013/14
£million
2012/13
£million
2011/12
£million
2010/11
£million
8,255
1,943
—
285
285
3
100
103
11
48
4
52
6
46
3
49
6
43
(1)
42
29.7p
28.7p
18.6p
10.9p
10.7p
18.3p
10.8p
10.2p
9.3p
8.9p
9,936
9,752
9,517
8,820
8,822
414
(33)
381
359
(43)
316
310
(33)
277
277
(39)
238
259
(35)
224
(1) Pro forma results are presented as though the Dixons Retail Merger and the CPW Europe Acquisition had occurred at the beginning of the
five year period. The Financial Years 2013/14 and prior have been restated to exclude discontinued operations.
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Shareholder and corporate information
Dixons Carphone plc is listed on the main market of the
London Stock Exchange (stock symbol: DC). It is a constituent
of the FTSE 100.
Registrar
Equiniti
Aspect House
Spencer Road, Lancing
West Sussex BN99 6DA
United Kingdom
0871 384 2089 (UK only)*
+44 (0)121 415 7047 (from outside the UK)
*Calls to the 0871 number cost 8p per minute plus network
extras. Lines are open 8.30am to 5.30pm, Monday to Friday.
You can manage your shareholdings via an electronic
communications service called Shareview -
www.shareview.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 is free.
Financial calendar
Ex-dividend date (final dividend 2014/15) 27 Aug 2015
Record date (final dividend 2014/15)
28 Aug 2015
Annual General Meeting
10 Sep 2015
Intended dividend payment date (final
dividend 2014/15)
25 Sep 2015
Registered office / Head office
1 Portal Way
London W3 6RS
United Kingdom
+44 (0)20 8617 6002
www.dixonscarphone.com
Company registration number
07105905
Company Secretary
Enquiries should be directed to:
Nigel Paterson
Company Secretary and General Counsel
cpwlegal@cpwplc.com
Investor relations
Enquiries should be directed to:
Kate Ferry, Investor Relations Director
Mark Reynolds, Investor Relations Manager
ir@dixonscarphone.com
Advisors
Auditor
Deloitte LLP
2 New Street Square
London EC4A 3BZ
Joint Stockbrokers
Deutsche Bank AG
1 Great Winchester Street
London EC2N 2DB
Citigroup Global Markets Limited
33 Canada Square
Canary Wharf
E14 5LB
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Dixons Carphone plc Annual Report and Accounts 2014/15
Glossary and definitions
The following definitions apply throughout this Annual Report and Accounts unless the context otherwise requires:
Acquisition intangibles
Acquired intangible assets such as customer bases, brands and other intangible assets
acquired through a business combination capitalised separately from goodwill.
ARPU
B2B
Best Buy
Average revenue per user.
Business to business
Best Buy Co., Inc. (incorporated in the United States) and its subsidiaries and interests
in joint ventures and associates.
Best Buy Europe
Best Buy Europe Distributions Limited and its subsidiaries and interests in joint ventures
and associates (incorporated in England and Wales).
Board
The Board of directors of the Company.
Carphone, Carphone Warehouse
or Carphone Group
The Company or Group prior to the Merger on 6 August.
CGU
Cash Generating Unit
Consideration Shares
The 42.1m ordinary shares in the Company issued to Best Buy on 25 June 2013
at a price of £1.90 per share, in connection with the CPW Europe Acquisition.
CPW
The continuing business of the Carphone Group, excluding its interest in
Virgin Mobile France.
CPW Europe
Best Buy Europe’s core continuing operations.
CPW Europe Acquisition
The Company’s acquisition of Best Buy’s interest in CPW Europe, which completed on
26 June 2013.
CWS
The Connected World Services division of the Company.
Dixons or Dixons Retail
Dixons Retail plc and its subsidiary companies.
Dixons Carphone or the Company Dixons Carphone plc (incorporated in England and Wales under the Act, with registered
number 07105905), whose registered office is at 1 Portal Way, London W3 6RS.
Dixons Retail Merger or Merger
The all share merger of Dixons Retail plc and Carphone Warehouse plc which occurred
on 6 August 2014.
Earnings
EBIT
EBITDA
EPS
ESOT
Free Cash Flow
Headline results
Profit or loss after taxation, unless the context otherwise requires.
Earnings before investment income, interest and taxation.
Earnings before investment income, interest, taxation, depreciation and amortisation.
Earnings per share (basic unless otherwise indicated).
Employee share ownership trust.
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. The 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.
Results before Non-Headline results. The phrases ‘Headline earnings’, ‘Headline EBIT’,
‘Headline EBITDA’ and ‘Headline EPS’ should be interpreted in the same way. The
Headline results of the Group’s joint ventures also include certain reclassifications,
as detailed in note 24 to the Group financial statements, to aid understanding of
underlying performance.
HMRC
IFRS
Her Majesty’s Revenue and Customs.
International Financial Reporting Standards as adopted by the European Union.
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147
Glossary and definitions
MNO
MVNO
MTR
Mobile network operator.
Mobile virtual network operator.
Mobile termination rates.
New CPW
New CPW Limited (incorporated in England and Wales).
Non‑Headline results
Non-Headline comprise the results of discontinued operations or exited / to be exited
businesses, amortisation of acquisition intangibles, any exceptional items considered
so one-off and material that they distort underlying performance (such as reorganisation
costs, impairment charges 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.
NPS
Net promoter score, a rating used by the Group to measure customers’ likelihood to
recommend its operations.
Old Carphone Warehouse
TalkTalk Telecom Holdings Limited (formerly "The Carphone Warehouse Group PLC")
(incorporated in England and Wales).
Old Carphone Warehouse Group Old Carphone Warehouse and its subsidiaries and interests in joint ventures prior to the
Demerger.
Participation Plan
The Carphone Warehouse Group plc Participation Plan 2011.
PAT
PBT
Pro forma
ROCE
Profit after taxation.
Profit before taxation.
Results incorporating Dixons Retail plc as if it had been owned by the Group for the
entire reporting period and the previous year. In addition, in respect of 2013/14, the
results aggregating CPW Europe and the Group’s wholly owned businesses, as though
CPW Europe had been 100% owned by the Group in the relevant period.
Return on capital employed. Net profit as a percentage of capital employed, calculated
using Headline earnings and with capital employed defined as average equity and
average non-current debt. Averages are calculated based on the opening and closing
positions for the relevant year.
RCF
Revolving credit facility.
Sharesave or SAYE
Save as you earn share scheme
SWAS
Stores-within-a-store
TalkTalk or TalkTalk Group
TalkTalk Telecom Group PLC and its subsidiaries and other investments.
TSR
UK GAAP
Virgin Mobile France
Total shareholder return.
United Kingdom Accounting Standards and applicable law.
Omer Telecom Limited (incorporated in England and Wales) and its subsidiaries,
operating an MVNO in France as a joint venture between the Company, Bluebottle UK
Limited and Financom S.A.S.
WAEP
Weighted average exercise price.
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Dixons Carphone plc Annual Report and Accounts 2014/15
Designed and produced by Whitehouse Associates London
Printed in the UK by Pureprint Group
This report is printed on Cocoon Offset 100% Recycled board and
Soporset paper. Both papers are FSC certified and produced in an
ISO 9001 and ISO 14001 certified paper mills.
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Dixons Carphone plc
1 Portal Way
London
W3 6RS
United Kingdom
Telephone: +44 (0) 345 600 4723
Email: ir@dixonscarphone.com
www.dixonscarphone.com