Annual Report and Accounts
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2016/17
Dixons Carphone plc
1 Portal Way
London
W3 6RS
United Kingdom
Telephone: +44 (0) 345 013 0345
Email: ir@dixonscarphone.com
www.dixonscarphone.com
www.dixonscarphone.com
@DixonsCarphone
“Over the last few years a great deal of work has been done to make the company
stronger, lower risk and more resilient. We are seeing the upside of these efforts now as
we declare record headline profits before tax of over half a billion pounds – up 10%. More
importantly, the improvement in our cost base, the strong leadership position that we
have built, the investment that we have made in our digital business and, above all, the
enormous shift in customer satisfaction and price competitiveness that we have driven
leave us well positioned to flourish in the years ahead.
While the UK consumer environment seems to be holding up for us, there will
undoubtedly continue to be changes in the way people buy all of the products that we
sell from phones to washing machines. Change always represents opportunity, and our
job is to find the propositions that keep us compelling to our customers forever. We are
excited about our plans in services and about the myriad of initiatives that will drive long-
term relationships with our customers.
In short, it has been a good year for Dixons Carphone and it gives me great pleasure
once again to thank my 43,000 colleagues for the work that they have done to deliver so
well and so energetically for our customers.”
Sebastian James
Group Chief Executive
27 June 2017
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.
Designed and printed by Black&Callow
This report is printed on Oxygen Offset 100% Recycled board and
Soporset paper. Both papers are FSC certified and produced in
ISO 9001 and ISO 14001 certified paper mills.
Contents
Strategic Report
Highlights of the year
Business segments
Chairman’s Statement
Group Chief Executive’s Statement
Strategy, KPIs and Risks overview
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3
4
6
8
10 Our markets
12 Business model and strategy
15 Key Performance Indicators
16 Principal risks to achieving the Group’s objectives
22 Performance review
28 Corporate Responsibility
Corporate Governance
36 Board of Directors
38 Corporate Governance Report
47 Directors’ Report
50 Audit Committee Report
58 Disclosure Committee Report
59 Nominations Committee Report
61 Remuneration Report
63 Remuneration Report – Remuneration Policy
74 Remuneration Report – Annual Remuneration Report
87 Statement of Directors’ responsibilities
Financial statements
Independent Auditor’s Report
88
95 Consolidated income statement
96 Consolidated statement of comprehensive income
97 Consolidated balance sheet
98 Consolidated statement of changes in equity
99 Consolidated cash flow statement
100 Notes to the Group financial statements
145 Company balance sheet
146 Company statement of changes in equity
147 Notes to the Company financial statements
Investor information
154 Five year record (unaudited)
155 Shareholder and corporate information
156 Glossary and definitions
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Dixons Carphone plc Annual Report and Accounts 2016/17 Highlights of the year
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Dixons Carphone plc is Europe’s leading specialist electrical and mobile
phone retailer and services company, employing over
43,000 people in 10 countries.
• Group like-for-like* revenue up 4%
• Total statutory revenue up 9%
• Group headline* PBT of £501 million, up 10%, total statutory PBT of
£386 million
• Group headline* basic EPS of 33.8p, statutory basic EPS 25.6p
• Free cash flow* of £160 million
• Year end net debt* at £271 million
• Final dividend of 7.75p proposed, taking total dividends for the year to 11.25p
Headline* revenue (£million)
Headline* EBIT (£million)
Headline* basic EPS (pence)
9,736
9,750
9,752
9,517
12,000
10,000
10,580
8,000
6,000
4,000
2,000
0
517
478
413
359
310
600
500
400
300
200
100
0
33.8
30.2
35
30
25
20
15
10
5
0
25.5
18.6
10.9
2016/17
2015/16
2014/15
2013/14
2012/13
2016/17
2015/16
2014/15
2013/14
2012/13
2016/17
2015/16
2014/15
2013/14
2012/13
Our European store presence
Store numbers
• UK and Ireland
• Nordics
• Southern Europe
Own
Franchise
Total
1,148
249
311
1,708
— 1,148
144
287
431
393
598
2,139
* See glossary for definition of terms including headline performance measures. Results for 2015/16 have been restated as set out in note 32 to the Group financial
statements.
Figures presented in charts for 2014/15 and previous periods are ‘pro forma’ results as defined in the glossary
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Dixons Carphone plc Annual Report and Accounts 2016/17
Business segments
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We operate four segments as follows:
UK & Ireland
• CurrysPCWorld is the largest specialist electrical retailing and
services operator in the UK & Ireland.
• Carphone Warehouse is the largest independent
telecommunications retailer in the UK & Ireland.
• Dixons Travel operates in major UK airports, Dublin and Oslo.
Brands
CurrysPCWorld
Websites
currys.co.uk
currys.ie
pcworld.co.uk
pcworld.ie
Carphone Warehouse
carphonewarehouse.com
carphonewarehouse.ie
• Team Knowhow is our market-leading services brand.
Dixons Travel
dixonstravel.com
• Geek Squad is the repairs and support provider for
Team Knowhow
knowhow.com
Carphone Warehouse.
• iD Mobile is one of the UK’s fastest growing MVNOs offering
innovative and flexible propositions.
• Simplifydigital is the UK’s largest, and fastest growing, multi-
channel broadband, phone and TV switching platform.
• PC World Business provides computing products and services
to business to business (‘B2B’) customers.
Geek Squad
geeksquad.co.uk
iD Mobile
idmobile.co.uk
Simplifydigital
simplifydigital.co.uk
PC World Business
pcworldbusiness.co.uk
Nordics
Elkjøp
elkjop.no
• The Elkjøp Group is the leading specialist electrical retailer
Elgiganten
across the Nordics.
• Elkjøp, Elkjøp Phonehouse and Lefdal stores operate in Norway,
Elgiganten and Elgiganten Phone House in Sweden and
Denmark and Gigantti in Finland.
Gigantti
Lefdal
elgiganten.se
elgiganten.dk
gigantti.fi
lefdal.com
• Knowhow has been introduced in the Nordic region.
Phone House
phonehouse.se
• InfoCare is the largest consumer electrical repair company in
InfoCare
infocareworkshop.no
the region, operating in Norway, Sweden, Denmark and Finland.
Southern Europe
Kotsovolos
kotsovolos.gr
• Kotsovolos is Greece’s leading specialist electrical retailer.
Phone House
phonehouse.es
• Phone House is the leading independent telecommunications
Geek Squad
geeksquad.es
retailer in Spain.
• Geek Squad is the repairs and support provider for the Phone
House in Spain.
Connected World Services (‘CWS’)
• CWS aims to leverage the Group’s existing expertise, operating
processes and technology to provide a range of services to
businesses.
• CWS organises its services into two product towers:
— Value Chain Services
— honeybee platform
connectedworldservices.com
honeybeesolutions.com
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Dixons Carphone plc Annual Report and Accounts 2016/17
Chairman’s Statement
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I am delighted to be reporting to you as the newly appointed Chairman
of Dixons Carphone plc. It is great to be back at a business I served for
more than a decade. Importantly, I would like to pay tribute to the
achievements of my predecessor, Sir Charles Dunstone, one of the UK’s
great entrepreneurs, who founded half of this business that has gone on
to be one of the world’s major retailers, serving millions of customers
every year in 10 countries and employing more than 43,000 people.
In the Nordic region, our expanded distribution centre in
Jönköping, Sweden, one of the largest in Northern Europe,
was completed to time and on budget with its own railway
station inside the centre. It distributes across the Nordics
and we expect to see benefits in stock availability and
efficiency.
We continue to gain market share across our businesses.
A particular mention should be made of Kotsovolos in
Greece which further enhanced its position as market leader
with 3ppts market share growth against a clearly difficult
economic environment.
The hard work of all our people and the management team
led by Seb – and a huge thank you to all of them - have
helped deliver a 10% growth in headline profit before tax
on 9% higher revenue with total profit before tax increasing
£123 million. This is an excellent achievement at a time
when many retailers are struggling. This has allowed
the Company to announce a dividend of 7.75 pence per
share for the full year, an increase of 19%, to be paid on
22 September 2017.
It has been a remarkable and sometimes challenging year.
In the days after the referendum on the UK’s membership of
the EU, the Company’s share price fell by as much as 34%,
as retailers were considered vulnerable to a post Brexit
slowdown. In this environment and despite the uncertainty,
the team got on with their job of making the business
stronger by serving our customers better.
In the UK & Ireland our new 3-in-1 stores bring together
Currys, PC World and Carphone Warehouse in an exciting
shopping environment and we are very pleased with the
initial results of these stores. We have also improved
our online capabilities, particularly with a new Carphone
Warehouse web platform and we have experienced strong
online sales growth across all our brands.
And it’s not just about great products. Team Knowhow, our
new services brand, is piloting a range of expanded services
in the Leeds and London conurbations. We think that this
support will be ever more important to help customers
to get the best from the amazing world which modern
technology can offer.
We also have become an important centre to help
customers choose the best providers of other services.
We successfully integrated Simplifydigital into the Group
and both in store and online made switching your energy,
broadband or TV service easy. Go to one of our stores and
try our 30 second challenge to save you money!
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Dixons Carphone plc Annual Report and Accounts 2016/17
In business, it is not just what a company does but how it
does it that matters and we are proud of our contribution
to the societies in which we operate. Our relationship with
our key stakeholders and the way we manage the business
in a sustainable manner are set out in our Corporate
Responsibility Statement on pages 28 to 35. We believe
that our unique expertise in technology can be used to
help tackle social issues and we are hugely supportive
of our colleagues’ roles in contributing to good causes.
Dixons Carphone is proud to be a founding partner of
Heads Together, which seeks to support those with mental
health issues. We are also a Charity Partner of the Mix
which supports the physical and mental wellbeing of young
people. This was recognised when Dixons Carphone were
shortlisted for Charity Partnership of the Year.
The future holds many opportunities and a few challenges
and uncertainties. But we are well positioned. We have
invested to make our stores best in class. We are market
leaders in our key markets. We believe that the future
will become more connected and more complicated.
Customers will choose and buy through a mix of online
and offline. We will be there with them providing technical
knowhow and unbiased independent advice together with
the ever important great prices, excellent service and great
choice. Our job is to provide great value for customers and
shareholders alike.
Finally I would like to take this opportunity to express
my thanks to not only Sir Charles but also Tim How and
Baroness Sally Morgan who will both be stepping down
from the Board following the 2017 Annual General Meeting.
Tim and Sally have been long-serving members of the Board
and have provided invaluable support and guidance during
their terms. I wish them both all the very best in their future
activities. I am also pleased to welcome Fiona McBain to
the Board; Fiona’s business leadership, in particular in the
financial services sector, will be a great asset as we evolve
our consumer services propositions.
Lord Livingston of Parkhead
Chairman
27 June 2017
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Dixons Carphone plc Annual Report and Accounts 2016/17
Group Chief Executive’s Statement
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I am very pleased to be reporting another set of strong numbers for the
Group. In what continues to be a lively political environment, in particular
in the UK, it has been good to see the business deliver a good year for
Dixons Carphone both financially and operationally.
Dixons Carphone has had another strong year financially;
Group like-for-like revenues were up 4% over the year,
with growth in every region in the Group leading to a
10% increase in Group headline PBT from £457 million to
£501 million, slightly above the guidance we gave, resulting
in an increase in headline basic EPS from 30.2p to 33.8p.
At the same time, it is pleasing to see – across the Group
– sustained high levels of customer satisfaction and Net
Promoter Scores driven by our continued relentless focus
on improving our proposition for our customers. Total
reported profit before tax has increased by £123 million
driven by the increase in headline EBIT and a reduction
in year on year non-headline costs, principally those
associated with our ‘big-box’ property plan, the costs of
which were fully recognised in FY16.
Our business in the UK & Ireland enjoyed a good year
despite some headwinds in particular within phone, with
like-for-like revenues up 4% over the year and headline
EBIT up 4% to £385 million. This sales growth was driven
in large part by growth in electricals in a flat overall market.
This was somewhat tempered by a more challenging phone
sector which was impacted by product safety issues, a
limited supply in the market of some key lines and some
changing trends in SIM-only. Against this backdrop, the
team have delivered good profit growth underpinned by
solid cost control across the business.
Over the course of the year we all but completed our
‘big-box’ property plan, closing 80 stores, and providing
a consistent experience with the latest categories and
look-and-feel now right across our estate. Virtually all
of our CurrysPCWorld stores now offer a fully-fledged
embedded Carphone Warehouse shop-in-shop. Separately
we have trialled a new format for our standalone Carphone
Warehouse stores; we now have 9 open and will continue to
open more during the course of the year. The performance
of these stores has been highly encouraging, in particular
for sales of accessories and insurance. In addition we have
launched a new Carphone Warehouse web platform which
is trading well.
Price competitiveness continues to be an area of real focus;
our customers are – rightly – savvy, and we need to be both
competitive and transparent - not only on the products
themselves, but also on the cost and availability of delivery
and services. Today, we show competitor prices on our
websites so that customers can feel confident at all times
that they are getting a great deal from us. We continue to
be at parity or better versus our most aggressive pure-
play competitors on pretty much all of our products, pretty
much all of the time and we are transparent about our
delivery availability versus our main competitors. Our free
app ‘Compare Prices’ is a great tool for colleagues and
customers to check prices themselves.
iD mobile operations in the UK continue to grow from
strength to strength since launch in May 2015. iD allows
us to offer highly differentiated propositions to customers,
supported by an innovative IT platform, enabling us to tailor
plans, for example, with the ability to transfer data between
friends and family, as well as being at the vanguard of
free roaming. These propositions are proving to be very
successful and I am very pleased that the active customer
base is now more than 600,000, making iD one of the
fastest growing postpay MVNOs (Mobile Virtual Network
Operator) in UK mobile history.
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Dixons Carphone plc Annual Report and Accounts 2016/17
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Multi-play has had a great year. The proposition was re-
launched and supercharged a little over a year ago and we
have more than doubled our market share of the fixed line
switching market. We are the only place where a customer
can compare, discuss, choose and switch – from a wide
choice of national providers – the broadband and TV
package that is perfect for them, expanding the expertise
we have developed in mobile to all telecommunications
and TV content needs, but we will not stop there. We have
ambitious plans for the business including our innovative
energy switching proposition in the coming year.
Both our Dixons Travel business and Harrods Technology
have had a very strong year, benefiting from an influx
of visitors post the EU referendum. In Dixons Travel we
opened new stores in Heathrow Terminal 2 and at London
City Airport as well as in Oslo, all trading well. In Harrods,
while sales have been good across the board the sales
of mobile phone hardware has been particularly strong.
While we do not expect to see the currency benefit extend
indefinitely in these stores, we have been pleased to be able
to take advantage of the increased demand.
Our new Team Knowhow proposition has had a promising
start, including our Leeds and London pilots. This has
focused initially on phone and white goods repairs and
NPS levels have been very encouraging indeed. Repair is
a critical first step, but we think that finance, protection
and support and services will all be strong elements of the
expanded proposition and we have put in place a strong
team, led by Feilim Mackle, to drive this business forward.
We believe passionately that customers will increasingly
want somebody to take responsibility for keeping the
dozens of devices and appliances in their homes working,
always on and upgraded and that we are uniquely placed to
do that cost-effectively and well.
Our Nordics business, against, again, a relatively tough
market backdrop, had a very respectable year with like-
for-like revenues up 1% over the year and 2% in the fourth
quarter, and headline EBIT increased 13% to £89 million.
Operationally the region has delivered some positive
improvements including the building and commissioning of
the new small-product warehouse in Sweden, creating the
most efficient and modern operation of its type in Europe,
integrating InfoCare, the largest computer repair company
in the region, developing its digital infrastructure, improving
its online proposition and integrating the Fona business
in Denmark. The business is also implementing electronic
shelf-edge ticketing and a new merchandising model which
will drive cost and stock out and improve margins.
Our Southern European business had a very good year in
the face of ongoing political and economic turbulence and
I am pleased it has reported Group leading 6% rise in like-
for-like revenues over the year with headline EBIT growing
from £17 million to £22 million. I am particularly proud of
the team in Greece; our Greek business has increased
profitability in 2016/17 against what continues to be a tough
operating environment on the back of continued innovation
and vigour. In the last year the team has opened new stores,
grown market share, radically improved delivery options
for customers across the country and developed a new
digital agenda including a new e-commerce platform due to
launch in the coming year. In Spain, we have continued to
be agile in tough, albeit improving, economic conditions. We
continue to move to a more flexible franchise approach, and
to pivot the model to offer multi-play, SIM-only and handset
only, as well as gaining traction with our new SmartHouse
proposition.
Our Connected World Services division has also had a
good year, generating £21 million of headline EBIT, driven
by deepening our existing partnerships. Our relationship
with Sprint continues to evolve and we are currently in the
process of rolling-out our IT platform, honeybee, across
their estate. In light of very volatile US market situations
and responding to Sprint’s desire to accelerate its own
distribution platform we have agreed to sell our share of the
joint venture that we built together back to them. honeybee,
our unique software platform, continues to push forward,
and we have signed an agreement with WebHelp, a large
French outsourcer for our Contact Centre product.
Finally, the political sands in the UK continue to shift. We
have, I believe, been able to manage the immediate fallout
of the referendum result without significant issues and our
proposition remains as competitive and attractive as ever.
Nevertheless, we will remain vigilant as the questions arising
out of the recent election ebb and flow and look, as always,
to turn changes in the market to our advantage.
In short, it has been another year of strong delivery within
the business and I feel pleased to be ending the year well-
positioned for the year ahead. I am also acutely aware that
we are only in this position thanks to our more than 43,000
colleagues operating in 10 countries across the Group
and my sincere thanks go out to them all. I am constantly
impressed by the passion and commitment of the men and
women who make up the Dixons Carphone family, and am
very proud to work alongside them.
Sebastian James
Group Chief Executive
27 June 2017
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Strategy, KPIs and Risks overview
Our markets1
Our strategic priorities2 Achievements in 2016/173
Product
Continue to enhance and drive
successful and sustainable retail
business models in a multi-
channel world
Services
Leverage our scale, our knowhow,
and our unique infrastructure to
drive growth in new product areas
including growth in services
Market share and like-for-like revenue
growth in core markets
Sustained high levels of customer
satisfaction and price competitiveness
Largely completed our 3-in-1 property
programme and increased our SWAS
presence
Strong growth in iD mobile base and multi-
play share
Launch of new Carphone Warehouse web
platform and store format
Rollout of click and collect to 500 Carphone
stores
Launch of same-day delivery
Opened newly extended distribution centre
in Sweden
Feilim Mackle hired to lead the team
Successful Leeds trial, extended to London
Launch of energy saver app
Instant repair trial in Nordics
Connected World Services (‘CWS’)
Develop the Connected World
Services model and establish it as
a material contributor to earnings
Extension of contract with TalkTalk, renewal
with RBS
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Dixons Carphone plc Annual Report and Accounts 2016/17
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Plans for 2017/183
Relevant Group KPIs4
Principal risks5
Unrelenting approach to price and
service
Extension of same day delivery and
order up to midnight for next day
Enhanced and simplified online
journeys
Expand new Carphone store format
roll-out
Develop B2B in Nordics
Headline revenue
Dependence on networks
Like-for-like revenue growth
Dependence on key suppliers
Market position
Headline EBIT
Headline profit before tax
Free cash flow
Return on capital employed
Consumer environment and sustainable
business model
Greek business
IT systems and infrastructure
Information security
Non-compliance with Financial Conduct
Authority (‘FCA’) regulation
Colleague retention and capability
Business continuity plans are
not effective
Health and safety
Fraud
Impact of Brexit
Rebrand and national roll-out of Team
Knowhow
Headline revenue
Market position
Consumer environment and sustainable
business model
Development of proposition
Develop Nordic on-site repair network
and expand at home services
Return on capital employed
Develop and convert pipeline
Headline revenue
Market position
Headline EBIT
Return on capital employed
IT systems and infrastructure
Information security
Colleague retention and capability
Business continuity plans are
not effective
Fraud
Impact of Brexit
Consumer environment and sustainable
business model
IT systems and infrastructure
Information security
Non-compliance with Financial Conduct
Authority (‘FCA’) regulation
Colleague retention and capability
Business continuity plans are
not effective
1
2
3
4
5
Our markets pages 10 to 11
Business model and strategy pages 12 to 14
Chairman’s and Group Chief Executive’s Statements on pages 4 to 7
Key Performance Indicators are explained on page 15
Principal risks to achieving the Group’s objectives on pages 16 to 21
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Dixons Carphone plc Annual Report and Accounts 2016/17
Our markets
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Our markets
The Group’s core retail focus is the sale of consumer
electricals and mobile phone products and connectivity.
The Group also has a significant services infrastructure
focused on maintenance, support, repairs, delivery and
installation of hardware and services. In addition, the Group
has developed a business-to-business operation via its
Connected World Services division which leverages the
specialist skills, operating processes and technology of the
business to provide services to third parties.
Product
CurrysPCWorld Carphone Warehouse is the only nationwide
consumer electricals and mobile phone retailer in the UK &
Ireland. The Elkjøp Group in the Nordics and Kotsovolos in
Greece are the largest consumer electrical retailers in their
respective markets.
The consumer electricals retail market can be split between
specialist electrical retailers, such as CurrysPCWorld,
and general retailers which sell 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
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.
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.
In each of our markets there are varying numbers of specialist
retailers who compete in the assisted market. Whilst we do
compete against general retailers, this is usually limited to
certain lower price categories and we consider that these
retailers do not offer the full range of products, assisted sale
or the other services that we are able to provide.
In mobile phone retailing, Carphone Warehouse as the only
nationwide independent channel is uniquely placed to offer
impartial advice over the vast array of network, handset and
operating platform propositions available in the market.
In addition to Carphone Warehouse, the mobile phone
market is served by Mobile Network Operators (‘MNOs’),
with whom the Group has long and well-established
relationships, as well as independent and generalist
retailers. The MNOs will offer propositions for their own
networks, whilst independent and generalist retailers will
provide a greater variety of propositions on one or multiple
networks. Furthermore there are online-only retailers
providing a variety of these services. This market is also
served by MVNOs as well as a relatively small number of
global manufacturers supplying goods to local, regional,
national and international MNOs / MVNOs and retailers.
The sophistication of mobile phones continues to grow,
from simple mobile devices to sophisticated hardware with
advanced functionality. There is a wide choice of operating
platforms and network options for customers, which makes
the Group’s expert and impartial advice, simplified by the
tablet based tool, Pin Point, particularly relevant.
Customers continue to use ever increasing levels of data.
As MNOs roll out their 4G networks and begin to trial 5G
technology, quality and speeds improve, facilitating much
faster downloads and providing levels of performance
comparable to many Wi-Fi networks, enabling a much better
platform for streaming, in particular for video content.
We have seen some significant shifts in capacity in many of
our markets in recent years; in consumer electricals some
mass merchandisers have been reducing space for electrical
products, some single channel internet operators have
de-emphasised certain segments, and in some specialists
have exited the market entirely. 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 an important part
of the retail landscape. It supports enhanced product
information as well as price comparability. It is an essential
part of the buying process for customers, particularly for
large ticket discretionary products. However, the expert
advice provided by well-informed sales advisors within
stores is highly valued by customers and manufacturers.
Larger retailers, with an integrated multi-channel offer, with
scalable distribution and systems, together with proven
after-sales service and support are increasingly attractive to
customers.
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.
Our reserve&collect service (collect@store in the Nordics),
where customers can order on the internet and collect
from a convenient store at a time to suit them is proving
to be increasingly attractive to customers. Similarly, 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, is also increasingly popular. Over the course of
the year we have greatly extended this option, enabling
customers to collect smaller electrical products in over 500
Carphone Warehouse stores, providing a more convenient
collection point in high streets across the country.
Innovation brings new products with improved functionality
that drives sales growth. These include 4K Ultra High
Definition (‘UHD’) and smart TVs, wearable technology,
connected products for the home such as heating and
lighting and the latest smartphones. Content, such as social
media, apps, camera picture quality, digital media and
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cloud storage, also help to drive hardware innovation and
replacement.
The economic backdrop determines whether customers
trade up or down. The consumer electricals market tends to
grow at a rate that is at or exceeding the economy during
years of economic growth. The effects of an economic
downturn may be mitigated by innovation. The mobile
market is less cyclical and mobile phones are considered an
essential part of modern life.
The rapid innovation cycle may lead to price deflation, but
also drives volumes 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 also driven by the dynamics of
the housing market as new construction, house sales and
refurbishment trigger new purchases.
Services
Everyday technology, whether smart TVs, computing,
mobile phones or kitchen appliances, is becoming more
complicated with connectivity and inter-operability becoming
increasingly necessary. Families are dependent on this
technology for keeping in touch with friends and family,
entertainment, work, finances and school homework.
In addition, innovation drives new service requirements,
including TV installation, data backup, computer set up and
instructional Showhow teach-ins. In this 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.
Most homes in markets in which we operate have more
than ten connected devices, and this is expected to grow
dramatically over the near term, creating more demand for
home technology support services.
We believe the market for home technology support to be
already large, worth around £5bn in the UK alone, of which
we estimate to hold a c. 10% share. Despite the significant
demand and a large market, the supply of services is highly
fragmented.
There is a major opportunity to grow our share in these
valuable and growing markets more closely to match our
share of product sales. Our aim is for Team Knowhow to be
the leader in technology support.
Importantly we start from a position of real strength; our
services capabilities and operating platform developed to
support our product sales business is already class-leading
and at real scale. We are the UK’s leading technology
support business with: over 11m warranty and insurance
customers; 1.1m mobile repairs per year; 4.2m home visits
per year; 700,000 computer and TV repairs per year; and over
400,000 finance customers.
We have Europe’s largest tech and white goods repair
facility in Newark with more technical support agents than
any other business providing a nationwide solution. This is a
complex business to replicate.
We have put in place a new leadership team dedicated
to this division and developed a commercial model with
refreshed and innovative propositions that we will roll-out
during 2017 and 2018. Our revised service propositions
will be accessed and delivered by customers through an
increasingly digital interface with highly responsive care
around the clock, easily accessed at home or on the move.
Once fully executed we expect our services business
to provide long-term sustainable revenues in attractive,
growing markets.
Connected World Services (‘CWS’)
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 major international
businesses and has a significant pipeline of active
opportunities. The current focus is on delivering value and
growth from two specific areas, Value Chain Services and
our proprietary IT software, honeybee.
Value Chain Services
Value chain services leverages the end-to-end capabilities
of Dixons Carphone to provide a full suite of services that
enable the sale and support of connected devices. We run
the largest mobile phone repair centre in Europe, operate
the biggest handset sourcing operation in Europe, are
proven experts in this complex and regulated industry
and we already have a significant established client base,
including TalkTalk, RBS and EE. We provide the following
services to our clients: connectivity, insurance services in
partnership with Aviva, device supply, sales operations,
forward and reverse logistics, software platforms, and
customer service.
honeybee
honeybee is our proprietary IT software, developed in-
house initially to serve our mobile phone customers. It is a
unique omni-channel, multi-industry software that simplifies
the delivery and management of complex digital customer
journeys. The software has been developed through
25 years’ experience of complex digital journey innovation
and today enables multi-country carrier activations which
can revolutionise customer journey development tools.
honeybee’s use is not limited to mobile phone retailing and
we have recently signed an agreement with WebHelp to
trial the platform to improve the efficiency of its call centre
operations for a leading European MNO.
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Business model and strategy
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Business model
Our core retail 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 insights. This includes
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 &
Ireland and Nordics businesses continued to sustain high
levels of customer satisfaction.
Taking each of the three pillars in turn, our model can be
described as follows:
Multi-channel retailing
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, and enabling
customers to interact with products before they buy. Within
our recently refitted stores, the TV and audio category is
set up to resemble a living room enabling customers to
experience the full sensation of a large wall-mounted 4K
television with surround speakers. These journeys are
supported by product specialists providing expert advice on
the products’ features and benefits.
Our websites are a crucial and fundamental part of the
customer shopping journey. A customer’s initial interaction
is often online as is more and more of the customer’s
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
we have in the year recruited and trained colleagues in
the selling of multi-play, helping to double our share of
the broadband switching market. In the Nordics we have
launched a new e-learning management system.
We constantly review our store portfolio to ensure we
have the right store for customers in the most competitive
locations. Over the course of 2016/17 we have all but
completed the roll-out of Carphone Warehouse SWAS
(‘stores-within-a-store’) and the transformation of our stores
to the 3-in-1 format. These stores allow us to offer the best
of both worlds to customers, attracting new footfall and
often at a lower cost.
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 and reducing our
capital requirements.
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.
The Jönköping site is also expanding to incorporate an up-
to-date automated ‘small box’ operation. In the UK alone we
now make more than 50,000 deliveries per week, including
some 600,000 installations per year.
Products
Combining our customer insight with our market-leading
presence 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 mean that
we can work with them to showcase the latest technology,
connectivity and products in our stores with areas dedicated
to key suppliers.
As market leader with an excellent reputation in the
consumer electricals market we have exceptional
relationships with suppliers. In a complex multi-channel
environment, suppliers trust us with their new product
releases and stock allocations, as they appreciate the
service and advice offered by our stores and indeed our
websites, as well as the exciting environments offered by
our transformed stores in which customers can experience
their brands and products.
In consumer electricals, 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. In addition, we continue to
focus on the roll-out of our kitchen furniture brand, Epoq, in
the Nordics.
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After-sales services and support
Our customers need help with their products, whether it
be maintenance and repair or 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 Team Knowhow brands; the latter 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 1m handsets
per year and provide over 11m insurance or service
agreements, carry out approximately 500,000 computing
set-ups per year and take over 40,000 technical support
calls each week.
Our Geek Squad and Team Knowhow teams in stores, in
our call centres as well as field technicians, can provide
set-up and upgrade services and online fix and backup
services. Our market-leading range of help and support
services ensure a customer, both business-to-customer
(B2C) and business-to-business (‘B2B’), 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 £700 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.
Strategy
Dixons Carphone is Europe’s leading specialist electrical
and telecommunications retailer and services company,
employing more than 43,000 people in 10 countries.
Focused on helping customers navigate the connected
world, Dixons Carphone offers a comprehensive range of
electrical and mobile products, connectivity and expert
after-sales services from the Geek Squad and Team
Knowhow. The Group’s core retail focus is the sale of
consumer electrical and mobile phone products. The Group
also has a significant services infrastructure focused on
maintenance, support, repairs, delivery and installation. In
addition, the Group has developed a business-to-business
operation via its Connected World Services division which
leverages the specialist skills, operating processes and
technology of the business to provide services to third
parties.
The Group’s primary brands include CurrysPCWorld
Carphone Warehouse in the UK & Ireland, Elkjøp and Elkjøp
Phonehouse, Elgiganten and Elgiganten Phone House,
Gigantti and Lefdal in the Nordic countries, Kotsovolos in
Greece, Dixons Travel in a number of European airports
albeit predominantly in the UK and Phone House in Spain.
Our key service brands include Team Knowhow in the UK,
Ireland and the Nordics, and Geek Squad in the UK, Ireland
and Spain.
B2B services are provided through CWS, PC World
Business, Elkjøp Business and Carphone Warehouse
Business. Connected World Services aims to leverage
the Group’s existing expertise, operating processes
and technology to provide a range of services to other
businesses.
We continue to drive the Group forward from a position
of strength with a focus on three strategic priorities. By
focusing on these we can deliver not only a better business
for our customers and colleagues, but also better returns for
our shareholders.
The strategic priorities are:
1. Continue to enhance and drive successful and
sustainable retail business models in a multi-channel
world;
2. Leverage our scale, our knowhow, and our unique
infrastructure to drive growth in value added consumer
services; and
3. Continue to develop the CWS B2B division.
Looking at each of these in turn:
1. Continue to enhance and drive
successful and sustainable retail
business models in a multi-channel
world
Our customers tell us that when buying consumer electricals
they want advice to ensure they are making the right
choices, particularly as these are often major purchases
that customers will own for several years. The growth of
the internet has empowered customers, providing instant
access to information including product knowledge and
price transparency.
In mobile, we are uniquely positioned in the UK & Ireland
and the Nordics to provide independent advice and meet
customer requirements for impartiality, comparability and
flexibility, both online and in store with the Pin Point tool
in the UK. In consumer electricals, 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 the advantages 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.
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:
1. Work closely with suppliers to harness benefits available
to our business model: Suppliers want to ensure that
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Business model and strategy
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.
2. Ensure a seamless and personalised multi-channel
experience for customers: We are indifferent whether
our customers buy in store and / or click ‘Buy’ online,
but the experience across these channels must be
joined-up and consistent. Today all our stores are
equipped with Beacon devices and we are increasingly
able to gain a better understanding of consumer activity
to improve their shopping experience as well as tailoring
more focused customer orientated marketing activity.
3. 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; we remain relentlessly
focused on managing costs to make our business more
efficient. Over the course of 2016/17 we have all but
completed our UK & Ireland property plan, right sizing
and revamping of ‘big-box’ estate into a best-in class
3-in-1 format.
4. 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 in the UK & Ireland and Team Knowhow in the
UK & Ireland and in the Nordics offer customers services
and technical support that can help them with their
product throughout its lifetime. This is expanded in our
second strategic priority. In consumer electricals, we
do more than simply sell the product; we will also get it
working and keep it working, as well as delivering it, and
providing peace of mind through product support and
after-sales services. The conversations our colleagues
have in store with customers give us an opportunity to
explain the benefits of these solutions and sell more of
them than our single-channel competition.
14
2. Leverage our scale, our knowhow,
and our unique infrastructure
to drive growth in value added
consumer services
We continue 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.
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 Team Knowhow services are at the forefront
of this in the UK and we have introduced 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.
We are driven to provide unparalleled expertise and services
to help our customers navigate the new digital era. We are
focused on improving every possible aspect of the shopping
journey. We want our colleagues to become famous for
service and we want to retain customers for life by having
exciting new stores, with the best range at great prices and
providing excellent after-sales support and service. We are
making excellent progress; however, we can continue to
make improvements to delight customers and to outpace
the competition.
3. Develop the Connected World
Services division
Building on the success of PinPoint, which has been
transformational in our Carphone Warehouse stores, we
are now seeking to expand our honeybee platform into
new categories and across all brands. Good progress has
also been made in securing honeybee software contracts
in the US, with Sprint and a leading device manufacturer
in Canada. The honeybee proposition of simplifying the
delivery and management of complex digital customer
journeys has resonated well across several industries and
we now have an active pipeline in the travel, general retail
and finance sectors, alongside significant opportunities in
our mobile heartland. To achieve global scale quickly and
access new industry verticals, we have agreed partnerships
with both Accenture and PwC who bring industry
experience, global scale and delivery credibility.
Dixons Carphone plc Annual Report and Accounts 2016/17
Key Performance Indicators
Financial and operational
What we measure(1)
Why we measure
Headline
revenue(2),(3)
The ability to grow revenue is an important measure of a brand’s appeal
to customers and its competitive position. It is a key measure of the
Group’s progress against our strategic priority to continue to enhance
and drive successful and sustainable retail business models in a multi-
channel world.
Our performance
2016/17
£10,580m
2015/16
£9,736m
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revenue growth
Like-for-like revenue enables the performance of the Group to be
measured on a consistent year-on-year basis.
2016/17
4%
2015/16
5%
Market
position
Headline
EBIT(2),(3)
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 specialist electrical or mobile retailer in their market.
Continued growth of headline EBIT enables the Group to invest in its
future and provide a return for shareholders. It is a key measure of
progress against our strategic priority to continue to enhance and drive
successful and sustainable retail business models in a multi-channel
world.
Headline
profit before
tax(2),(3)
Continued growth of headline profit before tax represents a measure of
Group performance to external investors and stakeholders against our
strategic priorities.
Free cash
flow(2)
Return on
Capital
Employed
(ROCE) (3)
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.
ROCE is a key measure of the efficiency of the capital invested by the
Group and the long-term value created for our stakeholders.
Shareholder
What we measure(1)
Why we measure
Headline basic
earnings per
share(2),(3) (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.
Market-leading
positions in:
UK & Ireland
Nordics
Greece
2016/17
£517m
2015/16
£478m
2016/17
£501m
2016/17
£160m
2016/17
22%
2015/16
£457m
2015/16
£202m
2015/16
21%
Our performance
2016/17
33.8p
2015/16
29.3p
(1)
(2)
(3)
Definitions of measurement for Key Performance Indicators are given in the glossary and definitions on pages 156 to 160.
Headline performance measures are as defined in the Performance Review on pages 22 to 27.
Prior year comparatives restated to remove the impact of businesses to be exited. See notes 1, 4 and 32 to the Group financial statements
for details of businesses to be exited and restatement.
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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. The Group’s approach to risk management is set out in the Corporate
Governance Report on pages 54 to 56. 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. These risks are aggregated by risk
category.
Specific risks and potential impacts
Principal risks
Specific risks
Potential impacts
STRATEGIC RISKS
1. Dependence on
• Changes in MNO strategies in relation to the Group, or more
• Reduced revenue and profitability
networks
generally, and / or their performance, could materially affect the
revenues and profits of the business
• Deteriorating cash flow
• Reduced market share
2. Dependence on key
• The Group is dependent on relationships with key suppliers to
• Reduced revenue and profitability
suppliers
source products on which availability may be limited
• Deteriorating cash flow
• Reduced market share
3. Impact of Brexit
• Economic uncertainty and impact on consumer confidence
• Reduced revenue and profitability
caused by the decision of the UK to leave the European Union
(‘Brexit’)
• Deteriorating cash flow
4. Greek business
• Further adverse exchange rate volatility
• Longer term changes in tax, regulation and other frameworks
that may impact our ability to operate across our European
businesses
• Economic uncertainty and / or possibility of Greece’s exit from
the Euro (‘Grexit’) could lead to a deterioration in consumer
confidence and disposable income resulting in a significant
impact on our Greek business, Kotsovolos
• Reduced revenue and profitability
• Deteriorating cash flow
5. 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 product range
• Deteriorating cash flow
• Reduced market share
• Failure to respond effectively to changes in the industry,
economic and / or competitor landscape
• Failure to accommodate changes in consumer preferences and
behaviours
REGULATORY RISKS
6. Non-compliance with
Financial Conduct
Authority (‘FCA’)
regulation
• Failure to manage the business of the Group in compliance with
FCA regulation to which the Group is subject in a number of
areas including the mobile insurance operations of The Carphone
Warehouse Limited and the consumer credit activities of DSG
Retail Limited
• Reputational damage
• Financial penalties
• Reduced revenues and profitability
• Deteriorating cash flow
• Customer compensation
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Example mitigating actions and related strategic priorities
Example mitigating actions
Change in net risk in 2016/17
• Multi-year commercial agreements are in place with all the major MNOs, which align interests and
drive value for both parties
• Continuing to leverage the scale of operations to strengthen relationships with key suppliers and
maintain a good supply of scarce products
• Strategic and business planning takes into account varying economic scenarios, with ongoing
monitoring by finance and senior executives
• Long-term credit facilities in place
• Foreign exchange hedging to mitigate impact of currency fluctuation
• Long-term contingency planning to address wider regulatory and legislative changes
This risk has remained stable over
2016/17
This risk has remained stable over
2016/17
The risk has increased in 2016/17
following the decision to leave the
EU
• Ongoing monitoring of local political and economic developments
• Focus on optimising business performance and management of costs
• Operation of controls over supplier funding and consumer credit arrangements to reduce risk
exposure
• Close scrutiny of product performance, trading results, competitor activity and market share
• Use of customer insight / advocacy to monitor success of initiatives and actions
• Continued focus on driving cost improvements through 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
• Development of the Services strategy
This risk has remained stable over
2016/17
This risk has increased in 2016/17
as uncertainty caused by the
decision to leave the EU has
impacted the financial markets’
evaluation of the prospects for the
UK economy and in particular the
consumer sector
• Board oversight and risk management structures actively monitor compliance and ensure that the
Company’s culture puts customer outcomes first
• Approved Persons perform oversight, monitoring of compliance, adherence to policy and
monitoring of any required mitigating actions
• Internal committees, including a dedicated FCA compliance committee, and control structures
to ensure appropriate compliance (e.g. undertaking quality assurance procedures for samples of
mobile phone sales) and to react swiftly should issues arise
• Ongoing investment in the compliance team
• Continuous review of the operation and effectiveness of compliance standards and controls with
the development of control improvement plans where required
• New training programmes for colleagues implemented across the retail estate
This risk has decreased over
2016/17 due to improvements over
the operation and monitoring of a
comprehensive control environment
covering all of the Group’s FCA-
regulated activities
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Principal risks to achieving the Group’s objectives
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Specific risks and potential impacts
Principal risks
Specific risks
REGULATORY RISKS continued
7. Data Protection
• Adequacy of internal systems and processes to comply with
requirements of forthcoming EU General Data Protection
Regulation (‘GDPR’) which comes into effect in May 2018
• Major loss of customer, colleague, or business sensitive data
Potential impacts
• Reputational damage
• Financial penalties
• Reduced revenue and profitability
• Deteriorating cash flow
• Loss of competitive advantage
OPERATIONAL RISKS
8. Information security
• Vulnerability to attack, malware, and associated cyber risks
• Reputational damage
• Financial penalties
• Reduced revenue and profitability
• Deteriorating cash flow
• Loss of competitive advantage
9. Health and Safety
• Failure to effectively protect customers and / or colleagues and /
• Employee / customer injury or loss of
or contractors from injury or loss of life
life
• Reputational damage
• Financial penalties
• Legal action
10. Business continuity
plans are not effective
and major incident
response is inadequate
TECHNOLOGY RISKS
11. IT systems and
infrastructure
• A major incident impacts the Group’s ability to trade and
business continuity plans are not effective resulting in an
inadequate incident response
• Reduced revenue and profitability
• Deteriorating cash flow
• Reputational damage
• Loss of competitive advantage
• Failure to appropriately invest in IT systems and infrastructure,
• Reduced revenue and profitability
or an inability to effectively integrate IT assets across the Group
constrains the Group’s ability to grow and / or adapt quickly. A
key system becomes unavailable for a period of time
• Deteriorating cash flow
• Loss of competitive advantage
• Restricted growth and adaptability
• Reputational damage
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Example mitigating actions and related strategic priorities
Example mitigating actions
Change in net risk in 2016/17
• A comprehensive GDPR readiness assessment is being conducted across the Group’s operations
to benchmark current practices against requirements of new legislation
• Existing control activities operate over management of customer and employee data in accordance
with the Group’s Data Protection policy and processes
• Ongoing training programmes for colleagues on requirements for data protection
• Investment in information security safeguards, IT security controls, monitoring, in-house expertise
and resources as part of a managed Information Security Improvement Plan
• Information Security and Data Protection Committee comprising senior management in the UK
& Ireland, set up with responsibility for oversight, co-ordination and monitoring of information
security policy and risk
• Information policy and standards defined and communicated
• Ongoing training and awareness programmes for employees
• Audit programme over key suppliers’ information security standards
• Ongoing programme of penetration testing
• Group Health and Safety strategy
• Group Health and Safety policy
This risk was presented as part
of the information security risk
in 2015/16 and is now shown
separately to reflect our focus on
meeting the requirements of GDPR.
The risk has remained stable over
2016/17
Our overall information security
position has improved in 2016/17
following significant and ongoing
management effort and investment
to reduce this risk exposure
• Health and Safety management / governance committee
• Comprehensive set of policies and standards supporting continued improvement
• Head of Health and Safety and operational Health and Safety teams located across business units
and markets
This risk has decreased in 2016/17
as a result of actions initiated
following a comprehensive internal
review of Health and Safety
processes conducted in 2015/16
• Risk assessment programme covering retail, support centres, distribution and home services
• Health and Safety training and development framework
• Health and Safety inspection programme
• Audit programme including factory audits for own brand products and third-party supply chains
• Business continuity and crisis management plans in place and tested for key business locations
• Disaster recovery plans in place and tested for key IT systems and data centres
• Crisis team appointed to manage response to significant events
This risk has remained stable over
2016/17
• Major risks insured
• Significant investment being made in IT systems and infrastructure across the Group, supported
by rigorous testing processes
• Ongoing IT transformation to align IT infrastructure to future needs of the business
• 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 established
The risk has remained stable over
2016/17
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Specific risks and potential impacts
Principal risks
Specific risks
Potential impacts
PEOPLE RISKS
12. Colleague retention
and capability
• Failure to attract, develop and retain quality and depth of
necessary leadership, management and colleague talent
• Maturing of long term incentive schemes may increase risk of
higher turnover in senior management population
• Reputational damage
• Reduced revenue and profitability
• Deteriorating cash flow
• Loss of competitive advantage
FINANCIAL RISKS
13. Fraud
• Payment card fraud
• Reduced revenue and profitability
• Manipulation or misuse of Electronic Point of Sale system and /
• Reputational damage
or other payment systems
• Customer false identity and other ‘no intention to pay’ frauds in
taking out network contracts
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Example mitigating actions and related strategic priorities
Example mitigating actions
Change in net risk in 2016/17
• Ongoing review to ensure appropriate and effective roles, responsibilities, and accountabilities
• Defined and standardised performance management frameworks in place and reward aligned to
attract and retain 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
• Development of appropriate Board succession planning, as set out in the Nominations Committee
Report on pages 59 and 60
The business is subject to
competition to attract and retain
talent in growth areas of the
business. Our exposure to this
risk increased in 2016/17 as we
approach the vesting date of
various long term incentive plans
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• Fraud prevention and detection controls
• Real-time transaction monitoring
• 24/7 fraud and loss prevention teams
• Customer identity verification and credit checks for network contracts
• Liaison with banks, card providers and MNOs to identify and mitigate opportunities for fraud
• Reporting and oversight by the Audit Committee
• Whistleblowing arrangements
This risk has remained stable over
2016/17
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Performance review
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Highlights: 12 months to 29 April 2017
• Group like-for-like revenue(3)
up 4%, Statutory revenue up 9%.
• Strong profit performance:
— Headline PBT(1) of £501 million (2015/16: £457 million) , up 10%
— Headline basic EPS(1)
33.8p (2015/16: 30.2p) , statutory basic EPS 25.6p (2015/16: 14.0p)
— Total statutory profit before tax of £386 million (2015/16: £263 million) after non-headline(1)
charges of £115 million
(2015/16: £194 million)
• Free cash flows(8) of £160 million (2015/16: £202 million) and net debt(9) broadly flat year-on-year at £271 million
• Final dividend of 7.75p (2015/16: 6.50p) proposed, taking total dividends for the year to 11.25p (2015/16: 9.75p) , up 15%
year-on-year
Headline results(1)
UK & Ireland
Nordics
Southern Europe
Connected World Services
Group
Net finance costs
Profit before tax
Tax
Profit after tax
Headline basic EPS
Headline revenue(1)
Headline profit / (loss) (1)
Note
(4)
(5)
(6)
(7)
2016/17
£million
6,550
3,156
661
213
10,580
2015/16
(restated)
£million
Reported
rate %
change
Local
currency(2)
% change
Like-for-
like(3)
% change
6,402
2,632
550
152
9,736
2%
20%
20%
41%
9%
2%
5%
4%
37%
3%
4%
1%
6%
N/A
4%
2016/17
£million
385
89
22
21
517
(16)
501
(112)
389
33.8p
2015/16
(restated)
£million
371
79
17
11
478
(21)
457
(110)
347
30.2p
– In the UK & Ireland, like-for-like revenues in the full year improved by approximately 3% as a net result of sales
successfully transferred from closed stores and sales disruptions
Notes.
(1)
Headline results exclude amortisation of acquisition intangibles, Merger integration and transformation costs, businesses to be exited,
property rationalisation costs, acquisition-related costs and other one-off, non-recurring items, net interest on defined benefit pension
schemes and discontinued operations. Such excluded items are described as ‘non-headline’. For further details see notes 4 and 25 to the
Group financial statements. Comparatives have been restated following the classification of the iD mobile operations in the Republic of
Ireland and the Sprint joint venture as businesses to be exited, and therefore included in non-headline results. For further details see note 32
to the Group financial statements.
(2) Change in local currency revenue reflects total revenues on a constant currency and period basis.
(3) Like-for-like revenue is defined in the glossary on pages 156 to 160.
(4) UK & Ireland comprises operations in the UK and Ireland and the Dixons Travel business.
(5) Nordics comprises operations in Norway, Sweden, Finland, Denmark, and Iceland.
(6) Southern Europe comprises operations in Spain and Greece.
(7)
Connected World Services 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.
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.
(8)
(9) Net debt is defined in the glossary on pages 156 to 160.
See glossary on pages 156 to 160 for further definitions of terms.
Headline results
The performance review below refers, unless otherwise
stated, to headline information for continuing businesses.
Prior year comparatives have been restated to remove the
results of businesses to be exited as disclosed in note 32 to
the Group financial statements.
Group
Group headline revenue increased 3% on a local currency
basis and 9% in Sterling terms to £10,580 million (2015/16:
£9,736 million) . Like-for-like revenue growth was 4%,
reflecting growth across all divisions.
Headline EBIT was up 8% to £517 million (2015/16:
£478 million) .
22
Headline profit before tax was £501 million (2015/16:
£457 million) , with a reduced year-on-year interest charge.
UK & Ireland
Revenue in the UK & Ireland increased by 2% to
£6,550 million (2015/16: £6,402 million) , with like-for-like
revenue for the year up 4%, benefiting by approximately 3%
as a net result of sales transferred from closed stores and
sales disruption. The electricals business delivered a solid
result with market share gains across consumer electronics,
white goods, computing and multiplay.
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The mobile market was more challenging due to product
safety and supply issues, limited product innovation,
delays in product launches and more competitive SIMO
propositions. iD in the UK continues to benefit from its
differentiated proposition and innovative tariffs with the
number of active customers increasing to more than
600,000 from 325,000 in the prior year.
Headline EBIT has increased 4% to £385 million. Electricals
profitability growth has reflected revenue growth with
margins remaining relatively flat year on year. There has
been an in-year benefit of £28 million from changes in the
cost profile of services provided under long-term customer
support agreements(a).
Electricals growth has offset lower mobile margin caused
by higher handset costs. In addition we have seen lower out
of bundle spend (partly due to new EU roaming legislation)
but have experienced higher average customer contract
life(b) (net impact positive £21 million; 2015/16: £32 million).
Changes in contractual terms for the sale of third party
insurance contracts have benefited headline EBIT by
£22 million(c).
We have made the decision to exit our iD mobile operations
in the Republic of Ireland. The iD mobile operations in the
Republic of Ireland represent a different business model to
the UK, as it is a capacity MVNO with options for expanding
its spectrum. This brings with it excellent control, but that
comes with upfront costs and increased administration, and
we believe the business will flourish faster under dedicated
ownership.
Nordics
The Nordic business delivered 5% revenue growth on
a local currency basis with growth across all countries.
Reported revenues increased 20% to £3,156 million
(2015/16: £2,632 million) benefiting from the weakness of
Sterling.
Like-for-like revenue was up 1% with the difference
between like-for-like growth and local currency growth
predominantly reflecting new store openings, FONA store
acquisitions and the contribution of Infocare, which was
acquired in the prior year. Like-for-like revenue growth
was helped by strong audio and mobile sales more than
offsetting a decline in tablet sales.
Headline EBIT in local currency remained broadly flat
year on year. Reported headline EBIT growth of 13% to
£89 million reflects the translation benefit of weaker Sterling.
Southern Europe
Southern Europe had strong underlying results with like-for-
like revenue up 6%, and revenue on a local currency basis
up 4%. The increase was driven by the business in Greece
which delivered excellent growth. Our Spanish business
continues to evolve to offer multi-play, sim-only and
handset propositions and move to a more flexible franchise
approach in a changing market.
(a) See Note 1t) to the Group financial statements
(b) See Note 26h) to the Group financial statements
(c) See Note 1d) to the Group financial statements
Southern Europe headline EBIT was £22 million (2015/16:
£17 million) , up 29% benefiting from the increased revenue
noted above and the relative strengthening of the Euro
against Sterling.
Connected World Services
Connected World Services (‘CWS’) has continued to grow,
delivering revenue of £213 million, up from £152 million
in the prior year with headline EBIT growth of £10 million
to £21 million. Year-on-year revenue and profit growth is
driven by contracts with EE and TalkTalk for mobile phone
insurance and the distribution of mobile, TV and broadband
connectivity, as well as the honeybee platform development
contract with Sprint.
On 9 June the Group announced that in light of the
changing US mobile market landscape and Sprint’s review
of its own distribution strategy, the companies have reached
mutual agreement that CWS will focus on the deployment
of the honeybee platform across the entire Sprint estate
and that Sprint will acquire the CWS 50% share of the
distribution joint venture. The Group’s share of joint
venture losses (£17 million, 2015/16: £4 million) , have been
classified as non-headline items in accordance with the
Group policy for businesses to be exited.
We continue to develop the honeybee pipeline, and
have signed an agreement with WebHelp, a large French
outsourcer, and a pilot call centre agreement with Capita,
both of which we anticipate will deliver further agreements
with new customers.
Net finance costs
Headline net finance costs were £16 million (2015/16:
£21 million) . The reduction in net financing costs reflects
the full year benefit of lower margin on the revolving credit
facility negotiated in October 2015 coupled with reduced
LIBOR rates and finance income received from the loan with
the Group’s investment in the Unieuro operations.
Tax
The headline effective tax rate for the full year is 22%
(2015/16: 24%). The rate is higher than the UK statutory rate
of 20% due mainly to higher statutory rates in the Nordics,
certain non-deductible items mainly in the UK and a net
increase in tax related provisions in the year.
Cash and movement on net debt
Free Cash Flow
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
2016/17
£million
2015/16
£million
517
152
(104)
(242)
(72)
(23)
2
230
(70)
160
478
137
(80)
(221)
(56)
(31)
18
245
(43)
202
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Performance review
Free Cash Flow before restructuring was an inflow of
£230 million (2015/16: £245 million) , a decrease of 6%.
The Group experienced a working capital outflow of
£104 million (2015/16: £80 million) , largely as a result
of increased receivables balances relating to network
commissions in the UK and changes in contractual terms
for the sale of third party insurance contracts coupled with
lower deferred income as a result of changes to the cost
profile of services provided under long-term customer
support agreements as discussed earlier in this report.
Capital expenditure in the period was £242 million (2015/16:
£221 million) . The year-on-year increase reflected spend
on SWAS stores and the refit of the stores as part of the
property rationalisation programme announced in the prior
year, together with further investment in IT platforms and
continued development in both our retail and Connected
World Services businesses.
The reduction in interest paid is as a result of facility fees
that were paid in H1 2015/16 and the reduction in financing
costs explained above.
Restructuring costs primarily comprise the cash costs
associated with the Merger, transformation activities and
the property rationalisation programme noted below within
non-headline items.
A reconciliation of free cash flow to cash flow from
operations is presented in note 27c) to the Group financial
statements.
Funding
Free Cash Flow
Dividends
Acquisitions and disposals including
discontinued operations
Pension contributions
Other items
Movement in net debt
Opening net debt
Closing net debt
2016/17
£million
2015/16
£million
160
(115)
(25)
(43)
19
(4)
(267)
(271)
202
(106)
(82)
(35)
14
(7)
(260)
(267)
At 29 April 2017 the Group had net debt of £271 million,
broadly flat year-on-year to net debt of £267 million in the
prior year. Free Cash Flow was an inflow of £160 million
(2015/16: £202 million) for the reasons described above.
Net cash outflows from acquisitions and disposals in the
current year represents cash outflows relating to the Sprint
joint venture, the acquisition of Simplifydigital and the FONA
stores in Denmark, offset by cash receipts in relation to the
Group’s previously disposed retail operations in Germany.
24
The increase in pension contributions reflects the agreed
deficit reduction plan following the 2016 triennial valuation.
Other items primarily relate to foreign exchange movements
on net debt.
Statutory results
Income statement – continuing operations
Revenue
EBIT
Net finance costs
Profit before tax
Tax
Profit after tax – continuing operations
Profit / (loss) after tax – discontinued
operations
Profit after tax for the period
Basic EPS
Diluted EPS
2016/17
£million
10,585
418
(32)
386
(95)
291
4
295
25.3p
25.2p
2015/16
£million
9,738
304
(41)
263
(84)
179
(18)
161
15.6p
15.1p
Revenue increased 9% to £10,585 million due to the
reasons discussed earlier in this report.
Earnings before interest and tax increased from £304 million
to £418 million in the current period, largely due to the
reasons discussed earlier in this report and a reduction in
non-headline costs incurred in the current year which are
explained later in this report.
Net finance costs have decreased by £9 million due to
reduced interest on borrowings reflecting the full year
benefit of lower interest rates on amounts drawn under
the revolving credit facility as described above and prior
year non-headline costs relating to the write off of deferred
facility fees incurred as disclosed below.
The tax charge increased from £84 million to £95 million
reflecting higher statutory profit in the year partially offset by
the impact of the lower effective tax rate discussed above.
Tax credits on non-headline items reduced as a result of
lower non-headline costs incurred in the year.
Basic EPS has increased from 15.6p to 25.3p for the period
due to the higher reported profit after tax. Diluted EPS has
increased from 15.1p to 25.2p reflecting the increase in the
reported profit after tax and the lower number of potentially
dilutive shares following the post-Brexit decline in the Group
share price.
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Non-headline items
Statutory profit before tax of £386 million (2015/16:
£263 million) includes non-headline charges of £115 million
(2015/16: £194 million) . These charges are analysed below.
Further details can be found in note 4 to the Group financial
statements.
2016/17
£million
2015/16
£million
Businesses to be exited
Merger and transformation-related
costs
Amortisation of acquisition intangibles
Property rationalisation costs
Acquisition-related costs
Share plan taxable benefit
compensation
Unieuro income
Total non-headline items before
interest and tax
Net pension interest
Total non-headline items before tax
Tax
Profit / (loss) after tax – discontinued
operations
Total non-headline items
(28)
(31)
(34)
—
—
(11)
5
(99)
(16)
(115)
17
4
(94)
(10)
(52)
(40)
(70)
(6)
—
—
(178)
(16)
(194)
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(18)
(186)
Businesses to be exited relates to the trading losses of the
iD mobile operations in the Republic of Ireland of £10 million
(2015/16: £6 million) , and the share of trading losses from
joint ventures of £18 million (2015/16: £4 million) (including
segmental allocation of central costs of £1 million (2015/16:
£nil) ) for which an agreement has been reached to sell the
Group’s 50% interest to Sprint.
Costs incurred in relation to the Merger relate to integration
costs of £18 million (2015/16: £48 million) and functional
transformation costs of £13 million (2015/16: £nil) . Integration
costs primarily reflect professional fees, employee severance
and incentive costs associated with the initial integration
of the two merged businesses. During the current period
functional transformation projects have commenced across
the finance, procurement and human resources functions
to rationalise shared service centre activities and harmonise
policies and procedures across key support functions of
the business. During 2015/16, Merger-related costs also
included the write-off of £4 million deferred facility fees
which were incurred as a result of the Merger and the
financing required to facilitate the Merger at short notice.
The charge for the amortisation of acquisition intangibles
was £34 million (2015/16: £40 million) with the decrease due
to some of the acquisition intangibles arising on the CPW
Europe Acquisition being fully amortised during the prior
period.
In the prior year the Group initiated a reorganisation of
its property portfolio. The costs associated with this
programme recognised in the prior year of £70 million
related to committed property exit costs, asset write-downs
and operational costs associated with the 3-in-1 store
concept roll-out across the UK & Ireland.
Acquisition-related costs in the prior period related to
professional fees incurred as a result of the acquisition of
Simplifydigital in the UK and Infocare in the Nordics and the
revaluation of deferred consideration payable to the former
shareholders of the Epoq kitchen business in the Nordics.
As discussed in the Remuneration Committee Chairmen’s
statement on page 61, in the event of non-vesting,
compensation will be paid to participants of the Share Plan
for any tax charges arising from taxable benefits from the
waiver of any portion of loans granted under the scheme.
Based on the current share performance it is considered
probable that this liability will crystallise and therefore a
provision of £11 million has been made during 2016/17.
Unieuro income relates to a special dividend to the Group to
distribute the proceeds raised through the 31.8% IPO of its
investment in Unieuro on the Milan stock exchange.
Net pension interest was £16 million reflecting the charge
incurred in relation to the Dixons Retail UK pension scheme.
Discontinued operations
A loss of £18 million was recognised during the prior year
in relation to the disposal of the Group’s retail operations in
Germany, the Netherlands and Portugal. In the current year,
£4 million income principally relates to the write back of the
previously impaired loan to Unieuro which was repaid during
the year. Consistent with the original impairment this income
is treated as discontinued operations.
Balance sheet
Goodwill
Other fixed assets
Working capital
Net debt
Tax, pension & other
2016/17
£million
3,111
973
(203)
(271)
(555)
3,055
2015/16
£million
3,054
906
(361)
(267)
(472)
2,860
The movement in goodwill is primarily due to the
retranslation of currency denominated balances largely in the
Nordics. Other fixed assets have increased, with the higher
capital expenditure during the year exceeding amortisation
and depreciation. Negative working capital has reduced
in the year largely as a result of network commission
receivables increasing due to favourable assumptions over
future contractual receipts, increased consumer insurance
commission receivables following changes in contractual
terms for the sale of third party insurance contracts,
a reduction in provisions due to utilisation of property
related provisions in the year and increases in stock offset
by increases in trade payables. Net debt has marginally
increased as described above. Other net liabilities (tax,
pension & other) have increased primarily as a result of the
increase in the IAS 19 accounting deficit described below
offset by the increase in carrying value of the joint venture
and recognition of the investment in the remaining interest in
Unieuro.
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Cash flow statement
EBIT – continuing operations
EBIT – discontinued operations
Depreciation and amortisation
Working capital
Other operating cash flows
Cash flows from operating activities
Acquisitions
Capital expenditure
Other investing cash flows
Cash flows from investing activities
Dividends paid
Other financing cash flows
Cash flows from financing activities
2016/17
£million
2015/16
£million
418
—
186
(154)
(86)
364
(46)
(242)
41
(247)
(115)
(41)
(156)
304
(4)
177
(8)
(73)
396
(59)
(221)
54
(226)
(106)
(11)
(117)
(Decrease) / increase in cash and
cash equivalents
(39)
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The statutory EBIT increase and working capital outflow
increase in the year are for those reasons outlined above.
Acquisition cash outflows in the current period of £46 million
relate to £29 million further capital injected into the US
joint venture with Sprint, £10 million deferred consideration
payment for the prior year acquisition of Simplifydigital,
£2 million in the Nordics in relation to the ‘Epoq’ kitchen
business acquired in 2011/12 and £5 million for the
acquisition of ten FONA stores in Denmark. The prior
year reflected the final CPW Europe Acquisition deferred
payment and the acquisitions of Simplifydigital and
InfoCare. The increase in capital expenditure reflects those
reasons outlined above.
The increase in other financing outflows is due to interest
paid on and reduction in year end amounts drawn under the
revolving credit facilities.
Comprehensive income / changes in equity
Total equity of the Group has increased from £2,860 million
to £3,055 million primarily reflecting the total statutory
profit of £295 million, the gain on retranslation of overseas
operations of £76 million offset by the payment of dividends
of £115 million and actuarial loss (net of taxation) relating to
the defined benefit pension scheme of £123 million.
Other matters
Pensions
The IAS 19 accounting deficit of the defined benefit section
of the UK pension scheme of Dixons Retail amounted to
£589 million at 29 April 2017 compared to £472 million at
30 April 2016. Contributions during the period under the
terms of the deficit reduction plan amounted to £43 million
(2015/16: £35 million) . The deficit has increased during
the year as a result of changes in financial assumptions,
primarily the discount and inflation rates, which determine
liabilities, partially offset by an increase in underlying asset
values.
Dividends
The Board declared an interim dividend of 3.5p per share,
up from 3.25p per share last year. The interim dividend was
paid on 27 January 2017.
We are proposing a final dividend of 7.75p per share,
taking the total dividend for the year to 11.25p per share,
a 15% increase on the previous year (2015/16: 9.75p) .
The final dividend is subject to shareholder approval at the
Company’s forthcoming Annual General Meeting. The
ex-dividend date is 24 August 2017, with a record date of
25 August 2017 and an intended final dividend payment
date of 22 September 2017.
Going concern
A review of the Group’s business activities, together
with the factors likely to affect its future development,
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 Annual
Report and Accounts.
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.
Viability statement
In accordance with provision C.2.2 of the UK Corporate
Governance Code 2014, the Directors have assessed
the viability of the Group over a period longer than the
12 months covered by the “Going Concern” provision
above.
In assessing the viability of the Group, the Directors have
considered the Group’s current position and prospects, risk
appetite, and those principal risks and mitigating actions as
described on pages 16 to 21 of the Strategic Report.
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Dixons Carphone plc Annual Report and Accounts 2016/17
The Board concluded that a period of three years was
appropriate for this assessment as it is consistent with the
period of focus of the annual strategic plan and reflects a
period of greater certainty over forecasting assumptions.
The strategic plan considers the forecast revenue, EBITDA,
working capital, cash flows and funding requirements
on a business by business basis as well as the available
borrowing facilities to the Group over the assessment period
and the financial covenants to which those facilities need
to comply. The strategic plan has been subject to robust
stress-testing, modelling the impact of a combination of
severe but plausible adverse scenarios based on those
principal risks facing the group. Examples include the
impact of regulation or information security incidents and
reduced forecast profitability and cash flow as a result in
a significant change in consumer behaviour. The model
assumes no further funding facilities are required over and
above those currently committed to the Group as disclosed
in note 18 to the Annual Report and Accounts.
Based on the results of this analysis, the Directors have
an expectation that the Company will be able to continue
in operation and meet its liabilities as they fall due over
the three year period of their assessment. In doing so, it is
recognised that such future assessments are subject to a
level of uncertainty and as such future outcomes cannot be
guaranteed or predicted with certainty.
Humphrey Singer
Group Finance Director
27 June 2017
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Corporate Responsibility
Dixons Carphone is committed to the highest standards of
corporate and social responsibility (CSR) across the Group.
It is our ambition to understand how technology can be
used to tackle social issues and then leverage our skills,
experience and position to support communities, connected
homes and the families within them. We will do this by
helping to ensure occupants are properly equipped, safe
and confident to explore the connected world.
We are building a sustainable, responsible and ethical
business by listening to customers, shareholders,
employees and wider communities to understand
expectations and make sure they are reflected in our
business decisions. We recognise good sustainability
practices make sound business sense, not only to benefit
the environment, stakeholders and the communities
in which we operate, but also to achieve our strategic
priorities.
We are improving the visibility of our work across our CSR
principles of people, connected community, environment
and supply chain by enhancing our website, responding
again to the CDP Climate Change programme and updating
and making available several of our key policies.
Dixons Carphone is a member of the Government’s All Party
Corporate Responsibility Group and for 2017/18 we joined
Business in the Community to explore and share the role of
business in creating a fairer society and more sustainable
future.
We are reviewing our overall long-term commitment to CSR
so we focus on areas where we have the most impact as a
Group. As part of this review we will be:
• Engaging more deeply with stakeholders;
• Benchmarking ourselves against our peers and best
practice leaders;
• Determining what is material to us as a business; and
• Developing an approach to long term targets, strategy
and reporting through a new sustainability programme
called Live Earth Neutral.
We are committed to creating a great place to work
and making a positive social impact, while building trust
and brand loyalty across all our brands. We strive for a
sustainable environment, minimal waste and optimum
efficiency and operate an ethical business, valuing rights
and prosperity across our value chain.
We aim to deliver transformative change through innovation,
collaborate with stakeholders as partners, and directly or
indirectly invest in initiatives which benefit the communities
in which we operate.
Integrated activity
Our approach to corporate responsibility means taking
business decisions guided by our values and code of
ethics. Throughout our business, dedicated personnel drive
and deliver our sustainability activities, with our Head of
Corporate Responsibility helping to co-ordinate and report
on progress while strategising and delivering our social
impact agenda. CSR is approved and represented at Senior
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Management then Board level by the IR, PR and Corporate
Affairs Director, where the Strategy is reviewed annually,
with specific issues and activity discussed whenever
necessary throughout the year.
People
Our people make us who we are, and as a business we are
passionate about attracting, recruiting and retaining the best
talent to help drive our growth and keep us at the forefront
of innovation and outstanding customer experience.
In 2016 we launched our Graduate Scheme which saw 15
university leavers given the opportunity to establish their
careers with bespoke training, on-the-job experience and
management coaching. The scheme continues in 2017 with
an increased intake of 19 graduates.
Our Apprentice scheme also goes from strength to strength.
This year we recruited 135 new apprentices through learning
providers, colleges and social media. Working across
different roles, brands and functions our apprentices are
providing us with a pipeline of talent and demonstrating
improved rates of retention, engagement and performance.
Apprenticeships
2014/15
75
2015/16
75
2016/17
135
2017/18
Est. 200
Investing in colleague expertise
As part of our learning strategy, formal and informal training
and management coaching is available to all employees
to help them grow their careers. Training is in line with our
business strategy and designed to create reliable experts
our customers can trust.
All new colleagues follow a 90-day induction plan and
every employee has regular one to one meetings with their
managers, as well as twice yearly formal performance
reviews where future development and career plans are
considered.
In 2016/17 we recorded over 220,000 learning hours with
over 80% of this completed digitally. We also run talent
and leadership development programmes to develop high
achievers and hone management leadership skills.
In 2017/18 we will increase volunteering opportunities
through an initiative with social housing charity, Abbeyfield,
so employees so can build their communication and team
work skills to benefit local communities.
To strengthen trust we expect high standards in
employment practices. We regularly review our
comprehensive suite of employment policies and
procedures, which includes anti-corruption and bribery,
guidance on being family friendly, colleague dispute
management, as well as diversity and equal opportunities.
All employees are required to read and digitally
acknowledge key company policies.
Dixons Carphone plc Annual Report and Accounts 2016/17
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Engaging our colleagues
Equal opportunities
We are committed to communicating openly and honestly
with colleagues across the Group and listen to their views.
All employees are asked to participate in our annual
engagement survey, Make a Difference. Administered
externally and in confidence, this balanced scorecard
gauges how people feel about working for Dixons Carphone
and is used to monitor and improve performance, help us
make decisions, and recognise success. 88% of colleagues
gave their feedback in the 2017 survey, an increase of
5 percentage points from 2016.
Our people have access to innovative information channels,
with an emphasis on collaboration and peer-to-peer
communication. In 2016/17 we introduced two new HR
platforms and following a successful launch in the Nordics,
rolled out ‘Workplace’ by Facebook to 12,000 colleagues
in the UK & Ireland. We are an early adopter of Workplace,
which provides colleagues with an intuitive mechanism
to engage and collaborate on projects, partake in social
activities and share best practice. We plan to roll-out
Workplace across the Group in 2017/18.
We will also continue to produce 360 Magazine specifically
for Team Knowhow and Connected, a magazine
available online and in hard copy to all colleagues. This
communication channel consistently receives positive
feedback from recipients and holds the title of ‘Best New
Publication’ from the Institute of Internal Communications.
Employee Benefits
Our employee benefits packages are periodically 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. 25% of our UK & Ireland workforce are
signed up to this scheme. As part of the harmonisation of
benefits across the organisation, we are implementing a
new benefits platform during 2017 that all UK colleagues will
be able to access and see the value of the core company
benefits – such as life assurance - and choose additional
benefits suited to their personal needs and lifestyle, such
as childcare vouchers, eye care vouchers, cycle to work
scheme and dental plans.
Minimum Wage
We pay a minimum hourly rate of £7 to all colleagues in the
United Kingdom under 21 + location allowance + bonus.
Colleagues aged 21 and over in the United Kingdom are
paid a minimum hourly rate of £7.50. In addition to basic
pay we pay location allowance, where applicable, and
bonus.
We are committed to equality of opportunity across all of
our 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.
Rainbow Award (Nordics)
In the Nordics, we were proud to win the Danish Rainbow
Awards for supporting LGBT through our Valentines
Campaign.
Diversity
We value the benefits a diverse workplace brings, 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 priority.
Across the Group
Work Level
All Employees
Senior Managers
Directors
Male
Female
Total
Number
30,518
13,365
43,883
% Number
% Number
%
69.54
30.46
74.80
25.20
95
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69.23
30.77
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Health, Safety and Wellbeing
Our Group Health and Safety (‘H&S’) Policy sets control
standards for key risks as well as responsibilities to our
customers, colleagues and other stakeholders (franchisees,
agency workers, supply chain and contractors) . This Policy
is widely displayed on noticeboards and acknowledged in
our statutory H&S training. Our compliance with this policy
is regularly audited.
Health and Safety Award 2017
We are proud to have received awards from The
Royal Society for the Prevention of Accidents for our
management of Retail Health and Safety and Health and
Safety in our Newark Distribution Centre.
Through our employee wellbeing strategy, we aim to create
a happier, healthier and more productive workforce, while
reducing time off through sickness and ensuring optimum
levels of energy and resilience. Employee turnover across
the Group was broadly flat at 29% in 2016/17.
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Mental health management training has been introduced
for HR Business Partners and all colleagues receive regular
updates and information on health, resilience and wellbeing.
In addition, ergonomics advice and equipment is provided
to prevent musculoskeletal injuries, along with training and
protective equipment for installers and delivery teams.
Ultimate Workforce
We gave specialist military units the mission to recruit,
train and up-skill eleven employee volunteers during a
cutting-edge wellbeing programme designed to create the
Ultimate Workforce. Run with support from SONYXperia
and GARMIN, this programme combined latest tech with
elite military training and insights to equip participants
with key skills such as first aid, influence and persuasion,
weightlifting, ergonomics and orienteering.
As well as the physical health gains (the team lost
27.9 kg / 18.1% body fat and grew 17.4% muscle) ,
their strengthened mental resilience has prepared them
to be effective in any Volatile, Uncertain, Complex and
Ambiguous (‘VUCA’) market place. Feedback from
managers and participants has been remarkable, with
demonstrable improvements to posture, confidence, overall
outlook, interaction with stakeholders, team working,
problem solving and leadership.
Connected community
Every decision we make is driven by insights and our
ambition to provide unparalleled expertise and services to
help customers and businesses navigate the digital era,
while building brand loyalty and trust. We are committed
to being a responsible member of every community we
do business in: whether it’s by match-funding employee
fundraising, community initiatives or charity partnerships,
we implement new ideas to make a positive impact locally.
Founding Partner of Heads Together
Dixons Carphone is proud to be a Founding Partner of
Heads Together, a campaign spearheaded by the Duke
and Duchess of Cambridge and Prince Harry. Throughout
2016/17 Heads Together made ground breaking progress in
helping to end the stigma around mental health and change
the conversation around mental health from fear and shame
to confidence and support. Our long-term charity partner,
The Mix, is one of eight charities that comprise Heads
Together.
Corporate Responsibility
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Healthy living is encouraged through corporate challenge
initiatives, while on-site fitness facilities include a gym in
our main support centre, shower facilities, secure bicycle
storage and restaurants offering a balanced menu and
range of healthy nutritionist-approved foods.
Dixons Carphone Race to the Stones 2016
Since our initial sponsorship in 2014, we have led the
way in the corporate challenge space, collaborating with
organisers, Threshold Sports, to transform the positioning
and purpose of ultra-events into accessible ultra-
experiences, attracting a diverse range of participants:
from people who want to get fit, socialise, take on a new
challenge or strengthen their mental wellbeing, to charities
looking for a demanding and rewarding addition to their
fundraising portfolio.
In 2016/17 over 2,500 participants chose to run, trek or
walk 100 km along the ancient Ridgeway to Avebury Stone
Circle, generating over three million Facebook impressions.
130 employees took part, raising over £36,000 for our
charity partner, The Mix. Overall, £108,027 was raised
for a variety of good causes and 100% of participating
employees agreed our sponsorship was positive.
For 2017 we have donated 100 places to Heads Together,
providing the opportunity for people affected by mental
health issues to benefit from the positive aspects of
participating in an endurance challenge. We are also
working with our suppliers to further enhance the event
experience through free demonstrations of wellness related
tech and household health-related electrical items along
the route.
Average to Awesome 2016
This UK wellbeing initiative focused on transforming
employees’ attitude to health and fitness as they prepared
for the Dixons Carphone Race to the Stones. Thirteen
sedentary employee volunteers were given the support of
a personal trainer, nutrition plan and Fitbit accessories.
After 12 weeks, we recorded their combined weight loss
at 104 kg. The team all completed the 100km event and
developed a strong bond. They continue positive changes
to their lifestyle habits and there is evidence of wider health
benefits to families and co-workers.
An Employee Assistance Programme operates 24/7 offering
support for a range of issues such as stress, smoking
cessation and debt management.
We participated in Mercer’s 2016 Britain’s Healthiest
Workplace with approximately 500 UK employees
responding to this comprehensive company-wide online
survey. The results provided a benchmark for improvement
for our 2017/18 workplace mental wellbeing strategy and
helped us to identify further actions to protect employee
welfare and improve our ranking.
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#Thereforme
This Dixons Carphone social media initiative paid tribute to
individuals who had ‘been there’ for people during tough
emotional times. Co created by Dixons Carphone and
promoted in-store across the UK, it became of one Heads
Together’s most successful campaigns, with over 3.5 million
impressions and a ‘sentiment score’ of 99 out of 100.
Mental Health Marathon
13 Dixons Carphone colleagues completed the London
Marathon as part of #TeamHeadsTogether. Led by our
Group Finance Director, Humphrey Singer, their efforts
raised £33,783 for The Mix.
#DCTaking Steps
To involve all employees in our work with Heads Together,
we launched Dixons Carphone Taking Steps, inviting them
to pledge one positive step towards tackling the wider
mental health issue – from identifying when a colleague
needs someone to talk to, to volunteering or sponsoring
colleagues taking physical steps to help support young
people with mental health issues in corporate challenges.
Charity partnership
We continued our support of The Mix (registered charity
number 1048995) . Just as Dixons Carphone matches
customers with the most suitable equipment and services
for their needs, The Mix supports the physical and mental
wellbeing of young people under 25 across the UK,
whatever their issue, through the technology of their choice.
The Mix operates a free, confidential support service,
available 24/7, 365 days a year, via phone, text, web, social
media and counselling.
In 2016/17 we gave a total of £623,723 to The Mix,
including gift in kind office and helpline accommodation and
fundraising through employee events and initiatives such
as our charity dinner, treks and challenges and a tennis
tournament held at Queens.
Our sixteen-year support of The Mix received recognition in
April 2017 when we were shortlisted for Charity Partnership
of the Year in the Business Charity Awards. Plans to develop
the partnership in 2017/18 include expanding corporate
volunteering opportunities and offering an employee
assistance programme for colleagues aged 25 and under.
Pennies
Pennies is a digital upgrade of the traditional charity
collection box which offers customers the opportunity
to make a 25p charitable donation when they pay by
card at point of sale. We successfully trialled this tech
in 2016/17 and anticipate a wider roll-out in 2017/18.
We conservatively estimate a charitable revenue of
£100,000 per annum across 300 stores (Phase 1 roll-out)
and £520,000 per annum across 1,000 outlets.
Internet Matters
We joined forces with the online child safety experts to
host free advice workshops on how to keep families and
children safe on the internet. A series of ‘Digital Drop In’
events for parents were hosted in our top 70 stores and
200,000 information leaflets were distributed by our delivery
drivers. This activity featured in national and local media
including the Evening Standard. Google, BT, TalkTalk, Sky,
BBC and Virgin Media are also partners.
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Project BluPoint
This groundbreaking solar powered device transmits digital
content to areas without reliable or affordable connectivity,
on any handset using Wi-Fi, FM Radio or Bluetooth. We
sent two teams of employee volunteers to South Africa to
deploy this new invention in 16 locations where it continues
to make a significant impact on the lives of over 50,000
learners and educators.
The Dixons Carphone Foundation
(‘Foundation’)
The Group operates two charitable foundations, The DSG
International Foundation, registered with the Charities
Commission, and a Dixons Carphone Foundation
fundraising account established under the Charities Aid
Foundation (‘CAF’) for the benefit of the charity or charities
selected by Dixons Carphone and approved by CAF. The
Dixons Carphone fundraising account was set up post-
Merger to deliver our ambition of improving lives through
technology and facilitates employee match-funding
applications and one-off donations to emergencies and
disaster funds. In 2016/17 we donated £15,950 through
the Charities Aid Foundation to a variety of causes. We did
not transact through the DSG International Foundation in
2016/17.
Kode (Greece)
Kotsovolos is the first and only Greek retailer to create an
online learning platform teaching kids how to code, ‘the
language of today’. With nine out of ten parents wanting
their children to study programming, but only one in four
schools offering this service, Kotsovolos offers an amazing
opportunity for children and teens to learn to code and
fulfill the growing demand for programmers.
Other charitable support
During 2016/17 employees donated £35,281 through Give
As You Earn, benefiting 78 local and national causes.
Colleagues also raised thousands of pounds for good
causes via a variety of fundraising events and activities,
which the business supports through match-funding up to
£100 or £300 for teams fundraising for the same event.
Outside the UK, Elkjøp and Lefdal continued to support the
Red Cross Water for Life (Vann for Livet) project, raising
780,000 NKR (£71,968). In Denmark, 65000 DKK (£8,400)
raised during a Christmas Foundation was donated to local
organisations chosen by employees.
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Corporate Responsibility
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Environment
Total company-wide kWh energy consumption is as follows:
We are fully committed to meeting our environmental
responsibilities and limiting the impact of our operations
in a way that is both practically and economically feasible.
Our environmental policy, endorsed by the Board, covers
material issues including energy consumption, carbon
emissions, supply chain and operational waste. We conduct
activities to address each of these areas and our progress
this year is presented below.
We have established a formalised enterprise risk
management process that operates at business unit and
Group level and includes climate change as a risk category.
At asset (store) level, climate change risks are identified
as part of business contingency / continuity processes –
with the identified risks mainly relating to extreme weather
events.
Energy management
We recognise that the operation of our retail stores is one of
our major environmental impacts and have set ourselves an
ambitious energy and CO2 reduction target to help mitigate
this.
UK Energy Consumption Reduction target
Dixons Carphone has an agreed target of reducing its UK
energy consumption by 30% by 2020, and corresponding
CO2 emissions by 35%.
(Measured from a 2013/14 baseline, the year prior to the
merger between Dixons Retail and Carphone Warehouse)
As part of our long-term review we are considering what
our longer term targets will be and whether to adopt a
science-based target. To ensure we meet our reduction
target by 2020, Dixons Carphone has a structured energy
management programme within the UK & Ireland that
provides an overarching framework of activities and projects
to manage and reduce our consumption while maximising
our efficiency.
The energy consumption and corresponding CO2 emissions
of our business have reduced year on year. For the UK &
Ireland portfolio in isolation, we have achieved a reduction in
electricity usage of 1.7% on a like-for-like basis and 10.3%
on an absolute basis.
Dixons Carphone – UK&I Consumption 2015-16 v’s 2016-17 (kWh)
Utility
Electricity
Gas
Combined
2016/17
2015/16
168,599,606
29,882,655
198,482,261
187,930,892
36,724,101
224,654,993
Change
(10.3%)
(18.6%)
(11.7%)
At Group level, overall energy consumption has decreased
by 9.1%, electricity consumption has decreased by 8% and
natural gas by 17.8%. The UK is the largest kWh contributor
to both these reductions.
Dixons Carphone – Group Energy Consumption (kWh)
Utility
Electricity
Gas
Fuel Oil for
heating
purposes
Total
2016/17
2015/16
279,189,910 303,551,007
36,725,630
30,185,347
Change
(8.0%)
(17.8%)
246,555
217,368
309,621,812 340,494,005
13.4%
(9.1%)
To continue to drive down consumption we embrace the
opportunities of improving our efficiency through property
development, disposals, acquisitions, our own internal
energy efficiency programme and, where financially viable,
utilising products, equipment and suppliers with the least
environmental impact.
In 2015/16 we combined the energy management reporting
platform and processes of the legacy Dixons Retail and
Carphone Warehouse businesses which has delivered great
results for Dixons Carphone through 2016/17. This helps
us manage our energy consumption through the collection
and analysis of half-hourly data at individual site level and
ensures optimum efficiency with minimal wastage. Through
2016/17 this work has helped mitigate consumption by
approximately 1,834 MWh.
In the UK, part of our programme to drive down energy
consumption in our stores includes the use of energy
dashboards at site level. Both our legacy Dixons Retail and
Carphone Warehouse retail sites now have access to energy
dashboards as a visual display of their consumption profiles.
Financial incentives are offered to business unit, facility and
energy managers for meeting their energy consumption
budgets or targets.
Dixons Carphone remains an active member of the Retail
Energy Forum and the British Retail Consortium engaging
on areas such as enhanced capital allowances for energy-
efficient technologies and the Government’s Electricity
Demand Reduction (‘EDR’) scheme.
Capital Expenditure Projects
As with previous years, Dixons Carphone has invested
significant sums in projects to ultimately reduce our energy
consumption and improve our efficiency. LED lighting
again features heavily in our 2016/17 energy efficiency
programme which has seen c. £2 million invested in this
technology. This year we have converted 42 large stores
to LED lighting alongside a selection of large car parks and
Building 2 (750,000 sq ft) of our National Distribution Centre
in Newark.
Solar Photovoltaic Schemes
Following last year’s successful installation of two Solar PV
schemes at Coventry and Southampton, our largest roof-
mounted installation to date was completed in June 2017.
A 1 MWp solar scheme (over 3,600 panels) will generate
approx. 940,000 kWh of electricity for our Newark National
Distribution Centre, reducing the site’s CO2 emissions by
over 500 tonnes per annum.
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Water
We have merged our water bureau services with energy
throughout the UK & Ireland to increase reporting
capabilities and facilitate activities surrounding the water
market deregulation.
Carbon Emissions
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, Northern and Southern
Europe. Operational control has been used to determine
organisational boundary. All scope one and two emissions
are included except where noted.
(3)
(4)
(5)
Our 2016/17 scope 1 and 2 emissions data has been
independently assured to ISO 14064-3 standards.
Overall Group emissions and emissions per sq ft have
decreased by over 15%.
The GHG emissions for the Dixons Carphone business are:
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contractor’s responsibility, so have not estimated leakage
from other units where no top-ups were carried out.
Refrigerant data from the Wednesbury Carphone Warehouse
site is not included as the data was not available for 2015/16
and 2016/17 (although this is estimated to be significantly less
than 1% of total emissions for the Group).
Refrigerant top-ups across the Nordics has been estimated
for 2016/17 based on the top-ups reported in 2015/16 as the
data was unavailable.
In previous years, some refrigerant charges for new
installations were reported as leakage which has been
amended for 2016/17 onwards. This accounts for most of the
reduction compared to 2015/16.
The electricity consumption figure includes Scope 2 generation
emissions but not Scope 3 transmission and distribution losses.
Electricity and gas usage is based on supplier bills. Manual gap
filling was conducted for April 2017 in the UK & Ireland for smaller
electricity supplies, using an average of the consumption year to
date. This is because this report was due before some electricity
bills had been provided by the suppliers.
Overall floor area of the Dixons Carphone business is estimated
to be 21,111,540 sq ft. This is split between the Dixons Retail
business which is estimated to be 19,390,570 sq ft and the
overall floor area of the Carphone Warehouse business which is
estimated to be 1,720,970 sq ft. Carphone Warehouse floor space
now includes back of house areas, contributing to the increase
in this division’s floor area of approximately 135,000 sq ft since
2015/16
Tonnes
of CO2e
emitted
2016/17
Increase/
(decrease)
%
Tonnes of
CO2e
emitted
2015/16
Tonnes of
CO2e
emitted
2014/15
21,698
5% 20,614
19,760
2,399
(14%)
2,797
3,661
88,496
(19%) 109,534 127,607
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 and is being
independently assured.
Supply Chain
At Dixons Carphone, we work hard to understand and
manage our impact in our supply chain and customer use of
products. We have a strong focus on ensuring our products
are sourced ethically and are taking action to address the
risk of modern slavery in our supply chain.
We also see our supply chain as an opportunity to help
consumers reduce their environmental footprint, offering
energy-saving products such as Hive and Nest.
Ref Category
A Emissions from
combustion of
fuel(1)
B Emissions from
the operation of
any facility(2)
C Emissions from
purchase of
electricity(3),(4)
Total:
112,593
(15%) 132,945 151,028
Ethical sourcing
Intensity measures
The emissions per unit area of occupied space are as
follows:
Tonnes of
CO2e
emitted per
1,000 sq ft
of floor
area(5)
2016/17
Tonnes of
CO2e
emitted per
1,000 sq ft
of floor
area
2015/16
Tonnes of
CO2e
emitted per
1,000 sq ft
of floor
area
2014/15
4.81
11.27
5.33
5.76
13.75
6.36
5.73
17.41
n/a
Division
Dixons Retail
Carphone Warehouse
Total
Notes
(1)
‘Emissions from combustion of fuel’ includes a proportion of
private cars being used for business travel, which would be
classified as Scope 3. It is not practical to exclude this data from
the company’s expense records so in keeping with the previous
years it has been included to provide a conservative view of
emissions. For a proportion of our company cars, we have moved
from using claimed business mileage to fuel card purchases (litres
of fuel) this year. This is more accurate but has led to a small
increase in overall emissions.
(2) Refrigerant data processing methodology and exclusions:
a.
Where refrigerant top-ups are reported, we assume this
covers all leakage across the area of the estate under that
We have an Ethical Sourcing Policy which reflects our
commitment to acting ethically and with integrity in all our
business relationships. Our Ethical Sourcing Policy is based
on the Social Accountability 8000 standard, FTSE4Good
criteria and takes into account the Modern Slavery Act. We
also work closely with organisations such as SEDEX and
the British Retail Consortium to ensure our policies and
procedures remain relevant.
Our Original Equipment Manufacturer (‘OEM’) in Hong
Kong sources many product types that are sold under our
own or licensed brand names. This part of our operation is
well established and has been actively engaging in ethical
auditing / risk assessment for many years. We require our
OEM suppliers to comply with our strict trading terms and
operational procedures, and to implement and enforce
effective systems and controls to meet our minimum
standards in respect of Health and Safety, wages, working
hours, equal opportunities, freedom of association,
collective bargaining and disciplinary procedures. It is
against our terms of operation to employ any forced or child
labour.
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Corporate Responsibility
We monitor adherence to our policies by auditing our
suppliers prior to selection and on an ongoing basis. Where
working practice failures have been identified, we work with
suppliers to help them improve their working practices.
Where this is not possible or no improvements are made,
they will not be approved as a supplier, or will be delisted.
During the year under review, 15 of the 25 suppliers
classified as red failed to make improvements and therefore
the Group did not approve them to supply our branded
products or they were delisted.
The results of ethical supply chain audits carried out during
the period under review are detailed below:
Performance indicators 2016/17
Green
Amber
Audit status
33
99
Red
25
Total
157
Delisted/
not
approved
15
Modern Slavery
Our Board fully supports the aims of the Act and is
committed to combatting slavery and human trafficking in
our business.
In the past twelve months we have made progress to map
our own business and key suppliers to identify those more
at risk from Modern Slavery, not just in the UK but also in all
countries where the Company and its subsidiaries conduct
their business.
The Board have also agreed our Modern Slavery Policy and
the Company have commenced a process to introduce it to
our businesses, suppliers, agents and partners.
Our Statement and Policy on Modern Slavery can be found
on www.dixonscarphone.com.
Waste and recycling
We strive to deliver continuous improvements to our
recycling and sustainability programme. All recyclables from
our stores are backhauled to our national recycling facility at
Newark. Across our estate, our 16 customer service centre
depots have standardised equipment to deliver consistent
grades of cardboard, plastic and expanded polystyrene to
our recyclers in order to ensure we utilise the transport to a
maximum and obtain the best value we can achieve for our
material.
We actively encourage our employees to recycle through
communication campaigns and the provision of recycling
facilities at all sites.
Product responsibility
We continually pursue ways to help our customers reduce
their environmental impact through providing low carbon
products and offering Waste Electrical and Electronic
Equipment (‘WEEE’) re-use schemes.
In 2017/18 we will introduce a new OEM LED light bulb
range. LED bulbs use 90% less energy than traditional
Incandescent bulbs and last up to 15 years so customers
can save over £100 per year on their energy bills (based on
2.5 hours’ per day).
Following our acquisition of Simplifydigital we now offer our
customers energy switching services, including our Voltz
App, which saves them money and reduces their energy
consumption. We are also collaborating with SSE to support
the roll-out of their smart metering to six million customers
in the UK.
We have several schemes in place to encourage and enable
WEEE recycling. Online customers buying white goods
or a TV larger than 39” are prompted with the option to
have an old appliance collected for recycling. At this point,
customers can also click through to our recycling page
which gives details of our free in-store take back which
covers smaller electronics too. In store, our sales teams
inform customers about our collection and recycling service.
This has resulted in WEEE tonnage of 67,000 tonnes being
collected in 2016/17 (7.8% increase on 2015/16) which is an
estimated 75,000 tonnes of CO2 saved.
We also work with 11 UK charities who select unwanted
WEEE from our Customer Service Centres which they
repair and reuse to sell. This has helped households save
an estimated £2,342,250 and 1,275 tonnes of CO2 during
2016/17. This translates to a reuse percentage of 8%
(1% increase on 2015/16).
In total, over 14,000 tonnes of packaging recycled (3% less
than 2015/16, driven by lighter and less packaging used
around products) which is an estimated 16,000 tonnes of
CO2 saved (figures from our waste management agency
responsible for all cardboard, plastic, polystyrene and wood
recycled across our estate).
We are also currently working on a project to improve the
wood recycling process for the business and enable us to
sell fuel into the UK biomass market.
Second Home (Greece)
Kotsovolos has launched a successful recycling scheme
which places unwanted or used electrical appliances and
devices in new homes among families who can’t afford
to buy new ones. The retailer collects, refurbishes and
delivers devices to local authorities who redistribute them
to those families in need, recycling any appliances unable
to be repaired.
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Re-use Innovation with HM Prisons
A three-way partnership between Dixons Carphone, DHL
EnviroSolutions and WasteCare in collaboration with
National Offenders Management Service (‘NOMS’) sees
unwanted large appliances repaired in a HM Prison within
purpose-built rooms. Inmates are trained in the necessary
skills and then refurbish the appliances, which are sent for
sale to charities and social housing projects. The prisoners
are paid a weekly wage to do this. The overall objective
will see an increase in the re-use rate of WEEE and reduce
reoffending rates by giving inmates purposeful skills which
they can use to gain employment upon release.
We actively engage to achieve a more resource-efficient
economy. This year we worked with WRAP, the Waste and
Resources Action Programme to support their Electrical and
Electronic Equipment Sustainability Action Plan to improve
business efficiency and gain greater value from re-use and
recycling by setting up a WEEE trial in Cardiff.
We are also working in collaboration with Axion Consultancy
to offer collection points at CurrysPCWorld stores in
Stockport, White City, Bury, Bolton and Cheetham Hill. This
collection accepts broken or working IT equipment, e.g.
laptops, smartphones, desktop PCs, gaming devices and
tablets. This is an EU-funded trial to increase the recovery
of Critical Raw Materials from WEEE. The information and
evidence gathered through the trials will contribute towards
the development of a European-wide infrastructure plan and
policy recommendations to support the increased recovery
of critical and valuable materials from WEEE.
This Strategic Report was approved by the Board and
signed on its behalf by:
Sebastian James
Group Chief Executive
27 June 2017
Humphrey Singer
Group Finance Director
27 June 2017
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Board of Directors
Lord Livingston of Parkhead
Chairman
1
Andrew Harrison
Deputy Chief Executive
Lord Livingston of Parkhead is the Chairman of Dixons Carphone and
the Nominations Committee. He joined the Board as Deputy Chairman
and Non-Executive Director in 2015. He was previously Minister of
State for Trade and Investment from 2013 to 2015 and chief executive
officer at BT Group plc from 2008 to 2013. Prior to that he was chief
executive officer, BT retail and group chief financial officer of BT.
He is a chartered accountant and previously held the position of
chief financial officer of Dixons Group plc between 1996 and 2002,
having served in a number of roles over more than a decade with the
company. He is chairman of Man Group plc, a non-executive director
of Belmond Ltd and a trustee of Jewish Care.
Tony DeNunzio CBE
Deputy Chairman and
Senior Independent Director
Tony DeNunzio CBE is Deputy Chairman and Senior Independent
Director of Dixons Carphone. He is also Chairman of the Remuneration
Committee and a member of the Nominations Committee. Tony
joined the Board as Senior Independent Director and Non-Executive
Director in 2015. He held the position of president and chief executive
officer of Asda / Walmart UK from 2002 to 2005, having previously
served as chief financial officer of Asda plc. He started his career in
the fast-moving consumer goods sector with financial positions in
Unilever PLC, L’Oréal and PepsiCo Inc. He was also previously non-
executive director of Alliance Boots GmbH, chairman of Maxeda Retail
Group BV, and deputy chairman and senior independent director of
MFI Furniture Group plc (now Howden Joinery Group Plc). He has
also been chairman of the advisory board of Manchester Business
School and was awarded a CBE for services to retail in 2005. Tony is
non-executive chairman of Pets at Home Group Plc, senior adviser at
Kohlberg, Kravis, Roberts & Co L.P., and a non-executive director of
PrimaPrix SL.
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 Dixons, Sebastian was chief executive officer of Synergy
Insurance Services Limited and was strategy director at Mothercare
plc. He started his career at The Boston Consulting Group.
Sebastian is also a non-executive director of Direct Line Insurance
Group plc, and a trustee of the charity Save the Children.
Andrew Harrison was appointed Deputy Chief Executive of Dixons
Carphone on 6 August 2014 following the merger of Dixons Retail
with Carphone Warehouse. 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 Best Buy Mobile
operation in the US. Andrew 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 conclusion of the joint venture in 2013,
Andrew became group chief executive of Carphone Warehouse.
Andrew is also a non-executive director of Ocado Group plc and a
trustee of The Mix.
Humphrey Singer
Group Finance Director
Humphrey Singer was appointed Group Finance Director of Dixons
Carphone on 6 August 2014 following the merger of Dixons Retail
with Carphone Warehouse. He was appointed group finance
director of Dixons in September 2011, having joined its board in July
2011. Since joining Dixons 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
Dixons, he held a number of finance roles at Cadbury Schweppes
plc and Coca-Cola Enterprises UK Limited, including finance
director at the latter. Humphrey is also a non-executive director of
Taylor Wimpey plc.
Katie Bickerstaffe
Chief Executive, UK & Ireland
Katie Bickerstaffe was appointed an Executive Director of Dixons
Carphone on 6 August 2014 following the merger of Dixons Retail
with 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 & Ireland
division. Katie joined the Dixons board in February 2012 and was
the chief executive of UK & Ireland for Dixons. She joined Dixons as
director of marketing, people and property in June 2008. Previously,
Katie was managing director of Kwik Save Limited and group retail
director and group HR director at Somerfield plc. Her earlier career
included roles at Dyson Limited, PepsiCo Inc. and Unilever PLC.
Katie is also a non-executive director of Scottish and Southern
Energy plc.
Key
Audit Committee
Disclosure Committee
Nominations Committee
Remuneration Committee
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Dixons Carphone plc Annual Report and Accounts 2016/17
Andrea Gisle Joosen
Independent Non-Executive Director
Fiona McBain
Independent Non-Executive Director
2
Andrea Gisle Joosen was appointed as a Non-Executive Director
of Dixons Carphone on 6 August 2014 following the merger of
Dixons Retail with Carphone Warehouse. Andrea joined Dixons
as a non-executive director on 1 March 2013. Her former roles
include chairman of Teknikmagasinet AB, 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.
She is currently a non-executive director of ICA Gruppen AB, James
Hardie Industries plc, Mr Green & Co AB and BillerudKorsnäs AB.
Tim How
Independent Non-Executive Director
Fiona McBain joined the Board as a Non-Executive Director on
1 March 2017. Fiona was chief executive officer of Scottish Friendly
Group until December 2016, having joined the company in 1998. She
was previously engaged in the finance functions at Prudential plc and
Scottish Amicable. She qualified as a chartered accountant with Arthur
Young (now EY) in London, working across a number of industry
sectors in the UK and then in the US. Fiona is a non-executive director
of Scottish Mortgage Investment Trust PLC, vice chair of Save the
Children, and a trustee of the Humanitarian Leadership Academy.
Baroness Morgan of Huyton
Independent Non-Executive Director
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Tim How was appointed as a Non-Executive Director of Dixons
Carphone on 6 August 2014 following the merger of Dixons Retail
with Carphone Warehouse. Tim joined Dixons as a non-executive
director on 8 September 2009 and became senior independent
director on 9 May 2012. Former roles include chairman of Rayner
and Keeler Limited and Enotria Wine Group Limited, senior
independent director of Henderson Group PLC, 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. He holds a variety of external board positions, including
chairman of Woburn Enterprises Limited, senior independent
director of the Norfolk and Norwich University Hospitals NHS
Foundation Trust, and chairman of Roys (Wroxham) Limited.
Jock Lennox
Independent Non-Executive Director
Jock Lennox was appointed as a Non-Executive Director of Dixons
Carphone on 6 August 2014 following the merger of Dixons Retail with
Carphone Warehouse and is Chairman of the Audit Committee. Jock
joined Dixons Retail as a non-executive director on 10 January 2012.
He is a chartered accountant and worked for over 30 years (20 years
as a partner) for EY (formerly Ernst & Young) 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 previously a
council member of the Institute of Chartered Accountants of Scotland.
Jock is the non-executive chairman of EnQuest PLC and Hill & Smith
Holdings PLC, and a non-executive director of Barratt Developments
PLC.
1 Lord Livingston was appointed to the Disclosure Committee on 27 June 2017.
2 Fiona McBain will join the Audit Committee on 7 September 2017, subject to her
election by shareholders.
3 Gerry Murphy was appointed to the Remuneration Committee on 9 May 2017.
Baroness Morgan of Huyton is a Non-Executive Director of Dixons
Carphone and joined Carphone Warehouse as a non-executive
director on 28 January 2010. She was a non-executive director of
Old Carphone Warehouse from 2005 to 2010, prior to the demerger
with TalkTalk. Prior to this, Baroness Morgan was director of
government relations at 10 Downing Street and Minister for Women
and Equalities. Her former roles also include board member of the
Olympic Delivery Authority and chair of Ofsted. She is currently
chairman of Royal Brompton & Harefield NHS Foundation Trust and
Ambition School Leadership. Baroness Morgan is a non-executive
director of Countryside Properties PLC, an advisor to the board
of the children’s charity ARK, a board member of the Frontline
Organisation, and a trustee of Education Policy Institute.
Gerry Murphy
Independent Non-Executive Director
3
Gerry Murphy is a Non-Executive Director of Dixons Carphone
and joined Carphone Warehouse 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 is a non-
executive board member of the Department of Health and a non-
executive director of Capital & Counties Properties PLC.
Nigel Paterson
General Counsel and Company Secretary
Nigel Paterson was appointed General Counsel and Company
Secretary in April 2015. He has a strong background in UK and
international telecoms and held several senior legal roles at BT
Group plc before joining Dixons Carphone. These included general
counsel of BT consumer, head of competition & regulatory law, and
vice president and chief counsel for UK and major transactions.
Prior to BT, Nigel was engaged as legal counsel at ExxonMobil
International Limited. He trained and qualified as a solicitor with
Linklaters.
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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 the business’s success. We have clearly
differentiated the roles between executive management
running the business and our non-executives, who provide
the appropriate level of scrutiny and oversight. In this way,
the directors work together to challenge as well as support
each other, with the aim being effective decision-making,
leadership and accountability for all aspects of the business.
Induction
The directors have continued to widen their knowledge of
the business as a whole through formal presentations, visits
to stores and facilities, and informal discussions. Fiona
McBain participated in a tailored induction programme upon
joining the Board, including meetings with key Company
executives.
Board evaluation
The triennial external Board evaluation last year was
followed by an internal Board evaluation this year. This
evaluation involved an in-depth review of the Board’s
activities, the directors’ interaction and their effectiveness in
carrying out their roles. Further information can be found on
pages 43 and 60.
Committee structure
The main committees of the Board are the Audit, Disclosure,
Nominations and Remuneration committees. Each has a
dedicated section in this Report. Beneath Board level there
are further management level committees which report back
to the Board as necessary.
Conclusion
We possess a strong, balanced and diverse Board supported
by sound policies and procedures. This provides us with a
good platform to grasp the opportunities that the future will
bring. My fellow directors and I look forward to meeting you
at this year’s Annual General Meeting in September.
Lord Livingston of Parkhead
Chairman
27 June 2017
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Corporate Governance Report
Chairman’s introduction
I am pleased to present my introduction to the Corporate
Governance section of the Annual Report and Accounts
2016/17. We continue to devote time and effort to ensuring
that our corporate governance practices and procedures
remain ‘fit for purpose’. I set out below how the Company
is committed to good corporate governance practice
and effective stewardship as the foundation of long-term
shareholder value creation.
Corporate governance
Good corporate governance is at the heart of any well-
run business. We review and update our Group policies
and procedures regularly to ensure that they comply with
best practice. Our Board policies, such as diversity, time
commitment, the role descriptions of the Chairman, Group
Chief Executive and Senior Independent Director, external
appointments and external advice are reviewed and refreshed
annually. The Board has reviewed our policies and practices
against the 2016 UK Corporate Governance Code (the
‘Code’), ensuring continuing alignment with best practice.
Changes to the Board
On 1 March 2017 Fiona McBain joined the Board as a Non-
Executive Director. Fiona brings a wealth of experience from
her career in financial services and will undoubtedly be an
asset to the Board. On 27 April 2017 Graham Stapleton left
the Board to become Chief Executive Officer of honeybee,
the Group’s software division, which will benefit greatly from
his entrepreneurial leadership and expertise. On 30 April
2017 Sir Charles Dunstone stepped down as Chairman of
the Board. On the same day, I was appointed Chairman
of the Board and the Nominations Committee, and Tony
DeNunzio CBE became Deputy Chairman and Chairman
of the Remuneration Committee, in addition to his role
as Senior Independent Director. The Board would like to
take this opportunity to thank Charles for his enormous
contribution to the Board and the business as a whole since
he founded Carphone Warehouse in 1989. Tony DeNunzio,
who has already made a valuable contribution to the Board,
is sure to provide continued strong leadership for the next
stage of the Company’s success.
Role and composition of the Board
The members of the Board are as set out on pages 36 and
37 of this Report.
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 encompasses
all forms of diversity, including gender, professional,
international and ethnic diversity. At 29 April 2017, the
Board had four female directors, one of whom is based
outside the UK and who provides strong support on matters
relating to the European business environment.
After this year’s review, it was again concluded that the Board
possessed the necessary skills and experience to discharge
its duties fully and to challenge management effectively.
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The Board and Committees Structure
Dixons Carphone Board
Audit Committee1
Disclosure Committee2
Nominations Committee3
Remuneration Committee4
1 Audit Committee pages 50 to 57
2 Disclosure Committee page 58
3 Nominations Committee pages 59 and 60
4 Remuneration Committee pages 61 to 86
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Fiona McBain was appointed as a Non-Executive Director
on 1 March 2017. She will stand for election at this year’s
AGM and, subject to her election by shareholders, will
replace Baroness Morgan on the Audit Committee at the
conclusion of the AGM.
In accordance with the Code, all directors, with the
exception of Baroness Morgan and Tim How, will stand for
election or re-election at the Company’s AGM. 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 in May 2017. 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 Senior Independent Director (‘SID’), set out
in writing and reviewed annually by the Board, is to support
the Chairman, be available to any shareholders who feel
they are unable to raise issues with the Chairman directly,
and to discuss with the Chairman the results of the latter’s
performance review.
Corporate Governance statement
The Board confirms that throughout the year ended 29
April 2017 and as at the date of this Annual Report and
Accounts, the Company has been fully compliant with The
UK Corporate Governance Code (the ‘Code’).
This Report, together with the Directors’ Report and the
reports from the Audit, Disclosure, Nominations and
Remuneration committees 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
At 29 April 2017, the Board comprised 13 members: the
Chairman, four executive directors and eight non-executive
directors, each of whom is determined by the Board to be
independent in character and judgement and who provide
effective challenge to the Board and the business. These
independent non-executive directors are Tony DeNunzio
CBE, Andrea Gisle Joosen, Tim How, Jock Lennox, Lord
Livingston of Parkhead, Baroness Morgan of Huyton, Fiona
McBain and Gerry Murphy. More than half the directors
(excluding the Chairman, who at 29 April 2017 was Sir
Charles Dunstone) are considered to be independent in
accordance with the Code.
The Board recognises that Baroness Morgan has been a
non-executive director of Carphone Warehouse since 2005
and Tim How has been a non-executive director of Dixons
Retail since 2009. The Board subjected the independent
status of these two directors to further and specific
scrutiny. Having witnessed their continuing commitment
and independent stance in their dealings with the business
and their fellow directors throughout the year, the Board
concluded that their lengths of tenure do not affect their
independence. Nevertheless, as part of succession planning
and the periodic refreshing of the Board, Baroness Morgan
and Tim How will both be stepping down at this year’s
Annual General Meeting (‘AGM’).
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Corporate Governance Report
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Board topics considered throughout the financial year 2016/17
July
• Investor relations activities
• SSE and TalkTalk contracts
• Sprint joint venture update
• Brexit
• Pension scheme
• Competition law update
• CWS strategy session
September
• Annual general meeting
• Q1 trading statement
• honeybee update
• Banking facilities
November
• Insurance update
December
• Interim announcement approval
• Interim dividend approval
• Post-acquisition review
• Diversity policy and reporting
• Pensions strategy
• Group fraud policy approval
• Remuneration Committee Terms
of Reference approval
• UK & Ireland strategy session
2016
May
• Q4 trading statement
• Budgetary approval
• External Board effectiveness review
• honeybee update
• Banking facilities
• Financial Conduct Authority (‘FCA’)
compliance
• Health and Safety
• Nominations Committee Terms of
Reference, Role Descriptions and Board
policies approval
• Corporate governance review and update
• Annual review of conflicts
• Delegation of Authority approval
June
• Preliminary announcement and annual
report and accounts 2015/16
• Annual general meeting documents
• Final dividend approval
• Sprint joint venture update
• IT infrastructure, including cyber security
• Property rationalisation
• Banking facilities
• Market Abuse Regulation training
• Non-executive director fees
• Modern slavery statement approval
• Environmental matters
• Audit Committee and Disclosure
Committee Terms of Reference approval
2017
January
• Christmas trading update
• Q3 trading statement
• Three-year plan
• Talent review and succession
planning update
• Network relationships
• Corporate Social Responsibility
(‘CSR’) update
• Services strategy session
March
• Finance transformation
• Risk management and risk
appetite review
• iD Ireland update
• Schedule of Matters Reserved for
the Board approval
• Nordics strategy session
Reserved matters
There are documented schedules of matters reserved for the
Board and matters delegated to committees of the Board. The
formal Schedule of Matters Reserved for the Board was last
reviewed in March 2017 and includes:
• approval of published financial statements, dividend policy
and other disclosures requiring Board approval;
• declaration of interim and recommendation of
final dividends;
Chairman’s responsibilities
• manage the Board;
• represent the interests of the shareholders;
• approve Group strategy, its implementation and the
performance and profitability of the Group;
• seek new business development opportunities;
• effectively chair Board, Nominations Committee
and shareholder meetings;
• approval of budget and Group strategy and objectives;
• ensure Board effectiveness in his role;
• appointment and remuneration of directors, Company
Secretary and other senior executives;
• approval of major acquisitions and disposals;
• approval of authority levels for expenditure;
• ensure clear and effective running of the committees;
• promote, with the Company Secretary, the highest
standards of corporate governance;
• facilitate effective contributions of the non-executive
• approval of Group policies;
directors;
• approval of treasury / internal control and risk
management policies; and
• approval of shareholder communications.
• ensure constructive relations between the executive
and non-executive directors; and
• oversee the process of induction, development and
performance evaluation and succession planning of the
Board.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Group Chief Executive’s responsibilities
Board attendance
• represent the Company in the City, with government
Baroness Morgan of
• formulate the Group strategy and direction (with the
Chairman) and develop Group objectives;
• deliver Group profitability;
• provide leadership to the Group and senior
management and ensure effective performance and
succession;
• ensure Group policies and procedures conform to a
high standard;
• review the effectiveness of the Group’s organisational
structure;
• identify acquisition and disposal opportunities and
other opportunities outside core activities;
• oversee management succession;
• manage Group risk profile and ensure internal controls
and risk mitigation measures are in place;
departments, key stakeholders and any other relevant
institutions;
• oversee the establishment of operational and support
functions including finance, human resources, risk
management and control functions; and
• set standards of performance throughout the Group.
Senior Independent Director’s responsibilities
• be available to communicate with shareholders;
• appraise the performance of the Chairman annually
with the Board;
• oversee an orderly succession for the position of
Chairman;
• support the Chairman in the performance of his duties;
and
• work with the Chairman, other directors and
shareholders to resolve significant issues and to
maintain Board and Company stability in periods of
stress.
The Board attended eight scheduled meetings as well as
four strategy sessions and three unscheduled meetings
during the period under review. The Board has met twice
since the year end.
Member
Appointed
Resigned
Attendance
Sir Charles Dunstone
30 Apr 2017
8 of 8
Sebastian James
Katie Bickerstaffe
Tony DeNunzio CBE(1)
Andrea Gisle Joosen
Andrew Harrison
Tim How
Jock Lennox
Lord Livingston of
Parkhead(1)
Fiona McBain(2)
1 Mar 2017
Huyton
Gerry Murphy
Humphrey Singer
Graham Stapleton
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8 of 8
8 of 8
7 of 8
8 of 8
8 of 8
8 of 8
8 of 8
7 of 8
1 of 1
8 of 8
8 of 8
8 of 8
27 Apr 2017
8 of 8
(1)
Lord Livingston and Tony DeNunzio were unable to attend one
Board meeting each due to commitments that were planned
before they joined the Board and could not be changed.
(2) Fiona McBain attended the only Board meeting following her
appointment.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Corporate Governance Report
Committee members
There are four main Board committees: Audit, Disclosure, 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.
Audit
(pages 50 to 57)
Disclosure
(page 58)
Nominations
(pages 59 and 60)
Remuneration
(pages 61 to 86)
C
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Sir Charles Dunstone(1)
Lord Livingston of Parkhead(2)
Tony DeNunzio CBE(3)
Andrea Gisle Joosen
Tim How
Jock Lennox
Fiona McBain(4)
Baroness Morgan of Huyton
Gerry Murphy(5)
Humphrey Singer
Sebastian James
Nigel Paterson
C – Chairman
M – Member
C
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(1) Sir Charles Dunstone resigned from the Board on 30 April 2017.
(2)
Lord Livingston of Parkhead became Chairman of the Board on 30 April 2017. He was appointed to the Disclosure Committee on
27 June 2017.
(3) Tony DeNunzio CBE succeeded Lord Livingston of Parkhead as Chairman of the Remuneration Committee on 30 April 2017.
(4) Fiona McBain was appointed to the Board on 1 March 2017.
(5) Gerry Murphy was appointed to the Remuneration Committee on 9 May 2017.
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 safe and secure dissemination of quality
information to the Board. All Board and committee papers
are sent out on a timely basis with sufficient information
for the directors to be able to discharge their duties. The
format, content and timely production of Board papers is
a continually evolving process to ensure relevance and
clarity of communication. Formal minutes of the Board
and committee meetings are prepared by the Company
Secretary, and / or his nominee, and approved by the Board
and 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 assist all Board members in gaining a deeper
understanding of the business. This also provides senior
management across the Group with the opportunity to meet
the Board. This year, Board meetings were held in Sheffield,
UK and Jönköping, Sweden. Visiting our various operational
locations also enables the Board to meet other members
of the team, and to visit stores throughout the business’s
portfolio.
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New directors appointed to the Board receive a personal
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
key sites. 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.
As a newly appointed Non-Executive Director, Fiona McBain
was given an individual induction programme tailored to her
specific responsibilities and past experience. These include
her role in providing regulatory oversight to the operating
board of the FCA-regulated entity and her eventual
appointment as a member of the Audit Committee, subject
to her election by shareholders at the AGM on 7 September
2017.
In accordance with the Code’s requirement for directors
to regularly update and refresh their skills and knowledge,
training is provided as appropriate to individual directors
and to the Board as a whole. The Board receives regular
updates on governance, compliance and company
knowledge in the form of training sessions from external
advisors and in-house briefings from senior management.
The Board has set aside time on the current Board agenda
as appropriate for these training and briefing sessions to
occur.
Dixons Carphone plc Annual Report and Accounts 2016/17
Succession planning
Last year, succession planning was identified as an area
where greater focus was required. This was addressed
by the refreshing of the Board and the appointment of a
new Board member, Fiona McBain, with financial services
experience. Planning continues for the future. In seeking
an optimal balance of skills, experience, independence,
knowledge and diversity required at Board level, the
directors endeavour to satisfy themselves that adequate
plans are in place to ensure an orderly succession of
appointments to the Board and senior management. The
Board reviewed in detail succession and talent management
plans for senior management at the January 2017 Board
meeting.
Performance evaluation
The Code recommends that the performance of the
Board be reviewed externally every three years. The
last external evaluation of the Board was carried out in
2015/16. This year, the Company Secretary facilitated an
internal evaluation of Board performance and that of the
Audit, Nominations and Remuneration committees. It was
not considered appropriate to evaluate the Disclosure
Committee because it was established in June 2016 and
had not held its first meeting at the time the evaluation was
carried out.
The review examined the level of skills, knowledge and
experience of the Board which involved all directors
responding to questionnaires about themselves, the Board,
and its committees. A summary of the results, together with
anonymised comments, was collated into a comprehensive
report. The Company Secretary submitted the draft
report to the Chairman and presented it to the Board for
consideration at its May 2017 meeting.
The report addressed all matters relating to the performance
of the Board which included, but were not limited to, the
roles of the executive and non-executive directors, the
Board, Board committees, preparation for and performance
at meetings, the effectiveness of each director, leadership,
culture, strategy and corporate governance. Due to the
timing of the change in Chairmanship, the Board focused
its time and attention on the role of the future Chairman
and the main Board committees, succession planning and
strategy planning.
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, his effectiveness in
leading the Board was not impaired and that he cultivated
an atmosphere for positive, challenging and constructive
debate.
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Following the results of the evaluation, the Board confirms
that all directors continue to be effective and demonstrate
commitment to the role, including having time to attend
all necessary meetings and to carry out other appropriate
duties.
The conclusion of the evaluation was that there were no
major areas for action. Some of the themes identified for
further improvement, together with agreed associated
actions, are set out in the table below:
Key areas of focus
Actions
1. Board composition,
• Continuing to focus on diversity
succession
planning and talent
management
in all its forms, including
diversity of thought
• Reinforcing the pipeline of future
appointments of the Board and
senior management
2. Stakeholder
management
and customer
engagement
• Considering how best to utilise
current performance indicators
to aid and encourage further
discussion
3. Format of Board
• Committing more time to
meetings
strategy discussions
• Further increasing the frequency
of informal non-executive
director discussions
4. Company vision and
• Scheduling more frequent
values
Board discussions dedicated to
this topic
5. Corporate Social
Responsibility
• Greater focus on CSR topics in
the Board schedule
Capital and constitutional disclosures
Information on the Company’s share capital and constitution
required to be included in this Corporate Governance
statement is contained in the Directors’ Report on pages 47
to 49. Such information is incorporated into this Corporate
Governance statement by reference and is deemed to be
part of it.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Corporate Governance Report
Risk and internal controls
Committed to effective risk management
the delivery of products and services to our customers
and operational control of business activities in
accordance with the risk appetite.
The Board has overall responsibility for the Group’s system
of risk management and internal control and for reviewing
its effectiveness.
• The Board’s composition is reviewed periodically and
Board effectiveness is assessed annually in line with the
Code requirements.
• The Board and its various committees have defined
financial authorities and operational responsibilities, which
are designed to enable effective decision-making and
organisational control.
• The Board has agreed a risk appetite that provides
the reference point against which to benchmark risk
management reviews and risk mitigation activity within
the organisation. The risk appetite defines the boundaries
within which risk-based decision-making can occur and
outlines the expectations for the operation of the control
environment.
• The Board establishes an organisation and management
structure which operates across the business to enable
Effective risk management requires collective responsibility
and engagement across the entire business. Dixons
Carphone’s senior management team, operating through
the Group Risk & Compliance Committee, are accountable
for:
• identifying, mitigating and managing risk in their areas of
responsibility; and
• implementing and monitoring controls which are designed
to mitigate the risks to which their area of the business
is exposed. The controls by their nature are designed to
manage rather than eliminate risk and can only provide
reasonable but not absolute assurance against material
misstatement or loss.
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Group Risk Management Structure
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A
Board
Responsible for risk management and internal control
Defines Dixons Carphone risk appe(cid:7)te
Reviews and approves the business risk profile
Audit Commi(cid:15)ee
Reviews the effec(cid:7)veness of internal
control
Approves the annual internal and
external audit plans
Considers the internal audit reviews
across the Group
Risk & Compliance Commi(cid:15)ee
Reviews Group and business
unit risk profiles
Monitors the management of
key risks
Considers new and emerging
risks
Execu(cid:20)ve Commi(cid:15)ee
Accountable for the design
and implementa(cid:7)on of the
risk management process and
the opera(cid:7)on of the internal
control environment
Group Director of Risk
FCA Compliance
Commi(cid:15)ee
Func(cid:20)onal risk
experts
Business unit risk
commi(cid:15)ees and champions
Supported by:
Our Three Lines of Defence
First line of defence – Business units and operations
The system of risk management and internal control is built
around a Three Lines of Defence model:
First Line
Second Line
Business units and operations that
own and manage risk
Central functions that oversee or
specialise in risk management and
compliance
Third Line
Assurance functions that provide
independent assurance
• Undertakes annual objective setting and performance
reviews to evaluate the performance of individuals and
teams against the objectives and expected standards of
conduct.
• A ‘How We Do Business’ framework that outlines the
requirements for each business unit to follow, in order
to operate a control environment that satisfies legal,
regulatory, Group and customer requirements in line with
the corporate cultural values set by the Board.
• A minimum control environment which defines detailed
financial, supplier funding, purchasing, payroll, capital
expenditure, treasury, B2B, information systems, stock
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management, merchandise revenue and service revenue
controls to be applied by all business operations.
with an evaluation of the key controls and management
processes established to mitigate these risks.
• Operates Health and Safety standards in line with Group
• The Group Risk & Compliance Committee reports to
policy and procedures.
• An ongoing programme of control improvement is
underway in each business unit to enhance control
operation.
the Audit Committee and meets quarterly to review the
management of risk arising out of the Group’s activities
and to monitor the status of key risks and actions at
Group and business unit level.
• Additional targeted internal control improvement initiatives
Third line of defence – Assurance
to enhance risk management over key risks.
• Control processes govern the Company’s retail,
wholesale, logistics, distribution and service operations.
The operation of these processes provides comfort on the
standard of our customer and service delivery.
• Each business unit maintains a risk register. Action plans
are determined to enhance risk mitigation if required.
• Each business unit has a risk committee which identifies
risk in accordance with the Group Risk Management
Framework. These committees meet to consider risk
and internal control matters for their respective areas of
responsibility.
• A system of quarterly business reviews covering financial
and operational reporting by each business unit, which
involves comparison of actual results with the original
budget and the updating of a full year forecast.
• An internal audit function provides the Audit Committee
with an independent assessment of the Group’s system
of internal control, through reviewing how effectively key
risks are being managed, and assists management in the
effective discharge of its responsibilities by carrying out
independent appraisals and making recommendations for
improvement.
Sources of assurance external to the three lines of
defence
• External audit conducts statutory audits of the Group and
many of its subsidiary financial statements.
• Some of the Group’s activities are subject to regulatory
control by external bodies such as the FCA.
• The operation of a 24/7 whistleblowing hotline to enable
reporting of breaches of ethical or policy requirements.
• Appropriate training is provided to colleagues as required
Statement on risk management and internal control
to cover risk and compliance obligations.
Second line of defence – Central functions
• Undertakes the annual strategic planning and budgeting
processes.
• Defines a delegation of authorities that cascades
throughout the Group.
• Establishes a Group policy framework which contains the
core compliance policies that all employees are required
to observe.
• Under the direction of the Group Director of Risk,
establishes a risk management policy and framework
which outlines the principles and approach to risk
management within the business.
• Undertakes a formal risk identification process to
evaluate and manage the significant risks faced by
the Group in accordance with the requirements of the
Code and Financial Reporting Council Guidance on
Risk Management and Internal Control. Risk is broadly
identified against strategic, operational, technological,
financial, people, regulatory and hazard / external
categories. Details of the principal risks and examples of
mitigating actions can be found on pages 16 to 21 of the
Strategic Report.
• Maintains a Group risk register, which identifies the risks
faced by each of the businesses, including regulated
business, their potential impact and likelihood of
occurrence (assessed on a gross and net basis), together
The system of risk management and internal control
described in this Report was in place and effective
throughout the period under review and up to the date of
approval of the Annual Report and Accounts 2016/17.
The effectiveness of these systems is regularly monitored
and reviewed by the Audit Committee and the systems
refined as necessary to meet changes in the Group’s
business and associated risks.
The Audit Committee is supported by the internal audit
function which provides an independent opinion on the
operation of controls through the delivery of its audit
programme. The system of risk management and internal
control can only provide reasonable and not absolute
assurance against material errors, losses, fraud or breaches
of laws and regulations.
The Board has carried out a robust assessment of the
principal risks facing the Company, including those that
would threaten its business model, future performance,
solvency or liquidity. A description of these risks, together
with details of how they are managed or mitigated, is set
out on pages 16 to 21. The Board also monitored the
Company’s system of risk management and internal control
and has, at least once a year, conducted a review of its
effectiveness. The review covered all material controls
during the year and up to the date of approval of the Annual
Report and Accounts 2016/17 which was approved by the
Audit Committee and the Board.
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Corporate Governance Report
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Risk appetite
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.
The Group Chief Executive has principal 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 updates
on investor relations matters at each Board meeting. 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.
The Company is committed to fostering effective
communication with all of its members, be they institutional
investors, private or employee shareholders. The Company
communicates 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, as
are other external announcements and press releases.
The annual general meeting is an important medium by
which the Company communicates with shareholders, at
which an account of the progress of the business over the
last year, along with a review of current issues facing the
business, is given. Shareholders are encouraged to ask
questions and the directors, including the Chairmen of
the Board committees, are in attendance to answer them.
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, www.dixonscarphone.com.
Lord Livingston of Parkhead
Chairman
27 June 2017
Dixons Carphone faces a broad range of risks reflecting the
business environment in which it operates and the risks that
can arise from the operating model. Successful financial
performance for the business is achieved by managing
these risks through intelligent decision-making and an
effective control environment that details the processes and
controls required to mitigate risk.
Dixons Carphone’s general risk appetite is a balanced one
that allows taking measured risk as it pursues its strategic
objectives whilst aiming to manage and minimise risk in its
operations. The Company recognises that it is not possible
or necessarily desirable to eliminate all of the risks inherent
in its activities. Acceptance of some risk is necessary to
foster innovation and growth within its business practices.
Internal audit
The Group has an internal audit department which conducts
reviews of selected business processes each year. The
internal audit programme for 2016/17 consisted of reviews
across a range of areas documented and prioritised in the
Group’s internal audit plan, which was prepared taking into
account the principal risks across the Group and approved
with input from management and the Audit Committee. The
three-year rolling assurance plan is designed each year
to test the robustness of mitigating controls and ensure
procedures are designed and operating effectively. 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.
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
internal audit team tracks and reports on the progress and
implementation of action plans agreed with management,
and follow-up procedures are performed once these actions
and additional controls have been put in place to ensure
that the new controls and / or procedures 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, 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, and these
procedures have operated effectively. Potential conflicts are
approved by the Board, or by two independent directors
if authorisation is needed quickly, and then reported to
the main Board at its next meeting. A register of directors’
conflicts is maintained.
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Directors’ Report
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Corporate Governance statement
Directors
As required by Rule 7.2.1 of the Financial Conduct Authority
(‘FCA’) Disclosure Guidance and Transparency Rules (‘DTR’)
the Corporate Governance statement 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.
Disclosure Guidance 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 at all levels of the organisation. 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 Corporate Responsibility Report on pages
28 to 35. Details of the employees’ involvement in the
Group’s share plans are contained in the Remuneration
Report.
Employment of disabled people
The business is committed to providing equal opportunities
in recruitment, training and development, and promotion.
We encourage applications from individuals with disabilities
who can do the job effectively and candidates will be
considered for each role they apply for. All efforts are made
to retain disabled colleagues in our employment including
making any reasonable re-adjustments to their roles. Every
endeavour is made to find suitable alternative employment
and to re-train any employee who becomes disabled while
serving the Group.
Information on greenhouse
gas emissions
Fiona McBain was appointed as a director on 1 March
2017. Graham Stapleton resigned as a director to become
Chief Executive Officer of honeybee, the Group’s software
division, on 27 April 2017. On 30 April 2017, Sir Charles
Dunstone stepped down as Chairman. On the same date,
Lord Livingston of Parkhead was appointed Chairman and
Tony DeNunzio CBE was appointed Deputy Chairman and
Chairman of the Remuneration Committee, in addition to
his role as Senior Independent Director. In accordance
with best practice, Sir Charles Dunstone did not participate
in the appointment of his successor. Gerry Murphy was
appointed to the Remuneration Committee on 9 May 2017.
Lord Livingston was appointed to the Disclosure Committee
on 27 June 2017. Baroness Morgan and Tim How will
step down from the Board at the conclusion of the Annual
General Meeting (‘AGM’) on 7 September 2017.
The names, biographies and dates of appointment of the
current Board of Directors are provided on pages 36 and 37.
With regard to the appointment and replacement of
directors, the Company is governed by its Articles of
Association (‘Articles’), the UK Corporate Governance Code
(the ‘Code’), the Companies Act 2006 (the ‘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 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 on an annual basis. The
Remuneration Report provides details of applicable
service agreements for executive directors and terms of
appointment for non-executive directors. All the directors
proposed by the Board for either election or re-election are
being unanimously recommended for their skills, experience
and contribution they can bring to the Board. This
recommendation follows an internal performance evaluation
of the Board, its committees, and the contribution of
individual directors.
The information on greenhouse gas emissions that the
Company is required to disclose is set out in the Corporate
Responsibility Report on page 33. This information is
incorporated into this Directors’ Report by reference and is
deemed to form part of this Report.
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 Remuneration
Report.
Donations
No political donations were made during the period by
the Group.
Subject to the Company’s Articles, the Act and any
directions given by the Company by special resolution, the
business of the Company will be managed by the Board
which 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.
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Directors’ Report
Directors’ indemnities and insurance
The Company has made qualifying third-party indemnity
provisions (as defined in the Act) for the benefit of its
directors during the year; these provisions remain in force at
the date of this Report.
In accordance with the Articles, 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
Details of long term incentive schemes as required
by Listing Rule 9.4.3R are located in the Directors’
Remuneration Report on pages 61 to 86. Details of
dividends waived by shareholders are given on page 49
of this Directors’ Report. There is no further 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 DTR 4.1.12 are set
out on page 87.
Capital structure
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 22 to the Group financial
statements. The voting rights of Dixons Carphone shares
are identical, with each share carrying the right to one vote.
Dixons Carphone holds no shares in treasury.
Details of employee share schemes are provided in note 5
to the Group financial statements. Following the Merger,
the Dixons Carphone plc Employee Benefit Trust (‘EBT’)
was established on 12 August 2016, after which the assets
held in the two legacy Employee Share Ownership Trusts
(‘ESOT’s), being the Carphone Warehouse ESOT and the
Dixons Retail ESOT, were transferred into the EBT. The
ESOTs were terminated on 16 September 2016 and 28
September 2016 respectively. On 29 April 2017 the EBT
held 461,367 shares. The EBT did not undertake any market
purchases of the Company’s shares during the year under
review.
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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 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
All of the Company’s share incentive scheme rules contain
provisions which may cause options and awards granted
under these schemes to vest and become exercisable in the
event of a change of control.
The Group’s main committed borrowing facility has a
change of control clause whereby the participating banks
can require the Company to repay all outstanding amounts
under the facility agreement in the event of a change of
control. The Company is not aware of any other significant
agreements, such as commercial contracts and property
lease arrangements etc, to which it is party, that take effect,
alter or terminate upon a change of control in the Company.
Furthermore, the directors are not aware of any agreements
between the Company and its directors or employees that
provide for compensation for loss of office or employment
that occurs in the event of a takeover bid.
Significant shareholdings
At 29 April 2017, pursuant to Chapter 5 of the FCA’s DTR,
the shareholders with 3% or more in the voting rights of the
Company are:
Name
Standard Life
BlackRock
Lansdowne Partners
D P J Ross
Legal & General Investment
Management
Newton Investment
Management
Capital Group
Number of shares
81,597,144
62,515,960
57,675,527
55,738,699
Percentage of
share capital
7.08%
5.42%
5.00%
4.83%
43,359,831
3.76%
41,792,133
35,711,000
3.62%
3.10%
At 27 June 2017, no change in these shareholdings had
been notified.
Directors’ interests in the Company’s shares and the
movements thereof are detailed in the Annual Remuneration
Report on pages 74 to 86.
Dixons Carphone plc Annual Report and Accounts 2016/17
Dividend
Use of financial instruments
The Board has proposed a final dividend for the year ended
29 April 2017. Details of this and other dividends paid for
the year are as follows:
Information about the use of financial instruments is given in
note 26 to the Group financial statements.
Interim dividend
Final dividend
Total dividends
Year ended
29 April 2017
Year ended
30 April 2016
3.50p
7.75p
11.25p
3.25p
6.50p
9.75p
The right to receive any dividend has been waived by the
trustees of the Company’s EBT over a combined holding of
461,367 shares.
Issue of shares
In accordance with section 551 of the Act, 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 annual general meeting in 2016
shareholders approved a resolution to give the directors
authority to allot shares up to an aggregate nominal value of
£383,820. 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 AGM.
Authority was given by the shareholders at the annual
general meeting in 2016 to purchase a maximum of
115,146,133 shares, such authority remaining valid for 15
months or until the conclusion of the Company’s AGM in
2017. 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 AGM but
has no current intention to make such purchases.
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Post-balance sheet date events
Events after the balance sheet date are disclosed in note 33
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 Act.
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 AGM.
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
27 June 2017
49
Dixons Carphone plc Annual Report and Accounts 2016/17
Audit Committee Report
Chairman’s statement
Looking ahead
Fiona McBain was appointed as a Non-Executive Director
on 1 March 2017. As you will note from her biography
on page 37, Fiona brings a wealth of regulated sector
experience, as well as significant general management
and finance expertise. The Company also announced
that Baroness Morgan will be stepping down as a Non-
Executive Director at the Company’s AGM in September
2017, to be succeeded by Fiona on the Company’s Audit
Committee. I wanted to take the opportunity to thank Sally
for her valuable contributions to the Audit Committee and to
welcome Fiona.
As the Group continues to develop the business in line with
its strategy and business plans, the Committee continues
to adapt its focus in providing support and oversight in
key and evolving areas of financial reporting and risk
management and has requested management to prepare
and present its assessment of the structure, governance
and control environment of the Services business.
The work programme will be responsive to the changing risk
landscape, the developing business model, the regulatory
environment, and the changing shape of the systems
(including IT) architecture. The risk assessment has been
prepared and updated by the Group’s management at all
levels. We are mindful of the need to remain vigilant as we
know that not all risks can be eliminated, as articulated in
the risk appetite statement.
I will be in attendance at the forthcoming AGM and will be
available to talk to you then. In the meantime, if you have
any questions, please do get in touch.
Jock Lennox
Chairman of the Audit Committee
27 June 2017
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Introduction
I am pleased to present the Report of the Audit Committee
for the year ended 29 April 2017. In this covering letter I set
out our key areas of activity in delivering on our objective of
ensuring that Dixons Carphone’s financial reporting and risk
management systems of internal control are effective and
appropriate.
This year the Committee has continued to oversee
the improvement of reporting and controls as well as
responding to specific matters that have arisen. The
assurance activities encompass, in proportionate measure,
non-regulated and regulated operations, the international
footprint and the risk profile of the Group. We have also
considered the Terms of Reference and workings of the
Risk & Compliance Committee.
Key activities
The Committee’s work, carried out during the year,
included:
• fully considering the requirements of the Code and its
application to the Annual Report and Accounts 2016/17;
• considering significant accounting and reporting
judgements, including the appropriateness of the
Group’s going concern position and longer term viability
statement, more information on which can be found on
pages 26 and 27;
• considering and recommending that the Annual Report
and Accounts 2016/17, when taken as a whole, are fair,
balanced and understandable;
• reviewing the effectiveness of the risk management
system and internal controls, operated by management;
• reviewing all correspondence from and to the Financial
Reporting Council (‘FRC’) following a request for further
information on certain aspects of the annual report and
accounts for 2014/15. Further information can be found
on page 52;
• providing oversight of the businesses regulated by
the FCA, including reviewing reports from the FCA
Compliance Committee (‘FCACC’);
• considering internal audit reports;
• receiving presentations and subsequent updates from
management on such matters as finance transformation
programme, UK & Ireland vendor management, data
protection, and IT strategy and governance; and
• monitoring the robustness of the information security
environment and its vulnerabilities, and the longer term
strategic transformation of the Company’s information
security capabilities.
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Dixons Carphone plc Annual Report and Accounts 2016/17
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Members
In compliance with the Code, the Committee continues
to consist exclusively of independent non-executive
directors, who, along with their attendance at scheduled
meetings, are set out in the table below. Biographical
details on each member can be found on pages 36
and 37.
Meetings
The Committee met four scheduled times during the
period under review. Since the year end there have been
two further meetings. All eligible members attended each
of the meetings during which they were a member of the
Committee. 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 relevant
Committee meetings by invitation.
Current members
Jock Lennox (Chairman)
Baroness Morgan of Huyton
Gerry Murphy
Scheduled
meetings
4 of 4
4 of 4
4 of 4
The Board continues to be satisfied that the Chairman of the
Committee, a member of the Institute of Chartered Accountants
of Scotland, and Gerry Murphy, a member of the Institute
of Chartered Accountants in England and Wales, both meet
the requirement for recent and relevant financial experience.
The Company Secretary, or his nominee, acts as Secretary
to the Committee and attends all meetings. The Committee’s
deliberations are reported by its Chairman at the subsequent
Board meeting and the minutes of each meeting are circulated
to all members of the Board following approval.
In order to allow discussion of private matters, which the
auditor may wish to raise, at each meeting, discussion may
be held between the Committee members and the external
auditor without the presence of management. If appropriate,
a discussion may be held between Committee members,
the external auditor and the Group Director of Internal Audit.
In undertaking its duties the Committee has access to the
services of the Group Director of Internal Audit, the Group
Finance Director, the Company Secretary, and their respective
teams, as well as external professional advice as necessary.
In addition the Chairman meets separately with the external
auditor and the Group Director of Internal Audit outside of
formal meetings and without management present.
Baroness Morgan will be stepping down as a Non-Executive
Director at the Company’s AGM in September 2017. Fiona
McBain, the Company’s new Non-Executive Director, will be
joining the Company’s Audit Committee, subject to her election
by shareholders at the AGM. Fiona McBain is a member of the
Institute of Chartered Accountants in England and Wales.
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 in fulfilling its oversight
responsibilities by acting independently from the executive
directors. There is an annual schedule of items which are
allocated to 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 principal duties of the Audit Committee are:
Accounting and financial reporting matters
• monitoring the integrity of the interim statement
and annual report and accounts and any formal
announcements relating to the Group’s financial
performance;
• reviewing significant financial reporting judgements
and accounting policies;
• advising the Board on whether, as a whole, the
annual report and accounts are fair, balanced and
understandable;
• considering the going concern statement;
• considering and reviewing the statement of the
Company’s viability over a specified period;
Risk management and internal control
• reviewing the Group’s financial controls and internal
control effectiveness and maturity;
• reviewing the Group’s risk management systems and
risk appetite;
Internal audit
• monitoring and reviewing the effectiveness of the
Company’s internal audit function;
• considering whistleblowing arrangements by which
employees may raise concerns about possible
improprieties in financial reporting or other matters;
• considering the major findings of internal
investigations;
External audit
• considering recommendation of the external auditor’s
appointment to the shareholders in general meeting
and approving their remuneration;
• reviewing the results and conclusions of work
performed by the external auditor;
• reviewing and monitoring the relationship with the
external auditor, including their independence,
objectivity, effectiveness and terms of engagement;
General 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 Committee were last
reviewed and adopted by the Board in May 2017 and are
available on the Group’s corporate website,
www.dixonscarphone.com. The Terms of Reference reflect
all the recent legislative and regulatory changes as well as
recently published best practice guidance.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Audit Committee Report
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Key matters considered during the year
Accounting and financial reporting matters
The Committee is responsible for considering reports from the external auditor and monitoring the integrity of the interim
statement and annual report and accounts in conjunction with senior management. During the year ended 29 April 2017,
consideration was given to the suitability and application of the Group’s accounting policies and practices, including areas
where significant levels of judgement have been applied or significant items have been discussed with the external auditor.
Accounting and
financial reporting
matters
Matters considered and how the Committee discharged its duties
Going concern and
viability statements
• The Committee reviewed the processes and assumptions underlying both the going concern and
longer term viability statements made on pages 26 and 27 of the Annual Report and Accounts.
• In particular the Committee considered:
— management’s assessment of the Group’s future cash forecasts, profit projections, available
financing facilities, facility headroom and banking covenants;
— the appropriateness of the three-year time period under assessment, noting the alignment of the
period with the Company’s strategic planning process, as well as the shorter-term nature of the
retail market which the Company operates in; and
— the robustness and severity of the stress-test scenarios with reference to the Group’s risk
register, those principal risks and mitigating actions as described on pages 16 to 21 to the
Annual Report and Accounts 2016/17, the latest Board-approved budgets, and indicative
headroom under the current facilities available – examples of which included the impact of
regulatory or information security incidents, and reduced forecast profitability and cash flow as
a result of a significant change in consumer behaviour.
• The Committee concurred with management’s conclusions that the viability statement, including the
three-year period of assessment, disclosed on pages 26 and 27 of the Annual Report and Accounts
2016/17 is appropriate. The Board was advised accordingly.
• In March 2016 the Group received a letter from the FRC requesting further information following
a review by the FRC of the 2014/15 annual report and accounts. The questions raised principally
related to certain aspects of accounting and disclosure arising from the Merger of Dixons Retail and
Carphone Warehouse in August 2014 and revenue recognition associated with network commission
receivable.
• The Audit Committee reviewed and approved the Group’s responses to the FRC. The Group’s
correspondence with the FRC closed satisfactorily with agreement on enhanced disclosures but
no changes to the reported results or changes in the valuation or timing of revenue recognition.
The Group included further information in relation to the Merger, including enhanced pro forma
reconciliations and key judgements, in the annual report and accounts 2015/16.
• Notes 26h), 1e) and 1t) in this year’s Annual Report and Accounts further build on the enhanced
disclosure in relation to the judgements, estimates and risks associated with the valuation of
network commission receivable provided in the annual report and accounts 2015/16.
FRC review
Fair, balanced and
understandable
• In ensuring that the Group’s reporting is fair, balanced and understandable, the Committee reviewed
the classification of items between headline and non-headline, including consideration of the
£115 million pre-tax non-headline charges disclosed in note 4 in the Group financial statements,
including tax impact thereon. The 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.
• In addition the Committee gave due consideration to the integrity and sufficiency of information
disclosed in the Annual Report and Accounts 2016/17 along with other relevant matters to
ensure that they explained the Group’s position, performance, business model and strategy. An
assessment of narrative reporting was included to ensure consistency with the financial reporting
section, including appropriate disclosure of material one-off items, and appropriate balance and
prominence of statutory and non-statutory performance measures. In response to the guidelines
on Alternative Performance Measures (‘APMs’) issued by the European Securities and Markets
Authority (‘ESMA’) the Committee considered the use of such measures and the additional
information on those APMs used by the Group provided in the glossary on pages 156 to 158.
• The Committee concluded that the Annual Report and Accounts, taken as a whole, are fair, balanced
and understandable, and that the measures used and disclosures provided were appropriate to
provide users of the Annual Report and Accounts 2016/17 with a meaningful assessment of the
performance of the underlying operations of the Group; the Board was advised of the conclusion.
52
Dixons Carphone plc Annual Report and Accounts 2016/17
Matters of significance and areas of judgement
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
Matters considered and how the Committee discharged its duties
Revenue recognition
• Revenue recognition is considered to be a critical accounting policy and the judgements
Supplier funding
Level at which goodwill is
monitored and impairment
testing performed
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are set out in notes 1e) and 1t) of the Annual Report and Accounts 2016/17. Key
components of judgement are largely in relation to the recognition of network
commission receivable.
• 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 MNOs. Particular attention was paid to the consistency of
application of the underlying assumptions used, significant changes in inputs to the
valuation model, historical forecasting accuracy and the sensitivity to the carrying
value of ongoing network receivables recognised to changes in key assumptions and
the disclosure of the impact of changes in assumptions as presented in note 26h) in
the Group financial statements. The carrying value of ongoing network commission
receivables at the balance sheet date was £1,014 million (2015/16: £904 million).
• A number of arrangements exist relating to supplier funding across the Group, including
promotional support and volume rebates. The Committee has continued to challenge
and debate with management its approach to supplier funding, and its recognition and
accounting treatment. In addition the Committee continues to monitor the effectiveness
of the controls in place to mitigate the risk of material misstatement of supplier funding
recognition; no major issues were noted. Further information in relation to supplier
funding can be found in note 1d) in the Group financial statements.
• During the year, management has reassessed the level at which the goodwill previously
related to the UK & Ireland operations of Carphone Warehouse and Dixons is monitored,
and therefore under IAS 36 ‘Impairment of Assets’ the level at which groups of cash
generating units (‘CGUs’) have been aggregated for goodwill impairment testing. The
Committee reviewed a detailed paper prepared by management outlining the rationale
for the change in the current year, which included the impact of the continued integration
activities within the UK & Ireland following the Merger, roll-out of ‘store-within-a-store’
operations, the integration of finance and operational management, and the combined
reporting of results for management reporting purposes.
• The Committee concurred with management that the aggregation of CGUs at the UK &
Ireland level is appropriate for goodwill impairment testing purposes. Total goodwill and
intangibles allocated to the UK & Ireland group of CGUs amounted to £2,066 million at the
balance sheet date (2015/16: £2,065 million).
Taxation
• The Group operates across multiple tax jurisdictions. The complex nature of tax
legislation in certain jurisdictions can necessitate the use of judgement.
• The Committee reviewed the judgements and assumptions concerning any significant tax
exposures, including progress made on matters being discussed with tax authorities and
where applicable advice provided by external advisors. The total provisions recognised at
the balance sheet date amounted to £66 million (2015/16: £54 million).
53
Dixons Carphone plc Annual Report and Accounts 2016/17
Audit Committee Report
Risk management and internal control
The Committee is responsible for reviewing the Group’s risk management and internal control systems. Details of
the overall risk management and governance policies and procedures are given in the Corporate Governance Report
on pages 38 to 46 of this Annual Report and Accounts. The Committee reviewed management’s assessment of risk
and internal control, results of work performed by the second lines of defence and internal audit, and the results and
controls observations arising from the annual audit and interim review procedures performed by the external auditor. The
Committee also ensures that all topics are appropriately covered, as defined by its Terms of Reference, with deep-dives
of risk topics scheduled throughout the year to ensure good visibility of any potential areas of concern. Specific matters
considered by the Committee to discharge its duties are detailed below:
Risk management
and internal control
Regulated activities
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Matters considered and how the Committee discharged its duties
• The Committee reviewed the nature of financial services regulated activities across the global
business operations and the governance and oversight arrangements for the operation of an
effective FCA compliance regime in the business. The Committee considered compliance
and regulatory reports prepared by the FCA Compliance Committee and monitored key
developments and ongoing activities for the compliance team in areas of governance, policy and
compliance monitoring.
• The Committee was reassured that the compliance programme was being embedded throughout
the Group, noted current arrangements at both Group and local levels and concurred with the
business plans for further investment in centralised compliance capability.
Information security
and IT controls
framework
• The Committee regularly reviews the progress of the ongoing information security improvement
programme and periodically considers and reviews the IT controls framework and related
improvement initiatives progressed by the management team, in order to ensure that appropriate
actions were taken. An update of the progress made against this programme has been
requested by the Committee in 2017/18.
Data protection
• The Committee reviewed data protection throughout the Group, particularly the implementation
of the new EU General Data Protection Regulation (‘GDPR’).
• The Committee concurred with the business’s plans to undertake a comprehensive GDPR
Readiness Assessment and has requested management to present their findings and
recommendations in the coming year.
Whistleblowing
arrangements
• The Committee reviewed twice yearly a summary of all whistleblowing calls received by the
Group, both through the independently operated hotline and other channels.
• The Committee confirmed that the calls had been appropriately dealt with (both individually and
in aggregate) in accordance with the Group’s Whistleblowing Policy.
Internal controls
• As per the obligations placed on the Audit Committee under the Code, the Committee formally
considered a review of the system of risk management and internal control. The Committee
noted developments in the system of risk management and internal control, management plans
for 2017/18 and agreed the statements contained in the Annual Report and Accounts 2016/17.
54
Dixons Carphone plc Annual Report and Accounts 2016/17
Internal audit
Internal audit represents an independent assurance function within Dixons Carphone, providing services to the Audit
Committee and senior management. Its remit is to provide independent and objective advice to facilitate, influence
and assist the organisation. It does this by evaluating and improving the effectiveness of risk management, control and
governance processes.
Whilst management is responsible for establishing and maintaining an appropriate system of risk identification and internal
control, and for the prevention and detection of irregularities and fraud, internal audit supports management in the assessment
and mitigation of risks, as well as reporting on the effectiveness of the systems of internal control as operated by management.
Internal audit
Matters considered and how the Committee discharged its duties
Audit reviews of
significant risk areas
• During the period the following significant risk areas of the business were included within internal
audit reviews:
— Health and Safety;
— information security and data protection;
— IT resilience, integrity and disaster recovery; and
— regulatory compliance.
• The Committee considered the key trends and major findings of internal audit’s work and the
adequacy of management’s proposed actions in relation to those findings.
• The Committee concurred with management’s assessment that the actions were both adequate
and achievable.
Assurance
programme
• As part of the three-year rolling assurance programme, audits were performed over the following
financial processes to provide assurance to the Committee that controls were operating within
these areas:
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— the Group’s treasury activities, including accounting for foreign exchange;
— purchasing and accounts payable controls in both UK & Ireland and the Nordics;
— UK & Ireland iD revenue controls;
— Nordics capital expenditure controls and processes; and
— general business controls in the Carphone Warehouse business, Ireland, the Sprint joint
venture and the Rotterdam insurance hub.
• The Committee used the audit results to review the effectiveness of the system of internal control
operated by management. The Committee concluded that the system of internal controls was
appropriately monitored and managed.
Effectiveness of
internal audit and
adequacy of its
resources
• Whilst 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.
• The Committee concluded that the internal audit function was effectively performing its duties in
accordance with its agreed charter.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Audit Committee Report
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External audit
The external auditor is appointed by shareholders to provide an opinion on the annual report and accounts 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:
External audit
Matters considered and how the Committee discharged its duties
Effectiveness of the
external auditor
• The Committee reviewed and agreed the annual audit plan, specifically considering the
appropriateness of the key risks identified and proposed audit work, the scope of the audit and
materiality levels applied which are detailed in the Independent Auditor’s Report on pages 88 to
94.
• As part of the reporting of the half year and full year results the Committee reviewed the reports
presented by Deloitte in assessing the Group’s significant accounting judgements and estimates
and considered the audit work undertaken, level of challenge and quality of reporting.
• Feedback on the effectiveness of the audit process in addressing areas of key audit risk was
obtained from members of the 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 favourable view
of the audit process and of Deloitte LLP as the external auditor, specifically in relation to the
consistent performance noted for quality of audit delivery, integrity and service of the team, the
constructive relationship and the effectiveness of the communication.
• Following due consideration of the above, the Committee continues to be satisfied with the quality
and effectiveness of the audit.
Auditor
independence
• The Committee considered the external auditor’s assessment of and declaration of independence
presented in the annual audit plan and final audit report, and those safeguards in place to make
such declarations.
• The Committee considered the annual audit fee and fees for non-audit services, with due regard
to the balance between audit and non-audit fees and the nature of non-audit fees undertaken in
accordance with the policy as set out on the facing page.
• The Committee has reviewed the Group policy on the employment of former employees of the
external auditor.
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Dixons Carphone plc Annual Report and Accounts 2016/17
The Company’s policy is to comply with the Code, which
includes a requirement to put the external audit out to
tender at least once every ten years. In accordance with the
Competition and Markets Authority (‘CMA’) Statutory Audit
Services Order, which is designed to align with provisions
of the EU Regulations on external audit tender and rotation,
and current guidance, the Company is required to conduct
a competitive audit tender by June 2023. This will be the
latest period that Deloitte LLP may remain as auditor.
The Committee will continue to evaluate annually the
performance of the auditor, in particular at each five-year
rotation of the lead audit partner, and will recommend a
tender for this service if the circumstances so warrant.
In accordance with International Standards on Auditing
(UK and Ireland) 260 and Ethical Standard 1 issued by
the Accounting Practices Board, and as a matter of best
practice, at year end Deloitte LLP formally confirmed to the
Board its independence as auditor of the Company.
In determining whether to recommend the auditor for
re-appointment this year, the Committee considered the
firm’s internal control procedures, the most recent audit
effectiveness review and the new tenure of the lead audit
partner, and thereby affirmed that the audit processes are
effective and that the appropriate independence continues
to be met. Accordingly, the Company confirms that it
complied with the provisions of the CMA Statutory Audit
Services Order for the financial year under review and the
Committee concluded that it was in the best interests of
the Company’s shareholders to re-appoint Deloitte LLP as
the independent auditor of the Company. The Committee’s
recommendation, that a resolution to re-appoint Deloitte
LLP be proposed at this year’s AGM, was accepted and
endorsed by the Board.
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Jock Lennox
Chairman of the Audit Committee
27 June 2017
Policy on provision of non-audit
services provided by the external
auditor
Under the Company’s policy on auditor independence,
auditors may only provide services which include:
a) audit services comprising issuing audit opinions on the
Company’s consolidated financial statements and on the
statutory financial statements of subsidiaries and joint
ventures;
b) audit-related services comprising review of the
Company’s consolidated interim financial statements,
and opinions / audit reports on information provided by
the Company upon request from a third party such as
prospectuses, comfort letters and rent certificates, etc; and
c) services otherwise required of the auditor by local law or
regulation.
Any exceptions are subject to pre-approval by the Group
Finance Director, and such permission is only granted
in exceptional circumstances. Where the non-audit
assignment is expected to generate fees of over £100,000,
prior approval must be obtained from the Committee.
During the period under review, the non-audit services
performed by the external auditor primarily arose from the
interim financial review procedures and the requirement in
Greek law for the external auditor of the company to provide
certain taxation services. The Committee has reviewed the
services performed by the external auditor during the year
and is 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 of the Group’s financial statements and amounted
to £0.3 million (2015/16: £0.4 million) compared with
£1.8 million (2015/16: £1.5 million) of audit fees. The
non-audit fees as a percentage of audit fees was 17%
(2015/16: 28%), which reflects the restrictive policy
governing the use of Deloitte LLP for non-audit services.
Consideration of auditor appointment
and independence
The Committee continues to consider the appropriateness
of the re-appointment of the external auditor, including
rotation of the audit partner. Deloitte LLP has been the
Company’s external auditor since August 2002, prior to
Carphone Warehouse’s demerger from TalkTalk. Deloitte
LLP was also the external auditor of Dixons Retail. The lead
audit partner, John Adam, completed his five-year term last
year and was succeeded by Stephen Griggs, in accordance
with the Auditing Practices Board Ethical Standards.
Stephen Griggs shadowed John Adam and attended the
Audit Committee meetings prior to the start of his term to
allow for a smooth transition.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Disclosure Committee Report
Chairman’s overview
Responsibilities
The principal duties of the Disclosure Committee are to:
• establish and maintain adequate procedures, policies,
systems and controls to enable the Company to fully
comply with its legal and regulatory obligations regarding
the timely and accurate identification and disclosure of all
information;
• implement and monitor compliance with the policies,
including arranging training where appropriate;
• identify inside information for the purposes of maintaining
insider lists;
• determine whether inside information requires immediate
disclosure or can be legitimately delayed, subject to
ongoing assessment and recording of the delay;
• monitor communications received from any regulatory
body in relation to the conduct of the Group, and review
any proposed responses;
• consider generally the requirement for announcements,
including in relation to the delayed disclosure of inside
information, substantive market rumours, and leaks of
inside information; and
• review the content of all material regulatory
announcements, transactional shareholder circulars,
prospectuses, and any other documents issued by
the Company, and ensure that these comply with all
applicable requirements.
The Committee’s Terms of Reference were last reviewed
and approved by the Board in June 2017. The Committee’s
Terms of Reference are available on the Group’s corporate
website, www.dixonscarphone.com.
Key matters considered
During the year ended 29 April 2017, the Committee met to
consider the definition of Persons Discharging Managerial
Responsibility (‘PDMRs’) and designated two additional
members of senior management as PDMRs.
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The Disclosure Committee was established in June 2016 to
prepare for the introduction of the Market Abuse Regulation
(‘MAR’). The Committee’s responsibilities include identifying
inside information, maintaining insider lists, implementing
and monitoring procedures and controls, and ensuring
that required disclosures meet all legal and regulatory
requirements.
The Disclosure Committee comprises the Chairman, the
Group Chief Executive, the Group Finance Director and the
General Counsel and Company Secretary.
The Company Secretary, or his nominee, acts as Secretary
to the Committee. The Committee’s deliberations are
reported by its Chairman at the following Board meeting and
the minutes of each meeting are circulated to all members
of the Board following approval.
The Committee carried out a thorough assessment of its
obligations under all relevant laws when it was established.
The Committee will review its performance, constitution,
Terms of Reference and responsibilities periodically, and at
least once a year. The first review of its Terms of Reference
took place in June 2017.
More information about the Disclosure Committee and its
position in the Company’s governance framework is shown
below.
Humphrey Singer
Chairman of the Disclosure Committee
27 June 2017
Meetings
• The Disclosure Committee meets as and when
required, and at least annually.
• The Disclosure Committee met once during the period
under review.
Committee membership and attendance
The members of the Disclosure Committee are shown in
the table below along with their attendance at meetings
for the period under review. Biographical details on each
member can be found on pages 36 and 37.
Current members
Humphrey Singer (Chairman)
Sebastian James
Nigel Paterson
Meetings
1 of 1
1 of 1
1 of 1
Lord Livingston was appointed to the Committee on
27 June 2017, after the end of the period under review.
The Committee receives input as appropriate from
other directors, senior management and the IR, PR and
Corporate Affairs Director. The Committee may invite
them to attend all or part of any meeting, as and when
appropriate and necessary.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Nominations Committee Report
Chairman’s overview
Meetings
The Nominations Committee has an important role in the
Dixons Carphone governance 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.
The Committee regularly reviews its obligations under
governance guidelines; the last review was in May
2017, which included an appraisal of Board experience,
composition, diversity, time commitments of each director,
director independence and a review of the Committee’s
Terms of Reference.
The Company announced in early February 2017 that Sir
Charles Dunstone was stepping down as Chairman, and
that I would be appointed as Chairman with effect from
30 April 2017 from my previous role as Deputy Chairman,
and Chairman of the Remuneration Committee. Tony
DeNunzio CBE became Deputy Chairman, and Chairman
of the Remuneration Committee, also with effect from
30 April 2017, in addition to his previous role as Senior
Independent Director. We are delighted that Charles will
remain connected to the business as a senior advisor. The
Company will continue to benefit from his experience and
support.
On 1 March 2017 the leadership of the business was
also significantly strengthened by the appointment of
Fiona McBain as Non-Executive Director. The Company
also announced that Tim How and Baroness Morgan
will be stepping down as Non-Executive Directors at the
Company’s AGM in September 2017, when Fiona McBain
will be joining the Company’s Audit Committee. Graham
Stapleton resigned as a director to become Chief Executive
Officer of honeybee, the Group’s software division, on
27 April 2017. As a result of these changes, the Board is
expected to reduce in size from 13 members at the end of
the financial year to 10 members following the AGM.
More information about the Nominations Committee and its
position in the Company’s governance framework is shown
on the right.
Lord Livingston of Parkhead
Chairman of the Nominations Committee
27 June 2017
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• The Nominations Committee meets as and when
required and at least twice a year.
• The Committee held one scheduled and one
unscheduled meeting during the period under review.
A second scheduled meeting was postponed from
March 2017 to May 2017, shortly after the financial
year end.
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.
Biographical details on each member can be found on
pages 36 and 37.
Current members
Lord Livingston of Parkhead (Chairman)
Tony DeNunzio CBE
Andrea Gisle Joosen
Former member
Sir Charles Dunstone(1)
Scheduled
meetings
1 of 1
1 of 1
1 of 1
1 of 1
(1)
Sir Charles Dunstone attended the one scheduled meeting
held before his resignation as Chairman on 30 April 2017.
The majority of the members are independent
non-executive directors as required by Code. Other
members of the Board or senior management may
be invited to attend meetings at the request of the
Chairman.
The Company Secretary, or his nominee, acts as Secretary
to the Committee. The Committee’s deliberations are
reported by its Chairman at the following Board meeting and
the minutes of each meeting are circulated to all members
of the Board following approval.
Responsibilities
The principal duties of the Nominations Committee are to:
• review the structure, size and composition of the Board,
and recommend changes as necessary;
• identify, evaluate and nominate candidates to fill
vacancies on the Board;
• review the leadership requirements with a view to ensuring
the continued ability of the organisation to compete
effectively and be responsible for succession planning;
• carry out a formal selection process of candidates;
• evaluate the skills, knowledge and experience of the
Board including reviewing the results of any Board
performance evaluation;
• consider other commitments of directors relative to the
time required for them to fulfil their duties; and
• make recommendations to the Board regarding the
continuation in office of a director upon the expiry of any
specified terms of appointment.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Nominations Committee Report
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The Committee’s Terms of Reference are reviewed
annually. The last review was in May 2017 and the Terms
of Reference were subsequently approved by the Board.
The Committee’s 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 (excluding any member whose potential
appointment was being discussed) also considered the
appointments of Lord Livingston, Tony DeNunzio and Fiona
McBain, and the resignations of Sir Charles Dunstone, Tim
How, Baroness Morgan and Graham Stapleton.
The Committee also considers these matters periodically:
• an evaluation of the size, composition and structure of the
Board and its committees;
• the Company’s diversity policy;
• time commitments of the directors;
• the external appointments policy;
• the Committee’s performance and Terms of Reference;
and
• a review of the role descriptions of the Chairman, Senior
Independent Director and the Group Chief Executive.
Board evaluation
During 2016/17 the Board evaluation was conducted
internally following the 2015/16 review which was
undertaken by an independent external company. The
internal review included the Board and the Audit, Disclosure,
Nominations and Remuneration committees and examined
all aspects of the Board’s procedures and activities. Further
details of the evaluation process can be found on page 43.
Appointments to the Board
The Committee has a formal, rigorous and transparent
procedure for the appointment of new directors.
Appointments are made to the Board based on objective
criteria and with due regard to the benefits of diversity and
the leadership needs of the Company. External search
consultancies are usually retained when recruiting non-
executive directors.
Candidate profiles were developed indicating the skills,
knowledge and experience required for each role, taking
into account the Board’s existing composition and skill sets.
The Committee, led by the Chairman, relied on the specific
candidate profile developed. The Committee undertook a
search process for the most appropriate candidates. Given
the specific set of requirements, including FCA and financial
services experience, there was only a very select field of
candidates. After interviewing Fiona McBain, the Committee
considered and recognised that she was the right fit for the
specific candidate profile and criteria set. The Committee
agreed that there was no further need to undertake
additional expense in appointing a global executive search
firm to conduct an extended search for the new non-
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executive appointment. The Committee and the Board were
unanimous in their decisions to appoint her.
Succession planning
The business requires a talented Board with appropriate
experience and expertise. This year, the Board has relied on
previous succession planning with Lord Livingston and Tony
DeNunzio stepping up to their new roles and placed further
emphasis on succession planning and Board composition
with Fiona McBain’s appointment in March 2017. The Board
considers no additional appointment is necessary at this
time but remains mindful of each of the Board members’
tenures. Board succession and composition will remain a
priority, as the Board is conscious that it must look further
and wider for the leaders of the future. In securing the
long-term prosperity of the business, the Board must look
deeper into the pool of talent that currently exists within
the organisation, identifying new talent and casting the net
wider, with a longer horizon, for potential directors with the
appropriate skill-sets to meet the demands of an ever more
complex business environment.
Diversity
The Board recognises the importance of diversity in
achieving the right mix of skills, knowledge and experience
to help the organisation reach its full potential. The Board
acknowledges the November 2016 Hampton-Alexander
Review on FTSE Women Leaders (‘Review’), which
recommends a voluntary target of 33% female directors
in FTSE 350 companies by 2020. Currently 33% of the
Board, and 25% of the Group senior management team, are
female.
Whilst noting the recommendations of the Review, the
Board does not establish targets on gender balance or
ethnicity as it believes that candidates should be appointed
on merit. Our Board supports the benefits of greater
diversity, which is not just gender or ethnicity-specific
but also encompasses age, background and diversity of
thought. The Board is conscious of the need to give weight
to these factors in future appointments. More information on
employee diversity can be found on page 29.
In performing its annual review the Board also looked at
other aspects of diversity relevant to the Group. 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.
Election and re-election
At the forthcoming AGM, all directors, except Tim How
and Baroness Morgan, will present themselves for election
or re-election. Each of the directors is 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.
Dixons Carphone plc Annual Report and Accounts 2016/17
Remuneration Report
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Chairmen’s statement
On behalf of the Board, we are pleased to present the
2016/17 Directors’ Remuneration Report which sets out our
philosophy and policy for directors’ remuneration, together
with the activities of the Remuneration Committee for this
financial year ended 29 April 2017. As this Remuneration
Report looks both back at the activities of the Committee
for the last financial year and also forward, we have
chosen that this statement should be from both Ian, as
the Remuneration Committee Chairman for the 2016/17
financial year, and Tony, as the new Committee Chairman.
Policy review
At the annual general meeting in September 2016,
shareholders approved both our new Remuneration Policy
and our new Long Term Incentive Plan with 98.9% and
99.2% of votes in favour, respectively. We were pleased
that shareholders felt positively about the proposals
that we put forward and recognise the importance of
the consultation process that we went through with
shareholders and the valuable feedback they provided on
our proposals. First awards were made under the new Long
Term Incentive Plan shortly after the annual general meeting
in 2016 and we plan to make a further set of awards in June
this year, following the announcement of the preliminary
results for 2016/17. Full details of the awards made in 2016
and the targets for the 2017 awards, based once again on
relative TSR and adjusted EPS, are contained in the Annual
Remuneration Report on pages 76 and 81.
The Share Plan
The previous long term plan (the ‘Share Plan’) was a major
element of the previous remuneration policy which sought
to incentivise management to deliver superior shareholder
returns through the Merger and integration of our two
businesses. The performance of the Share Plan is due to be
measured in July this year when, subject to the satisfaction
of the performance conditions, 60% of the shares will vest,
with the remaining 40% vesting 12 months later.
Given the performance of the share price over the last
12 months, particularly the fall which occurred after the
Brexit referendum, it has become increasingly likely that
either or both awards may not vest. In this event, the loans
that were provided by the Group to participants in order
to purchase participation shares in a subsidiary company
would be repayable. Under the Share Plan rules, repayment
of 90% of the loan (plus accrued interest) for the Dixons
awards and 80% of the loan (plus accrued interest) for the
Carphone awards would be an obligation of the Group (and
not the individual participants). The maximum loan amount
that the individual participants would have to repay would
be the remaining 10% or 20% of the loan (plus accrued
interest), the percentage dependant on the terms of the
individual’s award.
The Committee took detailed advice from both Aon
Hewitt and Freshfields Bruckhaus Deringer LLP during
the year on the position of the Company in the event that
the performance conditions were not met. That advice
concluded that the satisfaction by the Group of the loans
would trigger a benefit in kind income tax charge and social
security contributions for the participants on the portion of
the loan met by the Group. The Committee has determined,
on the basis of this advice, that as participants were not
informed of this possible outcome at the time the loans
were taken out, and as they were advised that the maximum
they would have to repay would be 10% or 20% of the loan
(plus accrued interest), the Company should compensate
them for any tax charge and social security contributions.
Otherwise participants could claim against the Group for
losses arising out of this unforeseen set of circumstances,
which according to the legal advice would have a strong
likelihood of success.
Directors who participate in the Share Plan would still be
required to pay back the remainder of the loans (10% in
the case of the Dixons awards and 20% for the Carphone
awards).
Information on the vesting of the awards will be provided
in next year’s Remuneration Report, as the vesting date is
after the latest practicable date for this Annual Report and
Accounts.
The new Long Term Incentive Plan operates on a basis that
is more closely aligned with market practice, by making an
annual award of nil-priced options. It was clear from the
consultation process last year that shareholders welcomed
the introduction of a more typical plan, with performance
measures that focus on the long-term growth of the
business and on shareholder value creation.
Pay and performance for 2016/17
This has been a challenging year for the business with
both economic and political uncertainty. The Committee is
very aware that much of the success of the Group is due
to the dedication and hard work of all our employees. The
Committee is also mindful of the current environment in
executive remuneration. Consequently, base pay increases
for 2017 for the executive directors will be in line with the
wider workforce. In spite of the challenges, the Group has
delivered a strong performance and the Committee has
approved annual bonus payments of 103.6% of base salary,
being 82.9% of maximum opportunity reflecting this. Full
details of the performance targets and actual performance
are provided in the Annual Remuneration Report on
pages 81 to 82. No payments relating to long term incentive
plans have been made to Directors since the Merger in
2014.
Other matters
Graham Stapleton’s remuneration for 2016/17 is included
in this Report as he resigned as a director on 27 April 2017.
Graham has taken up the very important role of leading the
development of our honeybee business and by enabling
him to focus on this responsibility alone, we will allow one
of our most entrepreneurial senior leaders to seek to build a
valuable business.
We are pleased that Tony has been able to take over
from Ian as Chairman of the Remuneration Committee,
having served as a member of the Committee since his
appointment to the Board in December 2015, as this has
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Dixons Carphone plc Annual Report and Accounts 2016/17
Remuneration Report
ensured a smooth transition. We would like to thank Tim
How for his service on the Committee and as a Non-
Executive Director. With Tim leaving the Committee, when
he steps down from the Board in September, Gerry Murphy
has joined the Committee in his place.
As always, we would welcome any feedback or comments
on this Report. The Remuneration Committee remains firmly
committed to the principle of pay for performance, ensuring
that rewards to the senior leadership team are aligned with
the experience of long-term shareholders.
Ian Livingston
Chairman of Dixons Carphone plc
Tony DeNunzio
Chairman of the Remuneration Committee
27 June 2017
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Dixons Carphone plc Annual Report and Accounts 2016/17
Remuneration Report – Remuneration Policy
Introduction
Remuneration strategy
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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 those of
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 particularly over the 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 across the
workforce;
• information and surveys from internal and independent
sources;
• the economic environment and financial performance of
the Company; and
• good corporate governance 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.
The purpose of this Report is to inform shareholders of the
Company’s directors’ remuneration for the year ended
29 April 2017. This Report is divided into two sections:
• the Remuneration Policy; and
• the Annual Remuneration Report.
The current Remuneration Policy was approved by
shareholders at the annual general meeting on 8 September
2016 and was effective from that date. The Annual
Remuneration Report will be put to an advisory vote at the
Annual General Meeting on 7 September 2017.
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 which
promotes the long-term success of the business through the
attraction and retention of 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 Corporate Governance Code (the ‘Code’)
and has complied with those principles in the year under
review.
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 (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.
Remuneration Policy –
unaudited information
The Remuneration Policy was approved overwhelmingly by
shareholders at the annual general meeting on 8 September
2016. In line with the authority given by shareholders, the
Policy may remain in force for up to three years.
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 Terms
of Reference of the Committee were last reviewed and
adopted by the Board in June 2017 and are available on
the Group’s corporate website, www.dixonscarphone.com.
The Terms of Reference reflect all the recent legislative
and regulatory changes as well as recently published best
practice guidance.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Remuneration Policy
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 skills, experience and importance to the business.
• Operation
Normally reviewed annually.
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• Maximum opportunity
The review reflects a range of factors including merit levels, internal relativity,
external market data and cost. Our overall policy, having due regard to the factors
noted, is normally to target salaries up to the mid-market level.
Salaries for new appointments as executive directors will be set in accordance with
the Recruitment Policy set out on pages 70 to 71 of this Remuneration Policy.
The Committee takes into consideration the impact of base salary increases on the
package as a whole, as other elements of pay (such as pension contributions) are
generally 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 normally 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
• Operation
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.
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 holiday.
Executive directors will be eligible for other benefits which are introduced for the
wider workforce on broadly similar terms.
Any reasonable business-related expenses (including the tax thereon) can be
reimbursed if determined to be a taxable benefit.
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 and / or reflect local market legislation.
Relocation or other related assistance could include, but is not limited to, removal
and other relocation costs, tax equalisation, tax advice and accommodation costs.
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.
• Maximum opportunity
• Performance assessment / targets Not applicable.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Pension (fixed pay)
• Purpose and link to strategy
• Operation
• Maximum opportunity
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.
Normal 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 up to 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.
Recovery and withholding provisions apply for material misstatement, misconduct
and reputational damage enabling performance adjustments and / or recovery of
sums already paid. These provisions will apply for up to three years after payment.
• 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 opportunity, with other measures
representing the balance.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Remuneration Policy
Long term incentive scheme (variable pay): Long Term Incentive Plan (‘LTIP’)
• 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 LTIP 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.
Discretionary awards of nil-priced options or conditional share awards are granted
over Dixons Carphone shares.
Awards will be granted annually and will usually vest after three years subject to
continued service and the achievement of performance conditions.
The level of vesting is dependent on achievement of performance targets, usually
over a three-year period.
The post-tax number of share awards vesting will be subject to a further two
year holding period, during which they cannot be sold, unless in exceptional
circumstances and with the Committee’s permission.
Dividend equivalents may be accrued on the shares earned from any award.
Awards will be subject to recovery and withholding provisions for material
misstatement, misconduct and reputational damage enabling performance
adjustments and / or recovery of sums already paid. These provisions will apply for
up to three years after vesting.
If employment ceases during the vesting period, awards will ordinarily lapse in full,
unless the Committee exercises its discretion.
The Committee has the discretion in certain circumstances to grant and / or settle
an award in cash. For the executive directors this would only be used in exceptional
circumstances.
In the event of a change of control, any unvested awards will vest immediately,
subject to satisfaction of performance conditions and reduction on a time-
apportioned basis.
• Maximum opportunity
Grants under the LTIP are subject to overall dilution limits.
The normal maximum grant per participant in any financial year will be a market
value of 275% of base salary, with up to 375% in exceptional circumstances,
e.g. recruitment.
More details on the award levels for executive directors in 2017/18 are set out
in the Annual Remuneration Report on page 76.
• Performance assessment / targets Performance targets are reviewed by the Committee prior to each grant and are set
to reflect the key priorities of the business at that time.
The Committee determines the metrics from a range of measures, including but
not limited to, market-based performance measures such as TSR and internal
financial metrics such as EPS. The Committee retains the flexibility to introduce
new measures in the future if considered appropriate given the business context,
although TSR will not be weighted any less than 40% of the total award. Material
changes will be subject to consultation with major shareholders.
The actual metrics for awards will be set out in the Annual Remuneration Report.
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Dixons Carphone plc Annual Report and Accounts 2016/17
All employee share plans
• Purpose and link to strategy
• Operation
• Maximum opportunity
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.
Executive directors are eligible to participate in any all employee share plans
operated by the Company which have been approved by shareholders on the same
terms as other eligible employees.
Currently share options are granted under the Dixons Carphone HMRC-approved
SAYE scheme, subject to three- or five-year vesting periods.
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 SAYE scheme is not subject to any performance conditions.
Share ownership guidelines
• Purpose and link to strategy
• Operation
Provides close alignment between the longer-term interests of executive directors
and shareholders in terms of the Company’s long-term success.
The Company requires executive directors to retain a certain percentage of base
salary in the Company’s shares. Executive directors have a five-year period to reach
these limits.
The shares which count towards this requirement are beneficially-owned shares
(both directly and indirectly).
• Maximum opportunity
Not applicable.
• Performance assessment / targets The Company requires all executive directors to retain 200% of base salary in the
Details of the directors’ shareholdings are shown in the table on page 85.
Company’s shares.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Remuneration Policy
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
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• Maximum opportunity
The fees are set to align with the duties undertaken, taking into account
market rates, and are normally reviewed on an annual basis. Factors taken into
consideration include the expected time commitment and specific experience.
Additional fees are payable for acting as the Senior Independent Director or
for acting as Chair of any Board committee, and for membership of a Board
Committee.
Non-executive directors do not participate in the annual performance bonus or the
long term incentive plans or pension arrangements.
Any reasonable business-related expenses (including the tax thereon) can be
reimbursed if determined to be a taxable benefit.
For material, unexpected increases in time commitments, the Board may pay extra
fees on a pro-rated basis to reflect additional workload.
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,
Deputy Chairman, Senior Independent Director or Committee Chair fees).
• Performance assessment / targets Not applicable.
Notes:
(1)
The Committee intends to honour all commitments previously provided to executive directors and current employees, including the terms
and conditions of outstanding long term incentives such as those previously approved by shareholders under the Dixons Carphone Share
Plan. Details of these awards for executive directors are set out on pages 82 to 83.
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Dixons Carphone plc Annual Report and Accounts 2016/17
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 three levels of performance: minimum, target and
maximum.
Remuneration Policy scenario chart
£4,500
£4,000
£3,500
£3,000
£2,500
£2,000
£1,500
s
0
0
0
£
£1,000
£933
£4,277
54%
£2,824
£2,846
45%
22%
£1,871
54%
24%
45%
22%
£602
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£2,487
£2,612
£1,644
54%
£1,726
54%
45%
45%
25%
£547
22%
24%
£572
22%
24%
£500
100%
33%
22%
100%
32%
21%
100%
33%
22%
100%
33%
22%
£-
Below
Target
Target
Maximum
Below
Target
Target
Maximum
Below
Target
Target
Maximum
Below
Target
Target
Maximum
Sebastian James
Andrew Harrison
Humphrey Singer
Katie Bickerstaffe
Fixed Pay
Bonus
LTIP
Notes:
(1)
(2)
(3)
Fixed pay is based on the basic salary payable as at the start of the current year, taxable benefits and pension contributions.
Annual variable pay represents the annual bonus entitlement. No bonus is assumed at the minimum performance level. Target performance
assumes a payment of 75% of salary (i.e. 60% of maximum) and at maximum performance a payment of 125% of base salary.
Long term incentives relate to the Long Term Incentive Plan, in which the executive directors started to participate in 2016. These are
illustrative amounts and the actual outcomes may differ depending on share price growth. No awards vest at the minimum performance
level. Target performance assumes a vesting of 151% of salary (i.e. 55% of maximum award) and maximum performance vesting of 275%
of salary.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Remuneration Policy
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Remuneration Committee discretions
The Committee operates the annual bonus plan, long term
incentive and all-employee plans in accordance with their
respective rules, the Listing Rules and HMRC rules (or
overseas equivalent) where relevant. The Committee retains
discretion, consistent with market practice, over a number
of areas relating to the operation and administration of these
plans. These include but are not limited to:
• 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 and the approved policy);
• 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 recovery and withholding 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, consultation took place with
major shareholders last year in relation to the Committee’s
proposed new Long Term Incentive Plan.
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. The Committee
is kept informed of general employment conditions across
the Group, including the annual pay review outcomes.
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.
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 over the longer term in order for the
Company to continue to grow.
The Company encourages wide employee share ownership,
and as such the Group’s UK & Irish employees, who meet
the eligibility criteria, are also invited to join the Company’s
UK & 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 a higher 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 Remuneration Policy table. As such,
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 (including
any tax thereon);
• for an overseas appointment, the Committee will have
discretion to offer cost-effective benefits and pension
provisions which reflect local market practice and
relevant legislation;
• the Committee may set alternative performance
conditions for the remainder of the initial annual
bonus performance period, taking into account the
circumstances and timing of the appointment; and
• the Committee retains the discretion to provide an
immediate interest in Company performance by making
a long term incentive award on recruitment (or shortly
thereafter if in a prohibited period) 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.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Service contracts will be entered into on terms similar to
those for the existing executive directors, summarised in
the recruitment table below. 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.
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 from a previous employer in accepting the
appointment. The Committee will have the authority to rely
on Listing Rule 9.4.2(2) or exceptional limits of awards of up
to 375% of base salary within the Long Term Incentive Plan.
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 may be
considered.
Elements of remuneration on appointment are set out in
the Recruitment table below.
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
Service contract and
incentive plan
provisions
Feature
Notice period
Policy
• 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.
Variable elements
• Gardening leave provisions.
• Non-compete, non-solicitation, non-dealing and confidentiality
provisions.
• 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.
• To be determined on appointment, taking into account factors
including market levels, experience, internal relativities and
cost.
Annual remuneration
Salary
Salary progression
• 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.
Benefits and allowances
• 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 (including any tax thereon).
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Dixons Carphone plc Annual Report and Accounts 2016/17
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;
• 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 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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Remuneration Policy
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 and may include modest outplacement costs.
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 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 default position
of the Long Term Incentive Plan is that awards will lapse
on termination of employment, except where certain good
leaver circumstances exist (e.g. death, ill-health, injury,
disability, redundancy, transfer of an undertaking outside
of the Group or retirement or any other circumstances at
the Committee’s discretion) whereby the awards may vest
on cessation, or the normal vesting date, in both cases
subject to performance and time pro-rating. Although, the
Committee can decide not to pro-rate an award (or pro-rate
to a lesser extent) if it regards it as appropriate to do so in
the particular circumstances.
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Dilution Limits
All the Company’s equity-based incentive plans incorporate
the current Investment Association Share Capital
Management Guidelines (‘Guidelines’) on headroom
which provide that overall dilution under all plans should
not exceed 10% over a ten-year period in relation to the
Company’s issued share capital (or reissue of treasury
shares). In addition, the Long Term Incentive Plan operates
with a 5% in ten-year dilution limit (excluding historic
discretionary awards). The Company regularly monitors
the position and prior to making any award the Company
ensures that it will remain within these limits. Any awards
which will be satisfied by market purchase shares are
excluded from such calculations. As at 27 June 2017, the
Company’s dilution position, which remains within the
current Guidelines, was 2.5% for all plans (against a limit of
10%) and 1% for the Long Term Incentive Plan (against a
limit of 5%).
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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 on page 75.
Availability for inspection
The service agreements for the executive directors and
the letters of appointments for the non-executive directors
are available for inspection during business hours at the
Company’s registered office and at the venue for the AGM,
15 minutes prior to and during the meeting.
Legacy arrangements
For the avoidance of doubt, in approving the Remuneration
Policy, authority is given to the Company to honour any
commitments previously entered into with the current
or former directors.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Remuneration Report – Annual Remuneration Report
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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 Annual General Meeting on 7 September 2017.
The following sections set out how the Remuneration
Policy was implemented during 2016/17 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:
Sebastian James
Andrew Harrison
Humphrey Singer
Katie Bickerstaffe
Date of contract
29 Mar 12
29 Oct 13
2 Sep 11
29 Mar 12
With the exception of Andrew Harrison, all the above
executive directors were appointed to the Board on
6 August 2014. Andrew Harrison had previously been a
director of Carphone Warehouse Group Plc, the listed entity
prior to the creation of Dixons Carphone plc, since 25 March
2010.
Graham Stapleton stepped down from the Board as an
executive director with effect from 27 April 2017.
More details are set out in the single figure of directors’
remuneration tables on pages 79 to 80.
Letter of appointment
Non-executive directors are normally appointed for three-
year terms, subject to annual re-election at the annual
general meetings, 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 contracts in respect of
the Chairman’s, Deputy Chairman’s and non-executive
directors’ services can be terminated by either party, the
Company or the director, giving not less than three months’
notice.
The date of the letters of appointment are shown below:
Letters of
appointment
17 Jun 14
16 Dec 15
6 Aug 14
6 Aug 14
6 Aug 14
16 Dec 15
1 Mar 17
6 Aug 14
6 Aug 14
Sir Charles Dunstone
Tony DeNunzio
Andrea Gisle Joosen
Tim How
Jock Lennox
Lord Livingston of Parkhead
Fiona McBain
Baroness Morgan of Huyton
Gerry Murphy
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Fiona McBain was appointed to the Board on 1 March 2017.
Charles Dunstone stepped down from the Board on 30 April
2017.
More details are set out in the single figure of directors’
remuneration tables on pages 79 to 80.
Remuneration Committee membership and attendance
Meetings
• The Remuneration Committee meets as and when
required and at least twice a year.
• The Committee attended five scheduled meetings
during the period under review.
• The Committee has met twice since the year end.
Members
Committee membership and attendance
The members of the Remuneration Committee are
shown in the table below along with their attendance
at scheduled meetings for the period under review.
Biographical details on each member can be found on
pages 36 to 37.
Current members
Tony DeNunzio CBE (Chairman)(1)
Andrea Gisle Joosen
Tim How
Former member
Scheduled
meetings
4 of 5
5 of 5
5 of 5
Lord Livingston of Parkhead(2)
5 of 5
(1)
Tony DeNunzio succeeded Ian Livingston as Chairman of the
Remuneration Committee on 30 April 2017, having previously
served as a member. Tony DeNunzio was unable to attend
one meeting due to a commitment that was planned before he
joined the Board and could not be changed.
(2)
Ian Livingston was a member and Chairman of the
Remuneration Committee until 30 April 2017.
Only members of the Remuneration 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 in an
advisory capacity only. Meetings are also regularly attended
by the Company Secretary (who acts as Remuneration
Committee secretary) , Deputy Company Secretary, Group
Human Resources Director and Group Reward 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;
Dixons Carphone plc Annual Report and Accounts 2016/17
• 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 the Remuneration
Policy or major changes to employee benefit structures;
and
• approving and operating employee share-based
incentive schemes and associated performance
conditions and targets.
Activities during the year
The principal activities of the Committee during 2016/17
included:
• reviewing and approving the Directors’ Remuneration
Report;
• approving share awards to senior management under
the new Long Term Incentive Plan after shareholders had
approved the plan at the annual general meeting in 2016;
• approving the Sharesave grant;
• assessing the performance of executive directors against
pre-determined targets set for the 2015/16 annual bonus
and approving the payments;
External directorships
The policy relating to external directorships is outlined in the
Remuneration Policy; the following external directorships
were undertaken and the fees retained by the executive
directors:
• Andrew Harrison has been a non-executive director
of Ocado Group plc during 2016/17 and was paid a fee of
£50,000 for the year to 29 April 2017.
• Sebastian James has been a non-executive director of
Direct Line Insurance Group plc during 2016/17 and was
paid a fee of £90,000 for the year to 29 April 2017.
• Katie Bickerstaffe has been a non-executive director of
Scottish and Southern Energy plc during 2016/17 and
was paid a fee of £79,500 for the year to 29 April 2017.
• Humphrey Singer has been a non-executive director
of Taylor Wimpey plc during 2016/17 and was paid
a fee of £59,000 for the year to 29 April 2017.
How the Remuneration Policy will be applied in 2017/18
Executive directors
i) Base Salary
The following salaries will apply during the 2017/18 financial
year, with effect from 29 April 2017:
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Salary at
29 April
2017
£’000
Increase
in salary
in 2017/18
£’000
Salary at
1 August
2017
£’000
836
561
485
510
17
11
9
10
853
572
494
520
• agreeing design of the 2016/17 annual bonus including
performance measures and targets;
• reviewing the current Share Plan and agreeing what
actions to take in the event that the awards under the
Share Plan do not vest in 2017;
Current directors
Sebastian James
Andrew Harrison
Humphrey Singer
Katie Bickerstaffe
• monitoring the developments in the corporate governance
environment and investor expectations; and
• noting remuneration practices across the Group.
Advice
The Committee appointed Aon Hewitt in April 2016 as
independent advisors, having used Towers Watson prior
to this. Aon Hewitt 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. They are members of the Remuneration
Consultants Group and operate under its code of conduct in
relation to the provision of executive remuneration advice in
the UK and have confirmed that they adhered to the Code
during 2016/17 for all remuneration services provided to
the Group. Aon Hewitt received fees of £92,000 (2015/16:
£26,000 to Towers Watson) in relation to the provision of
those services. In addition, during the year, the Committee
took external legal advice from Aon Hewitt and Freshfields
Bruckhaus Deringer LLP with respect to the awards under
the Share Plan. Aon Hewitt also provided advice to the
Company in respect of remuneration for the honeybee
business, but the Committee is satisfied that Aon Hewitt
continues to provide independent and objective advice to
the Committee.
ii) Pension Contributions
Company pension contributions or allowance in lieu will
continue in 2017/18 at their current levels of 10% for
Sebastian James, Humphrey Singer and Katie Bickerstaffe
and 5% for Andrew Harrison.
iii) Annual performance bonus
The maximum annual bonus for 2017/18 will be 125% of
base salary and will operate on a similar basis as in the
previous year. The measures have been selected to reflect
the Group’s key objectives and are aligned to the Group’s
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 2017/18 bonus scheme
are currently commercially sensitive and as such will not
be disclosed. Retrospective disclosure of the targets and
performance against them will be provided in next year’s
Remuneration Report.
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Annual Remuneration Report
The performance metrics and their weightings for 2017/18
are shown in the table below:
The relative TSR condition will be assessed over a three-
year period, with vesting determined as follows:
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EBIT
Net debt
ROCE
Customer Net Promoter Score
Employee engagement
Weighting (as a percentage of
maximum bonus
opportunity)
60%
10%
10%
10%
10%
Recovery and withholding provisions apply for material
misstatement, misconduct and reputational damage
enabling performance adjustments and / or recovery of
sums already paid. These provisions will apply for up to
three years after payment.
iv) LTIP
In line with the new LTIP as approved by shareholders
at the annual general meeting on 8 September 2016, the
Committee intends to make an award of 275% of base
salary to each of the executive directors shortly after the
announcement of the results for the 2016/17 financial year.
These awards will vest after three years based on continued
service and the achievement of the performance measures
noted below.
These awards will be subject to a further two-year post
vesting holding period, during which the executive director
is not permitted to sell any shares vesting, other than those
required to settle any tax obligations.
For 2017/18 these awards will be subject to two equally
weighted performance conditions. Half of the awards
will be subject to the achievement of a relative TSR
performance condition, measured against the companies
ranked FTSE 51-150 at the start of the performance period.
The remaining half of the awards will be subject to the
achievement of adjusted EPS growth targets.
Rank of Company TSR against Comparator
Group TSR
Below Median
Median
Between Median and Upper-
Quartile
Upper Quartile or above
% of TSR element vesting
0%
25%
Pro rata between 25%
and 100% on a straight-
line basis
100%
EPS growth will be assessed over a three-year period with
vesting to be determined as follows:
Three-year adjusted EPS growth to the end of
the 2019/20 financial year
% of EPS element vesting
Below 7.5%
7.5%
Between 7.5% and 20%
20% or above
0%
25%
Pro rata between 25%
and 100% on a straight-
line basis
100%
The EPS growth targets take into account a number of
inputs including market consensus at the time of the award,
the market within which the Company is operating and the
higher starting EPS than the previous award. Calculations of
the achievement against the targets will be independently
performed and approved by the Committee. The Committee
will retain discretion to adjust for material events which
occur during the performance period and will make full and
clear disclosure of any such adjustments in the Directors’
Remuneration Report, together with details of the achieved
levels of performance, as determined by the above
definitions at the end of the performance period.
Awards will be subject to recovery and withholding
provisions for material misstatement, misconduct and
reputational damage enabling performance adjustments and
/ or recovery of sums already paid. These provisions will
apply for up to three years after vesting.
Non-Executive Directors
Ian Livingston was appointed Chairman of the Board
on 30 April 2017 on a fee of £300,000 per annum. This
fee is inclusive of his Chairmanship of the Nominations
Committee.
Tony DeNunzio was appointed on the same date as Deputy
Chairman and Chairman of the Remuneration Committee on
a fee of £140,000. He retained, in addition, his responsibility
as Senior Independent Director.
Further information regarding non-executive director fees is
set out on page 82.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Remuneration details for 2016/17
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.
The FTSE 350 has been used as it is a broad market which
includes the Company and a number of its competitors.
Group Chief Executive pay
The following table shows, over the same seven year period
as the performance graph, 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.
Total shareholder return
Source: Datastream (Thomson Reuters)
Value (£)
(rebased)
700
600
500
400
300
200
100
0
Year
2016/17 Sebastian James
2015/16 Sebastian James
Sebastian James
Andrew Harrison
2014/15 Total
Andrew Harrison
Roger Taylor
29 Mar
2010
31 Mar
2011
31 Mar
2012
31 Mar
2013
29 Mar
2014
02 May
2015
30 Apr
2016
29 Apr
2017
2013/14 Total
Dixons Carphone plc
FTSE 350 Index
2012/13 Roger Taylor
2011/12 Roger Taylor
2010/11 Roger Taylor
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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
n/a
n/a
Annual
bonus
payout
against
maximum
%
83%
68%
100%
100%
54%
n/a
55%
0%(2)
82%
CEO single
figure of
remuneration(1)
£’000
1,795
1,616
1,687
420
2,107
679
159
838
958
474
1,193
This graph shows the value, by 29 April 2017, of £100 invested in
Dixons Carphone on 29 March 2010, compared with the value of £100
invested in the FTSE 350 Index on the same date.
The other points plotted are the values at intervening financial
year ends.
Start date of the graph reflects date of admittance to the London
Stock Exchange of Dixons Carphone, previously called Carphone
Warehouse Group plc.
(1)
(2)
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 that
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.
Roger Taylor waived a bonus of 25% maximum potential and
instead chose for it to be paid directly to charity.
77
Dixons Carphone plc Annual Report and Accounts 2016/17
Annual Remuneration Report
Percentage change in remuneration
The table below provides the percentage change in remuneration for the Group Chief Executive and the percentage
change for all UK head office-based employees as this group provides the best like-for-like comparison. The majority of the
UK head office-based employees (c. 94%) work for the UK & Ireland business and are bonused against the performance
of that business, which for 2016/17 had a lower level of payout compared with those bonused on Group performance.
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(2)
Group Chief
Executive
UK head
office
employees
2%
0%
2%
0%
23.62% (37.20)%
(1) The percentage change in taxable benefits is considered to be 0% since there have been no material changes in Group benefits.
(2)
A large proportion of the UK head office-based population work for the UK & Ireland business which had a lower level of bonus payout
compared with Group.
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 2016/17 and the prior year.
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Dividends paid(1)
Headline EBIT
Total staff costs – continuing operations(2)
Average employee numbers – continuing operations(2)
(1) Extracted from note 23 to the Group financial statements.
(2) Extracted from note 5 to the Group financial statements.
2016/17
£million
115
517
1,165
2015/16
£million
106
478
1,061
Change %
8.49%
8.16%
9.80%
Number
Number
Change %
45,461
45,202
0.57%
78
Dixons Carphone plc Annual Report and Accounts 2016/17
Audited information
Single figure of directors’ remuneration for the year ended 29 April 2017
Basic salary
and fees
£’000
Pension
contributions(3)
£’000
Annual
bonus
£’000
Taxable
benefits(4)
£’000
Total
emoluments
£’000
LTIP
payments(6)
£’000
Total
remuneration
£’000
2016/17
Executive
Current directors
Sebastian James
Andrew Harrison
Humphrey Singer
Katie Bickerstaffe(2)
Graham Stapleton(1) (5)
Non-executive
Current directors
Sir Charles Dunstone(1)
Tony DeNunzio
Andrea Gisle Joosen
Tim How
Jock Lennox
Lord Livingston of Parkhead(7)
Baroness Morgan of Huyton
Gerry Murphy
Fiona McBain(1)
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832
558
482
498
467
83
28
48
51
23
867
581
502
528
486
13
13
13
11
76
2,837
233
2,964
126
280
90
70
65
75
140
65
65
11
861
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,795
1,180
1,045
1,088
1,052
6,160
280
90
70
65
75
140
65
65
11
861
3,698
233
2,964
126
7,021
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,795
1,180
1,045
1,088
1,052
6,160
280
90
70
65
75
140
65
65
11
861
7,021
(1)
Remuneration is shown for the period served on the Board. Fiona McBain was appointed to the Board on 1 March 2017 and the fees shown
were from appointment to 29 April 2017. Graham Stapleton stepped down from the Board on 27 April 2017. Charles Dunstone stepped
down from the Board on 30 April 2017.
(2) Katie Bickerstaffe purchased annual leave under the Group’s holiday purchase scheme, reducing her salary by £10,000 in 2016/17.
(3)
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. The contribution amount was 10% of salary for
Sebastian James, Humphrey Singer and Katie Bickerstaffe and 5% for Andrew Harrison and Graham Stapleton.
(4) Taxable benefits include private medical insurance and car allowances.
(5) Taxable benefits for Graham Stapleton include expenses of £63,000 paid by the Company in relation to spousal and family travel.
(6)
LTIP payments would comprise amounts under the Share Plan; however, the performance period does not end until July 2017. Further
information has been set out on pages 82 to 83.
Ian Livingston has a deferred pension in the Dixons Retirement and Employee Security Scheme.
No payments were made to former directors and no payment for loss of office was made during the year.
(7)
(8)
79
Dixons Carphone plc Annual Report and Accounts 2016/17
Annual Remuneration Report
Single figure of directors’ remuneration for the year ended 30 April 2016
Basic salary
and fees
£’000
Pension
contributions(3)
£’000
Annual
bonus
£’000
Taxable
benefits(4)
£’000
Total
emoluments
£’000
LTIP
payments(6)
£’000
Total
remuneration
£’000
2015/16
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Executive
Current directors
Sebastian James
Andrew Harrison
Humphrey Singer
Katie Bickerstaffe(2)
Graham Stapleton(5)
Non-executive
Current directors
Sir Charles Dunstone
Tony DeNunzio(1)
Andrea Gisle Joosen
Tim How
Jock Lennox
Lord Livingston of Parkhead(1) (9)
Baroness Morgan of Huyton
Gerry Murphy
Former directors
John Gildersleeve(1)
Roger Taylor(1)(7)
820
550
475
490
460
82
28
48
50
23
701
470
406
428
393
2,795
231
2,398
280
34
70
65
75
54
65
65
53
97
858
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
13
11
13
11
892
940
—
—
—
—
—
—
—
—
—
1
1
1,616
1,059
942
979
1,768
6,364
280
34
70
65
75
54
65
65
53
98
859
3,653
231
2,398
941
7,223
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,616
1,059
942
979
1,768
6,364
280
34
70
65
75
54
65
65
53
98
859
7,223
(1)
(2)
(3)
(4)
(5)
Remuneration is shown for the period served on the Board. Tony DeNunzio and Ian Livingston were appointed to the Board on
16 December 2015 and the fees shown were from appointment to 30 April 2016. John Gildersleeve and Roger Taylor resigned from the
Board on 16 December 2015 and fees are from 3 May 2015 to date of leaving.
Katie Bickerstaffe purchased annual leave under the Group’s holiday purchase scheme, reducing her salary by £10,000 in 2015/16.
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. The contribution amount was 10% of salary for
Sebastian James, Humphrey Singer and Katie Bickerstaffe and 5% for Andrew Harrison and Graham Stapleton.
Taxable benefits include private medical insurance and car allowances.
The taxable benefits of Graham Stapleton includes the waiver of a loan, together with accrued interest, of £880,268 relating to a long term
incentive scheme of Carphone Warehouse that he took part in prior to him becoming a director of the Company. The scheme vested
following the sale of the Best Buy Europe business and awards became exercisable during 2013, but all shares awarded were subject to
a sales restriction until 2015. At the time of exercise Graham Stapleton, along with the other participants, was provided with a company
loan to be used to settle the outstanding tax liabilities that were created at the point of exercise. During 2015, the sales restrictions elapsed
and at that time the Company confirmed the writing off of the outstanding loan. This decision reflected the treatment afforded to other
participants of this plan and the past practice used by Carphone Warehouse. This is a legacy, pre-Merger obligation made before Graham
Stapleton was appointed to the Board.
(6) LTIP payments would comprise amounts under the Share Plan, however, the performance period ends in July 2017.
(7) Roger Taylor continued to receive private medical insurance benefits until 16 December 2016 when he stepped down from the Board.
(8) No payments were made to former directors and no payment for loss of office was made during the year.
(9)
Ian Livingston has a deferred pension in the Dixons Retirement and Employee Security Scheme.
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Long term incentive plans (LTIP)
Awards made under the legacy Share Plan will vest in July 2017 (60%) and July 2018 (40%), subject to satisfaction of
performance conditions .
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. The Chairmen’s Statement at the start of the Report explains the steps that will be
taken in the event that either or both the awards do not vest.
LTIP Awards made during 2016/17
Nil cost option awards were made to executive directors in September 2016 following approval of the new LTIP
by shareholders at the annual general meeting. Half of each award is subject to the achievement of a relative TSR
performance condition, measured against the companies ranked FTSE 51-150 at the start of the performance period. The
remaining half of each award will be subject to the achievement of adjusted EPS growth targets.
The vesting level of the relative TSR condition will be determined as follows:
Rank of Company TSR against Comparator Group TSR
% of TSR element vesting
Below Median
Median
Between Median and Upper Quartile
Upper Quartile or above
0%
25%
Pro rata between 25% and
100% on a straight-line
basis
100%
The vesting level of the EPS condition will be determined as follows:
Three-year adjusted EPS growth to the end of the
2018/19 financial year
Below 10%
10%
Between 10% and 30%
30% or above
% of EPS element vesting
0%
25%
Pro rata between 25% and
100% on a straight-line
basis
100%
The table below sets out the LTIP awards made to the executive directors on 9 September 2016:
Sebastian James
Andrew Harrison
Humphrey Singer
Katie Bickerstaffe
Graham Stapleton(2)
Nil Cost Options
awarded
Share Price at
date of award
£
591,284
396,592
342,512
360,538
331,696
3.89
3.89
3.89
3.89
3.89
Face Value
£(1)
2,300,094
1,542,743
1,332,372
1,402,493
1,290,297
End of Performance
Period
Vesting Date
30 Apr 2019
30 Apr 2019
30 Apr 2019
30 Apr 2019
30 Apr 2019
9 Sep 2019
9 Sep 2019
9 Sep 2019
9 Sep 2019
9 Sep 2019
(1) The face value is calculated based on the number of options awarded multiplied by the share price at the date of award.
(2) Graham Stapleton stepped down from the Board on 27 April 2017.
Annual bonus for 2016/17
The maximum bonus opportunity for all executive directors is 125% of base salary based on performance in the 12-month
period to the end of the financial year.
The Committee determined at the beginning of the year that the disclosure of performance targets were commercially
sensitive and therefore these were not disclosed in last year’s directors’ remuneration report. 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 overleaf the targets on a
retrospective basis and the actual performance against these.
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Annual Remuneration Report
The maximum annual bonus of 125% of base salary is payable at the maximum level of performance, 25% of base salary
on achievement of threshold performance and 75% of base salary on achievement of target performance.
Measure
Headline EBIT
Average net (debt) / funds – variance
vs budget
Return on Capital Employed
Customer Net Promoter Score
Employee engagement score
As a percentage
of maximum
bonus
opportunity
Threshold
Target
Maximum
Actual
60% £481.5 million £506.5 million £531.5 million £517 million
10% £(50) million
21.1%
10%
Improvement over prior year
10%
Improvement over prior year
10%
Budget
21.6%
£50 million
22.1%
£53 million
21.7%
Better
Better
Payout
46%
10%
7%
10%
10%
Overall bonus payments reflect strong business performance paying out at 82.9% of maximum opportunity and will be
paid in cash. The Committee is comfortable that the result is an appropriate reflection of overall performance during the
year under review. The bonus amounts to be paid to the executive directors in respect of 2016/17 are set out in the single
figure of directors’ remuneration table on page 79.
Non-executive directors’ and Chairman’s fees
The fees for the independent non-executive directors, including the Deputy Chairman, 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. 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.
The Chairman, and Deputy Chairman and Senior Independent Director receive all-inclusive fees reflecting their duties.
Other independent non-executive directors received a basic fee of £60,000 (2015/16: £60,000) and additional fees as set
out in the table below for chairing or membership of committees. Fees will remain unchanged for 2017/18, other than the
increase in fee for the Chairman as detailed earlier in this Report.
Chairman(1) (2)
Deputy Chairman(3) (4)
Senior Independent Director(5)
Chair of Audit Committee
Member of Audit Committee
Member of Nominations Committee
Member of Remuneration Committee
2016/17
£’000
2015/16
£’000
280
140
90
15
5
5
5
280
140
90
15
5
5
5
(1) The Chairman’s fee includes Chairmanship of the Nominations Committee.
(2)
Ian Livingston was appointed Chairman of the Board on 30 April 2017 on a fee of £300,000, inclusive of his Chairmanship of the
Nominations Committee.
(3) The Deputy Chairman’s fee includes Chairmanship of the Remuneration Committee and membership of the Nominations Committee.
(4)
On 30 April 2017, Tony DeNunzio was appointed as Deputy Chairman and Chairman of the Remuneration Committee in addition to his
Senior Independent Director’s role. He was paid an inclusive fee of £140,000 for all roles.
(5) The Senior Independent Director’s fee includes membership of the Nominations and Remuneration committees.
Directors’ interests in the Share Plan
The executive directors participate in the Dixons Carphone (formerly Carphone Warehouse Group plc) Share Plan approved
by Carphone Warehouse shareholders. Participants acquired at market value participation shares in a subsidiary company
that holds the Company’s interests in the Group’s main operating businesses. 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 plan will be measured at the end of the performance period in July 2017 and subject to satisfaction
of the performance conditions, 60% of the shares vest, with 40% deferred for a further year. If 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 would then be purchased by the Company
for cash and / or the Company’s ordinary shares.
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 October 2014, each being subject to a cap of 2% of the total issued share capital of the
Company.
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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
constituents of the FTSE 250 Index.
The table below shows the allocation to the executive directors of participation shares in the subsidiary, Dixons Carphone
Holdings Limited (previously known as New CPW Limited) , in relation to the Share Plan, together with details of the loans
issued to enable the directors to subscribe for the participation shares.
A ordinary
shares in
subsidiary
allocated
as at
30 April
2016(1)
Number
B ordinary
shares in
subsidiary
allocated
as at
30 April
2016(2)
Number
A ordinary
shares in
subsidiary
allocated
as at
29 April
2017(1)
Number
B ordinary
shares in
subsidiary
allocated
as at
29 April
2017(2)
Number
— 1,100
200
700
700
700
—
—
— 1,100
200
700
700
700
—
—
Current directors
Sebastian James
Andrew Harrison
Humphrey Singer
Katie Bickerstaffe
Graham Stapleton(4)
600
100
600
100
Allocation
of A pool
as at
30 April
2016(1)
%
Allocation
of B pool
as at
30 April
2016(2)
%
Allocation
of A pool
as at
29 April
2017(1)
%
Allocation
of B pool
as at
29 April
2017(2)
%
Loan
outstanding
as at
30 April
2016
£’000
Loan
outstanding
as at
29 April
2017(3)
£’000
—
7%
—
—
6%
11%
2%
7%
7%
1%
—
7%
—
—
6%
11% 2,306
2%
834
7% 1,467
7% 1,467
1%
565
2,030
796
1,292
1,292
551
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(1)
(2)
(3)
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.
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.
The amount of the loan is restated from figures in the 2015/16 remuneration report following the finalisation of the value of the B ordinary
shares.
(4) Graham Stapleton stepped down from the Board on 27 April 2017.
Directors’ interests in LTIP
Sebastian James
2016 LTIP
Andrew Harrison
2016 LTIP
Humphrey Singer
2016 LTIP
Katie Bickerstaffe
2016 LTIP
Graham Stapleton(1)
2016 LTIP
Date of grant
At
30 April
2016
Awarded
in the
year
Lapsed or
forfeited in
the year
Exercised
in the
year
At
29 April
2017
Date from which
first exercisable
Expiry of the
exercise period
Exercise
Price (p)
9 Sep 2016
— 591,284
9 Sep 2016
— 396,592
9 Sep 2016
— 342,512
9 Sep 2016
— 360,538
9 Sep 2016
— 331,696
—
—
—
—
—
— 591,284
9 Sep 2019
9 Sep 2026
— 396,592
9 Sep 2019
9 Sep 2026
— 342,512
9 Sep 2019
9 Sep 2026
— 360,538
9 Sep 2019
9 Sep 2026
— 331,696
9 Sep 2019
9 Sep 2026
—
—
—
—
—
(1) Graham Stapleton stepped down from the Board on 27 April 2017.
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Annual Remuneration Report
Directors’ interests in Sharesave
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. 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. These pre-Merger awards have now all
vested.
Date of grant
Exercise
price (p)
At
30 April
2016
Awarded
in the
year(4)
Lapsed or
cancelled in
the year (3)
Exercised(2)
in the year
At
29 April
2017
Date from which
first exercisable
Expiry of the
exercise period
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Sebastian James
Sharesave
Andrew Harrison
Sharesave
Humphrey Singer
Sharesave
23 Jul 2013(1)
26 Feb 2015
22 Feb 2017
209.35
344.00
252.00
601
4,866
—
—
— 7,142
5,467
7,142
—
(4,866)
—
(4,866)
(601)
—
— 7,142
— 1 Oct 2016 31 Mar 2017
— 1 Apr 2018 30 Sep 2018
1 Apr 2020 30 Sep 2021
(601)
7,142
10 Jan 2014
224.00
4,017
4,017
—
—
—
—
— 4,017
1 Mar 2017 31 Aug 2017
— 4,017
23 Jul 2013(1)
26 Feb 2015
25 Feb 2016
22 Feb 2017
209.35
344.00
377.00
252.00
601
4,500
334
—
—
—
— 7,142
5,435
7,142
—
(4,500)
(334)
—
(4,834)
(601)
—
—
— 7,142
— 1 Oct 2016 31 Mar 2017
— 1 Apr 2018 30 Sep 2018
— 1 Apr 2019 30 Sep 2019
1 Apr 2020 30 Sep 2021
(601)
7,142
Katie Bickerstaffe
Sharesave
23 Jul 2013(1)
26 Feb 2015
25 Feb 2016
22 Feb 2017
209.35
344.00
377.00
252.00
601
4,500
334
—
5,435
—
—
—
500
500
—
—
—
—
—
(601)
— 1 Oct 2016 31 Mar 2017
1 Apr 2018 30 Sep 2018
1 Apr 2019 30 Sep 2019
1 Apr 2020 30 Sep 2021
— 4,500
334
—
500
—
(601)
5,334
(1) Share options that were granted under the Dixons Retail Sharesave Plan and rolled over into options over Dixons Carphone shares.
The exercise price shown is the roll over price over Dixons Carphone shares.
(2) The options exercised by Katie Bickerstaffe and Humphrey Singer on 3 October 2016 had a market price of £3.71 on the date of exercise
and £3.41 for the options exercised by Sebastian James on 7 October 2016. The gain made on the date of exercise by Katie Bickerstaffe
and Humphrey Singer was £971, and £792 by Sebastian James.
(3) Sebastian James and Humphrey Singer cancelled prior year Sharesave contracts in order to participate in the 2017 award.
(4)
The face value of awards granted on 22 February 2017 for the executive directors was £22,497 for Sebastian James and Humphrey Singer,
and £1,575 for Katie Bickerstaffe. The exercise price was set at a 20% discount to the mid-market closing share price at 24 January 2017 of
£3.15.
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Directors’ shareholding
Details of directors’ interests in shares of the Company are shown in the following table:
Executive directors
Current directors
Sebastian James(2)
Andrew Harrison
Humphrey Singer(2)
Katie Bickerstaffe(2)
Graham Stapleton(2) (7)
Non-executive directors
Current directors
Sir Charles Dunstone(8)
Tony DeNunzio
Andrea Gisle Joosen(3)
Tim How
Jock Lennox
Lord Livingston of Parkhead(4)
Baroness Morgan of Huyton(5)
Gerry Murphy
Fiona McBain
Total beneficial
interests under
share ownership
guidelines
29 April
2017
Total beneficial
share interests
as a
% of
salary(6)
29 April
2017
29 April
2017
30 April
2016(1)
606,835
5,000,000
419,748
359,568
307,534
908,234
5,000,000
619,147
408,967
490,034
606,835
5,000,000
419,748
359,568
307,534
231%
2,843%
276%
225%
209%
134,758,481 134,758,481
50,000
6,076
12,400
11,625
—
991
20,000
—
50,000
9,076
12,400
11,625
31,889
8,183
20,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
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(1) Date of appointment, if later.
(2) On 2 February 2017, Sebastian James sold 302,000 shares, Humphrey Singer sold 200,000 shares, Katie Bickerstaffe sold 50,000 shares
(3)
(4)
(5)
and Graham Stapleton sold 182,500 shares, at a price of £3.15 per share.
On 5 July 2016, Andrea Gisle Joosen purchased 3,000 shares. The share price on 5 July 2016 was £2.99.
On 1 July 2016 and 6 February 2017, Ian Livingston purchased 15,236 and 16,653 shares respectively. The share price on 1 July 2016 was
£3.26 and £2.98 on 6 February 2017.
On 14 July 2016, 12 October 2016 and 13 February 2017, Baroness Morgan purchased 7,000, 119 and 73 shares respectively. The share
price on 14 July 2016 was £3.30. On 12 October 2016 the share price was £3.41 and £3.11 on 13 February 2017.
The percentage is based on base salary as at 29 April 2017 and an average share price over the month to 29 April 2017 of £3.19.
(6)
(7) Graham Stapleton stepped down from the Board on 27 April 2017.
(8) Charles Dunstone stepped down from the Board on 30 April 2017.
There were no changes in the directors’ restricted or unrestricted share interests between 29 April 2017 and the date of
this Report.
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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. In particular we consulted in 2016 with our shareholders on the new Remuneration Policy
being put to the vote at the annual general meeting in September 2016. 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 2016 annual general meeting:
Resolution
Votes for
%
Votes against
Approval of Remuneration Policy
Approval of annual remuneration report
Approval of the Long Term Incentive Plan 2016
880,154,462
835,264,767
878,422,918
98.86
94.28
99.20
10,177,401
50,721,166
7,119,656
%
1.14
5.72
0.80
Withheld
1,579,648
5,925,578
6,368,187
Compliance
As required by the Regulations, a resolution to approve this Remuneration Report will be proposed at the Annual General
Meeting on 7 September 2017.
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Tony DeNunzio
Chairman of the Remuneration Committee
27 June 2017
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Statement of Directors’ responsibilities
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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 as adopted by the European Union and
Article 4 of the IAS Regulation and have elected to prepare the Company financial statements in accordance with Financial
Reporting Standard 101 Reduced Disclosure Framework. 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 Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ 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
27 June 2017
Humphrey Singer
Group Finance Director
27 June 2017
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Independent Auditor’s report
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
29 April 2017 and of the Group’s profit for the year 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, including FRS 101 ‘Reduced Disclosure Framework’; and
• the 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,
• the Company balance sheet, the Company statement of changes in equity; and
• the related notes 1 to 33 and C1 to C10.
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
(United Kingdom Generally Accepted Accounting Practice) , including FRS 101 ‘Reduced Disclosure Framework’.
Summary of our audit approach
Key risks
The key risks that we identified in the current year were:
• impairment of goodwill and other intangible assets;
• revenue recognition – UK network commissions;
• UK supplier funding;
• inventory provisioning; and
• tax provisioning.
Last year our report included an additional risk in relation to property rationalisation
provisioning. This related to a non-recurring charge in the prior year, and, as there has been
no equivalent restructuring charge in the current year, is no longer significant to our audit
approach. We have included an additional risk this year in relation to tax provisioning given
the increase in quantum of the provision for uncertain tax positions in the year.
The materiality that we used in the current year was £21.5 million which was determined on
the basis of 5% of adjusted headline profit before tax, consistent with the previous year.
Our full scope audit procedures provided coverage at the Group’s key locations, being the
retail operations in the UK and Nordics, representing 90% of the Group’s revenue and 85%
of profit before tax.
Materiality
Scoping
Significant change in
our audit approach
There have been no significant changes in our audit approach in the current year other than
the removal of property rationalisation provisioning risk and addition of tax provisioning risk
as mentioned in the key risks section above.
Separate opinion in relation to IFRSs as issued by the IASB
As explained in note 1a) 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’) .
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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
regarding the appropriateness of the going concern basis of accounting
contained within note 1a) to the financial statements and the directors’
statement on the longer-term viability of the Group contained within the
strategic report.
We are required to state whether we have anything material to add or draw
attention to in relation to:
• the directors’ confirmation on page 45 that they have carried out a robust
assessment of the principal risks facing the Group, including those that
would threaten its business model, future performance, solvency or
liquidity;
• the disclosures on pages 16-21 that describe those risks and explain
how they are being managed or mitigated;
• the directors’ statement in note 1a) to the financial statements about
whether they considered it appropriate to adopt the going concern basis
of accounting in preparing them and their identification of any material
uncertainties to the Group’s ability to continue to do so over a period
of at least twelve months from the date of approval of the financial
statements; and
• the directors’ explanation on pages 26-27 as to how they have assessed
the prospects of the Group, over what period they have done so and why
they consider that period to be appropriate, and their statement as to
whether they have a reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as they fall due over the
period of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
Independence
We are required to comply with the Financial Reporting Council’s Ethical
Standards for Auditors and confirm that we are independent of the Group
and we have fulfilled our other ethical responsibilities in accordance with
those standards.
We confirm that we have nothing
material to add or draw attention to in
respect of these matters.
We agreed with the directors’
adoption of the going concern basis
of accounting and we did not identify
any such material uncertainties.
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.
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We confirm that we are independent
of the Group and we have fulfilled
our other ethical responsibilities in
accordance with those standards. We
also confirm we have not provided any
of the prohibited non-audit services
referred to in those standards.
Our assessment of the risks of 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.
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Last year our report included an additional risk in relation to property rationalisation provisioning which was announced
and commenced in that year and is no longer significant to our audit approach in the current year. We have included
an additional risk this year in relation to tax provisioning given the increase in quantum of the provision for uncertain tax
positions in the year. The other risks set out below are consistent with those identified in the previous year.
Risk
How the scope of our audit responded to the risk Key observations
Impairment of goodwill and other
acquisition intangibles
The Group has significant acquisition
related intangible assets, including
goodwill, (£3,433 million at 29 April
2017 comprising £3,111 million of
goodwill and £322 million of acquisition
intangibles) primarily related to the
CPW Europe and Dixons Retail plc
acquisitions in previous years. The
Group’s assessment of impairment of
acquisition related intangible assets is
a judgemental process which requires
estimates concerning the future cash
flows and associated discount rates and
growth rates based on management’s
projections of future business
performance and prospects. The key
judgements and estimates involved are
described in more detail in the Audit
Committee report and in notes 1k), 1l)
and 9 to the Group financial statements.
Revenue recognition – UK network
commissions
The monetary value of commission
receivable on sales (£1,014 million at
29 April 2017) , being commission for
which there is a contractual entitlement
based on mobile phone connections
already made, and for which there are
no ongoing performance obligations,
is dependent on consumer behaviour
beyond the point of sale. Management
is therefore required to exercise
judgement in respect of the level of
consumer default within the contract
period, consumer renewals, expected
levels of consumer spend and
consumer behaviour beyond the initial
contract period and recognise network
commissions when they are considered
to be reliably measurable. The key
judgements and estimates involved are
described in more detail in the Audit
Committee report and in notes 1e),
1t) and 26h) to the Group financial
statements.
We evaluated the design and implementation of
controls around the preparation of the impairment
models prepared by management. We also
assessed the identification of group’s of cash
generating units at which the level of goodwill is
monitored.
We assessed the assumptions used by
management in the impairment models for
goodwill and acquisition related intangible assets,
including 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 at
the year end.
We also considered the appropriateness of the
sensitivities applied by management.
We audited the mechanics of the impairment
models prepared by management.
We evaluated the design and implementation of
both the relevant manual and automated controls
over the revenue recognition process in respect
of commission receivable, utilising IT specialists
to assist with testing of automated controls. In
addition we tested whether these controls were
operating effectively throughout the period.
We tested the valuation of revenue recognised
through review of the contractual arrangements,
substantive testing of management assumptions
including tenure, line rental, and churn to data
received from networks and testing of cash
receipts.
We reviewed management’s assessment of
the accuracy of historical estimates against
subsequent cash received to consider the
appropriateness of the historical data as a
measure of expected future behaviours. We also
assessed any changes in estimate in comparison
to the prior year and reviewed year on year
movement in key assumptions.
We concur with the
treatment adopted in relation
to the impairment of goodwill
and other acquisition
intangibles and are satisfied
that the assumptions in
the impairment model are
within an acceptable range.
We are satisfied with the
sensitivities applied by
management and concur
that headroom remains
following the application of
these sensitivities.
We concur with the
treatment adopted in relation
to revenue recognition of UK
network commissions and
the assumptions applied by
management are considered
to be appropriate. In
particular we are satisfied,
based on management’s
assessment and our testing,
that historical data reflects
the directors’ best estimate
of expected future trends
and, as a result, we consider
that the revenue recognised
meets the IAS 18 Revenue
requirement of being reliably
measurable. We also agree
that the disclosures relating
to network commissions,
including disclosure of
the change in estimate
made during the year of
£21 million, provide an
appropriate understanding
of the estimates taken by
management.
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Risk
How the scope of our audit responded to the risk Key observations
UK supplier funding
The Group holds a number of
significant funding arrangements with
suppliers, primarily relating to the
UK retail operations. 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 target purchases
up front. These targets are generally a
mix of quarterly and annual targets. The
timing of recognition of this income is
sometimes judgemental, in particular
where the target period for measuring
target achievements spans the year
end and it is necessary to ensure
there is sufficient evidence justifying
recognition. The key judgements and
estimates involved are described in
more detail in the Audit Committee
report.
Inventory provisioning
Inventory is a significant balance for the
Group (£1,101 million at 29 April 2017)
and there are a number of judgemental
areas around valuation based on
estimates 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 consumer
electronics 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 note 1p) to the Group
financial statements.
We updated our understanding of the Group’s
key supplier funding arrangements. As part of
this, we met with the key individuals responsible
for the supplier funding accounting process, we
evaluated the design and implementation of the
key controls in operation, principally focused on
those that determine the appropriate timing of
recognition for supplier funding balances, and,
for certain key controls, tested the operating
effectiveness of these throughout the year. In
addition, we performed an analytical assessment
of movements in supplier funding throughout the
current year to historical trends.
We concur with the
treatment adopted and
amounts recognised in
relation to UK supplier
funding. We consider that
the disclosure provided with
respect to supplier funding
provides an appropriate
understanding of the types
of income received and
the impact on the Group’s
balance sheet as at 29 April
2017.
To ensure there is sufficient evidence to support
the recognition of supplier funding, our sample
procedures have comprised a mixture of
obtaining confirmations directly from suppliers
and recalculating amounts with reference to
signed supplier contracts.
We also considered the adequacy of the supplier
funding related disclosure within the Group’s
financial statements.
We evaluated the design and implementation, and
performed testing of the operating effectiveness,
of controls around the inventory business cycle
and attended a sample of inventory counts at
35 stores and the distribution centres across the
UK and Nordics consumer electricals businesses,
including visiting the Group’s main distribution
centre in Newark on 5 separate occasions, which
enables us to assess management’s processes
for monitoring inventory.
We verified a sample of inventory to assess
whether it is valued at the lower of cost and
net realisable value. We reviewed, recalculated
and assessed the inventory provisioning for
reasonableness, including challenging the
appropriateness of provisioning with reference
to inventory ageing, both historical and post year
end performance and a review of the provision
as a percentage of gross stock year-on-year. We
also considered the impact of range changes and
other specific known areas of overstock on the
required provision calculation.
We concur with the
treatment adopted in
relation to inventory
provisioning, and believe
that management’s inventory
provision methodology
includes a reasonable
consideration of the ageing
of inventory and the
recoverable amount of the
inventory value.
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Risk
Tax provisioning
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. The
Group has recognised provisions in
relation to uncertain tax positions of
£66 million at 29 April 2017.
Further information in this area is
discussed in the Audit Committee
report and in note 1t) to the financial
statements.
How the scope of our audit responded to the risk Key observations
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.
In assessing the provisions we have considered
the tax environment in which the Group operates,
the outcome of past settlements and the status
of matters being discussed with tax authorities.
Our tax specialists reviewed correspondence with
tax authorities as well as reviewing the opinions
or other support received from external advisors
which management has utilised in calculating the
provisions.
We concur with the
treatment adopted and
amounts recognised
in relation to taxation
provisioning, and believe
that management’s
provisioning methodology
includes a reasonable
consideration of all uncertain
positions.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these 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. Based on our professional judgement, we
determined materiality for the financial statements as a whole as follows:
Group materiality
£21.5 million (2015/16: £17.5 million)
Basis for determining
materiality
Rationale for the
benchmark applied
We have determined materiality on the basis of 5% of adjusted headline profit before tax. In
using adjusted headline profit before tax we have followed the Group’s definition of headline
results in note 1a) and adjusted this to add back the amortisation of acquisition intangibles
and pension finance costs due to their recurring nature. We have calculated materiality on a
consistent basis with the previous year and the increase in materiality in the current year is
due to the increase in the Group’s headline profit before tax.
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.
Significant change in
our audit approach
There have been no significant changes in our audit approach in the current year other than
the removal of property rationalisation provisioning risk as mentioned in the key risks section
above.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £1.0 million
(2015/16: £0.6 million) , 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
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 in the UK and the Nordics, which is consistent with
the previous year. Each of these components requires a local statutory audit.
These locations represent the principal business units and account for approximately 90% of the Group’s revenue from
continuing operations (2015/16: 94%) and 87% of the Group’s headline profit before tax (2015/16: 84%) . 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 levels of materiality applicable to each individual entity
which were lower than group materiality and ranged from £11.8 million to £12.9 million (2015/16: £3 million to £10 million) .
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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 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 where the Group audit scope was focused at least
once each year. For the year ended 29 April 2017, senior members of the Group audit team, including the senior statutory
auditor, visited Norway, where the Nordics head office is located and a sub consolidation is performed, on two occasions.
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;
• 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; and
• the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit,
we have not identified any material misstatements in the Strategic Report and the Directors’ Report.
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 part of the Corporate Governance
Statement relating to the Company’s compliance with certain provisions of the UK Corporate
Governance Code.
We have nothing to
report arising from our
review.
Our duty to read other information in the Annual Report
Under International Standards on Auditing (UK and Ireland) , we are required to report to you
if, in our opinion, information in the annual report is:
• materially inconsistent with the information in the audited financial statements; or
We confirm that we
have not identified any
such inconsistencies or
misleading information.
• 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 appropriately discloses those matters that we communicated to the audit committee
which we consider should have been disclosed.
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Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, 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) . 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.
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.
Stephen Griggs (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Statutory Auditors
London, United Kingdom
27 June 2017
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Dixons Carphone plc Annual Report and Accounts 2016/17
Consolidated income statement
Continuing operations
Revenue
Profit / (loss) from operations before share of
results of joint ventures
Share of results of joint ventures
Profit / (loss) before interest and tax
Finance income
Finance costs
Net finance costs
Profit / (loss) before tax
Income tax (expense) / credit
Profit / (loss) after tax – continuing operations
Year ended 29 April 2017
Year ended 30 April 2016
Note
Headline*
£million
Non-
headline*
£million
Total
£million
Headline
(restated) *
£million
Non-
headline
(restated) *
£million
Total
£million
2
10,580
5
10,585
9,736
2
9,738
2
12
2,3
6
7
517
—
517
17
(33)
(16)
(82)
(17)
(99)
—
(16)
(16)
435
(17)
418
17
(49)
(32)
478
—
478
17
(38)
(21)
(170)
(4)
(174)
—
(20)
(20)
308
(4)
304
17
(58)
(41)
501
(115)
386
457
(194)
263
(112)
389
17
(98)
(95)
291
(110)
347
26
(168)
(84)
179
Profit / (loss) after tax – discontinued operations
25
—
4
4
—
(18)
(18)
Profit / (loss) after tax for the period
389
(94)
295
347
(186)
161
Earnings per share (pence)
Basic – continuing operations
Diluted – continuing operations
Basic – total
Diluted – total
8
33.8p
33.7p
30.2p
29.2p
25.3p
25.2p
25.6p
25.5p
15.6p
15.1p
14.0p
13.6p
*
Headline results exclude amortisation of acquisition intangibles, Merger integration and transformation costs, property rationalisation costs,
acquisition related costs, net interest on defined benefit pension schemes, businesses to be exited and discontinued operations. Such
excluded items are described as ‘non-headline’. The headline and non-headline results have been restated for the year ended 30 April 2016
to reflect the current year classification of the iD mobile operations in the Republic of Ireland and the Sprint JV operations as businesses to
be exited as discussed in note 4 and note 32.
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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 movements recognised in other comprehensive income
Reclassified and reported in income statement
Amount recognised in inventories
Available-for-sale financial assets
Gains arising during the period
Exchange gain arising on translation of foreign operations
Other foreign exchange differences
Tax on items that may be subsequently reclassified to profit or loss
Items that will not be reclassified to the income statement in subsequent years:
Actuarial (losses) on defined benefit pension schemes – UK
Tax on actuarial gains / (losses) on defined benefit pension schemes
– Overseas
Other comprehensive (expense) / income for the period (taken to equity)
Total comprehensive income for the period
Notes
Year ended
29 April
2017
£million
Year ended
30 April
2016
£million
295
161
26
12
21
21
7
20
(18)
22
19
76
—
(3)
116
(144)
—
21
(123)
(23)
(35)
46
—
66
2
—
56
(5)
2
(9)
(12)
(7)
44
288
205
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Dixons Carphone plc Annual Report and Accounts 2016/17
Consolidated balance sheet
29 April
2017
£million
30 April
2016
£million
Note
Non-current assets
Goodwill
Intangible assets
Property, plant & equipment
Investments
Interests in joint ventures and associates
Trade and other receivables
Deferred tax assets
Current assets
Inventory
Trade and other receivables
Derivative assets
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Derivative liabilities
Deferred and contingent consideration
Income tax payable
Loans and other borrowings
Finance lease obligations
Provisions
Non-current liabilities
Trade and other payables
Deferred and contingent 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
12
12
14
7
13
14
26
15
16
26
17
18
19
20
16
17
18
19
21
7
20
22
Equity attributable to equity holders of the parent company
The financial statements were approved by the directors on 27 June 2017 and signed on their behalf by:
Sebastian James,
Group Chief Executive
Humphrey Singer,
Group Finance Director
3,111
553
420
19
18
531
253
4,905
1,101
1,136
17
209
2,463
7,368
(2,502)
(13)
(8)
(94)
(10)
(3)
(84)
(2,714)
(368)
(14)
(381)
(86)
(591)
(138)
(21)
3,054
540
366
—
5
408
234
4,607
958
1,113
18
233
2,322
6,929
(2,268)
(42)
(12)
(89)
—
(2)
(78)
(2,491)
(423)
(21)
(409)
(89)
(474)
(115)
(47)
(1,599)
(4,313)
3,055
(1,578)
(4,069)
2,860
1
2,260
1,513
31
(750)
3,055
1
2,256
1,398
(45)
(750)
2,860
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Consolidated statement of changes in equity
At 2 May 2015
1
2,256
1,369
(113)
(750)
2,763
Share
capital
£million
Share
premium
reserve
£million
Note
Accumulated
profits
£million
Translation
reserve
£million
Demerger
reserve
£million
Total equity
£million
Profit for the period
Other comprehensive income and expense
recognised directly in equity
Total comprehensive income and expense
for the period
Net purchase of own shares
Equity dividends
Net movement in relation to share schemes
Tax on items recognised directly in reserves
At 30 April 2016
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 29 April 2017
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
161
(24)
137
(5)
(106)
10
(7)
—
68
68
—
—
—
—
—
—
—
—
—
—
—
161
44
205
(5)
(106)
10
(7)
2,256
1,398
(45)
(750)
2,860
—
—
—
4
—
—
—
295
(83)
212
—
(115)
17
1
2,260
1,513
—
76
76
—
—
—
—
31
—
—
—
—
—
—
—
295
(7)
288
4
(115)
17
1
(750)
3,055
23
23
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Consolidated cash flow statement
Operating activities
Cash generated from operations
Special contributions to defined benefit pension scheme
Income tax paid
Net cash flows from operating activities
Investing activities
Interest received
Net cash outflow arising from acquisitions
Proceeds from disposal of property, plant & equipment
Proceeds on sale of business
Dividends received from available-for-sale investments
Acquisition of property, plant & equipment and other intangibles
Investment in joint ventures
Net cash flows from investing activities
Financing activities
Interest paid
Repayment of obligations under finance leases
Net purchase of own shares
Issue of ordinary shares
Equity dividends paid
(Decrease) / increase in borrowings
Facility arrangement fees paid
Net cash flows from financing activities
(Decrease) / increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Currency translation differences
Cash and cash equivalents at end of the period
Note
27
Year ended
29 April
2017
£million
Year
ended
30 April
2016
£million
479
(43)
(72)
364
2
(17)
9
22
8
(242)
(29)
(247)
(17)
(8)
—
4
(115)
(18)
(2)
(156)
487
(35)
(56)
396
—
(50)
24
30
—
(221)
(9)
(226)
(20)
(6)
(5)
—
(106)
25
(5)
(117)
(39)
53
233
15
209
163
17
233
27
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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.
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 an informative
additional measure of the ongoing trading performance
of the Group and believe that these measures provide
additional useful information for shareholders on the
Group’s performance and are consistent with how business
performance is measured internally.
Headline results are stated before the results of
discontinued operations or exited / to be exited businesses,
amortisation of acquisition intangibles, acquisition related
costs, any exceptional items considered so one-off and
material that they distort underlying performance (such
as reorganisation costs, impairment charges, property
rationalisation costs and other non-recurring charges) ,
income from previously disposed operations and net
pension interest costs. Businesses exited or to be exited
are those which the Group has exited or committed to or
commenced to exit through disposal or closure but do not
meet the definition of discontinued operations as stipulated
by IFRS and are material to the results and operations of the
Group.
Non-headline items in the current and prior periods
comprise businesses to be exited, amortisation
of acquisition intangibles, Merger integration and
transformation costs, property rationalisation costs,
acquisition related costs, net interest on defined benefit
pension schemes, share plan tax claims and discontinued
operations. A reconciliation of headline profit and losses to
total profits and losses is shown in note 2. Items excluded
from headline results can evolve from one financial year
to the next depending on the nature of exceptional items
or one-off type activities described above. Headline
performance measures and non-headline performance
measures may not be directly comparable with other
similarly titled measures or ‘adjusted’ revenue or profit
measures used by other companies.
The accounting policy for the use of these measures is
outlined in the ‘Alternative Performance Measures’ section
of the Glossary.
Going concern
The Group’s funding arrangements and processes for
managing its exposure to liquidity risk are set out in notes
18 and 26.
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. 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 18
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.
The principal accounting policies are set out below.
b) Accounting convention and basis of consolidation
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 affect 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.
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The results of overseas operations are translated each
month at the monthly rate, and their balance sheets are
translated at the rates prevailing at the balance sheet date.
Goodwill and acquisition intangible assets are held in the
currency of the operation to which they relate. 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 rates against UK Sterling used in these
financial statements are as follows:
Euro
Norwegian Krone
Swedish Krona
US Dollar
2017
1.18
10.86
11.32
1.29
Average
2016
1.36
12.51
12.65
1.49
2017
1.18
11.11
11.47
1.29
Closing
2016
1.28
11.77
11.74
1.46
d) Revenue and supplier income
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:
• network commission revenue is recognised with
reference to the stage of completion of the service under
the individual contract with the MNO, as outlined in
section (e) ;
• 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 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 by reference to
the stage of completion of the contractual terms at the
balance sheet date. The stage of completion is estimated
with reference to the proportion of the expected costs
of fulfilling the Group’s total obligations under the
agreements, determined by reference to extensive
historical claims data. Reliance on historical data assumes
that current and future experience will follow past trends.
The directors make an annual assessment of this data
to ensure this continues to reflect the best estimate of
expected future trends;
• revenue arising on services (including delivery and
installation, product repairs and product support) , is
recognised when the relevant services are provided;
• insurance revenue relates to the sale of third-party
insurance products. Sales commission received from 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.
Revenue from the provision of insurance administration
services is recognised over the life of the relevant policies.
Changes in contractual terms for the sale of third party
insurance contracts resulted in additional revenue
recognised of £22 million in the current year (2015/16:
£nil);
• for MVNO operations where the Group is the principal,
revenue is recognised in the period in which the
telecommunication service, such as airtime or data, is
provided;
• 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.
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 2015. 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. Judgement is required to ensure that income is
only recognised when all performance obligations within the
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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.
behaviour beyond the initial contract period. Further details
of estimates used to initially value revenue recognised and
subsequently value commission receivable at the balance
sheet date, effects on the current year income statement of
changes in estimates and sensitivity analysis of the carrying
value can be found in note 26.
e) Network commissions
The Group operates under contracts with a number of
Mobile Network Operators (‘MNOs’) . Over the life of these
contracts the service provided by the Group to each MNO
is the procurement of connections to the MNOs’ networks.
The individual consumer enters into a contract with the
MNO for the MNO to supply the ongoing airtime over that
contract period.
The Group earns a commission for the service provided to
each MNO (‘network commission’) . Revenue is recognised
with reference to the stage of completion of the service
under the individual contract with each MNO. A key
judgement associated with this recognition is the unit of
account used in recognition. The Group has determined
that the number and value of consumers provided to
each MNO in any given month (a ‘cohort’) represents
the best output measure of stage of completion of each
contract. As invoices to MNOs are raised on a monthly
basis, the monthly billing cycle has been deemed to be the
appropriate unit of account for the purposes of applying
IAS 39 to the financial assets arising from the provision of
services.
The level of network commission earned is based on a share
of the monthly payments made by the consumer to the
MNO. The total consideration receivable is determined by
both fixed (monthly line rental) and variable elements and is
therefore subject to significant judgement and is dependent
on consumer behaviour after the point of recognition. See
note 26 for further information around this judgement.
The method of measuring the fair value of the revenue and
associated receivables in the month of connection is to
estimate all future cash flows that will be received from the
network and discount these based on their timing of receipt.
The determined commission is recognised in full in the
month of connection of the consumer to the MNO as this is
the point at which we have completed the service obligation
relating to the consumer connection.
Commission revenue is only recognised to the extent it
can be reliably measured for each cohort of consumers.
Estimates are based on extensive historical evidence
obtained from the networks. Reliance on historical data
assumes that current and future experience will follow past
trends. Management make a quarterly, and the directors
a twice-yearly assessment of this data to ensure this
continues to reflect the best estimate of expected future
trends.
The associated receivables are subsequently measured at
amortised cost with remeasurements due to changes in
consumer behaviour recognised in the income statement.
Assumptions are therefore required, particularly in relation
to levels of consumer default within the contract period,
expected levels of consumer spend, and consumer
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In addition to remeasurement due to changes in consumer
behaviour, changes to revenue may also be made, where
for example, more recent information becomes available
enabling the recognition of previously unrecognised
commission. Any such changes are recognised in the
income statement. See note 26 for further detail of these
changes recognised in the current period.
In addition to the above, the Group may also receive
marketing support and volume incentives from the MNO,
which are recognised when the income becomes highly
probable.
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 at the balance sheet date 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.
Dixons Carphone plc Annual Report and Accounts 2016/17
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) 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.
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.
j) 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 other
comprehensive income or reserves, in which case it is
recognised directly in other comprehensive income or
reserves as appropriate.
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.
k) 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 group
of Cash Generating Units (‘CGUs’) expected to benefit from
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the combination and held in the currency of the operations
to which the goodwill relates.
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 group of CGUs
to which the goodwill relates, at the level at which this is
monitored by management. Where the future discounted
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.
l) 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.
Amortisation is provided to write off the cost of assets on a
straight-line basis on the following bases:
Brands
7% – 20% per annum
Customer relationships
13% – 50% per annum
This amortisation is recognised in non-headline
administrative expenses.
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, and is recorded in administrative expenses.
m) Property, plant & equipment
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 on a straight-line basis.
Rates applied to different classes of property, plant &
equipment are as follows:
Land and buildings
12⁄3% – 4% per annum
Fixtures, fittings and equipment 10% – 331⁄3% 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.
n) Financial assets and investments
Financial assets are recognised in the Group’s balance
sheet when the Group becomes party to the contractual
provisions of the investment. The Group’s financial assets
comprise cash and cash equivalents, receivables which
involve a contractual right to receive cash from external
parties, and investments classified as available-for-
sale. Financial assets comprise all items shown in notes
14 and 15 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 26, are classified as ‘loans
and receivables’ and ‘held for trading unless designated
in a hedge relationship’, respectively. Financial assets are
derecognised when the contractual rights to the cash flows
from the financial asset expire or the Group has substantially
transferred the risks and rewards of ownership.
Trade and other receivables
Trade and other receivables (excluding derivative financial
assets) are classified as ‘loans and receivables’. Trade
and other receivables are initially recognised at fair value
and subsequently held at amortised cost, less provision
or impairment. If there is objective evidence that the
Group will not be able to collect the full amount of the
receivable, impairment is recognised through the income
statement. Significant financial difficulties of the debtor,
probability that a debtor will enter bankruptcy or financial
reorganisation, and default or delinquency in payments are
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considered indicators that the trade receivable is impaired.
The impairment is calculated as the difference between the
carrying value of the receivable and the present value of
the related estimated future cash flows, discounted at the
original interest rate.
Available-for-sale investments
The Group has investments in unlisted shares that are not
traded in an active market but are classified as available-
for-sale financial assets and stated at fair value (because
the directors consider that their fair value can be reliably
measured) . Fair value is determined in the manner described
in note 12. Gains and losses arising from changes in fair
value are recognised in other comprehensive income and
accumulated in the accumulated profits reserve. Where
the investment is disposed of or is determined to be
impaired, the cumulative gain or loss previously recognised
in the accumulated profits reserve is reclassified to the
income statement. Dividends on available-for-sale equity
instruments are recognised in profit or loss when the
Group’s right to receive the dividends is established.
o) Interests in joint ventures
Joint ventures are joint arrangements whereby the parties
that have joint control of the arrangement have rights to the
net assets of the arrangement. These consolidated financial
statements include the Group’s share of the total recognised
gains and losses of joint ventures using the equity method
less any impairment losses. When the Group’s interest in a
joint venture has been reduced to nil because the Group’s
share of losses exceeds its interest in the joint venture, the
Group only provides for additional losses to the extent that
it has incurred legal or constructive obligations to fund such
losses, or where the Group has made payments on behalf of
the joint venture. Any associated goodwill is included within
the carrying value of the investment and is assessed for
impairment as part of that investment.
p) Inventories
Inventories are stated at the lower of cost and net
realisable value, and on a weighted average cost basis.
Cost comprises direct purchase cost and those overheads
that have been incurred in bringing the inventories to
their present location and condition less any attributable
discounts and bonuses received from suppliers in respect
of that inventory. 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.
q) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in
hand, bank overdrafts and short term highly liquid deposits
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.
r) 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 16 to 19 with the exception of deferred income.
Financial liabilities are recognised in the Group’s balance
sheet when the Group becomes a party to the contractual
provisions of the instrument. Financial liabilities (or a part
of a financial liability) are derecognised when the obligation
specified in the contract is discharged or cancelled or
expires.
Borrowings
Borrowings in the Group’s balance sheet represent
committed and uncommitted bank loans. Borrowings are
initially recorded at fair value less 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.
Subsequent to initial recognition, borrowings are stated
at amortised cost with any difference between cost and
redemption value being recognised in the income statement
over the period of the borrowings on an effective interest
basis.
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
26, 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 initially recorded at fair value and subsequently
measured at amortised 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.
Where the Group has right of offset in relation to trade and
other receivables and payables under IAS 39, these are
presented on a net basis. See note 26 for a description of
the financial assets and liabilities presented on a net basis.
Derivative financial instruments and hedging activity
The Group uses derivatives to manage its exposures to
fluctuating interest and foreign exchange rates. These
instruments are initially recognised at fair value on the
date the contract is entered into and are subsequently
remeasured at their fair value. The treatment of the
resulting gain or loss depends on whether the derivative is
designated as a hedging instrument and if so, the nature of
the item being hedged. Derivatives that qualify for hedge
accounting are treated as a hedge of a highly probable
forecast transaction (cash flow hedge) in the case of foreign
exchange hedging and a hedge of the exposure arising
from changes in the cash flows of a financial liability due
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to interest rate risk on a floating rate debt instrument in the
case of interest rate hedging.
At inception the relationship between the hedging
instrument and the hedged item is documented, as is an
assessment of the effectiveness of the derivative instrument
used in the hedging transaction in offsetting changes
in the cash flow of the hedged item. This effectiveness
assessment is repeated on an ongoing basis during the
life of the hedging instrument to ensure that the instrument
remains an effective hedge of the transaction.
1. Derivatives classified as cash flow hedges: the effective
portion of changes in the fair value is recognised in
other comprehensive income. Any gain or loss relating
to the ineffective portion is recognised immediately in
the income statement. Amounts recognised in other
comprehensive income are recycled to the income
statement in the period when the hedged item will
affect profit or loss. If the hedging instrument expires
or is sold, or no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in
other comprehensive income at that time remains in
other comprehensive income, and is recognised when
the forecast transaction is ultimately recognised in
the income statement. If the forecast transaction is no
longer expected to occur, the cumulative gain or loss in
other comprehensive income is immediately transferred
to the income statement.
2. Derivatives that do not qualify for hedge accounting:
these are classified at fair value through profit or loss.
All changes in fair value of derivative instruments that
do not qualify for hedge accounting are recognised
immediately in the income statement.
s) 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.
All provisions are assessed by reference to the best
available information at the balance sheet date.
t) Critical accounting judgements and key sources of
estimation uncertainty
Critical accounting judgements and estimates used in
the preparation of the financial statements are continually
reviewed and revised as necessary.
Whilst every effort is made to ensure that such judgements
and estimates are reasonable, by their nature they are
uncertain, and as such changes may have a material impact.
Key sources of estimation uncertainty
Revenue recognition – network commissions
For certain transactions with MNOs, commission receivable
on mobile phone connections depends on consumer
behaviour after the point of sale. Further details of the
judgement involved can be found at note 1 (e) , and further
details of estimates used to value commission receivable,
carrying amounts at the balance sheet date, effects on the
current year income statement of changes in estimates and
sensitivity analysis of the carrying value can be found in
note 26.
Revenue recognition – customer support agreements
As set out in note 1(d) , revenue relating to customer support
agreements is recognised by reference to the stage of
completion of the contractual terms at the balance sheet
date. The stage of completion is estimated with reference to
the proportion of the expected costs of fulfilling the Group’s
total obligations under the agreements, determined by
reference to extensive historical claims data. The estimation
techniques used for revenue and profit recognition in
relation to the agreements require forecasts to be made
of the outcome of the agreements and the timing of costs,
based on historical cost profiles for each type of agreement.
During the year, changes in estimates relating to contracts
entered in previous periods totalled £21 million (2015/16:
£3 million) .
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. Refer to note 21 for further
information.
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. The Group has recognised provisions in relation to
uncertain tax positions of £66 million at 29 April 2017 (2016:
£54 million) . Due to the nature of the provisions recorded,
the timing of the settlement of these amounts remains
uncertain.
Provisions
The Group’s provisions are based on the best information
available to management at the balance sheet date.
Judgement is required to assess the likelihood of success
of any claim made against the Group and if any liability will
arise. The most significant provision currently is in relation
to the store reorganisation programme described in note 4.
The costs and timing of cash flows are dependent on exiting
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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.
The Group’s reportable segments have been identified as
follows:
• UK & Ireland comprises operations in the 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.
the property lease contracts or subletting the property.
Significant assumptions are used in estimating the ultimate
cost to the Group including the nature, timing and cost of
exiting a lease and the level of sublease income. The future
costs assumed are inevitably only estimates, which may
differ from those ultimately incurred. Refer to note 20 for
further information.
u) Recent accounting developments
There were no new IFRSs or IFRIC interpretations that had
to be implemented during the year that significantly affect
these financial statements.
The following new standards, which are applicable to the
Group, have been published but are not yet effective and, in
some cases, 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. IFRS 9 is applicable for
periods beginning on or after 1 January 2018, and
therefore will be applied by the Group in the 2018/19
financial year. Based on our preliminary assessment, we
do not currently anticipate a material impact from the new
standard other than in providing additional disclosures in
the Annual Report.
• IFRS 15 ‘Revenue from Contracts with Customers’
provides guidance on the recognition, timing and
measurement of revenue. IFRS 15 is applicable for
periods beginning on or after 1 January 2018, and
therefore will be applied by the Group in the 2018/19
financial year. We have performed a high-level
assessment on the impact of the standard. We will initiate
a detailed project during 2017/18 in order to confirm
any potential impact on reported revenue. There are no
changes to cash flows or commercial impact from the
change in standard.
• IFRS 16 ‘Leases’ is applicable for periods beginning on or
after 1 January 2019, and will therefore be applied by the
Group in the 2019/20 financial year. IFRS 16 will require
the Group to recognise a lease liability and a right-of-
use asset for most of those leases previously treated
as operating leases. This will have a material effect on
both non-current and current liabilities, fixed assets and
the measurement and disclosure of expense associated
with the leases which under the new standard will be
treated as depreciation and financing expense which
were previously recognised as operating expenses over
the term of the lease. There is no cash impact of adoption
of this standard, however the presentation of the cash
flow statement will change. A project is underway across
the Group to assess the overall impact of the standard,
including considering the systems and processes required
for implementation and the options around transition.
We expect to report on the impact in the 2017/18 annual
report.
It is not practicable to provide a reasonable estimate of the
effect of the adoption of the above standards until a detailed
review has been completed.
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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
Headline EBIT
Reconciliation of headline profit to total profit before tax
UK &
Ireland
£million
6,550
81
6,631
385
—
385
Nordics
£million
3,156
—
3,156
89
—
89
Year ended 29 April 2017
Southern
Europe
£million
Connected
World
Services
£million
Eliminations
£million
Total
£million
661
—
661
22
—
22
213
—
213
21
—
21
— 10,580
—
(81)
(81)
10,580
—
—
—
517
—
517
Headline
profit
/ (loss)
£million
Businesses
to be exited
£million
Amortisation
of
acquisition
intangibles
£million
Merger
integration
and
transformation
costs
£million
Pension
scheme
interest
£million
Unieuro
income
£million
Share plan
taxable benefit
compensation
£million
Total profit
/ (loss)
£million
Year ended 29 April 2017
UK & Ireland
Nordics
Southern Europe
Connected World Services
EBIT before share of results of
joint ventures
Share of results of joint ventures
EBIT
Finance income
Finance costs
Profit / (loss) before tax
385
89
22
21
517
—
517
17
(33)
501
(11)
—
—
—
(11)
(17)
(28)
—
—
(28)
Headline external revenue (restated) *
Inter-segmental revenue
Total headline revenue (restated) *
Headline EBIT before share of results of joint ventures
(restated) *
Share of headline results of joint ventures (restated) *
Headline EBIT (restated) *
(20)
(12)
(1)
(1)
(34)
—
(34)
—
—
(34)
UK &
Ireland
£million
6,402
60
6,462
371
—
371
(28)
(3)
—
—
(31)
—
(31)
—
—
(31)
—
—
—
—
—
—
—
—
(16)
(16)
—
—
5
—
5
—
5
—
—
5
(10)
(1)
—
—
(11)
—
(11)
—
—
(11)
316
73
26
20
435
(17)
418
17
(49)
386
Year ended 30 April 2016 (restated)
Southern
Europe
£million
Connected
World
Services
£million
Eliminations
£million
550
—
550
17
—
17
152
—
152
11
—
11
—
(60)
(60)
—
—
—
Nordics
£million
2,632
—
2,632
79
—
79
Total
£million
9,736
—
9,736
478
—
478
*
Headline results have been restated to exclude the results of the iD mobile operations In the Republic of Ireland and the Sprint JV
operations, which have been classified as businesses to be exited in the current year and comparative have been restated accordingly as
discussed in note 4 and note 32.
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2 Segmental analysis continued
(a) Segmental results continued
Reconciliation of headline profit to total profit before tax
Headline
profit / (loss)
(restated) *
£million
Businesses
to be exited*
£million
Amortisation
of
acquisition
intangibles
£million
Dixons
Retail
Merger
£million
Property
rationalisation
costs
£million
Acquisition
related
£million
Pension
scheme
interest
£million
Total profit
/ (loss)
£million
Year ended 30 April 2016 (restated)
UK & Ireland
Nordics
Southern Europe
Connected World Services
EBIT before share of results of joint
ventures
Share of results of joint ventures
EBIT
Finance income
Finance costs
Profit / (loss) before tax
371
79
17
11
478
—
478
17
(38)
457
(6)
—
—
—
(6)
(4)
(10)
—
—
(10)
(24)
(13)
(2)
(1)
(40)
—
(40)
—
—
(40)
(37)
(5)
—
(6)
(48)
—
(48)
—
(4)
(52)
(70)
—
—
—
(70)
—
(70)
—
—
(70)
(1)
(5)
—
—
(6)
—
(6)
—
—
(6)
—
—
—
—
—
—
—
—
(16)
(16)
233
56
15
4
308
(4)
304
17
(58)
263
*
Headline results have been restated to exclude the results of the iD mobile operations In the Republic of Ireland and the Sprint JV
operations, which have been classified as businesses to be exited in the current year and comparative have been restated accordingly as
discussed in note 4 and note 32.
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
Year ended
29 April
2017
£million
2,746
1,268
63
7
4,084
Year
ended
30 April
2016
(restated)*
£million
2,687
1,203
53
17
3,960
Year ended
29 April
2017
£million
Year
ended
30 April
2016
£million
Year ended
29 April
2017
£million
Year
ended
30 April
2016
£million
175
40
11
16
242
152
57
5
7
221
132
43
7
4
186
129
40
6
2
177
*
Non-current assets above exclude financial assets, deferred tax assets and assets related to discontinued operations. Figures for 2015/16
have been restated to exclude financial assets.
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3 Revenue and profit / (loss) before interest, taxation and share of results of joint ventures
Revenue
Cost of sales
Gross profit
Operating expenses
Year ended 29 April 2017
Year ended 30 April 2016 (restated)
Headline
£million
10,580
(8,241)
2,339
(1,822)
Non-
headline
£million
5
(7)
(2)
(80)
Total
£million
10,585
(8,248)
2,337
(1,902)
Headline
(restated) *
£million
9,736
(7,548)
2,188
(1,710)
Non-
headline
(restated) *
£million
2
(5)
(3)
(167)
Total
£million
9,738
(7,553)
2,185
(1,877)
Profit / (loss) before interest, taxation and share of results
of joint ventures
517
(82)
435
478
(170)
308
Revenue can be further analysed as follows:
Sale of goods
Revenue from services
Year ended 29 April 2017
Year ended 30 April 2016 (restated)
Headline
£million
7,749
2,831
10,580
Non-
headline
£million
—
5
5
Total
£million
7,749
2,836
10,585
Headline
(restated)
£million
7,018
2,718
9,736
Non-
headline
(restated) *
£million
—
2
2
Total
£million
7,018
2,720
9,738
*
Headline results and revenue have been restated as outlined in note 32.
Revenue from services predominantly comprises those relating to commissions from MNOs, insurance, customer support
agreements, delivery and installation, product repairs and product support.
Profit / (loss) before interest and taxation for continuing operations is stated after charging / (crediting) the following:
Year ended
29 April
2017
£million
Year ended
30 April
2016
£million
95
34
57
8
51
3
7,837
326
24
(3)
(1)
(2)
17
1,148
98
40
39
11
55
1
7,343
340
17
(6)
(1)
2
10
1,051
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 (gains) / losses
Share-based payments expense
Other employee costs (see note 5)
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3 Revenue and profit / (loss) before interest, taxation and share of results of joint ventures continued
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 compliance services
Other assurance services
Year ended
29 April
2017
£million
Year ended
30 April
2016
£million
0.1
1.7
1.8
0.1
0.2
2.1
0.1
1.4
1.5
0.2
0.2
1.9
In addition to the above fees, £nil (2015/16: £0.1m) of non-audit fees were paid to the auditor in respect of tax compliance
and tax advisory services provided to discontinued operations.
4 Non-headline items
Included in revenue
Businesses to be exited
Included in profit / (loss) before interest and tax:
Businesses to be exited
Amortisation of acquisition intangibles
Exceptional items – Merger and transformation related costs
– Property rationalisation costs
– Acquisition related
Share plan taxable benefit compensation
Unieuro income
Included in net finance costs:
Net non-cash finance costs on defined benefit pension schemes
Exceptional items – Merger and transformation related costs
Total impact on profit / (loss) before tax
Tax on non-headline items
Total impact on profit / (loss) after tax – continuing operations
Discontinued operations
Total impact on profit / (loss) after tax
*
Comparative non-headline results for the year ended 30 April 2016 have been restated as set out in note 32.
Year ended
29 April
2017
£million
Year ended
30 April
2016
(restated) *
£million
5
5
(28)
(34)
(31)
—
—
(11)
5
(99)
(16)
—
(16)
2
2
(10)
(40)
(48)
(70)
(6)
—
—
(174)
(16)
(4)
(20)
(115)
(194)
17
(98)
4
(94)
26
(168)
(18)
(186)
Note
(i)
(i)
(ii)
(iii)
(iv)
(v)
(vii)
(viii)
(vi)
(iii)
25
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4 Non-headline items continued
(i) Businesses to be exited:
Comprises the trading result of businesses to be exited where they do not meet the criteria under IFRS 5 for separate
disclosure as discontinued operations. In the current period, this comprises of the iD mobile operations in the Republic
of Ireland and the results of the Sprint joint venture. For iD mobile Ireland, a decision was reached to exit the business,
most likely through a sale to a third party. The results of the Ireland MVNO have therefore been reclassified as non-
headline items in the current year in the income statement and related disclosures. The iD mobile operations in the
Republic of Ireland contributed £5 million in revenue and a loss of £10 million in EBIT in 2016/17 (2015/16: revenue of
£2 million and a loss of £6 million) which has been classified as non-headline. Restated amounts are set out in note 32.
In June 2017 the Group announced the sale of the 50% interest in the Sprint joint venture. The share of loss
recognised in the year of £17 million, together with central costs directly related to the operation of £1 million, have
therefore been classified as a business to be exited. The share of loss for 2015/16 of £4 million has been restated
accordingly as set out in note 32.
(ii) Amortisation of acquisition intangibles:
A charge of £34 million arose during the year in relation to acquisition intangibles arising on the CPW Europe
Acquisition, the Dixons Retail Merger and the Simplifydigital acquisition (2015/16: £40 million) .
(iii) Exceptional items – Merger and transformation related costs:
Merger integration costs
Transformation related costs
Revolving Credit Facility fee write off
Year ended
29 April
2017
£million
Year ended
30 April
2016
£million
(18)
(13)
—
(31)
(48)
—
(4)
(52)
The Merger has given rise to the following costs which have been treated as exceptional items:
• Merger integration costs relate to the reorganisation of the Group following the Merger and primarily comprise
professional fees, employee severance and incentive costs associated with the integration process.
• During the current period, functional transformation projects have commenced across the finance, procurement
and human resources functions to rationalise shared service centre activities and harmonise policies and
procedures across key support functions of the business. The costs primarily relate to consultancy fees.
• In the year ended 30 April 2016, the Revolving Credit Facility fee write off recognised in finance costs relates to the
deferred facility fees written off. The fees incurred were a result of the Merger and the financing required to facilitate
the Merger at short notice. No related amounts were recognised in the current year.
(iv) Property rationalisation costs:
Following the Merger it was announced that the Group would launch a major roll-out of its fully refurbished 3-in-1
store concept in the UK & Ireland. This involves merging the remaining PC World and Currys stores and inserting a
Carphone Warehouse, reducing the overall store portfolio by 134. The costs associated with this initiative, being early
lease termination premiums, onerous lease provisions, dilapidations and fixed asset impairments, have been treated
as exceptional items. On a net basis, there have been no additional costs incurred in the year ended 29 April 2017
relating to the property rationalisation, and existing provisions have been utilised.
(v) Acquisition related:
Acquisition related comprises costs incurred in the year ended 30 April 2016 relating to an increase in the contingent
consideration payable on a business acquired by Dixons in the Nordics in 2011/12 (£5 million) , and costs incurred in
the acquisition of Simplifydigital and InfoCare (£1 million) .
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4 Non-headline items continued
(vi) 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.
(vii) Share plan taxable benefit compensation:
As discussed in the Remuneration Committee Chairmen’s statement on page 61, in the event of non-vesting,
compensation will be paid to participants of the Share Plan for any taxable benefit arising on the waiver of any portion
of loans granted under the scheme. Based on the current share performance it is considered probable that this liability
will crystallise, and therefore provision of £11 million has been made during 2016/17.
(viii) Unieuro income:
In November 2013, the Group disposed of its Unieuro operations, and retained an investment of 14.96% in Italian
Electronics Holdings s.r.l (IEH) , a holding company which in turn owned 100% of the Unieuro operations. The
investment was initially recognised at £nil based on the fair value of the retained interest. In March 2017, Unieuro
undertook an IPO for 31.8% of its shareholdings, which reduced the Group’s investment to 10.2% of the Unieuro
operations. As a result of the IPO, the Group received a dividend from the intermediate holding company of £5 million,
which is treated as non-headline as relates to a disposal of a portion of our investment. A repayment was also received
of £5 million for a loan previously impaired following the disposal, which has been treated as a discontinued operation
income in line with the treatment of the original disposal, as disclosed in note 25.
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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
Year ended
29 April
2017
£million
Year ended
30 April
2016
£million
1,006
118
24
1,148
17
1,165
921
107
23
1,051
10
1,061
Aggregate remuneration for discontinued operations are salaries and performance bonuses of £nil (2015/16: £6 million) and
social security costs of £nil (2015/16: £1 million) .
The average number of employees for continuing operations is:
UK & Ireland
Nordics
Southern Europe
Connected World Services
The average number of employees for discontinued operations is nil (2015/16: 341 ) .
Year ended
29 April
2017
Number
30,917
10,309
3,918
317
45,461
Year ended
30 April
2016
(restated)
Number
31,003
10,283
3,764
152
45,202
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5 Employee costs and share-based payments continued
a) Employee costs continued
Compensation earned by key management, comprising the Board of Directors and senior executives, is as follows:
Short-term employee benefits
Share-based payments
Year ended
29 April
2017
£million
Year ended
30 April
2016
£million
11
3
14
12
2
14
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 Share Plan. At 29 April 2017, loans to key management in relation to these schemes totalled
£9 million (2016: £10 million) . Interest is charged on loans at market rates and interest of £0.2 million has been recognised
during the period (2015/16: £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.
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 one-month period prior to the announcement
of preliminary merger discussions in February 2015) 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 after the publication of the preliminary announcement for the
year ended 29 April 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 up to 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 scheme 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.
Based on the current share price performance it is considered probable that part of the Share Plan will not vest, and in the
event of non-vesting the Company has agreed to compensate participants for any taxable benefit arising on the waiver of
any portion of loans granted under the scheme. This is discussed further in note 4.
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.
Options were first granted under the scheme in January 2014. The options are subject to continuing employment and are
subject to performance conditions. For options granted during 2015/16 and earlier periods, performance conditions are
based on a combination of absolute TSR performance and relative TSR performance against the FTSE 250 or FTSE 350.
For options granted during the year ended 29 April 2017, performance conditions are based on a combination of EPS
growth and relative TSR performance against the constituents of the FTSE 51-150 at 1 May 2016.
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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 period
Granted during the period
Forfeited during the period
Outstanding at the end of the period
Exercisable at the end of the period
Weighted average remaining contractual life of awards outstanding
Exercise price for options outstanding
Year ended
29 April 2017
Year ended
30 April 2016
Number
million
WAEP
£
Number
million
WAEP
£
14
12
(1)
25
—
—
—
—
—
—
17
1
(4)
14
—
—
—
—
—
—
Year ended
29 April
2017
Year ended
30 April
2016
8.3 yrs
£nil
8.3 yrs
£nil
iii) SAYE scheme
The Group has SAYE schemes which allow 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 roll over their awards into options over shares in the merged entity, Dixons Carphone, on completion of the Merger.
Employees who chose to roll over received 0.155 options in Dixons Carphone in exchange for each Dixons option held.
The savings period and exercise date of these options remain unchanged.
The following table summarises the number and WAEP of share options for these schemes:
Outstanding at the beginning of the period
Granted during the period
Exercised during the period
Forfeited 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
Year ended
29 April 2017
Year ended
30 April 2016
Number
million
WAEP
£
Number
million
13
9
(2)
(5)
15
1
3.22
2.52
2.21
3.46
2.85
2.29
13
4
(2)
(2)
13
—
WAEP
£
2.71
3.77
1.03
3.13
3.22
—
Year ended
29 April 2017
Year ended
30 April 2016
£3.42
2.9 yrs
£4.38
2.6 yrs
£2.24 – £3.77 £2.09 – £3.77
115
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Notes to the Group financial statements
5 Employee costs and share-based payments continued
b) Share-based payments continued
iv) Fair value model
The fair value of options was estimated at the date of grant using a Monte Carlo model. The model combines the
market price of a share at the date of grant with the probability of meeting performance criteria, based on the historical
performance of Carphone Warehouse 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 £1.40 (2015/16: £0.74) . The following table lists
the inputs to the model:
Year ended
29 April 2017
Year ended
30 April 2016
Exercise price
Dividend yield
Historical and expected volatility
Expected option life
Weighted average share price
£nil – £2.52
2.6% – 3.0%
£nil – £3.77
2.3%
30% 27% – 28%
4 – 10 yrs
£4.35
4 – 10 yrs
£3.26
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, including
consideration of the historical volatility of Carphone Warehouse and Dixons prior to the Merger.
v) Charge to the income statement and entries in reserves
During the year ended 29 April 2017, the Group recognised a non-cash accounting charge to profit and loss of £17 million
(2015/16: £10 million) in respect of equity settled share-based payments, with a corresponding credit through reserves.
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c) Employee Benefit Trust (‘EBT’)
Investment in own shares
Maximum number of shares held during the period
29 April 2017
30 April 2016
Market
value
£million
Nominal
value
£million
2
3
—
—
Number
million
0.5
0.7
Market
value
£million
Nominal
value
£million
3
10
—
—
Number
million
0.7
2.2
Following the Merger, the Dixons Carphone plc EBT was established on 12 August 2016, after which the assets held
in the two legacy Employee Share Ownerships Trusts (‘ESOTs’), being the Carphone Warehouse ESOT and the Dixons
Retail ESOT, were transferred into the EBT. The ESOTs were terminated on 16 September 2016 and 28 September 2016
respectively.
The number of shares held by the EBT, which are shown in the table above, remain held for potential awards under
outstanding plans. The costs of funding and administering the EBT 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 EBT.
The EBT did not undertake any market purchases of the Company’s shares during the year ended 29 April 2017 (2015/16:
1.9 million shares were purchased by the ESOTs for net cash consideration (after the receipt of the exercise price from
employees) of £5 million) .
The EBT has waived rights to receive dividends and the shares have not been allocated to specific schemes.
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6 Net finance costs
Unwind of discounts on trade receivables
Interest receivable
Finance income
Interest on bank overdrafts, loans and borrowings
Finance lease interest payable
Net interest on defined benefit pension obligations(i)
Unwind of discounts on liabilities
Amortisation of facility fees
Revolving credit facility fee write off(i)
Other interest expense
Finance costs
Total net finance costs
Headline total net finance costs
Year ended
29 April
2017
£million
Year ended
30 April
2016
£million
15
2
17
(12)
(6)
(16)
(8)
(1)
—
(6)
(49)
17
—
17
(16)
(6)
(16)
(10)
(2)
(4)
(4)
(58)
(32)
(41)
(16)
(21)
(i)
Headline finance costs exclude net interest on defined benefit pension obligations and the write off of revolving credit facility fees
(see note 4) .
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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 19.92%(i) (2015/16 20% ) – Headline
– Non-headline
– Headline
– Non-headline
– Headline
– Non-headline
– Headline
– Headline
– Non-headline
– Headline
– Non-headline
– Headline
– Non-headline
– Headline
Overseas tax
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
Year ended
29 April
2017
£million
Year ended
30 April
2016
£million
85
(9)
21
—
97
(20)
(1)
4
(17)
71
(15)
23
(2)
77
(1)
(6)
(5)
(12)
80
65
13
(3)
3
(4)
9
5
—
1
6
15
95
19
—
2
(3)
18
2
—
(1)
1
19
84
112
110
(i)
The UK corporation tax rate for the 12 months ended 29 April 2017 was 20% for the 11 months to 31 March 2017 and 19% thereafter (year
ended 30 April 2016 was 20%) .
Tax related to discontinued operations is included in the figures set out in note 25.
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7 Tax continued
b) Reconciliation of standard 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 19.92% (2015/16: 20%)
Differences in effective overseas tax rates
Adjustments in respect of prior years
Items attracting no tax relief or liability
Movement in unprovided deferred tax
Effect of change in statutory tax rate
Other differences
Total tax charge / (credit)
Year ended 29 April 2017
Year ended 30 April 2016 (restated)
Headline
£million
Non-
headline
£million
Statutory
£million
Headline
£million
501
(115)
386
457
Non-
headline
£million
(194)
Statutory
£million
263
100
2
5
5
—
—
—
112
(23)
1
(1)
5
1
—
—
(17)
77
3
4
10
1
—
—
95
91
5
(5)
13
2
3
1
110
(38)
—
(6)
17
1
—
—
(26)
53
5
(11)
30
3
3
1
84
The effective tax rate on headline earnings of 22% (2015/16: 24%) has decreased due to a reduction in items attracting no
tax relief or liability and a reduction in tax paid at higher overseas tax rates, largely as a result of statutory rate changes in
the Nordics.
Adjustments in respect of prior years include a one-off tax credit following successful resolution of a prior year tax issue
and movements in uncertain tax positions. Items attracting no tax relief or liability relate primarily to capital expenditure on
which no deduction is available in respect of capital allowances.
A further reduction in the UK corporation tax rate to 17% from 1 April 2020 has been substantively enacted by the balance
sheet date and has been used in the recognition of deferred tax balances.
c) Deferred tax
At 3 May 2015
Charged directly to income statement
Charged to equity
Reclassification
At 30 April 2016
Charged directly to income statement
Credited / (charged) to equity
Reclassification
At 29 April 2017
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
(17)
(7)
—
—
(24)
(11)
—
1
(34)
98
—
(13)
(1)
84
—
15
—
99
4
(1)
—
—
3
—
—
—
3
77
(11)
(11)
1
56
(4)
(4)
(1)
47
162
(19)
(24)
—
119
(15)
11
—
115
29 April
2017
£million
253
(138)
115
30 April
2016
£million
234
(115)
119
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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
Defined benefit pension schemes
Share-based payments
Other temporary differences
Year ended
29 April
2017
£million
Year ended
30 April
2016
£million
15
(1)
(3)
11
(13)
(7)
(4)
(24)
The Group has total unrecognised deferred tax assets relating to tax losses of £1,404 million (2015/16: £1,414 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. The unrecognised tax losses may be carried forward indefinitely.
There were no temporary differences associated with undistributable earnings of subsidiaries or joint ventures for which
deferred tax liabilities had not been recognised at the end of either year.
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 EBT
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
Year ended
29 April
2017
£million
Year ended
30 April
2016
(restated)
£million
389
347
291
4
295
179
(18)
161
Million
Million
1,152
(1)
1,151
4
1,155
1,151
(1)
1,150
38
1,188
Pence
Pence
25.6
(0.3)
25.3
8.5
33.8
25.5
(0.3)
25.2
8.5
33.7
14.0
1.6
15.6
14.6
30.2
13.6
1.5
15.1
14.1
29.2
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.
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9 Goodwill
At beginning of period
Additions (note 24)
Foreign exchange
At end of period
Cost
Accumulated impairment
a) Carrying value of goodwill
The components of goodwill comprise the following businesses:
UK & Ireland
Nordics
Spain
b) Goodwill impairment testing
29 April
2017
£million
3,054
4
53
3,111
3,111
—
3,111
30 April
2016
£million
2,989
26
39
3,054
3,054
—
3,054
29 April
2017
£million
2,066
1,014
31
3,111
30 April
2016
£million
2,065
959
30
3,054
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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.
During the year, management has reassessed the level at which the goodwill previously related to the UK & Ireland
operations of Carphone Warehouse and Dixons is monitored by management, and therefore the level at which this is
monitored for goodwill impairment purposes under IAS 36 ‘Impairment of Assets’. Due to the continued integration
activities following the Merger, including the introduction of ‘store-within-a-store’ operations, the integration of finance
and operational management, and the combined reporting of results for management reporting purposes, management
has determined that the level at which goodwill for the UK & Ireland business is monitored is at an overall UK & Ireland
level, compared to the previous level used of UK – Carphone, Ireland – Carphone, UK&I Dixons and Simplifydigital. For this
reason, the goodwill has been combined for the purposes of impairment reviews.
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.
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Notes to the Group financial statements
9 Goodwill continued
b) Goodwill impairment testing continued
The long term projections, which have been approved by management, have been prepared using the latest approved
budget for 2017/18 together with the three-year strategic plans as a base extrapolated to five years. These projections
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:
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UK & Ireland *
Nordics
29 April 2017
30 April 2016
Compound
annual
growth in
sales
Compound
annual
growth in
costs
Growth rate
beyond five
years
2.7%
2.6%
2.6%
2.6%
2.0%
1.8%
Pre-tax
discount
rate
8.2%
8.4%
Compound
annual
growth in
sales
Compound
annual
growth in
costs
Growth rate
beyond five
years
2.5%
4.4%
2.4%
4.3%
2.1%
2.0%
Pre-tax
discount
rate
8.8%
8.1%
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* comparative values have been disclosed on an overall UK & Ireland level following the change discussed above. In the prior year, on a
separated basis, the compound annual growth rates in sales used for UK – Carphone and UK & Ireland – Dixons were 2.8% and 2.3% and
compound annual growth rates in costs were 2.6% and 2.1% respectively. Growth rates and pre-tax discount rates in the comparative period
are unchanged.
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 possible changes in key assumptions which would cause the
carrying amount of goodwill to exceed its value in use.
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10 Intangible assets
Balance at 1 May 2016
Additions
Amortisation
Impairment
Foreign exchange
Balance at 29 April 2017
Cost
Accumulated amortisation and impairment losses
Balance at 29 April 2017
Balance at 3 May 2015
Acquired on acquisition of subsidiary
Additions
Amortisation
Foreign exchange
Balance at 30 April 2016
Cost
Accumulated amortisation and impairment losses
Balance at 30 April 2016
Acquisition intangibles
Brands
£million
Customer
relationships
£million
Sub-total
£million
Software
and licences
£million
Total
£million
317
—
(26)
—
8
299
372
(73)
299
31
—
(8)
—
—
23
73
(50)
23
348
—
(34)
—
8
322
445
(123)
322
192
97
(57)
(3)
2
231
376
(145)
231
Acquisition intangibles
Brands
£million
Customer
relationships
£million
Sub-total
£million
Software and
licences
£million
336
—
—
(26)
7
317
364
(47)
317
26
20
—
(14)
(1)
31
73
(42)
31
362
20
—
(40)
6
348
437
(89)
348
163
3
63
(39)
2
192
277
(85)
192
540
97
(91)
(3)
10
553
821
(268)
553
Total
£million
525
23
63
(79)
8
540
714
(174)
540
Software and licences include assets with a cost of £24 million (2016: £15 million) on which amortisation has not been
charged as the assets have not yet been brought into use.
Individually material intangible assets
Customer relationships and brands include intangible assets which are considered individually material to the financial
statements. The primary intangible assets, their net book values and remaining amortisation periods are as follows:
CurrysPCWorld
Elgiganten
Elkjøp
Gigantti
Simplifydigital
Net book
value
£million
Remaining
amortisation
period
Years
140
64
48
31
16
13
13
13
13
4
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Notes to the Group financial statements
11 Property, plant & equipment
Balance at 1 May 2016
Additions
Depreciation
Disposals
Foreign exchange
Balance as at 29 April 2017
Cost
Accumulated depreciation
Balance as at 29 April 2017
Included in net book value as at 29 April 2017
Land not depreciated
Assets in the course of construction
Assets held under finance leases
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Balance at 3 May 2015
Acquisition of subsidiary
Additions
Depreciation
Disposals
Impairment
Foreign exchange
Balance as at 30 April 2016
Cost
Accumulated depreciation
Balance as at 30 April 2016
Included in net book value as at 30 April 2016
Land not depreciated
Assets in the course of construction
Assets held under finance leases
Fixtures,
fittings
and other
equipment
£million
Land and
buildings
£million
100
4
(8)
(4)
—
92
118
(26)
92
8
—
51
266
147
(87)
(3)
5
328
606
(278)
328
—
52
—
Fixtures,
fittings
and other
equipment
£million
Land and
buildings
£million
93
—
33
(6)
(20)
—
—
100
117
(17)
100
8
—
57
234
1
124
(92)
(3)
(4)
6
266
451
(185)
266
—
40
—
Total
£million
366
151
(95)
(7)
5
420
724
(304)
420
8
52
51
Total
£million
327
1
157
(98)
(23)
(4)
6
366
568
(202)
366
8
40
57
Freehold land and buildings include the Group’s investment property, which is recorded at cost. The fair value of
investment property was determined by an external, independent property valuation expert as £13 million (2016:
£14 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 is set out in note 30.
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12 Interests in joint ventures and investments
Interests in joint ventures
The principal interests in joint ventures are as follows:
Name
Sprint Connect LLC
Country of incorporation or registration
Nature of business
29 April
2017
Interest
30 April
2016
Interest
United States of America
Distribution
50.0%
50.0%
The Group’s interests in joint ventures are analysed as follows:
Opening balance
Additions
Share of results
Foreign exchange gain
Closing balance
29 April
2017
£million
30 April
2016
£million
5
29
(17)
1
18
—
9
(4)
—
5
The share of results recognised all relate to businesses to be exited, as described below. There were no items of
other comprehensive income in the period and therefore the share of results represents the Group’s share of total
comprehensive income.
In June 2017, the Group announced that the interest held in the Sprint joint venture would be sold, as set out in note 33. In
light of this decision, the trading result in the current and prior financial years has been restated as businesses to be exited,
as disclosed in notes 4 and 32.
The remaining joint venture investments (£1 million) relate to investments held by our Nordics operations through the
wholesaler network, which are not considered significant.
Investments
Investments classified as available-for-sale
29 April
2017
£million
19
30 April
2016
£million
—
In November 2013, the Group disposed of it’s Unieuro operations, and retained an investment of 14.96% in Italian
Electronics Holdings s.r.l (IEH) , a holding company which in turn owned 100% of the Unieuro operations. The investment
was initially recognised at £nil based on the fair value of the retained interest. In March 2017, Unieuro undertook an
IPO for 31.8% of its shareholdings, which reduced the Group’s investment to 10.2% of the Unieuro operations. Given
the successful IPO, a readily-determinable fair value is available based on the market price of the listed shares, and
the investment has therefore been valued at £19 million. The movement in investment value has been taken to other
comprehensive income as classified as an ‘available-for-sale’ investment. The fair valuation techniques used are outlined in
note 26.
13 Inventory
Finished goods and goods for resale
29 April
2017
£million
1,101
30 April
2016
£million
958
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14 Trade and other receivables
Trade receivables
Less provision for bad and doubtful debts
Prepayments
Other receivables
Accrued income
Non-current
Current
29 April
2017
£million
1,436
(18)
1,418
103
118
28
1,667
531
1,136
1,667
30 April
2016
£million
1,304
(20)
1,284
100
115
22
1,521
408
1,113
1,521
The majority of trade and other receivables are non-interest bearing. Non-current receivables mainly comprise commission
receivable on sales, as described in note 26. 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
1,284
(5)
1,279
1,186
(7)
1,179
29 April 2017
Gross trade
receivables
£million
Provision
£million
Net trade
receivables
£million
Gross trade
receivables
£million
Provision
£million
30 April 2016
Net trade
receivables
£million
Past due:
Under two months
Two to four months
Over four months
108
22
22
152
—
—
(13)
(13)
108
22
9
139
57
14
47
118
(1)
(1)
(11)
(13)
56
13
36
105
1,436
(18)
1,418
1,304
(20)
1,284
Movements in the provision for impairment of trade receivables is as follows:
Opening balance
Charged to the income statement
Receivables written off as irrecoverable
Closing balance
29 April
2017
£million
30 April
2016
£million
(20)
(8)
10
(18)
(20)
(11)
11
(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
126
29 April
2017
£million
30 April
2016
£million
108
22
9
139
56
13
36
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15 Cash and cash equivalents
Cash at bank and on deposit
29 April
2017
£million
209
30 April
2016
£million
233
Cash at bank and on deposit includes short-term bank deposits which are available on demand. Within cash and cash
equivalents, £62 million (2016: £67 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 the Group’s borrowings.
16 Trade and other payables
Trade payables
Other taxes and social security
Other creditors
Accruals
Deferred income
29 April 2017
30 April 2016
Current
£million
Non-current
£million
1,689
245
41
368
159
2,502
—
—
178
49
141
368
Current
£million
1,373
271
108
360
156
2,268
Non-
current
£million
—
—
206
60
157
423
Non-current other creditors relate principally to property leases that are deemed to be over-rented which arose from
acquisitions. These liabilities are unwound over the period of the relevant lease, of up to 21 years. The carrying amount of
trade and other payables approximates their fair value.
17 Deferred and contingent consideration
Deferred and contingent consideration
Opening balance
Recognised on acquisition of subsidiary (note 24)
Settlements
Change in valuation (note 4)
Closing balance
29 April 2017
30 April 2016
Current
£million
Non-current
£million
Current
£million
Non-current
£million
8
14
12
21
29 April
2017
£million
30 April
2016
£million
33
—
(11)
—
22
31
23
(26)
5
33
Earn-out consideration of up to £22 million is payable in cash (2015/16: £23 million) and is contingent on the performance
of Simplifydigital and the Epoq kitchen business against earnings growth targets over a period of up to four years. The
fair value of contingent consideration arrangements has been estimated by applying the income approach. A reduction
in growth assumptions used in the fair value methodology would result in a reduction in the amount of contingent
consideration payable.
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Notes to the Group financial statements
18 Loans and other borrowings
Current liabilities
Bank overdrafts
Non-current liabilities
Loans and other borrowings
29 April
2017
£million
30 April
2016
£million
10
10
381
391
—
—
409
409
Committed facilities
On 8 October 2015 the Group signed a new multi-currency revolving credit facility for £800 million, which matures
in October 2020 and replaced the multi-currency term and revolving credit facility which was previously in place. On
7 October 2016 this facility was extended to mature in October 2021.
On 7 October 2016 a further £250 million multi-currency revolving credit facility was signed which matures in 2020. In
addition, on 28 October 2016 an additional €50 million term loan facility was also signed, which also matures in 2020.
The rate of interest payable on facilities is a margin of 1.10% per annum over the applicable reference rate.
The rate of interest payable on the term loan is a margin of 1.50% per annum over the applicable reference rate.
Bank overdraft and other uncommitted facilities
The Group has overdraft and uncommitted money market facilities totalling approximately £136 million (2016: £128 million) .
19 Finance lease obligations
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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
29 April 2017
30 April 2016
Minimum
lease
payments
£million
Present
value of
minimum
lease
payments
£million
Minimum
lease
payments
£million
Present value
of minimum
lease
payments
£million
9
37
103
149
(60)
89
(3)
86
8
29
52
89
—
89
(3)
86
9
35
111
155
(64)
91
(2)
89
8
29
54
91
—
91
(2)
89
The majority of finance leases relate to properties in the UK where obligations are denominated in Sterling and remaining
lease terms vary between 9 and 20 years. The effective borrowing rate on individual leases ranged between 5.51% and
9.29% (2016: 5.51% and 8.67%) . 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.
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20 Provisions
At beginning of period
Additions
Released in the period
Utilised in the period
Foreign exchange
At end of period
Analysed as:
Current
Non-current
Reorg-
anisation
£million
Sales
£million
Property
£million
Other
£million
Total
£million
Reorg-
anisation
£million
Sales
£million
Property
£million
Other
£million
Total
£million
29 April 2017
30 April 2016
12
16
—
(16)
—
12
12
—
12
8
30
—
(29)
1
10
8
2
10
90
29
(24)
(34)
1
62
43
19
62
15
11
(1)
(4)
—
21
21
—
21
125
86
(25)
(83)
2
105
84
21
105
23
15
—
(26)
—
12
12
—
12
6
42
—
(40)
—
8
7
1
8
25
71
—
(6)
—
90
44
46
90
21
4
(1)
(9)
—
15
15
—
15
75
132
(1)
(81)
—
125
78
47
125
Reorganisation provisions relate principally to Merger related costs and redundancy costs and other onerous contracts
arising as a result of reorganisation, 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 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.
Property provisions relate mainly to costs associated with operating lease early exist premiums, onerous leases and
provisions for dilapidations. Additions during the year ended 30 April 2016 related principally to property rationalisation
costs as described in note 4.
Other provisions relate 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 other onerous contracts.
Non-current provisions are expected to be utilised over a period up to ten years.
21 Retirement and other post-employment benefit obligations
Retirement benefit obligations – UK
– Nordics
29 April
2017
£million
589
2
591
30 April
2016
£million
472
2
474
The Group operates a defined benefit and a number of defined contribution schemes. 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.
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Notes to the Group financial statements
21 Retirement and other post-employment benefit obligations continued
The defined benefit pension schemes expose the Group to actuarial risks such as longer than expected longevity of
members, lower than expected return on investments and higher than expected inflation, which may increase the liabilities
or reduce the value of assets of the plans.
a) Defined contribution pension schemes
The pension charge in respect of defined contribution schemes was £24 million (2015/16: £23 million) .
b) UK defined benefit pension scheme – actuarial valuation and assumptions
A full actuarial valuation of the scheme was carried out as at 31 March 2016 and showed a shortfall of assets compared
with liabilities of £560 million. A ‘recovery plan’ based on this valuation was agreed with the Trustees such that
contributions in respect of the scheme will increase to £46 million per year starting from the 2017/18 financial year. As a
result of the valuation, during the current year the Group agreed to pay an amount of £7 million in addition to the previously
agreed contribution of £36 million, which leads to total contributions paid in 2016/17 of £43 million. The next triennial
valuation will be as at 31 March 2019.
The principal actuarial assumptions as at 31 March 2016 were:
Discount rate for accrued benefits†
– Growth portfolio
– Matching portfolio
Rate of increase to pensions
Inflation
Rate per annum
4.6%
2.2%
0% – 3.6%
3.0%
†
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) and multi-asset credit over a period of 10 years from 2026 to 2036 so
that in 20 years’ time the asset portfolio is projected to be 90% invested in matching assets and multi-asset credit.
At 31 March 2016, the market value of the scheme’s investments was £930 million and, based on the above assumptions,
the value of the assets was sufficient to cover 62% of the benefits accrued to members with the liabilities amounting to
£1,490 million.
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 methods 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
29 April
2017
30 April
2016
2.6%
3.2% /
2.2%
3.3%
3.5%
2.9% /
2.1%
2.95%
The Group uses demographic assumptions underlying the last formal actuarial valuation of the scheme as at 31 March
2016. In particular, post retirement mortality has been assumed to follow the standard mortality tables ‘S2’ 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 2015 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 87.5 years and
89.7 years for men and between 88.9 years and 90.8 years for women for those reaching 65 over the next 20 years.
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21 Retirement and other post-employment benefit obligations continued
c) UK Defined benefit pension scheme – IAS 19 continued
(ii) Amounts recognised in consolidated income statement
Net interest expense on defined benefit obligation
(iii) Amounts recognised in the consolidated statement of comprehensive income:
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
(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:
Year ended
29 April
2017
£million
Year ended
30 April
2016
£million
16
16
Year ended
29 April
2017
£million
Year ended
30 April
2016
£million
(374)
58
(2)
174
(144)
25
27
—
(57)
(5)
29 April
2017
£million
(1,714)
1,125
(589)
30 April
2016
£million
(1,395)
923
(472)
Opening obligation
Interest cost
Remeasurements in other comprehensive income – actuarial losses / (gains) arising from changes in:
Financial assumptions
Experience adjustments
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
Interest income
Employer special contributions
Remeasurements in other comprehensive income:
Actual return on plan assets (excluding interest income)
Benefits paid
Closing fair value
29 April
2017
£million
1,395
48
374
(58)
2
(47)
30 April
2016
£million
1,431
49
(25)
(27)
—
(33)
1,714
1,395
29 April
2017
£million
30 April
2016
£million
923
32
43
174
(47)
1,125
945
33
35
(57)
(33)
923
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Notes to the Group financial statements
21 Retirement and other post-employment benefit obligations continued
Analysis of scheme assets:
Overseas and global equities
Diversified growth
Multi-asset credit funds
Emerging market multi asset funds
Private equity
Private credit
Property
Index-linked gilts
Corporate bonds
Liability driven investments (‘LDIs’)
Cash and cash instruments
Other
– Listed
– Listed
– Unlisted
– Listed
– Unlisted
– Listed
– Unlisted
– Unlisted
– Listed
– Unlisted
– Unlisted
– Listed
– Listed
– Listed
– Unlisted
– Unlisted
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t
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m
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t
a
t
s
29 April
2017
£million
30 April
2016
£million
320
115
—
45
43
—
—
30
70
21
14
—
90
310
66
1
1,125
277
170
11
28
24
45
3
37
—
—
13
102
80
112
20
1
923
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The investment strategy of the scheme is determined by the independent Trustees 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, corporate bonds and liability driven investments.
Actual return on the scheme assets was a gain of £174 million (2015/16: loss of £57 million) .
(v) Sensitivities
The value of the UK defined benefit pension scheme assets are sensitive to market conditions, particularly equity values
which comprise approximately 49% of the scheme’s assets. Changes in assumptions used for determining retirement
benefit costs and liabilities may have a material impact on the 2016/17 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
Year ended
29 April
2017
£million
Year ended
30 April
2016
£million
29 April
2017
£million
30 April
2016
£million
2
(2)
(1)
2
(2)
(2)
92
(74)
(69)
75
(52)
(41)
† The increase in scheme benefits provided to members on retirement is subject to an inflation cap.
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as
it is unlikely that the changes in assumptions would occur in isolation of one another as some of the assumptions may be
correlated.
d) Other post-employment benefits – IAS 19
The Group offers other post-employment benefits to employees in overseas territories, in particular in Greece. These
benefits are unfunded. At 29 April 2017 the net obligation in relation to these benefits was £3 million (2016: £3 million) .
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22 Share capital, retained earnings and reserves
a) Share capital
Authorised, 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 during the period
Ordinary shares of 0.1p each in issue at the end of the period
29 April
2017
million
1,153
29 April
2017
million
1,151
2
1,153
30 April
2016
million
1,151
30 April
2016
million
1,151
—
1,151
29 April
2017
£million
1
29 April
2017
£million
1
—
1
30 April
2016
£million
1
30 April
2016
£million
1
—
1
During the year ended 29 April 2017, 1,725,661 (2015/16: nil) ordinary shares with nominal value of 0.1p each were issued
for consideration of £4 million (2015/16: £nil) to satisfy exercises of share options awarded under the Group’s SAYE
schemes.
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.
Retained earnings at 29 April 2017 includes £4 million of gains (2016: £18 million of losses) associated with derivatives
which were designated and effective as cash flow hedges and interest rate hedges. Own shares held by the Group’s EBT
are recognised in retained earnings – refer to note 5 for further information. The demerger reserve arose as part of the
demerger of the Group from TalkTalk in 2010.
23 Equity dividends
Amounts recognised as distributions to equity shareholders in the period
– on ordinary shares of 0.1p each
Final dividend for the 13 months ended 2 May 2015 of 6.00p per ordinary share
Interim dividend for the year ended 30 April 2016 of 3.25p per ordinary share
Final dividend for the year ended 30 April 2016 of 6.50p per ordinary share
Interim dividend for the year ended 29 April 2017 of 3.50p per ordinary share
29 April
2017
£million
30 April
2016
£million
—
—
75
40
69
37
—
—
115
106
The following distribution is proposed but had not been effected at 29 April 2017 and is subject to shareholders’ approval
at the forthcoming Annual General Meeting:
Final dividend for the year ended 29 April 2017 of 7.75p per ordinary share
£million
89
24 Acquisitions
In August 2016 the Group acquired the trade and assets of ten FONA stores in Denmark for £6 million. Goodwill of
£4 million was recognised from this transaction.
On 31 March 2016 the Group acquired 100% of the issued share capital of Simplify Digital Limited. The provisional fair
value of identifiable assets and liabilities of Simplify Digital Limited were reported in the annual report and accounts for the
year ended 30 April 2016. During the current period, no material adjustments were identified.
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Notes to the Group financial statements
25 Discontinued operations and assets held for sale
a) Profit / (loss) after tax – discontinued operations
The net profit of £4 million recognised in the current year primarily relates to the income recognised relating to the Unieuro
investment. In April 2017 the Group received £5 million as repayment of a loan to the disposed operation from the disposal
in 2013, which was fully impaired as part of the loss on disposal. In the current year, as repayment of the principle has
been made, this income has been classified as a discontinued operation as the original impairment of the loan was
recognised in the original loss on disposal.
There were no other significant movements in results relating to other discontinued operations in the year ended 29 April
2017.
The net loss on disposal recognised in the prior year of £18 million primarily relates to working capital adjustments agreed
with acquirers, adjustments to net assets disposed, the recycling of foreign currency translation reserves of discontinued
operations and other costs associated with the exits.
b) Cash flows from discontinued operations
The net cash flows incurred by the discontinued operation during the year are as follows. These cash flows are included
within the Consolidated cash flow statement:
Operating activities
Investing activities
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s
Year ended
29 April
2017
£million
Year ended
30 April
2016
£million
(1)
22
21
2
30
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26 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 Group has assessed network commission receivables to meet the definition of loans and receivables as defined in
IAS 39 and are therefore accounted for at amortised cost. The measurement of certain network commission receivables
is a key source of estimation uncertainty, an explanation of the valuation method and an analysis of the sensitivity of the
carrying value of receivables to the assumptions and estimates of this method has been provided below in note 26(h) . The
carrying value of such ongoing network commission receivables (net of commission received at the point of connection)
is £1,014 million (2016: £904 million) . If network commission receivables were alternatively classified at fair value through
profit and loss these receivables would be categorised as level 3 in the fair value hierarchy as the valuation requires the use
of significant unobservable inputs. Under this alternative measurement basis their fair value is approximately equal to their
current carrying value.
An explanation of the valuation methodologies and the inputs to the models are provided below for network commission.
Available-for-sale financial assets, in relation to listed investments held, are categorised as level 1 in the fair value hierarchy
and are valued based on quoted bid prices in an active market.
Contingent consideration is categorised as level 3 in the fair value hierarchy as the valuation requires the use of significant
unobservable inputs. An explanation of the valuation methodologies and the inputs to the valuation model is provided in
note 17.
The significant inputs required to fair value the Group’s remaining financial instruments that are measured at fair value on
the balance sheet, being derivative financial assets and liabilities, are observable and are classified as level 2 in the fair
value hierarchy. 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 (where the impact of discounting is material) , assuming
no early redemption, or by revaluing forward currency contracts and interest rate swaps to period end market rates as
appropriate to the instrument.
The directors consider that the book value of financial assets and liabilities recorded at amortised cost and their fair value
are not materially different.
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26 Financial risk management and derivative financial instruments continued
The book value and fair value of the Group’s financial assets, liabilities and derivative financial instruments are as follows:
Investments (1)
Cash and cash equivalents (2)
Trade and other receivables excluding derivative financial assets (2)
Net derivative financial assets (3)
Net derivative financial liabilities (3)
Trade and other payables (4)
Finance leases (4)
Deferred and contingent consideration (3)
Loans and other borrowings (4)
(1) Held as an available-for-sale asset
(2) Classified as loans and receivables and held at amortised cost
(3) Held at fair value through profit and loss
(4) Held at amortised cost
Offsetting financial assets and financial liabilities
29 April
2017
£million
19
209
1,564
4
—
(2,570)
(89)
(22)
(391)
30 April
2016
£million
—
233
1,421
—
(24)
(2,378)
(91)
(33)
(409)
The Group has forward foreign exchange contracts and cash that are subject to enforceable master netting arrangements.
(i) Financial assets
Forward foreign exchange contracts
Cash and cash equivalents
Forward foreign exchange contracts
Cash and cash equivalents
(ii) Financial liabilities
Forward foreign exchange contracts
Cash and cash equivalents
Forward foreign exchange contracts
Cash and cash equivalents
Gross amounts of
recognised financial
assets
£million
Gross amounts of
recognised financial
liabilities set off in
the balance sheet
£million
Net amounts of
financial assets
presented in the
balance sheet
£million
Financial
instruments not set
off in the balance
sheet
£million
17
2,120
2,137
—
(1,911)
(1,911)
17
209
226
(11)
—
(11)
Gross amounts of
recognised financial
assets
£million
Gross amounts of
recognised financial
liabilities set off in the
balance sheet
£million
Net amounts of
financial assets
presented in the
balance sheet
£million
Financial instruments
not set off in the
balance sheet
£million
18
1,878
1,896
—
(1,645)
(1,645)
18
233
251
(17)
—
(17)
Gross amounts of
recognised financial
liabilities
£million
Gross amounts of
recognised financial
assets set off in the
balance sheet
£million
Net amounts of
financial liabilities
presented in the
balance sheet
£million
Financial
instruments not set
off in the balance
sheet
£million
(13)
(1,921)
(1,934)
—
1,911
1,911
(13)
(10)
(23)
11
—
11
Gross amounts of
recognised financial
liabilities
£million
Gross amounts of
recognised financial
assets set off in the
balance sheet
£million
Net amounts of
financial liabilities
presented in the
balance sheet
£million
Financial instruments
not set off in the
balance sheet
£million
(42)
(1,645)
(1,687)
—
1,645
1,645
(42)
—
(42)
17
—
17
29 April 2017
Net amount
£million
6
209
215
30 April 2016
Net amount
£million
1
233
234
29 April 2017
Net amount
£million
(2)
(10)
(12)
30 April 2016
Net amount
£million
(25)
—
(25)
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26 Financial risk management and derivative financial instruments continued
a) Financial risk management policies
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.
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 Euro, Norwegian Krone and US Dollar 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 29 April 2017, the total notional principal amount of outstanding currency contracts was £1,358 million (2016:
£2,856 million) and had a fair value of £4 million asset (2015/16: £23 million liability) . 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
10% movement in the Chinese Yuan Offshore exchange rate
c) Interest rate risk
Year ended
29 April 2017
Year ended
30 April 2016
Effect on
headline
profit before
tax
£million
Effect on
total equity
£million
Effect on
headline
profit before
tax
£million
Effect on
total equity
£million
—
—
—
—
—
—
5
56
24
13
17
6
—
—
—
—
—
—
5
58
2
2
6
—
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:
Year ended
29 April 2017
Year ended
30 April 2016
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
1
1
—
1
1% increase in the Sterling interest rate
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26 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 £1,050 million (2016: £800 million) . Further details of
committed borrowing facilities are shown in note 18.
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.
29 April 2017
Finance leases
Derivative financial instruments – payable:
Forward foreign exchange contracts
Interest rate swaps
Derivative financial instruments – receivable:
Forward foreign exchange contracts
Loans and other borrowings
Deferred consideration
Trade and other payables
30 April 2016
Finance leases
Derivative financial instruments – payable:
Forward foreign exchange contracts
Interest rate swaps
Derivative financial instruments – receivable:
Forward foreign exchange contracts
Loans and other borrowings
Deferred consideration
Trade and other payables
e) Credit risk
In more than
one year but
not more
than five
years
£million
Within
one year
£million
In more than
five years
£million
Total
£million
(9)
(37)
(103)
(149)
(1,358)
(1)
1,362
(17)
(8)
(2,343)
—
(1)
—
(408)
(14)
(227)
In more than
one year but
not more
than five
years
£million
Within
one year
£million
—
—
—
—
—
—
(1,358)
(2)
1,362
(425)
(22)
(2,570)
In more than
five years
£million
Total
£million
(9)
(35)
(111)
(155)
(2,856)
(1)
2,832
(7)
(12)
(2,112)
—
(1)
—
(441)
(19)
(266)
—
—
—
—
(2)
—
(2,856)
(2)
2,832
(448)
(33)
(2,378)
Credit risk is the risk of financial loss to the Group if a counterparty fails to meet its contractual obligations, and arises
principally from the Group’s receivables from consumers. 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. In addition credit risk is also inherently associated with the MNO end
consumers. Details of the sensitivity analysis of a change in credit risk associated with the MNO consumer is detailed
below (consumer default rates) . Exposure to credit risk associated with the MNO consumer is managed through extensive
consumer credit checking process prior to connection with the network. The large volume of MNO consumers reduces the
Group’s exposure to concentration of credit risk.
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Notes to the Group financial statements
26 Financial risk management and derivative financial instruments continued
The Group’s trade receivables also include balances due from equipment manufacturers, dealers and Connected
World Services consumers, business to business consumers 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 14.
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 £1,050 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 29 April 2017 the Group had forward and swap foreign exchange contracts in place with a notional value of
£1,190 million (2016: £1,909 million) and a fair value of £6 million asset (2015/16: £17 million liability) that were designated
and effective as cash flow hedges. These contracts are expected to cover exposures ranging from one month to one year.
The fair value of derivative foreign exchange contracts and foreign exchange swaps not designated as cash flow hedges
was £2 million liability (2015/16: £6 million liability) .
Interest rate swaps
The Group held interest rate swaps with a notional value of £60 million (2016: £255 million) and a fair value of £nil million
(2015/16: £1 million liability) whereby the Group receives a floating rate of interest based on LIBOR and pays a fixed
interest rate. These contracts mature between June 2017 and December 2020.
h) Network commission receivables consumer behaviour risk
Under certain arrangements with MNOs, the commission receivable for the monthly consumer connections to the MNOs
depends on consumer behaviour after the point of connection. A discounted cash flow methodology is used to measure
the fair value of the revenue and associated receivables in the month of connection, by estimating all future cash flows that
will be received from the MNO and discounting these based on their timing of receipt. Subsequently network commission
receivables are measured at the present value of the estimated future cash flows discounted using the effective interest
rate determined in the month of connection.
The key inputs to the model are:
• revenue share percentage – the percentage of the consumer’s spend (to the MNO) to which the Group is entitled;
• minimum contract period – the length of contract entered into by the consumer;
• out-of-bundle spend – additional spend by the consumer measured as a % of total spend;
• consumer default rate – rate at which consumers disconnect from the MNO;
• spend beyond the initial contract period – period of time the consumer remains connected to the MNO after the initial
contract term; and
• upgrade propensity – the % of consumers initially connected by the Group estimated to be subsequently upgraded by
an MNO.
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26 Financial risk management and derivative financial instruments continued
The last four inputs are estimated based on extensive historical evidence obtained from the networks, and adjustment is
made for the risk of potential changes in consumer behaviour. Reliance on historical data assumes that current and future
experience will follow past trends, there is therefore a risk that changes in consumer behaviour reduce or increase the total
cash flows ultimately realised over the forecast period. Management make a quarterly, and the directors a twice-yearly
assessment of this data to ensure this continues to reflect the best estimate of expected future trends.
The tables below provide the sensitivity of the carrying value of the network commission receivables to a reasonably
possible change in input to the discounted cash flow model. The gross value of the network commission receivable subject
to the below sensitivities is £1,581 million (2015/16: £1,391 million) :
Spend after the initial contract term The higher the spend, the higher
29 April 2017
Unobservable inputs
Out-of-bundle spend
Consumer default rate
Upgrade propensity
30 April 2016
Unobservable inputs
Out-of-bundle spend
Consumer default rate
Relationship of unobservable inputs to
remeasurement of carrying value
Favourable
£million
Unfavourable
£million
Sensitivity(1)
The higher the spend, the higher
the carrying value
The higher the default rate, the
lower the carrying value
the carrying value
The higher the propensity, the
higher the carrying value
57
29
25
35
(57)
(29)
(25)
Range(2)
7.0% - 22.0%
1.5% - 15.9% -
New subscribers
0.6% - 4.6% -
Upgrades
1.5 months -
7.7 months
(35)
10.0% - 36.4%
Relationship of unobservable inputs to
remeasurement of carrying value
Favourable
£million
Unfavourable
£million
Sensitivity(1)
The higher the spend, the higher
the carrying value
The higher the default rate, the
lower the carrying value
47
13
30
10
(47)
(13)
(30)
(10)
Range(2)
7.5% - 25.9%
4.9% - 18.2% - New
subscribers
1.2% - 4.2% -
Upgrades
1.0 months – 5.5
months
16.9% - 24.9%
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Spend after the initial contract term The higher the spend, the higher
Upgrade propensity
the carrying value
The higher the propensity, the
higher the carrying value
(1)
(2)
(3)
The sensitivity represents the favourable and unfavourable effect on the income statement of remeasuring the carrying value for a
reasonably possible change in the value of the input used. Whilst the nature of inputs is consistent across all MNOs the value applied differs
on a MNO by MNO basis. The sensitivity analysis performed has applied a reasonably possible change on an input by input and MNO by
MNO basis. The amounts shown above are the cumulative sensitivities for each input across all MNOs.
The reasonably possible range disclosed represent the high and low range of each unobservable input, across all MNOs, over the previous
three years. The sensitivities, which fall within this range, have been applied to the unobservable inputs on a MNO by MNO basis on the
relevant element of the gross receivable.
The value of commission receivable used for consumer default rate represents the total of in-contract commissions for the relevant MNOs,
as the percentage default rate applied is over this total balance.
Changes in range of assumptions
Ranges of assumptions used in the sensitivity analysis above evolve year on year to reflect the latest data provided by
the MNOs and actual variances experienced by management. In the current year the range of sensitivities in relation to
consumer default rates for new subscribers changed reflecting the increasing average consumer quality connected to the
MNOs. Upgrade propensity ranges have widened reflecting an increase to the sensitivity applied to the actual inputs to the
model (+/- 5%; 2015/16: +/- 2%), and changes in network upgrade behaviour in the year.
We consider that there are significant interdependencies between movements in the various inputs, in particular experience
shows an inverse relationship between upgrade propensity and spend after the initial contract term (a decrease in the
period of spend after the initial terms leads to an increase in upgrade propensity), and therefore these sensitivities should
not be considered in aggregate. The significant unobservable inputs in determining the amortised cost carrying values
used in the table above are the same significant unobservable inputs that would be required if the network commission
receivable was measured at fair value on the balance sheet. In addition, the fair value would be impacted by changes in
interest rates and counterparty credit risk.
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26 Financial risk management and derivative financial instruments continued
Changes in relation to network commission receivable, for consumer connections recognised in previous years, due to
changes in assumptions or recognition of previously unrecognised elements of commission resulted in an increase in
revenue of £21 million in the current year (2015/16: £32 million). In the current year, this principally relates to changes to
upgrade propensity and spend after the initial contract term assumptions offset by changes in anticipated out-of-bundle
spend assumptions. In 2015/16, this principally related to settlement of receipts due from MNOs for consumers connected
in previous periods and spend after the initial contract term assumptions offset by changes in anticipated out-of-bundle
spend assumptions. If these amounts relating to consumer connections originating in previous years were not recognised
in the current year, certain amounts would have been expected to be recognised in future periods, which would increase
future revenues by £26 million (2015/16: £13 million increase), and decrease current year revenue by £11 million (2015/16:
£7 million decrease).
Payment terms with the MNOs are based on a mix of cash received upon connection and future payments as the MNO
receives monthly instalments from end consumers over the life of the consumer contract. The gross commission receivable
in any month is settled for certain MNOs net of 1/24th of the amount received on connection. Initial commission received
not yet subject to net settlement is subject to clawback should the consumer default on its contract with the MNO. The
total gross network commission receivable at 29 April 2017 is £1,581 million (30 April 2016: £1,391 million) which is offset
by commission received of £567 million (30 April 2016: £487 million) , resulting in a net network commission receivable of
£1,014 million (30 April 2016: £904 million) .
Cash flows in association with the network receivable are received over a period of 1–5 years. The expected timing of net
cash flow settlement of commission is as follows:
Net network commission receivable in less than 1 year
Net network commission receivable in more than 1 year
Net network commission receivable presented in the balance sheet
27 Notes to the cash flow statement
a) Reconciliation of operating profit to net cash inflow from operating activities
Profit before interest and tax – continuing operations
Profit before interest and tax – discontinued operations
Depreciation and amortisation
Investment income
Share-based payment charge
Share of results of joint ventures
Impairments and other non-cash items
Operating cash flows before movements in working capital
Movements in working capital:
Increase in inventory
Increase in receivables
Increase in payables
(Decrease) / increase in provisions
29 April
2017
£million
526
488
1,014
30 April
2016
£million
621
283
904
Year ended
29 April
2017
£million
Year ended
30 April
2016
£million
418
—
186
(8)
17
17
3
633
(112)
(130)
110
(22)
(154)
304
(4)
177
—
10
4
4
495
(16)
(245)
170
83
(8)
Cash generated from operations
479
487
In the current year, the presentation of the above reconciliation and statement of cash flows include both continuing and
discontinued operations. Comparative amounts have been presented accordingly.
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27 Notes to the cash flow statement continued
b) Analysis of net debt
Cash and cash equivalents
Borrowings due within one year
Borrowings due after more than one year
Obligations under finance leases
1 May
2016
£million
233
233
—
(409)
(91)
(500)
Net (debt) / funds
(267)
(13)
Cash and cash equivalents
Borrowings due within one year
Borrowings due after more than one year
Obligations under finance leases
3 May
2015
£million
163
(55)
(330)
(91)
(476)
Other
non-cash
movements
£million
Currency
translation
£million
Cash flow
£million
(39)
(39)
(10)
28
8
26
53
55
(80)
6
(19)
29 April
2017
£million
209
209
(10)
(381)
(89)
(480)
(271)
30 April
2016
£million
233
—
(409)
(91)
(500)
(267)
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—
—
—
(6)
(6)
(6)
15
15
—
—
—
—
15
—
—
—
(6)
(6)
(6)
17
—
1
—
1
18
Other
non-cash
movements
£million
Currency
translation
£million
Cash flow
£million
Net funds / (debt)
(313)
34
c) Reconciliation of cash inflow from operations to free cash flow
Cash inflow from operations
Operating cash flows from discontinued operations(1)
Taxation
Interest, facility arrangement fees, dividends from investments and repayment of finance leases
Capital expenditure
Proceeds from disposal of fixed assets
Other movements
Free cash flow
Year ended
29 April
2017
£million
Year ended
30 April
2016
£million
479
1
(72)
(15)
(242)
9
—
160
487
(2)
(56)
(31)
(221)
24
1
202
(1)
Operating cash flows from discontinued operations are removed in the above reconciliation as free cash flow is presented on a continuing
basis.
28 Related party transactions
Transactions between the Group’s subsidiary undertakings, which are related parties, have been eliminated on
consolidation and accordingly are not disclosed. See note 5 (a) for details of related party transactions with key
management personnel.
The Group had the following transactions and balances with its associates and joint venture:
Revenue from sale of goods and services
Amounts owed to the Group
All transactions entered into with related parties were completed on an arm’s length basis.
29 April
2017
£million
11
6
30 April
2016
£million
24
2
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Notes to the Group financial statements
29 Capital commitments
Intangible assets
Property, plant & equipment
Contracted for but not provided for in the accounts
30 Operating lease arrangements
a) The Group as a lessee
29 April
2017
£million
30 April
2016
£million
18
23
41
18
21
39
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
29 April 2017
30 April 2016
Land and
buildings
£million
Other assets
£million
Land and
buildings
£million
Other assets
£million
343
1,032
644
2,019
14
24
—
38
350
1,126
785
2,261
7
10
—
17
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 £17 million (2016:
£21 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
Between two to five years
After five years
29 April
2017
£million
30 April
2016
£million
1
5
4
10
1
5
5
11
31 Contingent liabilities
In recent years the Group has entered into agreements to dispose of certain operations. As part of these disposal
agreements, the Group has provided the acquirer with general and tax related warranties. At the date of signing these
financial statements, some of these warranties remain open and it is possible that claims could arise under these
warranties.
The Group is subject to periodic tax audits and investigations by various tax authorities covering corporate, employee and
sales taxes across various jurisdictions in which the Group operates. Applicable tax laws and regulations are subject to
differing interpretations and the resolution of a final tax position, through negotiation or litigation, can take several years
to complete. Where it is considered that future tax liabilities are more likely than not to arise, an appropriate provision is
recorded in the financial statements.
Due to the nature of these contingent liabilities, it is not practicable to estimate their timing or possible financial impact.
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2
(5)
(3)
(3)
(6)
—
(6)
—
(6)
—
(6)
—
—
—
—
—
(4)
(4)
—
2
9,738
(5)
(3)
(167)
(7,553)
2,185
(1,877)
(170)
308
(4)
(4)
(174)
(20)
304
(41)
(4)
(194)
263
—
26
(84)
(4)
(168)
179
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During the year, the iD mobile operations in the Republic of Ireland and the Sprint Joint Venture in the United States
have been classified as ‘businesses to be exited’ as set out in note 4, and therefore classified in non-headline results. In
accordance with the accounting policy as described in note 1, comparative information for the financial year ended 30 April
2016 has been restated accordingly. The impact of the restatement has been set out below:
Consolidated income statement
The results of both operations have been reclassified from headline to non-headline results. There has been no impact on
the total reported performance measures. The impact of the restatement has been set out below:
Headline results
Non-headline results
Total
iD mobile
Ireland
£million
Sprint joint
venture
£million
2015/16
restated
£million
2015/16 as
previously
reported
£million
iD mobile
Ireland
£million
Sprint joint
venture
£million
2015/16
restated
£million
2015/16 as
previously
reported
and restated
£million
2015/16
as
previously
reported
£million
9,738
(7,553)
2,185
(1,713)
472
(4)
468
(21)
447
Continuing operations
Revenue
Cost of sales *
Gross profit *
Operating expenses *
Profit / (loss) from
operations before share of
results of joint ventures
Share of results of joint
ventures
Profit / (loss) before
interest and tax
Net finance costs
Profit / (loss) before tax
Income tax (expense) / credit
(110)
Profit / (loss) after tax –
continuing operations
Loss after tax – discontinued
operations
Profit / (loss) after tax for
the period
Earnings per share (pence)
337
—
337
(2)
—
9,736
— (7,548)
—
2,188
— (1,710)
—
—
—
(164)
478
(164)
—
—
478
(21)
(164)
(20)
457
(184)
(110)
26
347
(158)
—
4
4
—
4
—
4
—
5
3
3
6
—
6
—
6
—
6
—
6
—
(18)
—
—
(18)
(18)
4
347
(176)
(6)
(4)
(186)
161
Basic – continuing
operations
Diluted – continuing
operations
Basic – total
Diluted – total
29.3p
0.5p
0.4p
30.2p
28.4p
0.5p
0.3p
29.2p
15.6p
15.1p
14.0p
13.6p
* - Cost of sales, gross profit and operating expenses measures are disclosed in note 3.
Segmental information
The comparative segmental information provided in note 3 has been adjusted to reflect the above reclassifications. The
iD mobile operations were previously included in the UK & Ireland operating segment and have decreased the headline
external revenue of the UK & Ireland operating segment for 2015/16 by £2 million, from £6,404 million to £6,402 million.
The headline EBIT of the UK & Ireland segment for 2015/16 has increased by £6 million from £365 million to £371 million.
The Sprint joint venture operations were previously included in the Connected World Services operating segment, and
the restatement has increased the headline EBIT of the Connected World Services operating segment by £4 million, from
£7 million to £11 million.
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Notes to the Group financial statements
32 Restatement of comparative information continued
The sales from the iD Mobile operations in Republic of Ireland relate to sales of services, therefore the headline revenue
from services disclosed in note 3 has decreased from £2,720 million to £2,718 million in 2015/16.
Other disclosures
In accordance with the policy as set out in note 1, there have been no restatements made to the consolidated balance
sheet, consolidated statement of other comprehensive income, consolidated statement of changes in equity or
consolidated cash flow statement, as these statements do not separately distinguish headline and non-headline measures.
33 Events after the balance sheet date
In June 2017, in light of the changing US mobile market landscape and Sprint’s review of its own distribution strategy, the
companies reached mutual agreement that Sprint will acquire the 50% remaining share of the joint venture currently held
by the Group. In addition, ongoing agreements relating to consultancy and intellectual property will be settled. The total
value of consideration received by the Group on 9 June 2017 was $30 million. The results of the joint venture have been
presented as a ‘business to be exited’ as outlined in note 4, and comparatives have been restated as outlined in note 32.
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Company balance sheet
Fixed assets
Investments in subsidiaries
Current assets
Cash and cash equivalents
Debtors: due within one year
Derivative assets
Creditors: amounts falling due within one year
Derivative liabilities
Net current assets
Total assets less current liabilities
Provisions
Loans payable
Net assets
Capital and reserves
Called-up share capital
Share premium reserve
Profit and loss account
29 April
2017
£million
30 April
2016
£million
Notes
C4
2,678
2,678
C5
C6
C7
C8
C9
C9
223
2,194
30
2,447
(1,750)
(32)
665
3,343
(12)
(381)
2,950
32
1,884
57
1,973
(1,141)
(57)
775
3,453
(1)
(409)
3,043
1
2,260
689
2,950
1
2,256
786
3,043
The Company’s profit for the year was £18 million (2015/16: £75 million) .
The financial statements of the Company (registered number 07105905) were approved by the Board on 27 June 2017 and
signed on its behalf by:
Sebastian James,
Group Chief Executive
Humphrey Singer,
Group Finance Director
145
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Company statement of changes in equity
At 2 May 2015
Profit for the year
Other comprehensive income and expense recognised directly
in equity
Total comprehensive income and expense for the year
Equity dividends
At 30 April 2016
Profit for the year
Total comprehensive income and expense for the year
Issue of own shares
Equity dividends
At 29 April 2017
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Called-up
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£million
1
—
—
—
—
1
—
—
—
—
1
Share
premium
reserve
£million
2,256
Profit and
loss account
£million
Total equity
£million
818
3,075
—
—
—
—
2,256
—
—
4
—
2,260
75
(1)
74
75
(1)
74
(106)
786
(106)
3,043
18
18
—
(115)
689
18
18
4
(115)
2,950
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Notes to the Company financial statements
C1 Accounting policies
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) .
The separate financial statements of the Company are presented as required by the Companies Act 2006. The Company
meets the definition of a qualifying entity under FRS 100 (Financial Reporting Standard 100) issued by the Financial
Reporting Council. Accordingly, the financial statements have therefore been prepared in accordance with FRS 101
(Financial Reporting Standard 101) ‘Reduced Disclosure Framework’ as issued by the Financial Reporting Council,
incorporating the Amendments to FRS 101 issued by the Financial Reporting Council in July 2015 and has applied the
amendments to Company law made by The Companies, Partnerships and Groups (Accounts and Reports) Regulations
2015 that are effective for accounting periods beginning on or after 1 January 2016.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in
relation to share-based payments, financial instruments, capital management, presentation of comparative information in
respect of certain assets, presentation of a cash flow statement and certain related party transactions.
Where required, equivalent disclosures are given in the consolidated financial statements.
The financial statements have been prepared on the historical cost basis except for the re-measurement of certain financial
instruments to fair value. The principal accounting policies adopted are the same as those set out in note 1 to the Group
financial statements except as noted below.
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
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 year ended 29 April 2017 was £18 million
(2015/16: £75 million) . Information regarding the audit fees for the Group is provided in note 3 to the Group financial
statements.
C3 Equity dividends
Details of amounts recognised as distributions to shareholders in the period and those proposed are detailed in note 23 of
the Group financial statements.
C4 Fixed asset investments
Opening balance
Closing balance
Cost
Accumulated impairments
Net carrying amount
29 April
2017
£million
2,678
2,678
2,776
(98)
2,678
30 April
2016
£million
2,678
2,678
2,776
(98)
2,678
Fixed asset investments comprise investments in subsidiary undertakings and other minority investments. Details of the
Company’s investments in subsidiary undertakings are provided in note C10.
C5 Debtors: amounts falling due within one year
Amounts owed by Group undertakings
Deferred tax asset
Prepayments
Other debtors
Amounts owed by Group undertakings are repayable within 12 months of the balance sheet date.
29 April
2017
£million
2,183
1
7
3
2,194
30 April
2016
£million
1,869
2
5
8
1,884
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C6 Creditors: Amounts falling due within one year
Amounts owed to Group undertakings
Other creditors
Overdrafts
Corporation tax
Accruals and deferred income
C7 Provisions
Opening balance
Additions
Utilised
Closing balance
29 April
2017
£million
1,676
1
72
—
1
1,750
30 April
2016
£million
1,045
1
84
5
6
1,141
29 April
2017
£million
30 April
2016
£million
1
11
—
12
2
—
(1)
1
The provisions recorded in the current year primarily relate to the share plan taxable benefit compensation as discussed in
note 4 to the Group financial statements.
C8 Loans payable
Details of loans payable are provided in note 18 to the Group financial statements.
C9 Called-up share capital and share premium
Details of movements in called up share-capital and share premium are disclosed in note 22 to the Group financial
statements.
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C10 Subsidiary undertakings
a) Principal subsidiaries as at 29 April 2017
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
Carphone Warehouse Europe
Limited
Registered office address
1 Portal Way, London,
W3 6RS
Country of incorporation
or registration
Share class(es) held
% held Business activity
United Kingdom A & B Ordinary
100
Dixons Retail Group Limited1
1 Portal Way, London, W3 6RS United Kingdom
Ordinary
Deferred
100
100*
Holding
company
Holding
company
Dixons South East Europe
A.E.V.E.
14th km Athens - Lamia, National
Road & 2 Spilias Street, 14452
Metamorfosi Attiki, Athens
DSG International Holdings
Limited
1 Portal Way, London,
W3 6RS
DSG Retail Ireland Limited
40 Upper Mount Street, Dublin 2,
D02 PR89
Greece
Ordinary
100
Retail
United Kingdom
Ordinary
100
Holding
company
Ireland
Ordinary
100
Retail
1 Portal Way, London,
W3 6RS
United Kingdom
Irredeemable
Cumulative
Preference and
Ordinary
100
Retail
DSG Retail Limited
Elgiganten Aktiebolag
ElGiganten A/S
Elkjøp Nordic AS
Elkjøp Norge AS
Gigantti Oy
Box 1264, 164, 29 Kista,
Stockholm
Arne Jacobsens Allé 16, 2.sal
København S, 2300 Copenhagen
Solheimsveien, 6-8, 1473,
Lørenskog
Solheimsveien, 6-8, 1473,
Lørenskog
Honeybee Digital Solutions
Limited2
1 Portal Way, London,
W3 6RS
United Kingdom
Ordinary
Sahkotie 3, 01510, Vantaa
Finland
Ordinary
Dixons Carphone Holdings
Limited3
1 Portal Way, London, W3 6RS United Kingdom
New Technology Insurance
The Carphone Warehouse
Limited
3rd Floor, Fleming Court,
Fleming’s Place,
Dublin 4, D04 N4X9
1 Portal Way, London,
W3 6RS
Ireland
Ordinary
100
Insurance
United Kingdom
Ordinary
100
Retail
The Carphone Warehouse
Limited
40 Upper Mount Street, Dublin 2,
D02 PR89
Ireland
Ordinary
100
Retail
The Phone House Spain
S.L.U.
Vía de Las Dos Castillas, No. 33
Complejo Atica-Edificio l,
Pozuelo de Alarcón,
Madrid 28224
Spain
A & B Shares
100
Retail
Interest held directly by Dixons Carphone plc.
*
** This is the only interest of Dixons Carphone plc, directly or indirectly, in this class of shares.
1 Dixons Retail Group Limited was a public limited company called Dixons Retail plc until 8 June 2016.
2 Honeybee Digital Solutions Limited was called ISE-Net Solutions Limited until 14 March 2017.
3 Dixons Carphone Holdings Limited was called New CPW Limited until 9 November 2016.
149
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Sweden
Ordinary
100
Retail
Denmark
Ordinary
100
Retail
Norway
Ordinary
100
Retail
Norway
Ordinary
100
100
100
100*
100*
Retail
Retail
IT
Holding
company
Ordinary
Deferred
A Ordinary
37.1**
B Ordinary
3.5**
Dixons Carphone plc Annual Report and Accounts 2016/17
Notes to the Company financial statements
C10 Subsidiary undertakings continued
b) Other subsidiary undertakings
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 on the
previous page.
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Carphone Warehouse Ireland Mobile
Limited
Charterhouse Management Limited
Codic GmbH (in liquidation)
Connected World Services
Distributions Limited
Connected World Services Europe
S.L.
Connected World Services LLC
Connected World Services
Netherlands BV
Connected World Services SAS
CPW Acton Five Limited
CPW Acton One Limited
CPW Brands 2 Limited
CPW Consultancy Limited
CPW CP Limited
CPW Distribution Limited
CPW GC Holdings BV
CPW Irlam Limited
CPW Tulketh Mill Limited
Currys Group Limited
CWIAB Limited
DISL 2 Limited
DISL Limited
Registered office address
Country of incorporation
or registration
Share class(es) held
% held
40 Upper Mount Street,
Dublin 2, D02 PR89
6th Floor, Victory House,
Prospect Hill, Douglas, IM1 1EQ
Eschenheimer Anlage 1, 60316,
Frankfurt
Ireland
Ordinary
Isle of Man
Ordinary
Germany
Ordinary
1 Portal Way, London, W3 6RS
United Kingdom
Ordinary
100
100
100
100
Vía de Las Dos Castillas, No. 33
Complejo Atica-Edificio l,
Pozuelo de Alarcón,
Madrid 28224
2711 Centerville Road, Suite 400
Wilmington DE 19808
Watermanweg 96, 3067 GG,
Rotterdam
26 rue de Cambacérès, 75008
Paris
1 Portal Way, London, W3 6RS
6th Floor, Victory House,
Prospect Hill, Douglas, IM1 1EQ
1 Portal Way, London, W3 6RS
1 Portal Way, London, W3 6RS
1 Portal Way, London, W3 6RS
1 Portal Way, London, W3 6RS
Postbus 2645, 3800 GD,
Amersfoort
1 Portal Way, London, W3 6RS
1 Portal Way, London, W3 6RS
1 Portal Way, London, W3 6RS
1 Portal Way, London, W3 6RS
6th Floor, Victory House,
Prospect Hill, Douglas, IM1 1EQ
Spain
Ordinary
100
United States
Ordinary
Netherlands
Ordinary
France
Ordinary
United Kingdom
Ordinary
Isle of Man
Ordinary
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Netherlands
Ordinary
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Isle of Man
Ordinary
A, B, C & D
Preference and
Ordinary B
Business
Shares
Ordinary
100
100
100
100
100*
100*
100*
100
100
100*
100*
100*
100
100
100
100
100
100
6th Floor, Victory House,
Prospect Hill, Douglas, IM1 1EQ
Isle of Man
Dixons Carphone CoE s.r.o.4
Trnita, 491/5, 602 00 Brno
Czech Republic
Dixons Group Limited
1 Portal Way, London, W3 6RS
United Kingdom
*
Interest held directly by Dixons Carphone plc.
4 Dixons Carphone CoE s.r.o. was called Dixons Retail SSC s.r.o. until 19 July 2016.
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Registered office address
Country of incorporation
or registration
Share class(es) held
% held
Hong Kong
Ordinary
100
C10 Subsidiary undertakings continued
b) Other subsidiary undertakings
Name
Dixons Sourcing Limited
Dixons Stores Group Retail Norway
AS
Dixons Travel srl (in liquidation)
DSG Boxmoor Limited
31/F, AXA Tower Landmark East,
100 How Ming Street,
Kwun Tong Kowloon
Solheimsveien, 6-8, 1473,
Lørenskog
Foro Buonaparte 70, 20121,
Milan
1 Portal Way, London, W3 6RS
Norway
Ordinary
Italy
Ordinary
United Kingdom
United Kingdom
United Kingdom
Ordinary
Cumulative C &
D Preference and
Ordinary
Ordinary
Ordinary
Hong Kong
Ordinary
Belgium
Ordinary
DSG Card Handling Services Limited
1 Portal Way, London, W3 6RS
United Kingdom
1 Portal Way, London, W3 6RS
1 Portal Way, London, W3 6RS
31/F, AXA Tower Landmark East,
100 How Ming Street,
Kwun Tong Kowloon
Havenlaan 86C, Bus 204,
B-1000 Brussels
DSG Corporate Services Limited
DSG European Investments Limited
DSG Hong Kong Sourcing Limited
DSG International Belgium BVBA (in
liquidation)
DSG International Retail Properties
Limited
DSG International Treasury
Management Limited
DSG Ireland Limited
DSG KHI Limited
1 Portal Way, London, W3 6RS
United Kingdom
Ordinary
1 Portal Way, London, W3 6RS
United Kingdom
Ordinary
1 Portal Way, London, W3 6RS
1 Portal Way, London, W3 6RS
United Kingdom
United Kingdom
Ordinary
Ordinary
Preference,
B Preference
and Ordinary
DSG Overseas Investments Limited
1 Portal Way, London, W3 6RS
United Kingdom
DSG Retail Ireland Pension Trust
Limited
El-Giganten Logistik AB
Elkjøp Kleiverenga AS
Epoq Holding AB
Epoq Logistic DC k.s.
ID Mobile Limited
InfoCare CS AB
InfoCare Workshop AS
InfoCare Workshop Holding AS
InfoCare Workshop Oy
40 Upper Mount Street,
Dublin 2, D02 PR89
Mobelvagen 51, 556 52
Jönköping
Solheimsveien, 6-8, 1473,
Lørenskog
Esbogatan 12, 164 74 Kista
Evropská 868, 664 42 Modrˇice
1 Portal Way, London, W3 6RS
Arabygatan 9, 35246 Växjö,
Kronobergs län
Industrivegen, 53, 2212,
Kongsvinger
Industrivegen, 65, 2212,
Kongsvinger
Silvastintie 1, 01510, Vantaa
Ireland
Ordinary
Sweden
Ordinary
Norway
Sweden
Czech Republic
United Kingdom
Sweden
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Norway
Ordinary
Norway
Finland
Ordinary
Ordinary
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100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
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Notes to the Company financial statements
C10 Subsidiary undertakings continued
b) Other subsidiary undertakings
Name
Kereru Limited
Lefdal Elektromarked AS
Leverstock Investments Limited
Mastercare Service and Distribution
Limited
Mohua Limited
MTIS Limited
NSS Financials A/S
OSAA – Sociedade Gestora De
Participações Sociais, Lda
Osfone Comercio de Aparelhos de
Telecomunicações, Lda
Osfone Negócios – Comercio de
Aparelhos de Telecomunicações, Lda
PC City (France) SNC
PC City Norge AS
Pelham Limited
Petrus Insurance Company Limited
Simplify Digital Limited
Simplify Digital Systems Limited
Smarthouse Spain, S.A.5
TalkM Limited
The Carphone Warehouse (Digital)
Limited
The Carphone Warehouse Resources
Limited
The Carphone Warehouse UK Limited
The Phone House Holdings (UK)
Limited
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Country of incorporation
or registration
Share class(es)
held
% held
1 Portal Way, London, W3 6RS
Solheimsveien, 6-8, 1471,
Lørenskog
1 Portal Way, London, W3 6RS
United Kingdom
Ordinary
Norway
Ordinary
United Kingdom
Ordinary
1 Portal Way, London, W3 6RS
United Kingdom
Ordinary
United Kingdom
Ordinary
Ireland
Ordinary
Denmark
Ordinary
Portugal
Ordinary
Portugal
Ordinary
Portugal
Ordinary
France
Partnership
Norway
Ordinary
Isle of Man
Ordinary
Gibraltar
United Kingdom
United Kingdom
Ordinary
Ordinary
A Ordinary
1 Portal Way, London, W3 6RS
3rd Floor, Fleming Court,
Fleming’s Place, Dublin 4, D04 N4X9
Hørkær 12 A, 2730 Herlev
R. Latino Coelho nº13,
1050-132 Lisbon
R. Latino Coelho nº13,
1050-132 Lisbon
R. Latino Coelho nº13,
1050-132 Lisbon
52 rue de la Victoire
75009 Paris
Solheimsveien, 6-8, 1471,
Lørenskog
6th Floor, Victory House,
Prospect Hill, Douglas, IM1 1EQ
2 Irish Town
1 Portal Way, London, W3 6RS
1 Portal Way, London, W3 6RS
Vía de las Dos Castillas, No. 33
Complejo Atica-Edificio l,
Pozuelo de Alarcón,
Madrid 28224
1 Portal Way, London, W3 6RS
Spain
Ordinary
100
United Kingdom
Ordinary
1 Portal Way, London, W3 6RS
United Kingdom
Ordinary
6th Floor, Victory House,
Prospect Hill, Douglas, IM1 1EQ
1 Portal Way, London, W3 6RS
Isle of Man
Ordinary
100*
United Kingdom
Ordinary
1 Portal Way, London, W3 6RS
United Kingdom
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100*
100
100
*
Interest held directly by Dixons Carphone plc.
5 Smarthouse Spain, S.A. was called PC City Spain S.A. until 14 July 2016.
c) Other significant shareholdings
The following are the other significant shareholdings of the Company, all of which are held indirectly.
Name
Elkjøp Fjordane AS
F Group A/S (in liquidation)
Sprint Connect LLC
Registered office address
Country of incorporation
or registration
% held
Business
activity
Fugleskjærgata 10, 6900 Florø,
1401 Flora
Lyskaer 1, 2730 Herlev
2711 Centerville Road, Suite 400
Wilmington DE 19808
Norway
Denmark
United States
30
40
50
Retail
Retail
Retail
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C10 Subsidiary undertakings continued
d) Subsidiary undertakings exempt from audit
The following subsidiaries, all of which are incorporated in England and Wales and are all included in section b) , are exempt
from the requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of section 479A of
that Act:
Name
Company registration number
CPW Acton Five Limited
CPW Brands 2 Limited
CPW Consultancy Limited
CPW CP Limited
CPW Irlam Limited
CPW Tulketh Mill Limited
CWIAB Limited
DSG Boxmoor Limited
DSG Card Handling Services Limited
DSG European Investments Limited
DSG International Holdings Limited
DSG International Retail Properties Limited
DSG International Treasury Management Limited
DSG Ireland Limited
DSG KHI Limited
DSG Overseas Investments Limited
The Carphone Warehouse (Digital) Limited
The Carphone Warehouse UK Limited
The Phone House Holdings (UK) Limited
05738735
07135355
07881879
06585457
05825842
06585719
02441554
05430014
04185110
03891149
03887870
00476440
02792167
00240621
09012752
02734677
03966947
03827277
03663563
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Dixons Carphone plc Annual Report and Accounts 2016/17
Five year record (unaudited)
Income statement – Headline and Pro forma
Headline(1)
Revenue
Profit after tax – wholly owned operations
Share of results of joint ventures and associates (after tax)
Net profit after tax
Earnings per share
– Basic
– Diluted
Pro forma headline results(2)
Revenue
EBIT
Interest
Profit before taxation
2016/17
£million
2015/16(3)
£million
2014/15
£million
2013/14
£million
2012/13
£million
10,580
9,736
8,255
1,943
389
—
389
347
—
347
285
—
285
100
3
103
11
4
48
52
33.8p
33.7p
30.2p
29.2p
29.7p
28.7p
18.6p
18.3p
10.9p
10.8p
10,580
9,736
9,750
9,752
9,517
517
(16)
501
478
(21)
457
413
(32)
381
359
(43)
316
310
(33)
277
(1)
(2)
(3)
Headline results – continuing operations reflect the statutory results of the Group excluding items classified as non-headline.
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. This financial information has been prepared by aggregating the five year records presented by Carphone Warehouse in its
2013/14 annual report and accounts on page 97 and by Dixons Retail in its 2013/14 annual report and accounts on page 127, and adjusting
for discontinued operations.
Headline results for 2015/16 have been restated to reflect the current year classification of the iD mobile operations in the Republic of
Ireland and the Sprint joint venture as businesses to be exited in the comparative period, and therefore classified as non-headline. For
further details see note 4 to the financial statements. Results for 2014/15 and earlier periods have not been restated as the impact would
not be material.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Shareholder and corporate information
Registered office / Head office
1 Portal Way
London
W3 6RS
United Kingdom
+44 (0) 345 013 0345
www.dixonscarphone.com
Company registration number
07105905
Company Secretary
Enquiries should be directed to:
Nigel Paterson
General Counsel and Company Secretary
cosec@dixonscarphone.com
Investor relations
Enquiries should be directed to:
Kate Ferry, IR, PR and Corporate Affairs Director or
Mark Reynolds, Head of Investor Relations
ir@dixonscarphone.com
Advisors
Auditor
Deloitte LLP
2 New Street Square
London
EC4A 3BZ
www.deloitte.com
Joint Stockbrokers
Deutsche Bank AG
1 Great Winchester Street
London
EC2N 2DB
www.db.com
Citigroup Global Markets Limited
33 Canada Square
Canary Wharf
E14 5LB
www.citigroup.com
Dixons Carphone plc is listed on the main market of the
London Stock Exchange (stock symbol: DC) and is a
constituent of the FTSE 250.
Registrars
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
United Kingdom
0371 384 2089 (UK only)
+44 (0) 121 415 7047 (from outside the UK)
Lines are open 8.30am to 5.30pm Monday to Friday
(UK time) , excluding public holidays in England and Wales.
You can manage your shareholdings via an electronic
communications service called Shareview at
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 and use of the service is free.
Financial calendar
Ex-dividend date (final dividend 2016/17)
Record date (final dividend 2016/17)
Annual General Meeting
Intended dividend payment date
(final dividend 2016/17)
24 Aug 2017
25 Aug 2017
07 Sep 2017
22 Sep 2017
American Depositary Receipts (‘ADRs’)
Dixons Carphone plc has established a sponsored Level
1 ADR program and has appointed Deutsche Bank Trust
Company Americas (‘Deutsche Bank’) as the depositary
bank. The ADRs trade on the US over-the-counter (‘OTC’)
market under the symbol DXCPY (they are not listed on a
US stock exchange) . Each ADR represents two ordinary
shares in Dixons Carphone plc.
Contact details for ADR investors and brokers
Deutsche Bank ADR broker services desks
New York: +1 212 250 9100
London: +44 (0) 207 547 6500 (from outside the UK)
Contact details for registered ADR holders
Deutsche Bank Shareholder Services
American Stock Transfer & Trust Company
Operations Center
6201 15th Avenue
Brooklyn, NY 11219
United States
Email: DB@amstock.com
Toll free number: (866) 249 2593 (from within the US)
Direct dial: +1 718 921 8124 (from outside the US)
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Dixons Carphone plc Annual Report and Accounts 2016/17
Glossary and definitions
Alternative performance measures (‘APMs’)
In the reporting of financial information, the Group uses certain measures that are not required under IFRS. We consider
that these additional measures (commonly referred to as ‘alternative performance measures’) provide additional information
on the performance of the business and trends to shareholders. These measures are consistent with those used internally,
and are considered critical to understanding the financial performance and financial health of the Group. APMs are also
used to enhance the comparability of information between reporting periods, by adjusting for non-recurring or items
considered to be distortive on trading performance which may affect IFRS measures, to aid the user in understanding the
Group’s performance. These alternative performance measures may not be directly comparable with other similarly titled
measures or ‘adjusted’ revenue or profit measures used by other companies, and are not intended to be a substitute for, or
superior to, IFRS measures.
Headline and non-headline measures
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 an informative additional measure of the ongoing trading performance of the Group. Headline
results are stated before non-headline items.
Non-headline items consist of the results of discontinued operations or exited / to be exited businesses, amortisation of
acquisition intangibles, acquisition-related costs, any exceptional items considered sufficiently material that they distort
underlying performance (such as re-organisation costs, impairment charges, property rationalisation costs and other non-
recurring charges), income from previously disposed operations and net pension interest costs.
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. Where appropriate, for example where a business is classified as exited / to be exited,
comparative information is restated accordingly.
Local currency
Some comparative performance measures are translated at constant exchange rates, called ‘local currency’ measures.
This restates the prior period results at a common exchange rate to the current year in order to provide appropriate year-
on-year movement measures without the impact of foreign exchange movements.
In response to the Guidelines on Alternative Performance Measures issues by the European Securities and Markets
Authority (‘ESMA’), we have provided additional information on the APMs used by the Group below.
Alternative performance
measure
Closest equivalent GAAP
measure
Reconciliation to IFRS
measure
Definition and purpose
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Revenue measures
Headline / non-headline
Revenue
Revenue
See note 2 and 4,
and note 32 for
details of restated
amounts for
2015/16.
Like-for-like (LFL) %
change
No direct equivalent Not applicable
Headline revenues represent the ongoing revenues
of the Group, and are adjusted to remove non-
headline revenue items. In the current and restated
comparative periods, this relates to the iD mobile
operations in Republic of Ireland, which is classified
as a ‘business to be exited’ and therefore presented
in non-headline results.
Like-for-like revenue is calculated based on
headline store and internet revenue using constant
exchange rates. New stores are included where
they have been open for a full financial year both
at the beginning and end of the financial period.
Revenue from franchise stores are excluded and
closed stores are excluded for any period of
closure during either period. Customer support
agreement, insurance and wholesale revenues
along with revenue from Connected World Services
and other non-retail businesses are excluded from
like-for-like calculations. We consider that LFL
revenue represents a useful measure of the trading
performance of our underlying and ongoing store
and online portfolio.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Alternative performance
measure
Closest equivalent GAAP
measure
Reconciliation to IFRS
measure
Definition and purpose
Local currency % change Revenue compared
Not applicable
to prior period
consolidated at a
constant exchange
rate.
Reflects total revenues on a constant currency and
period basis. Provides a measure of performance
excluding the impact of foreign exchange rate
movements.
Profit measures
Headline / non-headline
profit / (loss) before tax,
EBIT and profit / (loss)
after tax
Profit / (loss) before
interest and tax,
profit / (loss) after
interest and tax.
See note 2 and 4,
and note 32 for
details of restated
amounts for
2015/16.
As discussed above, the Group uses headline profit
measures in order to provide a useful measure of
the ongoing performance of the Group. These are
adjusted from total measures to remove ‘non-
headline’ items, the nature of which are disclosed
above.
EBIT
Profit / (loss) before
interest and tax
No reconciling items Earnings before interest and tax (EBIT) is directly
comparable to profit / (loss) before tax. The
terminology used is consistent with that used
historically and in external communications.
Other earnings measures
Headline / non-headline
net finance costs
Net finance costs
See note 4
Headline / non-headline
income tax expense /
(credit)
Income tax expense
/ (credit)
See note 4
Headline / Total effective
tax rate
No direct equivalent
Statutory EPS
figures
Earnings per share measures
Headline basic EPS –
continuing operations,
headline diluted EPS –
continuing operations,
headline basic EPS – total,
headline diluted EPS -
total
See note 8
Headline net finance costs are adjusted from total
finance costs to remove non-headline finance
cost items. Non-headline finance costs includes
the finance charge of businesses to be exited,
net pension interest costs, finance income from
previously disposed operations not classified
as discontinued, and other exceptional items
considered so one-off and material that they distort
underlying finance costs of the Group. Under IAS
19 ‘Employee Benefits’, the net interest charge
on defined benefit pension schemes is calculated
based on corporate bond yield rates at a specific
date, which, as can vary over time, creates volatility
in the income statement and is unrepresentative of
the actual investment gains or losses made on the
liabilities. Therefore this item has been removed
from our headline earnings measure in order to
remove this non-cash volatility.
Headline income tax expense / (credit) represents
the income tax on headline earnings. Non-headline
income tax expense / (credit) represents the tax
on items classified as ‘non-headline’, either in the
current year, or the current year effect of prior year
tax adjustments on items previously classified as
non-headline. We consider the headline income
tax measures represent a useful measure of the
ongoing tax charge / credit of the Group.
The effective tax rate measures provide a useful
indication of the tax rate of the Group. Headline
effective tax is the rate of tax recognised on
headline earnings, and total effective tax is the rate
of tax recognised on total earnings.
EPS measures are presented to reflect the impact
of non-headline items in order to show a headline
EPS figure, which reflects the headline earnings per
share of the Group. We consider the headline EPS
provides a useful measure of the ongoing earnings
of the underlying Group.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Glossary and definitions
Alternative performance
measure
Closest equivalent GAAP
measure
Reconciliation to IFRS
measure
Definition and purpose
Cash flow measures
Free cash flow
Cash generated
from operations
See note 27
Net debt
Other measures
Return on Capital
Employed (ROCE)
See note 27
Cash and cash
equivalents less
loans and other
borrowings and
finance lease
obligations.
No direct equivalent Not applicable
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.
Comprises cash and cash equivalents and short
term deposits, less borrowings and finance lease
creditors. We consider that this provides a useful
measure of the indebtedness of the Group.
Calculated on a pre-tax and lease adjusted basis.
The return is based on headline EBIT, adjusted to
add back the 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. We
consider this a useful measure to understand how
the Group has used the capital employed during the
period.
Pro forma results
In previous periods (up to the annual report and accounts 2015/16), the Group presented ‘pro forma’ comparative financial
information in order to reflect results of both Carphone Warehouse and Dixons Retail throughout the comparative periods
as if the Merger on 6 August 2014 had occurred at the start of the 2013/14 financial year. In the current year, pro forma
information is not presented as does not affect the comparative periods for the current year, other than in the five year
summary. For information on the pro forma financial information and reconciliations please refer to the annual report and
accounts 2015/16.
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Dixons Carphone plc Annual Report and Accounts 2016/17
Other 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.
Where businesses have grown organically rather than through acquisition, there is no
amortisation of acquired intangibles and therefore the non-cash amortisation charge
is removed from our headline earnings measures in order to increase comparability
between segments.
ADRs
ARPU
B2B
Best Buy
American Depositary Receipts
Average monthly 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 & Wales)
Board
The Board of Directors of the Company
Businesses to be exited
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 or
operations of the Group. Comparative results in the statement of comprehensive
income and the notes are restated accordingly for the impact of businesses exited or
to be exited.
Carphone, Carphone Warehouse
or Carphone Group
The Company or Group prior to the Merger on 6 August 2014
CGU
Cash Generating Unit
Company 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
CPW
CPW Europe
The continuing business of the Carphone Group
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 Group
The Company, its subsidiaries, interests in joint ventures and other investments
Dixons Retail Merger or Merger
The all-share merger of Dixons Retail plc and Carphone Warehouse Group plc which
occurred on 6 August 2014
EBT
ESOT
HMRC
honeybee
Employee benefit trust
Employee share ownership trust
Her Majesty’s Revenue and Customs
honeybee is our proprietary IT software, developed in-house initially to serve our
mobile phone consumers. It is a unique omni-channel, multi-industry software that
simplifies the delivery and management of complex digital customer journeys.
IFRS
International Financial Reporting Standards as adopted by the European Union
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Dixons Carphone plc Annual Report and Accounts 2016/17
Glossary and definitions
Market position
MNO
MVNO
New CPW
NPS
Ranking against competitors in the electrical and mobile retail market, measured
by market share. Market share is measured for each of the Group’s markets by
comparing data for revenue or volume of units sold relative to similar metrics for
competitors in the same market
Mobile network operator
Mobile virtual network operator
Dixons Carphone Holdings Limited, previously called New CPW Limited (incorporated
in England and Wales)
Net Promoter Score, a rating used by the Group to measure customers’ likelihood to
recommend its operations
Old Carphone Warehouse
TalkTalk Telecom Holdings Limited (previously called The Carphone Warehouse Group
PLC) (incorporated in England and Wales)
RCF
Revolving credit facility
Sharesave or SAYE
Save as you earn share scheme
SIMO
Sprint JV
SWAS
Sales of SIM-only contracts, without attached handset
The 50% investment held by the Group in Sprint Connect LLC, a distribution joint
venture held with Sprint LLC in the USA.
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 2016/17
“Over the last few years a great deal of work has been done to make the company
stronger, lower risk and more resilient. We are seeing the upside of these efforts now as
we declare record headline profits before tax of over half a billion pounds – up 10%. More
importantly, the improvement in our cost base, the strong leadership position that we
have built, the investment that we have made in our digital business and, above all, the
enormous shift in customer satisfaction and price competitiveness that we have driven
leave us well positioned to flourish in the years ahead.
While the UK consumer environment seems to be holding up for us, there will
undoubtedly continue to be changes in the way people buy all of the products that we
sell from phones to washing machines. Change always represents opportunity, and our
job is to find the propositions that keep us compelling to our customers forever. We are
excited about our plans in services and about the myriad of initiatives that will drive long-
term relationships with our customers.
In short, it has been a good year for Dixons Carphone and it gives me great pleasure
once again to thank my 43,000 colleagues for the work that they have done to deliver so
well and so energetically for our customers.”
Sebastian James
Group Chief Executive
27 June 2017
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.
Designed and printed by Black&Callow
This report is printed on Oxygen Offset 100% Recycled board and
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Annual Report and Accounts
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Dixons Carphone plc
1 Portal Way
London
W3 6RS
United Kingdom
Telephone: +44 (0) 345 013 0345
Email: ir@dixonscarphone.com
www.dixonscarphone.com
www.dixonscarphone.com
@DixonsCarphone