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TECHNOLOGY
Annual Report & Accounts 2019/20
STRATEGIC REPORT
2 Chair of the Board’s Statement
4 Key Performance Indicators
6
8
Our Business
Group Chief Executive’s Statement
10 Our Strategy and Vision
12 Strategic Priorities
17 Core Enablers
20
Principal Risks to Achieving the Group’s Objectives
24
Performance Review
31 Stakeholders and Sustainable Business
CORPORATE GOVERNANCE
54 Board of Directors
56 Corporate Governance Report
68 Directors’ Report
71 Audit Committee Report
80 Disclosure Committee Report
81 Nominations Committee Report
84 Remuneration Committee Report
87
Remuneration Report – Remuneration Policy
99
Remuneration Report – Annual Remuneration Report
112 Statement of Directors’ Responsibilities
FINANCIAL STATEMENTS
113 Independent Auditor’s Report
130 Consolidated Income Statement
131 Consolidated Statement of Comprehensive Income
132 Consolidated Balance Sheet
133 Consolidated Statement of Changes in Equity
134 Consolidated Cash Flow Statement
135 Notes to the Group Financial Statements
190 Company Balance Sheet
191 Company Statement of Changes in Equity
192 Notes to the Company Financial Statements
199 Five Year Record (unaudited)
INVESTOR INFORMATION
200 Shareholder and Corporate Information
202 Glossary and Definitions
219 Shareholder Notes
Dixons Carphone plc Annual Report and Accounts 2019/20
1
Chair of the Board’s
Statement
“It is important to us and all our
stakeholders that we not only succeed
financially but also that, to be a
sustainable business over the long
term, we need to be ‘doing the right
thing in everything we do’.”
Lord Livingston of Parkhead
Chair of the Board
To say this has been a
challenging year would be
an understatement. On top
of a major transformation
programme and
substantial market
changes, the Group
has had to navigate the
uncertainty of Brexit and
the impact of Covid-19
which disrupted supply
chains and temporarily
closed all our stores in the
UK, Ireland and Greece.
Our management team, led by Alex
Baldock, and our colleagues have
responded magnificently to these
challenges. I want to thank them all.
Our key focus during the pandemic has
been to keep our people safe, serve
our customers and ensure the business
is in the best position for the future.
This has involved innovative solutions
such as contactless stores, constant
communication with our colleagues
and also ensuring that we do the right
thing. For example, we have prioritised
and supported vulnerable customers
and the NHS. To both support our
business and in solidarity with our
UK colleagues who are on furlough,
the Executive Committee members
and Board directors took a temporary
20% pay reduction and there was no
corporate bonus awarded in the UK &
Ireland this year.
Results
The first ten months of the year
saw us make good progress on our
transformation. Across our Electricals
business, we increased market share
and grew customer satisfaction. Our
International business had another
strong year and delivered almost half of
the Group’s total Electricals profit.
We also took some difficult but
essential decisions, closing our
standalone Carphone Warehouse
stores in the UK, before our immediate
priorities changed as a result of
Covid‑19.
We were on track to achieve profits
in line with our guidance reiterated in
January but the lost sales from store
closures in the UK, Ireland and Greece
and extra expenditure associated with
Covid‑19 was only partially offset by
a large increase in online sales and
internal and government actions that
reduced costs. This led to Group
adjusted PBT* coming in at £166m.
This was down year on year, reflecting
both the challenging mobile market in
the UK and the impact of Covid‑19.
The loss before tax on a statutory
basis was £140m, largely due to the
costs associated with the closure of
the Carphone Warehouse standalone
stores in the UK announced in March
this year.
Our year end net debt was up slightly
at £284m as the adverse working
capital caused by lower sales was
almost completely offset by reduced
capital expenditure and deferral of
taxes and rent.
* See page 202 for full Glossary and definitions
2
The Group ended the year with in
excess of £1bn of available liquidity.
Our planning has stress tested the
business against a range of downside
scenarios and we do not foresee
needing to access any additional
financing.
People
Our capable and committed colleagues
remain one of the key enablers of our
strategy.
We have continued our innovative
Colleague Shareholder Scheme. We
launched the award‑winning scheme
in February 2019 to over 31,000
colleagues globally. The award is worth
at least £1,000 at grant. This year we
extended the scheme to an additional
7,000 newly eligible colleagues,
ensuring that all our people can share
in our future success knowing they
own part of the business.
We are investing in supporting our
people. For example, we have made a
substantial investment in our revamped
training hub in Birmingham, The
Academy@Fort Dunlop, in collaboration
with our suppliers. A record 3,500
Retail colleagues have completed
courses in the facility in the last year.
Our Communities
It is important to us and all our
stakeholders that we not only succeed
financially but also that, to be a
sustainable business over the long
term, we need to be ‘doing the right
thing in everything we do’.
Over the year, we took action to
help those who might otherwise be
excluded from enjoying the benefits
of amazing technology. Our Nordic
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report business tackled digital exclusion
through their Elkjøp Foundation, while
our colleagues in Greece took time out
to volunteer during their annual ‘Good
Deed Day’. In the UK, colleagues
voted to champion a new cause in
their charity, Age UK, with the aim
of using technology to help combat
loneliness, improve mental health and
support independence and community
participation for older people.
The Coronavirus crisis underlined the
critical role technology plays in keeping
people connected. We started our
partnership with Age UK by responding
to their need for hundreds of laptops,
phones, SIM cards and headsets to
enable their Silver Line helpline staff to
provide vital support from their homes.
This was followed by an ambitious
project to get tablet technology into
the hands of hundreds of isolated older
people – with many getting online for
the first time. Our teams worked cross‑
functionally to dispatch fully charged
and ready‑to‑use devices, complete
with connectivity, useful apps and
supported by hard copy, large print
user instructions which we created in
collaboration with the charity.
Vulnerable older people were the focus
of additional support such as free DAB
Radios as part of an initiative with the
BBC and customers of our MVNO, iD
Mobile, aged over 70, were given free
unlimited minutes ‑ which was also
granted to NHS workers along with free
unlimited texts and data.
We are committed to helping
colleagues and customers minimise
their impact on the environment
and are pleased to have retained
our FTSE4Good status for the third
consecutive year.
To build on this, we are introducing
targets accredited by the Science
Based Target initiative across the
Group to support our ambitious carbon
reduction strategy, which also sees
the introduction of Scope 3 targets as
we strive to achieve net zero well in
advance of the UK Government’s 2050
target.
In our determination to ‘make it easier
for colleagues and customers to be
greener’, we are the largest recycler of
waste electricals in UK Retail and are
working to ensure customers receive
their technology in the most efficient
and environmentally friendly ways, with
our commitment to a fully electric or
alternative fuels delivery fleet by 2030.
Through our new Responsible Sourcing
Standards, we are collaborating with
suppliers to make sure products are
ethically sourced, and we are on
schedule to eliminate unnecessary
single‑use plastic from our own label
operation by 2023.
This year promises even more
emphasis on supporting the societies
in which we operate, so we can
help even more people benefit from
more affordable, ethical, energy
efficient, repaired, reused or donated
technology.
Outlook
The long term effect of the pandemic
remains unclear. However, the
products and services we sell remain
in strong demand. We are the clear
market leader across every country in
which we operate. We have both the
will and financial strength to invest in
our future. Most importantly, we have
capable and committed colleagues
and a great leadership team to lead us
through these choppy waters. These
strengths put us in a good position to
look forward to the future with a good
degree of confidence.
Finally, and most importantly, I would
like to wish all of you a healthy and
safe upcoming year. Thank you for
your support.
Lord Livingston of Parkhead
Chair of the Board
14 July 2020
Shareholders
We continue to have good open
dialogue with most of our larger
shareholders and welcome their
support for both our strategy and
initiatives such as our Colleague
Shareholder Scheme.
Strong corporate governance is critical
to our transformation programme and
to manage risk. Following this year’s
review, we have concluded again that
our governance framework is aligned
to best practice and appropriate to
meet the needs of the Group. We have
included a section 172 statement for
the first time outlining how we have
considered all stakeholders in the key
business decisions we have made
during this transformational period.
The Group paid an interim dividend
of £26m (2.25p per share) in January.
The Board has decided not to pay a
final dividend for 2019/20. Dividend
payments will not be resumed at least
until our standby debt facilities have
been cancelled. Given the current
uncertain environment, the Board will
keep the payment of dividends under
review to establish the appropriate time
and level to recommence payment.
We regret we will not be able to hold
a full Annual General Meeting (AGM)
this year, but we welcome an open
dialogue with our shareholders at any
time. Shareholders with any questions
can email us throughout the year at
cosec@dixonscarphone.com and we
will be more than happy to respond.
Dixons Carphone plc Annual Report and Accounts 2019/20
3
Strategic Report Financial
Key Performance Indicators
t
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i
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e
t
a
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Adjusted Revenue
Statutory Revenue
Adjusted Profit
Before Tax
Statutory Loss
Before Tax
£
1
0
,
4
7
4
m
£
1
0
,
2
1
7
m
£
1
0
,
4
3
3
m
£
1
0
,
1
7
0
m
£
3
3
9
m
(
£
2
5
9
m
)
£
1
6
6
m
(
£
1
4
0
m
)
2018/19
2019/20
2018/19
2019/20
2018/19
2019/20
2018/19
2019/20
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.
Continued growth of profit before tax represents a
measure of Group performance to external investors
and stakeholders against our strategic priorities.
Adjusted EPS
Statutory Loss per
Share
Electrical LFL
Revenue Growth
Free Cash Flow
2
3
.
2
p
(
2
6
.
8
p
)
1
0
.
8
p
(
1
3
.
9
p
)
+
3
%
+
2
%
£
1
5
3
m
£
1
0
9
m
2018/19
2019/20
2018/19
2019/20
2018/19
2019/20
2018/19
2019/20
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.
Like-for-like revenue
enables the performance
of the Group to
be measured on a
consistent year-on-year
basis. Statutory revenue
growth was +2%
(2018/19: +2%).
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.
Definitions of measurement for Key Performance Indicators are given in the glossary and definitions on pages 202 to 218
4
Dixons Carphone plc Annual Report and Accounts 2019/20
Non Financial
Key Performance Indicators
Growing market leading positions
t
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a
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UK & Ireland Electricals - 2019/20
Nordics - 2019/20
Greece - 2019/20
26.5%
26.0%
35.3%
24.2%
25.1%
25.2%
25.8%
26.5%
24.2%
25.0%
25.5%
26.0%
35.3%
35.0%
34.4%
21.2%
32.2%
28.7%
15/16
16/17
17/18
18/19
19/20
15/16
16/17
17/18
18/19
19/20
15/16
16/17
17/18
18/19
19/20
Net Promoter Score (‘NPS’)
Net Promoter Score – a rating
used by the Group to measure
customers’ likelihood to
recommend its operations.
2018/19: +64
Colleague Engagement
Colleague engagement – our ‘Make a
Difference’ survey enables our colleagues to
provide honest and open feedback on what
it is like to work at Dixons Carphone.
2018/19: 64%
2019/20
+70
62%
2019/20
See page 202 for full Glossary and definitions. Market share data from GFK.
Dixons Carphone plc Annual Report and Accounts 2019/20
5
Our
Business
Dixons Carphone plc is a leading omnichannel retailer of technology products and services, operating through 939 stores and
16 websites in eight countries. We Help Everyone Enjoy Amazing Technology, however they choose to shop with us.
We are the market leader in the UK & Ireland, throughout the Nordics and in Greece, employing 24,000 capable and committed
colleagues in the UK & Ireland and 36,000 globally across the Group. Our full range of services and support makes it easy for our
customers to discover, choose, afford and enjoy the right technology for them, throughout their lives. The Group’s core operations
are supported by an extensive distribution network, enabling delivery to stores and homes, a sourcing office in Hong Kong and a
state‑of‑the‑art repair facility in Newark, UK.
Our brands include Currys PC World and Carphone Warehouse in the UK & Ireland and iD Mobile in the UK; Elkjøp, Elgiganten and
Gigantti in the Nordics; and Kotsovolos in Greece. Our Dixons Travel brand has a presence across several UK airports as well as in
Dublin and Oslo, and our services are provided through Team Knowhow.
Our Business divisions:
UK & IRELAND ELECTRICALS
‑ Currys PC World is the largest specialist
Currys PC World
electrical retailing and services operator in
the UK & Ireland.
currys.co.uk
currys.ie
‑ Dixons Travel is a leading airport
Dixons Travel
dixonstravel.com
electrical retailer, with stores across the
UK & Ireland and Oslo.
‑ Team Knowhow is our services brand.
‑ PC World Business provides business
customers with technology products
and services.
NORDICS
Team Knowhow
teamknowhow.com
PC World Business
pcworldbusiness.co.uk
‑ The Elkjøp Group is the leading specialist
electricals retailer across the Nordics region.
‑ Elkjøp and Elkjøp Phonehouse stores
operate in Norway, Elgiganten and
Elgiganten Phone House in Sweden and
Denmark and Gigantti in Finland.
‑ InfoCare is the largest consumer electrical
repair company in the region, operating in
Norway, Sweden, Denmark and Finland.
Elkjøp
Elgiganten
Gigantti
Phone House
elkjop.no
elgiganten.se
elgiganten.dk
gigantti.fi
phonehouse.se
phonehouse.no
InfoCare
infocareworkshop.no
GREECE
‑ Kotsovolos is Greece’s leading specialist
Kotsovolos
kotsovolos.gr
electrical retailer.
UK & IRELAND MOBILE
‑ Carphone Warehouse is the largest
independent telecommunications
retailer in the UK & Ireland.
Carphone Warehouse
carphonewarehouse.com
carphonewarehouse.ie
‑ iD Mobile is our MVNO offering innovative
iD Mobile
idmobile.co.uk
and flexible propositions.
‑ Carphone Warehouse Business provides
telecommunications products
and services to business to business
(‘B2B’) customers.
6
Carphone Warehouse Business
business.carphonewarehouse.com
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report t
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Revenue
by division
2019/20
UK & Ireland Electricals:
£4,538m
Nordics:
£3,573m
Greece:
£470m
UK & Ireland Mobile:
£1,589m
Dixons Carphone plc Annual Report and Accounts 2019/20
7
Group Chief Executive’s
Statement
standalone Carphone Warehouse
stores in the UK, as customers continue
to change the way they buy mobile
devices and connectivity. This gives us
greater certainty on getting to promised
breakeven here.
At the same time, we have invested
in our Colleagues. We extended our
award‑winning Colleague Shareholder
Scheme and opened our new training
facility The Academy@Fort Dunlop.
Critical to our future success is attracting
transformational leaders and we are
delighted to welcome five appointments
onto the Executive Committee of Mark
Allsop as Chief Operating Officer, Ed
Connolly as Chief Commercial Officer,
Paula Coughlan as Chief People Officer,
Lindsay Haselhurst as Chief Supply Chain
Officer and Erik Sønsterud, our new
International Chief Executive. We have
made further progress on becoming One
Business that is a clearer, simpler and
faster place to work. Although some of
our spending has been curtailed due to
Covid‑19, we have invested in some of
the infrastructure we need to make this a
truly world class omnichannel business.
I am very pleased these initiatives
have started to drive results, with
strong double‑digit growth in customer
satisfaction, and with growing share in
every market that we operate in.
This was reflected in our financial
performance. We were on track to grow
sales and profits in UK and International
Electricals if Covid‑19 hadn’t resulted in
enforced store closures in UK, Ireland
and Greece at the end of the year. In the
end, Electricals like‑for‑like revenue still
grew +2% and Electricals adjusted EBIT*
was £298m, down only 5% from £313m
last year. In contrast, but as expected,
our Mobile profits declined significantly to
an adjusted EBIT loss of ‑£104m.
The Group adjusted PBT of £166m was
down from a profit of £339m last year.
Statutory loss before tax was £140m, an
improvement on the £259m loss in the
prior year. Adjusting items primarily relate
to the costs of closing the Carphone
Warehouse standalone stores and the
impact of implementing IFRS16 for the
first time.
Net debt increased £19m to £284m.
The year drew to a close with the impact
of the global pandemic, a situation that
quickly escalated from one that had some
effect on our supply chain to one that
fundamentally changed how many of us
live and work. The first thing to say is
that I was humbled by the speed and skill
with which thousands of our colleagues
reacted to this crisis in safely helping
millions of customers and securing the
business’s future. Through their efforts we
transformed our operations and services
almost overnight, including implementing
social distancing and hygiene standards
in our Nordics stores, which have
remained open throughout the crisis, and
operating our UK and Greek businesses
as online‑only retailers for the first time
in their history. This meant that through
these challenging times we have been
to able provide the vital technology our
customers need, to keep them connected
with loved ones, their families fed, clean
and entertained, to work from home
and home‑school the kids. The vital role
we play has been reflected in customer
demand and we have generated strong
sales in every open business.
This period has also seen an accelerated
pace of innovation in the business. After
successfully launching in the Nordics, we
have rolled out zero‑contact ‘Drive Thru’
stores to the UK and launched ShopLive,
a tremendously exciting way to bring the
best of stores (face‑to‑face advice from
thousands of expert colleagues) to our
customers online, in a way competitors
will find hard to match. ShopLive was
conceived and landed in days.
Meanwhile, we have secured the
business’s future. We raised more bank
facilities than we ever expect to need and
have been prudent in conserving cash,
which has meant a delay to some of
our larger infrastructure projects and no
payment of a final dividend. This leaves
us well positioned to plan for the future
with confidence.
Of course, the Covid‑19 pandemic has
been first and foremost a health crisis and
a humanitarian catastrophe, the wide‑
ranging repercussions of which will be felt
for many years. But this crisis has also
shown us that our strategy for Dixons
Carphone is the right one. Our business
has so far successfully navigated a
fraught period, and as we raise our gaze,
our big priorities around Credit, Services
and Omnichannel remain the right ones to
focus on after this crisis. Customers need
more help than ever to discover, choose,
afford and enjoy the benefits of amazing
technology, for life.
We remain committed to our longer‑
term transformation, therefore, and will
use everything we’re learning through
this crisis to build a better business for
customers, colleagues and shareholders.
Alex Baldock
Group Chief Executive
14 July 2020
Alex Baldock
Group Chief Executive
Dixons Carphone exists to help everyone
enjoy amazing technology: that’s the
starting point for every decision we make.
Technology plays a vital role in millions
of lives, though many customers find
it confusing and expensive as well as
exciting. No one is better placed than us,
as number one, to help them navigate that.
We will help customers choose, afford
and enjoy technology, for life, playing an
ever more valuable role for customers;
that’s the route to a much more valuable
business, alongside the turnaround of our
UK Mobile business. This strategy drives
the transformation that we started in
2018/19 with its priorities of Omnichannel,
Credit, Services and Mobile enabled
by Capable & Committed Colleagues,
working as One Business, with Stronger
Infrastructure. We have made good
progress in all these areas.
The first ten months of the year was a
story of delivering on our promises and
accelerating the transformation of Dixons
Carphone. In Omnichannel, we started
gaining market share online as well as
in stores; our Group Electricals online
growth was +22% for the year and we
invested in remodelling 121 UK stores
including experience zones and kitchens
in the Nordics. Sales on credit in the UK
grew +27% and we now have 1.2m active
credit customers.
In Services, we carried out over 3.8m
two‑person deliveries and set up or
installed over 1m pieces of equipment.
One set of services that consumers tell us
they value most is in protection. This is a
big strength for us today as we already
have 10m customer service agreements
and in the year, we carried out 1.3m
repairs. We’ve built on that strength
with revamped warranty and insurance
products, with higher customer adoption
to show for it.
In Mobile, we took the difficult but
essential decision to close our small
* See page 202 for full Glossary and definitions
8
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report CHOOSE,
AFFORD,
ENJOY,
FOR LIFE.
9
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Our Strategy
& Vision
Technology plays a more important
role in our lives today than ever.
We provide the vital technology
our customers need, to keep them
connected with friends, loved ones
and colleagues; be more productive,
whether working from home or away;
stay healthy; learn and play.
Customers find this technology
exciting, but also confusing and
expensive, and we know customers
value help to choose, afford and
enjoy technology, right the way
through their lives.
No one is better placed than Dixons
Carphone to help customers do all
this, with the assets, colleagues,
capabilities and scale that we have.
And our strategy sets out to build
on those strengths to help everyone
enjoy amazing technology.
WE HELP
EVERYONE
ENJOY
AMAZING
TECHNOLOGY
10
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report CHOOSE
We help customers choose
the right tech, across the
breadth of our range and
through every channel.
FOR
LIFE
AFFORD
We help customers afford
the tech they want, removing
price as a barrier and spreading
cost through credit.
ENJOY
We help customers
make the most of their
amazing tech through
our unique Services.
11
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Strategic
Priorities
Omnichannel
Across the Group, we are
using our unique omnichannel
strengths to make it easier for
the customer to choose, afford
and enjoy the right technology,
however they want to shop.
Bringing stores and online
together, giving customers the
best of both worlds at scale,
allowing the customer to shop
however they want to shop;
we can do this in ways our
competitors cannot match. We
start with strong foundations
and have made good progress
building on these.
Our European store presence
Stores – flexible, well invested estate
within our omnichannel model
Online — continuing to increase our
share
Our stores must be exciting places
to discover technology, easy places
to buy and be served.
We will continue to go with the
flow of how customers are buying
products and services.
Our network of stores allows our technology
partners to showcase their products in ways
and at a scale that nobody else can match,
making it easy for customers to discover
new and exciting technology.
Through our stores we can give face-to-
face advice from thousands of expert
colleagues, access to our full range online,
demonstrations of new and exciting
products, and more space to the categories
that customers want more of.
This year, we made further progress with
our store investment programme, giving
more space to high growth categories such
as large screen TVs, while putting slower-
moving products online-only.
We have also created experience zones
where customers can see, touch and
interact with amazing technology. We
completed the remodelling of 121 large
stores in the UK. This is slightly behind the
target of 142 set at the start of the year as
the programme was paused due to enforced
store closures.
Electricals saw online revenue growth of
+11% in the 47 weeks to the end of March
before it accelerated rapidly, growing at
+149% over the final five weeks of the year.
Even before Covid-19, we were taking share
online across all our markets.
In UK & Ireland Electricals, we continued
to make it easier for customers to find
what they want through a bigger range,
adding 2,000 SKUs this year without
holding additional stock. We’ve also made
it easier to buy with improved search and
recommendations and increased site speed,
whilst also reducing friction in the customer
journey. We strengthened our price promise
policy this year, making it simpler for
customers to understand and ensuring we
are more trusted on price.
All of this has been done in a smartphone-
first way. We launched our Currys PC World
app this year and it had been downloaded
0.5m times by the year-end, delivering
revenue growth well ahead of our websites
during lockdown.
UK & Ireland
UK & Ireland
Nordics
Nordics
Greece
Greece
Own
Franchise
Total
Own
Franchise
Total
Own
Franchise
Total
428
–
428
247
169
416
75
20
95
12
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Strategic
Priorities
We have also improved our delivery
capabilities, including extending delivery
options and the roll-out of intelligent routing
software that allows us to better plan and
track delivery routes. This led to a 20-point
improvement in our delivery customer
satisfaction scores and allowed us to fulfil
the heightened volumes seen in this channel
through lockdown.
Data is still a big focus, first ensuring
our customer data is secure, and now
looking at more ways to attract more
customers and give existing customers
a better personalised experience. Early
improvements in CRM saw increases in
email conversion and in customers returning
to abandoned baskets, together driving an
+85% increase in online sales attributed to
customer targeting.
In International, we improved our Click
and Collect propositions and rolled out our
customer care centre chatbot. The onset of
Covid-19 and store closures in Greece saw
a big acceleration in online sales. In Nordics,
online sales also grew significantly, even
though our stores remained open. Here,
we were able to trade safely throughout the
crisis by implementing measures including
a contactless payment solution, ‘Drive-in
Collect@store’, special opening hours for at-
risk groups and introducing Live Shopping
to allow customers to get video help from
home.
Omnichannel – bringing stores and online
together in the way customers value and
that makes the most of our strengths
UK & IRELAND ELECTRICALS
Online Revenue
We already know that many of our
customers are omnichannel
shoppers
Our unique omnichannel strengths make it
easier for customers to choose, afford and
enjoy the right technology, however they
want to shop. Online customers can use
stores to access our services including laptop
set-up, repairs and trade-in while having an
easy Order & Collect experience. A customer
in-store can now be sold the full online
range by colleagues equipped with Store
Mode tablets, an experience where NPS is
up to 20pts higher. We saw online in-store
sales growing +64% before Covid-19, an
acceleration on the performance seen in the
first half of the year.
We start with strong foundations, and have
made good progress here, but there is a lot
more to go for in this area. We will continue
to build on our capabilities, as demonstrated
by new innovations like ShopLive - our
personal shopping service by video link
- which brings the best of our stores to
customers through face-to-face advice from
expert store colleagues online. The ShopLive
service was launched in less than four weeks
and already supports over 20,000 customer
conversations each week. No one else can
deliver this experience at scale.
Over the next year we will continue to
improve the omnichannel experience,
making it even easier for customers to find
and buy what they want. We will drive further
extensions of our range, sharpen our focus
on price again and improve availability.
We will also enhance customer experience
through better search recommendations and
the evolution of our app.
22%
Online Share of Business
7ppts
NORDICS
GREECE
20%
3ppts
56%
3ppts
13
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Strategic
Priorities
Credit
Credit is a big opportunity for
us. It is good for customers:
technology is exciting but
expensive, and credit makes the
amazing technology customers
want more affordable. And
customers are happy to have it:
two thirds of market sales in our
category are on some form of
credit and credit customers have
an +18%pts higher satisfaction
score than non-credit customers.
We take our responsibility as
a lender seriously and all our
25,000 frontline colleagues who
sell credit are fully trained and
compliant.
It is also good for us, as credit
customers shop with us more
frequently, spend more with us and
have a significantly higher adoption
rate of services than for non-credit
customers. Credit is good for suppliers
too, as customers are more likely to
trade up to higher value products. Our
credit customers have a lifetime value
double that of cash customers.
Over the year, we built on the strong
foundations established in 2018/19.
Credit adoption is now over 11.2%
(+240bps year on year) in the UK
& Ireland and the number of active credit
customers almost 1.2m (+36% year
on year). Credit sales were £534m (up
+27% year on year). Credit adoption
over the year was higher in-store than
online but online progress closed the
gap towards the end of the year.
Services
At over 29% credit adoption, Greece
is a leading example of the potential
for credit. In Nordics, where credit
penetration lags the UK but we see
equivalent opportunity, there was also
progress with credit sales growing
slightly year on year.
We are now developing a new credit
offer and a new IT platform to build
on these foundations. This will give
us improved and easier customer
journeys, more personalised offers, and
improved acceptance rates - providing
a further tailwind to credit sales growth.
Credit is a big opportunity where we
have significant headroom for growth.
Customers value our help to get
the most out of their products
for life through our services.
These services include set-up
and connect, protect, maintain,
repair, trade-in and upgrade. We
can provide this range of services
at scale in ways no competitor
can match.
In the UK & Ireland, we set up or
installed over 1m products and repaired
1.3m products including 570,000 mobile
phones and 360,000 white goods this
year. We delivered 3.8m products
through our own two-person delivery
network.
We continued to improve our services
propositions with the introduction of a
new set-up option (Computing Set-up
& Personalise), in-store repairs (Tech
Treatments) and protection product
(Care & Repair).
Technology is expensive, and 69% of
customers tell us they want protection
against the risk of breakdown. This is
already a big strength for us today, with
our 10m warranty agreements. We are
making our protection products market-
leading, fit for the future, and better
value for money. Our new Care & Repair
proposition, which launched in the UK
UK Credit Customers - 2019/20
1,175,000
2018/19
863,000
UK Credit Sales - 2019/20
£534m
2018/19
£422m
14
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Strategic
Priorities
in Q4 as planned, gives customers the
flexibility and transparency they value in
this core service.
to happier customers who enjoy their
technology more and are more likely to
shop with us again in the future.
This protection offer is possible
because of our unique repair
capabilities. No one can match what we
can offer customers here, in-store, in-
home or via our Newark repair lab and
in the year, we carried out over 1.3m
repairs.
Our trade-in capabilities not only help
reduce the cost of new technology for
customers but puts to good use old
technology by recycling it or distributing
it to other markets. This service also
brings customers back to us for their
next purchase.
Our services, at scale, make the most
of what we uniquely have, giving the
customer a reason to shop with us
over others. Getting this right leads
Even though around one third of our
UK & Ireland Electricals sales have
a paid-for service as part of the total
proposition, we are only in the foothills
of being able to join these propositions
together for customers. We know
that customers’ technology needs will
change over time, and we want to help
customers make the most of amazing
technology - helping them stay in touch
with loved ones, helping them keep fit
and healthy, entertained and productive
- at all stages of life.
A good example of where we can start
to join together all of our services is the
Nordics “Customer Club”. This was
launched in Sweden in October 2016
and it successfully grew to over 1m
members by December 2017. This year,
we rolled this out to Denmark, Finland
and Norway and have now attracted
well over 3m members. During the
second half of the financial year, these
club members contributed one third
of our Nordics revenue, also giving us
a wealth of data that we can use to
improve our proposition for both Club
and non-Club customers.
These customers benefit from a
differentiated value proposition
including permanent discounts on
accessories, weekly and monthly
exclusive deals, VIP shopping,
extended returns policies and,
increasingly, some great collaborations
with streaming services. These
customers show increased customer
satisfaction, while purchasing more
frequently and at better margin,
generating a higher lifetime value for us.
3.8m two-person
deliveries
>250k laptop
set-ups
Mobile insurance
almost 1m
customers
Maintenance
Health checks
1m installations
in homes
10m Warranty
agreements
Repair >1.3m
products
Inc repair
>550k phones
Shortening
product
replacement cycles
Easy to Shop
To enjoy technology, it must be
made easy. We are obsessed
with making it easy for
customers: easy to discover,
choose and afford the right
technology solution; and easy to
enjoy their technology and get
the most out of it for life.
We are building a reputation as a reliable
place to shop, one where customers
trust us to keep the promises we make.
The significant improvements made to
our customer journey drove an +11pts
increase in our UK & Ireland Electricals
NPS during the year. Our International
businesses grew their already
impressive “Happy or Not” scores.
This focus does not just apply to the
sales process. Building deeper, more
trusted relationships requires us to
keep our promises at all stages of the
customer journey. We know, particularly
in areas like returns and support, that
this is not as easy as we would like and
need it to be.
There is much more we can do to
improve the customer experience,
and Covid-19 has shown us where
some pain points are. An example is
our contact centre operations. Over
the course of lockdown, the average
number of customer calls received
each week significantly increased while
the number answered dropped as
our contact centres were closed and
colleagues were working from home
across multiple different technology
platforms. We reacted quickly by
improving home-working systems,
setting up temporary call centres in
Sweden and Norway and moving more
than 300 UK store colleagues to contact
centres and training and upskilling
them. We have reduced call volumes by
improving digital solutions, increased
the productivity and capacity of our
call centres and moved a lot closer to
meeting our internal targets.
15
Delivery & InstallationSet up & ConnectivityProtectMaintainRepairTrade-in & UpgradeDixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Strategic
Priorities
Mobile
As the single-most important
piece of technology for most
customers, mobile remains
central to our vision.
Customers are changing how they
buy their technology and so we
must change with them, and we
are underway with a fundamental
transformation to do so. As expected,
our Mobile performance was
challenging as customers continue
to change the way they buy mobile
devices and connectivity, replacing their
handsets less often and buying them
separately or as part of more flexible
bundles.
Our business carries the burden of
volume commitments on our networks
contracts and a cost base geared
to post-pay. We have reacted by
renegotiating all our legacy network
contracts, revamping our own mobile
offer to address the trend of unbundling
handsets from connectivity and
consolidating duplicate cost bases.
The legacy volume commitments to the
mobile network operators will continue
to roll off during 2020/21 and the
Group will no longer be encumbered by
historic sales volume targets.
Our new mobile offer will better reflect
what customers want: flexibility,
transparency, and value. This will
include deals they can’t find anywhere
else, nationwide face-to-face advice,
the best range of handsets from the
biggest brands and a wide range of
tariffs and networks, underpinned by a
market-beating price promise. But this
has been delayed slightly as we had to
Trusted independent advice
pause system development during
the crisis.
The closure of our UK standalone
Carphone Warehouse stores
announced in March was a difficult,
but necessary decision. Mobile
has been holding back the Group
and this was an essential next step
in the turnaround of the Mobile
business to return this part of
the business to profitability. We can
now focus on creating a successful,
sustainable mobile category. Our 3-in-1
Currys PC World stores, which are 20
times larger than Carphone Warehouse
standalone stores, allow customers to
see, touch and play with technology
(electricals as well as mobile, services
as well as products) and receive trusted
independent advice from 17,000 expert
store colleagues, all in one place.
Unfortunately, Covid-19 has impacted
the Mobile business. Compared to
our Electricals business, our Mobile
business has a much smaller share
of revenue from online operations
and is running on a platform that has
deliberately seen little investment over
the last two years as it will be integrated
into our new platform. Consequently, it
has not seen the same sales transfer to
online as Electricals during lockdown.
We are still on course to eliminate
trading losses as we remove the costs
of running the historic Mobile systems
and consolidate duplicate cost bases
into One Business. However, due to the
delay in transformation, we expect this
to happen six to twelve months later
than originally planned.
25,000
EXPERT STORE
COLLEAGUES
16
An even more
connected future
We will provide an
offer that reflects
how customers are
buying technology
today and that goes
well beyond the
mobile phone.
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Core
Enablers
Our vision and strategy will be delivered through three core enablers: capable and committed
colleagues, working in one joined up business and strong infrastructure.
1
2
3
CAPABLE & COMMITTED COLLEAGUES
Capable and committed colleagues are our greatest advantage
Capable and committed colleagues are our
greatest advantage. We are building capabilities
that are important for the long term in areas
such as data, information security, analytics,
financial services, digital, CRM and connectivity.
We have invested in learning for all our
colleagues and, in September, we opened our
new training facility, The Academy@Fort Dunlop.
This will have an intake of over 6,000 colleagues
annually and will provide new colleagues with an
additional 400,000 hours of training a year.
We also extended our award-winning colleague
shareholder scheme to almost 7,000 newly-
eligible colleagues in the year, granting each
of them at least £1,000 worth of shares,
which vest three years from the award date.
Over 38,000 colleagues across the Group
have received an award under the Colleague
Shareholder Scheme launched in 2019. This is
a crucial lever of engagement and alignment
behind our common vision. Our colleagues are
acting more like owners, because they are. It
gives us all a stake in the business’s success
and positions us as a progressive employer.
In collaboration with 6,500 colleague
contributors across the business, we recently
launched our new culture and values. Many
world-class businesses have shown the power
of strong culture and values and we strongly
believe in them here.
The senior leadership team has also been
strengthened: Paula Coughlan joined as
Chief People Officer at the end of last year;
Erik Sønsterud was promoted to CEO of
International, Mark Allsop is our new Chief
Operating Officer having joined in December
from Merlin Entertainments plc; Lindsay
Haselhurst, previously of Kingfisher plc, joined
in January to become our new Chief Supply
Chain Officer; and Ed Connolly joined in March
from John Lewis Partnership as our new Chief
Commercial Officer.
WORKING AS ONE BUSINESS
Joining up the business for customers and being better joined up
behind the scenes.
The closure of our standalone Mobile shops
in the UK gives us greater visibility over a
significant portion of the £200m of gross annual
cost savings that we are targeting by the end
of 2021/22.
We have made further progress in becoming
One Business that is a clearer, simpler and
faster place to work. As we move towards
being one truly joined up business, this means
a joined up customer experience, so customers
get the full benefit of everything we have to
offer, and a joined up business behind the
scenes, realising the cost benefits of moving to
One Business.
In the year we made savings through
outsourcing contact centres, decommissioning
40 legacy IT applications, restructuring the
head office teams, re-gearing some store
leases and making many efficiencies in cost
areas such as supply chain.
STRONGER INFRASTRUCTURE
A big part of infrastructure is better IT; our IT will go from being a
constraint, to an enabler, to an accelerant for us.
The introduction of new colleague tools has
further improved our in-store experience.
Our Store Mode tablets have, enabled
conversations with customers away from fixed
terminals and given customers access to our
full range online. Our new zero-contact Drive
Thru Order & Collect proposition has driven a
closer connection between online and stores.
A new pricing platform has helped us ensure
we are always cost competitive, whilst in the
Nordics, we went live with the first phase
of our SAP-based Next Generation Retail
platform.
We deliberately paused spend on our large UK
re-platforming programme as Covid-19 began
and we have used the time during the crisis
to ensure we get this important initiative right,
first-time. During the crisis we successfully
pivoted to a new more agile approach for
technology innovation and delivery which
will now continue. This saw us launch our
ShopLive online personal shopping service in
less than four weeks and which already now
supports over 20,000 customer conversations
each week.
Technology infrastructure is still a constraint
for the business, but clear progress is being
made and this will accelerate as investment
in this area is prioritised to ensure we help
everyone enjoy amazing technology.
17
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report WE HELP
EVERYONE
ENJOY
AMAZING
TECHNOLOGY
18
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report 19
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Principal Risks to Achieving
the Group’s Objectives
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 has developed and continues to evolve robust risk management processes,
and risk management is integrated into business decision-making. The Group’s approach to risk management is set out in
the Corporate Governance Report on pages 56 to 67. The risks are linked to the strategic priorities on pages 12 to 16. The
principal risks and uncertainties, together with their potential, impacts and changes in net risk since the last report, are set
out in the tables below along with an illustration of what is being done to mitigate them.
Risks and potential impacts
1 Covid-19
What is the risk?
Covid-19 has had an impact
across the Group’s business in
every operational function and
geography in order to comply
with government instructions.
2 Dependence on key suppliers
What is the risk?
The Group is dependent on
relationships with key suppliers
to source products on which
availability may be limited.
3 Future EU Relationship
What is the risk?
Uncertainty over the outcome
of the negotiations on future
relationship with EU post the
conclusion of the Transition
Period on 31 December 2020.
Risk owner:
Group Chief Executive
How we manage it
A range of initiatives grouped under three ‘Big Priorities’ –
Keeping our Colleagues and Customers Safe, Helping our
Customers and Securing Our Future.
What is the impact?
– Reduced revenue and
profitability
– Deteriorating cash flow
– Colleague / customer
illness or loss of life
Risk owner:
Chief Commercial Officer
What is the impact?
– Reduced revenue and
profitability
How we manage it
Ensuring alignment of key suppliers to Group strategic
priorities.
– Deteriorating cash flow
– Reduced market share
Continuing to leverage the scale of operations to
strengthen relationships with key suppliers and maintain a
good supply of scarce products.
Working with suppliers to ensure availability of products
through the Covid-19 crisis in order to help our customers.
Broadening the range of suppliers to support Dixons
Carphone’s Extended Range offerings.
Risk owner:
Chief Supply Chain Officer
What is the impact?
– Reduced revenue and
How we manage it
– Continuous monitoring of developments.
profitability
– Brexit Steering Committee and Crisis Management
– Deteriorating cash flow
Committee.
– Reduced market share
– Strategic and business planning.
– Contingency planning to address potential operational
impacts changes.
4 Business Transformation
What is the risk?
Failure to respond with a business
model that enables the business
to compete against a broad range
of competitors on service, price
and / or product range.
Failure to optimise digital
opportunities.
Failure to respond to changes
in consumer preferences and
behaviours.
Risk owner:
Group Financial Officer
What is the impact?
– Reduced revenue and
How we manage it
– Continued strengthening of Executive Committee and
profitability
leadership team.
– Deteriorating cash flow
– Transformation Programme office established and
– Reduced market share
delivering key strategic objectives.
– Future Mobile Strategy.
– Development of customer credit propositions.
– Development of e-commerce capabilities.
– Enhancement of data analytics capabilities.
Risk category:
Strategic
Changes since
last report
This risk is new.
Risk category:
Strategic
Changes since
last report
This risk has
remained stable
over 2019/20.
Risk category:
Strategic
Changes since
last report
This risk initially
decreased
after Brexit
was concluded
but is trending
upwards as the
deadline for the
agreement of post
transition period
arrangements
approaches.
Risk category:
Strategic
Changes since
last report
This risk has
remained
unchanged over
2019/20. Progress
has been made in
a number of areas,
although elements
of Transformation
delivery have been
rephased due
to the Covid-19
response.
20
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report 5 Non-compliance with Financial Conduct Authority (‘FCA’)
and other financial services regulation
Risk owner:
Chief Customer Officer
What is the risk?
Failure to manage the business
of the Group in compliance with
FCA regulation and other financial
services 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.
What is the impact?
– Reputational damage
– Financial penalties
– Reduced revenues and
profitability
– Deteriorating cash flow
– Customer
compensation
How we manage it
– Board oversight and risk management structures
actively monitor compliance and ensure that the
Group’s culture puts good customer outcomes first.
– Senior Manager and Certification Regime implemented.
– FCA Compliance Committee and other internal
governance structures provide oversight, monitoring
of compliance, adherence to policy and monitoring
of performance and implementation of any required
mitigating actions.
– Control structures to ensure appropriate compliance
(e.g. undertaking quality assurance procedures for
samples of mobile phone sales, and complaints) and to
react swiftly should issues arise.
– Compliance review of the operation and effectiveness
of compliance standards and controls, with the
development of control improvement plans where
required.
– Compliance training programmes for colleagues.
Risk owner:
Chief Customer Officer
6 Data Protection
What is the risk?
Major loss of customer,
colleague or business
sensitive data.
Adequacy of internal systems,
policy, procedures and
processes to comply with the
requirements of EU General
Data Protection Regulation
(GDPR).
7 IT systems and infrastructure
What is the risk?
A key system becomes
unavailable for a period of
time.
What is the impact?
– Reputational damage
How we manage it
– The operation of a Data Management Function to
– Financial penalties
– Reduced revenue and
profitability
– Deteriorating cash flow
– Loss of competitive
advantage
– Customer compensation
ensure compliance with GDPR-compliant operational
processes and controls.
– The operation of a Data Protection Office to ensure
appropriate governance and oversight on the Group’s
data protection activities. Control activities operate
over management of customer and employee data in
accordance with the Group’s data protection policy
and processes.
– Investment in information security safeguards and
IT security controls and monitoring.
Risk owner:
Chief Operating Officer
What is the impact?
– Reduced revenue and
How we manage it
– Ongoing IT transformation to align IT infrastructure to
profitability
Group strategic priorities.
– Deteriorating cash flow
– Peak planning and preparation to ensure system
– Loss of competitive
advantage
– Restricted growth and
adaptability
– Reputational damage
stability and availability over high-demand periods.
– 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.
Risk category:
Regulatory
Changes since
last report
This risk has
remained stable
over 2019/20.
Risk category:
Regulatory
Changes since
last report
Further progress
has been made in
managing this risk,
although the risk
has temporarily
increased as
the business
responded to
Covid-19.
Risk category:
Technology
Changes since
last report
This risk has
remained stable
over 2019/20.
21
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Principal Risks to Achieving
the Group’s Objectives continued
8 Information security
What is the risk?
Vulnerability to attack,
malware, and associated
cyber risks.
9 Health and Safety
What is the risk?
Failure to effectively protect
customers and / or colleagues
and / or contractors from
injury or loss of life.
10 Business Continuity
What is the risk?
A major incident impacts the
Group’s ability to trade and
business continuity plans are
not effective, resulting in an
inadequate incident response.
Risk owner:
Chief Operating Officer
What is the impact?
– Reputational damage
How we manage it
– Investment in information security safeguards, IT
– Financial penalties
– Reduced revenue and
profitability
– Deteriorating cash flow
– Customer compensation
– Loss of competitive
advantage
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, set up with
responsibility for oversight, co-ordination and
monitoring of information security policy and risk.
– Information security policy and standards defined and
communicated.
– Training and awareness programmes for employees.
– Audit programme over key suppliers’ information
security standards.
– Introduction of enhanced security tooling.
– Ongoing programme of penetration testing.
Risk owner:
Chief Operating Officer
What is the impact?
– Employee / customer
How we manage it
– Covid-19 actions to protect colleagues in the workplace
illness, injury or loss of life
and customers in the retail estate.
– Reputational damage
– Group Health and Safety strategy.
– Financial penalties
– Legal action
– Comprehensive Health and Safety policies and
standards supporting continued improvement.
– Health and Safety management / governance
committee.
– Operational Health and Safety teams located across
business units.
– Risk assessment programme covering retail, support
centres, distribution and home services.
– Incident reporting tool and process.
– 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.
Risk owner:
Chief Operating Officer
What is the impact?
– Reduced revenue and
How we manage it
– Business continuity and crisis management plans in
profitability
place and tested for key business locations.
– Deteriorating cash flow
– Disaster recovery plans in place and tested for key IT
– Reputational damage
– Loss of competitive
advantage
systems and data centres.
– Crisis team appointed to manage response to significant
events.
– Major risks insured.
Risk category:
Risk Operational
Changes since
last report
This risk decreased
over the 2019/20
period as improved
InfoSec tools and
controls have been
implemented. The
risk temporarily
increased during
transition to
homeworking
arrangements
in response to
Covid-19.
Risk category:
Operational
Changes since
last report
This risk has
been trending
downwards
during 2019/20
but increased
as potential
Covid-19 threat
to the welfare of
customers and
colleagues.
Risk category:
Operational
Changes since
last report
This risk has
remained stable
over 2019/20.
22
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report 11 Tax liabilities
What is the risk?
Crystallisation of potential
tax exposures resulting from
legacy corporate transactions,
employee and sales taxes
arising from periodic tax audits
and investigations across the
various jurisdictions in which
the Group operates.
12 Product Safety
What is the risk?
Unsuitable procedures and
due diligence regarding
product safety, particularly
in relation to OEM sourced
product, may result in poor
quality or unsafe products
provided to customers which
pose risk to customer health
and safety.
Risk owner:
Group Chief Financial Officer
What is the impact?
– Financial penalties
How we manage it
– Board and internal committee oversight that actively
– Reduced cash flow
– Reputational damage
monitors tax strategy implementation.
– Appropriate engagement of third-party specialists to
provide independent advice where deemed appropriate.
Risk owner:
Chief Operating Officer
What is the impact?
– Financial penalties
How we manage it
– Factory audits conducted over OEM suppliers.
– Reduced cash flow
– Technical evaluation of OEM products prior to
– Reputational damage
production.
– Product inspection of OEM products prior to shipment.
– Monitoring of reported incidents.
– Safety governance reviews conducted by internal by
Technical and Business Standards teams.
– Establish protocols and procedures to manage product
recalls.
Risk owner:
Group Chief Financial Officer
13 Long term and diversification of funding
What is the risk?
Ensuring that the nature
and structure of the Group’s
committed funding activities
remain optimal.
What is the impact?
– Restricted growth and
How we manage it
– Existing unsecured credit/loan facilities.
adaptability
– Securing additional £266m revolving credit facility to
– Reputational damage
ensure headroom through Covid-19 crisis.
– Regular review of the long term and short-term cash
flow projections for the business.
– Regular review of the Group’s capital structure.
Risk category:
Financial
Changes since
last report
The Group
continues to
co-operate with
HMRC in relation
to open tax
enquiries. The
risk has remained
stable over
2019/20.
Risk category:
Operational
Changes since
last report
This risk has
remained stable
over 2019/20.
Risk category:
Financial
Changes since
last report
The risk increased
due to uncertainty
caused by
Covid-19 but was
stabilised as new
facilities were put
in place increasing
liquidity to over
£1bn following the
2019/20 year end.
23
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Performance
Review
2019/20 Financial Performance Review
During the period, the Group has adopted IFRS 16 which requires lease liabilities and corresponding right-of-use assets to
be recognised on the balance sheet. The Group has adopted IFRS 16 using the modified retrospective approach, therefore
prior year comparative numbers have not been restated.
This financial year is reported on a 53-week basis. The 53rd week has a small impact on sales, which is highlighted where
appropriate but an immaterial impact on profits.
To aid understanding of our performance through the year, here we present like-for-like and online sales growth for
Electricals both pre and post Covid-19:
Like-for-like growth
UK&I Electricals
– UK&I Online growth
International
– International Online growth
Nordics
– Nordics Online growth
Greece
– Greece Online growth
Electricals
Electricals Online growth
UK & Ireland Electricals
Revenue
Statutory EBIT
Less IFRS 16 impact
Add back other adjusting items
Adjusted EBIT*
Adjusted EBIT margin
47 Weeks to
21 March
3%
10%
3%
14%
3%
14%
5%
19%
3%
11%
5 Weeks to
52 Weeks to
25 Apr
-16%
166%
16%
114%
24%
98%
-40%
597%
-3%
149%
25 Apr1
1%
22%
4%
22%
4%
20%
2%
56%
2%
22%
Reported
% change
Currency neutral
% change
Like-for-Like
% change
1%
1%
1%
-10%
-10%
2019/20
£m
4,538
119
(2)
45
162
3.6%
2018/19
£m
4,475
94
-
86
180
4.0%
*See page 202 for further information on our alternative performance measures (APMs). This includes definitions, purpose, changes to the prior year, and reconciliation
to the nearest IFRS measures.
Sales increased +1%, driven by like-for-like sales +1% with slight negative impact from store closures and +1% benefit
from the 53rd week. Like-for-like sales grew +3% across the first 11 months of the year before declining -16% in April due
to stores closing from 24 March. Across the year, online sales grew +26% and contributed 35% of sales, +7%pts higher
than last year. There was a sharp acceleration in this growth when stores were closed in April as online sales grew +166%
from +10% across the first 11 months.
Sales were very strong in large screen TVs, computing, gaming and smart tech across the whole year, as were sales of
small domestic appliances where our extended ranges and experience zones drove performance. White goods saw solid
performance across most of the year, but sales were impacted by the Covid-19 lockdown.
The market declined -1.4% over the year as a whole, with Currys PCWorld gaining +0.7% of share, with market share
gains both in stores and online. To the end of February 2020, the share gain was +1.0%, however, our market share
declined by -1.3% in March and April 2020 as some of our competitors were able to keep stores open as they were part
of broader businesses deemed to be essential retailers. Encouragingly, over this period our online market share increased
significantly as customers valued the breadth and depth of range sold online.
Gross margin declined -170bps (1H: -40bps / 2H: -280bps) including a c.-110bps (1H: na / 2H: -200bps) impact from
Covid-19 due to the accelerated shift towards online, delay of product launches, negative impact from not hitting supplier
volume targets and associated end of range provisions. The remaining movement of -60bps (1H: -40bps / 2H: -80bps) was
1 Like-for-like calculated and disclosed on 52-week basis for comparability purposes
24
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report
due to the continuing expected growth of online as a proportion of our sales, continued investment in our unambiguous
price promise and our improved delivery proposition.
Operating costs improved relative to sales driven by head office team restructuring, contact centre outsourcing,
renegotiated rent deals and government schemes that reduced rates and colleague costs.
As a result, adjusted EBIT reduced -10% to £162m in 2019/20, from £180m in 2018/19. We estimate that without the
impact of Covid-19 our operating margins would have been flat for the year, driving profit growth on an increased revenue
base.
The adoption of IFRS 16 increased EBIT by £2m in the year. Other adjusting items of £45m were lower by £41m year
on year with current year costs relating to the strategic change programmes and ongoing amortisation of acquisition
intangibles recognised during the 2014 merger and impairment losses. Statutory EBIT increased to £119m in 2019/20 from
£94m in 2018/19.
Nordics
Revenue
2019/20
£m
3,573
2018/19
£m
3,501
Reported
% change
Currency neutral
% change
Like-for-Like
% change
2%
6%
4%
Statutory EBIT
115
100
Less IFRS 16 impact
Add back other adjusting items
Adjusted EBIT*
Adjusted EBIT margin
(10)
11
116
3.2%
-
12
112
3.2%
4%
10%
*See page 202 for further information on our alternative performance measures (APMs). This includes definitions, purpose, changes to the prior year, and reconciliation
to the nearest IFRS measures.
Nordics delivered another year of sales and profit growth. On a currency neutral basis, this business has almost doubled
sales over the last eight years and adjusted EBIT growth has averaged +11% over the last three years. Currency neutral
revenue grew by +6%, with strong growth in all territories. The 53rd week benefitted sales growth by +1%. Reported
revenue was +2% year-on-year, the difference from local currency due to the relative weakening of Nordic currencies.
Like-for-like revenue grew by +4% with particularly strong performance in March and April as the majority of the stores
continued to trade.
Online sales grew +22% during the year and contributed 19% of sales, +3%pts higher than last year. Online saw a marked
acceleration in April when online sales grew +98% from +14% over the first 11 months of the year.
Across the year, there was an uplift in built-in kitchen appliances on the back of our increased emphasis on the kitchen
category while headphones, wearables and cordless vacuums all sold well driven by innovation and new product launches.
Market share in the Nordics grew again, up +0.5% to 26.0%, with share gains across most categories.
Gross margin was flat year-on-year, as the impact of weaker currency was offset by commercial initiatives including
services, subscriptions, peripherals and accessories.
Operating costs ratio remained flat relative to sales due to cost efficiencies and a small benefit of weaker currency offset by
higher branch costs.
The resulting adjusted EBIT of £116m was up +4% year-on-year in reported terms, and +10% year-on-year in local
currency. Every market saw EBIT growth in local currency.
The impact of IFRS 16 adoption was an increase in EBIT of £10m. Other adjusting items relate to amortisation of
acquisition intangibles.
As a result of the above factors statutory EBIT increased to a profit of £115m in 2019/20 from a profit of £100m in 2018/19.
25
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report
Performance
Review continued
Greece
Revenue
Statutory EBIT
Less IFRS 16 impact
Add back other adjusting items
Adjusted EBIT*
Adjusted EBIT margin
2019/20
£m
470
20
(1)
1
20
4.2%
2018/19
£m
459
21
-
-
21
4.6%
Reported
% change
Currency neutral
% change
Like-for-Like
% change
2%
3%
2%
-4%
-1%
*See page 202 for further information on our alternative performance measures (APMs). This includes definitions, purpose, changes to the prior year, and reconciliation
to the nearest IFRS measures.
Sales in local currency increased +3%, with like-for-like sales +2% over the year. Store closures from the 18 March to 10
May meant that like-for-like sales dropped from +5% over the first 11 months of the year to -40% in April.
Across the year, online sales grew +60% and contributed 8% of sales, with a significant acceleration in April when online
grew +597%.
Products that sold well during the year included TVs, laundry and cooling equipment.
This sales performance resulted in market share increasing to 35% (2018/19: 34.6%).
Gross margin was up +10bps over prior year due to better trading offset by higher distribution costs.
Operating costs increased due to investments in IT services and additional depreciation associated with recent store
developments.
Overall EBIT impact from Covid-19 was slightly negative, as a result of lost gross profit, offset by reduced store costs
due to rent reductions in March and April and lower payroll as employees’ contracts were suspended with Government
support.
The total adjusted EBIT was £20m, down -4% year-on-year in reported terms and -1% on a neutral currency basis.
The adoption of IFRS 16 increased EBIT by £1m while costs associated with the strategic change programme totalled £1m
in the year, resulting in statutory EBIT of £20m.
UK & Ireland Mobile
Revenue
Statutory EBIT
Less IFRS 16 impact
Add back mobile network debtor revaluations
Add other adjusting items
Adjusted EBIT*
Adjusted EBIT margin
2019/20
£m
1,589
2018/19
£m
1,998
Reported
% change
Currency neutral
% change
Like-for-Like
% change
-20%
-20%
na2
(282)
(438)
(7)
47
138
(104)
-6.5%
-
41
447
50
2.5%
na
na
*See page 202 for further information on our alternative performance measures (APMs). This includes definitions, purpose, changes to the prior year, and reconciliation
to the nearest IFRS measures.
2 During this period, the Group closed its 531 standalone Carphone Warehouse shops in the UK. As a result of these closures our UK&I Mobile sales will no longer
be disclosed on a like-for-like basis.
26
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report
Revenue decreased by -20% reflecting the continuing
challenges in the 24-month postpay market and our
decision in March 2020 to close the Carphone Warehouse
standalone stores in the UK.
The decrease in adjusted EBIT to a £104m loss in 2019/20
from a £50m profit in 2018/19 mostly reflects the reduced
sales of our constrained offer on a largely fixed legacy cost
base.
The implementation of IFRS 16 has resulted in a £7m
increase in EBIT.
Cash flow
Free cash flow*
Adjusted EBIT
Depreciation and amortisation
Working capital
Capital expenditure
Taxation
Interest
Other
In the year the net decrease in the network commission
receivables and contract assets was £181m as a result of
£47m negative out of period network debtor revaluations
and £1,139m cash received, offset by £995m of new
capitalisation and £10m of other movements.
Free cash flow before exceptional
items
Exceptional items
Free cash flow
2019/20
£m
2018/19
£m
194
128
108
(191)
(20)
(31)
-
188
(79)
109
363
146
(17)
(166)
(45)
(30)
9
260
(107)
153
The negative revaluation of £47m (2018/19: negative
revaluation of £41m) was driven by three factors: Regulatory
impacts causing total consumer spend reduction and end
of contract notifications; changes in customer behaviour
driven by Covid-19 and impacts from the closure of the UK
standalone Mobile stores. These are exceptional events
and we believe there will be no further significant reversal
of revenue in future periods. Out of period revaluations
are excluded from the Group’s alternative performance
measures as explained further on page 202.
Other adjusting items of £138m predominantly reflected
the costs associated with the closure of the UK Carphone
Warehouse standalone stores, redundancies and claims
from a small proportion of customers who believe they were
mis-sold Geek Squad mobile phone insurance policies in
the past.
Statutory EBIT has improved to a loss of (£282m) from a
loss of (£438m).
Finance costs
Statutory net finance costs have increased from £36m to
£112m year-on-year primarily as a result of interest on
newly recognised lease liabilities following the adoption of
IFRS 16. Adjusted net finance costs were £4m higher than
last year at £28m, mainly driven by costs associated with
the increased debt facilities (2018/19: £24m).
Tax
The full year adjusted effective tax rate at 25% was higher
than the prior year rate of 21% due to a reduction in the
Group’s total adjusted profits for the year and the impact
of different tax rates in the UK and overseas on the mix
of those profits, together with the impact of prior period
adjustments.
*See page 202 for further information on our alternative performance measures
(APMs). This includes definitions, purpose, changes to the prior year, and
reconciliation to the nearest IFRS measures.
Free cash flow was an inflow of £109m (2018/19: £153m).
Adjusted EBIT decreased for the reasons described above.
Depreciation and amortisation in the year decreased by
£18m due to the reduced depreciation on assets fully
impaired in the prior year.
The Group benefited from a working capital inflow of £108m
(2018/19: -£17m), this was largely as a result of £134m
network debtor unwind in the year (2018/19: £219m).
Capital expenditure was £191m, an increase of £25m
compared to the prior year reflecting the investment in our
UK IT infrastructure and store estate.
Taxation cash flows were lower than prior year reflecting
lower profitability in the UK & Ireland and tax cash refunds
during the period.
Exceptional items predominantly related to strategic change
programmes and payment of previously provided data
incident costs.
A reconciliation of cash generated from operations to
free cash flow is presented in note A9 to the Financial
Information.
Funding
Free cash flow
Dividends
Net issue of new shares and purchase
of own shares
Pension contributions
Other items
2019/20
£m
2018/19
£m
109
(78)
(12)
(46)
8
(19)
(265)
(284)
153
(116)
–
(46)
(7)
(16)
(249)
(265)
*See page 202 for further information on our alternative performance measures
(APMs). This includes definitions, purpose, changes to the prior year, and
reconciliation to the nearest IFRS measures. The Group’s net debt APM does
27
Income statement – Discontinued operations
The current year discontinued operations charge of £2m
relates to a change in provisions for potential payments
under warranties for legacy European Carphone operations.
Movement in net debt
Opening net debt
Closing net debt*
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report
Performance
Review continued
not have a direct IFRS equivalent measure. This has been reconciled back to the
statutory balance sheet within the financial information.
Mobile tangible, intangible and acquisition related assets
fully impaired at the prior year end.
As at 2 May 2020, the Group had net debt of £284m
(2018/19: £265m). A reconciliation of net debt is presented
in note A10 to the financial information. Free cash flow
was an inflow of £109m (2018/19: inflow of £153m) for the
reasons above.
Of the free cash flow, £78m was returned to shareholders
in the form of dividends. This was the payment of the prior
year’s final dividend and the interim dividend for 2019/20.
The Board has decided not to pay a final year dividend for
the current year. The employee benefit trust acquired £12m
of shares to satisfy share awards to colleagues.
Pension contributions of £46m are consistent with the prior
period, and in line with the current agreement with the
Trustees of the fund.
Statutory Cash flow statement
Loss before interest and tax –
continuing operations
Loss before interest and tax –
discontinued operations
Depreciation and amortisation
Impairments
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
Interest paid
Capital repayment of lease
liabilities
Other financing cash flows
Cash flows from financing
activities
2019/20
£m
2018/19
£m
(28)
(223)
(2)
367
64
235
(53)
(14)
174
347
72
(70)
583
286
(3)
(191)
2
(192)
(78)
(106)
(219)
20
(1)
(166)
17
(150)
(116)
(23)
(8)
(62)
Working capital cash inflow on a free cash flow basis was
£155m (2018/19: £24m) as explained above. The remaining
£80m increase in statutory working capital was mainly due
to the group adopting IFRS 16 (free cash flow is shown
excluding IFRS 16) resulting in a £56m increase and £43m
increase due to lower provisions, partially offset by share
based payment charges.
Other operating cash flows primarily relate to pension
contributions and taxation cash flows.
The increase in capital repayment of lease liabilities relates
to the adoption of IFRS 16. Prior year relate solely to capital
repayments on finance leases under IAS 17.
Interest paid relates to interest on borrowings and lease
liabilities.
Other financing cash flows related to increased use of
the revolving credit facility in the year offset by shares
purchased in the period to satisfy the colleague share
scheme. Prior year other financing cash flows related to
reduction in usage of the revolving credit facility.
Balance sheet
Goodwill
Other fixed assets
Network commission receivables and
contract assets
Working capital
Net debt*
IFRS 16 leases*
Pension
Tax & other
2 May 2020
£m
27 April 2019
£m
2,803
1,823
616
(795)
(284)
(1,359)
(550)
26
2,280
2,840
740
797
(956)
(265)
-
(579)
63
2,640
*See page 202 for further information on our alternative performance measures
(APMs). This includes definitions, purpose, changes to the prior year, and
reconciliation to the nearest IFRS measures. This includes a reconciliation of the
above working capital balance to the statutory balance sheet. The IFRS 16 leases
relate to the incremental impact of leases brought on balance sheet due to the
adoption of IFRS 16. For comparability purposes this excludes leases that were
previously on balance sheet classified as finance leases under IAS 17.
(383)
(209)
Goodwill decreased in the period as a result of revaluation
of foreign currency goodwill in Nordics operations.
Increase / (decrease) in cash
and cash equivalents
8
(73)
The movements in statutory loss before interest and tax,
capital expenditure and dividend cash flows are for those
reasons previously discussed in this report.
Depreciation and amortisation in the current year includes
£217m of depreciation on newly recognised right-of-use
assets following the adoption of IFRS 16 and £25m of
amortisation of acquisition related assets. The prior year
includes depreciation and amortisation on UK & Ireland
Other fixed assets increased by £1,083m primarily as a
result of newly recognised right-of-use assets following
the adoption of IFRS 16 in the year of £1,114m (net of
depreciation).
Network commission receivables and contract assets
decreased by £181m as the scale of our mobile business
reduced resulting in a net cash inflow, as well as a negative
£47m out of period network debtor revaluation. Out of
period network debtor revaluations are excluded from the
Group’s APMs as further detailed on page 202.
28
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report
Working capital increased by £161m as a result of the timing
of payments around year end due to the financial close
being a week later than prior year.
Net debt increased by £19m due to working capital
outflow caused by lower sales, offset by reduced capital
expenditure and deferral of taxes and rent.
Tax and other decreased as a result of a reassessment of
the deferred tax asset position due to the loss in year.
Comprehensive income / changes in equity
Total equity for the Group decreased from £2,640m to
£2,280m in the period, driven by the statutory loss, the loss
on retranslation of overseas operations of £39m, dividend
payments of £78m and the actuarial loss (net of taxation)
on the defined benefit pension deficit for the UK pension
scheme of £3m.
Following the adoption of IFRS 16 a £37m charge has
been taken to reserves reflecting the impact of transitional
impairments net of taxation.
Pensions
The IAS 19 accounting deficit of the defined benefit section
of the UK pension scheme amounted to £550m at 2 May
2020 (26 October 2019: £586m, 27 April 2019: £579m).
Contributions during the period under the terms of the
deficit reduction plan amounted to £46m (2018/19: £46m).
The deficit decreased largely as a result of decreases
in inflation rate assumptions and increased values of
underlying assets in the period and the annual contributions
made in H1 of £46m, offset by changes in discount rates
following falling bond yield returns.
A full actuarial valuation of the scheme was carried out
as at 31 March 2019 and showed a shortfall of assets
compared with liabilities of £645m. A ‘recovery plan’
based on this valuation was agreed with the Trustees such
that contributions in respect of the scheme will be £46m
for 2020/21, rising to £78m per year from 2021/22 until
2027/28, with a final payment of £52m in 2028/29.
Dividends
The Group paid an interim dividend of 2.25p per share
(£26m total) in January. The Board has decided not to pay
a final dividend for 2019/20. Dividend payments will not
be resumed at least until our standby debt facilities have
been cancelled. Given the current uncertain environment,
the Board will keep the payment of dividends under review
to establish the appropriate time and level to recommence
payment.
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. This includes
consideration of the uncertainty caused by the Covid-19
pandemic and the mitigating actions the Group has taken.
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 outlined the assessment approach
for going concern in the accounting policy disclosure in
note 1 of the consolidated financial statements. Following
that review the Directors have concluded that the going
concern basis remains appropriate.
Viability Statement
In accordance with the UK Corporate Governance Code,
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 making the assessment
that three years was appropriate for 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 20 to
23 of the Strategic Report. This included the uncertainty
regarding the duration, extent and ultimate impact of the
Covid-19 pandemic as well as the mitigations already put in
place. In considering the appropriate period, the Directors
considered reducing the three-year viability period to align
with the 12-month going concern period. The Directors, in
making the assessment that three years was appropriate,
considered the current financial and operational positions
of the Group, the potential impact of the risks and
uncertainties as outlined on pages 20 to 23 of the Strategic
Report and the uncertainty regarding the duration, extent
and ultimate impact of the Covid-19 pandemic plus the
further mitigating actions available to the Board. The Board
concluded that a period of three years was appropriate for
this assessment as this period is covered by the Group’s
strategic planning process, which is updated annually, and
reflects the period of the 5 year strategic plan where there is
greater certainty of cash flows associated with the Group’s
major revenue streams.
The strategic plan considers the forecast revenue, EBITDA,
working capital, cash flows and funding requirements
on a business by business basis, which are assessed in
aggregate with reference to the available borrowing facilities
to the Group over the assessment period including seasonal
cash flow and borrowing requirements on a monthly basis
and the financial covenants to which those facilities need
to comply. The model assessed by the Directors has been
derived from the Board-approved annual Group budget
for 2020/21, and Board-approved strategic plan for the
remaining two year period. This aligns with the period over
which the Group’s primary transformation strategy will
be implemented. Given the global political and economic
uncertainty resulting from the Covid-19 pandemic and
the effect of Brexit in the UK, it is difficult to estimate with
29
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Performance
Review continued
precision the impact on the Group’s prospective financial
performance. These approved plans have therefore been
adjusted to model a range of Covid-19 scenarios. These
scenarios include the possibility that all stores may need to
close for another extended period of time and the impact
of a longer-term recession due to a reduction in household
income. These forecasts have 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.
As well as focussing on the potentially prolonged impact
of Covid-19, these scenarios also included other principal
risks such as regulation or information security incidents
and reduced forecast profitability and cash flow as a result
in a significant change in consumer behaviour. A key
assumption of the three year viability period is that the
Group is able to extend the financing facilities that are
currently due to expire in October 2022, as disclosed in note
19 to the Annual Report and Accounts, or raise alternative
forms of financing.
Based on the results of this analysis, the Directors have
an expectation that the Group will be able to continue
in operation and meet its liabilities as they fall due over
the three year period of their assessment. The long-term
impact of Covid-19 is uncertain and should the impacts of
the pandemic on trading conditions be more prolonged or
severe than currently forecast by the Directors, the Group
would need to implement additional operational or financial
measures.
Jonny Mason
Group Chief Financial Officer
14 July 2020
30
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Stakeholders
and Sustainable Business
This report includes the Board’s section 172(1) disclosure,
the non-financial information disclosures required by
the Companies Act 2006 and a summary of the Group’s
sustainable business activities.
Section 172(1) statement
Section 172(1) of the Companies Act 2006 requires each
director to act in the way he or she considers, in good
faith, would be most likely to promote the success of the
Company for the benefit of its members as a whole and in
doing so have regard (amongst other matters) to the:
– likely consequences of any decisions in the long term;
– interests of the company’s employees;
– Our Customers - page 31
– Our Colleagues - page 32
– Our Shareholders - page 34
– Our Suppliers - page 36
– Our Communities - page 37
Non-Financial Information Statement
We aim to comply with the Non-Financial Reporting
requirements contained in sections 414CA and 414CB
of the Companies Act 2006. Under Further Stakeholder
Information, further details are provided to help stakeholders
understand our position on key non-financial matters:
– need to foster the company’s business relationships with
– Environmental matters (including impact of business on
suppliers, customers and others;
the environment) – page 42
– impact of the company’s operations on the community
– Colleagues – page 39
and environment;
– desirability of the company maintaining a reputation for
high standards of business conduct; and
– need to act fairly as between members of the company.
This statement explains how the Board has embedded
stakeholder considerations across decision-making and,
in particular, how directors have had to regard the factors
included in section 172(1) in addition to other factors
relevant to any decision being made.
There are different processes across the business to
manage the inclusion of stakeholder considerations
depending on the nature of the decision and the
stakeholders impacted. A clear corporate governance
structure is in place which, together with the Group’s
Delegated Authority Policy, ensures that business decisions
are made by the appropriate people, in the appropriate
forum (in accordance with the terms of reference of that
forum), and the relevant stakeholder considerations are
embedded as part of decision-making processes. The
supporting documentation for each Board and committee
meeting includes, for reference, a summary of section 172
responsibilities immediately after the meeting agenda. To
ensure that the impact on stakeholders is duly considered,
Board and committee decision paper templates include
mandatory fields for papers’ authors to include an impact
assessment on each stakeholder group.
The Board acknowledges that decisions made will
not necessarily result in a positive outcome for every
stakeholder group. By considering the Group’s purpose,
vision and values together with its strategic priorities and
having a process in place for decision-making, the Board
does, however, aim to make sure that all decisions are
considered and made following reflection across a broader
view of stakeholder considerations.
The following pages provide examples, for each stakeholder
group, of the key matters that the Board considered during
the year, including how decisions were reached and sets
out those stakeholder considerations that were central to
discussions and outcomes.
– Social matters – page 52
– Respect for human rights - page 50
– Anti-corruption and anti-bribery matters - page 76
Please see page 6 for a description of our business model
and page 20 for details of the principal risks relating to non-
financial matters.
OUR CUSTOMERS
Matters of focus for Our Customers
Product availability
Product range
Product value and affordability
Customer journey experience
Services
Advice and support
Choice of how to purchase; online or in-store
Seamless delivery experience
Sustainability and ethical sourcing
Means of Engagement
In-store
Online
Customer app
Customer care centres
Email
Post-sales survey
Media including social media
Customer Priorities
– Enhance the customer experience by making it easier for
customers to find and buy what they need;
– Increase product affordability for customers through
credit;
– Offer customers more choice on how to buy;
– Enhance the services and credit products available to
customers; and
– Support customers through the Covid-19 pandemic.
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Customer focus in Board decision-making
Webhelp
The need to enhance the customer experience was a key
factor in the Board decision in January 2020 to transfer
most of our customer contact centre operations in Sheffield
and Preston to a third-party specialist provider, Webhelp.
Since the launch of the vision ‘We Help Everyone Enjoy
Amazing Technology’, ensuring that every customer has
an easy end-to-end experience has been identified as a
critical part of transforming the Group into a world class
business. The Board has welcomed the progress made
and customer satisfaction improvements in the contact
centres in recent months. The business has worked hard
to improve performance, including creating capacity for
300,000 additional customer calls and reducing call waiting
times by over 10%. The Board received updates during the
year that, while there had been significant improvements
to the contact centres, they had not been able to meet
best-in-class customer service levels. Service challenges
in the contact centres included being hindered by obsolete
technology and complicated processes. A comprehensive
review of all contact centre operations was completed.
The Board agreed that customers having an easy end-to-
end experience was vital to the long-term success of the
business. Customer contact centres are in place to provide
support when a customer wants to find out more about
or buy a product, or if the customer has an enquiry about
the progress of an order or delivery. The Board concluded
that the best action to take for customers and colleagues
was to bring in the support of an external company with
specialist expertise in contact centre management. Webhelp
has strong customer expertise, access to market leading
technology and has committed to making significant
customer satisfaction improvements.
Voice of the Customer
The Company launched a Voice of the Customer Dashboard
in 2018 to provide real time feedback on what matters
most to our customers, in particular detailed customer
satisfaction metrics for the UK and Ireland. The Nordics
region has a separate ‘Happy or Not’ satisfaction measure.
In addition to this numerical customer feedback, every
week, verbatim feedback is captured from thousands
of customers. Typically, the comments reflect known
satisfaction drivers, but they do also help the business
better understand customer expectations and concerns.
Machine learning and AI solutions are used to quantify the
sentiment of the comments. This information is reviewed
internally and used to generate improvements to the
customer experience. The Board continued to receive a
synopsis of the results of this feedback during the year
as part of reports from the Group Chief Executive at each
Board meeting. This enables directors to oversee how the
business is responding to customer feedback and to ensure
customer views were considered in their decision-making.
Covid-19
The Executive Committee and the Board considered the
interests of customers as part of agreeing the appropriate
response to the Covid-19 pandemic, including whether to
close stores and distribution centres. During March 2020,
32
stores were closed in Greece, UK and Ireland in compliance
in each case with local government guidance. The Board
concluded that the Group performed an important function
in providing customers with vital goods, helping millions of
people sustain themselves in lockdown by keeping them
connected, healthy and productive. The Board resolved to
ensure that the online sales channel was kept operational
and enhanced during the period of shop closures and
reduced customer footfall in the Nordics region, while
ensuring compliance with best practice health and safety
guidance. The Board and Executive Committee considered
customer safety, in line with government advice and
guidelines, the most suitable approach to adapting stores
for safe shopping and a phased re-opening of those
stores that had been closed as the restrictions evolved.
This included a front-of-store trading concept and a
zero-contact, ‘Drive Thru’ model and measures including an
enhanced cleaning regime, rigorous social distancing and
safety screens for stores.
ShopLive
During the year, ShopLive was launched in Ireland, the UK
and the Nordics to give customers an in-store experience
from their own homes via video link with Currys PC World
experts. This functionality enables customers to receive
advice on laptops, TVs, washing machines and refrigeration
products to ensure that customers, including the most
vulnerable, can benefit from store colleagues’ expertise
remotely. The Board has been receiving regular updates
on the demand for ShopLive and on those customer
satisfaction scores. The Board has considered the possible
medium-term and long-term impacts that Covid-19 might
have on customer shopping habits. The Board will keep
under review customer demand and feedback on ShopLive
as one example of these changes and this provides
important context for strategic discussions.
Sustainability
A Non-Executive Director attended the Company’s
Environmental, Social and Governance (ESG) Committee
meetings during the year and the Company’s Social
Purpose Strategy was approved in June 2019. The Board
is aware that customers are increasingly concerned
about corporate responsibility issues. The Company,
with the support of the Board, seeks to be a sustainable
business and works with customers to help them reduce
their environmental impact. This includes working with
our suppliers to eliminate unnecessary packaging on the
products sold to customers and providing re-use schemes
to help customers find a new use for the technology they no
longer need.
More information on this is below in the Sustainable
Business section of this report.
OUR COLLEAGUES
Matters of focus for Our Colleagues
Company culture and values
Reward
Benefits
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Flexible working
Health and safety
Training and development
Engagement and feeling invested in the business
Means of Engagement
Internal communications; Executive Committee member
updates, Workplace intranet, newsletters, emails,
Townhall events, team meetings, individual meetings with
line managers and appraisals
Employee engagement survey
Events - annual Peak event, campus event for Nordics
region, training at The Academy@Fort Dunlop
Employee listening forums
Colleague Priorities
– Attract, develop and retain capable and committed
colleagues to drive growth;
– And ensure a diverse pipeline for succession to senior
management and Board roles;
– Be an employer of choice where everyone feels
respected, involved, heard, well-led and valued,
regardless of race, gender, religion, national origin,
disability, sexual orientation, age or any other
characteristic and increase diversity (in all its forms)
across our business;
– Maintain high standards of health and safety;
– Colleague share Ownership Scheme – giving colleagues a
stake in the success of the business;
– Enhance expertise and training; and
– Work cohesively together as One Business.
Colleague focus in Board decision-making
Transformation of the UK Mobile business
During the year, a key area of focus for the Board was
reviewing the options for the future of the UK Mobile
business. On 17 March 2020, the Company announced that
all 531 standalone Carphone Warehouse stores in the UK
would be closed to enable focus on selling mobile devices
and connectivity through shop-in-shops in its Currys PC
World stores and online. This decision was necessary due to
changes in how customers buy mobile devices, connectivity
and technology.
The impacts on colleagues were a key consideration of
this decision. The directors agreed that it was critical to
resolve the unsustainable losses in the UK Mobile business
in order to ensure the long-term sustainable success of
the whole Group for customers, colleagues as a whole and
shareholders. Having agreed that the turnaround of the UK
Mobile business was essential, the directors considered
the implications for colleagues and the business worked
to minimise detrimental impacts including the number of
redundancies and to offer as much support as possible
to those colleagues that would be leaving the business.
The Board reviewed and contributed to the colleague
communications on the change and challenged the
Executive team on the plans to redeploy colleagues into
other business roles to ensure that all possible steps had
been taken to support all impacted colleagues. The Board
also considered the impacts on those colleagues that would
remain in the business, including the cultural changes in
those Currys PC World stores that would have redeployed
colleagues joining their teams.
New roles were identified for as many Carphone Warehouse
colleagues as possible and 837 of affected colleagues took
new roles internally. Those colleagues made redundant
received redundancy payments well in excess of legal
obligations and other support including CV and interview
preparation.
Transformation of contact centre operations
In January 2020, the Board approved the transfer of most
of our contact centre operations in Sheffield and Preston
to Webhelp, a world leader in contact centre management.
The Board considered the interests of colleagues as part
of this decision, including colleague feedback received
from those in call centre roles on their work experiences
and the challenges faced. The Board had been pleased to
see that contact centre colleagues had helped to deliver
significant improvements to service levels. However,
despite best efforts, these colleagues were not able to give
customers best-in-class service levels due to outdated IT
and complicated processes. The Board considered the
impacts of the move to Webhelp on colleagues and noted
that most of the teams in Sheffield and Preston would
move to Webhelp and continue to work helping Dixons
Carphone customers. Colleagues would be equipped with
better tools to help customers and have simpler processes
to work to. The Board considered the natural alignment of
Webhelp’s values to the Company’s vision and ensured that
colleagues moving to Webhelp would be fully supported in
the transition to Webhelp prior to approving the change. The
Board reviewed the communications for those colleagues
impacted and obtained assurance from management that
those colleagues impacted would receive appropriate
support following the change.
Covid-19
In March 2020, as the severity of the Covid-19 pandemic
became clear, the management team, with the support of
the Board, identified colleague safety as the first priority.
The directors attended a weekly call during the period of
the initial response to the pandemic to receive updates
on colleague wellbeing, the steps being taken to ensure
colleague safety and feedback received from colleagues.
Those colleagues already able to work remotely were asked
to work from home with immediate effect. The IT team put
in place new remote working capability for hundreds of
contact centre colleagues.
The Board considered the need to keep colleagues safe,
together with the need for the operation of the supply
chain to secure the future of the business and protect
employment for colleagues. For those in supply chain
roles, a suite of measures taken to ensure colleague safety
included changes to working hours and rotas to reduce
the number of colleagues on sites, physical adjustments
to sites and work areas to support social distancing,
additional cleaning and hygiene measures and the provision
of protective equipment. Sites were transformed to include
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Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Stakeholders
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floor markings, barriers and one-way systems, hourly
tannoy reminders, maximum occupancy notices, extensive
site signage on handwashing and social distancing as
well as temperature checks at the start and end of driver
shifts. Certain installation services were discontinued, and
colleagues were advised not to carry out any activity unless
they were satisfied it was safe to do so. For any operational
tasks where the 2 metres social distancing rule could not
be consistently followed, goggles, overalls and masks were
available although these tasks were reduced to a minimum.
Installation services were reduced to essential cooking
installations only, and only then on a voluntary basis. The
Executive Committee established in the early stages of
the pandemic the principle that no colleague would be
asked to do anything they did not feel safe doing and home
installations were an early area where some activities were
stopped.
The Group Chief Executive visited the Newark distribution
centre, several customer service centres and call centres
during March and April to meet with (in accordance with
government guidance on social distancing) colleagues and
answer any questions. Regular customer contact centre
and distribution centre team forums and Q&A sessions
were held to ensure that any concerns and feedback that
colleagues had were fed back to the appropriate persons
directly and efficiently. Covid-19 site audits were completed
to verify that consistent best-practice was in place.
The Board agreed that it was in the best interests of the
long-term sustainable success of the business to put all
store colleagues and a number of support team colleagues
on the Government Coronavirus Job Retention Scheme
during the Covid-19 pandemic. However, for those
colleagues that received a salary above the Government
furlough cap, the Company decided to make up the
difference to ensure that all colleagues on furlough received
80% of their salary.
The Board and Executive Committee unanimously agreed
to a temporary 20% pay reduction, and all senior managers
were asked to agree to a temporary 10% pay reduction in
support of securing the Company’s future.
Colleague Listening
During the year, the colleague forums were restructured
and increased in scope to enhance engagement between
the Board and the wider colleague population and
ensure consistency across the Group’s geographies. An
International Forum has been established to unify the
long-term existing country forums into a single, listening
and engagement forum for all colleagues. Tony DeNunzio,
the Deputy Chair and Senior Independent Director, attends
these forum meetings with the Chief People Officer,
Paula Coughlan. Andrea Gisle Joosen, Independent
Non-Executive Director, attends the Nordics colleague
forum meetings. The Board received an update on
Colleague Listening at a Board meeting in January 2020
and the directors were pleased to hear that the enhanced
framework was working well and generating useful insights.
The colleague feedback, together with the direct insights
from the two non-executive directors, enables the Board to
better take account of colleague considerations in decision-
making. The outputs from the colleague forums are used
to help shape the business. These forums took part in the
review of the company’s culture and the development of
the new culture and values during 2019. The International
Forum was instrumental in the development of our
Wellbeing strategy, our Inclusion and Diversity strategy and
our Listening strategy.
People Operations
In January 2020, the Board approved a People Operations
proposal that included moving all colleagues to a single
payroll provider. This change was to improve the colleague
experience and simplify the delivery model and process. A
critical element of delivering the vision, ‘We Help Everyone
Enjoy Amazing Technology’, is to collaborate effectively
as One Business. The Executive Committee and the
Board considered feedback received from colleagues on
existing payroll processes and policies being inconsistent
and agreed that it was important to improve the colleague
experience in this area. The alignment of policies and
terms ensure fairness across the colleague population and
supports the goal to remain competitive in the market whilst
being able to continue to attract talented people to join our
existing team of capable and committed colleagues.
Board visits
The October 2019 Board meeting was held in Oslo. This
enabled the directors to visit a selection of different stores
in Oslo and meet several store colleagues. In January 2020,
the Board spent a day visiting the Company’s training
centre The Academy@Fort Dunlop in Birmingham. All new
store-based colleagues that join the business attend a
training event at the Fort Dunlop centre before they start
work serving customers in stores. Directors were provided
with an insight into the three-day training programme to
understand the support that colleagues are given before
they interact with customers. All of the directors have also
visited stores individually during the year. These visits
have provided the Board with additional insights into the
colleague experience and useful context for strategic
discussions in the Board.
OUR SHAREHOLDERS
Matters of focus for Our Shareholders
Ensuring the long-term sustainable future of the business
Financial and share price performance
Dividend policy
Current trading
Business strategy and vision
Director remuneration
Shareholder communications and engagement
Environment, Social and Governance issues
Means of Engagement
Results announcements and presentations
Annual report and accounts
Annual General Meeting
Investor roadshows
Shareholder meetings
Company website
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Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Registrar contacts
Consultation with major shareholders on remuneration
topics
2018/19 Remuneration Report. More information on the
results of these engagements is available in the Directors’
Remuneration Report on page 100.
Shareholder priorities
– Managing the impacts of the Covid-19 pandemic;
– Securing the long-term sustainable success of the
business;
– Delivering on financial performance promises; and
– Effective and transparent communication of the strategic
vision and transformation of the business.
Shareholder focus in Board decision-making
Feedback on Shareholder views and questions
The Board receives updates from the Investor Relations
team at every Board meeting. These include updates on
any material changes to the composition of the shareholder
register, a summary of investor interactions that have taken
place during the period as well as upcoming interactions
and a summary of investor questions received, and
topics discussed. The Investor Relations team manages
a programme of meetings with the top 30 shareholders
and many of these meetings are also attended by at least
one Board director. For other shareholders, the primary
point of contact is the company’s registrar, although any
matters can be escalated to either the Investor Relations
or Company Secretariat teams as appropriate. All directors
attended the 2019 Annual General Meeting and spent
time speaking to shareholders after the conclusion of this
meeting. The directors are disappointed not to be able
to meet with shareholders in person at the 2020 Annual
General Meeting this year and encourage shareholders to
submit any questions on the business of the meeting to
cosec@dixonscarphone.com. The directors find shareholder
insights useful and use the feedback received to shape
investor communications and in decision-making where
appropriate.
Shareholder engagement
A structured shareholder engagement programme is in
place. Each of the top 30 shareholders is invited to have
an engagement meeting with any of the Board Chair, Audit
Committee Chair or Remuneration Committee Chair on at
least an annual basis. This engagement meeting invitation
letter also confirms the contact details for team members
from the Investor Relations, Reward and Company
Secretariat teams to enable any ongoing dialogue that
shareholders might find useful. Shareholders are able to
arrange meetings with a Board director on request. During
2019/20 the Board particularly valued the shareholder
feedback received during the consultation process for the
Remuneration Policy that was submitted to and approved
by shareholders at the 2019 AGM.
Director Remuneration 2018/19
Following the 76.54% vote in favour of the 2018/19
Remuneration Report at the Annual General Meeting
held on 5 September 2019, the Company sought further
engagement with our shareholders and the proxy agencies
to discuss the specific rationale for the votes against the
Director Pension contributions
Following consultation with shareholders, on 27 August
2019 the Board announced that for any newly appointed
executive director, the pension contribution would be in
line with the level paid to the majority of the UK workforce
across the Group. More information is available in the
Directors’ Remuneration Report on page 84.
Colleague Shareholder Scheme
Over 38,000 colleagues in 11 countries have received an
award under the Colleague Shareholder Scheme, launched
in 2019. The Remuneration Committee and the Board
considered during 2019/20 the positive feedback received
from both colleagues and shareholders and have, as a
result, decided to extend the scheme. Colleague share
ownership is a crucial lever of engagement and gives
colleagues a stake in the future success of the business.
More information is available in the Directors’ Remuneration
Report on page 85.
Board and Executive share ownership
Each member of the Board is a shareholder. At 14 July
2020, the Board collectively held interests in 1,113,469
shares. Executive Committee members are subject to
minimum shareholding requirements and executive directors
are subject to post-employment shareholding requirements.
Covid-19
Following the Covid-19 pandemic and resulting store
closures in Greece, UK and Ireland, the Board considered
the implications for all stakeholders including shareholders.
One of the three immediate priorities identified was to
secure the future of the business. Securing the long-
term sustainable future of the business for the benefit of
shareholders was the main consideration for a number of
important Board decisions. These included the removal
of almost all discretionary spend, measures to conserve
cash including the decision not to pay a final dividend for
2019/20, putting in place additional bank facilities and the
decision to place 71% of UK colleagues onto furlough.
UK Mobile business
Shareholder interests were an important part of discussions
on a significant business decision made during the year.
The Board considered the critical need to resolve the
unsustainable losses from the UK Mobile business in order
to ensure the long-term sustainable success of the whole
Group for stakeholders including shareholders. This led
to the decision to close the 531 standalone Carphone
Warehouse stores in the UK. More information on this
change is included in the Strategic report on page 16.
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Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Stakeholders
and Sustainable Business continued
ensured resilience during the disruption of supply chains
caused by the crisis. The Board was kept updated on all
aspects of the Covid-19 response over weekly calls held
during March and April.
Modern Slavery and ensuring the highest ethical
standards
The Board received an update in July 2019 on the
procedures in place to prevent Modern Slavery and
ensure responsible sourcing. An updated Modern Slavery
Statement was approved and is available on the Company’s
website www.dixonscarphone.com. Adherence to the
Group’s Modern Slavery policy is required from suppliers.
The Group’s Standards for Responsible Sourcing reflect the
Group’s commitment to human rights, acting morally and
with integrity in all our business relationships. The Standards
require suppliers to work towards full Ethical Trade Initiative
(ETI) Base Code compliance. Further information on Modern
Slavery and Ethical Sourcing is available below in this
report.
It is an essential requirement that all Original Equipment
Manufacturer (OEM) suppliers comply with the strict trading
terms and operational procedures. OEM suppliers must
enforce effective systems and controls to meet minimum
standards of health and safety, wages, working hours, equal
opportunities, freedom of association, collective bargaining
and disciplinary procedures as set out in our OEM Ethical
Sourcing Policy. Employing forced or child labour is strictly
against the Company’s terms of operation.
The Company monitors adherence to policies using
assessors who audit suppliers, prior to selection and on an
ongoing basis. Where working practice failures have been
identified, our Technical and Commercial teams work with
the supplier to help them improve their working practices.
Where it is not possible to resolve an issue of concern, the
Company will cease to work with the supplier. Any material
supplier compliance matters would be reported to the
Board.
The approval of the Modern Slavery policy and statement
and all Corporate Responsibility policies are matters
reserved for the decision of the Board.
Sustainability
When selecting new suppliers and renegotiating contracts,
the Company considers sustainability performance
including energy efficiency, climate change impact, water
use or biodiversity impacts. All suppliers are encouraged
to eliminate all unnecessary plastics and packaging. The
Environmental, Social and Governance Committee leads the
Group’s work in this area and a Non-Executive Director of
the Board is a member of this Committee. More information
on the sustainability work with suppliers is included below in
this report.
OUR SUPPLIERS
Matters of focus for Our Suppliers
Strong customer demand
Good collaboration
Reliability
Value
Health and safety
Compliance
Effective communications
Means of Engagement
Formal engagement strategy including regular visits and
meetings
Supplier relationship management team
Supplier questionnaires
Due diligence process for new suppliers
Supplier priorities
– Being a trusted business partner;
– Reliable payment practices;
– Enhancing supplier and partner satisfaction;
– Managing the environmental impacts within our supply
chain; and
– Ensuring products come from ethically and responsibly
aware supply chains, free from modern slavery, bribery or
corruption.
Supplier focus in Board decision-making
Board feedback from Suppliers
The Board receives regular feedback on substantive
Supplier matters via the Group Chief Executive. The Group
Chief Executive participates in regular meetings with the
Group’s largest suppliers and receives regular updates
on all suppliers from the Chief Commercial Officer. The
Commercial team put in place a formal engagement strategy
with each large supplier. This strategy is customised in
each case but includes regular meetings and calls between
the Group Chief Executive and his counterpart at the
Supplier company and between the Chief Commercial
Officer and his counterpart. This is supported by a team of
colleagues engaging at least every four weeks to assess
progress against agreed business plans. Supplier updates
are provided to the Group Chief Executive, Executive
Committee and the Group Chief Executive notifies the
directors of matters that ought to be brought to the attention
of the Board.
Covid-19
During the year the Commercial team collaborated
effectively with the Group’s suppliers in helping our
customers and securing the future of the Group. The teams
started work to secure a supply of stock during the early
stages of the Covid-19 pandemic. Stock of key lines was
increased as soon as it became apparent that factories in
China and the rest of Asia might close. This ensured that the
business was better prepared to meet the sudden increase
in customer demand for laptops, refrigeration, gaming and
home office. The strong relationships in place with suppliers
36
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report business in providing vital goods to the public, and in
turn how trading would help millions of people sustain
the essential lockdown. In particular the importance of
technology that facilitates connectivity with loved ones,
including mobile phones and tablets, essential household
items including fridges, cookers and washing machines,
and laptops and equipment for working from home and
home-schooling. The Board agreed that it was important to
help customers as an online-only retailer in those countries
where our stores could not remain open subject to being
able to keep colleagues and customers safe. Measures
included prioritising helping older and vulnerable customers
and requests for tablets, mobile phones, laptops, webcams,
headsets and chargers for all NHS Trusts and hospitals
to help offer patients the opportunity to stay in touch
with friends and families. In addition, iD Mobile offered all
existing customers over 70 years old free and unlimited
minutes for the 12-week isolation period advised by the
government in the UK. Stores in the Nordics put in place
special opening hours for vulnerable and at-risk people.
In the UK, the Company sent hundreds of free laptops,
mobile phones, SIM cards and headsets to Age UK’s Silver
Line helpline teams, to help them maintain their vital support
to older people during the Covid-19 lockdown. The two
organisations are working together at pace to find more
ways to help older people through the Covid-19 crisis. More
information is included below in this report.
Chair of the Board’s Shield
Being a sustainable, responsible and ethical business is
important to the Board. The Chair of the Board’s Shield
award is an annual award to ensure that those teams
and colleagues that have made a positive contribution to
their local community through fundraising or volunteering
initiatives, are recognised for their work and to further
promote these behaviours. There is a rigorous process for
nominations and selection of the winning colleagues and
teams. More information is included below in this report.
Electric Vehicles
The Board has given broad support to any and all initiatives
within our transport operations that reduce carbon
emissions and help progress towards the use of alternative
fuels and achieving net zero emissions. The Group will
also join The Climate Group’s EV100 initiative. This is a
globally recognised movement for corporate action on more
environmentally friendly transport options, with the aim of
accelerating the transition to electric vehicles (EVs) as the
new normal by 2030.
OUR COMMUNITIES
Matters of focus for Our Communities
We Help Everyone Enjoy Amazing Technology
Being a responsible contributor to society
Being a good employer
Having sustainable business practices and minimising
impact to the environment and climate change
Means of Engagement
Sustainability working group
Website
Media including social media
Engagement meetings with third parties
Charity partnership
Community priorities
– Ensuring high standards of corporate and social
responsibility across the group;
– Meeting environmental responsibilities;
– Limiting the impact of our operations in a way that is both
practically and economically feasible;
– Management of climate change risk;
– Enhancing disclosure of ESG performance;
– Working with suppliers to reduce unnecessary plastic
packaging; and
– Providing our customers with more sustainable choices.
Community focus in Board decision-making
Sustainable business approach
During 2019, the Board received an update on the
Sustainable Business approach, programme and activities.
The Board agreed that it would be appropriate to work with
a headline charity partner in the UK and focus on a smaller
number of charitable projects. The Board was particularly
supportive of those charitable projects that would help the
elderly, disabled or underprivileged to enjoy technology.
During the Board visit to Oslo in 2019, the business
update provided by the local team included insights into
the charitable activities of the Elkjøp Foundation, which
operates across the Nordics.
Age UK
During the year, the Company chose a new UK headline
charity partner, Age UK. Colleagues were able to nominate
charities for consideration as charity partner. This list was
then refined into a shortlist and the final choice was made
by a colleague poll vote on the Company’s intranet. Age UK
was selected by almost half of the thousands of colleagues
that voted. More information on how the partnership was
selected and the Company’s activities to date is included
below in this report.
Covid-19
During March, the Board considered how best the Company
could support the wider community during the Covid-19
lockdown. In considering whether or not to close stores
in all countries, the Board noted the critical role of the
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Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Stakeholders
and Sustainable Business continued
Sustainable Business
Technology can do amazing things to enrich people’s lives, and we, with our scale and expertise, are uniquely placed
to bring these benefits to everyone: that’s our core business purpose. Our Social Purpose strategy was launched to
colleagues in November 2019, to drive colleague engagement on sustainability matters, to grow a customer base who
are confident that we are a responsible contributor to society with business practices that minimise our impacts on the
environment, and to build a sustainable business that our shareholders can feel good about investing in.
We are committed to putting social purpose at the heart of everything we do - galvanising our expertise, scale and reach
to help everyone, who might otherwise be excluded, benefit from amazing technology, whether this is by making it more
affordable, energy efficient or simpler to use or accessible through repair, reuse or donation.
Everything we do starts with the customer. Our Social Purpose strategy starts with this principle and is categorised under
the pillars of We Help Everyone Enjoy Amazing Technology.
WE
WE COLLABORATE WITH OUR STAKEHOLDERS AS A FORCE FOR
GOOD
Dixons Carphone is committed to ‘doing the right thing’ and operating a responsible and ethical business, by
understanding stakeholder expectations and best practice and ensuring this is reflected in our business decisions.
In 2019/20 our progress in developing and reporting our ESG performance was recognised by FTSE4Good with our
repeated inclusion in the FTSE4Good UK Index.
A detailed ESG risk register has been developed to enable a systematic approach to ESG risk management, allowing us
to monitor changes in the risk profile. In 2020/21, we will use this register to formalise the review of progress on delivery of
controls, to reduce or remove identified risks before they materialise.
United Nations Sustainable Development Goal (SDG 17): Partnerships
We collaborate with stakeholders as a force for good, to advocate and effect change. We are
members of a number of organisations such as the British Retail Consortium (BRC), the Ethical Trading
Initiative (ETI) and the Government’s All-Party Corporate Responsibility Group.
We also play an active role in SEDEX, the British Retail Consortium’s Ethical Labour Working Group
as well as Slave Free Alliance, which is a best practice scheme run by the leading anti-slavery charity
Hope for Justice, who we are working with in the UK and Nordics.
As part of the BRC’s Better Retail, Better World initiative, we pledged to support UN sustainability goals (SDGs)
covering modern slavery, sustainable economic growth, inequalities, responsible consumption and production and
climate change. For 2020/21, we have expanded this to support all relevant Global Goals.
In March 2020, we joined the BRC Taskforce on Climate Action to develop a ground-breaking decarbonisation plan that
will guide the industry on the steps necessary to accelerate progress to a net zero UK, ahead of the Government’s 2050
target.
Our partnerships with suppliers make a big difference - they know their products best and are helping us to bring amazing
technology to life for our customers in meaningful ways.
Suppliers are key to helping us address areas of public concern, such as unnecessary plastic. We have introduced clearer
guidance to support the reduction of plastic packaging and in 2019, engaged with our own label suppliers and licensed
brand ranges to identify and implement improvements. ADX gaming keyboards, mice and headsets are our first product
range to be plastic packaging free and we aim to make all own label plastic packaging reusable or recyclable by 2023.
When selecting new suppliers and renegotiating contracts, we consider sustainability performance including energy
efficiency, climate change impact, water use or biodiversity impacts. Suppliers are asked for a copy of their Environmental
Policy and to complete a questionnaire for every Request for Proposal placed through our procurement system.
38
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Colleagues
Capable and committed colleagues are our greatest
advantage.
During 2019/20 colleague priorities were identified and
grouped into the following categories: colleague experience,
talent and leadership, clearer, simpler, faster place to work
and one business culture.
To deliver these priorities we will:
• upskill, empower, recognise and reward our colleagues
by investing in learning and employee reward, and
developing leadership programmes to drive a customer
first culture;
• match the best talent to our highest value roles by
increasing our focus on managing talent, becoming an
employer of choice, concentrating on talent acquisition,
improving performance management, leadership and
development;
• continuously improve the colleague experience across
the employment lifecycle by making the Group a clearer,
simpler, faster place to work; and
• work together as one business by uniting through shared
values and culture, driving inclusion and diversity across
our business and increasing our focus on colleague
engagement.
The Academy@Fort Dunlop
All store-based new hires from all brands across the UK
and Republic of Ireland now complete a three-day learning
event at our new state-of-the-art, UK training facility; The
Academy@Fort Dunlop. The courses available are tailored to
each brand and form the first part of a 90-day ‘learning plan’
completed by all new colleagues. Colleagues are equipped
with the skills and knowledge they need to help our
customers choose, afford and enjoy amazing technology.
MyLearning
A comprehensive online training portal is available for
colleagues; MyLearning. MyLearning includes courses on a
range of subjects including to enhance colleague knowledge
of products so they are able to recommend the best
technology to customers.
Every year mandatory compliance training is deployed to all
colleagues via MyLearning. In 2019/20, there was a 98.7%
completion rate of all these compliance modules.
Customer First mindset
We are investing in ensuring our colleagues have a
Customer First mindset. In the past year, nearly 2,300
managers at all levels were trained in developing Customer
First skills. These programmes build colleague capability
throughout the customer journey, for example, lifestyle
listening, so colleagues are able to ask the right questions to
help recommend the best product for each customer.
Store managers are provided with further skills to continue
training within our stores through coaching, facilitating
and giving feedback. The supporting online modules were
accessed 15,000 times throughout this launch. As part of
this programme nearly 1,500 hours of advanced coaching
was deployed to first and second-line managers in 2019.
Category and product knowledge
Having the most up-to-date product knowledge is essential
for colleagues to be able to meet customer needs. We host
annual MyLearning Live events for consumer electronics,
computing and domestic appliances. Over 2,100 colleagues
took part in this year’s face-to-face learning with key
suppliers from our sales categories. Participating stores
have seen a significant uplift in sales as a result.
Workplace Live Supplier Events provide ongoing updates
to colleagues. Following the relaunch of our Care & Repair
and our credit products, we have designed and deployed
core compulsory modules which were completed by 12,000
colleagues and ensure that our business complies with
regulatory requirements.
In the Nordics, all new joiners are assigned to ‘learning
tracks’ that set out all of the training modules required
for all colleagues and for each specific role. Nordics have
approximately 400 digital courses available for colleagues.
In Greece, all new joiners participate in a 15-day classroom
training course in our Training Academy facilities in Athens
and Thessaloniki. This covers customer service skills, the
operating model, systems and basic product knowledge.
Colleagues then return to their place of work to complete
their 90-day onboarding programme through eLearning.
Enhancing colleague reward
Our colleague reward is continually reviewed to attract and
retain capable and committed colleagues.
We pay a minimum hourly rate to all colleagues in the UK
under 21 of £8.25 and £8.75 for those over 21. This was
further increased in April 2020 as we consistently remain
above the National Living Wage. In addition to basic pay,
we pay location allowance where applicable and bonus
where targets are met. Pay for our apprentices is above the
national minimum wage.
We launched our award-winning Colleague Shareholder
Scheme in February 2019. More information on the
Colleague Shareholder Scheme is available in the
Remuneration Report on page 85. We also offer our UK &
Ireland colleagues the opportunity to build a personal stake
in the business through our Sharesave Scheme. All UK &
Ireland colleagues have access to a defined contribution
workplace pension, and colleagues and their families also
benefit from a 10% discount in our stores on our products
and services. In Greece the Company’s Pension plan is
a private scheme that exceeds state pension scheme
requirements. Every employee can participate with voluntary
contributions based on salary through payroll.
We offer access to an employee assistance programme and
access to Salary Finance, which provides help and support
to our UK colleagues through financial education should
they have financial concerns. Salary Finance offers access
to affordable loans and savings as well as tools and tips on
budgeting.
39
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Stakeholders
and Sustainable Business continued
The flexible benefits programme in the UK includes eye
care vouchers, dental plans, a cycle to work programme,
childcare vouchers, personal accident insurance, travel
insurance, and discounts for beauty and fitness, restaurants
and other family activity passes.
The ‘Better Me, Better Team’ programme is available for
colleagues in Greece. This includes promoting the mental
and physical wellness of colleagues through gym discounts,
life management workshops, a series of seminars on ‘better
living’ and provision of psychological support.
Launched our ‘Adopt a Leader’ programme
Members of the leadership team in the UK are required
to spend a day in a store, contact centre, distribution
centre or our main repair and distribution hub in Newark,
on a quarterly basis. Between August 2019 and February
2020, 79 visits were completed by our leadership team
with positive feedback from both the leaders and the store
colleagues involved. This opportunity to connect, listen and
learn helps enhance understanding of front-line operations
and the customer experience and facilitates the building of
relationships between colleagues in different areas of the
business. The programme of visits has been temporarily
paused since the start of the Covid-19 crisis.
We received external recognition and awards during the
year including:
– Ranked 29th nationwide of 100 at the Rate My
Apprenticeship Awards. These awards are voted for by
apprentices themselves.
– Awarded Silver at The Learning Awards for ‘People
Development Programme of the Year – Private Sector’ for
the Graduate Development programme; Emerging Talent
and Learning Technology.
– Awarded ‘Most Effective Learning & Development
Initiative’ for our Aspire Programme at the European
Contact Centre and Customer Service Awards.
Talent acquisition
In September 2019, we launched a new employer brand
‘Tech Lovers Unite’. As a result, job applications are up
by over 45% on last year. Activity on social channels has
increased and there has been over 1.4 million views on
Facebook and Instagram.
The focus on front-line customer sales channels increased
this year through the creation of our in-store Brilliant
Business Centres requiring B2B talent to be hired across
50 Currys PC World flagship stores. Targeted recruitment
was increased for specialised talent in our support
functions, commercial and customer teams this year. This
increased capability in the key areas of e-commerce, IT,
Customer Strategy, Customer Analytics, Credit, Services
and Transformation resulting in, for example, doubling the
size of our e-commerce team. To strengthen our focus on
customer insight-led marketing and data protection we have
scaled up our recruitment in analytical, data management,
information security and digital skills.
Graduate programme
In 2019, ten university graduates joined our graduate
programme in the UK. As well as gaining work experience
across the organisation, our graduates get online support
with access to digital content to enhance their formal and
on-the-job learning. All our graduates who completed the
graduate programme this year were successfully deployed
into key roles within our business and continue to thrive in
their management careers.
In Greece, we have recruited 35 graduates to work across
different business areas. In the Czech Republic, we have
19 colleagues undertaking the CIPD certification and 31
working through the ACCA diploma.
Apprenticeships scheme
Our apprenticeship scheme in the UK & Ireland allows us
to bridge skills gaps, cultivate loyalty and compete in the
modern marketplace. This year we enrolled 247 apprentices
into 18 Apprenticeship Standards across the group. We
also successfully introduced our IT degree apprenticeship
programme to eight colleagues across IT and iD Mobile, and
three colleagues onto a Level 7 Finance Apprenticeship.
Performance management
This year there was increased focus on leadership
development in the UK & Ireland. The leadership team
explored how to evolve our business model and culture to
anticipate challenges, collaborate with purpose, innovate
and act quickly to deliver results.
In Greece, the performance management system ‘GROW’
includes reviews every four months of goals, performance
and progress against objectives. There is also a series of
management courses supporting leadership development.
Over 1,000 colleagues have attended these courses.
In the Nordics, a leadership development track is in place
covering all levels of the organisation. The leadership
development programmes focus on growth mindset,
strengths- based leadership, maximising potential and
empowerment. Over 400 colleagues in the Nordics have been
through one of our leadership programmes during the year.
Talent management
In the UK & Ireland, talent reviews take place on a quarterly
basis. These include ensuring clear succession plans are
in place and resolving any gaps to ensure an exceptional
pipeline of leaders for the future. Top value-generating roles
have been identified and these roles are subject to more
rigorous review.
Launched our new values
During 2019, a transformation project was initiated to help
diagnose our current culture, analyse current strengths and
propose our ideal future state including the mindset and
behaviours most critical to support our vision and strategy.
Inputs were sought from more than 7,000 colleagues
through a variety of channels including a Culture Survey,
Executive Committee interviews, two leadership workshops,
33 workshops with colleagues in the UK, Ireland and Czech
Republic, and over 6,000 colleague interactions with an AI
chat bot gathering inputs in an agile and innovative way
through our internal social channel, Workplace.
40
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report During the year, the Group Chief Executive had individual
meetings with the majority of the members of the Group
Leadership Team (GLT).
Our Inclusion and Diversity Framework
put our customers first.
win together.
own it.
We
One business.
Three values.
Colleague engagement
A comprehensive internal communications programme is
in place to keep colleagues informed on the progress being
made to deliver our strategy and vision. This includes blogs,
Workplace posts, emails, videos or face-to-face briefings
and Townhall live broadcast sessions. For colleagues in
our supply chain and service operations who do not use
digital channels as often, we also use newsletters, cascade
briefings, posters and printed material to ensure they
receive regular updates.
Alex also makes himself available to all colleagues through
regular ‘Ask Alex’ video call sessions. Colleagues can
submit questions and receive live responses from Alex. A
Peak Conference is held shortly before our peak trading
period each year. At this event, nearly 2,000 colleagues
receive updates on our strategy and performance, as well
as getting the chance to hear directly from suppliers and be
able to see and test products.
Making a Difference – colleague engagement survey
In March 2020, all colleagues were invited to take part in
our externally-facilitated Making a Difference survey in
Greece and UK & Ireland. In our Nordics region, the Making
a Difference survey was delayed due to Covid-19.
Our Make A Difference Survey results were largely
comparable to the previous year with an exceptionally
positive survey participation rate of 95%.
The survey showed that the two main indices we track
(Engagement and Enablement) are stable despite the
significant volume of change in the business. The
Enablement Index (showing whether we have the
right people in the right roles in an enabling working
environment) has reduced by one percentage point to 68.
The Engagement Index (showing where we have committed
and loyal people willing to go the extra mile) has reduced by
two percentage points to 62.
We put our
customers first
• We are proud to sell what our
customers need and want to help
them enjoy amazing technology
• We are passionate about
technology and how it helps our
customers throughout their lives
• We always ask ‘what’s the
responsible thing to do for our
customer?’
• We put the customer at the heart
of everything we do
We win together
We own it
• We consistently deliver as part of
one business
• We are always learning, growing
and developing
• We have fun and celebrate the
success of all our colleagues
• We welcome diversity and are
united by our common vision
• We are aligned to the vision, clear
on our goals and accountable for
delivering them
• We are super helpful, going above
and beyond to do the right thing
• We continuously seek
opportunities to make things
clearer, simpler, faster
• We are responsible owners and
spend every pound as if it’s our
own
Within the data provided – which included nearly 40,000
comments – there is a mixed picture with success stories
we can build on and areas we need to improve. Our senior
leaders have committed to making the understanding and
improving the drivers of engagement and enablement part
of our day-to-day leadership, and improvements in these
measures will be a focus of how we will be assessed as
leaders this year and beyond.
Launched our Inclusion and Diversity strategy
Inclusion and Diversity continues to be a priority. Our
Inclusion and Diversity strategy framework focuses on three
key pillars: Diverse Customers; Inclusive Workplace; and
Diverse Colleagues. Our Inclusion and Diversity vision is:
‘We are Dixons Carphone, excited by our vision and united
by our shared values. Diverse colleagues and customers
alike. We enjoy being part of an inclusive company where
everyone belongs, and diversity is our strength.’
Diverse
colleagues
Diverse
customers
WE HELP
EVERYONE
ENJOY
AMAZING
TECHNOLOGY
Inclusive
workplace
The priorities outlined in the strategy are:
–
–
–
to better represent the diversity of our customers and
wider society throughout our workforce. Three initial
focus areas have been identified to accelerate progress:
gender; generational; and ethnic/cultural diversity;
Private and Confidential
to improve the capability, confidence and commitment
of all leaders and colleagues to create an inclusive
culture. This will be achieved through leadership
interventions, building of people management skills
and key communications/ engagement with colleagues
across all diverse groups; and
to be recognised internally and externally as a diverse
and inclusive employer through external benchmarking,
celebrating diversity internally and through external
recognition.
41
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Stakeholders
and Sustainable Business continued
Gender diversity
Improving gender balance has been identified as an initial focus area in our new inclusion strategy.
Our Group level gender diversity position as at May 2020:
Three of our eight Dixons Carphone plc Board director positions are held by women (37.5%). In the last 12 months, we
have improved female representation on our Executive Committee to 20% with the appointment of a second female to the
Executive Committee. Gender diversity across the remaining levels of the organisation has remained stable since last year.
We are committed through our inclusion strategy and action plans to improve female representation across key areas of
the business through positive action measures.
Number of employees as at May 2020 (Total Group)
Dixon Carphone plc Board
Executive Committee
Direct reports of Executive Committee
Total
8
10
84
Female
3
2
25
All employees
36,350
10,834
37.5%
20%
30%
30%
Male
5
8
59
25,516
62.5%
80%
70%
70%
This has improved since the Hampton Alexander review published in November 2019 reported our Board and Senior
Leadership gender position for the UK & Ireland, as at 30th June 2019 placing Dixons Carphone at number 50 within the
FTSE 250. Three of the eight directors of the Dixons Carphone plc Board were female – 37.5% (above the 29.6% FTSE 250
average and the 33% goal). The UK & Ireland Executive team and their direct reports were 38.5% female (compared to the
29.6% FTSE 250 average).
Gender pay
We published our third Gender Pay Report in April 2020. There has been a positive improvement with the pay gap between
men and women working for the Group in the UK reducing from 6.3% last year to 4.3% this year. This is compared to the
UK median pay gap of 17.3% (Office for National Statistics data).
United Nations Sustainable Development Goal (SDG 5): Gender Equality
In March 2020 we used International Women’s Day as a platform to celebrate the many talented
women we already have working for us and to reaffirm our commitment to improving gender balance
moving forwards. We invested in a week of communications and activities including a virtual ‘Fireside
Chat’ with our Group Chief Executive, Alex Baldock and recently appointed female Chief Supply
Chain Officer, a ‘Career Series’ profiling 15 senior women from across our business, blog posts from
our Executive Committee members, a panel discussion hosted by our HQ Diversity Network, and the sharing of many
stories and videos on our internal social channel, Workplace.
HELP
WE HELP COLLEAGUES AND CUSTOMERS REDUCE THEIR
ENVIRONMENTAL IMPACT BY MAKING IT EASIER TO BE GREENER
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 covers material issues including energy
consumption, carbon emissions, supply chain and operational waste.
We continue to respond to the Carbon Disclosure Project (CDP) questionnaire on climate change, demonstrating our
commitment to identifying, assessing and managing climate-related risks and opportunities across the Group. In 2019/20
we retained our ‘B’ score and in 2020/21 will use the results of a gap analysis to aid further improvement.
As part of our revised risk assessment approach we have been reviewing the long-term impacts of climate change.
Our analysis of risks and opportunities has allowed us to develop a roadmap for the future, which is part of our
implementation of recommendations by the Task Force on Climate-related Financial Disclosures (TCFD). The roadmap
will also inform our business continuity plans and the insights gained are incorporated in our revised ESG risk register.
Further details on this approach will be disclosed in our CDP response this year.
42
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Carbon Reduction Targets
In caring for our environment, we can create cost benefits from large scale efficiencies and are committed to saving
energy. We are also actively seeking more renewable energy sources to power our properties.
United Nations Sustainable Development Goal (SDG 13): Climate Action
Current operations (Scope 1 and 2 Electricity & Gas)
The Group is in the process of setting Science Based Targets (SBTs) for Scope 1 and 2 emissions in
line with a 1.5°C climate scenario. We aim to achieve a 50% reduction in Scope 1 and 2 emissions
across our Group from a 2018/19 baseline by 2030.
Value chain - Scope 3 (Including Procurement)
We are also assessing our value chain or Scope 3 emissions in line with the Greenhouse Gas (GHG) Protocol’s
Corporate Value Chain (Scope 3) Accounting Standard using a 2018/19 baseline. Initial studies show these emissions
account for the largest proportion of our total emissions.
In line with our Science Based Target for Scopes 1 and 2 we will look to achieve at least a 30% reduction in Scope 3
emissions by 2030 from a 2018/19 baseline. This reduction will be achieved through a programme of activities involving
our suppliers, our manufacturers, our fleet and transport providers and colleague engagement.
Scope 3 Emissions
The assessment of Scope 3 shows the most material impacts are within purchased goods and services, upstream
transportation and distribution and the use of sold products.
Purchased
Goods and
Services
92.4%
Upstream
Transport
4.8%
Downstream
Transport
1.1%
Waste from
Opera(cid:31)ons
0.2%
Employee
Commu(cid:31)ng
0.8%
Business
Travel
0.2%
Fuel and
Energy
0.5%
Use of Sold
Products
?%
The ‘Use of Sold Product’ category is in the process of being calculated but is predicted to be a significant category.
Details of our Scope 3 assessment will be communicated in our CDP response this year.
43
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Stakeholders
and Sustainable Business continued
UK Emission Reduction Target
The Group has already achieved its progressive energy reduction target of reducing UK energy consumption by 35% by
2020, and corresponding CO2 emissions by 50% (measured from a 2013/14 baseline, prior to the merger between Dixons
Retail and Carphone Warehouse). In the final year, our 2019/20 energy consumption had reduced overall by 43% and
corresponding CO2 emissions by 65% against our 2013/14 baseline year.
Looking forward to 2020 and beyond, we have reset our UK targets to be in line with the Science Based Target (SBT)
initiative.
In 2019 the Group implemented an Energy Management System (EnMS) for the UK & Ireland portfolio and fleet to increase
the profile of energy management within the organisation and formalise our approach. In recognition of our efforts the
system has been externally certified to the ISO 50001 EnMS Standard.
United Nations Sustainable Development Goal (SDG 7): Affordable and Clean
Energy
All UK Mainland Group properties are now powered by 100% renewable electricity. The Group has
purchased 126,000 MWh of renewable energy generated by wind and hydro technologies. The
renewable energy is certified by Renewable Energy Guarantees of Origin (REGOs) and independently
verified.
Solar power
The Group has four sites with Solar PV installed on the roofs of buildings with a capacity of 2.2MWp. This includes
Newark Distribution Centre Building 1 and 2 and three retail sites. The latest was the Croydon Purley Way Store, with
209kWp capacity completed in October 2019. These panels contribute to our grid energy reduction by 413 tonnes of
CO2e*.
We continue to investigate additional opportunities with landlords where this is practically possible.
*calculation using UK 2019 conversion factor for greenhouse gas reporting = 0.2556kg CO2e /kWh (‘electricity generated’ only)
Property Refurbishment Programme
Over 30% of the UK retail portfolio uses LED technology as the main source of lighting. In 2019/20 we further
invested in retrofitting LED lighting to retail stores and distribution sites delivering savings of ~3,850 MWh, equating to
approximately 1,217 tonnes of CO2e* avoided. Other areas of work were in the replacing the auto-door controls and
ensuring new out of town stores were developed with lobbies where possible.
*calculation using UK 2019 conversion factor for greenhouse gas reporting = 0.31598kg CO2e /kWh (including T&D, WTT generation & WTT T&D)
Energy efficient products
We are committed to helping our customers reduce their energy use and reduce associated costs by improving awareness
of more energy efficient and sustainable options, such as on our corporate website and during ‘green tag’ events. Much of
our own label/licenced brand range is energy efficient, for example:
– All our Washing Machines are ‘A++’ rated or above, with 76% of the range having the highest ‘A+++’ rating
– All our refrigeration products are ‘A+’ rated
– 96% of Dishwashers are rated ‘A++’ or above
– All our TVs are rated ‘A’ or above with 93% of those rated ‘A+’ and ‘A++’
– By purchasing our LED light bulbs customers can save on their energy bills or they can make savings through our
energy switching service. Other energy-saving products we sell, such as Nest and Hive, help consumers reduce their
environmental footprint.
44
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Energy and Carbon Reporting
This section of the report details the energy consumption and greenhouse gas emissions from the activities of the Group
for the period 1 May 2019 to 30 April 2020, as required by the Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013 (‘the 2013 Regulations’) and the Companies (Directors’ Report) and Limited Liability Partnerships
(Energy and Carbon Report) Regulations 2018 (‘the SECR Regulations’).
An ‘operational control’ approach has been used to define the Greenhouse Gas emissions boundary. All material Scope 1
and 2 emissions are included except where noted. Accordingly, this report covers the international operations of the Group.
The data has been externally verified using ISO 14064-3 Part 3: Specification with Guidance for the Validation and
Verification of Greenhouse Gas Assertions.
UK & Ireland Energy Consumption 2019/2020 compared to previous years1:
Energy consumption (kWh)
2019/20
Change (%)
2018/19
2017/18
2016/17
2015/16
Electricity
Gas
Fuel Oil
Total
135,856,170
21,142,103
214,868
157,213,141
-5% 142,286,908 150,343,973 168,599,606 187,930,892
36,724,101
8% 19,503,987
217,368
236,130
-9%
29,775,875
145,962
29,882,655
246,555
-3% 162,027,025 180,265,810 198,728,816 224,872,361
Intensity (MWh/1,000 sqft)
13.26
-2%
13.50
13.82
Total Group-wide kWh Energy Consumption 2019/20 compared to previous years:
Energy consumption (kWh)
2019/20
Change (%)
2018/19
2017/18
2016/17
2015/16
Electricity
Gas
Fuel Oil
Total
236,944,182
22,142,355
214,868
259,301,405
-2% 241,815,670 251,225,719 279,189,910 303,551,007
36,725,630
8% 20,490,148
217,368
242,130
30,989,326
152,322
30,185,349
246,555
-11%
-1% 262,547,948 282,367,367 309,621,814 340,494,005
Intensity (MWh/1,000 sqft)
13.02
-3.6%
13.50
13.44
14.67
16.30
Carbon Emissions
This section of the report details the GHG emissions from the activities of the Group for the period 1 May 2019 to 30 April
2020, as required by the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 (‘the 2013
Regulations’). The emissions have been calculated using the GHG Protocol methodology.
The GHG emissions for our business for the reporting period 1 May 2019 to 30 April 2020, are as follows:
Emissions on location basis:2
Category
Emissions from combustion of
fuel (2,7)
Emissions from the operation of
facilities (5)
Emissions from purchase of
electricity (3,4)
Total:
Tonnes of CO2e
emitted
2019/20
Change
(%)
Tonnes of CO2e
emitted
2018/19
Tonnes of CO2e
emitted
2017/18
Tonnes of CO2e
emitted
2016/17
Tonnes of CO2e
emitted
2015/16
Tonnes of CO2e
emitted
2014/15
21,334
-3%
21,943
23,178
21,698
20,614
19,760
874
-59%
2,147
2,525
2,399
2,797
3,661
51,120
73,329
-16%
-13%
60,659
84,748
67,795
93,498
88,496
112,593
109,534
132,945
127,607
151,028
(1) Table aligned to previous reporting under the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme.
(2) A location-based method reflects the average emissions intensity of grids on which energy consumption occurs and a market-based method reflects emissions from
electricity that companies have selected.
45
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report
Stakeholders
and Sustainable Business continued
Emissions on market basis:
Category
Emissions from combustion of
fuel (2,7)
Emissions from the operation of
any facility (5)
Emissions from purchase of
electricity (3,4)
Total:
Tonnes of CO2e
emitted
2019/20
Change
(%)
Tonnes of CO2e
emitted
2018/19
Tonnes of CO2e
emitted
2017/18
Tonnes of CO2e
emitted
2016/17
Tonnes of CO2e
emitted
2015/16
Tonnes of CO2e
emitted
2014/15
21,334
-3%
21,943
23,178
21,698
20,614
19,760
874
-59%
2,147
2,525
2,399
2,797
3,661
18,228
40,436
-50%
-33%
36,495
60,584
82,294
107,997
121,995
146,092
146,531
169,942
161,965
185,386
Intensity measures
The emissions per unit area of occupied space are as follows:
Emissions on location basis:
Tonnes of CO2e
emitted per
1,000 ft2
of floor
area (1)
2019/20
3.50
6.33
3.68
Tonnes of CO2e
emitted per
1,000 ft2
of floor
area (1)
2019/20
2.12
0.69
2.03
Change
(%)
-16%
-16%
-16%
Change
(%)
-35%
-3%
-35%
Tonnes of CO2e
emitted per
1,000 ft2
of floor
area
2018/19
Tonnes of CO2e
emitted per
1,000 ft2
of floor
area
2017/18
Tonnes of CO2e
emitted per
1,000 ft2
of floor
area
2016/17
Tonnes of CO2e
emitted per
1,000 ft2
of floor
area
2015/16
Tonnes of CO2e
emitted per
1,000 ft2
of floor
area
2014/15
4.15
7.53
4.36
4.07
9.90
4.45
4.81
11.27
5.33
5.76
13.75
6.36
5.73
17.41
n/a
Tonnes of CO2e
emitted per
1,000 ft2
of floor
area
2018/19
Tonnes of CO2e
emitted per
1,000 ft2
of floor
area
2017/18
Tonnes of CO2e
emitted per
1,000 ft2
of floor
area
2016/17
Tonnes of CO2e
emitted per
1,000 ft2
of floor
area
2015/16
Tonnes of CO2e
emitted per
1,000 ft2
of floor
area
2014/15
3.28
0.71
3.12
4.87
8.94
5.14
6.33
13.56
6.92
n/a
n/a
8.14
n/a
n/a
8.14
Division
Dixons Retail
Carphone Warehouse
Group total
Emissions on market basis:
Division
Dixons Retail
Carphone Warehouse
Group total
Notes:
(1) Overall floor area of the Group business is estimated to be 19,913,017 ft2. This is split between the Dixons Retail business which is estimated to be 18,652,483 ft2
and the overall floor area of the Carphone Warehouse business, which is estimated to be 1,260,534 ft2.
(2) ‘Emissions from combustion of fuel’, includes a proportion of private cars being used for business travel, which would be classified as Scope 3, in keeping with
previous years.
(3) The electricity consumption figure includes Scope 2 generation emissions but not Scope 3 transmission and distribution losses.
(4) Electricity and gas usage is based on supplier bills. Manual gap filling was conducted for a small proportion of suppliers in the UK and Ireland, using an average of
the consumption year to date. This is because this report was due before some electricity and gas bills had been provided by the suppliers. This report does not
include electricity consumption through suppliers where the landlord procures the energy; which represents only 1% of total energy consumption.
(5) 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 contractor’s responsibility, so have not
estimated leakage from other units where no top-ups were carried out.
(b) In previous years, some refrigerant charges for new installations were reported as leakage. This practice was stopped for 2016/17 onwards, which accounts for
most of the reduction in leakage compared to 2015/16.
(c) In 2019/20 a small percentage of emissions related to top-ups has been estimated.
46
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report
Energy and Carbon Emissions by Region
This year we have stated our carbon emissions by UK and Offshore and Global (excluding UK and Offshore), in accordance
with the requirements of the Streamlined and Energy and Carbon Reporting Regulations. A summary of energy projects is
summarised earlier in this report.
Energy and Emissions on location basis:
Tonnes of CO2e emmitted 2019/20
Tonnes of CO2e emitted 2019/20 per 1,000 ft2 of floor area 2019/20
Total energy consumption (kWh) – 2019/20
Energy intensity kWh per 1,000 ft2 of floor area 2019/20
UK and
Offshore(6)
Global (excluding
UK and Offshore)
55,430
4.68
17,899
2.22
214,937,409 115,625,542
13,711
18,723
(6) The calculations use the guidance set out in Environmental Reporting Guidelines: Including Streamlined Energy and Carbon Reporting Guidance (ref. PB 13944),
issued in March 2019.
(7) Estimation has been applied in April 2020 due to Covid-19 lockdown impact.
Commercial Waste
In October 2019 we consolidated our service provider for waste bins and hazardous services across our UK sites, resulting
in a more cost effective and efficient operation.
Recyclables from our UK stores are backhauled to our national recycling facility in Newark. From there, consistent grades
of cardboard, plastic and expanded polystyrene are channelled through our Customer Service Centre depots to our
recycling partners, minimising transportation and ensuring the best return for our material. In 2019, our UK operation
generated 5% less waste than in 2018. Of the 14,478 tonnes collected, 88.6% was diverted for recycling or energy
recovery, an increase from 86.3% in 2018.
We have a target for Zero Waste to Landfill in the UK & Ireland of 95% by 2022 and 100% by 2024.
Increase Waste Electric and Electronic Equipment (WEEE) recycling
Throughout our channels, we encourage everyone to bring old or unwanted technology into our stores to be recycled or
reused - whether they bought it from us or not. We will also collect our customers’ unwanted electrical equipment, small
electrical appliances and batteries for recycling when we deliver their amazing new technology.
Our award-winning waste management programme continues to evolve, with 103,096 tonnes of waste electrics collected
across our Group, preventing 115,262 tonnes of CO2 from being released into our atmosphere.
WEEE collected in Tonnes
UK&I
Nordics
Greece
2019
67,421
28,782
6,894
2018
61,222
26,573
2,590
+/-
CO2 saved
6,199
2,209
4,304
75,377
32,177
7,707
We train store colleagues to tell customers about our collection and recycling service and prompt online customers with
the option of having their old appliance collected for recycling for a small fee. In addition, we provide a free in-store take
back for all electronics and were the first UK retailer to offer a free small WEEE collection service as part of an existing
home delivery service. We also operate several schemes to help colleagues easily recycle WEEE.
Small initiative making a big difference
In its first full year, the volume of small waste electricals we collected was up 215% compared to when it began in 2018
and in May 2019, this service was recognised with an Excellence in Recycling and Waste Management Award. It was
also shortlisted for MRW’s (Materials Recycling World) National Recycling Award, a Business Green Leaders Awards
and a Retail Week Award.
47
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report
Stakeholders
and Sustainable Business continued
50.4% of all major domestic WEEE collected by UK retailers in 2019 was collected by us - making the Group the biggest
recycler of waste electricals in UK Retail. We recycled 336,065 fridges in the UK in 2019 - the equivalent of taking 112,021
cars off the road in Co2 emissions and we collected and refurbished 421,520 phones in the UK in 2019/20.
United Nations Sustainable Development Goal (SDG 4): Quality Education
In September 2019, we partnered with one of the world’s leading metal recyclers, EMR, to launch
an e-waste and metals recycling initiative in UK schools. Recyclabots is a free schools education
programme aimed at Key Stage 2 to help pupils learn about metals and recycling. It teaches children
about recycling, why it is necessary and how it benefits the planet, while rewarding schools for
recycling old technology and metal waste through the programme and Currys PC World stores.
Hazardous WEEE Waste is disposed of through our Authorised, Approved Treatment Facilities (AATFs) in line with
legislation. In line with legislation, any plastics that may contain Persistent Organic Pollutants (POPS) such as Bromine, are
sent for incineration.
Recycling in Greece
We make it easy for customers in our Kotsovolos stores to recycle by providing in-store receptacles for small electricals,
ink cartridges and batteries. We offer to collect large WEEE from customers’ homes during the delivery of new technology
and are committed to taking WEEE away for recycling whenever we replace a faulty item. For 2019/20, Kotsovolos
collected and recycled 161,480 appliances, compared to 121,383 last year.
Reuse
We partner with the Reuse Network, who support over 150 charities across the UK, helping them alleviate poverty, reduce
waste and tackle climate change. In 2019 this partnership helped 10,376 low income households save an estimated
£1,945,500 and 1,100 tonnes of CO2.
Second Home is Kotsovolos’ largest charitable initiative and involves collecting home appliances that would normally be
disposed of and finding them a ‘second home’ with low income families. Kotsovolos collects, checks, cleans and carries
out any necessary repairs before redistribution. In 2019, eight Greek cities competed in a challenge to collect the most
appliances for Second Home. This resulted in a 30% increase in demand for this service. Over 1,500 appliances have been
rehomed since the Second Home initiative began in 2017.
Transporting technology cleanly and efficiently
We are committed to reducing carbon emissions and transitioning to 100% EVs or alternative fuel on light duty vehicles
(<3.5t) and 50% of medium duty (3.5t -7.5t) by 2030, subject to progress in the development of a nationwide charging
infrastructure, advances in vehicle charging technology and help from manufacturers in understanding and preparedness
to transition.
In addition, we have signed up to the Freight Transport Association’s ‘Van Policy’ Working Group, which will enable us to
have an influence in future planning for a sustainable and affordable electric vehicle solution.
48
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report EVERYONE
WE ARE A COMPANY FOR EVERYONE AND ARE ACCESSIBLE –
WHATEVER A COLLEAGUE, CUSTOMER OR OTHER STAKEHOLDER
NEEDS
In 2019/20 we continued our focus on fuel efficiency, working with our driver assessors to improve driving techniques,
increase mpg, reduce the risk of accidents and keep our colleagues safe. We also commenced work with our insurers to
support the implementation of ISO50001 and are developing a Driver Risk Management Framework as part of our policies.
Britain’s Healthiest Workplace 2019
We entered this national survey, sponsored by the Financial Times and Vitality Health for the fourth consecutive year.
During summer 2019, approximately 902 (+302 year on year) colleagues in the UK completed a comprehensive survey
personal to their health and wellbeing at work. The resulting independent report and recommendations continue to help us
identify and mitigate health risks and further support colleague wellbeing.
According to our 2019 report, colleagues spent an average of 21% of working hours with ill-health related absence or
presenteeism in the week prior to the survey, compared to 16.5% for our sector average.
While these figures provide an indication, we recognise the need to increase our 3% sample size for more accurate results.
We therefore set a participation target of 30% for 2020.
United Nations Sustainable Development Goal (SDG 3): Good Health and
Wellbeing
In July, we activated our headline sponsorship of the multi award-winning Dixons Carphone Race to
the Stones for the 6th consecutive year.
Our Group General Counsel and Company Secretary, Nigel Paterson and our Director of Strategy &
Corporate Affairs, Assad Malic, were two of 111 colleagues and over 3,030 participants from over 30
countries, who chose to run, trek or walk 100km along the ancient Ridgeway to Avebury Stone Circle.
This two-day event, which also enjoyed a 50:50 gender split, raised over £475,000 for 57 charities, including £45,000
by colleagues, for Sport Relief and causes personal to them. Since 2014, the Dixons Carphone Race to the Stones has
raised over £2.32 million for good causes.
Dixons Carphone Step to the Stones
Over a two-week period in June 2019, 1,084 colleagues from across the UK, Ireland, Greece, Nordics, Czech Republic,
Hong Kong and Portugal took a collective 98,086,061 steps to ‘virtually’ take part in the Dixons Carphone Race to the
Stones.
An interactive ‘Step Challenge’ platform provided participating colleagues with a fun and engaging way to improve their
fitness, win prizes and engage towards a common goal with colleagues across our Group.
United Nations Sustainable Development Goal (SDG 9): Industry, Innovation and
Infrastructure
In 2019/20 we tendered for a new fleet for our White Goods Repair Engineers. As part of the
procurement process, key colleagues were consulted on their specific requirements, including
Operational Management teams and members of the Customer Service Centre Staff Association.
286 new Ford Transit vans fitted with ‘in-cab’ driver alert technology to help improve fuel efficiency and reduce CO2 will
be delivered in the second half of 2020/21.
For 2020/21 we are setting mpg targets for each driver and each fleet, leading to targets for each CSC and our overall
network. This will translate to an improvement year on year and allow for tracking the reduction in our CO2 emissions to
support our commitment to a 100% electric or alternative fuel fleet by 2030.
49
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Stakeholders
and Sustainable Business continued
ENJOY
COLLABORATING WITH MANUFACTURERS AND SUPPLIERS TO
GIVE CUSTOMERS PEACE OF MIND
We fully support the Modern Slavery Act’s requirements to manage risk and prevent modern slavery in our business at
every level and in 2019/20, increased our efforts to help eradicate this issue through initiatives to mitigate risk and identify
areas in need of more focus. Our Modern Slavery Statement is available on www.dixonscarphone.com
We are committed to giving customers peace of mind that the amazing technology they buy from us is sourced
responsibly, from a supply chain free from forced labour and exploitation.
United Nations Sustainable Development Goal (SDG 12): Responsible
Consumption and Production
Our Standards for Responsible Sourcing provide clear guidelines on the high standards and common
values we expect from our suppliers to ensure the products we sell are safe, ethical and produced and
transported in a way that is not harmful to our environment.
These Standards set out minimum requirements across human rights, labour, environment, anti-corruption, integrity,
business ethics, data security and social impact, which apply in addition to compliance with all relevant national and
international legislation.
A dedicated Responsible Sourcing team assists colleagues making purchasing decisions, ensuring our standards are
upheld and considered alongside traditional drivers such as price, product features and stock availability. This process
is helping us to grow our product range from ethically and responsibly aware supply chains and safeguard against risk.
Ethical audits on our own label and licenced brand suppliers are well-established and all suppliers receive our Modern
Slavery Policy, which sets out the actions to take if a case of modern slavery is discovered or suspected.
In January 2020, we submitted our first biennial report to the Ethical Trade Initiative (ETI) Board and were accepted as full
members. We did this a year earlier than required in order to validate our work to date and test our roadmap for the future.
Membership of the ETI drives continuous improvement, through the sharing of best practice and collaboration. Our
Standards for Responsible Sourcing ask suppliers and their supply chains to work towards full compliance with the ETI
Base Code.
United Nations Sustainable Development Goal (SDG 8): Decent Work and
Economic Growth
The Bright Future employment programme provides survivors of modern slavery with a pathway to
paid employment and reintegration into society. We employed our first candidate in 2018/19 and have
since given opportunities to several more individuals in 2019/20. To date more than 200 victims of
modern slavery in the UK have been helped and the programme has continued to grow. We have been
part of a steering committee and join as founding members of the co-operative making Bright Future an independent
organisation. Survivors will join the newly created board, helping to run the co-operative and make sure the focus
remains victim centric.
We are also founding members of Slave Free Alliance, which is a best practice membership scheme run by the modern
slavery charity, Hope for Justice, leveraging their experience to review our recruitment practices within our distribution
network in the UK, with further assessments of our waste and recycling network and Nordic distribution centre planned.
Membership also gives us the opportunity to discuss common issues with other global companies across a variety of
business sectors.
With the majority of our suppliers based across Asia and Europe, our OEM operation is based in Hong Kong and sources
product types sold in our stores under our own or licenced brand names.
50
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Auditing and risk assessments are a governing part of our supplier selection process and ongoing relationships. OEM
suppliers must comply with our rigorous terms and operational procedures, implementing and enforcing 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. Employing forced or child labour is strictly
against our terms of operation.
Compliance is assessed and monitored by our team of auditors. If issues are identified, we will work with the supplier on
a corrective action plan. Where there are amber or red audit results, suppliers are required to submit a corrective action
plan within 14 days and a follow-up audit will be arranged to ensure effective implementation. There are various criteria that
would lead to a supplier being given a red audit – examples include the presence of child labour, having excessive working
hours or operating a building with dormitory, warehouse and production facility in the same building. If it is impossible
for the supplier to improve their performance or we do not see positive results, they will not be approved, or they will be
delisted.
During the year under review, two of the factories were delisted after failing to make the required improvements.
The results of ethical supply chain audits carried out during the period under review are in the table below:
Audit status
Performance indicators 2019/20
Green
13
Amber
63
Red
11
Total
87
Delisted / not approved
2
Health and Safety Policy
Keeping colleagues safe is our number one priority. The commitment to meet our obligations for health, safety and welfare
is clearly set out in the company’s Health & Safety Policy, which is reviewed and approved by the Board each year (most
recently in June 2020) and signed by our Group Chief Executive.
Managing Health and Safety Risks
The development of our Health and Safety Management System continues with the creation of framework documents
detailing how we manage significant risks to colleagues, contractors, customers and visitors. Regular internal inspections
in our retail stores and audits across our supply chain, contact centre and corporate offices are undertaken to verify
compliance.
Continual improvement is important to us and measured through impressive improvements in gap analysis scores within
retail stores, customer contact centres and offices, customer service and regional distribution centres, Newark campus
and Acton Head Office.
Over the past 12 months we focussed on colleague training, including e-learning on subjects ranging from health and
safety, anti-bribery and information security and data protection. E-learning Display Screen Equipment (DSE) training and
work-station assessments have also been introduced and completed by over 1,250 colleagues.
Face-to-face training was provided on topics including first aid, fire marshalling and material handling equipment as well as
refresher training to maintain core competency in these areas.
There has been a reduction in the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations (RIDDOR)
accidents over the last three years. As we strive to make our workplaces as safe as possible, we are introducing a
balanced scorecard to measure and monitor lead as well as lag measures.
As well as tracking lag measures such as RIDDOR accidents, we will also focus on lead measures such as near miss and
hazard reporting, safety interventions, workplace inspections and training completion rates. For 2020/21 SMART Health
and Safety objectives will be set for all managers and incorporated in their annual performance targets to ensure colleague
engagement with our wider Health and Safety.
In 2019 our Retail Health and Safety Team was once again awarded a Gold RoSPA award for best practice in the
prevention of accidents.
Road safety
Our Operations Procedures document covers the safety of drivers working in and around vehicles, including the safe use
of tail lifts. It is regularly updated by our Fleet Compliance team, which works with our Health and Safety teams to keep
drivers and management teams up to date with policies and procedures in relation to climate-related risks such as extreme
weather conditions of snow, ice, high winds and heavy rain.
Regular briefs and mail drops remind drivers to carry out daily vehicle checks, inspect essential equipment and assess
potential risks.
The teams also work together to investigate any vehicle accidents occurring onsite at Customer Service Centres, resolving
issues and recommending changes to improve workplace transport management.
51
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report
Stakeholders
and Sustainable Business continued
AMAZING TECHNOLOGY
WE USE AMAZING TECHNOLOGY FOR GOOD
We are committed to being a responsible member of every community we do business in, using our time, expertise and
amazing technology for good. Using technology as an enabler, we support causes that contribute to helping everyone, who
might otherwise be excluded, enjoy a better life and encourage and empower all colleagues to ‘do the right thing’ and help
make a positive difference.
United Nations Sustainable Development Goal (SDG 11): Sustainable Cities and
Communities
Our annual Chair of the Board’s Shield colleague award recognises outstanding team performance
and community engagement. Teams are nominated through our leadership structure and are subject
to a rigorous judging process, culminating in visits from our Group Chief Executive, Alex Baldock and
Chair of the Board, Ian Livingston. Our Stores of the Year must demonstrate a positive contribution
to their local community through initiatives such as volunteering or fundraising, and the winners are celebrated in our
annual colleague conference.
Supporting a common charitable cause – Age UK (registered charity number 1128267)
Age UK, the leading charity for older people in the UK, was selected as our lead charity partner following a colleague vote.
The Social Purpose Strategy included a desire to unite our UK business with a common charitable cause and Age UK was
the clear winner, receiving almost two thirds of the 1,300 colleague votes.
The Group exists to help everyone benefit from amazing technology and Age UK gives friendship, advice and practical
support to older people and their families when they need it most.
Over the next two years, we plan to maximise our combined nationwide presence and resources to help combat loneliness,
improve mental health and support independence and community participation for older people.
Together, we aim to deliver digital support to thousands of people over the age of 70, equipping them with essential
technology skills, strengthening their connections with friends and family and helping them to make the most of the
benefits and enjoy being online.
Age UK emergency response
During Covid-19 the vital role of technology as a way of helping older people stay connected with loved ones, up to date
with health-related information and as a source of comfort became clear.
After consultation with Age UK, we sent 100 laptops, mobile phones, SIM cards and headsets with an approximate
donation value of £37,000 to Age UK’s Silver Line helpline, so their teams could maintain their vital telephone support from
the safety of their own homes.
This was followed with an ambitious project to get £62,000 worth of tablet technology into the hands of 500 older people
most in need, identified through Age UK’s weekly ‘Friendship Calls’. With the possibility of many older people using this
technology to get online for the first time, we had to make sure the tablets could simply be switched on and ready to use.
Further support for older people
Our mobile network, iD Mobile, offered all existing customers aged 70 and over free and unlimited minutes for the 12-week
isolation period advised by Government during the pandemic.
As part of the BBC’s Make a Difference campaign, we collaborated with other retailers and manufacturers and loneliness
charity ‘Wavelength’ to provide thousands of free DAB radios to vulnerable people aged over 70, as part of an initiative
championed by BBC Local Radio.
NHS Support (UK)
We continue to use our size, scale and expertise to support our NHS including providing NHS workers with our Gift and
eGift cards to facilitate the affordable purchase of the technology we sell, over an extended period of time through their
employee benefits platforms. Our B2B business continues to support NHS Trusts, sourcing items such as phones, tablets
and webcams at reduced cost, prioritising delivery and ensuring patients have a critical lifeline to loved ones.
‘Pennies’ (registered charity number 1122489)
Working with the award winning fintech charity, Pennies, we rolled out their ‘digital charity box’ in Carphone Warehouse
stores in June 2018. Pennies offers customers the chance to make a 25p charitable donation when they pay by card
or digital wallet. In 2019/20 our customers raised £52,549.88 for Heads Together and £7,539.30 for the World Wildlife
Federation (registered charity no. 1081247) Emergency Appeal in response to the Australia Bush Fires, through a total of
52
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report 267,063 in-store customer donations. Pennies receives 10% of all donations which supports their ongoing charitable aims,
including the protection of growth and micro-donations to raise vital funds for the UK charity sector.
The Mix (registered charity number 1048995)
The Group has a long history of support for The Mix, which can be traced back to 1999 through Carphone Warehouse
and its partnership with the confidential helpline for young people, Get Connected. Just as the Group matches customers
with the best equipment and services for their needs, The Mix supports the physical and mental wellbeing of young people
under 25 by connecting them to information, peers and experts, whatever their issue, through the technology of their
choice. The Mix does this via a free, confidential support service, available 24/7, 365 days a year, via phone, text, web,
social media and counselling. Our support has been instrumental to its success, growing the charity from reaching a few
thousand young people to helping over 2.5 million young people last year. Over the past 21 years, we have raised millions
of pounds and provided Gift in Kind support, from professional services through to office and Helpline accommodation,
which equated to the value of £351,000 in 2019/20. Our partnership with The Mix came to an official end in June 2020. We
continue to support their work, advocating their mental health services to colleagues and customers.
United Nations Sustainable Development Goal (SDG 2): Zero Hunger
We continued our partnership with Grundig to donate £200,000 worth of appliances to local food
related charities nominated by our store colleagues. This supplier collaboration supports Grundig’s
Respect Food initiative and the United Nation’s Sustainability Goal for Zero Hunger. Hundreds of
brand-new cooking, laundry, refrigeration or dishwashing appliances are being donated until 2020,
with 191 units to the value of £94,000 donated to local community causes across the UK since its
launch in September 2018.
International charity support
The Elkjøp Foundation was established to help address the issue of digital exclusion in the Nordics. This Foundation is
funded by company donations, carrier bag sales and colleague fundraising; it supports a variety of causes across four
countries. During 2019/20, it’s support included the following:
Norway – worked with the Norwegian Association of the Blind, to provide education programmes with handsets and tablets
for the visually impaired. We also helped older people develop their digital skills through Senior Net’s Digital Support
Person programme as well as donating a range of technology to several associations nursing homes, youth clubs, local
municipalities and local branches of Norwegian Volunteer Central.
Finland – joined a partnership donating laptops to facilitate technology home loans enabling those without access of their
own to learn digital skills.
Denmark – we donated technology to charitable causes including two women’s crisis centres, a socio-economic housing
project, a shelter for the homeless, a senior’s Club, a centre for socially challenged children, a home for young people with
disabilities and the Children’s Department at the Hospital of Skejby.
Sweden – 17 out of 32 stores were granted funding totalling 200,000 SEK. Benefitting projects ranged from digital training
for older people, to equipping a children’s hospital with technology. In October 2019, Elgiganten celebrated 25 years in
Sweden and to mark the occasion donated 100,000 SEK to Maskrosbarn, towards the development of a digital platform to
support children in need.
Greece
Kotsovolos focussed on supporting children, the elderly, people with disabilities and the environment during 2019/20.
Support for schools included the donation of 166 printers reclaimed from stores under renovation. In partnership with
ELEPAP Kotsovolos, gift packaging was designed for selected products, with a percentage of sales from the 17,112 items
sold, contributing towards the care and treatment of children with disabilities. We also gave support to low income families
through the Second Home initiative, raised €10,000 for Make a Wish and launched a nationwide competition for a proposal
to help people with disabilities lead a better day to day life through technology. Of the 140 participations there were three
winners receiving €13,000 in prizes and two scholarships.
Approval of Strategic Report
This Strategic Report was approved by the Board and signed on its behalf by:
Alex Baldock
Group Chief Executive
14 July 2020
53
Dixons Carphone plc Annual Report and Accounts 2019/20Strategic Report Board of Directors
Biographies
Lord Livingston of Parkhead
Chair of the Board N
Appointed: December 2015 (as Deputy Chair
and Non-Executive Director), April 2017 (as
Chair of the Board and Chair of the Nominations
Committee)
Current external roles: Member of the House of
Lords and a trustee of Jewish Care.
Experience: Ian was Chairman of Man Group plc
from 2016 to 2019, 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 was group
finance director of Dixons Group plc between
1996 and 2002, having served in a number of roles
over more than a decade with the company. Ian
has previously served as a non-executive director
on the boards of a number of public companies.
Skills and contribution to the Board: Ian is a
chartered accountant with over twenty years of
board level experience. He provides extensive
knowledge and understanding of successfully
growing a complex international business. He
has a strong track record of delivering innovative
leadership that is invaluable to the Company.
Board meeting attendance 2019/20: 13 of 13
Alex Baldock
Group Chief Executive D
Appointed: April 2018
Experience: Alex was group chief executive of
Shop Direct from 2012 to early 2018. Prior to that,
Alex was managing director of Lombard (a division
of Royal Bank of Scotland), and was commercial
director and corporate director at Barclays Bank.
His earlier career included consultancy roles with
Bain & Company and Kalchas.
Skills and contribution to the Board: Alex has
an outstanding track record in leading large,
complex consumer-facing businesses. He led
Shop Direct through one of UK Retail’s fastest,
most far-reaching and most successful digital
transformations, delivering five consecutive years
of record financial performance, with strongly
rising sales and an almost tenfold increase
in profits. Before that, he led the successful
transformation of Lombard. Alex is particularly
valued for his strategic clarity, relentless execution
and his ability to inspire individuals around him.
Board meeting attendance 2019/20: 13 of 13
Board skills and experience
Tony DeNunzio CBE
Deputy Chair and
Senior Independent Director N R
Appointed: December 2015 (as Senior
Independent Director), April 2017 (as Deputy
Chair and Senior Independent Director and Chair
of the Remuneration Committee)
Current external roles: Tony is senior adviser at
Kohlberg, Kravis, Roberts & Co L.P., a non-
executive director of PrimaPrix SL and Chairman
of the British Retail Consortium.
Experience: Tony was non-executive chairman
of Pets at Home Group Plc from 2014 to May
2020 and 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.
Skills and contribution to the Board: Tony has
extensive experience in the European retail and
consumer goods sectors in finance, CEO and
chairman roles.
Board meeting attendance 2019/20: 13 out of 13
Jonny Mason
Group Chief Financial Officer D
Appointed: August 2018
Experience: Jonny was chief financial officer of
Halfords plc from 2015 and was interim chief
executive officer between September 2017 and
January 2018. Prior to that, Jonny was chief
financial officer of Scandi Standard AB, chief
financial officer at Odeon and UCI Cinemas and
finance director of Sainsbury’s Supermarkets. His
early career included finance roles with Shell and
Hanson plc.
Skills and contribution to the Board: Jonny has an
extensive track record as chief financial officer in
diverse businesses and his business experience
in Scandinavia is particularly valued by the Board.
Board meeting attendance 2019/20: 13 of 13
Number of Board members
0
2
1
3
4
5
6
7
8
0
1
2
3
Strategy (development and implementation)
General retailing experience
Accounting, finance and audit
Corporate transactions
International
Risk management
54
Regulatory
Marketing / advertising
Governance
IT and technology
Consumer Financial Services
Online retailing experience
Human Resources Management
Dixons Carphone plc Annual Report and Accounts 2019/20Corporate Governance Andrea Gisle Joosen
Independent Non-Executive Director N R
Appointed: 6 August 2014 (following the merger
of Dixons Retail with Carphone Warehouse having
served on the Dixons Retail board since March
2013)
Current external roles: Andrea is currently a non-
executive director of ICA Gruppen AB, James
Hardie Industries plc and BillerudKorsnäs AB.
Experience: Andrea was chair 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.
Skills and contribution to the Board: Andrea has
extensive international business experience in
a variety of sectors including marketing, brand
management, business development and
consumer electronics.
Board meeting attendance 2019/20: 13 of 13
Nigel Paterson
General Counsel and
Company Secretary D
Appointed: April 2015
Experience: Nigel held several senior legal roles
at BT Group plc including 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.
Skills and contribution to the Board: Nigel is a
solicitor and has a strong background in UK and
international telecommunications.
Board meeting attendance 2019/20: 13 of 13
Gerry Murphy
Independent Non-Executive Director
A R
Appointed: April 2014
Current external roles: Gerry is a non-executive
board member of the Department of Health and
Social Care.
Experience: Gerry was a non-executive director
of Capital & Counties Properties PLC from
2015 to 2018 and senior independent director
from 2018 to 2020. Gerry 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.
Skills and contribution to the Board: Gerry
has extensive audit and finance experience in
consumer business, retail and technology and
media and communications sectors.
Board meeting attendance 2019/20: 13 of 13
Key
A Audit Committee
D Disclosure Committee
N Nominations Committee
R Remuneration Committee
Eileen Burbidge MBE
Independent Non-Executive Director A
Appointed: January 2019
Current external roles: Eileen is the HM Treasury
Special Envoy for Fintech and Tech Ambassador
for the Mayor of London’s office. Eileen co-
founded Passion Capital in 2011 where she is a
partner and represents as non-executive/investor
director at Monzo Bank along with several other
Passion Capital portfolio companies.
Experience: Eileen has a university degree in
computer science and since a career start in
telecoms at Verizon Wireless, she has held various
roles at Apple, Sun Microsystems, Openwave,
PalmSource, Skype and Yahoo!. Eileen was
previously a member of the Prime Minister’s
Business Advisory Group.
Skills and contribution to the Board: Eileen
has a strong technology background and
is a leader in the development of the UK’s
increasingly renowned fintech industry. Eileen
brings a constructive, challenging and balanced
perspective to the Board, with a real focus on
technology innovation, value creation and an
informed perspective on the digital consumer.
Board meeting attendance 2019/20: 13 of 13
Fiona McBain
Independent Non-Executive Director A
Appointed: 1 March 2017 (as a Non-Executive
Director), September 2018 (as Chair of the Audit
Committee)
Current external roles: Fiona is currently chair of
Scottish Mortgage Investment Trust PLC and a
non-executive director of Direct Line Insurance
Group plc and Monzo Bank Limited.
Experience: 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.
Skills and contribution to the Board: Fiona has an
outstanding record of business leadership and
has over 30 years’ experience in retail financial
services, in the industry and as an auditor.
Board meeting attendance 2019/20: 13 of 13
Board composition
Board members
by gender
Balance of
the Board
Non-Executive
Directors’ Tenure
Male: 5
Female: 3
Executive: 2
Non-Executive: 6
0–3 years: 1
3–6 years: 4
over 6 years: 1
55
Dixons Carphone plc Annual Report and Accounts 2019/20Corporate Governance Corporate
Governance
Report
Corporate Governance
Report
Corporate Governance Report
Chair of the Board’s Q&A
Q What is the Board’s approach to Corporate
Governance?
This Corporate Governance report describes the
governance framework that we have in place to ensure
that the Board is operating effectively and supporting and
challenging management to maintain high standards of
corporate governance across the Group. I believe that
robust corporate governance is the foundation to ensuring
the long-term sustainable success of a business and
helps us deliver the right outcomes for our shareholders,
our customers, our colleagues, our suppliers and our
communities.
The Board is fully compliant with all provisions of the 2018
UK Corporate Governance Code (the ‘Code’). Each year
the Board considers the Group’s key policies, the Matters
Reserved for the decision of the Board, the structure and
terms of reference for each of the Board committees and,
the time commitment, external appointments and the
duties of all directors including the Chair of the Board, the,
Group Chief Executive and the Senior Independent Director
to ensure that our governance framework is operating
effectively. The Board carried out this review during the year
and has concluded again that our governance framework
is aligned with best practice and appropriate to meet
the needs of the Group. We have included a section 172
statement in our Strategic Report for this first time this year,
and that includes a report of the key business decisions
we have made in 2019/20 and how we have considered
the implications for our stakeholders in making them. This
focus has been particularly critical during 2019/20 given the
important strategic decisions that the Board has needed to
take and the extraordinary external circumstances that the
business has been required to navigate through.
Q What were the Board priorities during 2019/20?
The main focus of the Board during the year has been the
oversight and challenge of the delivery of the strategic
priorities for the business. This included the January 2020
decision to move part of our contact centre operations to
be operated by a third party and the March 2020 decision
to close standalone Carphone Warehouse stores in the
UK and focus on selling mobile devices and connectivity
through the shop-in-shops in Currys PC World stores and
online. In addition, the Board has supported the executive
team during the planning for Brexit and the response to
the Covid-19 pandemic. A summary of all Board topics
considered during the year is included in this report.
56
Q How was the Board performance evaluation completed
during 2019/20?
A comprehensive external Board evaluation was carried
out in 2018/19 and the findings from that process have
been implemented. This year we have carried out an
internal evaluation by way of a questionnaire supported
by individual meetings with the Chair of the Board. I am
pleased to report that the 2019/20 process concluded that
the Board is operating effectively. The directors collaborate
well together, all directors invest significant time and energy
in their roles both at and between board meetings and there
is robust challenge of management and performance. There
was a significant number of ad hoc Board meetings and
informal Board calls during this year to discuss key strategic
decisions and respond to external events and all directors
attended all of these sessions although several had to be
arranged at short notice. More detail on the 2019/20 board
effectiveness process has been included in this report.
Q How has the Board taken into account feedback from
Colleagues during the year?
2019/20 is the first full year that the new colleague listening
forums in the UK & Ireland and International businesses
have been in place. These help us enhance and streamline
our engagement with colleagues and the Board was pleased
to receive an update during the year reporting that these
forums are working well and generating useful information
and feedback. More information on the outcomes of these
forums is on page 34. Our Board is committed to promoting
and embracing all forms of diversity and there have been
detailed discussions during the year on the strategic plans
and initiatives to accelerate diversity improvements across
the Group. There is further information on measures to
enhance diversity on page 41. This year the Board has
continued to enjoy meeting many colleagues from all areas
of the business. One Board meeting this year was held in
Oslo to allow directors to spend a day visiting stores and
meeting store colleagues. Another Board meeting was held
at the Company’s training centre The Academy@FortDunlop
in Birmingham to provide directors with an insight into the
training programme that all new colleagues complete before
starting work in our stores. Several directors have also been
on individual visits to stores and other facilities such as our
main distribution and repair centre in Newark.
Conclusion
The challenging external sales environment and the impacts
of Brexit and the Covid-19 pandemic have presented
significant hurdles for the Group to overcome. In spite
of this, 2019/20 has been an important year and the
Board and colleagues have successfully delivered strong
progress with our business transformation. We are further
along on our journey to deliver a more valuable business
for our customers, colleagues, shareholders and other
stakeholders.
Lord Livingston of Parkhead
Chair of the Board
14 July 2020
Corporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 continued
The Board and Committees Structure
Dixons Carphone Plc Board
Audit Committee
Disclosure Committee
Nominations Committee
Remuneration Committee
Executive Committee
ESG Committee
Main Operating Subsidiaries
Risk & Regulatory Committee
Product Governance Committee
Corporate Governance statement
The Board confirms that throughout the year ended
2 May 2020 and as at the date of this Annual Report and
Accounts (‘ARA’), the Company has been fully compliant
with the Code. A copy of the Code can be obtained from
the Financial Reporting Council’s website, www.frc.org.uk.
This report, together with the Directors’ Report on pages 68
to 70 details how the principles and provisions have been
applied.
Role of the Board
The Board is responsible for overall leadership and
promoting the long-term sustainable success of the
company, generating value for shareholders and
contributing to wider society. The Board sets the Company
strategy and oversees its implementation within a
framework of efficient and effective controls that allow the
key issues and risks facing the business to be assessed
and managed. The Board considers the impact on, and
the responsibility it has to, all the Company’s stakeholders
as part of decision-making. The Board delegates clearly
defined responsibilities to its committees and the terms
of reference for these committees are available on the
Company’s website at www.dixonscarphone.com/investors
Corporate Governance Framework
The Dixons Carphone plc Board is supported by four
committees:
– Audit Committee – oversees the financial reporting,
internal controls and the relationship with the external
auditor;
– Disclosure Committee – oversees the procedures and
controls for the identification and disclosure of price
sensitive information;
– Nominations Committee – oversees the composition of
the Board and its committees and that a diverse pipeline
is in place for succession planning; and
– Remuneration Committee – oversees remuneration of
the executive directors and senior management and the
structure of remuneration for the workforce.
These committees are each comprised of directors of
the Dixons Carphone plc Board with the exception of the
General Counsel and Company Secretary who is a member
of the Disclosure Committee.
The day to day management of the business is delegated
to the Group Chief Executive who is responsible for leading
the implementation of the strategy that has been approved
by the Board. The Group Chief Executive is supported by an
Executive Committee which consists of 10 senior leaders in
the business and also by a wider Group Leadership Team
of approximately 70 colleagues who support the Executive
Committee in driving the management agenda. The
Environmental, Social and Governance (ESG) Committee
reports into the Executive Committee. The ESG Committee
drives the sustainability, wellbeing and ethical impact
initiatives in the Group including consideration of the
impacts of climate change.
Dixons Carphone plc is the ultimate beneficial owner of
the two main operating subsidiaries in the Group. The
Risk and Regulatory Committee is a committee of the
main operating subsidiary boards and monitors emerging
risks and oversees the management of risks. The Product
Governance Committee reports into the Risk and Regulatory
Committee and oversees the development of, and any
subsequent material changes to, regulated products.
Board composition and independence
At year end, the Board comprised eight members: the Chair
of the Board, two executive directors and five 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.
The Nominations Committee considers the criteria set
out in the Code when considering independence, as well
as contributions made during Board deliberations. These
independent non-executive directors are Tony DeNunzio,
Eileen Burbidge, Andrea Gisle Joosen, Fiona McBain and
Gerry Murphy. More than half of the Board (excluding
the Chair of the Board, Lord Livingston of Parkhead) is
considered to be independent in accordance with the
Code. Every year the Board, supported by the Nominations
Committee, considers the collective skills, experience and
the composition of the Board and assesses whether or not
the Board membership enables the effective delivery of the
Company’s strategy.
57
Corporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 continued
Director responsibilities
In accordance with the Code, there is a clear division
of responsibility between the Chair of the Board and
the Group Chief Executive. Role descriptions are in
place for the Chair of the Board, Group Chief Executive
and Senior Independent Director and the Nominations
Committee reviews and considers these on an annual
basis and recommends any changes to the Board. The role
descriptions were last approved by the Board in January
2020 and are available on the Company’s website www.
dixonscarphone.com. The main responsibilities of the
different components of the Board are set out below.
Chair of the Board’s responsibilities
–
overall Board effectiveness and leadership;
– Board culture, including the encouragement of openness
and debate and constructive relations between the
executive and non-executive directors;
the appropriate balance of skills, experience and
knowledge on the Board;
oversight of the induction, development, performance
evaluation, and succession planning of the Board;
–
–
– promotion of diversity and equality of opportunity across
the Group;
–
representation of all stakeholders’ interests; and
– promotion (with the support of the Company Secretary)
of the highest standards of corporate governance.
Group Chief Executive’s responsibilities
–
formulation and proposal of the Group strategy and
delivery of the strategy approved by the Board;
– delivery of Group financial performance;
–
leadership of the Group and senior management
including effective performance and succession
planning;
representation of the Company to key stakeholders;
communication of Company culture and ensure
operational practices drive appropriate behaviours;
communication to the Board of views of the workforce;
–
– promotion of diversity and equality of opportunity across
–
–
the Group;
–
identification of business development opportunities;
– management of Group risk profile and ensuring internal
controls and risk mitigation measures are in place;
ensuring compliant management of the Group’s
business; and
oversight of the operational and support functions.
–
–
Corporate Governance
Report continued
There have not been any changes to the composition of the
Board during 2019/20. The Board, with the support of the
Nominations Committee, considered the composition of the
Board and its committees during the year. The Chair of the
Board keeps Board composition under regular review and
addressed this specifically with each director as part of the
one to one meetings held during the Board effectiveness
review process. Overall, the Board is satisfied that the
current composition is appropriate given the needs of the
business.
In accordance with the Code, all directors will stand for
re-election at the Company’s Annual General Meeting
(‘AGM’). Biographical information, committee membership
and the Board meeting attendance of each of the directors
is shown on pages 54 and 55.
Board diversity
The Board composition review takes account of all forms of
diversity, including gender, social and ethnic backgrounds,
cognitive and personal strengths. At year end, the Board
had three female directors, one of whom is based outside
the UK, one director that meets the ethnic minority criteria
as set out in the Parker review and the majority of the
directors have substantial international business experience.
The review this year again concluded that the Board
possessed the necessary personal attributes, skills and
experience to discharge its duties fully and to challenge
management effectively.
Time commitment
The Nominations Committee has considered the commitment
shown by the non-executive directors to the Company and
is satisfied that all directors devote appropriate time to their
roles. There were a number of ad hoc Board meetings and
additional informal update calls during 2019/20. These were
convened due to the important strategic decisions that
were made during the year and the challenging external
circumstances created by the Covid-19 pandemic. All
directors made themselves available to attend all these
unscheduled calls and update calls including those that had
to be arranged at short notice. The Nominations Committee
considers the external appointments of each of the directors
on at least an annual basis. It was concluded again for
2019/20 that none of the directors had external commitments
that would hinder their ability to devote sufficient time
to discharging their Board role. Details of the directors’
attendance at the nine scheduled and four ad hoc Board
meetings that took place during the year can be found on
page 54 and 55.
58
HEAD_0 1st line continuedCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 Senior Independent Director’s responsibilities
–
–
–
–
available to communicate with shareholders;
annual appraisal of the performance of the Chair of the
Board;
oversight of an orderly succession for the position of
Chair of the Board;
support the Chair of the Board in the performance of
their duties; and
– work with the Chair of the Board, other directors
and shareholders to resolve significant issues and to
maintain Board and Company stability in periods of
stress.
Independent Non-Executive Director’s responsibilities
– provision of an independent perspective;
–
–
ensuring constructive challenge of management;
considering the effectiveness of the implementation of
the strategy within the risk appetite; and
contribution of diversity of experience and backgrounds
to Board deliberations.
–
General Counsel and Company Secretary’s
responsibilities
–
–
–
–
trusted advisor to the Board on corporate governance
matters;
support for the Chair of the Board and non-executive
directors;
ensuring that the Board and committees have the
appropriate type and quality of information they need to
make sound business decisions; and
ensuring that the corporate governance framework and
practices remain fit for purpose.
Board reserved matters
The formal schedule of matters reserved for the decision
of the Board is considered on an annual basis. This
was last considered in January 2020 and the directors
agreed that the balance of matters reserved and matters
delegated remain appropriate. The matters reserved for
Board decision are available on the Company’s website
www.dixonscarphone.com and these include:
–
approval of published financial statements, dividend
policy and other disclosures requiring Board approval;
– declaration of interim and recommendation of final
dividends;
– approval of budget and Group strategy and objectives;
– appointment and remuneration of directors, Company
Secretary and other senior executives;
– approval of major acquisitions and disposals;
– approval of authority levels for expenditure;
– approval of certain Group policies; and
– approval of shareholder communications.
Board meetings and information
The Chair of the Board 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. A comprehensive rolling agenda
is in place for the Board and each committee to ensure
that all regular updates and approvals can be considered
in sufficient detail whilst leaving appropriate space on
meeting agendas for the consideration of current issues.
The Company uses an electronic board paper system
which enables the safe and secure dissemination of quality
information to the Board. Paper templates and guidance
are provided to ensure that directors are provided with the
information they need to be able to discharge their duties.
Formal minutes of the board and committee meetings are
prepared by the General Counsel and Company Secretary,
or their nominee, and are approved by the Board or
committee at the next meeting.
The Chair of the Board maintains regular communications
with the non-executive directors in between meetings.
Time is provided before and after every Board meeting for
the non-executive directors to meet without the executives
present. Prior to the Covid-19 pandemic, Board dinners
were held periodically on an evening prior to a Board
meeting to provide the opportunity to discuss corporate
strategy, business performance and other matters in an
informal setting.
Board meetings are usually held at the Company’s head
office and have been held by videoconference since the
Covid-19 pandemic. The Board usually holds meetings
at other Group locations from time to time. This enables
directors to visit stores and operational centres throughout
the portfolio and gain a deeper understanding of the
business. During 2019/20 Board meetings were held in Oslo
in October 2019 and at The Academy@FortDunlop training
centre in Birmingham in January 2020. In Oslo, the Board
met several store and management colleagues and received
a detailed presentation on the Nordics business. The
Academy@FortDunlop, the directors were given an overview
of the training programme that all colleagues complete
before starting work in stores.
59
Corporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 Corporate Governance
Report continued
Board topics 2019/20
Each Board meeting follows a tailored
agenda agreed in advance by the
Chair of the Board, Group Chief
Executive, Group Chief Financial
Officer and the General Counsel and
Company Secretary. Standing items
at scheduled board meetings include:
– Group CEO reports on recent
trading and strategic projects;
– Group CFO reports on financial
performance, transformation
updates and Investor Relations
updates;
– Reports from Board Committee
Chairs on the key discussion points
at committee meetings and any
recommendations made;
– Legal, governance and regulatory
updates; and
– Reports from operating subsidiary
board meetings of DSG Retail
Limited and The Carphone
Warehouse Limited.
The Board meetings agendas
included the following additional
topics during 2019/20:
Strategy and Company Performance
– Future of the UK Mobile business
proposals;
– Deep dive session on credit;
– Deep dive on Nordics strategy;
– IT infrastructure and cyber security
updates;
– 5-year plan;
– Strategy for enhancing customer
contact centres;
– New store design (Space Mix);
– Updates and business response to
Covid-19;
– Re-consideration of strategic
projects following Covid-19;
Financial updates
– Q1 Trading Update, Interim
Results, Peak Trading Update,
Covid-19 Trading Updates;
– Transformation updates;
– Budget updates;
– Dividend proposals;
People and Culture
– Annual health and safety review;
– Colleague Shareholder Scheme
award;
– Modern slavery update and
statement;
– 2019-21 people plan and priorities;
– Updated Delegated Authority
– Company values update;
Policy;
– Interest rate hedging;
– Tax strategy;
– Inclusion and diversity update;
– Colleague engagement and
colleague listening survey;
– Company pension fund update;
– People operations proposal;
– Capital expenditure approvals;
– Gender pay gap reporting;
Governance, legal, risk and
regulatory
– Litigation updates;
– Annual corporate governance
review;
Shareholders
– Annual General Meeting
documents;
– Proxy agency and shareholder
engagement plan and updates; and
– Product recall procedure;
– Investor Relations updates.
– Board and Committee evaluation –
proposal and results;
– Annual review of conflicts;
– Share Dealing Code and Disclosure
Policy;
– Insurance update;
– Competition law update;
– Regulator engagement Plan;
– SMCR update;
– Board Matters Reserved and
Committee Terms of Reference;
The Board’s areas of focus in 2020/21
are expected to include:
– Reconsideration of strategic
projects following the Covid-19
pandemic;
– Embedding of the Group’s
purpose, values and culture;
– Oversight of the next phase of the
Group’s transformation;
– financial and operational
performance;
– Review of principal risks, emerging
– Role Descriptions: CEO, Chair of
risks and risk appetite;
the Board, SID;
– Risk Appetite Statement;
– Risk horizon scanning;
– NED fee review;
– Annual review of conflicts of
interest;
– Presentation from Deloitte on
external corporate governance
environment;
– Regulatory compliance;
– IT infrastructure and cyber security;
– Succession planning for Board and
senior management;
– Diversity and inclusion;
– Health and safety; and
– Corporate social responsibility
including climate change response.
60
HEAD_0 1st line continuedHEAD_0 2nd line continuedCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 Board inductions and training
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 also meet with the Group’s auditor and advisors.
An example of a typical induction programme is included in the table below. The Chair of the Board will meet with a
new director on appointment to agree any appropriate changes to be made before the start of the induction. Directors
are provided with a comprehensive induction pack on appointment and in addition, group information and policies are
maintained within the electronic board paper software to ensure directors have access to current resources. There were no
new appointments to the Board during 2019/20.
Standard induction programme briefings and
information
finance, treasury and tax overviews
current financial position and future projections
Business and strategy
– business model and strategy
– markets and competitive landscape
–
overview of each business area
– market opportunities
Finance and audit
–
–
– budget
–
–
–
Investor relations
–
–
–
Governance
–
– UK Corporate Governance Code and best practice
shareholder base and communications
analyst coverage and perspectives
communication policies
accounting issues
audit report and findings
risk and internal controls
overview of committees
guidance
– UK listed company requirements including Market
Abuse Regime
– Companies Act and directors’ duties
– Company articles and the role of the Board
committee chairs
People to meet
– directors
–
– General Counsel and Company Secretary
– members of the Executive Committee
–
senior management, including the Group Director of
Internal Audit
– members of the external audit team
–
store and distribution centre colleagues
Sites to visit
– different format stores that are convenient for new
director to visit;
the Newark distribution centre; and
the store colleague training centre The Academy@
FortDunlop.
–
–
61
Corporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 Corporate Governance
Report continued
The Board receives regular briefings on governance,
compliance and company knowledge in the form of training
sessions from external advisors and in-house briefings from
senior management. During the year, the directors received
briefings on external corporate governance developments
(including an overview of the section 172 statement
requirements), the Senior Managers & Certification Regime
and regulatory engagement.
Succession planning
The average director tenure is three years, only two
directors have been on the Board since the formation of
the Company in 2014 and both the Group Chief Executive
and the Group Chief Financial Officer joined the Board
in 2018. However, the Board, with the support of the
Nominations Committee, continues to view the need for
robust succession plans as a priority. During 2019/20 the
Nominations Committee considered the skills and expertise
of the Board and concluded that the existing composition is
appropriate to meet the leadership needs of the business.
The appointment of an additional director was considered
during 2019 but it was agreed not to proceed with an
appointment in that year. The Chair of the Board discussed
the future Board succession planning needs during
individual meetings with each director to support Board
composition planning. In respect of senior management
succession planning, the Executive Committee completed
a detailed talent review of GLT members during the year
and the Board will receive an update during H2 2020.
There have been a number of new senior hires during the
year including three new Executive Committee members
appointed during 2020. In response to the Covid-19
pandemic, the Executive team put in place emergency
succession plans for each Executive Committee member
and other key roles in the business. The Nominations
Committee will review updated succession plans for all
Board and senior management roles during 2020.
Performance evaluation
2018/19 process
An externally facilitated Board performance evaluation was
carried out in 2018/19. The outcomes of this process are
summarised below:
Actions relating to meeting format;
– Only bring non-Board members into Board meetings to
discuss substantive business to ensure greater time for
the most important topics;
– Add 90 minutes to the length of Board meetings; and
– Use the Board dinner forums to provide updates on
people, recruitment culture and succession plans.
Actions relating to agenda content:
– Review and resolve duplication of topics across the
Board and its Committees;
–
Increase Board agenda time allocated to People and
culture;
– Use the Reading Room area of the Board portal for
detailed paper appendices to reduce the length of
meeting packs; and
– Consider a broader view of emerging risks.
Actions relating to our colleagues:
–
Increase the visibility the directors have of diversity and
inclusion initiatives in the wider organisation;
– Review succession plans and processes; and
–
Increase contact between directors and executives
below Executive Committee level.
Other actions:
– More frequent director meetings with the Chair of the
Board; and
– Seek increased contact between the Board and major
shareholders.
All of these follow up actions have since been successfully
implemented other than increasing the access that directors
have to team members below Executive Committee level.
The Board has agreed that each non-executive director will
host discussion sessions with small groups of colleagues
but this programme is on hold due to Covid-19.
2019/20 process
An internal Board effectiveness evaluation process was
undertaken in 2019/20 by way of questionnaires and
individual interviews with the Chair of the Board.
The process addressed all matters relating to the
performance of the Board and included the roles of
the executive and non-executive directors, the Board,
committees, the effectiveness of each director and the
Chair of the Board, leadership, culture, strategy and
corporate governance. A report summarising the findings
of the review was tabled at the Board meeting on 28 April
2020.
Overall, the process was very positive. The directors
provided positive feedback on the below items in particular;
–
–
–
–
–
–
the length of Board meetings was now appropriate;
the use of the Reading Room area of the Directors
paper portal for appendices and detailed updates was
working well;
using Board dinners to provide updates on People,
succession planning and culture had worked well;
the majority of Board agenda time was allocated to
key business and strategic topics and this had been
demonstrated by sufficient time being available to
debate the important strategic decisions made during
the year;
the reduction of number of presenters attending
meetings had improved meeting time efficiency; and
the additional weekly Board updates during the early
stages of the Covid-19 pandemic had been useful and
had enabled more effective use of time at the scheduled
Board meetings as the non-executives had already
62
HEAD_0 1st line continuedHEAD_0 2nd line continuedCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 been comprehensively briefed on the Covid-19 logistical
response.
The process identified some further actions to help enhance
effectiveness:
–
–
–
–
–
following the success of the Covid-19 update
videoconference calls, directors agreed that
videoconference update calls should be scheduled
during the year at times when there is a significant gap
between scheduled Board meetings;
those attending meetings to present papers to be
given additional briefings on areas of focus for the
presentation;
some of the regular Board update papers do not require
discussion at each meeting and should be for noting
only;
the Board requested to have more agenda time
allocated to ESG matters and colleagues; and
the Board requested further details for any future
non-executive director recruitment processes.
Chair of the Board performance
The Senior Independent Director collated feedback from
the Board on the performance of the Chair of the Board and
carried out his annual performance review. The directors
provided positive feedback on the Chair of the Board’s
leadership during the year. The Board is of the opinion that
the Chair of the Board had no other commitments during
the year that adversely affected his performance, that his
effectiveness in leading the Board was not impaired and
that he cultivated an atmosphere for positive, challenging
and constructive debate.
Individual Director performance
Following the results of the evaluation, the Board confirms
that all directors, including the Chair of the Board, 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.
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 68 to 70. Such information is incorporated into
this Corporate Governance statement by reference and is
deemed to be part of it.
Risk management and internal control
The Board has overall responsibility for Group’s system of
risk management and internal control and for reviewing its
effectiveness.
The Board is supported by the Audit Committee, the Group
Risk & Compliance Committee, the FCA Compliance
Committee, business unit risk committees and the Risk
team in delivering on this responsibility.
The Group operates a process of continuous identification
and review of business risks. This includes the monitoring
of principal risks, undertaking horizon scanning to identify
emerging risks, evaluating how risks may affect the
achievement of business objectives and, by taking into
account risk appetite, reviewing management’s treatment
of the risks.
The main business units, locations and functions are
responsible for preparing and maintaining risk registers
and operating risk management processes for their areas
of responsibility. Risk registers and the risk processes are
undertaken in accordance with a consistent Group Risk
Management methodology, toolkit and process.
The Group Risk & Compliance Committee meets at
least four times annually. The work of the Group Risk
& Compliance Committee includes: assessing and
challenging the consolidated risk profile, agreeing and
monitoring the Group’s principal risks; determining the
prioritisation of mitigating actions; reviewing the Company’s
horizon-scanning processes and its emerging risks;
providing reports and recommendations to the Audit
Committee and Board including to assist with the setting of
risk appetite with regard to the principal risks.
In addition to the Group’s principal risks, the business
faces emerging threats which have been identified
through Horizon Scanning that may potentially impact the
business in the longer-term. The Group Risk & Compliance
Committee evaluates the appropriateness of management
planning to address such emerging risks. In some areas,
there may be insufficient information to understand the
scale, impact or velocity of these risks. Emerging risks
continue to be monitored as part of the ongoing risk
management process in order to ensure that action is taken
at the right time.
The directors confirm that they have carried out a robust
assessment of the principal and emerging risks facing the
Group, 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 20 to 23.
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 also monitors the Company’s system of risk
management and internal control and conducts a review
of its effectiveness at least once a year. This year’s review
covered all material controls during the year and up to the
date of approval of the ARA 2019/20, which were approved
by the Audit Committee and the Board.
63
Corporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 Corporate Governance
Report continued
Group Risk Management Structure
Board
Responsible for risk management and internal control
Defines Dixons Carphone risk appetite
Reviews and approves the business risk profile
i
i
n
o
s
v
o
r
p
e
c
n
a
r
u
s
s
A
Audit Committee
Reviews the effectiveness of internal
control
Approves the annual internal and
external audit plans
Considers the internal audit reviews
across the group
Group Risk & Compliance Committee
Responsible for risk Reviews
Group and business unit risk
register
Monitors the management of
key risks
Considers new and emerging
risks
Executive management
Responsible for the
implementation of the risk
management process and
the operation of the internal
control environment
Supported by:
Group Director of Risk
FCA Compliance
Committee
Information Security and
Data Protection
Committee
Functional risk experts
and risk champions
The diagram above shows the governance structure in place over the Group’s risk management activities, as at July 2020.
Risk appetite
Dixons Carphone faces a broad range of risks reflecting the business environment in which it operates. The risks arising
from the Dixons Carphone business environment and operating model can be significant. 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 the Company pursues its
strategic objectives, whilst aiming to manage and minimise risk in its operations. Dixons Carphone recognises that it is not
possible or necessarily desirable to eliminate all of the risks inherent in its activities. Acceptance of some risk is inherent in
operations and necessary to foster innovation and growth within its business practices.
64
HEAD_0 1st line continuedHEAD_0 2nd line continuedCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20
The system of risk management and internal control
Dixons Carphone’s system of risk management and internal control consists of a number of components, which are
described below:
Components of a system of internal
control
The organisation demonstrates a
commitment to integrity and ethical
values.
The Board of Directors demonstrates
independence from management and
exercises oversight of the development
and performance of internal control.
Management establishes, with Board
oversight, structures, reporting
lines, and appropriate authorities
and responsibilities in the pursuit of
objectives.
The organisation demonstrates a
commitment to attract, develop,
and retain competent individuals in
alignment with objectives.
The organisation holds individuals
accountable for their internal control
responsibilities.
The organisation specifies control
objectives with sufficient clarity
to enable the identification and
assessment of risk relating to its
objectives.
Dixons Carphone activities
– The ‘Tone from the Top’ communicates a clear commitment to do the right
thing for customers, colleagues and shareholders.
– The organisation demonstrates its commitment to ethical values through its
range of ESG initiatives and programmes.
– The business is committed to maintaining an ethical supply chain.
– Annual Ethical Conduct Declarations are completed by all management.
– A 24/7 independent whistleblowing hotline enables colleagues to report
breaches of ethics or policy.
– The Board reviewed the Group’s principal risks throughout the period.
– The Board undertook a horizon scanning review to identify future risks and
opportunities that may impact the business.
– The effectiveness of internal control 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 Board undertakes an annual effectiveness review which includes
considerations on the management of risk and internal control.
– The ExCo continues to strengthen its capabilities in order to drive the delivery of
the business strategy.
– The Board and its various sub-committees have defined a delegation of
authorities that cascades throughout the Group.
– The creation of the Chief Technology Officer role has strengthened
management in areas of IT, Infosec and Data Management risks.
– A Transformation Management Office governs the Programmes in place to
deliver the business strategy.
– The operation of performance management and development processes for
colleagues.
– Training and development are provided to colleagues to cover their risk and
compliance obligations.
– The performance management process holds people accountable for their
responsibilities.
– Financial Services coaches help the business to ensure that we are selling
regulated products compliantly.
– Senior Management undertakes annual business planning and ongoing
management of business performance.
– Business reviews covering financial and operational involves comparison of
actual results with the original budget and the updating of a full year forecast.
– The Minimum Controls framework allocated control objectives for key
operational and financial controls.
– A Conduct Risk & Control Framework identifies control objectives for activities
that underpin our delivery of Good Customer Outcomes in our FCA regulated
activities.
65
Corporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 Corporate Governance
Report continued
The organisation identifies risks to the
achievement of its objectives across
the entity and analyses risk as a basis
for determining how the risks should be
managed.
The organisation considers the potential
for fraud in assessing risk to the
achievement of objectives.
The organisation selects and develops
control activities that contribute to the
mitigation of risk to the achievement of
objectives to acceptable levels.
The organisation selects and develops
general control activities over
technology to support the achievement
of objectives.
The organisation deploys control
activities through policies that establish
what is expected and procedures that
put policies into action.
The organisation internally
communicates information, including
objectives and responsibilities for
internal control, necessary to support
the functioning of internal control.
The organisation communicates with
external parties regarding matters
affecting the functioning of internal
control.
The organisation selects, develops, and
performs on-going and / or separate
evaluations to ascertain whether the
components of internal control are
present and functioning.
The organisation evaluates and
communicates internal control
deficiencies in a timely manner to those
parties responsible for taking corrective
action including senior management
and the Board of Directors as
appropriate.
– 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 Group risk process identifies the principal risks faced by the business, their
potential impact and likelihood of occurrence (assessed on a gross and net
basis), together with an evaluation of the key controls and risk mitigation plans.
– The Group Risk & Compliance Committee meets quarterly and reports to the
Audit Committee to review the management of risks arising out of the Group’s
activities.
– Each business unit operates a risk management process in accordance with the
Group Risk Management Framework and maintains a risk register.
– Fraud and loss prevention operate across our retail, online and logistics
activities.
– The Board has defined a risk appetite which sets the boundaries within which
risk-based decision-making can occur and outlines the expectations for the
operation of the control environment.
– The operation of a control self - assessment process to evaluate the operation
of the Minimum Control Standards.
– Control procedures operate over the Company’s operations and IT General
Controls (ITGC).
– The Information Security environment continues to evolve in line with emerging
threats.
– Senior management has established a policy framework for the business.
– Management accountabilities and responsibilities are reviewed to ensure that
they remain appropriate following changes in organisational design.
– The Group communicates with external stakeholders, including industry bodies
and regulators on the management of risks and issues.
– An Internal Audit function and an annual plan is approved by the Audit
Committee.
– A Compliance Monitoring function reviews operation of financial services
regulated activities.
– Business Management is supported by evaluations conducted by internal or
external specialists over the operation of controls for the principal risks of the
business.
– There are ongoing control improvements to enhance control design and
effectiveness.
– Control improvement actions resulting from Internal Audit and Minimum
Controls are reviewed and tracked to completion.
66
HEAD_0 1st line continuedHEAD_0 2nd line continuedCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 Internal audit
The Group has an internal audit department which conducts
audits of selected business processes and functions.
The Group’s internal audit plan sets out the internal audit
programme for the year and is usually agreed at the April
Audit Committee meeting for the year ahead. The internal
audit plans are prepared taking into account the principal
risks across the Group with input from management and
the Audit Committee. The internal audit plan is designed
each year to test the robustness of financial and operational
controls and to determine whether operating procedures
are designed and operating effectively. The Audit
Committee considers the alignment of the internal audit
plan with the principal risks faced by the Group as part of
its approval process. The Audit Committee approved the
2020/21 internal audit plan in June 2020, having considered
the impacts of Covid-19 and the revised audit priorities.
The Audit Committee Chair 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 each audit
report with a summary at each meeting. The internal audit
team tracks and reports on the progress against the audit
plan and the implementation of action plans agreed with
management. Once closed, the action plans agreed with
management can be reviewed to determine whether any
new controls and procedures have been implemented
effectively.
The Audit Committee considered the effectiveness of the
internal audit department by considering; scope, resources
and access to information as laid out in the internal audit
charter; the reporting line of internal audit; the annual internal
audit work plan; and the results of the work of internal audit.
The Audit Committee concluded that the internal audit
function was operating effectively during the year.
Authorisation of conflicts of interest
Each director has a duty under the Companies Act 2006 (the
‘Act’) to avoid a situation where they have or may have a
conflict of interest. They are also required to disclose to the
Board any interest in a transaction or arrangement that is
under consideration by the Company. The General Counsel
and Company Secretary supports the directors in identifying
potential conflicts of interest and reporting them to the
Board. The Board is permitted by the Company’s articles
of association to authorise conflicts when appropriate.
Potential conflicts are approved by the Board, or by two
independent directors if authorisation is needed quickly, and
then reported to the Board at its next meeting. A register
of directors’ conflicts is maintained. Directors are asked
to confirm periodically that the information on the register
is correct. The Board is satisfied that the Company’s
procedures to identify, authorise and manage conflicts of
interest have operated effectively during the year.
engagement with both existing and potential institutional
shareholders 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
methods used to impart information to shareholders are
news releases (including results announcements), investor
presentations and Company publications. The Board
receives a report from the Investor Relations team at
every scheduled meeting and this includes a summary of
investor interactions during the period and a synopsis of
questions and feedback from shareholders. During 2019/20
the Board wrote to shareholders representing over 70% of
the Company’s issued share capital. This communication
confirmed the appropriate contact details for engagement
and offered engagement meetings with any of the Chair of
the Board, the Chair of the Audit Committee or the Chair of
the Remuneration Committee. The Company wrote to this
group of shareholders again in March 2020 to consult with
them on Remuneration issues. More details are available in
the Remuneration Report on page 100.
The Group Chief Executive has principal responsibility for
investor relations. He is supported by a dedicated investor
relations department that, amongst other matters, ensures
there is a full programme of regular dialogue with major
institutional shareholders and potential shareholders as well
as with sell-side analysts throughout the year. In all such
dialogue, care is taken to ensure that no price-sensitive
information is released.
The Chair of the Board and non-executive directors are
available to meet with major shareholders as required, and
the Chair of the Remuneration Committee communicates
with major shareholders on remuneration matters.
The Company is committed to fostering effective
communication with all 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 corporate website, as are other external
announcements and press releases.
The AGM usually provides an opportunity for the Company
to engage with shareholders and for the Board to provide
an account of the progress made by the business during
the year, along with a synopsis of current issues facing
the business. Unfortunately, it will not be possible for
shareholders to attend the 2020 AGM due to Covid-19.
Shareholders are encouraged to submit votes in advance
of the meeting and submit any questions to the Board
via the General Counsel and Company Secretary at
cosec@dixonscarphone.com. We look forward to receiving
your feedback and questions.
Further financial and business information is available on
the Group’s corporate website, www.dixonscarphone.com.
Communication with investors
The Board supports the initiatives set out in the Code
and the UK Stewardship Code and encourages regular
Lord Livingston of Parkhead
Chair of the Board
14 July 2020
67
Corporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 Directors’
Report
Directors’
Report
Directors’ Report
The Directors’ Report required by the Act, the corporate
governance statement as required by DTR 7.2 and the
management report required by DTR 4.1 comprises
the Strategic Report on pages 2 to 53, the Corporate
Governance Report on pages 56 to 67, together with this
Directors’ Report on pages 68 to 70. All information is
incorporated by reference into this Directors’ 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 alleged wrongful acts in connection with their
positions, to the point where any culpability for wrongdoing
is established. The insurance provided does not extend to
claims arising from fraud or dishonesty.
Directors
The names, biographies, committee memberships and
dates of appointment of each member of the Board are
provided on pages 54 and 55.
The Board is permitted by its Articles of Association
(‘Articles’), to appoint new directors to fill a vacancy as
long as the total number of directors does not exceed
the maximum limit of 15. The Articles may be amended
by special resolution of the shareholders and require that
any director appointed by the Board stand for election at
the following annual general meeting. In accordance with
the UK Corporate Governance Code, all directors submit
themselves for election or re-election every year.
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 re-election are being
unanimously recommended for their skills, experience and
the contribution they can bring to Board deliberations.
During the year, no director had any material interest in
any contract of significance to the Group’s business. Their
interests in the shares of the Company, including those of
any connected persons, are outlined in the Remuneration
Report.
The Board exercise all the powers of the Company subject
to the Articles, the Act and shareholder resolutions.
A formal schedule of matters reserved for the Board is
in place and is available on the Company’s website at
www.dixonscarphone.com.
Directors’ responsibilities
The directors’ responsibilities for the financial statements
contained within this ARA and the directors’ confirmations
as required under DTR 4.1.12 are set out on page 112.
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 Directors’ Report.
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 84 to 111. Details of
dividends waived by shareholders are given below in this
Directors’ Report. There is no further information required to
be disclosed under Listing Rule 9.8.4R.
Dividend
The Board has not proposed a final dividend for the year
ended 2 May 2020. Dividend payments will not be resumed
at least until our standby debt facilities have been cancelled.
Given the current uncertain environment, the Board will
keep the payment of dividends under review to establish
the appropriate time and level to recommence payment. An
interim dividend was paid during the year:
Interim dividend
Final dividend
Total dividends
Year ended
2 May 2020
Year ended
27 April 2019
2.25p
Nil
2.25p
2.25p
4.5p
6.75p
The right to receive an interim dividend was waived by the
trustees of the Company’s Employee Benefit Trust (‘EBT’)
over a holding of 5,902,665 shares.
Colleague involvement
The Group has a robust communications programme in
place to provide colleagues with information on matters
of concern to them. This includes regular publications on
the Group’s intranet, email updates from the Group Chief
Executive, monthly Townhall sessions and regular meetings
with line managers. The Executive Committee team regularly
communicates matters of current interest and concern with
colleagues. During 2019 the colleague listening framework
was enhanced to ensure that colleague feedback is
received effectively and consistently across all countries
in the Group. These forums support the development of
action plans to allow colleagues the opportunity to input
and influence change. More information on these forums
and colleague engagement is included on pages 38 to 42.
Details of the colleagues’ involvement in the Group’s share
plans are disclosed in the Remuneration Report on pages
84 to 111.
68
HEAD_0 2nd lineCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20
Employment of disabled people
The business is committed to providing equal opportunities
in recruitment, training, development and promotion. We
encourage applications from individuals with disabilities who
can do the job effectively and candidates will be considered
for each role. 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
and support the career development of any employee who
becomes disabled while serving the Group.
Information on greenhouse
gas emissions
The information on greenhouse gas emissions that
the Company is required to disclose is set out in the
Stakeholders and Sustainable Business report on pages 31
to 53. This information is incorporated into this Directors’
Report by reference and is deemed to form part of this
Directors’ Report.
Political Donations
No political donations were made by the Group during the
period.
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 23 to the Group financial
statements. The voting rights of the Company’s shares are
identical, with each share carrying the right to one vote. The
Company holds no shares in treasury.
Details of employee share schemes are provided in note 4
to the Group financial statements. As at 2 May 2020, the
Dixons Carphone plc EBT held 10.1 million shares. The EBT
acquired 9.75 million shares by market purchase during the
year under review.
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. There are a number of significant agreements
which would allow the counterparties to terminate or alter
those arrangements in the event of a change of control
of the Company. These arrangements are commercially
confidential and their disclosure could be seriously
prejudicial to 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 in
the event of a takeover bid.
Significant shareholdings
As at 2 May 2020, the Company had been notified of the
following voting interests in the ordinary share capital of
the Company in accordance with Chapter 5 of the FCA’s
DTR. Percentages are shown as notified, calculated with
reference to the Company’s disclosed share capital as at
the date of the notification.
Name
Standard Life Aberdeen plc
RWC Asset Management LLP
BlackRock
Majedie Asset Management
Lansdowne Partners
Ruffer
D P J Ross
Tameside MBC re Greater
Manchester Pension Fund
Capital Group
Cobas Asset Management
Sir Charles Dunstone CVO
Number of
shares
Percentage
of share capital
64,515,107
62,906,333
60,261,946
59,063,441
57,675,527
62,845,115
55,738,699
40,916,049
34,578,355
34,811,516
14,440,134
5.55%
5.41%
5.20%
5.08%
5.01%
5.00%
4.80%
3.52%
3.00%
3.00%
1.24%
On 29 May 2020, the Company received a notification
that Wishbone Management LP had a voting interest in
41,500,000 ordinary shares of the Company, or 5.25%
of the issued share capital. On 15 June, the Company
received notification that Fil Limited had a voting interest in
58,551,510 ordinary shares of the Company, or 5.03% of
the issued share capital.
At 14 July 2020, being the last practicable date prior to the
publication of this Annual Report and Accounts, no further
changes to the shareholdings reported above had been
notified to the Company in accordance with DTR 5.
69
Corporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 Directors’
Report continued
Directors’ interests in the Company’s shares and the
movements thereof are detailed in the Remuneration Report
on pages 84 to 111.
Issue of shares
In accordance with section 551 of the Act, the Articles and
within the limits prescribed by The Investment Association,
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 AGM in 2019
shareholders approved a resolution to give the directors
authority to allot shares up to an aggregate nominal value of
£386,737. 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 AGM in 2019
to purchase a maximum of 116,021,022 shares, such
authority remaining valid until 27 October 2020 or until the
conclusion of the Company’s AGM in 2020. 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.
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 they ought to
have taken as a director in order to make themself 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 has expressed its willingness to continue in
office as auditor and a resolution to reappoint it 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
Use of financial instruments
Information about the use of financial instruments is given in
note 26 to the Group financial statements.
Nigel Paterson
Company Secretary
14 July 2020
Post-balance sheet date events
Events after the balance sheet date are disclosed in note 33
to the Group financial statements.
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Committee
Report
Audit Committee
Report
Audit Committee Report
Chair’s statement
Introduction
I am pleased to present the Audit Committee (the
‘Committee’) report for the year ended 2 May 2020. This
report describes how the Committee has carried out its
duties to provide independent scrutiny of the Group’s
financial reporting, risk management and internal control
systems in order to determine whether these remain
effective and appropriate.
In addition to the scheduled Committee meetings, I have
met regularly with the Group Chief Financial Officer, the
Chief Information Security Officer, Internal Audit and the
external Auditor in the absence of management to discuss
their reports as well as any relevant issues. I regularly meet
with the Deloitte LLP audit team as part of my ongoing
review of their effectiveness and I continue to liaise directly
with members of the team that prepare updates that fall
within the remit of the Committee as appropriate. I have
also met with Deloitte LLP’s Head of Audit Quality and
Risk, UK to discuss Deloitte’s approach to audit quality
and assurance in connection with the audit of the Group, in
particular in the course of the Covid-19 pandemic.
There have not been any significant changes to the
responsibilities and role of the Committee during this
financial year. The Committee continues to monitor with
interest the external market reforms designed to enhance
the quality of audits. It is likely that these will result in the
evolution of the duties of audit committees. The Terms
of Reference for the Committee were last approved in
January 2020 and the Committee is satisfied that its Terms
of Reference remain appropriate at the current time. The
Committee Terms of Reference are available on the Group’s
corporate website www.dixoncarphone.com.
This year the Committee has continued to oversee the
accounting implications of changes to the business as well
as to respond to specific matters that have arisen. The
Committee considered the accounting implications of the
closure of the standalone Carphone Warehouse stores in
the UK. Cyber security, IT infrastructure, data management
and regulatory compliance continue to be important areas
of Committee focus in addition to accounting matters and
other duties. The Committee continues to have oversight
across the international footprint of the Group.
The Committee also considered the continuing implications
of the Covid-19 outbreak during 2020, taking account
of external guidance as appropriate as the situation has
evolved, and reviewing in particular the impact on the
control environment and on the ‘three lines of defence’ –
management, risk & compliance and internal audit.
The Committee considered the requirements arising from
the Companies (Miscellaneous Reporting) Regulations 2018
and the 2018 UK Corporate Governance Code as part of the
process to review the non-financial information included in
this Annual Report, including in particular the section 172(1)
statement on pages 31 to 37.
Key activities
This year, the Committee’s work included:
– considering significant accounting and reporting
judgements, the appropriateness of taxation disclosures
and the appropriateness of the Group’s going concern
position and longer-term viability statement;
– considering and recommending that the Annual Report
and Accounts (‘ARA’) 2019/20, when taken as a whole,
are fair, balanced and understandable;
– reviewing the interim results and strategy update on 11
December 2019;
– reviewing the Covid-19 Trading Updates released on 26
March and 29 April 2020;
– considering the presentation, fairness, and balance of the
Group’s alternative performance measures (APMs);
– considering the FRC Thematic review on impairment of
non-financial assets;
– reviewing all correspondence from and to the Financial
Reporting Council (FRC) following a request for further
information on certain aspects of the ARA 2018/19.
The constructive correspondence lead to enhanced
disclosures in the ARA 2019/20;
– considering the accounting implications of the closure of
the standalone Carphone Warehouse stores in the UK;
– considering the implications of the Covid-19 outbreak
relevant to the remit of the Committee;
– reviewing the Group Risk Register and considering the
effectiveness of the risk management system and internal
controls, operated by management;
– considering updates on Information Security, IT
infrastructure, Data Management and Business
Transformation;
– providing oversight of the businesses regulated by the
Financial Conduct Authority (‘FCA’) and receiving updates
from the Head of Compliance;
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– approving the internal audit annual plan, considering
internal audit reports and management actions, and
monitoring the effectiveness of internal audit in line with
the approved internal audit charter;
– considering the external audit plan, audit reports and
updates from Deloitte LLP;
Committee Membership and Attendance
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 54 and 55.
Current members
Fiona McBain (Committee Chair)
Gerry Murphy
Eileen Burbidge
Scheduled
meetings
6 of 6
6 of 6
5* of 6
*Eileen was unable to attend one Committee meeting during the year but
reviewed the meeting pack, provided questions to the Chair of the Audit
Committee in advance and received an update following the meeting.
The Board continues to be satisfied that the Chair of
the Committee, a member of the Institute of Chartered
Accountants in England and Wales, and Gerry Murphy,
also a member of the Institute of Chartered Accountants
in England and Wales, meet the requirement for recent
and relevant financial experience. The Committee, as a
whole, has competence relevant to the sector in which
the Company operates. The Company Secretary, or his
nominee, acts as Secretary to the Committee and attends
all meetings. The Committee’s deliberations are reported by
its Chair at the subsequent Board meeting and the minutes
of each meeting are circulated to all members of the Board
following approval.
The Committee members meet without management
present before and after each Committee meeting. The
Director of Internal Audit and representatives of Deloitte
LLP are invited to these private discussions periodically to
allow discussion of matters which the external Auditor or
Director of Internal Audit may wish to raise in the absence of
management.
In undertaking its duties, the Committee has access to the
services of the Group Director of Internal Audit, the Group
Chief Financial Officer, the Company Secretary and their
respective teams, as well as external professional advice as
necessary.
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.
– considering the effectiveness of the external Auditor and
the reappointment of the external Auditor; and
– receiving presentations and challenging management
on matters such as system access controls, data
management, payment processes, supplier funding,
regulatory compliance-related customer claims, minimum
control standards assessments, whistleblowing, and
procedures in place to prevent bribery and corruption.
Membership
There have not been any changes to the membership of the
Committee during the financial year.
Looking ahead
It has been a significant year in terms of progressing the
Business Transformation. The Committee will continue
to support this work by reviewing and challenging the
governance, risk and control environments relating to
strategic transformation plans. The Covid-19 pandemic
has had extensive repercussions across the business
landscape in terms of business disruption and causing
fundamental changes to customer behaviours and the
risks to which companies are exposed. The Committee will
continue to keep those considerations and risks that fall
within the Committee’s remit under review. The Committee
will continue to receive presentations from management
on the challenges faced by the business and the operation
of internal controls. The Committee will also continue to
be responsive to the issues raised by the ‘three lines of
defence’ internally as well as to the external evolving risk
landscape and regulatory environment.
Meetings
The Committee met six scheduled times during the period
under review. One additional Committee meeting was
arranged with management during the year to enable an
additional detailed discussion on the network debtor.
Since the year end there has been two further Committee
meetings. The Chair of the Board, Group Chief Executive,
Group Chief Financial Officer, Group Financial Controller,
Group Director of Internal Audit, General Counsel and
Company Secretary, members of the senior leadership team
with responsibility for Cyber Security, Data Management
and Transformation and representatives from Deloitte LLP
have joined all Committee meetings during the year at the
invitation of the Committee Chair. Other members of senior
management attend Committee meetings by invitation when
appropriate.
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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 monitor that 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 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 Group’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;
– considering whistleblowing arrangements by which colleagues may raise concerns about possible improprieties in
financial reporting or other matters;
Internal audit
– approving the appointment of the Director of Internal Audit;
– monitoring and reviewing the effectiveness of the Group’s internal audit function;
– approving the internal audit plan;
– considering the reports of work performed by internal audit and reviewing the actions taken by management to
implement the recommendations of internal audit;
– 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.
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Report continued
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 2 May 2020,
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
Going concern and
viability statements
Closure of
Carphone
Warehouse
standalone stores
Fair, balanced and
understandable
Matters considered and how the Committee discharged its duties
The Committee reviewed the processes and assumptions underlying both the going concern and longer-
term viability statements made on page 29 of the ARA 2019/20.
In particular, the Committee considered:
– the impact in respect of the Covid-19 pandemic situation;
– management’s assessment of the Group’s prospects including its current position, assessment of
principal business risks and its current business model, future cash forecasts, historical cash flow
forecasting accuracy, 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 Group’s detailed strategic planning process, as well as the shorter-term nature of the
retail market in which the Group operates; 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 20 to 23 of the ARA 2019/20, the
latest Board-approved budgets, strategic plans, and indicative headroom under the current facilities
available – examples of which included the impact of regulatory, taxation or information security
incidents, and reduced forecast profitability and cash flow as a result of a significant change in mobile
phone consumer behaviour.
The Committee concurred with management’s conclusions that the viability statement, including the
three-year period of assessment, disclosed on page 29 of the ARA 2019/20 is appropriate. The Board
was advised accordingly.
During the year, on 17 March 2020, the Company announced the closure of its 531 standalone Carphone
Warehouse stores in the UK. The Committee carefully considered the impact of this announcement
on the 2019/20 Financial Statements. In particular, the Committee considered the impact of the store
closures on the impairment of assets including the IFRS 16 right-of-use lease assets, the restructuring
provisions recognised, and the assessment of the existence of any onerous contracts as a result of the
decision. The Committee also considered the treatment of store closure related costs as adjusting items
when considering if the ARA as a whole are fair, balanced, and understandable.
Following detailed review, the Committee agreed with management’s conclusions that the judgements
and estimates and accounting treatment applied are appropriate.
In ensuring that the Group’s reporting is fair, balanced and understandable, the Committee reviewed
the classification of items between adjusting and non-adjusting items including consideration of the
£306 million pre-tax adjusting items disclosed in note A5 in the glossary and definitions section of the
ARA 2019/20, and the tax impact thereon. The assessment considered whether items fell within the
Group’s definition of adjusting items as well as the consistency of treatment of such items year on year.
The Committee gave due consideration to the integrity and sufficiency of information disclosed in
the ARA 2019/20 to ensure that they explain 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 adjusting 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 is provided in the glossary on pages 202 to 218.
The Committee concluded that the ARA 2019/20, taken as a whole, are fair, balanced and
understandable, and that the measures used and disclosures made are appropriate to provide users of
the ARA 2019/20 with a meaningful assessment of the performance of the underlying operations of the
Group; the Board was advised of the conclusion.
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.
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significance and
areas of judgement
Matters considered and how the Committee discharged its duties
Revenue recognition The Group discloses revenue recognition in relation to network commissions as a ‘key source of
estimation uncertainty’ as set out in note 1(t) to the Group financial statements.
The Committee reviewed management’s assessment of these policies with reference to contractual
terms, the Group’s historical experience of customer behaviour, reliability of information received from
MNOs, legislative changes, future expectation of consumer behaviour and changes in the trends within
the mobile industry. Particular attention was paid to the consistency of application of the underlying
assumptions used, significant changes in inputs to the valuation model, and historical forecasting
accuracy. The Committee debated and reviewed enhancements to the network commission contract
assets and receivables disclosures included in note 15 to the Group financial statements. The carrying
value of ongoing network commission contract assets and receivables at the balance sheet date was
£616 million (2018/19: £797 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 its recognition and accounting treatment of supplier funding. 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; issues identified in the prior year were fully addressed.
Further information in relation to supplier funding can be found in note 1 to the Group financial
statements.
Supplier funding
Impairment testing
of goodwill,
intangible assets
and fixed asset
investments
The Group has significant goodwill, intangible assets and fixed asset investments in the UK and Ireland
which are reviewed for impairment annually, or where there is an indicator of impairment. The Committee
reviewed appropriateness and accuracy of cash flow forecasts, discount rates and long-term growth
rates used in the impairment review performed at both the interim and year end dates. Specific attention
was paid to cash flow forecasts in light of the Covid-19 pandemic, and the level of sensitivities applied by
management in determining reasonably possible changes to cash flows.
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
£83m (2018/19: £98m).
The Committee also reviewed the appropriateness of the disclosures made around tax provisions, and
the disclosure of related contingent liabilities.
Risk management and internal control
The Audit 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
56 to 67 of this ARA 2019/20. 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 interim review procedures and the annual audit performed by the external Auditor. The Committee also ensured that all
Risk topics were covered, as defined by its Terms of Reference, with detailed reviews of risk topics scheduled throughout
the year monitoring potential areas of concern.
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Corporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 Audit Committee
Report continued
The table below shows the number of times specific matters were considered by the Committee in 2019/20:
Audit Committee topics coverage 2019/20
Number of times topic was covered
0
1
2
3
4
5
6
7
Bribery and corruption
Data Protection
Compliance
Information and Cyber Security
Internal Controls
IT general controls
Risk Review
Whistleblowing
Specific matters considered by the Committee to discharge its duties are detailed below:
Risk management
and internal control
Matters considered and how the Committee discharged its duties
Bribery & corruption
– The Committee reviewed the arrangements put in place to satisfy requirements to comply with
regulation for anti-bribery & corruption.
Data protection
– The Committee reviewed data protection compliance throughout the Group, particularly in
relation to the embedding of policies, procedures and processes implemented to comply with the
requirements of EU General Data Protection Regulation (‘GDPR’).
Compliance
– The Committee reviewed the nature of financial services regulated activities across the Group’s
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 (“FCACC”) and monitored key
developments and ongoing activities for the compliance team in areas of governance, policy and
compliance monitoring.
Information security
and IT general
controls
– The Committee regularly reviews the progress of the ongoing security improvement programme
and periodically considers and reviews the IT controls framework and related improvement
initiatives progressed by the management team, in order to monitor that appropriate actions are
taken.
The Company is currently undergoing a large transformation programme across many areas of the
business including its IT infrastructure. All transformation programmes are managed in line with
the Group risk management methodology to manage the risk appropriately in order to provide
reasonable reassurance against material losses. This control framework is intended to manage
rather than eliminate the risk of failure and oversight of the security programme is provided by
the Audit Committee that, along with the Board, receives regular updates on the progress and
maturity of our control environment. During the year, the Committee requested that management
commission a third-party review on the IT transformation Programme. EY was appointed to carry
out this work.
Internal controls
– As per the obligations placed on the 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
2020/21 and agreed the statements contained in the ARA 2019/20. The Committee continues to
review the results of Internal Audit reviews and Minimum Controls Standards assessments.
Whistleblowing
– The Committee reviews a summary at every meeting 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.
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Internal audit is an independent, objective assurance function that impartially appraises the Group’s control activities.
Internal audit works with management to help improve the overall control environment and assist Group management, the
Audit Committee and the Board in discharging their respective duties relating to maintaining an adequate and effective
system of internal control and risk management, and safeguarding the assets, activities and interests of the Group.
Internal audit
Matters considered and how the Committee discharged its duties
Audit reviews of
significant risk areas
– The Committee considered the alignment of the annual internal audit plan with the key risks of
the business.
– During the period, internal audits included coverage of the following significant risk areas of the
business:
– information security and data protection;
– business transformation;
– IT resilience, integrity and disaster recovery;
– relationships with major suppliers;
– future EU relationship;
– health and safety;
– business continuity;
– product safety; and
– financial services regulatory compliance.
– The Committee considered the key trends and material findings arising from internal audit’s work
and the adequacy of the agreed management actions in relation to those findings.
Assurance
programme
– The Committee approved the annual internal audit plan and received an update relating to the
execution of the annual plan at each Committee meeting.
– The Committee also considered how the internal audit plan was realigned in light of the Covid-19
pandemic.
– As part of the rolling assurance programme, audits were performed over the following processes
to provide assurance to the Committee that controls were operating within these areas:
– general business controls relating to UK & Ireland operations including the Senior Managers
Certification regime readiness, HR transformation programme, Identity and Access
management programme and goods not for resale, business to business retail, repairs,
prepaid gift vouchers, consumer credit, Hong Kong sourcing, supplier funding and marketing
processes;
– Nordics programme assurance, Epoq kitchens, business to business retail and goods not for
resale processes and controls;
– Greek health and safety framework and stock controls; and
– whistleblowing framework, Brexit readiness, and minimum controls framework.
– The Committee considered the actions taken by management in relation to the audit findings.
– The Committee considered the results from these audits during its assessment of the
effectiveness of the system of internal control operated by management. The Committee
concluded that the system of internal control was appropriately monitored and managed.
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Report continued
Effectiveness of
internal audit and
adequacy of its
resources
– The Committee approved the internal audit charter, concluding the role and mandate were
appropriate to the current needs of the organisation.
– The Committee approved the appointment of a new Group Director of Internal Audit in June
2020. The Committee was involved in the selection process for this role. The new Group Director
of Internal Audit joined a Committee meeting as a guest and met with the Audit Committee Chair
prior to his appointment date as part of ensuring an effective handover process.
– The Committee monitored the work of internal audit and formally reviewed the effectiveness of
internal audit and the adequacy of its resources, considering:
– scope, resources and access to information as laid out in the internal audit charter;
– the reporting line of internal audit;
– the annual internal audit work plan; and
– the results of the work of internal audit.
– The Committee concluded that the internal audit department had in all respects been effective
during the period under review and performed its duties in accordance with its agreed charter.
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 113 to
129.
– As part of the reporting of the half year and full year results, the Committee reviewed the reports
presented by Deloitte LLP in assessing the Group’s significant accounting judgements and
estimates, and considered the audit work undertaken, level of challenge and quality of reporting.
– Following the year end, 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, level of
challenge, 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 external 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 the 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 next page.
– The Committee reviewed and approved the Group policy on the employment of former
employees of the external Auditor in March 2020.
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provided by the external Auditor
Under the Group’s policy on Auditor independence, the
Auditor may only provide services which include:
a)
audit services comprising issuing audit opinions on the
Group’s consolidated financial statements and on the
statutory financial statements of subsidiaries and joint
ventures;
b) audit-related services comprising review of the Group’s
consolidated interim financial statements, and opinions /
audit reports on information provided by the Group
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
Chief Financial Officer, 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
tax compliance 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
to the Group financial statements and amounted to £0.5m
(2018/19: £0.4m) compared with £1.5m (2018/19: £1.6m) of
audit fees. The non-audit fees as a percentage of audit fees
were 33.3% (2018/19: 25%), which reflects the restrictive
policy governing the use of Deloitte LLP for non-audit
services.
Consideration of Auditor appointment
and independence
The Committee considers the appropriateness of the
reappointment of the external Auditor each year, including
the rotation of the audit partner. Deloitte LLP has been the
Company’s external Auditor since the Company was formed
on 7 August 2014 by the merger of Carphone Warehouse
and Dixons Retail.
Deloitte LLP was the external Auditor of Carphone
Warehouse and Dixons Retail prior to 2014. In accordance
with the Auditing Practices Board Ethical Standards, there
is a five-year rotation of the lead audit partner. Stephen
Griggs, the current lead audit partner, was appointed for the
2016/17 audit and will therefore need to rotate at or before
the end of the 2020/21 financial year.
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.
During the year, the Committee discussed the most
appropriate time to carry out the external Auditor tender
process. In particular, the Committee considered the
timeframe and process steps necessary to conduct an
effective tender process, the new EU requirement for a 12
month “cooling in” period, the current consultancy services
that would need to be exited prior to a tender process and
having an adequate period of transition to a new auditor.
The Committee concluded that a tender to appoint a new
auditor for 2021/22 did not allow sufficient time to complete
a thorough process and would have precluded some firms
from participating in a tender.
The Committee will continue to evaluate annually the
performance of the Auditor and will recommend a tender for
this service prior to June 2023.
In accordance with FRC’s 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
reappointment this year, the Committee considered the
Audit firm’s internal control procedures, the most recent
audit effectiveness review and the tenure of the current 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 reappoint Deloitte LLP as
the independent Auditor of the Company. The Committee’s
recommendation, that a resolution to reappoint Deloitte
LLP be proposed at this year’s AGM, was accepted and
endorsed by the Board.
Fiona McBain
Chair of the Audit Committee
14 July 2020
79
Corporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 Disclosure
Committee
Report
Nominations
Committee
Disclosure Committee
Report
Chair’s statement
The principal role of the Disclosure Committee (the
‘Committee’) is to ensure that adequate procedures,
systems and controls are maintained to enable the
Company to fully meet its legal and regulatory obligations
regarding the timely and accurate identification and
disclosure of all price sensitive information.
The Committee is chaired by the Group Chief Financial
Officer. The Group Chief Executive, and the General
Counsel and Company Secretary are also members. The
Chair of the Board and the Senior Independent Director
receive notices and papers for all meetings and will act as
‘alternates’ to the members in the event that the quorum
of three cannot be met. The Company Secretary, or
their nominee, acts as Secretary to the Committee. The
Committee’s deliberations are reported by its Chair at the
next Board meeting and the minutes of each meeting are
circulated to all members of the Board.
The Committee performance, Terms of Reference and
responsibilities are reviewed periodically, and at least once
a year. The Terms of Reference were last reviewed and
approved by the Board in January 2020. The Committee
was considered as part of the internal board and committee
effectiveness review this year and this review concluded
that the Committee discharges its duties effectively.
Meetings
– The Committee has scheduled meetings in advance of the
preliminary and interim results and the Christmas trading
update. It meets at other times as and when required.
– The Committee held 7 meetings during the period under
review. Since the financial year end, there have not been
any other meetings.
Committee membership and attendance
The members of the Committee are shown in the table
below along with their attendance at meetings for the period
under review. Biographical details for each member can be
found on pages 54 and 55.
Members
Jonny Mason (Chair)
Alex Baldock
Nigel Paterson
Scheduled and
unscheduled meetings
7 of 7
7 of 7
7 of 7
The Chair of the Board and the Senior Independent director
were not required to act as alternate Committee members
during the year.
The Committee receives input as appropriate from other
directors, the Company’s brokers and senior management.
The Committee invites the Group Strategy and Corporate
Affairs Director to attend all meetings.
80
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
price sensitive information;
– determine whether information is inside information and if
it requires immediate disclosure;
– keep under review the adequacy of the Disclosure
and Communications Policies, implement and monitor
compliance;
– 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;
– consider and give final approval for trading statements
and / or results to be released in order to meet legal and
regulatory requirements; 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 January 2020 and are
available on the Group’s corporate website,
www.dixonscarphone.com.
Key matters considered
During the year ended 2 May 2020, the Committee met to
consider the following key matters:
– the draft proposals for the FY2019/20 Group budget;
– the preliminary results for the financial year ended 27 April
2019;
– the interim results for the 26 weeks ended 26 October
2019;
– the Peak trading update for the 10 weeks ended
4 January 2020;
– the closure of the Carphone Warehouse standalone
stores; and
– the updated financial guidance following the Covid-19
pandemic.
Jonny Mason
Chair of the Disclosure Committee
14 July 2020
HEAD_0 1st lineHEAD_0 2nd lineCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 Nominations
Committee
Report
Nominations Committee
Report
Chair’s statement
The Nominations Committee (the ‘Committee’) has
continued to oversee the structure, size and composition
of the Board during the year, having regard to the collective
skills, knowledge, experience and diversity in all its
forms. This report sets out the key responsibilities of the
Nominations Committee and describes how it discharges its
duties.
The Committee completed a review in March 2020 to
assess compliance with the Code and concluded that the
Board size and composition remain appropriate to meet the
leadership needs of the business and operational needs
of the Company. This review included consideration of the
time commitments of each director, director independence,
director tenure, the diversity of the Board, the collective
skills and experience of the Board, directors’ external
appointments and potential conflicts of interests.
The Board meets the voluntary diversity targets in both the
Hampton Alexander review and Parker review although is
not complacent about diversity. A new Chief People Officer
was appointed during 2019 and there have been a number
of additions to the HR function senior management team
during the year to enhance our recruitment, development
and diversity of our colleagues particularly in some
senior positions. Although succession planning and the
oversight of the development of a diverse pipeline for
succession fall within the remit of the Committee, these
discussions have also taken place at Board meetings and
Board dinners during 2019/20. Enhancing diversity and
succession planning remain a priority for the whole Board
and delivering the colleague agenda is a critical component
of the successful business transformation of the Group. It
has therefore warranted input from all directors. The Board
received several comprehensive updates from the HR
team during the year including an update on the diversity
initiatives in progress.
Meetings
– The Committee meets as and when required and at least
twice a year.
– The Committee held two scheduled meetings during the
period under review in addition to all directors receiving a
succession planning update at a Board dinner.
Committee membership and attendance
The members of the 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 54 and 55.
Current members
Lord Livingston of Parkhead (Chair)
Tony DeNunzio
Andrea Gisle Joosen
Scheduled
meetings
2 of 2
2 of 2
2 of 2
The majority of the members are independent non-executive
directors as required by the Code. Other members of the
Board or senior management are invited to attend meetings
at the request of the Chair.
The Company Secretary, or their nominee, acts as Secretary
to the Committee. The Committee’s deliberations are
reported by its Chair at the next Board meeting and the
minutes of each meeting are circulated to all members of
the Board.
Responsibilities
The principal duties of the Nominations Committee are to:
– review the structure, size and composition of the Board,
and recommend changes to the Board as necessary;
– give full consideration to orderly succession planning
for both the Board and senior management positions
and oversee the development of a diverse pipeline for
succession;
– identify and nominate candidates to fill vacancies on the
Board when they arise;
– carry out a formal, rigorous and transparent selection
process of candidates, giving due regard to promoting the
benefits of diversity on the Board and senior management
team, including gender, social and ethnic backgrounds,
and cognitive and personal strengths; and
– review all the recommendations from the annual board
effectiveness process that relate to Board composition,
diversity or how effectively board members work together.
The Committee’s Terms of Reference are reviewed on
at least an annual basis and updated to take account of
any changes to corporate governance best practice. In
the 2019/20 financial year, they were reviewed by the
Committee in October 2019 then approved by the Board in
January 2020. These terms of reference are available on the
Group’s corporate website, www.dixonscarphone.com.
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HEAD_0 1st lineHEAD_0 2nd lineCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 Nominations Committee
Report continued
Key matters considered
During the year, the Committee considered the following
matters:
– an evaluation of the size, composition and structure of the
Board and its committees;
– the Company’s diversity policy taking account of the
recommendations of the Hampton-Alexander Review,
Parker Review, and McGregor-Smith Review;
– the independence and time commitments of the directors;
– the director external appointments policy;
– director effectiveness during the year and concluding that
each director be recommended for re-election at the 2020
AGM;
– the Committee’s performance and Terms of Reference;
– the role descriptions of the Chair of the Board, Senior
Independent Director and the Group Chief Executive; and
– external corporate governance developments relating to
the remit of the Committee.
Board evaluation
Following an externally facilitated Board effectiveness
review in 2018/19, an internal evaluation of the Board
was carried out by way of questionnaires and individual
interviews with the Chair of the Board. The evaluation
process found that the Committee is operating effectively.
Further information on the outcomes of the Board
effectiveness review is available on page 62.
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 used when recruiting directors.
The Committee uses a skills matrix tool when assessing the
skills and capabilities required in a new director, taking into
account the existing experience and expertise on the Board.
The Committee develops candidate profiles describing the
skills, knowledge and experience required for each new role.
In October 2019, the Committee considered the
appointment of an additional non-executive director. Further
to a rigorous review, the Committee resolved that no further
appointments to the Board were required at this time.
Succession planning
The business requires a talented Board with appropriate
experience, expertise and diversity. The longest serving
director recently reached a six-year tenure and half of the
directors on the Board have served for less than four years.
The Committee considered the composition during the
year and concluded that the current Board size of eight
directors continued to be appropriate for the current and
near future needs of the business. As part of the internal
Board effectiveness process for 2019/20, the Chair of the
Board had discussions with each director individually to
discuss Board succession planning needs and seek input to
support discussions on director succession planning. The
Board skills matrix is used to support conversations on the
additional skills, experience and attributes that could benefit
the Board.
During the year, the Executive Committee carried out a
detailed talent review across every area of the business.
Succession plans are in place for every member of the
Executive Committee and this was refreshed in March 2020
during the Covid-19 pandemic. The Committee, together
with the Board, is focused on ensuring that credible
succession plans are maintained and that there is a talent
pipeline for future business leaders.
Diversity
The Company is committed to developing a diverse
workforce and equal opportunities for all. The Board
recognises that enhancing diversity in all its forms is a
critical part of having an effective and engaged workforce
which in turn supports the long-term sustainable success of
the business.
The Board meets the voluntary targets recommended by
the Hampton-Alexander Review and the Parker Review. At
the end of the financial year 37.5% of the Board, and 18%
of the Executive Committee, are female. One member of
the Board meets the criteria as set out in the Parker Review.
Whilst the Board is strongly supportive of enhancing all
forms of diversity across the Board and wider workforce as
a matter of priority, the Board does not currently set specific
targets on gender balance or ethnicity. The Committee and
the Board continue to be very mindful of the benefits of
greater diversity of gender, social and ethnic backgrounds,
and cognitive and personal strengths, in all appointments.
82
Corporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 In accordance with DTR 7.2.8A, the Committee confirms
that a Board Diversity Policy is in place and was last
reviewed and approved in October 2019. The policy seeks
to support the development of a diverse workforce and
to ensure that the Board takes opportunities to enhance
diversity as suitable roles and candidates become available.
The policy has been approved by the Board and will apply in
respect of all Board and senior management appointments.
The policy does not include any quotas and emphasises the
need for appointments to be made on the basis of merit.
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 enhance
the Board’s knowledge of these international markets.
This Non-Executive Director also attends the International
colleague forum to support colleague listening and
engagement. More information on this forum is included
in the Strategic Report on page 34. In addition, the Group
Chief Financial Officer also has wide-ranging financial
experience, both in the UK and the Nordics.
Election and re-election
At the forthcoming AGM, all directors as listed on pages
54 and 55 will present themselves for re-election. Each
of the directors is being unanimously recommended by
the other members of the Board due to their experience,
knowledge, wider management and industry experience,
continued effectiveness and commitment to their role. More
information on the individual contributions of each director
is available within their biographies on pages 54 and 55.
Lord Livingston of Parkhead
Chair of the Board
14 July 2020
continued
83
Corporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20
Remuneration
Committee
Report
Remuneration Committee
Report
opportunities and risks that face the business, with the need
to reflect both the shareholder experience on overall pay
outs as well as the performance in the context of market
and external environment.
Some shareholders also considered that the 2019 LTIP
award should have been scaled back to recognise the fall
in share price over the period since the previous award.
The Remuneration Committee did consider whether a scale
back of the award was required and considered business
performance, share price and market practice at the time.
In fact, many companies with similar share price falls had
not scaled back awards. The Committee noted that there
was already a reduction in the allocation amount from
the prior year from 275% to 250% of salary, in line with
the implementation of the new Remuneration Policy, and
the Committee judged at the time that the award levels
were appropriate in the context of incentivising a new
management team embarking on a major transformation of
the business. We listened to and understood shareholders’
views on this matter and it was the main reason we have
reached our decision to scale back the 2020 LTIP award,
details of which are set out below.
A report on the shareholder engagements and feedback has
also been included in this report. Please see page 100 for
further information.
Long-term incentive awards in 2019/20
In the prior financial year, we made a change to the TSR
comparator group used as one of the measures for our
long-term incentive awards. We previously measured
performance against a basket of companies from all
industry sectors, but such a broad group is subject to
different business dynamics and pressures to Dixons
Carphone, so we identified a group of companies with
which we have more in common. A group of specialist
retailers provided a better fit when we examined the
historical movement and volatility in share prices and their
underlying business profile and risk. We reviewed a UK-only
peer group as well as a European group and decided the
latter was better aligned with our European footprint as well
as providing a far larger sample of companies (and therefore
a more robust comparator group). We used this group last
year and plan to use this same comparator group when
making the 2020/21 awards. Please see page 103 for further
information on the comparator group.
The long-term incentive plan awards made in 2017 reached
the end of their performance period at the end of the
2019/20 financial year. None of the performance measures
were met and therefore these awards lapsed when they
vested in June 2020. Neither of the current executive
directors received awards under this grant, as they were not
employed by the Company when the awards were made.
Please see page 104 for further information.
Committee Chair’s statement
On behalf of the Board, I am pleased to present the 2019/20
Directors’ Remuneration Report and the report of the
Remuneration Committee (the ‘Committee’) for the financial
year ending 2 May 2020. This report describes the duties
of the Committee and how these have been discharged
during the year. As with last year, we have included a
Remuneration at a glance section in our report on page 87.
Remuneration Policy
Our Directors’ Remuneration Policy (the ‘Policy’) was
approved by shareholders at the Annual General Meeting
(“AGM”) in September 2019. We would like to thank
shareholders for their engagement during 2019 as we
consulted on this Policy and then for the 89.26% vote in
favour of the Policy at the AGM. In line with evolving market
practice and shareholder sentiment, the Remuneration
Committee gave an additional undertaking in August
2019 that the pension contributions for any new executive
directors would be aligned to pension contributions of
the wider workforce. The Committee is also mindful of
the investor expectations regarding pension contribution
rates and is exploring ways to align the level of pension
contributions for the current executive directors with those
of the wider workforce.
2018/19 Remuneration Report
Our remuneration report received less support from our
shareholders than the Policy, and, whilst we welcomed the
support of over three-quarters of shareholders who voted
in favour, we sought to better understand the concerns
of those who did not. To that end we invited engagement
with shareholders and welcomed the opportunity to have
constructive discussions on remuneration with those that
responded. The concerns expressed by those shareholders
and shareholder advisers that provided feedback primarily
related to the level of bonus payments for 2018/19, given
the assessment of business performance; and the number
of shares awarded in the 2019 LTIP grant, given the lower
share price.
Some shareholders felt that the bonus outturn was
excessive in the context of the financial results in 2018/19
which were down on the prior year. The Remuneration
Committee recognised that the determination of the
2018/19 bonus outcome was a difficult judgement to
make during the business transformation. However, on
the basis that the Group Chief Executive and Group Chief
Financial Officer joined the business in April 2018 and
August 2018 respectively and then delivered the financial
targets for 2018/19 in line with the Company’s guidance
issued in 2018, the Remuneration Committee concluded
that the bonus outcomes were reasonable. In addition,
both executive directors voluntarily deferred 100% of their
2018/19 cash bonus into share awards, that will not vest
for 2 years, in order to more strongly align themselves with
shareholders. We undertook to continue to ensure that
our incentive targets balance a realistic assessment of the
84
HEAD_0 2nd lineCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 continued
Covid-19 implications and pay and performance for
2019/20
In line with Government guidance, the Company closed
all stores across the UK and Ireland from 24 March 2020.
This followed closures of our stores in Greece from
18 March 2020. Our online operations in these countries
were able to continue, and online trading remained strong,
recovering some of the lost store sales. Meanwhile, our
stores in the Nordics have been able to continue to trade.
To protect our business and our colleagues, we are focused
on our Big Three priorities: Keeping our colleagues safe,
helping our customers and securing our future. On this
basis we furloughed over 16,000 store, corporate, supply
chain and contact centre colleagues in the UK and Ireland;
and to show total alignment across the business, all
members of the Board and the UK Executive Committee
members agreed to a temporary 20% reduction in base
pay. UK and Ireland colleagues at the two grades below
Executive Committee level agreed to a 10% reduction in
base pay. The pay reduction was effective from 5 April 2020
to 28 June 2020.
Prior to the onset of the Covid-19 restrictions, Group
performance was on track to deliver a bonus out-turn above
threshold. However, as a result of significantly reduced
revenues caused by the pandemic closures in the last two
months of the year, the profit underpin was missed for the
year as a whole. The Remuneration Committee considered
whether it was appropriate to over-ride this mechanism
in light of ten months of strong performance and the
exceptional and wholly external reasons why the year’s
target was missed. However, the management did not
believe paying a bonus would have been the right course
of action at a time when the focus should be on protecting
the business and its cashflow for the benefit of all our
stakeholders. The Remuneration Committee accepted and
welcomed management’s position on this issue. As well
as there being no bonus for 2019/20, the Remuneration
Committee agreed that there would be no standard pay
increases for executive directors, Executive Committee and
corporate colleagues for 2020.
Pay and performance for 2020/21
In line with our Remuneration Policy, the maximum bonus
opportunity for 2020/21 is 150% of base salary, with one
third of any bonus earned deferred into shares for a period
of two years. The bonus scheme will remain based on
performance against a balanced scorecard of financial and
non-financial measures, with financial measures making
up the majority of the opportunity, and, as in 2019/20, the
bonus will also include a clawback facility to demonstrate
the Company’s objective to reinforce a culture of ‘Treating
Customers Fairly’.
The Committee recognises that significant uncertainties
remain as the country (and therefore the Company) moves
out of lockdown, and therefore will review the bonus
position as the year progresses, using its overriding
discretion, if appropriate, in a manner that recognises the
context of the business and shareholder experience, but
maintains the incentive necessary to spur our recovery. The
Committee will also use its discretion when reviewing bonus
pay outs should it be demonstrated that a windfall gain
has been received as a result of the use of any government
subsidies received during the Covid-19 period. Targets and
performance against all the scorecard elements will be fully
disclosed in next year’s Remuneration Report.
We will also be making long-term incentive plan awards
this year under the 2016 LTIP Plan. These awards will
be granted at 200% of base salary, which is 20% lower
than the 250% normal award level under our policy.
The Committee was mindful of the feedback received
from some investors who believed that last year’s LTIP
award should have been scaled back to reflect the fall in
share price prior to that award. Based on the share price
progression this year alone, there were sound argument
as to why we might not have scaled back. Up to the onset
of the Covid-19, the share price had risen by over 16%
and some investors have signalled that falls resulting from
Covid-19 may be disregarded for this purpose. However,
the Committee believed that to have proceeded with a full
award would not adequately have reflected shareholders’
feedback following the 2019 award. This decision follows
other remuneration elements which have shown restraint
on pay – the temporary 20% base pay reduction, no
2019/20 bonus payment despite strong performance prior
to Covid-19, and no pay increase in 2020. We remain very
conscious of the need to motivate our talented team in this
challenging period, but believe these adjustments are right
in the circumstances.
This year, we plan to set the targets and make the awards
after we have announced our annual results. This reflects
the greater uncertainty as our stores are only just in the
process of fully re-opening and we need to ensure that
we have targets in place that are both stretching for
participants and also fully reflective of how shareholders
and the market view the long-term performance of the
business.
We will fully disclose the award details and targets at the
time of the grant announcement and include them in next
year’s Remuneration Report.
Enabling Colleagues to become shareholders
We strongly believe in the positive benefits of making our
colleagues shareholders in the business driven by one of
our core values ‘We Own It’. We have seen that colleagues
welcome the opportunity to become shareholders through
the introduction of our Colleague Shareholder Scheme
(“CSS”). This year we were delighted to receive shareholder
approval for the CSS at the 2019 AGM and to announce
our decision to extend the CSS for another year. Under the
CSS we are able to make one off awards of shares from
time to time to all eligible colleagues. The first awards were
made in February 2019 and at least £1,000 of options were
granted to every permanent colleague with 12 months’
service. Since February 2019, awards have been made to
85
HEAD_0 1st lineHEAD_0 2nd lineCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 Report
Remuneration Committee
Report continued
over 38,000 colleagues globally and these awards will vest
after three years. However, these awards are not allocated
to senior management. The awards have been well
received, with much positive feedback from both colleagues
and shareholders. We are already seeing tangible benefits
since the launch of the scheme resulting in significant
improvements in our customer metrics.
The initial awards under this scheme were made using
shares purchased in the market and so did not affect our
dilution limits. However, we would like to have the ability to
fund awards to newly eligible employees using new-issue
shares. Whilst the approval gained from shareholders in
2019 allows this, it would cause us a technical problem
against our current dilution limits. This issue arises
because our share plans count the CSS awards against
the dilution limit on ‘discretionary’ schemes with a 5%
dilution limit – a label that normally applies to schemes
for senior management, whereas the CSS is available
to all eligible colleagues and specifically not senior
management. Following consultation with a number of our
major shareholders, who expressed strong support for
this scheme and recognised the issue it created with the
technical dilution limit, we are proposing to change the
rules in our share plans to allow us to treat the CSS as an
all-employee scheme and count its dilution just within our
overall 10% limit on share usage.
Engaging with our colleagues
We are committed to continuing to engage with the wider
workforce and I have been given responsibility by the
Board to lead on this. As part of this role I attended the
UK and International colleague listening forums with the
Chief People Officer, Paula Coughlan. My fellow Committee
member Andrea Gisle Joosen attended the Nordics
colleague forum. Attendance at these forums provided us
with a very welcomed opportunity to directly engage with
the wider workforce and to bring colleagues’ views to both
the Committee and Board discussions in addition to the
existing methods such as our company wide engagement
survey. I am looking forward to engaging further with
colleagues during the coming year.
As always, we would welcome any feedback or comments
on this Report. The Committee remains firmly committed to
the principle of pay for performance, ensuring that rewards
to the senior leadership team are aligned with the returns
of long-term shareholders, and this remains a key tenant
to our policy. This year has been exceptional due to the
Covid-19 pandemic. In this environment, the Board and
Remuneration Committee have sought to take the interests
of all stakeholders into account whilst focusing on our Three
Big priorities. The executive directors and management
team have skilfully navigated the business through this
crisis. However, we are also mindful that we need to strike
a balance on the one hand with short-term renumeration
sacrifices and on the other hand the need to motivate and
incentivise management to create long-term shareholder
value. We look forward to your continued engagement and
thank you for the feedback provided to date.
Tony DeNunzio CBE
Chair of the Remuneration Committee
14 July 2020
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HEAD_0 1st line continuedHEAD_0 2nd line continuedCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 Remuneration Report
—
Remuneration Policy
Remuneration Report —
Remuneration Policy
Remuneration at a glance
Implementation of the remuneration policy
Remuneration at a glance
Performance
metrics
(weighting)
• EBIT (50%)
• Average net debt (20%)
• Net Promoter Score (15%)
• Employee engagement (15%)
• EBIT underpin and “Treating Customers
Fairly” clawback.
• EBIT (50%)
• Average net debt (20%)
• Net Promoter Score (15%)
• Employee engagement (15%)
• EBIT underpin and “Treating Customers
Fairly” clawback.
Maximum
opportunity
250% of base salary
200% of base salary.
Scaled back by 20% from 250% maximum
LTIP
Performance
metrics
(weighting)
• TSR relative to a bespoke group of UK
and European retailers (50%)
• Cumulative free cash flow (50%)
• TSR relative to a bespoke group of UK
and European retailers (50%)
• Cumulative free cash flow (50%)
Share ownership
guidelines
• 200% of salary to be achieved within
five years of appointment
• For new appointments, shares to the
value of 200% of salary must be retained
for the first year post-cessation and 100%
for the second year
• 200% of salary to be achieved within
five years of appointment
• For new appointments, shares to the
value of 200% of salary must be retained
for the first year post-cessation and 100%
for the second year
Total remuneration earned in the year
Total remuneration earned in the year
Due to the EBIT threshold not being met no bonus was paid out in respect of the 2019/20 financial year. Additional details
are set out in the Chair’s letter and in the body of the remuneration report. The Executive Directors were not in post when
LTIPs due to vest this year were granted, and therefore are not eligible for payments under the LTIP plan in the year.
87
HEAD_0 1st lineHEAD_0 2nd line2019/202020/21 proposedBase salary• CEO –£867,000• CFO -£479,400• CEO –£867,000 (no increase)• CFO -£479,400 (no increase)Note: Due to the COVID-19 impact, the Executive Directors agreed to a 20% reduction from the above salaries with effect from 5 April 2020 to 28 June 2020.Annual bonusMaximum opportunity150% of base salaryOne third deferred into shares for a period of two years (although executives voluntarily deferred 100% of their bonus)150% of base salaryOne third deferred into shares for a period of two years.Corporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 Remuneration Report
continued
Remuneration Policy
—
Remuneration Report —
Remuneration Policy continued
Introduction
The purpose of this Report is to inform shareholders of
the Company’s directors’ remuneration for the year ended
2 May 2020 and the Remuneration Policy for subsequent
years. 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
5 September 2019 and is effective from that date. The
Annual Remuneration Report will be put to an advisory vote
at the Annual General Meeting.
The role of 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 5 of the Code and has paid close regard to
the principles of clarity, transparency, risk management,
proportionality and alignment to culture and strategy. The
Committee 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.
The policy set out here is the version approved by
shareholders other than minor updates to certain sections
such as the Remuneration Committee objectives, illustration
of remuneration policy, shareholder and employee
consultation, service agreements and dilution limits. The
actual version which was approved by shareholders can be
found in the annual report and accounts 2018/19.
Remuneration Policy –
unaudited information
Remuneration Committee objectives
The Board has delegated to the Committee responsibility for
determining policy in relation to the remuneration packages
for executive directors and other senior management.
This delegation includes their terms and conditions of
employment in addition to the operation of the Group’s
share-based employee incentive schemes. The Committee’s
Terms of Reference are reviewed annually. In the 2019/20
financial year, they were reviewed by the Committee in
December 2019 and subsequently approved by the Board
in January 2020. The Committee’s Terms of Reference 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.
Remuneration strategy
Put simply, our aim is to generate superior returns for our
shareholders and the key to achieving this is our colleagues.
Our remuneration strategy is therefore designed to motivate
high-performing colleagues 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 so that it 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;
– the remuneration arrangements and policy 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.
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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 colleagues.
– Operation
Normally reviewed annually.
To reflect their skills, experience and importance to the business.
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 at market level taking into consideration
FTSE51-150 and retailers of a similar size.
Salaries for new appointments as executive directors will be set in accordance with
the Recruitment Policy set out on pages 94 to 96.
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.
– Maximum opportunity
– 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
– Maximum opportunity
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 or the use of a driver for company business;
– private medical 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.
– Performance assessment / targets Not applicable.
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Remuneration Policy continued
Pension (fixed pay)
– Purpose and link to strategy
– Operation
– Maximum opportunity
A pension is provided which is consistent with that provided to other Corporate
employees in the UK 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.
Current executive directors will receive 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. Any executive director appointed after 5 September 2019 will
receive a pension contribution in line with the level paid to the majority of the UK
workforce across the Group, up to 10% of base salary, which can be taken in whole
or in part as a cash allowance in lieu of pension.
– Performance assessment / targets Not applicable.
Annual performance bonus (variable pay)
– Purpose and link to strategy
– Operation
– Maximum opportunity
Annual performance bonuses are in place to incentivise the delivery of stretching,
near-term business targets based on our business strategy.
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.
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 20% of the maximum potential
award is payable. A sliding scale determines payment between the minimum and
maximum bonus payable.
The annual bonus is typically determined in June based on the audited performance
over the previous financial year.
One third of any bonus earned will be deferred into shares for a period of two years,
with the remaining two-thirds paid in cash. Any bonus earned is non-pensionable.
Where any bonus is deferred dividends (or equivalents) may accrue.
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,
calculation error, reputational damage and corporate failure, enabling performance
adjustments and / or recovery of sums already paid. These provisions will apply for
up to three years after payment.
Maximum annual bonus potential for all executive directors is 150% 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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HEAD_0 1st line continuedHEAD_0 2nd line continuedCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 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
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. No more than 25% of the maximum will be payable for
threshold level of performance.
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, calculation error, reputational damage and corporate
failure, 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 250% of base salary, with up to 375% in exceptional circumstances,
e.g. recruitment.
More details on the proposed award levels for executive directors in 2020/21 are
set out in the Annual Remuneration Report on page 111 and full details will be
disclosed at grant.
– 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 financial
metrics such as free cash flow. The Committee retains the flexibility to introduce
new measures in the future if considered appropriate given the business context,
although TSR and free cash flow will each not be weighted any less than 30%
of the total award. Material changes will be subject to consultation with major
shareholders.
The actual metrics applying for each award will be set out in the Annual
Remuneration Report and any changes in the metrics will be explained.
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Remuneration Policy continued
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 the Group all-employee share
schemes, but not the Colleague Shareholder Scheme, on the same terms as other
eligible employees.
The same limits apply to executive directors as to all other participants in the
schemes and are in line with the appropriate regulations.
The Committee reserves the right to increase the savings limits for future schemes
in accordance with the statutory limits in place from time to time.
– Performance assessment / targets None of the schemes are 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, with a five-year period in which to reach these
limits. Executive directors are also required to retain a proportion of these shares
post the cessation of employment.
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
Company’s shares during employment. Any executive director appointed after
5 September 2019 will also be required to retain shares equivalent to 200% of their
base salary on leaving for a period of 12 months and then 100% of their base salary
for a further period of 12 months.
Details of the directors’ shareholdings are shown in the table on page 109.
Non-executive directors and Chair of the Board / Deputy Chair 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
– 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 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 Chair of the
Board, Deputy Chair, 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.
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HEAD_0 1st line continuedHEAD_0 2nd line continuedCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 Selection of Performance Metrics
The policy provides flexibility for the Committee to determine the measures to be used in the Annual Performance Bonus
and the LTIP. The measures used currently, and their purposes are set out below.
Measure
EBIT
Average net debt
Net promoter score
Where used
Annual Performance Bonus
Annual Performance Bonus
Annual Performance Bonus
Employee engagement
Annual Performance Bonus
Cumulative free cashflow LTIP
Relative TSR
LTIP
Purpose
Key measure of annual financial delivery
Focus on the business’s cash position
Captures the overall perception of our business in the eyes of
our customers
Reflects how well we engage our colleagues – a factor which
we know to be a key driver of retention and performance
A principal measure of the financial health of the business
including the management of working capital, captured over a
multi-year period
Seeks to measure the growth in shareholders’ investment
in Dixons Carphone (share price movements plus dividends
paid) relative to other similar companies
Illustration of Remuneration Policy
The Remuneration Policy scenario chart below illustrates the level and mix of potential total remuneration the ongoing
executive directors could receive under the Remuneration Policy at three levels of performance: minimum, target and
maximum.
Remuneration Policy scenario chart
)
s
0
0
0
£
(
n
o
(cid:31)
a
r
e
n
u
m
e
R
£6,000
£5,000
£4,000
£3,000
£2,000
£1,000
£0
£4,958
52%
26%
21%
£4,091
42%
32%
26%
£2,791
34%
28%
38%
£1,024
100%
£1,498
35%
29%
36%
£540
100%
£2,216
43%
32%
24%
Minimum
Target
Maximum
Maximum + 50%
share price
growth
Minimum
Target
Maximum
Alex Baldock
Jonny Mason
Fixed pay
Annual bonus
Long term incen(cid:31)ves
£2,695
53%
27%
20%
Maximum +50%
share price
growth
Notes:
(1) Fixed pay is based on the basic salary payable at 1 August 2020, taxable benefits and pension contributions.
(2)
Annual variable pay represents the annual bonus entitlement. No bonus is assumed at the minimum performance level. Target performance
assumes a payment of 90% of salary (i.e. 60% of maximum) and at maximum performance a payment of 150% of base salary.
Long-term incentives relate to the Long Term Incentive Plan. No awards vest at the minimum performance level. Target performance
assumes a vesting of 110% of salary (i.e. 55% of maximum award) and maximum performance vesting of 200% of salary. The LTIP reflects
the scaled back award level of 200% made in 2020 (normal maximum: 250%).
The chart above does not take into account the impact of share price appreciation, other than the fourth bar, which assumes a growth in the
share price of 50% over the vesting period for long-term incentive awards.
(3)
(4)
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Remuneration Policy continued
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:
Remuneration policy for the wider workforce
Dixons Carphone employs a large number of colleagues
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.
– 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. The Committee also takes into consideration
remuneration guidance issued by leading 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. The Committee
welcomes the introduction of the ‘employee voice’ initiative.
During the year, an International Colleague forum was
established to unify the existing country forums into a
single, listening and engagement forum for colleagues.
Tony DeNunzio, the Deputy Chair and Senior Independent
Director attends the UK forum meetings with the Chief
People Officer and Andrea Gisle Joosen, Independent
Non-Executive Director attends the Nordics colleague
forum meetings. Attendance at these forums provides a
welcomed opportunity to directly engage with the wider
workforce and to bring colleagues’ views to both the
Committee and Board discussions. In addition, we 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.
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.
The Company actively encourages wide employee share
ownership. The Colleague Shareholder Scheme provides
the opportunity for all colleagues, subject to eligibility
criteria, to become shareholders in the Company and the
Company has put in place the structure and plan rules
for a SIP, for introduction at a future date. In addition, the
Group’s UK & Irish employees, who meet the eligibility
criteria, are already invited to join the Company’s UK &
Ireland approved SAYE.
Discretionary share plans are also 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.
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 the 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 and
the provision of benefits. This discretion will not be
used in respect of pension contributions in excess of
the Committee’s commitment to ensure that any newly
appointed executive director will receive a pension
contribution in line with the level paid to the majority of
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HEAD_0 1st line continuedHEAD_0 2nd line continuedCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 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.
the UK workforce across the Group, up to 10% of base
salary.
– 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, at the time of award, the
level of the award, the performance conditions and time
horizon that would apply to such awards, taking into
account the strategy and business circumstances of the
Company.
Service contracts will be entered into on terms similar to
those for the existing executive directors, summarised in
the recruitment table 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.
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Remuneration Policy continued
With respect to the appointment of a new Chair of the Board 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 Chair of the Board 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.
Recruitment table for executive directors
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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HEAD_0 1st line continuedHEAD_0 2nd line continuedCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 Policy on loss of office
Service contracts contain neither 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 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.
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 Alex Baldock and
Jonny Mason;
– sick pay; and
– notice periods whereby Alex Baldock has a notice period
of 12 months from either party and Jonny Mason has a
notice period of 12 months from the Company and six
months from him.
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.
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 Chair of the Board
Deputy Chair and the other non-executive directors have a
notice period of three months from either party.
Appointments are reviewed by the Nominations Committee
and recommendations made to the Board accordingly.
External appointments
The Board supports executive directors should they chose
to take non-executive directorships as a part of their
continuing development and agrees that the executive
directors may retain their fees from one such appointment.
Currently neither of the executive directors hold any non-
executive directorships.
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—
Remuneration Report —
Remuneration Policy continued
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 are made available at
annual general meetings. Also scanned copies are available
on request from cosec@dixonscarphone.com.
Legacy arrangements
For the avoidance of doubt, authority is given to the
Company to honour any commitments previously entered
into with the current or former directors.
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 14 July 2020, the
Company’s dilution position, which remains within the
current Guidelines, was 5.2% for all plans (against a limit of
10%) and 3.8% for the Long Term Incentive Plan (against a
limit of 5%).
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—
Annual Remuneration
Report
Remuneration Report —
Annual Remuneration Report
Introduction
This part of the report has been prepared in accordance
with Part 3 of Schedule 8 to the Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations
2008 (as amended), and contain those elements required by
section 9.8.6R and stipulated in 9.8.8 of the Listing Rules.
This Annual Remuneration Report will be put to an advisory
vote at the Annual General Meeting on 10 September 2020.
Remuneration Committee membership and attendance
Meetings
• The Remuneration Committee meets as and when
– determining the fees of the Chair of the Board and Deputy
Chair;
– 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;
– reviewing the reward and benefits structures across the
required and at least twice a year.
group for all levels of colleagues; and
• The Committee attended 6 scheduled meetings and 3
unscheduled meeting during the period under review.
• The Committee has met once since the year end.
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 54 to 55.
– 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 2019/20
included:
– reviewing and approving the Directors’ Remuneration
Report;
Scheduled
meetings
– assessing the performance of executive directors against
pre-determined targets set for the 2018/19 annual bonus
and approving the payments;
Current members
Tony DeNunzio (Chair)
Andrea Gisle Joosen
Gerry Murphy
6 of 6
6 of 6
6 of 6
Only members of the Remuneration Committee are entitled
to attend Committee meetings. The Chair of the Board,
Group Chief Executive, Group Chief Financial Officer,
General Counsel and Company Secretary, Chief People
Officer, Group Reward Director, Head of Executive Reward
and Share Plans and other members of senior management,
and representatives from the Company’s remuneration
advisor (Aon Hewitt) attended the relevant Committee
meetings by invitation.
No director participates in discussions about their own
remuneration.
The Company Secretary, or his nominee, acts as
Secretary to the Committee and attends all meetings. The
Committee’s deliberations are reported by its Chair at
the subsequent Board meeting and the minutes of each
meeting are circulated to all members of the Board following
approval.
Responsibilities
Responsibility for the establishment of an overall
remuneration policy for the Group lies with the Board. The
Committee has the following principal duties:
– making recommendations to the Board on the Company’s
framework of executive remuneration;
– agreeing the design of the 2019/20 annual bonus
including performance measures and targets;
– agreeing the design of the 2019/20 share awards
including the performance measures, reviewing the TSR
peer group, considering whether awards should be scaled
back in light of a fall in the Company’s share price and
setting targets;
– approving share awards to senior management under the
2016 Long Term Incentive Plan;
– agreeing the terms for the Sharesave;
– approving plans to make ongoing use of the Colleague
Shareholder Scheme for new joiners;
– consulting with shareholders on remuneration matters,
including the 2019 AGM voting outcome for the
Remuneration Report and the dilution impact of ongoing
awards under the Colleague Shareholder Scheme;
– approving the Deferred Share Bonus Plan rules;
– reviewing the Gender Pay submission;
– monitoring the developments in the corporate governance
environment and investor expectations; and
– monitoring and ensuring alignment of remuneration
practices across the Group.
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Corporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 continued
Remuneration Report —
Annual Remuneration Report continued
Statement of voting at shareholder meetings
The Company is committed to ongoing shareholder dialogue in respect of directors’ remuneration and takes an active
interest in voting outcomes. Where there are substantial votes against resolutions, explanatory reasons will be sought, and
any actions in response will be communicated to shareholders.
The following table sets out the voting results in relation to the approval of the remuneration policy when it was last put to
shareholders at the annual general meeting 2019:
Resolution
Votes for
%
Votes against
%
Withheld
Approval of directors’ remuneration policy
831,610,451
89.26
100,031,252
10.74
33,572,688
The following table sets out the voting results in relation to the resolutions put to the annual general meeting 2019:
Resolution
Votes for
%
Votes against
Approval of annual remuneration report
738,083,754
76.54
226,263,505
%
23.46
Withheld
867,132
Shareholder Engagement
2019 AGM Remuneration Report voting outcome
The 2018/19 Directors’ remuneration report was passed with 76.54% votes cast in favour at the Annual General
Meeting (“AGM”) held on 5 September 2019. The Committee acknowledged that this meant that a significant minority of
shareholders did not support the resolution.
Prior to and after the AGM results, the Company and the Committee consulted with those shareholders and shareholder
advisers who voted against the resolution and / or raised their concerns in order to better understand the issues behind the
vote. From these discussions the primary concerns raised were:
•
the level of bonus payments for 2018/19 given the assessment of business performance; and
•
the number of shares in the 2019 LTIP award given the lower share price.
In the context of the concerns raised with respect to the 2018/19 bonus outcome, the Remuneration Committee
recognised that the outcome was a difficult judgement at the point during the business transformation when it was
taken. The Group Chief Executive and Group Chief Financial Officer joined the business in April 2018 and August
2018 respectively, at the start of the transformation and the 2018/19 targets when set represented a stretching view of
performance in the context of the plan approved by the Board and market consensus. The executive directors delivered
the financial targets for 2018/19 in line with this plan, exceeding the EBIT threshold and the Company’s guidance issued in
2018.
The executive directors also both voluntarily deferred all of their cash bonus for 2018/19 into share awards that will not
vest for 2 years. The executive directors volunteered to do this as they were keen to align themselves more strongly with
shareholders. On this basis the Committee considered that the bonus pay out level was appropriate.
With regard to the LTIP award size, the Committee did consider whether a scale back of the award was required based
on business performance, share price and market practice at the time. A review of comparable companies highlighted
that many had not scaled back awards despite a similar share price fall. The Committee noted that there was already
a reduction in the allocation amount from the prior year from 275% to 250% of salary, in line with the implementation
of the new Remuneration Policy, and the Committee believed that the award levels were appropriate in the context of
incentivising a new management team embarking on a major transformation of the business. However, the Committee
understands that some shareholders took a different view and will be mindful of this when assessing the size of future
awards.
Since the AGM, the Company has sought further engagement with our shareholders and the proxy agencies. As part of this
engagement, the Company has either met with, or written to, shareholders representing over 70% of the Company’s share
capital and invited them to attend meetings with their choice of the Group Chair of the Board, Chair of the Remuneration
Committee or Chair of the Audit Committee.
The Remuneration Committee and the Board has welcomed the opportunity to have constructive discussions on
remuneration with our shareholders. The Committee has considered the feedback received when assessing the level
of award for the 2020 LTIP and determined that a reduction of 20% in this year’s award is appropriate. This decision is
explained further in the Chair’s opening letter.
Colleague Shareholder Scheme changes and dilution limits
In March 2020 we wrote to our major shareholders and the Investment Association regarding proposals to recategorise our
Colleague Shareholder Scheme (“CSS”) from a discretionary scheme (subject to the 5% dilution limit) to an all employee
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HEAD_0 1st line continuedCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 scheme (subject to the 10% dilution limit). We believed this to be consistent with the spirit of the scheme, and therefore
this change effectively remedies a technical anomaly. The CSS is awarded to all eligible colleagues with the exclusion of
senior management. The technical anomaly results from different share award values at different levels in the organisation
and the fact that senior management are deliberately excluded. However, the CSS is effectively an all colleague scheme.
Following the feedback received during the consultation process, and given the strong support received from shareholders
for this scheme and the recognition of our aim to increase all colleague share ownership within the business, the
Committee will put a resolution to shareholders at the AGM to allow us to treat the CSS as an all-employee scheme and
count its dilution just within our overall 10% limit on share usage.
Advice
The Committee retained Aon Hewitt throughout 2019/20 as independent advisors. Aon Hewitt, who were appointed by
the Committee in 2016 following a competitive tender process, are 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 2019/20 for all
remuneration services provided to the Group. Aon Hewitt received fees of £75,255 (2018/19: £180,000) in relation to the
provision of those services. Fees are charged on a time and expenses basis. During the year, Aon Hewitt also provided
other ad hoc remuneration services outside the scope of the Committee to the Company.
Remuneration details for 2019/20
The following sections set out how the Remuneration Policy was implemented during 2019/20 and how it will be
implemented for the following year.
Single figure of directors’ remuneration for the year ended 2 May 2020 (audited information)
Basic salary
and fees
£’000(1)
Pension
contributions(2)
£’000
Annual bonus
£’000
Taxable
benefits(3)
£’000
Total
emoluments
£’000
LTIP
payments
£’000
Total
remuneration
£’000
Executive
Alex Baldock
Jonny Mason
Non-executive
Eileen Burbidge
Tony DeNunzio
Andrea Gisle Joosen
Lord Livingston of
Parkhead(4)
Fiona McBain
Gerry Murphy
850
470
1,320
64
138
70
296
74
69
711
85
47
132
0
0
0
0
0
0
0
2,031
132
0
0
0
0
0
0
0
0
0
0
0
103
13
116
1
2
5
1
6
0
15
131
1,038
530
1,568
65
140
75
297
80
69
726
2,294
—
—
—
—
—
—
—
—
—
0
0
1,038
530
1,568
65
140
75
297
80
69
726
2,294
(1)
(2)
(3)
(4)
Due to the impact of Covid-19, all members of the Board agreed to a temporary 20% reduction in base pay and fees from 5 April 2020 to
28 June 2020. Base pay amounts waived by Alex Baldock and Jonny Mason for the period from 5 April 2020, were £12,480 and £6,900,
respectively. Andrea Gisle Joosen is paid on a lunar payroll cycle and therefore the impact of the 20% reduction on basic fees paid in the
financial year is slightly different than for other non-executives, who are on a monthly payroll cycle. The reduction was applied from 5 April
2020 for all.
Pension contributions comprise the Company’s contribution or allowance in lieu. The contribution amount was 10% of salary for Alex
Baldock and Jonny Mason.
Taxable benefits for executive directors include private medical insurance and car allowance or driver benefit amounts. £101,863 for Alex
Baldock relates to the grossed-up element payable to cover the tax liability for his car and driver, arising from business activities considered
taxable by HMRC. For non-executive directors they include routine travel expenses relating to travel, accommodation and subsistence
costs incurred in connection with attendance at Board meetings and other Board business during the year, which are considered taxable by
HMRC.
Ian Livingston has a deferred pension in the Dixons Retirement and Employee Security Scheme.
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Remuneration Report —
Annual Remuneration Report continued
Single figure of directors’ remuneration for the year ended 28 April 2019 (audited information)
Basic salary
and fees
£’000(1)
Pension
contributions(2)
£’000
Annual bonus
£’000(3)
Taxable
benefits(4)
£’000
Total
emoluments
£’000
LTIP
payments
£’000
Total
remuneration
£’000
Executive
Current directors
Alex Baldock
Jonny Mason(1)
Former directors
Humphrey Singer(1)
Non-executive
Current directors
Eileen Burbidge(5)
Tony DeNunzio
Andrea Gisle Joosen
Lord Livingston of
Parkhead(8)
Fiona McBain(7)
Gerry Murphy
Former directors
Jock Lennox(6)
850
339
77
1,266
22
140
70
300
72
70
47
721
85
34
10
129
—
—
—
—
—
—
—
—
619
244
—
863
—
—
—
—
—
—
—
—
1,987
129
863
65
9
2
76
1
3
5
—
13
—
—
22
98
1,619
626
89
2,334
23
143
75
300
85
70
47
743
3,077
—
—
—
—
—
—
—
—
—
—
—
—
—
1,619
626
89
2,334
23
143
75
300
85
70
47
743
3,077
(1)
(2)
(3)
(4)
Remuneration is shown for the period served on the Board. Jonny Mason was appointed to the Board on 13 August 2018. Humphrey
Singer stepped down from the Board and left the Company on 20 June 2018.
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 Alex
Baldock, Jonny Mason and Humphrey Singer.
100% of Alex Baldock and Jonny Mason’s bonus entitlement has been voluntarily deferred into a share award. The award will vest two
years from the grant date, unless the executive director is dismissed for gross misconduct.
Taxable benefits for executive directors include private medical insurance and car allowance or driver benefit amounts. For non-executive
directors they include routine travel expenses relating to travel, accommodation and subsistence costs incurred in connection with
attendance at Board meetings and other Board business during the year, which are considered to be taxable by HMRC.
(5) Eileen Burbidge was appointed to the Board on 1 January 2019.
(6)
Jock Lennox stepped down as Chair of the Audit Committee on 6 September 2018 but remained a member of the Audit Committee until he
stepped down from the Board on 31 December 2018.
(7) Fiona McBain was appointed Chair of the Audit Committee on 6 September 2018.
(8)
Ian Livingston has a deferred pension in the Dixons Retirement and Employee Security Scheme.
Annual bonus for 2019/20 (audited information)
The maximum bonus opportunity for executive directors was 150% of base salary based on performance in the 12-month
period to the end of the financial year. The maximum is payable at the maximum level of performance, 20% of the
maximum opportunity is payable on achievement of threshold performance (30% of base salary) and 60% on achievement
of target performance (90% of base salary). No bonus is payable if the minimum EBIT threshold is not achieved.
Prior to the onset of the Covid-19 restrictions, Group performance was on track to deliver a bonus out-turn above
threshold. However, as a result of significantly reduced revenues caused by the pandemic closures in the last two months
of the year, the profit underpin was missed for the year as a whole. The Committee considered whether it was appropriate
to over-ride this mechanism in light of ten months of strong performance and the exceptional and wholly external reasons
why the year’s target was missed. However, the executive team did not believe paying a bonus would have been the
right course of action at a time when the focus should be on protecting the business and its cashflow for the benefit of
all our stakeholders. The Committee accepted and welcomed the executive team’s position on this issue. Therefore,
notwithstanding the performance of the underlying measures shown in the table below, as the EBIT threshold was not met
the Committee determined that there will be no annual bonus paid for 2019/20.
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Measure
Adjusted EBIT
Average net (debt) – variance vs
budget
Customer Net Promoter Score
Employee engagement score(1)
Total
Total Awarded
As a percentage of
maximum bonus
opportunity
50%
20%
15%
15%
Threshold
£234m
(£50m)
64.5%
63%
Target
£254m
0
65.7%
65%
Maximum
£284m
£50m
66.6%
67%
Actual
£194m
£87m
67.9%
62%
Potential Bonus %
Achieved
0%
20%
15%
0%
35%
Nil
(1)
Due to Covid-19, the Nordics business group did not carry out their annual engagement survey and so, as the Group target is a weighted
average based on targets set for each region, in the absence of a Nordics result, both the target and outcome are shown excluding this
region.
The Committee determined at the beginning of the year that the disclosure of performance targets was 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 above the targets on a
retrospective basis and the actual performance against these. The 2019/20 targets when set represented a stretching view
of performance in the context of the plan approved by the Board and market consensus.
Long Term Incentive Plans (LTIP) and other share awards (audited information)
LTIP Awards made during 2019/20
Nil cost option awards of 250% of base salary were made to executive directors on 25 July 2019.
The awards made on 25 July 2019 have two equally weighted performance conditions. Half of the awards will be subject to
the achievement of a relative TSR performance condition, measured against a bespoke comparator group comprised of 22
European Special Lines Retailers and other comparable companies at the start of the performance period. Awards made in
years prior to 2019/20, were measured against the FTSE 51-150 group of companies, but that group is subject to different
business dynamics and pressures to the Company. The Committee identified an alternative group of companies with
similar characteristics for measurement. Looking at the closeness of share-price movement, relative share-price volatility
and analysis of the business risk profile - a retail group was deemed to provide a better measure of outperformance. The
Committee considered a UK-only peer group as well as a European group, with the latter providing a far larger sample of
companies (and therefore a more robust comparator group) with little decline in quality of comparison versus the UK peers.
The Committee therefore concluded that a peer group made up of UK and European Special Lines retailers would be the
best group against which to measure performance. The list of companies included in the group is provided below.
The remaining half of the awards will be subject to the achievement of a cumulative free cash flow target.
The relative TSR condition will be assessed over a three-year period, with vesting 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%
Comparator Group: AO World, Ceconomy Ag, Dufry AG, Dunelm Group, Esprit, Fenix Outdoor International AG, Fielmann
AG, FNAC Darty SA, Grandvision N.V., JD Sports Fashion, Kingfisher, Maisons Du Monde S.A., Marks & Spencer Group.,
Mobilezone Holding Ag, Pets At Home Group, SMCP S.A.S., Sports Direct International, Superdry, Valora Holding AG,
WH Smith, XXL ASA, Zur Rose Group AG.
The free cash flow performance condition is measured cumulatively over the three-year performance period. The
percentage of the award vesting will be as follows:
Cumulative free cash flow up to the end of the 2021/22 financial year
% of the free cash flow element vesting
Below £500m
£500m
Between £500m and £586m
£586m
Between £586m and £674m
Above £674m
0%
10%
Pro rata between 10% and 25% on a straight-line basis
25%
Pro rata between 25% and 100%
100%
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Remuneration Report —
Annual Remuneration Report continued
The free cash flow targets were set taking into account a number of inputs including market consensus at the time of the
award and the external environment within which the Company is operating. Calculations of the achievement against the
targets will be independently performed and approved by the Committee. Free cash flow is defined in the glossary on
page 205; however the Committee retains discretion to adjust for exceptional items which impact cash flow 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, calculation error,
reputational damage and corporate failure, enabling performance adjustments and / or recovery of sums already paid.
These provisions will apply for up to three years after vesting.
The awards are subject to a 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.
The table below sets out the LTIP awards made to the executive directors in 2019/20:
Nil Cost Options
awarded
Share Price at
date of award
£
Face Value
£(1)
End of
Performance
Period
Vesting Date
Minimum value at
threshold vesting
£(2)
Alex Baldock – 250% of salary(3)
Jonny Mason – 250% of salary(4)
1,737,530
960,752
1.223
1.223
2,125,000
1,175,000
1 May 2022 25 July 2022
25 July 2022
1 May 2022
371,875
205,625
(1) The face value is calculated based on the number of options awarded multiplied by the share price at the date of award.
2)
The minimum value at threshold vesting is calculated on 50% of the award operating with a threshold vesting of 25% of maximum, and
50% with a threshold vesting of 10% of maximum.
Nil cost option awards were made to Alex Baldock on 25 July 2019 and the share price used to calculate the number of shares granted was
the mid-market price on the day prior to grant, being 24 July 2019 (£1.223).
Nil cost option awards were made to Jonny Mason on 25 July 2019 and the share price used to calculate the number of shares granted was
the mid-market price on the day prior to grant, being 24 July 2019 (£1.223).
(3)
(4)
Deferred Share Bonus Plan Awards made during 2019/20
On 25 July 2019 the following nil cost options were granted to Alex Baldock and Jonny Mason under the Dixons Carphone
2018/19 Deferred Share Bonus Plan (“DSBP”):
Alex Baldock
Jonny Mason
Nil Cost Options awarded
506,490
199,494
Share Price used to grant
award (1)
£
1.223
1.223
Face Value
£(2)
619,438
243,981
Vesting Date
25 July 2021
25 July 2021
(1)
The share price used to calculate the numbers of shares granted was using the mid-market price on the day prior to grant, being 24 July
2019.
(2) The face value is calculated based on the number of options awarded multiplied by the share price used to grant the award.
Each award (a nil cost option) will be satisfied using market purchase shares and will ordinarily vest and become
exercisable on the second anniversary of grant.
Vesting of awards made under 2016 Long Term Incentive Plan (audited information)
Awards granted in June 2017 under the 2016 Long Term Incentive Plan (the ‘LTIP’) vested on 29 June 2020. The
performance period for this award ended on 2 May 2020.
Neither of the current executive directors have awards in respect of this grant as the awards were made before they joined.
However, the former executive directors, Sebastian James and Andrew Harrison, were both granted awards in June 2017
and were granted good leaver status on leaving, resulting in their awards being pro-rated for time.
Based on the achieved level of performance, the threshold required for vesting for both of the performance measures has
not been met. The Committee decided whether any discretion should be applied to the vesting outcomes and determined
that the awards lapsed on reaching their vesting date.
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The performance measures for the award and the outcomes are shown below.
TSR Target
Level of Performance
TSR Performance over performance period
Vesting Level
EPS Target
Level of Performance
EPS Growth over performance period
Vesting %
Below Threshold
Below Median
0%
Threshold
Median
25%
Maximum
Achieved
Upper Quartile
100%
Below median
0%
Below Threshold
0%
0%
Threshold
7.5%
25%
Maximum
20%
100%
Achieved
-66%
0%
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.
Total shareholder return
Source: FactSet
)
d
e
s
a
b
e
r
(
)
£
(
e
u
a
V
l
700
600
500
400
300
200
100
0
29 Mar
2010
31 Mar
2011
31 Mar
2012
31 Mar
2013
29 Mar
2014
02 May
2015
30 Apr
2016
29 Apr
2017
28 Apr
2018
27 Apr
2019
02 May
2020
Dixons Carphone plc
FTSE 350 Index
This graph shows the value, by 2 May 2020, 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.
The start date of the graph reflects the date of admittance to the London Stock Exchange of Dixons Carphone, previously called Carphone
Warehouse Group plc.
105
HEAD_0 1st lineHEAD_0 2nd lineCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20
Remuneration Report —
Annual Remuneration Report continued
Group Chief Executive pay
The following table shows, over the same ten-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.
Year
2019/20
2018/19
2017/18
2017/18
2016/17
2015/16
2014/15
2014/15
2013/14
2013/14
2012/13
2011/12
2010/11
Alex Baldock(5)
Alex Baldock
Alex Baldock
Sebastian James
Sebastian James
Sebastian James
Sebastian James
Andrew Harrison
Andrew Harrison
Roger Taylor
Roger Taylor
Roger Taylor
Roger Taylor
CEO single
figure of
remuneration(1)
£’000
Annual
bonus
payout a gainst
maximum
%
Long-term incentive
vesting rates against
maximum opportunity
%
1,038
1,619
75
2,716(3)
1,795
1,616
1,687
420
679
159
958
474
1,193
0
58%(4)
0%
0%
83%
68%
100%
100%
54%
n/a
55%
0%(2)
82%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
(1)
(2)
(3)
(4)
(5)
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.
The single figure includes the taxable benefit relating to the waiving of the loan from the Dixons Share Plan award.
Alex Baldock voluntarily deferred 100% of his annual bonus into a share award, vesting two-years from grant.
As a result of Covid-19, Alex Baldock voluntarily agreed to a temporary 20% base pay reductions with effect from 5 April 2020 to 28 June
2020.
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. 85%) work for the UK & Ireland business and are bonused against the performance of
that business.
Salary and fees
(3)
Taxable benefits
Annual bonuses(4)
Group Chief
Executive
UK head office
employees
0%(1)
0%
-100%
1%(1)(2)
0%
-100%
(1)
(2)
(3)
(4)
A 2% base pay increase was applied for 2019/20 for the Group Chief Executive and UK head-office based staff, however the Chief Executive
and his direct reports voluntarily agreed to a temporary 20% base pay reductions with effect from 5 April 2020 to 28 June 2020.
Changes in salary relating to changes in roles and / or responsibilities have been excluded from the increase presented for the wider Group.
The percentage change in taxable benefits is considered to be 0% since there have been no material changes in Group benefits.
No bonus was paid out for 2019/20 for either the UK & Ireland or Group, due to the EBIT performance threshold not being met by the
business areas.
Relative importance of spend on pay
The following table sets out both the total cost of remuneration for the Group compared with adjusted EBIT and profits
distributed for 2019/20 and the prior year. Adjusted EBIT was chosen by the Committee as it is the most appropriate
measure of the Group’s performance. Adjusted EBIT is defined in the glossary on page 203.
106
HEAD_0 1st line continuedHEAD_0 2nd line continuedCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20
Dividends paid(1)
Adjusted EBIT
Total staff costs – continuing operations(2)
Average employee numbers – continuing operations(2)
(1) Extracted from note 24 to the Group financial statements.
(2) Extracted from note 4 to the Group financial statements.
(3) There were no share buybacks in 2018/19 or 2019/20.
2019/20
£million
78
194
1,123
2018/19
£million
116
363
Change %
-32.76%
-46.56%
1,170
-4.02%
Number
42,209
Number
Change %
42,990
-1.82%
CEO Pay Ratio
The legislation requires the publishing of the ratio of total remuneration of the Group Chief Executive to the 25th, 50th and
75th equivalent percentile of full-time equivalent colleagues.
The ratio is shown in the table below:
Financial Year
Methodology
P25 (Lower Quartile)
P50 (Median)
P75 (Upper Quartile)
2019/20
2018/19
Option A
Option A
54:1
79:1
48:1
65:1
37:1
50:1
Of the three calculation approaches available in the regulations, we have chosen Methodology A because we believe it to
be the most appropriate and robust way for the Company to calculate the ratio.
In determining the figures, the following should be noted:
– The single total figure of remuneration of our UK colleagues was calculated as at 30 April 2020 and ranked using
2019/20 P60 and P11D data, employer pension contributions and payments under the Company share schemes, in line
with the reporting regulations. P60 data was used as it also includes the value of any overtime payments made in the
year.
– The 2018/19 corporate bonus was excluded from the P60 figure as it related to earnings paid in respect of the prior year.
– Part time colleagues’ earnings have been annualised on a full-time equivalent basis.
– Joiners and leavers were excluded from the ranking.
– The 25th, 50th and 75th percentile colleagues’ single total figure of remuneration was then identified and compared to
the CEO pay, as shown in the single total figure of remuneration table on page 106.
The following table provides base salary and total remuneration information in respect of the 25th, 50th and 75th percentile
colleagues, on a full-time equivalent basis.
Financial Year
Remuneration
Group Chief Executive
P25 (Lower Quartile)
P50 (Median)
P75 (Upper Quartile)
2019/20
Base salary
Total remuneration
£850,455
£1,038,737
£19,206
£19,206
£20,202
£21,590
£26,704
£27,704
The Committee has confirmed that the ratio is consistent with the Company’s wider policies on colleague pay and reward,
taking into account a range of factors including market practice, experience and National Living Wage requirements.
Last year, the CEO pay ratio was disclosed on a voluntary basis. The pay ratio has improved since last year primarily
because there was no 2019/20 bonus received by the CEO this year.
Service agreements
Service contracts
The following table summarises key terms of the service contracts in place with the executive directors:
Alex Baldock
Jonny Mason
Date of contract
3 Apr 18
13 Aug 18
More details are set out in the Service agreements section of the report on pages 107 to 108.
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 Chair of the Board’s, Deputy Chair’s and non-executive directors’ services can
be terminated by either party, the Company or the director, giving not less than three months’ notice.
107
HEAD_0 1st lineHEAD_0 2nd lineCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20
Remuneration Report —
Annual Remuneration Report continued
The date of the letters of appointment are shown below:
Eileen Burbidge
Tony DeNunzio
Andrea Gisle Joosen
Lord Livingston of Parkhead
Fiona McBain
Gerry Murphy
Letters of appointment
1 Jan 19
16 Dec 15
6 Aug 14
16 Dec 15
1 Mar 17
6 Aug 14
More details are set out in the Service agreements section of the report on pages 107 to 108.
External directorships
The policy relating to external directorships is outlined in the Remuneration Policy. No Executive Director held external
directorships during 2019/20.
Leavers and joiners (audited information)
Full details were provided in last year’s Remuneration Report on the changes in executive directors that took place during
2018/19. No changes took place in 2019/20 and no payments.
Payments to Past Directors (audited information)
No payments were made to past directors during 2019/20.
Directors’ interests in LTIP (audited information)
Date of grant
At
27 April
2019
Awarded
in the
year
Lapsed or
forfeited in
the year
Exercised
in the
year
At
2 May 2020
Date from
which first
exercisable
Expiry of the
exercise period
Exercise
Price (p)
25 July 2019
25 July 2019
22 Jun 2018
3 Apr 2018
3 Apr 2018
— 1,737,530
506,490
—
—
1,197,182
—
455,641
—
989,078
25 July 2019
25 July 2019
13 Aug 2018
13 Aug 2018
13 Aug 2018
—
—
734,583
267,121
81,435
960,752
199,494
—
—
—
—
—
—
—
—
—
—
—
—
—
— 1,737,530
—
506,490
— 1,197,182
455,641
—
989,078
—
25 July 2022
25 July 2021
22 Jun 2021
3 Apr 2021
3 Apr 2021
25 July 2029
25 July 2029
22 Jun 2028
3 Apr 2028
3 Apr 2028
3,390,353
1,495,568
—
—
—
—
—
960,752
199,494
734,583
267,121
25 July 2022
25 July 2021
13 Aug 2021
13 Aug 2021
81,435 13 Aug 2021
25 July 2029
25 July 2029
13 Aug 2028
13 Aug 2028
13 Aug 2028
—
—
—
—
—
—
—
—
—
—
1,962,456
280,929
Alex Baldock
2016 LTIP
2018/19 DSBP
2016 LTIP
2016 LTIP
Section 9.4.2
Total (with performance
conditions)
Total (without
performance
conditions)
Jonny Mason
2016 LTIP
2018/19 DSBP
2016 LTIP
2016 LTIP
Section 9.4.2
Total (with performance
conditions)
Total (without
performance
conditions)
Directors’ interests in Sharesave (audited information)
Date of grant
Exercise
price
(p)
At
27 April
2019
Awarded in
the year
Lapsed or
cancelled in
the year
Exercised in
the year
At 2 May
2020
Date from
which first
exercisable
Expiry of
the exercise
period
Alex Baldock
Sharesave
10 Sep
2019
97.28
—
13,939
13,939
—
—
—
—
13,939
13,939
1 Oct
2024
1 Apr
2025
108
HEAD_0 1st line continuedHEAD_0 2nd line continuedCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20
Directors’ shareholding (audited information)
The Company share ownership guidelines are designed to encourage shareholding in the Company for executive directors.
The level of shareholding requirement for executive directors is 200% of base salary to be achieved five years from their
appointment date.
Beneficially owned shares (including any interests held by connected persons e.g. spouse) count towards the guidelines,
together with:
– unvested awards, on a ‘net-of-tax’ basis, granted under any deferred bonus arrangement or other plan/arrangement with
no post-grant performance conditions; and
– shares subject to an unexpired holding period (including any shares held under a vested but unexercised option), on a
‘net-of-tax’ basis and provided that no further performance targets must be met.
Details of directors’ interests in shares of the Company are shown in the following table:
27 April
2019
27 April
2019
Purchased or awarded in the year
2 May
2020
2 May
2020
Shares awarded
(without
performance
conditions)
Beneficially
owned shares
(including any
interests held
by connected
persons
Shares
Purchased in
year
Shares awarded
(without
performance
conditions)
Total beneficial
interests
under share
ownership
guidelines(9)
Total beneficial
share interests
as a
% of
salary(10)
Sharesave
Executive directors
Alex Baldock(1)(11)
Jonny Mason(2)(11)
989,078
81,435
225,533
100,000
150,000
75,000
506,490
199,494
13,939
1,176,889
322,909
97%
48%
Non-executive directors
Eileen Burbidge(3)
Tony DeNunzio(4)
Andrea Gisle Joosen(5)
Lord Livingston of
Parkhead(6)
Gerry Murphy(7)
Fiona McBain(8)
—
—
—
—
—
—
0
100,000
20,176
105,631
50,000
19,129
4,200
100,000
4,800
100,000
50,000
9,000
—
—
—
—
—
—
—
—
—
—
—
—
4,200
200,000
24,976
205,631
100,000
28,129
—
—
—
—
—
—
(1) Alex Baldock purchased 150,000 shares on 21 June 2019. The purchase price was £1.14 per share.
(2) Jonny Mason purchased 75,000 shares on 21 June 2019. The purchase price was £1.14 per share.
(3) Eileen Burbidge purchased 4,200 shares on 21 June 2019. The purchase price was £1.14 per share.
(4) Tony DeNunzio purchased 100,000 shares on 21 June 2019. The purchase price was £1.13 per share.
(5) Andrea Gisle Joosen purchased 4,800 shares on 21 June 2019. The purchase price was £1.14 per share.
(6) Lord Livingston of Parkhead purchased 100,000 shares on 21 June 2019. The purchase price was £1.14 per share.
(7) Gerry Murphy purchased 50,000 shares on 21 June 2019. The purchase price was £1.15 per share.
(8) Fiona McBain purchased 9,000 shares on 21 June 2019. The purchase price was £1.11 per share.
(9) This figure is calculated on a ‘net of tax and commission basis’, as appropriate.
(10) The percentage is based on base salary as at 2 May 2020 (before the 20% temporary reduction) and an average share price over the month
to 2 May 2020 of £0.7127.
(11) Executive directors have five years from their appointment date to reach their shareholding requirement of 200%.
There were no changes in the directors’ share interests between 2 May 2020 and the date of this Report.
Non-executive directors’ and Chair of the Board’s fees
The fees for the independent non-executive directors, including the Deputy Chair, 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 Chair of the Board 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.
109
HEAD_0 1st lineHEAD_0 2nd lineCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20
Remuneration Report —
Annual Remuneration Report continued
The fees were reviewed during 2019/20 and remain unchanged. The Chair of the Board and Deputy Chair receive all-
inclusive fees reflecting their duties. Other independent non-executive directors received a basic fee of £60,000 and
additional fees as set out in the table below for chairing or membership of committees.
Chair of the Board(1)
Deputy Chair(2)
Chair of Audit Committee(3)
Member of Audit Committee
Member of Nominations Committee
Member of Remuneration Committee
2019/20
£’000(4)
2018/19
£’000
300
140
15
5
5
5
300
140
15
5
5
5
(1) The Chair of the Board’s fee includes Chairship of the Nominations Committee.
(2)
The Deputy Chair’s fee includes the Senior Independent Director, Chairship of the Remuneration Committee, and membership of the
Nominations Committee fees.
(3) The Chair of the Audit Committee fee includes fees for attending the board meetings of the two main operating subsidiaries.
(4) Due to the impact of Covid-19, all non-executive directors agreed to a temporary 20% reduction in fees with effect from 5 April 2020 to
28 June 2020. The figures represented do not reflect this 20% reduction, as it is temporary in nature.
How the Remuneration Policy will be applied in 2020/21
Executive directors
i) Base Salary
The following salaries will apply during the 2020/21 financial year:
Current directors
Alex Baldock
Jonny Mason
Salary at
2 May 2020
£’000(1)
Increase in salary in
2020/21
£’000
Salary at 1 August 2020
£’000
867
479
0
0
867
479
(1)
Due to the impact of Covid-19, the executive directors agreed to a temporary 20% reduction in fees with effect from 5 April 2020 to 28 June
2020. The figures represented do not reflect this 20% reduction, as it is temporary in nature.
ii) Pension Contributions
Company pension contributions or allowance in lieu of 10% of base salary will be paid. The Committee is also mindful
of investor expectations regarding pension contribution rates and is exploring ways to achieve alignment of the pension
contributions for the current executive directors with those of the wider workforce.
iii) Annual performance bonus
The maximum annual bonus for 2020/21 will be 150% of base salary. Measures are selected to reflect the Group’s key
objectives and for 2020/21 the bonus will include a clawback facility in order to demonstrate the Company’s objective to
reinforce a culture of ‘Treating Customers Fairly’. A minimum EBIT threshold must be achieved before any bonus is paid
out. One-third of any bonus earned will be deferred into shares for two years after payment. The Committee recognises
that significant uncertainties remain as the country (and therefore the Company) moves out of lockdown, and therefore
will review the bonus position as the year progresses, using its overriding discretion, if appropriate, in a manner that
recognises the context of the business and shareholder experience, but maintains the incentive effective necessary to spur
our recovery. The Committee will also use its discretion when reviewing bonus pay outs should it be demonstrated that a
windfall gain has been received as a result of the use of any government subsidies received during the Covid-19 period.
The Committee feels that specific targets relating to the 2020/21 bonus scheme are 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.
The performance metrics and their weightings for 2020/21 are shown in the table below:
Adjusted EBIT
Average net debt
Customer Net Promoter Score
Employee engagement
Weighting (as a percentage of
maximum bonus opportunity
50%
20%
15%
15%
Recovery and withholding provisions apply for material misstatement, misconduct, calculation error, and reputational
damage and corporate failure, enabling performance adjustments and / or recovery of sums already paid. These provisions
will apply for up to three years after payment.
110
HEAD_0 1st line continuedHEAD_0 2nd line continuedCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20
iv) LTIP
Awards will be made later this year under the 2016 Long Term Incentive Plan. The normal level of awards, following the
change in Policy in 2019, is 250% of salary for each of the executive directors. However, the Committee has considered
carefully whether it is appropriate to grant this full amount and concluded it is not; rather awards will be made at 200% of
salary, a 20% reduction on the normal level.
In reaching this conclusion, the Committee weighed several competing considerations. Since last year’s LTIP awards were
made the Company’s share price has fallen from £1.22 to around 87p at the time this year’s award was determined on
13 July 2020. Ordinarily, based on investors’ guidance, this would trigger calls for awards to be scaled back. However,
immediately prior to the onset of the Covid-19 pandemic, the share price had risen to around £1.42, an increase of over
16%. This is relevant since guidance from several investor bodies including the Investment Association is that share price
falls related solely to Covid-19 should not necessarily trigger scale-back of awards so long as the Committee monitors
the eventual vesting and is prepared to adjust for windfall gains. On the other hand, the Committee was conscious of the
context of the 2019 AGM vote on remuneration, in which some shareholders voted against the remuneration report as a
result of the 2019 LTIP awards not having been scaled back.
In our judgement, proceeding with a full award would have ignored this context and shareholders’ recent experience.
Equally, to have granted a number of shares with reference to the share price in 2018 and based on a share price
depressed as a result of Covid-19 would have been punitive. While wishing to respond appropriately to shareholder
concerns, we kept in mind the need to continue to reward and motivate an executive team that is continuing to make
excellent progress on a major transformation programme while navigating unprecedented external challenges.
We believe that a scale back of 20% in award size strikes an appropriate balance between these considerations. The
number of shares to be awarded was set as a fixed number of shares on 13 July 2020, based on 200% of the executives’
respective salaries and the closing share price on 10 July 2020; the Board retains the flexibility to make adjustments if the
share price moves significantly between the 10 July 2020 and the actual award date; awards will be made within six weeks
of the announcement of our full-year results.
In light of the evolving external environment, we will set the targets for this award later than normal to allow a clearer
picture to emerge on our emergence from lock-down and to gauge the market expectation of the long-term performance of
the business. Full details of these targets will be disclosed when the awards are made.
Awards will be subject to recovery and withholding provisions for material misstatement, misconduct, calculation error,
reputational damage and corporate failure, enabling performance adjustments and / or recovery of sums already paid.
These provisions will apply for up to three years after vesting. Any shares vesting as a result of these awards, net of tax
and national insurance, will be required to be held for a further two years post vesting.
Compliance
As required by the Regulations, resolutions to approve this Remuneration Report will be proposed at the 2020 Annual
General Meeting.
Tony DeNunzio CBE
Chair of the Remuneration Committee
14 July 2020
111
HEAD_0 1st lineHEAD_0 2nd lineCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20 Statement of Directors’ Responsibilities
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable
law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are
required to prepare the consolidated financial statements in accordance with IFRS 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
Alex Baldock
Group Chief Executive
14 July 2020
112
Jonny Mason
Group Chief Financial Officer
14 July 2020
HEAD_0 1st lineCorporate GovernanceDixons Carphone plc Annual Report and Accounts 2019/20
Independent
Auditor’s Report
Independent
Auditor’s Report
Report on the audit of the financial statements
1. Opinion
In our opinion:
– the financial statements of Dixons Carphone plc (the ‘Company’) and its subsidiaries (the ‘Group’) give a true and fair
view of the state of the Group’s and of the Company’s affairs as at 2 May 2020 and of the Group’s loss for the 53 week
period then ended;
– the Group financial statements have been properly prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union;
– the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice, including Financial Reporting Standard 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.
We have audited the financial statements which 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 of the Group financial statements and notes C1 to C10 of the Company financial statements.
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 Company financial statements is applicable law and United Kingdom Accounting Standards, including
FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial
statements section of our report.
We are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as
applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. The non-audit services provided to the Group and Company for the year are disclosed in note 3 to the
financial statements. We confirm that the non-audit services prohibited by the FRC’s Ethical Standard were not provided to
the Group or the Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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Independent
Auditor’s Report continued
3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
– revenue recognition – valuation of UK network receivables;
– Carphone Warehouse restructuring;
– tax provisioning;
– the going concern basis of accounting; and
– impairment of UK&I Electricals goodwill, central assets and Company investments.
Last year we included a key audit matter in respect of the allocation of goodwill and
impairment in relation to the Mobile and Electricals UK & Ireland (UK&I) groups of cash
generating units (CGUs). The allocation of goodwill in relation to the Mobile and Electricals
UK&I groups of CGUs was a one-off matter triggered by the change in Operating Segments
in the previous financial year. All goodwill allocated to the Mobile group of CGUs was
impaired in the previous financial year. Our key audit matter has been revised for this year
to be in respect of impairment of the UK&I Electricals goodwill, central assets and Company
investments.
Last year we included a key audit matter in respect of the IT infrastructure environment.
Management has taken appropriate remedial action to address the most significant findings
identified by our evaluation of the Group’s controls over certain information systems. As a
result, this matter no longer reflects an area requiring a significant proportion of our audit
effort, and therefore we no longer consider this to be a key audit matter.
Following the Group’s announcement of the restructuring of the Carphone Warehouse
business on the 17 March 2020, we have identified an additional key audit matter in the
current year. This has been identified due to the judgement required in determining the
valuation of the provisions associated with the restructuring.
Due to the impact of the Covid-19 pandemic, the level of audit effort, judgement and
complexity in the area of going concern has significantly increased. Accordingly, this is a key
audit matter in the current year.
The materiality that we used for the Group financial statements was £9.5m which was
determined on the basis of considering a number of different metrics used by investors and
other readers of the financial statements. These included:
– adjusted profit before tax;
– total assets; and
– revenue.
Materiality
We have changed the basis on which we have determined materiality in the current period
to reflect the volatility in the results of the Group arising from the impact of Covid-19. For
further details refer to section 6 of this report.
Scoping
Our full scope audit procedures provided coverage at the Group’s key locations, being
the retail operations in the UK and Nordics, representing 94% of the Group’s revenue.
Significant changes in
our approach
We have identified the going concern basis of accounting and restructuring of the
Carphone Warehouse business as additional key audit matters as set out above.
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4. Conclusions relating to going concern, principal risks and viability statement
Going concern is the basis of
preparation of the financial statements
that assumes an entity will remain
in operation for a period of at least
12 months from the date of approval of
the financial statements.
We confirm that we have nothing material
to report, add or draw attention to in
respect of these matters.
4.1. Going concern
We have reviewed 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 and Company’s ability to
continue to do so over a period of at least twelve months from the date of
approval of the financial statements.
We considered as part of our risk assessment the nature of the Group, its
business model and related risks including where relevant the impact of
both the Covid-19 pandemic and Brexit, the requirements of the applicable
financial reporting framework and the system of internal control. We
evaluated the directors’ assessment of the Group’s ability to continue
as a going concern, including challenging the underlying data and key
assumptions used to make the assessment, and evaluated the directors’
plans for future actions in relation to their going concern assessment.
We are required to state whether we have anything material to add or draw
attention to in relation to that statement required by Listing Rule 9.8.6R(3)
and report if the statement is materially inconsistent with our knowledge
obtained in the audit.
Refer to section 5.2 for details of our work regarding going concern.
4.2. Principal risks and viability statement
Based solely on reading the directors’ statements and considering whether
they were consistent with the knowledge we obtained in the course of the
audit, including the knowledge obtained in the evaluation of the directors’
assessment of the Group’s and the Company’s ability to continue as a
going concern, we are required to state whether we have anything material
to add or draw attention to in relation to:
Viability means the ability of the Group
to continue over the time horizon
considered appropriate by the directors.
We confirm that we have nothing material
to report, add or draw attention to in
respect of these matters.
– the disclosures on pages 20-23 that describe the principal risks,
procedures to identify emerging risks, and an explanation of how these
are being managed or mitigated;
– the directors’ confirmation on page 112 that they have carried out
a robust assessment of the principal and emerging risks facing the
Group, including those that would threaten its business model, future
performance, solvency or liquidity; or
– the directors’ explanation on page 29 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.
We are also required to report whether the directors’ statement relating to
the prospects of the Group required by Listing Rule 9.8.6R(3) is materially
inconsistent with our knowledge obtained in the audit.
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Auditor’s Report continued
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall
audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
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.
5.1. Revenue recognition – valuation of UK network receivables
The Group sells mobile phone contracts on behalf of a number of mobile
operators. The valuation of gross network receivable and commission contract
assets (2 May 2020: £1,005m, 27 April 2019: £1,294m), 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
subject to significant management judgement.
Included within the gross value are contract assets of £546m (27 April 2019:
£702m). These are recognised where the performance obligations have been
met but the right to consideration from the customer is conditional on something
other than passage of time. The valuation is based on management’s estimate
of the extent to which it is highly probable that recognised revenue will not be
subject to a material reversal in the future.
The valuation of the expected receivable is determined by four key assumptions:
– the expected level of customer spend in excess of their current contracted
amount (known as out of bundle spend);
– the forecast customer default rate within the contract period;
– the forecast rate of customer renewals with the same network provider; and
– the expected customer behaviour beyond the initial contract period.
We have focused our risk related to the valuation of contract assets on the
determination of these four key assumptions for the largest operators with which
the Group has a relationship. Due to the level of judgement involved, we have
determined that there is potential for manipulation of this balance.
The value of these assumptions influences the level of network commission
revenue that the Group recognises. A change in these assumptions can also
lead to the adjustment of revenue that has been recognised in prior periods.
In determining these assumptions the Group considers historical activity by
customers and operators and makes an assessment as to how this activity
will change in the future. These future variations can be influenced by external
factors, including customer behaviour, operator behaviour and changes to
market regulations.
The downward revaluation of the opening network commission contract asset
was recognised as a reversal of revenue of £47m. The reversal of revenue
is related to a number of events or conditions that have changed since
the previous balance sheet date including the Group’s announcement of a
significant strategic change for the Carphone Warehouse business and the
impact of Covid-19 on the Group’s assessment of future expected consumer
behaviour as described in footnote iv in note 15.
Key audit matter description
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HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements 5.1. Revenue recognition – valuation of UK network receivables (continued)
As described in note 15, in determining the revenue to recognise the Group
applies a constraint to the total amount of commission that the Group will
receive over the life of the relationship between the customer and the operator.
This commission is recognised in full in the month of connection between
the consumer and the operator as the Group has completed its performance
obligation relating to connection. When estimating these future assumptions the
Group does so to the extent that it is highly probable that a significant reversal in
the amount of revenue recognised will not occur in a future period.
As described in note 1e to the Group financial statements, remeasurement of
prior period assumptions due to changes in consumer behaviour, or where more
recent information becomes available, are recognised as revenue in the income
statement. Any changes in prior period assumptions, and their consequential
impact on revenue, are eliminated from the Group’s adjusted profit before tax
which is a key alternative performance measure.
The key judgements and estimates involved are described in more detail in the
Audit Committee report on page 74, in the key sources of estimation uncertainty
disclosed in note 1t and in note 15 to the Group financial statements.
How the scope of our audit
responded to the key audit matter
We obtained an understanding of the senior management review control of the key
assumptions used to determine the UK network receivables balance.
We tested the valuation of revenue recognised through review of the contractual
arrangements and performed procedures to assess the reasonableness of the four
key assumptions. We challenged:
– the forecast customer spend assumptions by comparison to actual customer
spending data trends from the network operators and with reference to external
market data;
– the forecast customer default rate by comparison to the actual rates of default seen
in the latest data from the networks and with reference to default rates observed in
the most recent external market data;
– the forecast rate of customer renewals with the same network provider by
comparison to the latest renewals data from the network operators and with
reference to other external market data; and
– the expected customer behaviour beyond the initial contract period by comparison
to actual rates of customers continuing their contract after their fixed contract term
and with reference to external market data and analysis.
In considering the assumptions we analysed existing and forthcoming changes in
regulation and wider macro-economic environment. We considered whether these
could lead to behavioural changes which would impact the amount of revenue
recognised in the current year. Such changes could also risk the reversal of revenue
recognised in previous accounting periods and the recoverability of the receivable
on the balance sheet. Specifically, we considered expected behavioural changes
relating to the events described in footnote iv in note 15 and challenged the quantum
of constraint applied contract asset recognised at year end. We considered whether
management’s assumptions in respect of the impact of possible behavioural changes
and the resulting impact on the valuation of the UK network receivables balance
were reasonable. We considered whether the reversal of revenue recognised was
appropriate as a result of events occurring in the period.
We assessed the changes in assumptions in relation to the revenue recognised
for current year connections between consumers and operators, and in relation to
revenue recognised in previous accounting periods. In doing so we verified that the
amount of revenue recognised in each circumstance is consistent with the captions
disclosed in note 15. We assessed the disclosures relating to the treatment of out
of period revaluations as an adjusting item in the reconciliation of adjusted profit
before tax, a key alternative performance measure.
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Auditor’s Report continued
Key observations
We consider the treatment adopted in relation to the valuation of the UK network
commission receivable and the related assumptions applied by management to
be appropriate.
We agree that the disclosures relating to network commissions, summarised
in note 15, provide an appropriate understanding of the estimates taken by
management and how changes in these estimates have influenced the total
revenue recognised from network commissions in the year.
We consider that the reversal of revenue relating to prior periods is correctly
stated and relates to the factors stated in note 15, part iv.
5.2. The going concern basis of accounting
The consolidated financial statements have been prepared on the going concern
basis. Management has concluded that there are no material uncertainties which
may cast significant doubt over the Group’s and Company’s ability to continue
as a going concern for at least twelve months from the date of approval of the
financial statements.
In undertaking their assessment of going concern, which is supported by the
cash flows of the Group, management reviewed the forecast future performance
and anticipated cash flows. Management has updated their 2020/21 budget
and three year forecasts to take into account their estimate of the impact of the
Covid-19 pandemic and the financial support provided by the government to
the Group. As part of their assessment, management considered the financing
available to the Group, forecast compliance with the associated debt covenants
and potential cost saving actions that the Group could take.
At 2 May 2020, the Group had net cash and overdrafts of £120m and committed
facilities of £1,360m, of which £324m had been drawn down. These facilities
consist of three revolving credit facilities (£800m and £250m expiring in October
2022; and £266m expiring in April 2021) and a €50m term loan expiring in
October 2020. These facilities contain covenants relating to the Group’s
leverage and fixed charges cover ratios.
On 23 March 2020, the Group closed all its retail outlets in the UK. These started
to reopen, albeit on a restricted basis, from 15 June 2020. During this period the
Group’s primary sources of revenue were from the online business in the UK and
Greece, and from the Nordics business where the majority of the store estate
remained open through enacting strict social distancing measures. The impact
of the Covid-19 pandemic is described further on page 136.
The implications of Covid-19 are evolving and there is significant uncertainty in
respect of future potential financial impacts as a result. Should the impacts of
the pandemic on trading conditions be more prolonged or severe than those
currently considered by the Directors, the Group would need to implement
additional operational or financial measures. In particular, there is significant
judgement in managements’ assessment of the reductions in cash inflows, the
risk of further government restrictions in the future, the impact of mitigations
initiated by the Group and compliance with the conditions of the Group’s facility
arrangements.
Due to the impact of the pandemic there is significantly more judgement applied
in developing short-term cash flow forecasts, particularly from the UK store
estate, and in assessing the long-term impacts of the pandemic on consumer
spending in all territories.
Key audit matter description
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Management has considered a range of scenarios in assessing the impact
of Covid-19 as detailed on page 136, which includes a reverse stress test
of assumptions that would need to occur for the Group to require additional
sources of financing. The scenarios considered by management primarily model
an impact on forecast revenue and operating profit margin against their initial
budget, the impact of cost savings primarily related to the transformation of
the Mobile business, and mitigations initiated by the Group. Full details of the
scenarios applied by management are set out in detail on page 136.
Taking into account the sensitivities, management has concluded that the Group
and Company have adequate resources to continue in operational existence for
the foreseeable future and they continue to adopt the going concern basis of
accounting in preparing the annual financial statements.
We have identified a key audit matter related to the going concern basis of
accounting as a result of the judgement required to conclude there is not a
material uncertainty related to going concern. The key audit matter is pinpointed
to the assumptions and mitigations to which the fixed charge cover ratio
covenant is most sensitive to. This reflects that this covenant is the most
sensitive to downside assumptions in forecast trading performance.
Further details of the Directors’ assessment are included within the Strategic
Report on pages 2 to 30, the Audit Committee Report on page 71 to 79 and in
note 1a to the financial statements.
How the scope of our audit
responded to the key audit matter
In responding to the identified key audit matter we completed the following audit
procedures:
– obtained an understanding of key controls over management’s going
concern models, including the review of the inputs and assumptions used
in those models and evaluated whether such controls had been effectively
implemented;
– tested the accuracy of management’s models, including agreement to the
most recent board approved budgets and forecasts which included the
impact of Covid-19;
– we challenged the key assumptions of these forecasts by:
–
reading analyst reports, industry data and other external information and
comparing these with management’s estimates;
– comparing forecast sales with the Group’s performance during the
period of closure due to the initial Covid-19 pandemic. This included
the performance of the online operations of the business during March,
April and May 2020 while the Group’s UK store estate was closed and
performance of the online operations and the stores once the estate
reopened in June 2020. We also challenged the future performance of the
UK store estate with reference to the performance of the Nordics business
segment which did not close, and the post re-opening trading in Ireland
and Greece;
– considering the forecast revenue from the Nordics business segment with
reference to its performance throughout March to May 2020;
– challenging management’s assessment of the impact of mitigations
initiated by the Group to reduce costs and manage cash flows;
– understanding the level of further mitigations available to the Group
beyond those included within the forecast. This included challenging the
extent to which these mitigations are within the control of management
against historical financial information and costs included in the
management’s underlying forecasts;
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Auditor’s Report continued
5.2. The going concern basis of accounting (continued)
– assessed the impact of reasonably possible downside scenarios on the
Group’s funding position, including requesting the Directors to perform
additional sensitivity analysis to reflect a more severe or prolonged period
of uncertainty. This included an assessment of the likelihood of the ‘reverse
stress test’ scenario;
– reviewed the basis of the calculation per the loan agreement to the calculation
that management performed for determining the forecast fixed charge cover
ratio covenant at each covenant measurement point;
– reviewed correspondence relating to the availability of the Group’s financing
arrangements, including the reduction in the hurdle rate for assessing
covenant compliance for October 2020 obtained by the Group in relation to its
revolving credit facilities. We also reviewed the Group’s covenant compliance
over the forecast period and challenged whether the forecast covenant
calculations were in accordance with the specified terms of the facility
agreements and included all appropriate revenue and costs;
– assessed the accuracy of the forecast fixed charges included in
management’s forecast compliance with the fixed charges cover ratio
covenant; and
– assessed the sufficiency of the Group’s disclosure concerning the going
concern basis and uncertainties arising.
Management’s forecasts, reasonably possible downside scenarios and reverse
stress test, indicate that the Group has sufficient financial resources over the
going concern period.
We are satisfied with management’s conclusion that there are no material
uncertainties over the Group and Company’s ability to continue as a going
concern.
We reviewed the disclosures prepared by the Directors set out on pages 135 to
137 and consider them to be appropriate.
Key observations
5.3. Carphone Warehouse Restructuring
Key audit matter description
120
Following the announcement of the closure of all standalone Carphone
Warehouse stores, we identified a key audit matter in relation to the valuation
of restructuring provisions. Impairment of IFRS 16 right of use assets as a
result of the closure of the Carphone Warehouse property estate totals £32m.
Additionally, Carphone Warehouse related restructuring provisions form a
significant part of the total reorganisation and property provisions disclosed in
note 21. The total reorganisation and property provisions held at 2 May 2020 are
£25m and £40m respectively. Accounting for these provisions is complex and
involves management making a number of forward-looking estimates such as
future redundancy costs, property-related costs and IT costs.
Furthermore, there is incentive for management to inappropriately identify costs
as relating to the restructuring of the Carphone Warehouse business, as these will
be treated as an adjusting item which directly impacts the value of adjusted profit
before tax which is a key metric for the Group. Therefore we have also pinpointed
our key audit matter to the classification of costs related to the restructuring.
Due to the incentive for management to inappropriately identify costs as relating
to the restructuring of the Carphone Warehouse business, we have determined
that there is potential for manipulation through the misleading presentation of
the costs associated with this restructuring programme.
Further information in this area is discussed in note 21 to the financial
statements, in the Audit Committee report and in section A5 of the alternative
performance measures (APMs) appendix to the Annual Report.
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements 5.3. Carphone Warehouse Restructuring (continued)
How the scope of our audit
responded to the key audit matter
We obtained an understanding of the senior management review control of the
valuation of the restructuring provisions and which costs were determined to
relate to restructuring of the Carphone Warehouse business.
We obtained management’s estimation of the total costs associated with
the restructure. For each component of the provision we have performed
procedures to assess, based on current facts and circumstances, whether
the estimates made by management are appropriate. In order to assess
the valuation of the individual elements of the provision we assessed the
completeness and accuracy of the data used by management. This included
agreeing amounts to payslips, agreeing to actual property costs incurred and
challenging whether the allocated IT costs were specific to the restructuring of
the business.
We challenged management on the classification of adjusted items attributed to
the Carphone Warehouse restructuring against the Group’s accounting policy,
as set out in the APMs appendix to the Annual Report.
Key observations
We concur with the amounts recognised in relation to the Carphone Warehouse
restructuring provisions.
We agree that the related adjusted items included in management’s
reconciliation of adjusted profit before tax, a key alternative performance
measure, are appropriately disclosed as being in respect of the Carphone
Warehouse restructuring.
5.4. Tax Provisioning
Key audit matter description
How the scope of our audit
responded to the key audit matter
The nature of the Group’s operations and related transactions can give
rise to uncertain tax treatments, thereby requiring the use of estimates and
assumptions which may be subsequently challenged by the relevant tax
authorities. In some instances the Group has recognised a provision in relation
to certain historical treatments. Additionally, the Group has disclosed a
contingent liability of £220m in relation to uncertain tax positions, excluding any
penalties and interest, as set out in note 31 and note 1t.
Our key audit matter is focused on the valuation of the provision in respect
of the two largest exposures in the UK, and completeness of the disclosed
potential range of tax exposures, based on the status of discussions with HMRC
in respect of certain open enquiries arising from pre-merger legacy corporate
transactions in the Carphone Warehouse group.
Further information in this area is discussed in the Audit Committee report, in the
key sources of estimation uncertainty disclosed in note 1t and in note 31 to the
Group financial statements.
We utilised internal tax specialists to evaluate and test management’s
assumptions in respect of these tax-related provisions, including assessment
against local tax legislation and review of supporting documentation. In
assessing the provisions and disclosures 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 and
legal counsel which management has utilised in calculating the provisions.
Our specialists also held discussions with, and assessed the competency,
capabilities and objectivity of, management’s external advisors in determining
the extent of any amount that could become payable.
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Auditor’s Report continued
5.4. Tax Provisioning (continued)
Key observations
We concur with the amounts recognised and amount disclosed as a contingent
liability in relation to tax provisioning for these certain open matters, and
believe that management’s provisioning methodology includes a reasonable
consideration of all uncertain positions.
5.5 Impairment of UK&I Electricals goodwill, central assets and Company investments
Key audit matter description
In light of the impact of Covid-19, there is a heightened risk of impairment in
respect of the UK&I Electricals goodwill of £1,840m, allocable central assets and
Company investments in subsidiaries of £2,670m.
£1,840m of goodwill is reviewed by management for impairment within the UK&I
Electricals group of cash generating units (CGUs). As set out in note 8b to the
Group financial statements, management assess the recoverable amount of the
group of CGUs by calculating its value in use using projections covering a five-
year period.
There is judgement required by management in determining their forecasts,
particularly in respect of the later and terminal years of their five-year period
projections.
As disclosed in note 8 we note that a reasonably possible change in
management’s forecast annual operating profit by the end of their Strategic Plan
forecasts in 2023/24 would result in headroom of the UK&I combined groups
of CGUs being eroded to nil. We note there is uncertainty in the assumptions
underlying these forecasts, particularly in respect of forecast operating profit.
Management has included a key source of estimation uncertainty in note 1t, and
provided associated sensitivity disclosures in respect of the long term operating
profit of the UK&I Electricals group of CGUs as set out in note 8.
Management has reviewed the recoverability of the investment in subsidiaries
held by the Company at 2 May 2020 by comparing to the total value in use
of their forecasts for the Group. As stated in note C4, as at 2 May 2020,
management’s forecasts for the Group value the business significantly higher
than the valuation implied by the Group’s market capitalisation.
Further information in this area is discussed in the Audit Committee report on
page 75 and in note 8 to the Group financial statements.
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How the scope of our audit
responded to the key audit matter
We have completed the following procedures:
– obtained an understanding of key controls relating to the review and approval
of the impairment review and evaluated whether such controls had been
effectively implemented;
– tested the mechanical accuracy of the model and cash flow forecasts and
assessed whether the methodology used in determining the recoverable
amount is consistent with IAS 36;
– challenged the key assumptions used by management in their impairment
review through comparison to historical performance and external evidence.
In particular, we challenged management in respect of their forecast
improvement in operating profit. We assessed this by:
– considering the extent to which the possible effects of Covid-19 should
be included in the impairment models and assessing the impact of the
pandemic with reference to the recent performance of the Group while the
store estate was closed and subsequent to the reopening of stores in key
territories;
– challenging management on the overall valuation of their forecasts by
benchmarking the minimum EBIT multiple valuation required to support
the carrying value of assets against the EBIT multiple of comparator
companies;
– considering the reasonableness of management’s short term cash flow
forecasts, including cost savings related to the transformation of the
Mobile business that the Group expects to achieve, which form a key
part of management’s value in use model used to derive the recoverable
amount of the group of CGUs. We assessed whether the Group was
committed to these plans to the extent that the cost savings can be
included in an impairment assessment under IAS 36; and
– evaluating management’s assessment of the sensitivity to forecast
operating profit margin required to indicate an impairment. We compared
the breakeven operating profit margin to the margins achieved by
comparator companies;
– engaged our internal valuation specialist to assess the appropriateness of the
discount rate;
– benchmarked the long term growth rates to applicable macro-economic and
market data;
– challenged management’s rationale for the premium of the net assets of the
Group and Company above the market capitalisation of the Group;
– assessed the completeness of assets being included in the asset base and
the appropriateness of any liability balances included by management;
– evaluated management’s assessment of assets which cannot be allocated on
a reasonable and consistent basis to the UK&I Electricals group of CGUs; and
– we assessed the completeness and accuracy of disclosures included in note
1t and 8 against the requirements of IAS 1 and IAS 36 respectively.
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Auditor’s Report continued
5.5 Impairment of UK&I Electricals goodwill, central assets and Company investments (continued)
Key observations
We considered that the related disclosures in note 1t, and associated sensitivity
disclosures in note 8, appropriately summarise the uncertainties associated with
this assumption. We concur with management’s conclusion that no impairment
of the goodwill or central assets allocated to the UK&I Electricals group of CGUs
is required.
We concur with management’s conclusion that no impairment of the Company
investments is required.
6. Our application of materiality
6.1. 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:
Materiality
£9.5m (2018/19: £12.4m)
£9.0m (2018/19: £11.7m)
Consolidated financial statements
Company financial statements
Company materiality equates to 0.33%
of net assets, which is capped at 95%
of group materiality.
Net assets was selected as an
appropriate benchmark for determining
materiality, as the Company acts as a
holding company.
Basis for determining materiality
We considered the following metrics:
– Adjusted profit before tax
– Total assets
– Revenue
Using professional judgement we
determined materiality to be £9.5m.
In the prior year, materiality was
determined on the basis of 5% of
adjusted profit before tax, taking into
account the amortisation of acquisition
intangibles and pension finance costs
due to their recurring nature.
In determining our benchmark for
materiality we considered a number
of different metrics used by investors
and other readers of the financial
statements.
This approach is a change from the
prior year to reflect the volatility in the
results of the Group arising from the
impact of Covid-19.
Materiality for the current year
represents 7.5% of adjusted profit
before tax (2018/19: 4.1%), 0.12%
of total assets (2018/19: 0.16%) and
0.09% of revenue (2018/19: 0.12%).
Rationale for the benchmark applied
124
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements 6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected
and undetected misstatements exceed the materiality for the financial statements as a whole. Group performance
materiality was set at 70% of group materiality for the 2019/20 audit (2018/19: 70%). In determining performance
materiality, we considered the following factors:
a.
The impact of Covid-19 and industry wide pressure on the financial statements, the judgements taken by management
and the associated disclosures;
b. Our risk assessment, including our assessment of the Group’s overall control environment and our reliance on controls
in the Nordics; and
c.
Our past experience of the audit, including the low value of profit impacting misstatements identified in prior periods
and management’s willingness to correct any misstatements identified.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £0.5m
(2018/19: £0.6m), 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.
7. An overview of the scope of our audit
7.1. Identification and scoping of components
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 94% of the Group’s revenue from
continuing operations (2018/19: 93%). 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 £5.7m to
£6.7m (2018/19: £8.6m to £9.3m).
7.2. Our consideration of the control environment
Dixons Carphone plc is reliant on the effectiveness of a number of IT applications and controls to ensure that financial
transactions are processed and recorded completely and accurately.
UK control environment
The revenue earned from extended warranty service agreements with customers relies upon a single financial reporting
system, the general IT controls of which we found to be operating effectively. As a result, in the UK, we relied on the
operating effectiveness of controls over this operating cycle. We also tested and relied upon the operating effectiveness of
controls associated with the Dixons supplier funding operating cycle, as this does not rely upon automated controls.
Due to the IT deficiencies identified in prior years, we did not plan to rely on the effectiveness of the controls over other
operating cycles as these rely on automated controls.
As a result of the IT deficiencies identified in the prior and current years, we completed additional substantive procedures.
Whilst, for audit purposes, the additional procedures performed mitigated the risk presented by the deficiencies,
management is in the course of performing further stabilisation activities associated with the Group’s IT infrastructure.
General IT controls continue to be a focus area for management and the Audit Committee. Further information is set out in
the risk management and internal control section of the Audit Committee report on page 75.
Nordics control environment
In the Nordics, we relied upon controls across the following operating cycles: inventory, supplier funding, cash, property,
plant & equipment, trade payables, revenue and cost of goods sold.
We tested and relied upon the operating effectiveness of two finance systems. In assessing the general IT controls of these
systems, we identified some minor control deficiencies in both systems. We completed additional procedures to mitigate
the risk arising from these control deficiencies. As a result, where required, we relied upon the operating effectiveness of
these IT systems for our testing of the above operating cycles.
125
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements Independent
Auditor’s Report continued
7.3. Working with other auditors
The same audit team is responsible for both the Group and UK component audit work, incorporating the services of
Deloitte India for certain areas of the UK component audit work where these business processes are led by the Group’s
outsourced service provider in India.
The Group audit team engaged a component audit team from Deloitte Norway to perform an audit of the Nordics sub-
consolidation. The Group audit team held regular communication with the component auditor ahead of and during the year
end audit process. Oversight of the component audit team included reviewing the audit work of the component audit team
via video conferencing.
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.
8. Other information
The directors are responsible for the other information. The other information comprises the information included in the
annual report, other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether
there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on
the work we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact.
In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the other
information include where we conclude that:
– Fair, balanced and understandable – the statement given by the directors that they consider the annual report and
financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for
shareholders to assess the Group’s position and performance, business model and strategy, is materially inconsistent
with our knowledge obtained in the audit; or
– Audit committee reporting – the section describing the work of the audit committee does not appropriately address
matters communicated by us to the audit committee; or
– Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the directors’ statement
required under the Listing Rules relating to the Company’s compliance with the UK Corporate Governance Code
containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly
disclose a departure from a relevant provision of the UK Corporate Governance Code.
We have nothing to report in respect of these matters.
9. Responsibilities of directors
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, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Company’s ability to
continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Group or the Company or to cease operations, or have no
realistic alternative but to do so.
126
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements 10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
Details of the extent to which the audit was considered capable of detecting irregularities, including fraud and non-
compliance with laws and regulations are set out below.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and
then design and perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient
and appropriate to provide a basis for our opinion.
Identifying and assessing potential risks related to irregularities
11.1.
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance
with laws and regulations, we considered the following:
– the nature of the industry and sector, control environment and business performance including the design of the Group’s
remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets;
– results of our enquiries of management, internal audit and the audit committee about their own identification and
assessment of the risks of irregularities;
– any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures
relating to:
–
identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of
non-compliance;
– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged
fraud;
–
the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
– the valuation of management’s provision in respect of future customer compensation in relation to the mis-selling of
Geek Squad mobile phone insurance policies;
– the matters discussed among the audit engagement team including significant component audit teams and involving
relevant internal specialists, including tax, valuations, insurance, pensions, IT and industry specialists regarding how and
where fraud might occur in the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for
fraud and identified the greatest potential for fraud in the following areas: valuation of UK network receivables, the going
concern basis of accounting, Carphone Warehouse restructuring and supplier funding. In common with all audits under
ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on
provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures
in the financial statements. The key laws and regulations we considered in this context included the UK Companies Act,
Listing Rules, pensions legislation, tax legislation and FCA regulation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial
statements but compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty.
These included the Group’s health and safety, insurance selling and environmental regulations.
127
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements Independent
Auditor’s Report continued
Audit response to risks identified
11.2.
As a result of performing the above, we identified the valuation of UK network receivables, the going concern basis of
accounting and Carphone Warehouse restructuring as key audit matters related to the potential risk of fraud. The key audit
matters section of our report explains the matters in more detail and also describes the specific procedures we performed
in response to those key audit matters.
In addition to the above, our procedures to respond to risks identified included the following:
– reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with
provisions of relevant laws and regulations described as having a direct effect on the financial statements;
– assessing the valuation of UK&I Electricals supplier funding related accruals that require the most significant level of
management judgment by confirming a sample of items directly with the supplier;
– enquiring of management, the audit committee and external legal counsel concerning actual and potential litigation and
claims;
– performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;
– reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing
correspondence with HMRC; and
– in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries
and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a
potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal
course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members
including internal specialists and significant component audit teams, and remained alert to any indications of fraud or non-
compliance with laws and regulations throughout the audit.
Report on other legal and regulatory requirements
12. Opinions 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.
In our opinion, based on the work undertaken in the course of the audit:
– 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 Group and the Company and their environment obtained in the
course of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.
13. Matters on which we are required to report by exception
13.1.
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 Company, or returns adequate for our audit have not been
received from branches not visited by us; or
– the Company financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
128
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements Directors’ remuneration
13.2.
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 in respect of these matters.
14. Other matters
Auditor tenure
14.1.
Following the recommendation of the audit committee, we were appointed by the Board on 31 July 2003 to audit the
financial statements of the Group for the year ending 29 March 2003 and subsequent financial periods. The period of
total uninterrupted engagement as the Group’s auditor, including previous renewals and reappointments of the firm is 18
years, covering the years ending 2003 to 2020. The period of engagement as the Company’s auditor, following a group
restructuring, since being incorporated in 2009, is 10 years, covering the years ending 2011 to 2020.
Consistency of the audit report with the additional report to the audit committee
14.2.
Our audit opinion is consistent with the additional report to the audit committee we are required to provide in accordance
with ISAs (UK).
15. Use of our report
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.
Stephen Griggs (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
14 July 2020
129
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements Consolidated Income
Statement
Consolidated Income
Statement
Continuing operations
Revenue
Loss before interest and tax
Finance income
Finance costs
Net finance costs
Loss before tax
Income tax expense
Loss after tax – continuing operations
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
10,170
10,433
(28)
(223)
10
(122)
(112)
11
(47)
(36)
(140)
(259)
(21)
(161)
(52)
(311)
Note
2,3
2,3
5
6
Loss after tax – discontinued operations
25
(2)
(9)
Loss after tax for the period
Loss per share (pence)
Basic – continuing operations
Diluted – continuing operations
Basic – total
Diluted – total
7
(163)
(320)
(13.9) p
(13.9) p
(14.1) p
(14.1) p
(26.8) p
(26.8) p
(27.6) p
(27.6) p
130
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Consolidated
Statement of
Comprehensive Income
Consolidated Statement of
Comprehensive Income
Loss 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
Exchange loss arising on translation of foreign operations
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
– Overseas
Fair value through other comprehensive income financial assets
(Losses) / gains arising during the period
Tax on actuarial movements on defined benefit pension schemes
Other comprehensive expense for the period (taken to equity)
Total comprehensive expense for the period
Note
23
22
22
13
6
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
(163)
(320)
26
12
(39)
—
(1)
(3)
(1)
(8)
(39)
(51)
10
(19)
(30)
2
(37)
(128)
(1)
1
22
(106)
(52)
(143)
(215)
(463)
131
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Consolidated
Balance Sheet
Consolidated
Balance Sheet
Non-current assets
Goodwill
Intangible assets
Property, plant & equipment
Right-of-use assets*
Lease receivable*
Investments
Interests in joint ventures and associates
Trade and other receivables
Deferred tax assets
Current assets
Inventory
Lease receivable*
Trade and other receivables
Derivative assets
Assets held for sale
Cash and cash equivalents**
Total assets
Current liabilities
Trade and other payables
Derivative liabilities
Contingent consideration
Income tax payable*
Loans and other borrowings**
Lease liabilities*
Liabilities held for sale
Provisions*
Non-current liabilities
Trade and other payables
Contingent consideration
Loans and other borrowings
Lease liabilities*
Retirement benefit obligations
Deferred tax liabilities
Provisions
2 May
2020
£m
27 April
2019
(restated)
£m
28 April
2018
(restated)
£m
Note
2,803
469
240
1,114
4
10
—
294
259
5,193
970
1
831
76
—
660
2,538
7,731
(2,017)
(52)
(1)
(78)
(584)
(258)
—
(114)
(3,104)
(131)
(2)
(280)
(1,186)
(550)
(162)
(36)
(2,347)
(5,451)
2,280
2,840
464
276
—
—
18
—
387
282
4,267
1,156
—
1,039
18
—
665
2,878
7,145
(2,350)
(6)
(1)
(76)
(559)
(3)
—
(86)
(3,081)
(252)
(4)
(288)
(80)
(579)
(156)
(65)
(1,424)
(4,505)
2,640
3,088
478
394
—
—
17
1
507
240
4,725
1,145
—
1,154
27
17
1,383
3,726
8,451
(2,505)
(7)
(1)
(72)
(1,218)
(3)
(2)
(67)
(3,875)
(318)
(12)
(329)
(82)
(472)
(135)
(32)
(1,380)
(5,255)
3,196
8
9
10
11
12
13
15
6
14
12
15
26
16
17
26
18
19
20
21
17
18
19
20
22
6
21
23
Total liabilities
Net assets
Capital and reserves
Share capital
Share premium reserve
Accumulated profits***
Other reserves***
Equity attributable to equity holders of the parent company
*
1
2,263
1,610
(678)
3,196
During the period the Group has adopted IFRS 16: ‘Leases’ using the modified retrospective approach, as a result prior year comparative numbers
have not been restated. Lease liabilities for the year ended 27 April 2019 relate solely to finance lease obligations recognised in accordance with
IAS 17. See note 32 for details of transitional impacts.
Cash and cash equivalents and loans and other borrowings have been restated to meet the presentational requirements of IAS 32 as further
described in note 1. This has had no impact on net assets.
In order to provide better visibility of reserves, the Group has restated the comparative periods to reclassify certain reserves balances.
The Group has separately presented ‘other reserves’ for the first time in the period. This is to separately disclose the hedging, investment in own
shares, and investment revaluation reserves which were previously presented within accumulated profits. Other reserves also include the previously
disclosed translation and demerger reserves. These are described in detail and a full reconciliation of these reserves is provided in note 23.
1
2,263
791
(775)
2,280
1
2,263
1,089
(713)
2,640
**
***
The financial statements were approved by the directors on 14 July 2020 and signed on their behalf by:
Alex Baldock
Group Chief Executive
Company registration number: 7105905
132
Jonny Mason
Group Chief Financial Officer
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Consolidated
Statement of
Changes in Equity
Consolidated Statement of
Changes in Equity
At 28 April 2018*
Adjustment on initial application of IFRS 15
(net of tax)
Adjustment on initial application of IFRS 9
(net of tax)
Adjusted balance at 28 April 2018
Loss for the period
Other comprehensive income and expense recognised
directly in equity
Total comprehensive income and expense for the period
Amounts transferred to the carrying value of inventory
purchased during the year
Equity dividends
Net movement in relation to share schemes
At 27 April 2019
Adjustment on initial application of IFRS 16
Taxation on IFRS 16 transition adjustment
Adjusted balance at 27 April 2019
Loss for the period
Other comprehensive expense recognised
directly in equity
Total comprehensive income for the period
Amounts transferred to the carrying value of inventory
purchased during the year
Equity dividends
Net movement in relation to share scheme
Purchase of own shares
At 2 May 2020
Share
capital
£m
Share
premium
reserve
£m
Note
Other
reserves*
£m
Accumulated
profits
£m
Total equity
£m
1
2,263
(678)
1,610
3,196
—
—
1
—
—
—
—
—
—
1
—
—
1
—
—
—
—
—
—
—
1
—
—
2,263
—
—
—
—
—
—
2,263
—
—
2,263
—
—
—
—
—
—
—
—
—
(678)
—
(36)
(36)
1
—
—
(713)
—
—
(713)
—
(9)
(9)
(41)
—
—
(12)
4
(1)
4
(1)
1,613
(320)
3,199
(320)
(107)
(427)
(143)
(463)
—
(116)
19
1,089
(45)
8
1,052
(163)
1
(116)
19
2,640
(45)
8
2,603
(163)
(43)
(206)
(52)
(215)
—
(78)
23
—
(41)
(78)
23
(12)
2,263
(775)
791
2,280
24
32
32
24
*
In order to provide better visibility of reserves, the Group has restated the comparative periods to reclassify certain reserves balances. The
Group has separately presented ‘other reserves’ for the first time in the period. This is to separately disclose the hedging, investment in own
shares, and investment revaluation reserves which were previously presented within accumulated profits. Other reserves also include the
previously disclosed translation and demerger reserves. These are described in detail and a full reconciliation of these reserves is provided
in note 23.
133
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Consolidated Cash
Flow
Statement
Consolidated Cash Flow
Statement
Operating activities
Cash generated from operations*
Contributions to defined benefit pension scheme
Income tax paid
Net cash flows from operating activities
Investing activities
Net cash outflow arising from acquisitions
Proceeds from disposal of property, plant & equipment
Proceeds on sale of business
Acquisition of property, plant & equipment and other intangibles
Net cash flows from investing activities
Financing activities
Interest paid*
Capital repayment of lease liabilities*
Purchase of ordinary shares
Equity dividends paid
Drawdown / (repayment) of borrowings
Facility arrangement fees paid
Net cash flows from financing activities
Increase / (decrease) in cash and cash equivalents and bank overdrafts
Cash and cash equivalents and bank overdrafts at beginning of the period
Currency translation differences
Cash and cash equivalents and bank overdrafts at end of the period
Note
27
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
649
(46)
(20)
583
(3)
—
2
(191)
(192)
(106)
(219)
(12)
(78)
36
(4)
(383)
377
(46)
(45)
286
(1)
9
8
(166)
(150)
(23)
(8)
—
(116)
(61)
(1)
(209)
8
(73)
106
6
120
185
(6)
106
*
During the period the Group has adopted IFRS 16 using the modified retrospective approach, as a result prior year comparative numbers
have not been restated. For the year ended 27 April 2019 capital repayments on lease liabilities relate solely to finance leases recognised in
accordance with IAS 17. Prior period cash generated from operations includes lease rental expenses that fall within the scope of IFRS 16 in
the current period. The transitional impact is further described in note 32.
134
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements
Notes to the Group
Financial Statements
1 Accounting policies
a) Basis of preparation
Dixons Carphone plc (the Company) is a public company
limited by shares incorporated in the United Kingdom, which
is registered in England and Wales under the Companies
Act 2006.
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 Pound
Sterling, the functional currency of the Company based
on the Group’s primary economic environment, and on
the historical cost basis except for the revaluation of
certain financial instruments and defined benefit pension
obligations, as explained below. All amounts have been
rounded to the nearest £1m, unless otherwise stated.
The Group has adopted IFRS 16: ‘Leases’ effective for the
current financial year from 28 April 2019 using the modified
retrospective approach. Comparatives for the prior reporting
period have not been restated and continue to be reported
under IAS 17: ‘Leases’, as permitted under the specific
transitional provisions of IFRS 16. The reclassifications
and the adjustments arising from the new leasing standard
are therefore recognised in opening reserves as at 28 April
2019. Further details on the adoption and transitional
impacts of IFRS 16 are described in note 32.
Alternative performance measures (APMs)
In the prior year, the financial statements included
presentation of alternative performance measures in
addition to IFRS measures. In the current year, the financial
statements present only IFRS measures which are in line
with the basis of preparation disclosed above. The alternative
performance measures used by the group are included within
the glossary and definitions section of the Annual Report on
page 202. This includes further information on the definitions,
purpose, and reconciliation to IFRS measures.
Going concern
Going concern is the basis of preparation of the financial
statements that assumes an entity will remain in operation
for a period of at least 12 months from the date of
approval of the financial statements. The Group and
Company’s business activities, factors likely to affect future
development, performance and position, as well as the
principal risks are set out in the Strategic Report on pages
20 to 23. The Group and Company’s funding arrangements
and processes for managing its exposure to liquidity
risk are set out in notes 19 and 26. The Directors have a
reasonable expectation that the Group and Company have
adequate resources to continue in operational existence
for the foreseeable future and they continue to adopt the
going concern basis of accounting in preparing the annual
financial statements. The Directors have reached this
conclusion based on the following considerations.
Key judgements
The key judgement that the Directors have considered in
forming their conclusion is the potential impact of Covid-19
on future revenue and earnings. In relation to forecast
revenue the primary consideration is the likelihood and
future impact of a recurrence of Covid-19 which could result
in the closure of stores in the Group’s key markets. The
Directors have also considered the longer-term economic
outlook in the countries where the Group operates. In
forming their conclusion, the Directors have reviewed the
trading performance during the first lockdown period, which
varied across the countries where the Group operates,
between 18 March 2020 and 14 June 2020, the trading
performance since restrictions have been lifted in the
Group’s key markets and have considered the extent to
which the observed level of trading activity should influence
the trading forecasts over the lookout period, particularly in
light of the uncertain economic environment.
In forming their conclusions, Management have considered
the potential mitigating actions that the Group could
take to preserve liquidity and ensure compliance with the
Group’s financial covenants. In doing so, judgement has
been applied in determining whether such actions would
be reasonably possible to execute as well as the financial
impact of taking such actions.
Operational impact of the virus
Stores
– In line with Government regulations, the Group’s stores in
Greece closed on 18 March 2020 and all UK and Ireland
stores closed on 24 March 2020. Our Nordics stores
predominantly remained open throughout the period. Our
stores in Greece were then fully reopened between 11 -
18 May 2020, and our stores in UK and Ireland began to
reopen from 15 June 2020 and 18 May 2020 respectively.
– In our stores we have ensured colleague and customer
safety through measures including protective barriers
for cashiers, contactless payment, pre-paid pickups and
increased cleaning and hygiene actions.
Online
– Across the Group, the online sales channel remained
operational, and as described on page 8, the Group
benefitted from an increase in online activity. To ensure
delivery colleague safety, shift patterns were adjusted
to reduce potential congestion and rosters are designed
to keep colleagues in the same pairs and the same
vehicle wherever possible. Among many measures,
our colleagues are equipped with masks and full safety
equipment, and deliveries are done on a no-contact
basis. We ask customers to keep a safe distance from our
colleagues while they are delivering to, or working in or
near, their homes.
– Our distribution centres have introduced extensive
measures to keep our colleagues safe, including social
distancing in all areas, one-way systems, signage and
tannoy reminders, regular cleaning and sanitisation of all
frequently touched surfaces.
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Financial Statements
Notes to the Group
Financial Statements continued
1 Accounting policies continued
a) Basis of preparation continued
Head office and customer service
All UK contact centres and offices have enabled working
from home for all colleagues by providing laptops and
increasing VPN access. Our UK head office building
has been closed since 20 March 2020 with continuity of
operations maintained.
Mitigations implemented
In responding to the impact of the pandemic the Group
has initiated a number of mitigations that are relevant for
assessing cashflows during the going concern period:
Utilised Government cost support – We furloughed over
16,500 store, supply chain and support colleagues across
territories who were temporarily not working due to
Covid-19. All UK&I furloughed colleagues are paid at 80%
of their salary, with the Company making up any difference
beyond the Government subsidy limits. In 2019/20 the UK
job retention scheme combined with the UK business rates
suspension and International government support measures
lowered net operating costs by c.£30m. We expect these
measures to reduce net operating costs by c.£80m in
2020/21.
Reduced central costs - All Executive and Board members
took a temporary 20% pay reduction and other senior
leaders took a temporary 10% pay reduction, effective from
5 April to 28 June 2020, and non-essential expenditure was
stopped.
Reduced capital expenditure – The Group capital
expenditure in 2019/20 was £191m, slightly lower than
previous guidance of around £200m. Due to the delay
to transformation projects, we would expect 2020/21
expenditure to be closer to run rate of £175m than the
previously expected £240m. The Group has the ability to
control capital expenditure and will continue to evaluate the
right level for 2020/21 as the Covid-19 situation develops.
Streamlined working capital – We moved some of our rents
to monthly payments and, where offered, have accepted
extended payment terms from some of our large, global
suppliers. Our normal inventory commitment is 4-14 weeks
in advance, depending on product.
Delayed tax payments – At the end of 2019/20 the Group
had a cash benefit from Government backed tax payment
delays of c.£70m which will reverse through 2020/21. In
addition, UK VAT payments due between March and July
2020 will be deferred until March 2021.
Spread pension payments – The Group’s annual pension
contribution will now be paid in monthly instalments, instead
of an annual lump sum.
Not declared a final dividend – The Group paid an interim
dividend of 2.25p per share (£26m total) in January. The
Board has decided not to pay a final dividend for 2019/20.
Dividend payments will not be resumed at least until
our standby debt facilities have been cancelled. Given
the current uncertain environment, the Board will keep
the payment of dividends under review to establish the
appropriate time and level to recommence payment.
Modelling and potential future impact of Covid-19
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 recent
past experience. Given the global political and economic
uncertainty resulting from the Covid-19 pandemic, it is
difficult to estimate with precision the impact on the Groups
prospective financial performance. We have therefore
modelled a range of Covid-19 scenarios into our going
concern considerations.
The Directors have also modelled a ‘downside worst
case’ scenario which assumes that the Group’s stores are
required to shut in all territories in the event of a second
Covid-19 outbreak during our peak Christmas trading period
later in the year, with a gradual reopening throughout the
following two months. The scenario assumes Group sales
decrease by approximately £800m throughout the closure
and following two months. Throughout this second closure,
which we have modelled within our peak trading period,
we have assumed no government support across our
territories. This modelled ‘downside worst case’ scenario
is significantly worse than the initial Covid-19 outbreak
we have witnessed to date given our stores in the Nordics
markets did not close in this period. In this scenario once
the stores reopen this is followed by ongoing reduced sales
against pre Covid-19 levels for the remainder of the going
concern period across all of the Group’s key markets.
The scenario models a recessionary impact of 15% for
the UK&I and Greece markets, and 7% within the Nordics
markets over the remainder of the going concern 12 month
period. The scenario models approximately £1.4bn lower
sales over the 12 month going concern period compared
to a similar 12 month period of the pre-Covid-19 budget
for 2020/21. During this period, online in these territories
would continue operating at a level similar to that seen
during the first period of lockdown but would not include
any increase for recovery of store sales during the following
two month period, which is again a worse case than has
actually occurred during the first period of lockdown. This
‘downside worst case’ scenario includes a number of cost
savings and cash mitigations that are within the Group’s
control and would need to be implemented. Throughout this
‘downside worst case’ scenario the Group would not breach
any of their financing covenants and would not require any
additional sources of financing.
As a result of the uncertainties surrounding the forecasts
due to the Covid-19 pandemic, the Group has also
modelled a reverse stress test scenario. The reverse stress
test models the decline in sales that the Group would
be able to absorb before requiring additional sources of
financing in excess of those that are committed. Such a
scenario, and the sequence of events which could lead to it,
is considered to be remote.
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a) Basis of preparation continued
Financing
The Group has extended its committed debt facilities with
an additional £266m RCF and now has total committed
facilities in excess of £1,350m. At the year end the Group
had net debt of £284m and access to over £1bn of
unutilised committed facilities. The Group has a number of
financing facilities that contain covenants terms requiring
the Group to comply with certain financial covenants. The
financial covenants are tested semi-annually in line with our
October interim reporting and April year end reporting. The
covenants relate to fixed charge cover (1.75x) and leverage
(2.5x) ratios. These covenants are normally met with
significant headroom and are outside times of peak liquidity
demands for the Group which tends to be in February and
March following peak trading inventory purchases. As at
2 May 2020 the financial covenants were met. As a result
of the Covid-19 outbreak and the uncertainty caused, the
Group requested and received a reduction in the hurdle
rate for assessing covenant compliance for October 2020.
The additional £266m RCF expires in April 2021. The other
RCF’s totalling £1bn expire in October 2022 and the €50m
term loan expires in October 2020.
Under the ‘downside worst case’ Covid-19 scenario
as explained above, factoring in the cost savings and
mitigations within the Group’s control, the Group is forecast
to comply with all financial covenants throughout the going
concern period.
Going concern conclusion
The additional RCF and the reduction in the hurdle rate
for assessing covenant compliance agreed with the banks
combined with the other measures taken mean that, even
under the Covid-19 scenarios modelled (excluding the
reverse stress test), the business would continue to have
significant liquidity headroom on its existing facilities and
against the revolving credit facility financial covenants for
the going concern period. As a result, the Board believes
that the Group is well placed to manage its financing and
other significant risks satisfactorily and that the Group will
be able to operate within the level of its facilities for the
foreseeable future. For this reason, the Board considers
it appropriate for the Group to adopt the going concern
basis in preparing its financial statements. The long-term
impact of Covid-19 is uncertain and should the impacts of
the pandemic on trading conditions be more prolonged or
severe than what the Directors consider to be reasonably
possible, the Group would need to implement additional
operational or financial measures.
Restatement of prior periods
Within the period, it was determined that the Group’s cash
and overdrafts within notional cash pooling arrangements
did not meet the requirements for offsetting in accordance
with IAS 32: ‘Financial Instruments: Presentation’ and
cannot be presented net in the balance sheet. For
presentational purposes, amounts have therefore been
restated for the preceding period ended 27 April 2019 and
the beginning of the preceding period being 28 April 2018
in accordance with IAS 8: ‘Accounting Policies, Changes
in Accounting Policies and Errors’. The impact of this
change is to increase both cash and cash equivalents and
overdrafts within current loans and other borrowings for the
year ended 27 April 2019 by £540m (2017/18: £1,155m) in
the Group’s Consolidated balance sheet.
This has had no impact on net assets as seen on the face of
the Consolidated balance sheet.
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
Transactions denominated in foreign currencies are
translated to the Group’s functional currency using the
exchange rate at the date of the transaction. The Group
uses foreign exchange (‘FX’) forward contracts to hedge
material transactions denominated in foreign currencies, as
outlined in section (q).
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.
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.
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Financial Statements continued
1 Accounting policies continued
c) Foreign currency translation and transactions
continued
All other exchange differences are included in profit or loss
in the year in which they arise.
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
2020
1.14
11.71
12.18
1.26
Average
2019
1.14
10.96
11.80
1.30
2020
1.14
12.93
12.31
1.25
Closing
2019
1.16
11.23
12.29
1.29
d) Revenue and supplier income
Revenue
Revenue primarily comprises sales of goods and services
excluding sales taxes. Revenue is measured based on the
consideration to which the Group expects to be entitled
in a contract with a customer and excludes amounts
collected on behalf of third parties. The Group recognises
revenue when it transfers control of a product or service to
a customer. The following accounting policies are applied
to the principal revenue generating activities in which the
Group is engaged:
– network commission revenue is recognised at a point in
time on completion of the performance obligation under
the individual contract with the Mobile Network Operator
(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;
– revenue earned from the sale of customer support
agreements is recognised in full as each performance
obligation is satisfied under the contracts with the
customer. Where consideration is received in advance
of the performance of the obligations being satisfied, a
contract liability is recognised. Due to the cancellation
options and customer refund clauses, contract terms
have been assessed to either be monthly or a series of
day to day contracts with revenue recognised respectively
in the month to which payment relates, or on a ‘straight-
line’ basis;
– revenue arising on services (including delivery and
installation, product repairs and product support) is
recognised when the obligation to the customer is
fulfilled; and
– 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, there are no ongoing performance
obligations, and it is highly probable that there will not
be a material reversal of revenue. The Group recognises
a contract asset in relation to this revenue. Any amount
previously recognised as a contract asset is reclassified
to trade receivables at the point at which it is becomes
billable and is no longer conditioned on something other
than the passage of time. Revenue from the provision of
insurance administration services is recognised over the
life of the relevant policies when the Group’s performance
obligations are satisfied.
Income received from suppliers such as volume rebates
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.
Customer discount support: 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. Marketing income is recognised over the period
as set out in the specific supplier agreements and is
recognised as a reduction to the relevant expense line within
the income statement.
Supplier funding amounts that have been recognised and
not invoiced are shown within accrued income on the
balance sheet. Cash inflows for supplier funding received
are classified as operating cashflows, being part of the
variable margin on sales.
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.
Each connection made to an MNO’s network relates to an
individual consumer. The 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
at the point the individual consumer signs a contract with
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1 Accounting policies continued
e) Network commissions continued
the MNO. Consideration from the MNO becomes receivable
over the course of the contract between the MNO and the
consumer. A judgement associated with this recognition is
the unit of account used in measurement. As there is a large
population of homogeneous items, in measuring the amount
of revenue to recognise the Group has determined that the
number and value of consumers provided to each MNO
in any given month (a ‘cohort’) represents the best unit of
account.
The level of network commission earned is based on a
share of the monthly payments made by the consumer
to the MNO, including contractual monthly line rental
payments together with a share of ‘out-of-bundle’ spend,
spend after the contractual term, and amounts due from
customer upgrades performed directly by the network. The
total consideration receivable is determined by consumer
behaviour after the point of recognition. The transaction
price includes elements of variability and is therefore an
area of estimation.
The method of measuring the value of the revenue and
contract asset in the month of connection is to estimate all
future cash flows that will be received from the network and
discount these based on the expected timing of receipt.
A constrained estimate of 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.
Transaction price is estimated based on extensive historical
evidence obtained from the networks and an adjustment
is made for expected and possible changes in consumer
behaviour including as a result of regulatory changes
impacting the sector. The consideration for a cohort of
consumers is estimated by modelling the expected value of
the portfolio of individual sales. Revenue is only recognised
to the extent that it is highly probable that a significant
reversal in the amount of revenue recognised will not occur.
Management makes a quarterly, and the directors a twice-
yearly, assessment of this data. This is based on the best
estimate of expected future trends.
Network commission revenue recognised on fulfilment of
the service obligation results in a contract asset as the
amount that will ultimately be collected is variable based
on consumer behaviour . Over time, and dependent on
the future behaviour of the consumer, amounts initially
recognised as contract assets become payable by
the network to the Group and are transferred to trade
receivables.
Contract assets are measured at present value.
Assumptions are therefore required, particularly in relation
to levels of consumer default within the contract period,
expected levels of consumer spend, and consumer
behaviour beyond the initial contract period.
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 as revenue
in the income statement.
In contracts in which the consideration for the transfer of
services to customers is conditional on something other
than the passage of time, these amounts are accounted
for as a contract asset within ‘trade and other receivables’
in the statement of financial position. Amounts receivable
that are no longer conditional on something other than the
passage of time are accounted for as trade receivables.
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.
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Financial Statements continued
1 Accounting policies continued
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 expensed 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 of 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
IFRS 16 – For the year ended 2 May 2020
The Group has adopted IFRS 16: ‘Leases’ effective for the
current financial year from 28 April 2019 using the modified
retrospective approach. Comparatives for the prior reporting
period have not been restated and continue to be reported
under IAS 17: ‘Leases’, as permitted under the specific
transitional provisions of IFRS 16. The reclassifications
and adjustments arising from the new leasing standard
are therefore recognised in opening reserves as at 28 April
2019. Further details on the adoption and transitional
impacts of IFRS 16 are described in note 32.
A lease is classified as a contract, or part of a contract, that
conveys the right to use an asset (the underlying asset) for a
period of time in exchange for consideration.
The Group as a lessor
The Group is a lessor predominantly when subleasing retail
store properties that are no longer open for trading. Leases
for which the Group is a lessor are classified as finance or
operating leases. Whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the
lessee, the contract is classified as a finance lease. All other
leases are classified as operating leases.
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.
Amounts due from lessees under finance leases are
recognised as receivables at the amount of the Group’s net
investment in the leases. Finance lease income is allocated
to accounting periods so as to reflect a constant periodic
rate of return on the Group’s net investment outstanding in
respect of the leases.
When the Group is an intermediate lessor, it accounts for
the head lease and the sublease as two separate contracts.
The sublease is classified as a finance or operating lease
by reference to the right-of-use asset arising from the head
lease. For the prior period, in accordance with IAS 17, the
intermediate lessor was required to classify the sublease by
reference to the underlying assets. Because of this change,
the Group has reclassified certain sublease agreements
as finance leases and recognised financial lease asset
receivables as outlined in note 12.
The Group as a lessee
The Group’s leasing activities predominantly relate to
retail store properties and distribution properties as well
as distribution vehicle fleet. The Group assesses whether
a contract is or contains a lease, at inception of the
contract. The Group recognises a right-of-use asset and
a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months
or less) and leases of low value assets (which comprise IT
equipment and small items of office furniture). For these
leases, the Group recognises the lease payments as an
operating expense on a straight-line basis over the term of
the lease with no corresponding right-of use asset.
Lease liabilities
The lease liability is initially measured at the present value of
the lease payments that are not paid at the commencement
date, discounted by using the Group’s weighted average
incremental borrowing rate and subsequently held at
amortised cost in accordance with IFRS 9.
Lease payments included in the measurement of the lease
liability comprise:
– Fixed lease payments (including in-substance fixed
payments), less any lease incentives receivable;
– Variable lease payments that depend on an index or
rate, initially measured using the index or rate at the
commencement date;
– The amount expected to be payable by the lessee under
residual value guarantees;
– The exercise price of purchase options, if the lessee is
reasonably certain to exercise the options; and
– Payments of penalties for terminating the lease, if the
lease term reflects the exercise of an option to terminate
the lease.
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i) Leases continued
The Group remeasures the lease liability (and makes a
corresponding adjustment to the related right-of-use asset)
whenever:
– The lease term has changed or there is a significant event
or change in circumstances resulting in a change in the
assessment of exercise of a purchase option, in which
case the lease liability is remeasured by discounting the
revised lease payments using a revised discount rate.
– The lease payments change due to changes in an index or
rate or a change in expected payment under a guaranteed
residual value, in which cases the lease liability is
remeasured by discounting the revised lease payments
using an unchanged discount rate (unless the lease
payments change is due to a change in a floating interest
rate, in which case a revised discount rate is used).
– A lease contract is modified and the lease modification
is not accounted for as a separate lease, in which case
the lease liability is remeasured based on the lease term
of the modified lease by discounting the revised lease
payments using a revised discount rate at the effective
date of the modification.
The Group did not make any such adjustments during the
periods presented.
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.
Right-of-use assets
The right-of-use assets comprise the initial measurement of
the corresponding lease liability, lease payments made at
or before the commencement day, less any lease incentives
received, any initial direct costs and any dilapidation costs.
They are subsequently measured at cost less accumulated
depreciation and impairment losses.
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.
Right-of-use assets are depreciated over the shorter period
of lease term and useful life of the underlying asset.
Right-of-use assets 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 as
further described in note 1m.
Variable rents that do not depend on an index or rate are
not included in the measurement of the lease liability and
the right-of-use asset. The related payments are recognised
as an expense in the period in which the event or condition
that triggers those payments occurs.
IAS 17 – For the comparative year ended 27 April 2019
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.
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
141
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements Notes to the Group
Financial Statements continued
This amortisation is recognised in adjusting items as an
administrative expense.
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 ten years, and is recorded in administrative expenses.
Intangible assets 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 intangible assets form part
of a separate CGU, such as a store or business unit,
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.
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.
1 Accounting policies continued
j) Taxation continued
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
the combination and held in the currency of the operations
to which the goodwill relates.
Goodwill is not amortised, but is assessed 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 or recoverable amount is 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:
Brands
7% – 20% per annum
Customer relationships
13% – 50% per annum
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m) Property, plant & equipment continued
Rates applied to different classes of property, plant &
equipment are as follows:
Land and buildings
1.7% – 4% per annum
Fixtures, fittings and equipment 10% – 33.3% per annum
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,
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
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 financial assets designated as at FVTOCI.
Financial assets comprise all items shown in notes 12, 13,
15 and 16 with the exception of prepayments and contract
assets.
When the Group recognises a financial asset, it classifies
it in accordance with IFRS 9. Trade receivables are initially
measured at their transaction price. Where there is a
significant financing component, trade and other receivables
are discounted at contract inception using a discount
rate that is at an arm’s length basis and which would be
reflected in a separate financing transaction between the
Group and the customer. All other financial instruments
(except for trade receivables) are initially measured at fair
value plus transaction costs that are directly attributable to
the acquisition or issue of the financial asset.
Cash and cash equivalents, trade and other receivables
(excluding derivative financial assets) and lease receivables
are classified as held at amortised cost. The Group has
elected to classify its investment in listed shares as FVTOCI,
recognising the movement in the investment’s fair value
in other comprehensive income. These are long-term
investments and the Group considers this classification to
be more relevant.
All of the Group’s assets are subject to impairments driven
by the expected credit loss (ECL) model as further stipulated
in note 15 and 26.
Financial assets are derecognised when the contractual
rights to the cash flows expire or the Group has transferred
the financial asset in a way that qualifies for derecognition in
accordance with IFRS 9.
o) 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.
p) 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.
Cash and cash equivalents include restricted cash which
predominantly comprises funds held by the Group’s
insurance businesses to cover regulatory reserve
requirements.
q) 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 17 to 20. 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,
cancelled or expires. In the event that the terms in which the
Group are contractually obliged are substantially modified,
the financial liability to which it relates is derecognised and
subsequently re-recognised on the modified terms.
Where the Group has the right and intention to offset in
relation to financial assets and liabilities under IAS 32, these
are presented on a net basis. See note 26 for a description
of the financial assets and liabilities presented on a net
basis.
Borrowings
Borrowings in the Group’s balance sheet represent
bank loans drawn under committed and uncommitted
facilities. 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.
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Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements Notes to the Group
Financial Statements continued
1 Accounting policies continued
q) Borrowings and other financial liabilities continued
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 IFRS 9, 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.
Contingent consideration
On initial recognition, contingent consideration is
measured using the income approach to estimate fair
value. Contingent consideration that does not qualify
as a measurement period adjustment is subsequently
remeasured to fair value at each reporting date with
changes in fair value recognised in profit or loss.
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 to fair value at each prevailing balance
sheet date and are recorded within assets or liabilities as
appropriate. 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 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.
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
144
statement in sales or cost of sales, to match the hedged
transaction. Amounts recognised in other comprehensive
income and accumulated in the cash flow hedge reserve
are recycled to the income statement, in the same line as
the recognised hedged item, 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
and recognised within finance costs.
Where hedged forecast transactions result in the recognition
of a non-financial asset or liability, the gains and losses
previously recognised and accumulated in the cash flow
hedge reserve are subsequently removed and included in
the initial cost of the non-financial asset or liability. Such
transfers will not affect other comprehensive income.
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 within finance costs.
r) Provisions
Provisions are recognised when a legal or constructive
obligation exists as a result of past events and it is probable
that an outflow of resources will be required to settle the
obligation and a reliable estimate can be made of the
amount of the obligation. Provisions are discounted where
the time value of money is considered to be material.
Provisions for onerous contracts are recognised when the
Group believes that the unavoidable costs of meeting or
exiting the contract exceed the economic benefits expected
to be received under the contract. Where the Group has
assets dedicated to the fulfilment of a contract that cannot
be redirected, an impairment loss is recognised before a
separate provision for an onerous contract.
A restructuring provision is recognised when the Group has
developed a detailed formal plan for the restructuring and
has raised a valid expectation in those affected that it will
carry out the restructuring by starting to implement the plan
or announcing its main features to those affected by it. The
measurement of a restructuring provision includes only the
direct expenditures arising from the restructuring, which
are those amounts that are both necessarily entailed by the
restructuring and not associated with the ongoing activities
of the entity.
All provisions are assessed by reference to the best
available information at the balance sheet date.
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements 1 Accounting policies continued
s) Government grants
Government grants are not recognised until there is
reasonable assurance that the Group will comply with the
conditions attaching to them and that the grants will be
received.
Government grants are recognised in profit or loss on
a systematic basis over the periods in which the Group
recognises as expenses the related costs for which the
grants are intended to compensate. Government grants
that are receivable as compensation for expenses or losses
already incurred or for the purpose of giving immediate
financial support to the Group with no future related costs
are recognised in profit or loss in the period in which they
become receivable.
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
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 inflation rates, discount rates and
member longevity. Such assumptions are based on actuarial
advice and are benchmarked against similar pension
schemes. Refer to note 22 for further information.
Revenue recognition – network commissions
For certain transactions with MNOs, the quantum of
commission receivable on mobile phone connections
depends on consumer behaviour after the point of sale.
This leads to a judgement over the unit of account for
measurement of the amounts arising from the MNO and
an estimate over the transaction price due to the variability
of revenue. A level of constraint is applied to the revenue
recognition to ensure revenue is only recognised when it is
highly probable there will not be a significant reversal. By
the nature of this constraint, applied in line with IFRS 15:
‘Revenue from Contracts with Customers’, it is possible
that additional revenue will be recognised in future periods
from performance obligations satisfied in prior periods. For
example, the network commission receivables are routinely
increased each year in line with RPI, however as part of the
variable revenue constraint, the Group does not include
this RPI estimate in the revenue recognised at point of sale.
For the year ended 2 May 2020, the revenue recognised
includes a value of £14m (2018/19: £13m) relating to the
application of RPI increases on end consumer contracts by
the respective MNOs relating to performance obligations
satisfied in prior periods. In addition to this, within the
current period, given the unprecedented nature of the
current Covid-19 pandemic and the potential impact on
consumer behaviour, a further constraint has been applied
to the network commissions receivable at year end. If
these risks do not transpire, it is reasonably possible that
additional revenue may be recognised in future periods
from performance obligations satisfied in prior periods of
between nil and £20m.
Further details of the estimations involved with network
commissions can be found at note 1e and a reconciliation
of the movements in the network commission receivables
within the year is included within note 15.
Impairment of non-financial assets
The group tests whether goodwill has suffered any
impairment on an annual basis based on the value of
the discounted future cash flows allocated to the group
of CGUs to which it is allocated. The methodology and
key assumptions used in assessing the carrying value
of goodwill are set out in note 8. The key assumptions
made for long term projections, sales and costs growth
rates, discount rate and the potential impact of Brexit and
Covid-19 all include an element of estimation that may
give rise to a difference between the value ascribed and
the actual outcomes. Due to the current Covid-19 global
pandemic, there is an increased level of risk and therefore a
key source of estimation uncertainty with the growth in sales
and growth in costs assumptions that drive the operating
profit forecasts and it is reasonably possible that a change
in these assumptions could lead to a material change in
the carrying value of goodwill specifically within the UK &
Ireland Electricals operating segment, where £1,840m of
goodwill is allocated, within the next financial year. Further
details of the key assumptions used and the sensitivity
analysis in respect of the recoverable amount of UK &
Ireland Electricals goodwill is disclosed in note 8.
Critical accounting judgements
Taxation
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. The
Group recognises a provision when it is probable that an
obligation to pay tax will crystallise as a result of a past
event. The quantum of provision recognised is based on
the best information available and has been assessed by
in-house tax specialists, and where appropriate third-party
taxation and legal advisers, and represents the Group’s
best estimate of the most likely outcome. 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. 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 (or changes in existing
provisions) assessed where necessary.
The Group has recognised provisions in relation to uncertain
tax positions of £83m at 2 May 2020 (2018/19: £98m). Due
145
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements Notes to the Group
Financial Statements continued
1 Accounting policies continued
t) Critical accounting judgements and key sources of
estimation uncertainty continued
to the nature of the provisions recorded, the timing of the
settlement of these amounts remains uncertain.
Furthermore, the Group is currently cooperating with HMRC
in relation to open tax enquiries arising from pre-merger
legacy corporate transactions in the Carphone Warehouse
group. One of the underlying pre-merger transactions
under enquiry is considered to have a “more likely than
not” chance of resulting in settlement. The Group therefore
determined, due to this level of risk, that a provision was
appropriate and this was recognised in the 2018/19 financial
statements. This enquiry is still open and the treatment
as a provision continues to be deemed appropriate, with
£39m (comprising both the amount of tax due on settlement
together with interest up to 2 May 2020) included within
the uncertain tax provisions balance explained above as at
2 May 2020. Refer to note 6 for further information.
In addition, the Group has a further open tax enquiry arising
from a separate pre-merger legacy corporate transaction.
Based on the strength of third-party legal advice it is not
considered “more likely than not” that this enquiry will
result in an economic outflow to the Group and therefore
no provision has been made. The potential range of tax
exposures relating to this enquiry is estimated to be
approximately £nil - £220m excluding interest and penalties.
Interest on the upper end of the range is approximately
£50m up to 2 May 2020. Penalties could range from nil
to 30% of the principal amount of any tax. This potential
outflow has been disclosed as a contingent liability within
note 31.
u) Recent accounting developments
In the current year, the Group has applied a number of
amendments to IFRS Standards and Interpretations issued
by the International Accounting Standards Board (IASB)
that are effective for the financial year beginning 28 April
2019. Their adoption has not had any material impact
on the disclosures or on the amounts reported in these
financial statements with the exception of IFRS 16: ‘Leases’
as discussed above and disclosed further in note 32. The
Group has considered the following standards whose
impact is not deemed to be material:
IFRIC 23: ‘Uncertainty over Income Tax Treatments’
Amendments to IFRS 9 Prepayment Features with Negative
Compensation
Amendments to IAS 28 Long-term Interests in Associates
and Joint Ventures
Annual Improvements to IFRS Standards 2015–2017 Cycle:
Amendments to IFRS 3: ‘Business Combinations’, IFRS 11:
‘Joint Arrangements’, IAS 12: ‘Income Taxes’ and IAS 23:
‘Borrowing Costs’
Amendments to IAS 19 Employee Benefits Plan
Amendment, Curtailment or Settlement
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:
IFRS 17: ‘Insurance Contracts’
IFRS 10 and IAS 28 (amendments) Sale or Contribution
of Assets between an Investor and its Associate or Joint
Venture
Amendments to IFRS 3 Definition of a business
Amendments to IAS 1 and IAS 8 Definition of material
Conceptual Framework Amendments to References to the
Conceptual Framework in IFRS Standards
Amendments to IFRS 9: ‘Financial Instruments’, IAS 39:
‘Financial Instruments: Recognition and Measurement’ and
IFRS 7: ‘Financial Instruments: Disclosures’ on interest rate
benchmark reform
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 operating and reportable segments have
therefore been identified as follows:
– UK & Ireland Electricals comprises the operations of
Currys PCWorld and the Dixons Travel business.
– UK & Ireland Mobile comprises the Carphone Warehouse,
iD Mobile and Simplify Digital businesses and the
Connected World Services B2B operations.
– Nordics operates in Norway, Sweden, Finland, Denmark
and Iceland.
– Greece, consisting of our ongoing operations in Greece.
UK & Ireland Electricals, UK & Ireland Mobile, Nordics and
Greece 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.
In accordance with IFRS 5, discontinued operations
are disclosed separately as a single amount within the
Group’s consolidated income statement after profit after
tax for continuing operations. Discontinued operations
are therefore excluded from the segmental analysis.
Further information on the Group’s operations classified as
discontinued is outlined in note 25.
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HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements 2 Segmental analysis continued
(a) Segmental results
External revenue
Inter-segmental revenue
Total revenue
Year ended 2 May 2020
UK &
Ireland
Electricals
£m
4,538
86
4,624
UK &
Ireland
Mobile
£m
1,589
98
1,687
Nordics
£m
Greece
£m
Eliminations
£m
Total
£m
3,573
—
3,573
470
—
470
— 10,170
—
(184)
(184)
10,170
Profit / (loss) before interest and tax
119
(282)
115
20
—
(28)
External revenue
Inter-segmental revenue
Total revenue
Year ended 27 April 2019
UK &
Ireland
Electricals
£m
4,475
79
4,554
UK & Ireland
Mobile
£m
1,998
90
2,088
Nordics
£m
3,501
—
3,501
Greece
£m
Eliminations
£m
Total
£m
459
—
459
— 10,433
—
(169)
(169)
10,433
Profit / (loss) before interest and tax
94
(438)
100
21
—
(223)
UK & Ireland Electricals
UK & Ireland Mobile
Nordics
Greece
Loss before interest and tax
Finance income
Finance costs
Loss before tax
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
119
(282)
115
20
(28)
10
(122)
(140)
94
(438)
100
21
(223)
11
(47)
(259)
No individual customer represents more than 10% of the Group’s revenue in the current or prior period.
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. Non-current assets exclude financial instruments and deferred tax assets.
Revenue
Non-current assets
Capital expenditure
Year ended 2 May 2020
UK
£m
5,865
3,184
111
Norway
£m
1,119
519
Sweden
£m
1,121
453
Other
£m
2,065
729
Total
£m
10,170
4,885
43
13
24
191
UK
£m
6,200
2,666
108
Norway
£m
1,111
429
24
Year ended 27 April 2019
Sweden
£m
1,081
349
Other
£m
Total
£m
2,041
489
10,433
3,933
14
20
166
147
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
3 Revenue and profit / (loss) before interest and taxation
Revenue
Cost of sales
Gross profit
Operating expenses
Loss before interest and tax
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
10,170
(8,318)
1,852
(1,880)
10,433
(8,330)
2,103
(2,326)
(28)
(223)
The Group’s disaggregated revenues recognised under ‘Revenue from Contracts with Customers’ in accordance with IFRS
15 relates to the following operating segments and revenue streams:
Sale of goods
Commission revenue
Support services revenue
Other services revenue
Other revenue
Total revenue
Sale of goods
Commission revenue
Support services revenue
Other services revenue
Other revenue
Total revenue
UK &
Ireland
Electricals
£m
4,147
5
285
97
4
4,538
UK &
Ireland
Mobile
£m
397
1,090
—
102
—
1,589
Year ended 2 May 2020
Nordics
£m
Greece
£m
3,218
268
30
57
—
3,573
446
1
17
6
—
470
Total
£m
8,208
1,364
332
262
4
10,170
Year ended 27 April 2019
UK & Ireland
Electricals
£m
UK & Ireland
Mobile
£m
Nordics
£m
Greece
£m
4,085
9
275
99
7
4,475
474
1,401
—
123
—
1,998
3,161
263
25
52
—
437
1
14
7
—
Total
£m
8,157
1,674
314
281
7
3,501
459
10,433
Revenue from support services relates predominantly to customer support agreements, while other services revenue
comprises delivery and installation, product repairs and product support.
148
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements
3 Revenue and profit / (loss) before interest and taxation continued
Profit / (loss) before interest and taxation for continuing operations is stated after charging / (crediting) the following:
Depreciation of property, plant & equipment
Impairment of property, plant & equipment
Depreciation of right-of-use assets*
Impairment of right-of-use assets*
Amortisation of acquisition intangibles
Impairment of acquisition intangibles
Amortisation of other intangibles
Impairment of other intangibles
Impairment of goodwill
Impairment of inventory
Net impairment on financial assets (see note 15)
Loss on disposal of property, plant & equipment
Cost of inventory recognised as an expense
Cash flow hedge amounts reclassified and reported in income statement
Short-term lease expense*
Low value lease expense*
Variable lease expense*
Rentals paid under operating leases*:
Non-contingent rent
Contingent rent
Rentals received under operating leases – subleases*
Income from sub-leasing right-of-use assets*
Government grant income
Net foreign exchange (gains) / losses
Share-based payments expense
Other employee costs (see note 4)
Restructuring costs**
Regulatory costs**
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
81
5
217
50
25
—
44
9
—
92
11
3
7,789
12
21
1
18
—
—
—
(1)
(20)
(2)
23
1,100
56
30
91
28
—
—
28
10
55
84
225
87
7
1
8,217
(19)
—
—
—
308
26
(2)
—
—
7
21
1,149
32
52
*
During the period the Group has adopted IFRS 16: ‘Leases’, which requires lease liabilities and corresponding right-of-use assets to be
recognised on the balance sheet. The Group has adopted IFRS 16 using the modified retrospective approach. As a result, prior year
comparative numbers have not been restated.
Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses and are depreciated over the
shorter period of lease term and useful life of the underlying asset.
Those lease liabilities that are classified as short-term and leases of low value continue to be recognised as operating expenses on a
straight-line basis over the term of the lease. This is further discussed in note 1i and the initial adoption is described in note 32.
** Regulatory costs and restructuring costs are further detailed within note A5 of the glossary.
149
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
3 Revenue and profit / (loss) before interest and taxation 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
Audit-related assurance services
Review of interim statement
Other assurance services
Total audit and audit-related assurance services
Tax compliance services
Total audit and non-audit fees
4 Employee costs and share-based payments
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
0.2
1.3
1.5
0.3
0.1
1.9
0.1
2.0
0.1
1.5
1.6
0.3
—
1.9
0.1
2.0
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
2 May
2020
£m
Year ended
27 April
2019
£m
949
117
34
1,100
23
1,123
999
120
30
1,149
21
1,170
Aggregate remuneration for discontinued operations are salaries and performance bonuses of £nil (2018/19: £2m) and
social security costs of £nil (2018/19: £nil).
The average number of employees for continuing operations is:
UK & Ireland Electricals
UK & Ireland Mobile
Nordics
Greece
Year ended
2 May
2020
number
Year ended
27 April
2019
number
20,908
8,585
10,113
2,603
42,209
21,173
9,304
10,045
2,468
42,990
The average number of employees for discontinued operations is nil (2018/19: 5 ) .
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
2 May
2020
£m
Year ended
27 April
2019
£m
6
3
9
10
6
16
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.
150
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements
4 Employee costs and share-based payments continued
b) Share-based payments
i) Share option schemes
The Group offers discretionary awards of nil-priced options under the Long Term Incentive Plan (LTIP) to senior employees.
Awards are granted annually and will usually vest after three years subject to continued service. Some awards are also
subject to the achievement of performance conditions.
All awards granted during the year ended 29 April 2017 are subject to performance conditions based on a combination of
EPS growth and relative TSR performance against the constituents of the FTSE 51-150 at 1 May 2016.
For subsequent years, awards granted to executive directors and key management are subject to performance conditions.
For options issued to other senior management, awards are not subject to performance conditions.
For awards granted during the years ended 28 April 2018 and 27 April 2019, performance conditions are based on a
combination of relative TSR performance against the constituents of the FTSE 51-150 at the beginning of the performance
period and either EPS growth or cumulative free cash flow. For awards granted during the year ended 2 May 2020,
performance conditions are based on a combination of relative TSR performance against a bespoke comparator group of
22 European Special Line Retailers and other comparable companies and cumulative free cash flow.
In February 2019, the Group launched the Colleague Shareholder Award which granted every permanent colleague with 12
months service at least £1,000 of options which will vest after three years. These awards are not subject to performance
conditions.
The following table summarises the number and weighted average exercise price (WAEP) of share options for these
schemes:
Outstanding at the beginning of the period
Granted during the period
Forfeited during the period
Exercised during the 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
Exercise price for options outstanding
Year ended
2 May 2020
Year ended
27 April 2019
Number
million
WAEP
£
Number
million
WAEP
£
55
26
(16)
(2)
63
—
—
—
—
—
—
—
22
42
(8)
(1)
55
—
—
—
—
—
—
—
Year ended
2 May
2020
Year ended
27 April
2019
£1.08
8.8 yrs
£nil
£1.75
9.1 yrs
£nil
ii) 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.
The following table summarises the number and WAEP of share options for these schemes:
Year ended
2 May 2020
Year ended
27 April 2019
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
Number
million
WAEP
£
Number
million
12
14
—
(11)
15
1
1.90
0.97
0.97
1.71
1.19
1.88
19
—
—
(7)
12
1
WAEP
£
2.00
—
1.65
2.16
1.90
3.03
151
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
4 Employee costs and share-based payments continued
b) Share-based payments continued
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
2 May 2020
Year ended
27 April 2019
£0.77
2.7 yrs
£0.97 — £3.77
£2.31
2.3 yrs
£1.65 — £3.77
iii) 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 the Group.
The weighted average fair value of options granted during the period was £0.75 (2018/19: £1.33). The following table lists
the inputs to the model:
Exercise price
Dividend yield
Historical and expected volatility
Expected option life
Weighted average share price
Year ended
2 May 2020
Year ended
27 April 2019
£nil — £0.97
0% — 5.7%
31% — 37%
4 — 10 yrs
£1.24
£nil
0% — 5.7%
36% — 37%
10 yrs
£1.54
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.
iv) Charge to the income statement and entries in reserves
During the year ended 2 May 2020, the Group recognised a non-cash accounting charge to profit and loss of £23m
(2018/19: £21m) in respect of equity settled share-based payments, with a corresponding credit through reserves.
c) Employee Benefit Trust (‘EBT’)
Investment in own shares
Maximum number of shares held during the period
2 May 2020
27 April 2019
Market
value
£m
Nominal
value
£m
8
12
—
—
Number
m
10.1
10.4
Market
value
£m
Nominal
value
£m
1
5
—
—
Number
m
0.7
2.8
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 administering the EBT are charged to the income statement in the year to which they
relate. Investment in own shares are recorded at cost and are recognised directly in equity within other reserves.
The EBT acquired 2.1m of the Company’s shares during the year ended 2 May 2020 at nominal value and 9.8m via market
purchases for cash consideration of £11.8m. For the comparative period 2.2m shares were acquired at nominal value.
The EBT has waived rights to receive dividends and agrees to abstain from exercising their right to vote. The shares have
not been allocated to specific schemes as further disclosed in the Directors’ Report.
152
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements
5 Net finance costs
Unwind of discounts on trade receivables
Finance income
Interest on bank overdrafts, loans and borrowings
Interest expense on lease liabilities(i)
Finance lease interest payable(i)
Net interest on defined benefit pension obligations
Unwind of discounts on liabilities
Amortisation of facility fees(ii)
Other interest expense
Finance costs
Total net finance costs
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
10
10
(15)
(80)
—
(14)
—
(2)
(11)
(122)
(112)
11
11
(17)
—
(6)
(12)
(4)
(2)
(6)
(47)
(36)
(i)
(ii)
During the period the Group has adopted IFRS 16: ‘Leases’ using the modified retrospective approach, as a result prior year comparative
numbers have not been restated. Interest expense on lease liabilities for the year ended 27 April 2019 relates to finance leases recognised in
accordance with IAS 17.
All finance costs in the above table represent interest costs of financial liabilities and assets, other than amortisation of facility fees which
represent non-financial assets.
6 Tax
a) Tax expense
The corporation tax charge comprises:
Current tax
UK corporation tax at 19% (2018/19: 19% )
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
Tax related to discontinued operations is included in the figures set out in note 25.
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
9
24
33
(5)
1
(4)
29
(3)
3
—
(4)
(4)
(8)
(8)
51
29
80
(10)
(5)
(15)
65
(16)
1
(15)
2
—
2
(13)
21
52
153
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
6 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:
Loss before taxation
Tax at UK statutory rate of 19% (2018/19: 19%)
Items attracting no tax relief or liability (i)
Movement in unprovided deferred tax (ii)
Effect of change in statutory tax rate
Differences in effective overseas tax rates
Adjustments in respect of prior year – provisions (iii)
Adjustments in respect of prior years - other
Total tax charge
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
(140)
(259)
(27)
7
52
(2)
3
(17)
5
21
(49)
105
(1)
4
5
–
(12)
52
(i)
(ii)
(iii)
Items attracting no tax relief or liability relate mainly to non-deductible depreciation in the UK business.
Deferred tax assets relating principally to tax losses in the UK business have not been recognised due to uncertainty over the group’s ability
to utilise the losses in the future.
As disclosed within our key sources of estimation uncertainty in note 1t, the Group is currently cooperating with HMRC in relation to open
tax enquiries arising from pre-merger legacy corporate transactions in the Carphone Warehouse group. One of the underlying pre-merger
transactions under enquiry is considered to have a “more likely than not” chance of resulting in settlement. Due to this level of risk, a
provision was recognised in the prior year. This enquiry is still open and a release of £17m has been made during the period to reflect the
current status of discussions.
Accelerated
capital
allowances
£m
Retirement
benefit
obligations
£m
Losses
carried
forward
£m
Other
temporary
differences
£m
(32)
1
(8)
—
—
(39)
—
(39)
(12)
—
(51)
79
—
—
18
—
97
—
97
—
(44)
53
3
2
—
—
—
5
—
5
34
—
39
55
10
—
(1)
(1)
63
6
69
(13)
—
56
Total
£m
105
13
(8)
17
(1)
126
6
132
9
(44)
97
2 May
2020
£m
259
(162)
97
27 April
2019
£m
282
(156)
126
c) Deferred tax
At 28 April 2018
Credited directly to income statement
Charged in respect of discontinued operations
Credited / (charged) to equity
Other
At 27 April 2019
Taxation on IFRS 16 transition adjustment
Adjusted balance at 27 April 2019
(Charged) / credited directly to income statement
Charged to equity
At 2 May 2020
Deferred tax comprises the following balances:
Deferred tax assets
Deferred tax liabilities
154
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements
6 Tax continued
c) Deferred tax continued
Analysis of deferred tax relating to items credited / (charged) to equity in the period:
Defined benefit pension schemes
Other temporary differences
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
(44)
—
(44)
18
(1)
17
The Group has total unrecognised deferred tax assets relating to gross tax losses of £1,257m of which £1,242m relates to
the UK (2018/19: £1,075m). £1,052m of these losses relate to carried forward capital losses in the legacy Dixons group.
The balance of the losses relates to carried forward trading losses, principally due to the losses realised in the Carphone
Warehouse business in the UK in the current period and in the prior period.
A deferred tax asset has not been recognised in respect of the losses for the period (£183m), other deductible temporary
differences (£123m) and pension contributions (£266m) expected to reverse after the period of the Group’s 5-year plan
which is used to determine the availability of future taxable profits.
There were no temporary differences associated with non-distributable earnings of subsidiaries for which deferred tax
liabilities had not been recognised at the end of the current period or the prior period.
The Group has a current tax credit of £5m (2018/19: £5m) recognised through equity in relation to pensions (2018/19: £4m
in relation to pensions and £1m in respect of other items).
7 Loss per share
Total loss
Continuing operations
Discontinued operations
Total
Weighted average number of shares
Average shares in issue
Less average holding by Group EBT
For basic loss per share
Dilutive effect of share options and other incentive schemes
For diluted loss per share
Basic loss per share
Total (continuing and discontinued operations)
Adjustment in respect of discontinued operations
Continuing operations
Diluted loss per share
Total (continuing and discontinued operations)
Adjustment in respect of discontinued operations
Continuing operations
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
(161)
(2)
(163)
(311)
(9)
(320)
Million
Million
1,162
(5)
1,157
25
1,182
1,160
(1)
1,159
9
1,168
Pence
Pence
(14.1)
0.2
(13.9)
(14.1)
0.2
(13.9)
(27.6)
0.8
(26.8)
(27.6)
0.8
(26.8)
Basic and diluted losses per share are based on the loss for the period attributable to equity shareholders.
155
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
8 Goodwill
Cost
As at 28 April 2018
Disposals
Foreign exchange
As at 27 April 2019
Disposals
Foreign Exchange
As at 2 May 2020
Accumulated impairment
As at 28 April 2018
Impairment
As at 27 April 2019 and 2 May 2020
Carrying amount
As at 28 April 2018
As at 27 April 2019
As at 2 May 2020
a) Carrying value of goodwill
The components of goodwill comprise the following businesses:
UK & Ireland Electricals
UK & Ireland Mobile
Nordics
£m
3,088
—
(23)
3,065
—
(37)
3,028
£m
—
(225)
(225)
£m
3,088
2,840
2,803
27 April
2019
£m
1,840
—
1,000
2,840
2 May
2020
£m
1,840
—
963
2,803
No impairment charge has been recognised over goodwill in the current period.
The prior year impairment of £225m related to the full impairment of goodwill in the UK & Ireland Mobile segment due to
the deterioration of the forecast performance within this segment. The recoverable amount of the UK & Ireland Mobile
segment as at 27 April 2019 was £317m based on the value in use of this group of cash generating units.
b) Goodwill impairment testing
As required by IAS 36, goodwill is subject to annual impairment reviews. These reviews are carried out using the following
criteria:
– business acquisitions generate an attributed amount of goodwill;
– the manner in which these businesses are run and managed is used to determine the CGU grouping as defined in IAS
36: ‘Impairment of Assets’;
– the recoverable amount of each CGU group is determined based on calculating its value in use (‘VIU’);
– the VIU is calculated by applying discounted cash flow modelling to management’s own projections covering a five-year
period;
– cash flows beyond the five-year period are extrapolated using a long-term growth rate equivalent to long-term forecasts
of Gross Domestic Product (‘GDP’) growth rates for the relevant market; and
– the VIU is then compared to the carrying amount in order to determine whether impairment has occurred.
The key assumptions used in calculating value in use are:
– management’s projections;
– the growth rate beyond five years; and
– the pre-tax discount rate.
156
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements
8 Goodwill continued
b) Goodwill impairment testing continued
The long term projections are based on Board approved budgets for 2020/21 together with the Board approved five-year
strategic plan. 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.
Given the global political and economic uncertainty resulting from the Covid-19 pandemic, the cash flows have been
adjusted to represent management’s best estimate of the economic conditions that will exist over the five-year period.
In forming these assumptions, management have incorporated guidance from the governments in which each business
unit operates and readily available external market information. Further information on the assumptions used for Covid-19
estimations can be found in the going concern section of the accounting policies note.
Key assumptions used in determining the five-year projections comprise the growth in sales and costs over this period.
The compound annual growth rate in sales and costs can rise as well as fall year-on-year depending not only on the year
five targets, but also on the current financial year base. These targets, when combined, accordingly drive the resulting
profit margins and the profit in year five of the projections which is in turn used to calculate the terminal value in the VIU
calculation. Historical amounts for the businesses under impairment review as well as from other parts of the Group are
used to generate the values attributed to these assumptions.
The value attributed to these assumptions for the most significant components of goodwill are as follows:
2 May 2020
27 April 2019
Compound
annual
growth in
sales
Compound
annual
growth in
costs
Growth rate
beyond five
years
Pre-tax
discount
rate
Compound
annual
growth in
sales
Compound
annual
growth in
costs
Growth rate
beyond five
years
UK & Ireland Electricals
UK & Ireland Mobile
Nordics
4.2%
—
3.2%
4.0%
—
3.1%
1.4%
—
1.8%
7.8%
1.3%
— (0.5%)
2.6%
7.6%
1.3%
(1.5%)
2.4%
1.6%
1.6%
1.7%
Pre-tax
discount
rate
9.6%
9.6%
9.4%
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
In line with the assumptions noted above and highlighted in note 1t, the Group undertook an impairment review of the UK &
Ireland Electricals group of CGUs, where £1,840m of goodwill is allocated. The goodwill relating to the UK & Ireland Mobile
group of CGUs was fully written off in a previous period. Within the Group’s UK & Ireland Electricals operating segment
and the UK & Ireland Mobile operating segment there are corporate assets that are not allocable to these separate groups
of CGUs on a reasonable and consistent basis. Accordingly, the Group tests such assets for impairment by comparing the
combined recoverable amount of the UK & Ireland Electricals and UK & Ireland Mobile group of CGUs with the combined
carrying value of assets of these respective groups of CGUs including the corporate assets.
These impairment tests are prepared using the methodology required by IAS 36. The recoverable amount, based on
value in use, shows headroom of £730m above the carrying amount of UK & Ireland Electricals and UK & Ireland Mobile
combined group of CGUs. Within the value in use model growth in sales and growth in costs assumptions drive the
operating profit forecasts in line with the Group’s strategic plan. The key assumption within the value in use model is
therefore the operating profit forecast in the final year of the strategic plan which is underpinned by the recovery from the
impact of Covid-19 and the delivery of key strategic initiatives.
In accordance with IAS 36, the Group performed sensitivity analysis on the estimates of recoverable amounts and found
that the excess of recoverable amount over the carrying amount of the UK & Ireland Electricals and UK & Ireland Mobile
combined group of CGUs would be reduced to nil as a result of a reasonably possible change in the key assumption. The
recoverable amount would equal the carrying value if operating profit was reduced by 20% within the value in use model
in FY24, and then extrapolated for the remainder of the forecast period including the period beyond the strategic plan.
The Directors do not consider that the relevant change in this assumption would have a consequential effect on other key
assumptions.
For the Nordics group of CGUs, where £963m of goodwill is allocated, the Directors do not consider that any reasonably
possible changes to the key assumptions would reduce the recoverable amount to its carrying value.
157
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
9 Intangible assets
Balance at 28 April 2019
Additions
Reclassification from property, plant & equipment
Amortisation
Impairment
Foreign exchange
Balance at 2 May 2020
Cost
Accumulated amortisation and impairment losses
Balance at 2 May 2020
Balance at 29 April 2018
Additions
Reclassification from property, plant & equipment
Amortisation
Impairment
Foreign exchange
Balance at 27 April 2019
Cost
Accumulated amortisation and impairment losses
Balance at 27 April 2019
Acquisition intangibles
Brands
£m
Customer
relationships
£m
Sub-total
£m
Software
and licences
£m
246
—
—
(24)
—
(4)
218
367
(149)
218
3
—
—
(1)
—
—
2
73
(71)
2
249
—
—
(25)
—
(4)
220
440
(220)
220
215
90
3
(44)
(9)
(6)
249
712
(463)
249
Acquisition intangibles
Brands
£m
Customer
relationships
£m
Sub-total
£m
Software and
licences
£m
274
—
—
(25)
—
(3)
246
371
(125)
246
16
—
—
(3)
(10)
—
3
73
(70)
3
290
—
—
(28)
(10)
(3)
249
444
(195)
249
188
119
48
(55)
(84)
(1)
215
625
(410)
215
Total
£m
464
90
3
(69)
(9)
(10)
469
1,152
(683)
469
Total
£m
478
119
48
(83)
(94)
(4)
464
1,069
(605)
464
Software and licences include assets with a cost of £75m (2018/19: £49m) on which amortisation has not been charged as
the assets have not yet been brought into use.
For the year ended 2 May 2020, an impairment of £9m was recognised in the UK & Ireland Mobile operating segment
following the announcement to close the Carphone Warehouse standalone stores within the UK.
The impairment recognised in the prior year primarily represents the impairment of intangible assets in the UK & Ireland
Mobile business following the separation of the UK & Ireland operating segment in accordance with IFRS 8.
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:
2 May 2020
Remaining
amortisation
period
Years
27 April 2019
Remaining
amortisation
period
Years
Net book
value
£m
Net book
value
£m
106
47
31
25
10
10
10
10
117
52
40
27
11
11
11
11
Currys PCWorld
Elgiganten
Elkjøp
Gigantti
158
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements
10 Property, plant & equipment
Balance at 28 April 2019
Adjustment on initial application of IFRS 16*
Additions
Reclassification to intangible assets
Depreciation
Disposals
Impairment
Foreign exchange
Balance as at 2 May 2020
Cost
Accumulated depreciation
Balance as at 2 May 2020
Included in net book value as at 2 May 2020
Assets in the course of construction
Fixtures,
fittings
and other
equipment
£m
Land and
buildings
£m
69
(41)
7
—
(7)
—
(3)
—
25
52
(27)
25
693
(478)
215
745
(505)
240
—
35
35
Land and
buildings
£m
Fixtures, fittings
and other
equipment
£m
Total
£m
276
(41)
98
(3)
(81)
(2)
(5)
(2)
240
Total
£m
394
53
(48)
(91)
(2)
—
(28)
(2)
276
746
(470)
276
207
—
91
(3)
(74)
(2)
(2)
(2)
215
317
46
(48)
(82)
(2)
—
(22)
(2)
207
635
(428)
207
25
—
25
41
*
The Group adopted IFRS 16: ‘Leases’ for the first time during the period. As at 28 April 2019, those assets previously held under
finance leases in accordance with IAS 17 have been removed from property, plant and equipment (cost £67m net of £26m accumulated
depreciation) and subsequently recognised as right-of-use assets as further disclosed in note 11.
Balance at 29 April 2018
Additions
Reclassification to intangible assets
Depreciation
Disposals
Disposed with subsidiary
Impairment
Foreign exchange
Balance as at 27 April 2019
Cost
Accumulated depreciation
Balance as at 27 April 2019
Included in net book value as at 27 April 2019
Assets in the course of construction
Assets held under finance leases
77
7
—
(9)
—
—
(6)
—
69
111
(42)
69
—
41
For the year ended 2 May 2020, an impairment of £5m was recognised in the UK & Ireland Mobile operating segment
following the announcement to close the Carphone Warehouse standalone stores within the UK.
In the prior year, following the separation of the UK & Ireland operating segment into separate UK & Ireland Electricals
and Mobile operating segments an impairment indicator was identified. This resulted in an impairment of £28m being
recognised over central and store related assets recognised in the UK & Ireland Mobile operating segment.
159
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
11 Right-of-use assets
Right-of-use assets
Land and buildings
Vehicles, equipment and other
Additions to the right-of-use assets for the period were £229m.
The total cash outflow for leases amount to £300m.
Amounts recognised in profit and loss
Depreciation expense on right-of-use assets:
Land and buildings
Vehicles, equipment and other
Total depreciation on right-of-use assets
Impairment of right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term leases
Expense relating to leases of low value assets
Expense relating to variable lease payments not included in the measurement of the lease liability
Income from subleasing right-of-use assets
2 May
2020
£m
1,084
30
1,114
Year ended
2 May
2020
£m
207
10
217
50
80
21
1
18
1
12 Lease receivables
Under IFRS 16, an intermediate lessor accounts for the head lease and sublease as two separate contracts. The
intermediate lessor is required to classify the sublease as a finance or operating lease by reference to the right-of-use asset
arising from the head lease. The Group’s finance lease arrangements do not include variable payments.
For the year ended 27 April 2019, in accordance with IAS 17, the intermediate lessor was required to classify the sublease
by reference to the underlying asset. Therefore, all subleases were previously recognised as operating leases as further
disclosed in note 30.
Net investment in the lease analysed as:
Recoverable after 12 months
Recoverable within 12 months
2 May
2020
£m
27 April
2019
£m
4
1
5
—
—
—
The Group applies the simplified model in accordance with IFRS 9 to recognise lifetime expected credit losses on lease
receivables. The value of the expected credit loss on lease receivables is immaterial.
The Group is not exposed to foreign currency risk as a result of the lease arrangements, as all leases are denominated in
functional currency.
Undiscounted amounts receivable under finance leases:
Year 1
Year 2
Year 3
Year 4
Year 5
Onwards
Undiscounted lease payments
Less: unearned finance income
Net investment in the lease
160
2 May
2020
£m
27 April
2019
£m
1
1
1
1
1
2
7
(2 )
5
—
—
—
—
—
—
—
—
—
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements
13 Interests in associates and investments
The Group’s interests in associates are analysed as follows:
Opening balance
Additions
Share of results
Disposals
Closing balance
2 May
2020
£m
27 April
2019
£m
—
—
—
—
—
1
—
—
(1)
—
During the year ended 27 April 2019 the Group disposed of associate investments previously held by our Nordic operations
through the franchise network.
Investments
Financial assets designated as at FVTOCI
2 May
2020
£m
10
27 April
2019
£m
18
The Group holds a 10.2% investment in Unieuro S.p.A, an Italian retailer of consumer electronics and household
appliances listed on the Borsa Italiana. Given a readily determinable fair value is available based on the market price of the
listed shares, the investment has been valued at £10m.
These investments in equity instruments are not held for trading. Instead, they are held for long-term strategic purposes.
Accordingly, the Group has elected to designate these investments in equity instruments as at FVTOCI with the movement
in investment value being recognised in other comprehensive income.
The fair valuation techniques used are outlined in note 26.
14 Inventory
Finished goods and goods for resale
15 Trade and other receivables
Trade receivables*
Less expected credit loss allowances
Contract assets*
Prepayments
Other receivables
Accrued income
Non-current
Current
2 May
2020
£m
970
2 May
2020
£m
396
(26)
370
565
50
71
69
27 April
2019
£m
1,156
27 April
2019
£m
452
(17)
435
725
100
58
108
1,125
1,426
294
831
387
1,039
1,125
1,426
*
Trade receivables and contract assets for the prior year have been restated to reflect the correct classification between trade receivables
and contract assets (previously reported as £524m and £653m for trade receivables and contract assets respectively). This has had no
impact on the overall trade and other receivables balances reported at 27 April 2019.
The majority of trade and other receivables are non-interest bearing. Non-current receivables mainly comprise commission
receivable on sales, as described below. Where there is a significant financing component, trade and other receivables are
discounted at contract inception using a discount rate that is at an arm’s length basis and which would be reflected in a
separate financing transaction between the Group and the customer.
Included within other receivables is £20m of government grants receivable (2018/19: nil). This relates to compensation for
expenses already incurred by the Group that have been pledged by national governments, primarily the UK governments
‘Coronavirus Job Retention Scheme’, in light of the recent Covid-19 pandemic.
161
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
15 Trade and other receivables continued
Ageing of gross trade receivables and expected
credit loss allowances:
Not yet due
Past due:
Under two months
Two to four months
Over four months
2 May 2020
27 April 2019
Gross trade
receivables
£m
Expected
credit loss
allowances
£m
Net trade
receivables
£m
Gross trade
receivables
£m
Expected
credit loss
allowances
£m
Net trade
receivables
£m
312
(3)
309
363
—
363
35
13
36
84
(1)
(2)
(20)
(23)
34
11
16
61
47
9
33
89
(1)
(1)
(15)
(17)
46
8
18
72
396
(26)
370
452
(17)
435
Movements in the expected credit loss allowances for trade receivables is as follows:
Opening balance
IFRS 9 opening adjustment
Charged to the income statement
Receivables written off as irrecoverable
Amounts recovered during the year
Closing balance
Further details with regards to trade receivables credit risk are included in note 26.
Contract assets
Insurance commission contract assets
Network commission contract assets
2 May
2020
£m
(17)
—
(12)
2
1
(26)
2 May
2020
£m
19
546
565
27 April
2019
£m
(13)
(1)
(9)
4
2
(17)
27 April
2019
£m
23
702
725
The Group recognises contract assets where the performance obligations have been met but the right to consideration
from the customer is conditioned on something other than the passage of time. This occurs on both insurance commission
revenue and network commission revenue as detailed in note 1d.
The Group has considered the risk profile for amounts due from network and insurance customers based on historical
experience and forward looking information. The contract asset values are adjusted at each reporting date to reflect the
future expected value.
The significant changes in the contract asset balances within the year occurred within the network commission contract
assets. Further detail and a full reconciliation of movements within the financial year have therefore been provided below.
Network commission contract assets and receivables
As described in note 1e, the revenue earned by the Group for the acquisition of consumers on behalf of third-party network
operators is subject to variable consideration. Some consideration is paid by the MNOs at the time of connection with the
remainder paid over the duration of the consumer’s contractual relationship with the MNO which is usually between 1 and
5 years. Whilst the underlying contract with the consumer predominately constitutes a fixed monthly value, variability arises
due to future expected behaviour of such consumers after the point of connection.
The Group adopted IFRS 15: ‘Revenue from Contracts with Customers’ with effect from 29 April 2018 and in doing so
only recognises such revenue to the extent that it is highly probable that there will not be a material reversal in the future.
Determining the amount of revenue to recognise is judgemental and subject to a degree of estimation uncertainty in
particular due to the nature of the variable revenue constraint applied in line with IFRS 15 as described in note 1t. In previous
periods, the Group has estimated such revenue with a high level of accuracy, as evidenced and regularly monitored by the
level of cash the Group receives from MNOs in the periods subsequent to acquiring consumers on their behalf.
162
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements
15 Trade and other receivables continued
In determining the amount of revenue to recognise, the Group estimates the amount that it expects to receive in respect
of each consumer based on historic trends and anticipated changes in consumer behaviour. The Group also discusses
and analyses emerging behavioural trends with the respective MNOs, considers external sources of industry and market
analysis and models the impact of potential regulatory changes, if any are proposed.
A discounted cash flow methodology is used to measure the expected consideration, by estimating all future cash flows
that will be received from the MNO and discounting these based on the timing of receipt. 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 percentage 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 percentage of consumers initially connected by the Group estimated to be subsequently
upgraded by an MNO.
Having estimated the expected consideration, the Group applies a constraint to reduce to a level where any future material
reversal of revenue would be considered highly improbable. Management makes a regular assessment of historical
amounts and market data to ensure that the amounts recognised still meet the requirements of IFRS 15. In the prior year
ended 27 April 2019, the net revaluation recognised from performance obligations satisfied in previous periods was a
reduction of £3m and in the preceding year ended 28 April 2018 this was an increase of £3m.
Amounts recognised in the financial statements in respect of such variable consideration are summarised and reconciled
from prior year below:
Gross network commission receivable and contract asset: Opening balance
Less: amounts received in advance from MNO’s
Net network commission receivable and contract asset: Opening balance
Revenue recognised in respect of current year sales
Revaluation of opening network commission contract asset
Revenue (reversed) / recognised in respect of prior period sales not previously
included in the estimation of revenue recognised
Revenue (reversed) / recognised in respect of prior period sales
Revenue recognised in the period
Cash received from network operators
Movements due to the effect of discounting
2 May
2020
£m
27 April
2019
£m
1,294
1,545
(497)
(488)
797
1,057
997
1,235
(47)
(41)
(2)
(49)
948
38
(3)
1,232
(1,139)
10
(1,503)
11
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Net network commission receivable and contract asset: closing balance
(vii)
616
797
Comprising:
Net network commission receivable and contract asset in less than 1 year
Net network commission receivable and contract asset in more than 1 year
Less amount billed (network commission trade receivable)
Net network commission contract asset
357
259
616
(70)
546
(viii)
(ix)
444
353
797
(95)
702
163
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
15 Trade and other receivables continued
i. Net of discounting for the time value of money. The unwind of this discounting is recognised as finance income in
the relevant period. The amount of related finance income within the year, as shown in the table above, was £10m
(2018/19: £11m).
ii. 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. This balance shows
the net amounts receivable from the MNOs. Further information is included below to explain the classification split
of this balance between trade receivables and contract assets.
iii. This relates to revenue recognised from connections made in the current year. This revenue is recognised at point
of sale as explained within the accounting policies in note 1e. This figure includes in-year adjustments to the
carrying value of revenue recognised (net of constraints) where the estimated consideration has changed since
point of recognition within the year. In response to the events highlighted in (iv) below and in consideration of other
market headwinds, the level of constraint applied to revenue recognised in the current year has been increased.
iv. The Group continues to monitor the level of this revaluation as an indicator of estimation uncertainty in respect
of previously recognised variable consideration. The reversal of revenue within the year is related to a number
of events that, due to their nature, would have been considered highly improbable to occur and therefore not
incorporated into the estimation of revenue upon initial recognition:
–
–
–
–
During the second half of the year, on 17 March 2020, the Group announced a significant strategic change for
the Carphone Warehouse business. The Group took the decision to close all standalone Carphone Warehouse
stores in the UK. This was a positive step for the long term value of the Group but resulted in a reduction in the
expected value of the variable consideration in relation to previously recognised network commission revenues
reflecting reduced ability to service the market. This strategic decision only came into fruition in the second half
of the financial year and previously would have been considered remote.
The global pandemic Covid-19 caused the Group to reassess the future expected consumer behaviour in terms
of consumer default rate and consumer spend, which resulted in a more prudent assessment and therefore
increases to the constraint on the estimated consideration that will be received. In previous years when the
revenue was recognised, the possibility of a global pandemic was considered to be remote.
From 15 February 2020, new Ofcom regulation required MNOs to notify consumers that their contracts are
ending. Although this regulation was known about at the prior year end, MNO voluntary action in response was
unforeseen. This has impacted potential future cash receipts worse than initially estimated.
Due to the impact of the unforeseen events described above, and in consideration of other market headwinds,
the Group has reassessed the expected value of commissions to be received from MNOs in respect of revenue
recognised in previous periods and has recognised an additional constraint.
In the prior year, the £41m revaluation of opening network commission contract assets principally related to
changes in anticipated out-of-bundle spend following bill-capping legislation in October 2018 and a reduction in
spend after the initial contract term.
This revaluation of £47m (2018/19: £41m) discussed above is the figure that has historically been used by the
Group to monitor the accuracy of assumptions made in previous periods and is excluded from measuring the
performance of the UK & Ireland Mobile segment in our alternative performance measures as explained within the
glossary to the Annual Report. This amount is also presented as the Group has received feedback from certain
stakeholders that its separate presentation is helpful, in order to present more clearly the underlying performance in
year.
v.
These amounts were not previously recognised as revenue due to the application of the constraint (described
above) and include a value of £14m (2018/19: £13m) relating to the uplift in the profit share the Group receives
associated with RPI on commission receivable where the performance obligations were satisfied in prior periods.
These amounts also include other out of period amounts settled with MNOs in respect of prior period transactions
of -£16m (2018/19: £25m). As the Group does not recognise an estimate of these amounts within revenue at
the point of sale, they are recognised in revenue within each financial year once the amounts for that period are
known. Therefore, the RPI uplift and the other out of period amounts settled with MNOs are included within the
Group’s alternative performance measures as explained within the glossary to the Annual report.
vi. Cash received in the period.
vii. Gross network receivable and contract asset balance of £1,005m, offset by amounts received in advance of
£389m. This is in line with the explanation in (ii) above.
164
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements
15 Trade and other receivables continued
viii. Amounts that have been invoiced to the network operators and are no longer conditional on something other than
the passage of time. These amounts are therefore classified as trade receivables.
ix. This is the contract asset element of the network commissions receivable. This is variable based on future
consumer behaviour and hence conditional on something other than the passage of time therefore as per IFRS 15
this is classified as a contract asset.
16 Cash and cash equivalents
Cash at bank and on deposit
2 May
2020
£m
660
27 April
2019
(restated)
£m
665
As disclosed in note 1, the Group’s cash and cash equivalents have been restated to meet the presentational requirements
for offsetting in accordance with IAS 32. Comparative information for the year ended 27 April 2019 has increased from
£125m to £665m. This has had no impact on the Group’s net assets.
Cash at bank and on deposit includes short-term bank deposits which are available on demand. Within cash and cash
equivalents, £32m (2018/19: £43m) is restricted and predominantly comprises funds held by the Group’s insurance
businesses to cover regulatory reserve requirements. These funds are not available to offset the Group’s borrowings.
17 Trade and other payables
Trade payables
Other taxes and social security
Other creditors
Contract liabilities
Accruals
2 May 2020
27 April 2019
Current
£m
Non-current
£m
Current
£m
Non-current
£m
1,249
363
2
184
219
2,017
—
—
—
92
39
1,571
298
29
160
292
131
2,350
—
—
109
112
31
252
Non-current other creditors in the prior year related principally to property leases that were deemed to be off market rent
which arose from acquisitions. These liabilities were unwound over the period of the relevant lease, of up to 19 years. On
initial adoption of IFRS 16, the right-of-use asset was adjusted for these amounts.
The carrying amount of trade and other payables approximates their fair value.
Included in trade payables are amounts due where extended payment terms have been agreed with the supplier using a
supplier financing facility. These payment terms are customary in the industry and in line with credit terms offered by our
other suppliers of similar products. These terms are made available and administered under arrangements between the
supplier and third-party banks selected by the supplier. The total amount outstanding on such extended payment terms at
2 May 2020 is £51m (2018/19: £59m). These arrangements do not provide the Group with a significant benefit of additional
financing and accordingly are classified as trade payables.
Contract liabilities
Movements in the contract liabilities balance are as follows:
Opening balance
IFRS 15 opening adjustment
Revenue recognised in the period that was included in the opening balance
Increase in contract liabilities in the period not yet recognised in revenue
Closing balance
2 May
2020
£m
272
—
(147)
151
276
27 April
2019
£m
300
(24)
(136)
132
272
165
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
17 Trade and other payables continued
Contract liabilities predominantly relate to the sale of customer support agreements. Revenue is recognised in full as each
performance obligation is satisfied under the contracts with the customer. Where consideration is received in advance of
the performance of the obligations being satisfied, a contract liability is recognised. Due to the cancellation options and
customer refund clauses, contract terms have been assessed to either be monthly or a series of day to day contracts
with revenue recognised respectively in the month to which payment relates, or on a ‘straight-line’ basis. The above
reconciliation from opening to closing balance shows there has been no significant movement in the balance compared to
prior year. The reduction in the contract liability balance due to amounts recognised as revenue within the year that were
included in the balance at the start of the year have been offset by new sales made and consideration received in advance
of satisfying the performance obligations.
As shown above, £147m included in contract liabilities at the start of the period was recognised as revenue during the year.
18 Contingent consideration
Contingent consideration
Opening balance
Settlements
Change in valuation
Closing balance
2 May 2020
27 April 2019
Current
£m
Non-current
£m
Current
£m
Non-current
£m
1
2
1
4
2 May
2020
£m
27 April
2019
£m
5
(2)
—
3
13
(1)
(7)
5
Earn-out consideration of up to £3m is payable in cash (2018/19: £5m) and is contingent on the performance of the
Epoq kitchen business against earnings growth targets in the period following the balance sheet date. The fair value
of contingent consideration arrangements has been estimated by applying the income approach. A change in growth
assumptions used in the fair value methodology could result in an amount of contingent consideration payable per annum
decreasing to £nil.
19 Loans and other borrowings
Current liabilities
Bank overdrafts*
Loans and other borrowings
Non-current liabilities
Loans and other borrowings
2 May
2020
£m
27 April
2019
(restated)
£m
540
44
584
280
864
559
—
559
288
847
*
As disclosed in note 1, the Group’s bank overdrafts have been restated to meet the presentational requirements for offsetting in accordance
with IAS 32. Comparative information for the year ended 27 April 2019 has increased from £19m to £559m. This has had no impact on the
Group’s net assets.
Committed facilities
£800m Revolving Credit Facility
In October 2015, the Group signed a five-year £800m Revolving Credit Facility (‘RCF’) with a number of relationship banks;
this facility was extended in October 2016 and 2017 by an additional year and the facility currently expires October 2022.
The interest rate payable for drawings under this facility is at a margin over LIBOR (or other applicable interest basis) for
the relevant currency and for the appropriate period. The actual margin applicable to any drawing depends on the fixed
charges cover ratio calculated in respect of the most recent accounting period. A non-utilisation fee is payable in respect of
amounts available but undrawn under this facility and a utilisation fee is payable when aggregate drawings exceed certain
levels. For the year ended 2 May 2020, the Group had drawn down on this facility by £280m (2018/19: £245m).
166
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements
19 Loans and other borrowings continued
£250m Revolving Credit Facility
In October 2016, the Group signed a four-year £250m RCF with a group of relationship banks; this facility is on broadly
similar terms to the £800m RCF; this facility was extended in February 2019 by an additional two years and the facility
expires October 2022.
€50m term loan
In October 2016, the Group signed a four-year term loan of €50m with BBVA. The terms of this facility are also broadly
similar to the £800m RCF and expires in October 2020. This loan was fully drawn at the current and proceeding balance
sheet dates.
£266m Revolving Credit Facility
In April 2020, the Group signed a one-year £266m RCF to mitigate any potential impact of the Covid-19 crisis with a group
of relationship banks; this facility is on broadly similar terms to the £800m and £250m RCF.
Bank overdraft and other uncommitted facilities
The Group also has overdrafts and short-term money market lines from UK and European banks denominated in various
currencies, all of which are repayable on demand. Interest is charged at the market rates applicable in the countries
concerned and these facilities are used to assist in short-term liquidity management. Total available facilities are £57m
(2018/19: £109m).
All borrowings are unsecured.
20 Lease Liabilities
Analysed as:
Non-current
Current
Total undiscounted future committed payments due are as follows:
Amounts due:
Year 1
Year 2
Year 3
Year 4
Year 5
Onward
2 May
2020
£m
1,186
258
1,444
2 May
2020
£m
306
261
237
209
179
589
1,781
The Group does not face a significant liquidity risk with regard to its lease liabilities. Lease liabilities are monitored within
the Group’s treasury function.
167
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
20 Lease Liabilities continued
The Group has adopted IFRS 16: ‘Leases’ using the modified retrospective approach. Comparatives for the prior reporting
period have therefore not been restated and continue to be reported under IAS 17: ‘Leases’, as permitted under the
specific transitional provisions of IFRS 16. For the year ended 27 April 2019, the obligations under those leases previously
defined as finance leases is as follows.
Amounts due:
Within one year
In more than one year and not more than five years
In more than five years
Less future finance charges
Present value of lease obligations
Less amounts due within one year
Amounts due after more than one year
27 April 2019
Present value
of minimum
lease
payments
£m
Minimum
lease
payments
£m
9
41
82
132
(49)
83
(3)
80
8
31
44
83
—
83
(3)
80
The majority of finance leases related to properties in the UK where obligations are denominated in Sterling and remaining
lease terms as at 27 April 2019 varied between 6 and 17 years. The effective borrowing rate on individual leases at this
date ranged between 5.51% and 9.29%. Interest rates are fixed at the contract date. These obligations are secured
over the related leased asset. All leases are on a fixed repayment basis and no arrangements have been entered into for
contingent rental payments.
The Group’s obligations under finance leases are secured by the lessors’ rights over the leased assets disclosed in
note 11.
21 Provisions
At beginning of period
Adjustment on initial
application of IFRS 16
Additions
Released in the period
Utilised in the period
Disposed
Foreign exchange
At end of period
Analysed as:
Current
Non-current
2 May 2020
27 April 2019
Reorg-
anisation
£m
Sales
£m
Property
£m
16
7
98
—
51
—
(28)
—
—
39
39
—
39
—
14
—
(13)
—
(1)
7
5
2
7
(47)
45
—
(32)
—
—
64
31
33
64
Other
£m
30
—
37
(6)
(21)
—
—
40
39
1
40
Total
£m
151
(47)
147
(6)
(94)
—
(1)
150
114
36
150
Reorg-
anisation
£m
15
Sales
£m
10
Property
£m
63
Other
£m
11
—
30
(1)
(28)
—
—
16
14
2
16
—
13
—
(16)
—
—
7
6
1
7
—
66
(2)
(29)
—
—
98
37
61
98
—
63
(3)
(41)
—
—
30
29
1
30
Total
£m
99
—
172
(6)
(114)
—
—
151
86
65
151
Reorganisation:
Reorganisation provisions relate principally to redundancy costs and other costs arising as a result of restructuring and are
only recognised where plans are demonstrably committed and where appropriate communication to those affected has
been undertaken at the balance sheet date.
168
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements
21 Provisions continued
As part of the Group’s long-term strategy in joining up the UK mobile operations with the wider business, the Group
took the next steps in the turnaround of the mobile business by announcing on 17 March 2020 that it would be closing
the Carphone Warehouse UK store estate and continue to focus on selling devices and connectivity through its shop-
in-shops in 305 big Currys PCWorld stores and online. Further information on the announcement can be found here:
https://www.dixonscarphone.com/en/news-and-media/press-releases/year/2020/dixons-carphone-takes-essential-next-
stepturnaround-uk. The provision as at 2 May 2020 predominantly relates to costs associated with this strategic decision.
Sales:
Sales provisions relate to ‘cash-back’ and similar promotions and product and service warranties. The anticipated costs
of these are assessed by reference to historical trends and any other information that is considered relevant. Management
estimates the related provision for future related claims based on historical information, as well as recent trends that might
suggest that past cost information might differ from future claims.
Property provisions:
During the period the Group has adopted IFRS 16: ‘Leases’ using the modified retrospective approach, as a result prior
year comparative numbers have not been restated. Property provisions in the prior year relate mainly to costs associated
with operating lease early exit premiums, onerous leases and provisions for dilapidations recognised in accordance with
IAS 37.
For the current period, property provisions include closure costs and dilapidations provisions relating to previously
announced closure programmes. This predominantly relates to the closure of the Carphone Warehouse standalone store
estate, as discussed above.
Other provisions
Other provisions relate to regulatory costs, data incident costs, and warranties in relation to discontinued operations.
The Group operates in a regulated environment and failure to manage the business in line with regulation could expose the
Group to financial penalties.
In the year ended 27 April 2019 the Group reported that it was subject to a £29m fine imposed by the FCA following the
conclusion of an investigation into historical Geek Squad mobile phone insurance selling processes. This fine related to a
period prior to June 2015. Historical regulatory investigations may be subject to potential future claims and subsequent
payments that may take several years to complete and evaluate. The Group ran two voluntary redress programmes which
led to the refund of £1.5m.
Nonetheless, the Group has subsequently received claims from a number of customers who believe they were mis-sold
Geek Squad policies. These claims are carefully considered by the Group on a case by case basis. The majority of claims
received have been invalid. The Group has recorded an additional regulatory costs provision of £30m in the period for
customer compensation, with £16m paid out by year end.
During the current year, VAT assessments have also been issued for historical periods relating to the previously disposed
Phone House Germany business. The full amount of these assessments have been provided, resulting in a current year
charge of £6m. This is further disclosed in note 25.
For the year ended 27 April 2019, further costs of £20m associated with the data incident announced on 13 June 2018
were also provided for.
Non-current provisions are expected to be utilised over a period up to ten years.
169
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements Notes to the Group
Financial Statements continued
22 Retirement and other post-employment benefit obligations
Retirement benefit obligations – UK
– Nordics
2 May
2020
£m
550
—
550
27 April
2019
£m
579
—
579
The Group operates a defined benefit and a number of defined contribution schemes. The principal scheme which
operates in the UK includes a funded final salary 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.
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 £34m (2018/19: £30m).
b) UK defined benefit pension scheme – actuarial valuation and assumptions
A full actuarial valuation of the scheme was carried out as at 31 March 2019 and showed a shortfall of assets compared
with liabilities of £645m. A ‘recovery plan’ based on this valuation was agreed with the Trustees such that contributions in
respect of the scheme will be £46m for the 2020/21 financial year, rising to £78m per year from the 2021/22 financial year
until 2027/28, with a final payment of £52m in 2028/29.
The principal actuarial assumptions as at 31 March 2019 were:
Discount rate for accrued benefits†
– Equity portfolio
– Multi-asset credit portfolio
– Matching portfolio
Rate of increase to pensions
Inflation
Rate per annum
3.85%
3.00%
1.50%
0.00% — 3.80%
3.40%
†
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 8 years from 2026 to 2034 so
that by 2034 the asset portfolio is projected to be 100% invested in matching assets and multi-asset credit.
c) UK Defined benefit pension scheme – IAS 19
At 31 March 2019, the market value of the scheme’s investments was £1,210m and, based on the above assumptions,
the value of the assets was sufficient to cover 65% of the benefits accrued to members with the liabilities amounting to
£1,855m.
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.
170
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22 Retirement and other post-employment benefit obligations continued
c) UK Defined benefit pension scheme – IAS 19 continued
(i) Principal assumptions adopted
The assumptions used in calculating the expenses and obligations are set by the directors after consultation with the
independent actuaries.
Rates per annum
Discount rate
Rate of increase in pensions in payment / deferred pensions (pre / post April 2006
accrual)
Inflation
2 May
2020
27 April
2019
1.60%
2.50%
2.55% / 1.95% 3.25% / 2.20%
3.25%
2.55%
The Group uses demographic assumptions underlying the formal actuarial valuation of the scheme as at 31 March 2019.
In particular, post retirement mortality has been assumed to follow the standard mortality tables ‘S3’ All Pensioners tables
published by the CMI, based on the experience of Self-Administered Pension Schemes (SAPS) with multipliers of 108% for
males and 104% for females. In addition, an allowance has been made for future improvements in longevity from 2003 by
using the new CMI 2018 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 86.4 years and 88.1 years for
men and between 88.8 years and 90.3 years for women for those reaching 65 over the next 20 years.
(ii) Amounts recognised in consolidated income statement
Past service cost
Net interest expense on defined benefit obligation
Total expense recognised in the income statement
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
—
14
14
15
12
27
On 26 October 2018, the High Court issued a judgement in a claim to address the issues of unequal Guaranteed Minimum
Pensions (GMPs) in the Lloyds Banking Group’s defined benefit pension schemes (the ‘Lloyds case’). This will potentially
impact the DSG Retirement and Employee Security Scheme operating in the UK. The Group is working through the details
of the ruling and assessing its impact on the liability valuation of the scheme. We currently estimate that this will increase
the liability by £15m, which was recorded as a past service cost in the prior period. There are a number of uncertainties
surrounding the change, including the method of calculation of the equalisation and any potential appeals against the
ruling, therefore we consider that the amount is subject to further change, however currently represents our best estimate.
(iii) Amounts recognised in other comprehensive income:
Remeasurement of defined benefit obligation – actuarial gains / (losses) arising from:
Changes in demographic assumptions
Changes in financial assumptions
Experience adjustments
Remeasurement of scheme assets:
Actual return on plan assets (excluding amounts included in net interest expense)
Cumulative actuarial loss
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
93
(136)
(46)
86
(3)
—
(142)
(53)
67
(128)
Amounts recognised in other comprehensive income include amounts arising from changes in demographic and
membership modelling estimates identified from the full actuarial valuation of the Scheme as at 31 March 2019. Changes in
demographic assumptions include gains of £97m arising from the update of pensioner longevity assumptions by using the
new CMI 2018 Core projections. Experience adjustments include losses of £59m to align modelling of future liabilities with
updated membership data used for the actuarial valuation at 31 March 2019.
171
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
22 Retirement and other post-employment benefit obligations continued
c) UK Defined benefit pension scheme – IAS 19 continued
iv) Amounts recognised in the consolidated balance sheet
Present value of defined benefit obligations
Fair value of plan assets
Net obligation
Changes in the present value of the defined benefit obligation:
Opening obligation
Past service cost
Interest cost
Remeasurements in other comprehensive income – actuarial (gains) / losses arising from changes in:
Demographic assumptions
Financial assumptions
Experience adjustments
Benefits paid
Closing obligation
2 May
2020
£m
(1,850)
1,300
(550)
27 April
2019
£m
(1,775)
1,196
(579)
2 May
2020
£m
1,775
—
45
(93)
136
46
(59)
27 April
2019
£m
1,584
15
44
—
142
53
(63)
1,850
1,775
The weighted average maturity profile of the defined benefit obligation at the end of the year is 21 years (2018/19:
21 years), comprising an average maturity of 25 years (2018/19: 25 years) for deferred members and 13 years (2018/19:
13 years) for pensioners.
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
2 May
2020
£m
1,196
31
46
27 April
2019
£m
1,114
32
46
86
(59)
67
(63)
1,300
1,196
172
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements
22 Retirement and other post-employment benefit obligations continued
c) UK Defined benefit pension scheme – IAS 19 continued
Analysis of scheme assets:
Overseas and global equities
Diversified growth
Multi-asset credit funds
Private equity
Corporate bonds
Other credit linked funds*
Liability driven investments (‘LDIs’)*
Synthetic equity*
Cash and cash instruments
Other
— Listed
— Listed
— Listed
— Unlisted
— Unlisted
— Listed
— Listed
— Unlisted
— Listed
— Unlisted
— Unlisted
— Listed
— Unlisted
— Unlisted
2 May
2020
£m
—
—
133
151
11
108
358
8
855
(302)
(24)
1
—
1
27 April
2019
£m
132
14
141
115
20
96
—
—
508
—
—
64
105
1
1,300
1,196
*
These assets are managed together as part of one investment portfolio.
In the fair value hierarchy, listed investments are categorised as level 1. Unlisted investments relate to derivatives, which
are categorised as level 2, and private credit and private equity funds which are categorised as level 3. Private credit
investments are valued by aggregating bid and offer quotes from brokers where this information is available. If this
information is not available, investments are valued at amortised cost, with provision for impairment where appropriate.
Private equity fund valuations are based on the last audited accounts of each investment plus any known movements
including distributions since the last audited accounts.
The investment strategy of the scheme is determined by the independent Trustees through advice provided by an
independent investment consultant. The Trustee’s objective is to achieve an above average long term return on the
scheme’s assets from a mixture of capital growth and income, whilst managing investment risk and ensuring the strategy
remains within the guidelines set out in the Pensions Act 1995 and 2004 and the scheme’s statement of investment
principles. In setting the strategy, the nature and duration of the scheme’s liabilities are taken into account, ensuring that
an integrated approach is taken to investment risk and both short term and long term funding requirements. 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.
To reduce volatility risk a liability driven investment (LDI) strategy forms part of the Trustee’s management of the UK
defined benefit scheme’s assets, including government bonds, corporate bonds and derivatives. Repurchase agreements
are entered into with counterparties to better offset the scheme’s exposure to interest and inflation rates, whilst remaining
invested in assets of a similar risk profile. Interest rate and inflation rate derivatives are also employed to complement the
use of fixed and index-linked bonds in matching the profile of the scheme’s liabilities.
Actual return on the scheme assets was a gain of £86m (2018/19: gain of £67m).
173
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
22 Retirement and other post-employment benefit obligations continued
c) UK Defined benefit pension scheme – IAS 19 continued
(v) Sensitivities
The value of the UK defined benefit pension scheme assets is sensitive to market conditions. Changes in assumptions
used for determining retirement benefit costs and liabilities may have a material impact on the 2019/20 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: 0.5% (2018/19: 0.25%) increase
Inflation rate: 0.5% (2018/19: 0.25%) increase†
Mortality rate: 1 year increase
Net finance costs
Net deficit
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
2 May
2020
£m
27 April
2019
£m
3
(4)
(2)
1
(2)
(2)
184
(151)
(74)
91
(71)
(71)
†
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 2 May 2020 the net obligation in relation to these benefits was £5m (2018/19: £4m) which is
included in trade and other payables.
23 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
2 May
2020
million
1,162
2 May
2020
million
1,160
2
1,162
27 April
2019
million
1,160
27 April
2019
million
1,158
2
1,160
2 May
2020
£m
1
2 May
2020
£m
1
—
1
27 April
2019
£m
1
27 April
2019
£m
1
—
1
During the year ended 2 May 2020, 2,149,777 (2018/19: 2,178,994) ordinary shares with nominal value of 0.1p each were
issued for consideration at nominal value (2018/19: at nominal value) to satisfy awards under the Group’s share option
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.
The Group has separately presented ‘other reserves’ for the first time in the period. This is to separately disclose
the hedging, investment in own shares, and investment revaluation reserves which were previously included within
accumulated profits. Other reserves also include the previously disclosed translation and demerger reserves.
In the 2018/19 Annual Report and Accounts, accumulated profits at 27 April 2019 were disclosed as £1,117m (28
April 2018: £1,646m after the adjustments on transition to IFRS 9: ‘Financial Instruments’ and IFRS 15: ‘Revenue from
Contracts with Customers’). Following the change in presentation of the hedging, investment in own shares and investment
revaluation reserves balances to other reserves, the disclosed accumulated profits at 27 April 2019 has been restated
to £1,089m before recognising the adjustments of transition to IFRS 16: ‘Leases’ (28 April 2018: £1,613m after the
adjustments on transition to IFRS 9: ‘Financial Instruments’ and IFRS 15: ‘Revenue from Contracts with Customers’).
174
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements
23 Share capital, retained earnings and reserves continued
b) Retained earnings and reserves continued
Movements within in the individual reserves are as follows:
At 28 April 2018
Other comprehensive income and expense recognised
directly in equity
Reclassified to income statement during the year (net of
tax)
Amounts transferred to the carrying value of inventory
purchased during the year
As at 27 April 2019
Other comprehensive income and expense recognised
directly in equity
Reclassified to income statement during the year
Amounts transferred to the carrying value of inventory
purchased during the year
Purchase of own shares
As at 2 May 2020
Investments
revaluation
reserve
£m
Investment
in own
share
reserve
£m
17
1
—
—
18
(8)
—
—
—
10
(1)
—
—
—
(1)
—
—
—
(12)
(13)
Hedging
reserve
£m
17
10
(17)
1
11
26
12
(41)
—
8
Translation
reserve
£m
Demerger
reserve
£m
39
(750)
Total
£m
(678)
(19)
(17)
—
—
—
(750)
1
(713)
—
—
—
—
(21)
12
(41)
(12)
(30)
—
—
9
(39)
—
—
—
(30)
(750)
(775)
The hedging reserve is used to recognise the effective portion of gains or losses on derivatives that are designated and
qualify as cash flow hedges. Amounts are subsequently either transferred to the initial cost of inventory or reclassified to
profit or loss as appropriate.
The investments revaluation reserve represents changes in the fair value of investments in listed shares which the Group
has elected to classify as FVTOCI. These changes are accumulated within the investments revaluation reserve, and
amounts are transferred from this reserve to accumulated profits when the listed shares are sold.
The investment in own shares reserve is used to recognise the cost of shares held by the EBT.
The translation reserve accumulates exchange differences arising on translation of foreign subsidiaries which are
recognised in other comprehensive income. The cumulative amount is reclassified to accumulated profits when the related
net investment is disposed of.
The demerger reserve arose as part of the demerger of the Group from TalkTalk in 2010.
24 Equity dividends
Amounts recognised as distributions to equity shareholders in the period
– on ordinary shares of 0.1p each
Final dividend for the year ended 28 April 2018 of 7.75p per ordinary share
Interim dividend for the year ended 27 April 2019 of 2.25p per ordinary share
Final year dividend for the year ended 27 April 2019 of 4.50p per ordinary share
Interim dividend for the year ended 2 May 2020 of 2.25p per ordinary share
2 May
2020
£m
27 April
2019
£m
—
—
52
26
78
90
26
—
—
116
Following the Group’s Covid-19 business update, announced 29 April 2020, the Board has made the decision not to pay a
full year dividend.
175
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
25 Discontinued operations and assets held for sale
There have been no additional operations classified as discontinued during the year ended 2 May 2020. The following were
classified as discontinued in the year ended 27 April 2019 and have continued to incur costs in the current financial year:
honeybee
For the year ended 2 May 2020 no profit or loss has been recognised in relation to the disposal of the honeybee operation.
For the year ended 27 April 2019 additional costs of £7m were recognised in relation to onerous contracts following the
sale of the operation and compensation to previous employees. A further £4m tax credit was recognised in the year ended
27 April 2019 relating to accelerated capital allowances.
Spain
On 29 September 2017, the Group completed the disposal of The Phone House Spain S.L.U., Connected World Services
Europe S.L. and Smarthouse Spain S.A. which together represented the trading operations in Spain. For the year ended
27 April 2019, the £1m tax credit was recognised in relation to the reversal of previously held provisions for tax risks due to
the fact that the statute of limitations had lapsed.
Other
As previously reported the sale of operations in Germany was completed on 5 May 2015, the Netherlands on 30 June
2015, Portugal on 31 August 2015 and Virgin Mobile France on 4 December 2014.
During the current year, VAT assessments have been issued for historical periods relating to the disposed Phonehouse
Germany business. These assessments fall under warranties given as part of the sale agreement and as such, it is probable
that the Group will need to pay these amounts. Therefore, the full amount of these assessments has been provided,
resulting in a current year charge of £6m.
An additional £4m credit has been recognised following the release of provisions relating to other legacy European
Carphone operations which are now in liquidation.
No additional profit or loss has been recognised in relation to Portugal (2018/19: £2m) or Virgin Mobile France (2018/19:
£5m) in the current period.
honeybee
£m
Spain
£m
Other
£m
Total
£m
Year ended 2 May 2020
—
—
—
—
—
—
—
—
—
—
—
(2)
(2)
—
(2)
—
(2)
(2)
—
(2)
Year ended 27 April 2019
honeybee
£m
Spain
£m
Other
£m
—
(7)
(7)
4
(3)
—
—
—
1
1
—
(7)
(7)
—
(7)
Total
£m
—
(14)
(14)
5
(9)
Revenue
Expenses
Loss before tax
Income tax
Revenue
Expenses
Loss before tax
Income tax
176
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements
25 Discontinued operations and assets held for sale continued
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
Operating activities
Investing activities
Year ended 2 May 2020
honeybee
£m
Spain
£m
Other
£m
—
2
2
—
—
—
(1)
—
(1)
Total
£m
(1)
2
1
Year ended 27 April 2019
honeybee
£m
Spain
£m
Other
£m
(5)
8
3
—
—
—
(3)
—
(3)
Total
£m
(8)
8
—
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).
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 18. The impact of Covid-19 has had no material impact on the fair value of contingent consideration.
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 carrying amount of financial assets and liabilities recorded at amortised cost and their fair
value are not materially different.
177
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
26 Financial risk management and derivative financial instruments continued
The carrying amount 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)
Derivative financial assets(3)
Derivative financial liabilities(3)
Trade and other payables(2)
Leases(2)*
Deferred and contingent consideration(3)
Loans and other borrowings(2)**
2 May
2020
£m
10
660
510
76
(52)
(1,509)
—
(3)
(864)
27 April
2019
(restated)
£m
18
665
601
18
(6)
(2,032)
(83)
(5)
(847)
(1) Held at fair value through other comprehensive income
(2) Held at amortised cost.
(3) Held at fair value through profit and loss
*
During the period the Group has adopted IFRS 16: ‘Leases’ using the modified retrospective approach, as a result prior year comparative
numbers have not been restated. Lease liabilities for the year ended 27 April 2019 relate solely to lease obligations recognised in
accordance with IAS 17. In accordance with changes to IFRS 7 within the period, leases recognised under IFRS 16 are no longer
recognised within the Group’s financial instruments fair value disclosure.
As disclosed in note 1, the Group’s cash and bank overdrafts have been restated to meet the presentational requirements for offsetting
in accordance with IAS 32. Comparative information for the year ended 27 April 2019 has increased cash from £125m to £665m and
overdrafts from £19m to £559m.
**
Offsetting financial assets and financial liabilities
The Group has forward foreign exchange contracts and cash that are subject to enforceable master netting arrangements
and cash pooling arrangements that do not meet the IAS 32 criteria for offset in balance sheet:
(i) Financial assets
Forward foreign exchange
contracts*
Cash and cash equivalents
Gross amounts of
recognised financial
assets
£m
Gross amounts of
recognised financial
liabilities set off in the
balance sheet
£m
Net amounts of
financial assets
presented in the
balance sheet
£m
Financial instruments
not set off in the
balance sheet
£m
76
660
736
—
—
—
76
660
736
(39)
(540)
(579)
Forward foreign exchange
contracts*
Cash and cash equivalents**
Gross amounts of
recognised financial
assets
£m
Gross amounts of
recognised financial
liabilities set off in the
balance sheet
£m
Net amounts of financial
assets presented in the
balance sheet
£m
Financial instruments
not set off in the
balance sheet
£m
18
665
683
—
—
—
18
665
683
(6)
(540)
(546)
2 May 2020
Net amount
£m
37
120
157
27 April 2019 (restated)
Net amount
£m
12
125
137
178
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements
26 Financial risk management and derivative financial instruments continued
(ii) Financial liabilities
Forward foreign exchange
contracts*
Overdrafts
Gross amounts of
recognised financial
liabilities
£m
Gross amounts of
recognised financial
assets set off in the
balance sheet
£m
Net amounts of
financial liabilities
presented in the
balance sheet
£m
Financial instruments
not set off in the
balance sheet
£m
(52 )
(540)
(592)
—
—
—
(52)
(540)
(592)
39
540
579
Forward foreign exchange
contracts*
Overdrafts**
Gross amounts of
recognised financial
liabilities
£m
Gross amounts of
recognised financial
assets set off in the
balance sheet
£m
Net amounts of financial
liabilities presented in
the balance sheet
£m
Financial instruments
not set off in the
balance sheet
£m
(6)
(559)
(565)
—
—
—
(6)
(559)
(565)
6
540
546
2 May 2020
Net amount
£m
(13 )
—
(13 )
27 April 2019 (restated)
Net amount
£m
—
(19)
(19)
*
**
The forward foreign exchange contract assets and liabilities are recognised within the statement of financial position as derivative assets
and derivative liabilities respectively. The change in fair value of the forward foreign exchange contract assets is accounted for as a
qualifying cash flow hedge.
As disclosed in note 1, the Group’s cash and cash equivalents and loans and other borrowings have been restated to meet the
presentational requirements for offsetting in accordance with IAS 32. Comparative information for the year ended 27 April 2019 has
therefore been restated to remove the previously disclosed cash and cash equivalents from the master netting tables presented above. This
has had no impact on the Group’s net assets.
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 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 2 May 2020, the total notional principal amount of outstanding currency contracts was £2,201m (2018/19: £2,004m) and
had a net fair value of £24m asset (2018/19: £12m asset). Monetary assets and liabilities and foreign exchange contracts
are sensitive to movements in foreign exchange rates.
There is no impact from the movement in foreign exchange rates on the Group’s profit and loss as all monetary assets and
liabilities in foreign currency are offset by non-hedged derivatives or offsetting monetary assets or liabilities.
179
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
26 Financial risk management and derivative financial instruments continued
b) Foreign exchange risk continued
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
Year ended
2 May 2020
Year ended
27 April 2019
Effect on
profit before
tax
£m
Effect on
total equity
£m
Effect on
profit before
tax
£m
Effect on
total equity
£m
—
—
—
—
—
—
13
62
30
26
17
6
—
—
—
—
—
—
13
61
29
26
17
7
c) Interest rate risk
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 100 basis point movements in the interest rate for the currencies in which
most Group cash, cash equivalents, loans and other borrowings are denominated and on which the valuation of most
derivative financial instruments is based is as follows, assuming that the year end positions prevail throughout the year:
1% increase in the Sterling interest rate
Year ended
2 May 2020
Year ended
27 April 2019
Effect on
profit before
tax increase
/ (decrease)
£m
Effect on
total equity
increase /
(decrease)
£m
Effect on
profit before
tax increase /
(decrease)
£m
Effect on
total equity
increase /
(decrease)
£m
1
(2)
1
(1)
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 response to Covid-19, the Group entered into a one year facility of £266m due to mature in April 2021.
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 £1,360m (2018/19: £1,093m). Further details of committed
borrowing facilities are shown in note 19.
180
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements
26 Financial risk management and derivative financial instruments continued
d) Liquidity risk continued
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.
2 May 2020
Lease liabilities*
Derivative financial instruments – payable:
Forward foreign exchange contracts
Derivative financial instruments – receivable:
Forward foreign exchange contracts
Loans and other borrowings
Deferred consideration
Trade and other payables
27 April 2019
Lease liabilities*
Derivative financial instruments – payable:
Forward foreign exchange contracts
Derivative financial instruments – receivable:
Forward foreign exchange contracts
Loans and other borrowings**
Deferred consideration
Trade and other payables***
In more than
one year but
not more
than five
years
£m
Within
one year
£m
In more than
five years
£m
Total
£m
(306)
(886)
(589)
(1,781)
(2,201)
—
— (2,201)
2,225
(589)
(1)
(1,470)
(2,342)
—
(287)
(2)
(39)
2,225
—
(876)
—
—
(3)
— (1,509)
(1,214)
(589)
(4,145)
In more than
one year but
not more
than five
years
£m
In more than
five years
£m
Total
(restated)
£m
(41
—
—
(303)
(4)
(140)
(488)
(82)
(132)
—
(1,992)
—
—
—
—
2,004
(868)
(5)
(2,032)
(82)
(3,025)
Within
one year
(restated)
£m
(9)
(1,992 )
2,004
(565)
(1)
(1,892)
(2,455)
*
**
The Group has adopted IFRS 16 during the period using the modified retrospective approach. As a result prior year comparative numbers
have not been restated. Prior period lease liabilities relate solely to finance lease obligations recognised in accordance with IAS 17.
As disclosed in note 1, the Group’s Loans and other borrowings have been restated to meet the presentational requirements for offsetting in
accordance with IAS 32. For the year ended 27 April 2019, Loans and other borrowings payable within one year have increased from £25m
to £565m to reflect £540m of overdrafts.
*** Trade and other payables have been restated in the presentation of the above table for the comparative period to remove other taxes and
social security that do not meet the definition of financial liabilities. This has led to trade and other payables reducing by £298m to £2,032m.
181
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
26 Financial risk management and derivative financial instruments continued
e) Credit risk
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.
Cash and cash equivalents and derivative assets are considered low risk financial instruments as they are held at banks
that are investment grade, with a strong capacity to meet their contractual cash flow obligations in the near term and
whose ability to pay will not necessarily be hampered by adverse changes in economic or business conditions. The credit
risk associated with 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 contract assets of £565m (2018/19: £725m), which are generally owed to the Group by 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
subscribers. Exposure to credit risk associated with the MNO subscriber is managed through an extensive consumer
credit checking process prior to connection with the network. The large volume of MNO subscribers reduces the Group’s
exposure to concentration of credit risk. Further information for credit risk associated to contract assets and the MNOs is
disclosed within note 15.
For the Group’s trade and other receivables in the UK and Nordics, it has adopted the simplified approach to calculating
expected credit losses allowed by IFRS 9. Historical credit loss rates are applied consistently to groups of financial
assets with similar risk characteristics. These are then adjusted for known changes in, or any forward-looking impacts on
creditworthiness. In Greece the Group has adopted both the simplified approach for business to business and a debtor by
debtor expected credit loss model based on the probability of default.
The Group reviews several factors when considering a significant increase in credit risk including but not limited to: credit
rating changes; adverse changes in general economic and/or market conditions; material changes in the operating results
or financial position of the debtor.
Indicators that an asset is credit-impaired would include observable data in relation to the financial health of the debtor:
significant financial difficulty of the issuer or the debtor; the debtor breaches contract; it is probable that the debtor will
enter bankruptcy or financial reorganisation.
Of the Group’s £510m trade and other receivables that fall within the classification of financial assets (2018/19: £601m),
£120m is deemed by the Group to have a material level of credit risk (2018/19: £120m). The Group applies the expected
credit loss model, as described above, to those receivables with a material level of credit risk. For the year ended 2 May
2020, management have considered the impact of Covid-19 by increasing the expected level of default however this has
resulted in an immaterial increase in the Group’s expected credit losses. The areas of risk and corresponding expected
credit loss are as follows:
2 May
2020
Gross
carrying
amount
£m
Expected
credit loss
£m
Gross
carrying
amount
£m
27 April
2019
Expected
credit loss
£m
8
31
2
20
29
4
3
20
3
120
3
3
2
—
2
1
2
1
1
15
8
33
2
29
21
4
3
17
3
120
2
2
2
1
—
—
2
1
2
12
UK – PC World Business (B2B)
UK – DSG Retail – Main Sales Ledger
UK – CPW Concessions
Nordics – Business to Business
Nordics – Franchise Debtors
Greece – Business to Business
Greece – Franchise Debtors
Greece – Consumer Credit
Greece – Main Sales Ledger
182
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26 Financial risk management and derivative financial instruments continued
e) Credit risk continued
Ageing of the areas of credit risk is set out in the tables below:
Gross amounts of recognised financial assets
Not Yet Due
0-90 Days
91-180 Days
180+ Days
2 May
2020
£m
93
12
3
12
120
27 April
2019
£m
97
8
4
11
120
The Group’s funding is reliant on its £1,360m bank facilities, which are provided by ten banks; these institutions are
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 a going concern,
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 IFRS 9 as follows:
Cash flow hedges
Foreign exchange
The objective of the Group’s policy on foreign exchange hedging is to protect the Group from adverse currency
fluctuations and to gain greater certainty of earnings by protecting the Group from sudden currency movements. All
hedging of foreign currency exposures is managed centrally within the Group Treasury function. The Group analyses its
exposure to FX rate movements without assuming any correlations between currency pairs and uses this analysis to hedge
up to the level prescribed in its transactional hedging policy (a target of up to 80% hedged a year in advance). The Group
generally prefers to use vanilla forward FX contracts as hedging instruments for hedges of forecasted transactions. The
Group has a policy that all its FX rate derivatives must be eligible for hedge accounting. The Group can use more complex
derivatives including options when management considers that they are more appropriate, based on management’s views
on potential FX rate movements.
Any amendments to the Group’s policies or strategy on managing foreign currency risk must be approved by the Group’s
Tax and Treasury Committee.
183
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
26 Financial risk management and derivative financial instruments continued
g) Derivatives continued
At 2 May 2020 the Group had forward and swap foreign exchange contracts in place with a notional value of £1,499m
(2018/19: £1,492m) and a net fair value of £23m asset (2018/19: £11m asset) 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 £1m asset
(2018/19: £1m asset).
Possible sources of ineffectiveness are scenarios where future cash flows are delayed to a later period or brought forward
to a prior period. Ineffectiveness can also be caused by credit risk (both own risk and that of the counterparty). All hedges
are expected to be highly effective.
Covid-19 has had an impact on the timing and volume of foreign currency purchases into the UK business. However, all
hedged items are considered highly probable, therefore no material ineffectiveness has been recognised.
As of 2 May 2020, the Group holds the following levels of foreign exchange hedging derivatives (foreign exchange
forwards) to hedge its exposure to fluctuating foreign exchange rates of the next 12 months:
Hedging USD purchases into GBP (UK)
Hedging EUR purchases into GBP (UK)
Hedging CNY purchases into GBP (UK)
Hedging EUR purchases into NOK (Nordics)
Hedging USD purchases into NOK (Nordics)
Hedging SEK sales into NOK (Nordics)
Hedging DKK sales into NOK (Nordics)
Hedging EUR purchases into GBP (Ireland)
Maturing
hedges in
the next
12 months
£m
51
18
65
733
88
285
190
69
1,499
Weighted
average
hedge rate
1.2649
1.1401
9.0544
10.6596
9.3812
1.0215
0.7081
0.8755
Year ended
2 May 2020
Change in
value during
the period
£m
Year ended
27 April 2019
Maturing
hedges in
the next
12 months
£m
Weighted
average
hedge rate
Change in
value during
the period
£m
1
—
1
48
8
(20)
(15)
—
23
57
12
74
720
85
288
189
67
1,492
1.3130
1.1250
8.9595
9.7915
8.3819
1.0604
0.7611
0.8798
—
—
2
(2)
3
7
1
—
11
The change in value of hedged items is a total of £23m (2018/19: £11m), this is used in assessing the economic
relationship between hedged items and hedging instruments.
Interest rate
The Group’s interest rate risk management objective is to limit the amount of additional expense incurred if interest rates
rise to unexpected levels. To manage the interest rate exposure, the Group generally enters interest rate swaps to fix its
floating rate borrowings, in which the Group agrees to exchange, at specified intervals, the difference between fixed and
variable rate interest amounts calculated by reference to an agreed-upon notional principal amount. The Group monitors
and manages its interest rate risk individually in each currency and it does not make any assumptions about how interest
rates in different currencies may move in tandem.
Any amendments to the Group’s policies or strategy on managing Interest rate risk must be approved by the Group’s Tax
and Treasury Committee.
The Group held interest rate swaps with a notional value of £280m (2018/19: £110m), and a fair value which rounds to £nil
(2018/19: £nil), whereby the Group receives a floating rate of interest based on LIBOR and pays a fixed interest rate. These
contracts mature between June 2020 and June 2024.
184
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements
26 Financial risk management and derivative financial instruments continued
g) Derivatives continued
As of 2 May 2020, the Group holds the following levels of interest rate hedging derivatives (interest rate swaps) to hedge its
exposure to fluctuating interest rates over the next 5 years:
Financial year ending 2020
Financial year ending 2021
Financial year ending 2022
Financial year ending 2023
Financial year ending 2024
Financial year ending 2025
Year ended
2 May 2020
Weighted
Average
fixed rate
%
Year ended
27 April 2019
Notional
value of
swaps
£m
Weighted
Average fixed
rate
%
Notional
value of
swaps
£m
—
220
10
20
20
10
—
0.68
0.71
0.54
0.52
0.52
70
30
10
—
—
—
0.55
0.66
0.71
—
—
—
A reconciliation of the Group’s hedging items included in the hedging reserve is set out in note 23b.
27 Notes to the cash flow statement
a) Reconciliation of operating profit to net cash inflow from operating activities
Loss before interest and tax – continuing operations
Loss before interest and tax – discontinued operations
Depreciation and amortisation
Share-based payment charge
Loss on disposal of fixed assets
Impairments and other non-cash items
Operating cash flows before movements in working capital
Movements in working capital:
Decrease / (increase) in inventory
Decrease in receivables
(Decrease) in payables
Increase in provisions
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
(28)
(2)
367
23
3
51
414
156
284
(248)
43
235
(223)
(14)
174
21
—
347
305
(26)
226
(182)
54
72
Cash generated from operations
649
377
185
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
27 Notes to the cash flow statement continued
b) Changes in liabilities arising from financing activities
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-
cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be,
classified in the Group’s consolidated cash flow statement as cash flows from financing activities.
Loans and other borrowings (note 19)*
Lease liabilities (note 20)(ii)
Total liabilities from financing activities
Adjustment
on initial
application
of IFRS 16
£m
—
(1,403)
(1,403)
28 April
2019
£m
(288)
(83)
(371)
Financing
cash flows
£m
(10)
299
289
New
leases
£m
—
(194)
(194)
Other
changes(i)
£m
(26)
(63)
(89)
2 May
2020
£m
(324)
(1,444)
(1,768)
*
The Group uses interest rate swaps and FX forward contracts to hedge borrowings. The fair value of these derivatives rounded to £nil (2019:
£nil). There were no material cash flows or changes in fair value on these instruments during the year.
(i) Other changes include interest accruals and FX.
(ii)
During the period the Group has adopted IFRS 16 using the modified retrospective approach. The current period lease liabilities are
recognised on balance sheet under IFRS 16.
Loans and other borrowings (note 19)**
Lease liabilities (note 20)(ii)
Total liabilities from financing activities
29 April
2018
£m
(349)
(85)
(434)
Financing
cash flows
£m
Other
changes(i)
£m
84
8
92
(23)
(6)
(29)
27 April
2019
£m
(288)
(83)
(371)
**
The presentation of Financing cash flows has increased from £61m to £84m and Other changes decreased from £nil to -£23m for the year
ended 27 April 2019 to reflect the gross movement of interest paid on Loans and other borrowings. This has had no impact on the opening
or closing balance of liabilities.
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 4a 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 Capital commitments
Intangible assets
Property, plant & equipment
Contracted for but not provided for in the accounts
2 May
2020
£m
14
2
2 May
2020
£m
4
8
12
27 April
2019
£m
13
2
27 April
2019
£m
15
6
21
186
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements
30 Operating lease arrangements
The Group as a lessee
The Group adopted IFRS 16: ‘Leases’ from 28 April 2019 using the modified retrospective approach. See note 11 and note
20 for details of the Group as a lessee for the year ended 2 May 2020. Comparatives for the prior reporting period have not
been restated to reflect this and therefore continue to be reported under IAS 17: ‘Leases’. As such, for the year ended 27
April 2019, the 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
27 April 2019 (Restated*)
Land and
buildings
£m
Other assets
£m
302
839
489
1,630
18
27
5
50
*
Operating lease commitments have been restated as at 27 April 2019 to reflect the future minimum lease payments under non-cancellable
operating leases in line with IAS 17. The figure disclosed within the 27 April 2019 Annual Report and Accounts overstated these future lease
payments by £171m.
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 at 27 April 2019 was
£9m.
The Group as a lessor
Under IFRS 16, an intermediate lessor is required to classify the sublease as finance lease or an operating lease by
reference to the right-of-use asset arising from the head lease. As such, for the year ended 2 May 2020, operating leases
in which the Group is a lessor relate to right-of-use assets subleased to external third parties. A maturity analysis of
undiscounted lease payments to be received relating to these operating leases is shown below.
Undiscounted amounts receivable under sub-leases classified as operating leases:
Year 1
Year 2
Year 3
Year 4
Year 5
Onwards
2 May
2020
£m
1
1
1
—
—
1
31 Contingent liabilities
The Group continues to cooperate with HMRC in relation to open tax enquiries arising from pre-merger legacy corporate
transactions in the Carphone Warehouse group. There are two separate material underlying transactions where there are
open enquiries. These have been explained further within note 1t. One of the enquiries has resulted in a contingent liability
being disclosed. This determination is based on the strength of third-party legal advice on the matter and therefore the
Group does not consider it “more likely than not” that these enquiries will result in an economic outflow. The potential
range of tax exposures relating to this enquiry is estimated to be approximately £nil - £220m excluding interest and
penalties. Interest on the upper end of the range is approximately £50m up to 2 May 2020. Penalties could range from nil to
30% of the principal amount of any tax.
187
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Group
Financial Statements continued
32 Changes in accounting policies
The group has adopted IFRS 16: ‘Leases’ from 28 April 2019 using the modified retrospective approach. Comparatives
for the prior reporting period have not been restated and continue to be reported under IAS 17: ‘Leases’, as permitted
under the specific transitional provisions of IFRS 16. The reclassifications and the adjustments arising from the new leasing
standard are therefore recognised in the opening balance sheet on 28 April 2019.
IFRS 16 introduces new requirements with respect to lease accounting. It presents significant changes to lessee
accounting by removing the distinction between operating and finance leases and requiring the recognition of a right-of-
use asset and a lease liability at commencement for all leases, except for short-term leases and leases of low value assets.
In contrast to lessee accounting, the requirements for lessor accounting have remained largely unchanged. The impact of
the adoption of IFRS 16 on the Group’s consolidated financial statements is described below.
Impact of the new definition of a lease
The group has performed a review of all leasing arrangements and applied the definition of a lease and related guidance
as set out in IFRS 16. The change in definition mainly relates to the concept of control. IFRS 16 distinguishes between
leases and service contracts on the basis of whether the use of an identified asset is controlled by the customer. Control is
considered to exist if the customer has:
– the right to obtain substantially all of the economic benefits from the use of an identified asset; and
– the right to direct the use of that asset.
Impact on Lessee Accounting
Former operating leases
IFRS 16 changes how the Group accounts for leases previously classified as operating leases under IAS 17, which were
off-balance sheet and charged to the income statement on a straight-line basis over the period of the lease.
On initial application of IFRS 16, for all leases (except as noted below), the Group:
a)
Recognises right-of-use assets and lease liabilities in the consolidated balance sheet, initially measured at the present
value of future lease payments;
b) Recognises depreciation of right-of-use assets and interest on lease liabilities in the consolidated income statement;
and
c)
Recognises the total amount of cash paid (both principal and interest portion) within financing activities (previously
presented within operating activities under IAS 17) in the consolidated cash flow statement.
On transition to IFRS 16 these lease liabilities were measured at the present value of the remaining lease payments,
discounted using the lessee’s incremental borrowing rate as of 28 April 2019. The Group’s weighted average incremental
borrowing rate applied to the lease liabilities on 28 April 2019 was 5.4%.
Lease incentives (e.g. rent-free periods) are recognised as part of the measurement of the right-of-use assets and lease
liabilities whereas under IAS 17 they resulted in the recognition of a lease incentive liability, amortised as a reduction of
rental expense on a straight-line basis.
On initial adoption, the right-of-use assets were adjusted for any previously recognised prepaid and accrued lease
payments as well as any liabilities from previously applying IFRS 3: ‘Business Combinations’ relating to unfavourable terms
of an operating lease.
Under IFRS 16, there is a lease-by-lease transition choice whereby a lessee can take a practical expedient to rely on
assessments immediately before the date of initial application of whether leases are onerous under the IAS 37: ‘Provisions,
Contingent Liabilities and Contingent Assets’ definition and to adjust the right-of-use asset by this amount. Alternatively,
the new requirements under IFRS 16 can be applied and the right-of-use asset is tested for impairment in accordance with
IAS 36: ‘Impairment of Assets’. The Group has considered this on a lease by lease basis with a transitional impairment
review taken on a number of leases.
On those leases where an impairment review was performed, rather than taking the practical expedient, this resulted in
an opening adjusted to reserves of £37m (net of tax). Changes around assumptions on the probability of future sub-lease
cash flows used in the impairment tests caused impairments. In addition to this, the impairment predominantly resulted
from the application of different discount rates in line with the applicable accounting standards. The onerous contract
provisions previously recognised in accordance with IAS 37 used a risk-free rate however on adoption of IFRS 16 and
recognition of right-of-use assets, these assets are tested for impairment under IAS 36 which uses a market participants
rate. The application of these standards and changes in discount rates caused an impairment on numerous right-of-use
lease assets.
188
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements 32 Changes in accounting policies continued
Payments associated with short-term leases, leases of low-value assets, and variable lease payments not included in the
right-of-use asset are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with
a lease term of 12 months or less. Low-value assets comprise IT-equipment and small items of office furniture.
Former finance leases
The Group did not change the initial carrying amounts of recognised assets and liabilities at the date of initial application
for leases previously classified as finance leases (i.e. the right-of-use assets and lease liabilities equal the lease assets and
liabilities recognised under IAS 17). The requirements of IFRS 16 were applied to these leases from 28 April 2019.
Impact on lessor accounting
IFRS 16 does not change substantially how a lessor accounts for leases. Under IFRS 16, a lessor continues to classify
leases as either finance leases or operating leases and account for those two types of leases differently.
Under IFRS 16, an intermediate lessor accounts for the head lease and the sublease as two separate contracts. The
intermediate lessor is required to classify the sublease as a finance or operating lease by reference to the right-of-use asset
arising from the head lease (and not by reference to the underlying asset as was the case under IAS 17).
Because of this change, the Group has reclassified certain sublease agreements as finance leases and recognised finance
lease asset receivables. This change has impacted the timing of recognition of the related revenue (recognised in finance
income).
Practical expedients applied on adoption
In applying IFRS 16 for the first time, the group has used the following practical expedients permitted by the standard:
– the use of a single discount rate to a portfolio of leases with reasonably similar characteristics
– reliance on previous assessments on whether leases are onerous (with the exception of certain leases as discussed
above)
– the accounting for operating leases with a remaining lease term of less than 12 months as at 28 April 2019 as short-term
leases
– the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application, and
– the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
The following table reconciles the minimum lease commitments for the year ended 27 April 2019, to the amount of lease
liabilities recognised on 28 April 2019:
Operating lease commitments restated as at 27 April 2019*
Discounted using the lessee’s incremental borrowing rate at the date of initial application
Finance lease liabilities recognised as at 27 April 2019
Short-term leases recognised on a straight-line basis as expense
Adjustments as a result of a different treatment of extension and termination options
Lease liability recognised at 28 April 2019
Of which are:
Current
Non-current
£m
1,680
1,346
83
(23)
79
1,485
210
1,275
1,485
*
Operating lease commitments have been restated as at 27 April 2019 to reflect the correct future minimum lease payments under non-
cancellable operating leases in line with IAS 17. The figure disclosed within the 27 April 2019 Annual Report and Accounts overstated these
future lease payments.
33 Events after the balance sheet date
The impact of the Covid-19 pandemic on the Group’s operations is discussed within the strategic report on page 8 as
well as set out within note 1 to the financial statements which summarises the downside worse case Covid-19 scenario
modelled by the Group. Subsequent to the balance sheet date, the Group has monitored trade performance, internal
actions, as well as other relevant external factors (such as changes in any of the government restrictions). No adjustments
to the key estimates and judgements that impact the balance sheet as at 2 May 2020 have been identified.
189
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Company
Balance Sheet
Company
Balance Sheet
Fixed assets
Investments in subsidiaries
Debtors
Current assets
Cash and cash equivalents
Debtors
Derivative assets
Creditors: amounts falling due within one year
Loans payable
Derivative liabilities
Net current assets
Total assets less current liabilities
Loans payable
Net assets
Capital and reserves
Share capital
Share premium reserve
Profit and loss account
Note
C4
C5
C5
C7
C6
C8
C7
C8
C9
C9
2 May
2020
£m
2,670
4
2,674
160
2,803
124
3,087
(2,593)
(44)
(124)
27 April
2019
(restated)
£m
2,676
—
2,676
123
2,768
24
2,915
(2,511)
—
(24)
326
380
3,000
(280)
3,056
(288)
2,720
2,768
1
2,263
456
1
2,263
504
2,720
2,768
The Company’s profit for the year was £42m (2018/19: £34m) .
Cash and cash equivalents and creditors: amounts falling due within one year have been restated to meet the
presentational requirements of IAS 32 as further described in note C1. This has had no impact on net assets.
The financial statements of the Company (registered number 07105905) were approved by the Board on 14 July 2020 and
signed on its behalf by:
Alex Baldock,
Group Chief Executive
Jonny Mason,
Group Chief Financial Officer
Company registration number: 7105905
190
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Company Statement of
Changes in Equity
Company Statement of
Changes in Equity
At 28 April 2018
Profit for the year
Total comprehensive income for the year
Equity dividends
At 27 April 2019
Profit for the year
Total comprehensive income for the year
Purchase of own shares
Equity dividends
At 2 May 2020
Share
capital
£m
1
—
—
—
1
—
—
—
—
1
Share
premium
reserve
£m
2,263
—
—
—
2,263
—
—
—
—
2,263
Profit and
loss account
£m
586
34
34
Total equity
£m
2,850
34
34
(116)
504
(116)
2,768
42
42
(12)
(78)
456
42
42
(12)
(78)
2,720
191
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Company
Financial Statements
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 as issued by the Financial Reporting Council.
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.
The Company had no employees during the year ended 2 May 2020 (2018/19: nil). All directors were remunerated by other
group companies.
Restatement of prior periods
Within the period, it was determined that the Company’s cash and overdrafts within notional cash pooling arrangements
did not meet the requirements for offsetting in accordance with IAS 32: ‘Financial Instruments: Presentation’. For
presentational purposes, amounts have therefore been restated for the preceding period ended 27 April 2019 and
the beginning of the preceding period being 28 April 2018 in accordance with IAS 8: ‘Accounting Policies, Change in
Accounting Policies and Errors’. The impact of this change is to increase both cash and cash equivalents and overdrafts
within current loans and other borrowings by £46m.
This has had no impact on net assets as seen on the face of the Consolidated balance sheet.
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 2 May 2020 was £42m (2018/19: £34m).
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 24 of
the Group financial statements.
192
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20Financial Statements C4 Fixed asset investments
Opening balance
Impairments
Closing balance
Cost
Accumulated impairments
Net carrying amount
2 May
2020
£m
2,676
(6)
2,670
2,776
(106)
2,670
27 April
2019
£m
2,677
(1)
2,676
2,776
(100)
2,676
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.
The directors acknowledged that as at 2 May 2020 the market capitalisation of Dixons Carphone plc was less than the
net assets of the company, which primarily consists of investments in subsidiaries. This was considered an indicator of
impairment and an impairment test over the investment in subsidiaries was performed. The recoverable amounts of the
investments have been determined based on value-in-use calculations which require the use of estimates. Management
has prepared discounted cash flows based on the latest 5 year strategic plan updated for the impact of Covid-19 as
further explained in the Group accounting policies within the consolidated financial statements. No impairment charge was
recognised over investment subsidiaries as a result of the impairment test detailed above.
For the year ended 2 May 2020, an impairment of £6m (2018/19: £1m) was recognised over subsidiaries where trading has
ceased during the period. The Company received a dividend in the period from these entities which led to an impairment
being recognised as the investment exceeded the net assets of the subsidiaries.
C5 Debtors
Amounts owed by Group undertakings
Prepayments
Other debtors
2 May
2020
£m
2,798
9
—
2,807
27 April
2019
£m
2,761
6
1
2,768
Amounts owed by Group undertakings are unsecured, repayable on demand and any interest charged is at current market
rates.
Receivable balances with other Group entities, are reviewed for potential impairment based on the ability of the
counterparty to meet its obligations. The net current asset / liability position of the entity is considered and where the
amount due to the Company is not covered, the estimated future cashflows of the counterparty and subsidiary companies
with the ability to distribute cash to it are considered. The Company recognised an impairment of £19m in the period
(2018/19: £nil) in relation to amounts owned by Group undertakings.
Included within debtors, £4m (2018/19: £nil) of prepayments is classified as non-current. All other amounts are due within
one year.
C6 Creditors
Amounts owed to Group undertakings
Overdrafts*
Corporation tax
Accruals and deferred income
Amounts falling due within one year
2 May
2020
£m
2,124
468
—
1
2,593
27 April
2019
(restated)
£m
2,099
409
2
1
2,511
*
As disclosed in note C1, the Company’s overdrafts have been restated to meet the presentational requirements for offsetting in accordance
with IAS 32. Comparative information for the year ended 27 April 2019 has increased from £363m to £409m. This has had no impact on the
Company’s net assets.
193
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
continued
Notes to the Company
Financial Statements continued
C7 Derivatives
Foreign exchange contracts
Derivative assets
Foreign exchange contracts
Derivative liabilities
2 May
2020
£m
124
124
(124)
(124)
27 April
2019
£m
24
24
(24)
(24)
Interest rate swaps convert floating rate debt (3 month LIBOR plus a margin) to a fixed rate.
This value is determined using forward exchange and interest rates derived from market sourced data at the balance sheet
date, with the resulting value discounted back to present value (level 2 classification). See note 26 for further details.
C8 Loans payable
Details of loans payable are provided in note 19 to the Group financial statements.
C9 Share capital and share premium
Details of movements in share-capital and share premium are disclosed in note 23 to the Group financial statements.
C10 Subsidiary undertakings
a) Principal subsidiaries as at 2 May 2020
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
CPW Technology Services
Limited
Dixons Carphone Holdings
Limited
Registered office address
Country of incorporation
or registration
Share class(es) held
1 Portal Way, London, W3 6RS United Kingdom A & B Ordinary
% held Business activity
Holding
company
100
1 Portal Way, London, W3 6RS United Kingdom
Ordinary
100
IT
1 Portal Way, London, W3 6RS United Kingdom
Ordinary
Deferred
A Ordinary
B Ordinary
Ordinary
Deferred
100*
100*
84.6**
100*
100
100*
Holding
company
Holding
company
Dixons Retail Group Limited
1 Portal Way, London, W3 6RS United Kingdom
Dixons South East Europe
A.E.V.E.
DSG International Holdings
Limited
DSG Retail Ireland Limited
90 Marinou Antypa str.,Neo
Irakleio, Athens 14121
Greece
Ordinary
100
Retail
1 Portal Way, London, W3 6RS United Kingdom
Ordinary
100
Holding
company
3rd Floor Office Suite,
Omni Park Shopping Centre,
Santry, Dublin 9
Ireland
Ordinary
100
Retail
DSG Retail Limited
1 Portal Way, London, W3 6RS United Kingdom
Irredeemable
Cumulative
Preference and
Ordinary
100
Retail
Elgiganten Aktiebolag
ElGiganten A/S
Elkjøp Nordic AS
Elkjøp Norge AS
Gigantti Oy
New Technology Insurance
Unlimited Company(1)
194
Box 1264, 164, 29 Kista,
Stockholm
Arne Jacobsens Allé 16, 2.sal
København S, 2300 Copenhagen
Nydalsveien 18A, NO-0484 Oslo
Solheimveien 10, NO-1473,
Lørenskog
Töölönlahdenkatu 2, FI-00100,
Helsinki
Baker Tilly Hughes Blake,
Joyce House,
22-23 Holles Street, Dublin 2
Sweden
Ordinary
100
Retail
Denmark
Norway
Norway
Ordinary
Ordinary
Ordinary
100
100
100
Retail
Retail
Retail
Finland
Ordinary
100
Retail
Ireland
Ordinary
100
Insurance
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements
C10 Subsidiary undertakings continued
a) Principal subsidiaries as at 2 May 2020 continued
The Carphone Warehouse
Limited
The Carphone Warehouse
Limited
1 Portal Way, London, W3 6RS United Kingdom
Ordinary
100
Retail
3rd Floor Office Suite,
Omni Park Shopping Centre,
Santry, Dublin 9
Ireland
Ordinary
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) New Technology Insurance Unlimited Company was dissolved on 8 May 2020.
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.
Registered office address
Country of incorporation
or registration
Share class(es) held
% held
Name
Alfa s.r.l.
Carphone Warehouse Ireland Mobile
Limited (in liquidation)
CCC Nordic A/S
Codic GmbH (in liquidation)
Connected World Services
Distributions Limited
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 CP Limited
CPW Tulketh Mill Limited
DISL 2 Limited
DISL Limited
Via monte Napoleone n. 29,
20121 Milano
Italy
Ordinary
44 Fitzwilliam Place, Dublin 2
Ireland
Ordinary
Arne Jacobsens Allé 15, 8.,
2300 København S.
Eschenheimer Anlage 1, 60316,
Frankfurt
Denmark
Ordinary
Germany
Ordinary
1 Portal Way, London, W3 6RS
United Kingdom
Ordinary
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
6th Floor, Victory House,
Prospect Hill, Douglas, IM1 1EQ
United States
Ordinary
Netherlands
Ordinary
France
Ordinary
United Kingdom
Ordinary
Isle of Man
Ordinary
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Isle of Man
Ordinary
6th Floor, Victory House,
Prospect Hill, Douglas, IM1 1EQ
Isle of Man
Dixons Carphone CoE s.r.o.
Trnita, 491/5, 602 00 Brno
Czech Republic
Dixons Deutschland GmbH
Ottostraße 21, 80333 Munich
Germany
*
Interest held directly by Dixons Carphone plc.
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
195
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Notes to the Company
Financial Statements continued
C10 Subsidiary undertakings continued
b) Other subsidiary undertakings continued
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Name
Dixons Sourcing Limited
Dixons Stores Group Retail Norway
AS
Dixons Travel srl (in liquidation)
Registered office address
Country of incorporation
or registration
Share class(es) held
% held
31/F, AXA Tower Landmark East,
100 How Ming Street,
Kwun Tong Kowloon
Hong Kong
Ordinary
100
Nydalsveien 18A, NO-0484 Oslo
Norway
Ordinary
Foro Buonaparte 70, 20121, Milan
Italy
DSG Card Handling Services Limited
1 Portal Way, London, W3 6RS
United Kingdom
Ordinary
Cumulative C
& D Preference
and Ordinary
Ordinary
Ordinary
United Kingdom
United Kingdom
Hong Kong
Ordinary
Belgium
Ordinary
DSG Corporate Services Limited
DSG European Investments Limited
DSG Hong Kong Sourcing Limited
DSG International Belgium BVBA
DSG International Retail Properties
Limited
DSG Ireland Limited
DSG KHI Limited
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, Box 204, B-1000
Brussels
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
Epoq Logistic DC k.s.
iD Mobile Limited
InfoCare CS AB
InfoCare Workshop AS
InfoCare Workshop Oy
40 Upper Mount Street,
Dublin 2, D02 PR89
Mobelvagen 51, 556 52 Jönköping
Evropská 868, 664 42 Modrˇice
1 Portal Way, London, W3 6RS
Arabygatan 9, 35246 Växjö,
Kronobergs län
Industrivegen, 53, 2212,
Kongsvinger
Silvastintie 1, 01510, Vantaa
Ireland
Ordinary
Sweden
Czech Republic
United Kingdom
Ordinary
Ordinary
Ordinary
Sweden
Ordinary
Norway
Finland
Ordinary
Ordinary
196
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements C10 Subsidiary undertakings continued
b) Other subsidiary undertakings continued
Name
Kereru Limited
Kungsgatan Concept Store AB
Mastercare Service and Distribution
Limited
Mohua Limited
MTIS Limited
New CPWM
PC City (France) SNC
Petrus Insurance Company Limited
Simplify Digital Limited
TalkM Limited
Team Knowhow Limited
The Carphone Warehouse (Digital)
Limited
The Carphone Warehouse UK
Limited
The Phone House Holdings (UK)
Limited
Registered office address
Country of incorporation
or registration
Share class(es) held
% held
1 Portal Way, London, W3 6RS
Box 1264, 164, 29 Kista, Stockholm
United Kingdom
Sweden
Ordinary
Ordinary
1 Portal Way, London, W3 6RS
United Kingdom
Ordinary
1 Portal Way, London, W3 6RS
Carphone Warehouse, Dixons Unit,
301 Omni Park Shopping Centre,
Swords Road, Dublin 9
1 Portal Way,
London, W3 6RS
52 rue de la Victoire
75009 Paris
2 Irish Town
1 Portal Way, London, W3 6RS
1 Portal Way, London, W3 6RS
1 Portal Way, London, W3 6RS
United Kingdom
Ordinary
Ireland
Ordinary
United Kingdom
Ordinary
France
Partnership
Gibraltar
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
1 Portal Way, London, W3 6RS
United Kingdom
Ordinary
100*
1 Portal Way, London, W3 6RS
United Kingdom
Ordinary
1 Portal Way, London, W3 6RS
United Kingdom
Ordinary
*
Interest held directly by Dixons Carphone plc.
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)
Registered office address
Country of incorporation
or registration
Share class held
% held
Fugleskjærgata 10, 6905 Florø
Amerika Plads 37,
DK-2100 København Ø
Norway
Ordinary
Denmark
Ordinary
30
40
100
100
Business
activity
Retail
Retail
197
Dixons Carphone plc Annual Report and Accounts 2019/20Financial Statements Notes to the Company
Financial Statements continued
C10 Subsidiary undertakings continued
d) Subsidiary undertakings exempt from audit
The following subsidiaries, all of which are incorporated in England and Wales 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
Carphone Warehouse Europe Limited
Connected World Services Distributions Limited
CPW Acton Five Limited
CPW Brands 2 Limited
CPW CP Limited
CPW Technology Services Limited
CPW Tulketh Mill Limited
Dixons Carphone Holdings Limited
Dixons Retail Group Limited
DSG Card Handling Services Limited
DSG European Investments Limited
DSG International Holdings Limited
DSG International Retail Properties Limited
DSG Ireland Limited
DSG KHI Limited
DSG Overseas Investments Limited
New CPWM Limited
Simplify Digital Limited
TalkM Limited
The Carphone Warehouse (Digital) Limited
The Carphone Warehouse UK Limited
The Phone House Holdings (UK) Limited
Company registration number
06534088
01847868
05738735
07135355
06585457
02881162
06585719
07866062
03847921
04185110
03891149
03887870
00476440
00240621
09012752
02734677
07866069
06095563
04682207
03966947
03827277
03663563
198
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedFinancial Statements Five Year Record
(unaudited)
Five Year Record
(unaudited)
Income statement – Adjusted and Pro forma
Adjusted(1)
Revenue
Net profit after tax
Earnings per share
– Basic
– Diluted
Pro forma adjusted results(1)
Revenue
EBIT
Interest
Profit before taxation
2019/20
£m
2018/19
£m
2017/18
£m
2016/17
£m
2015/16
£m
10,217
10,474
10,555
10,221
9,412
125
269
327
370
326
10.8p
10.6p
23.2p
23.0p
28.3p
28.2p
32.1p
32.0p
28.3p
27.4p
10,217
10,474
10,555
10,221
9,412
194
(28)
166
363
(24)
339
430
(18)
412
495
(16)
479
453
(22)
431
(1)
Adjusted results – continuing operations reflect the statutory results of the Group excluding items classified as adjusting items.
199
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20Financial Statements
Shareholder and
Corporate
Information
Shareholder and Corporate
Information
latest investment scams. You can also call the Consumer
Helpline on +44 (0)800 111 6768.
ShareGift
If you have a very small shareholding that is uneconomical
to sell, you may wish to consider donating it to ShareGift
(Registered charity no. 1052686), a charity that specialises
in the donation of small, unwanted shareholdings to good
causes. You can find more information by visiting sharegift.
org or by calling +44 (0)207 930 3737.
Electronic communications
Shareholders will receive annual reports and other
documentation electronically, unless they tell our registrars
that they would like to continue to receive printed materials.
This is in line with best practice and underpins our
commitment to reduce waste.
Shareholders may view shareholder communications online
instead of receiving them in hard copy. Shareholders may
elect to receive notifications by email whenever shareholder
communications are added to the website by visiting
www.shareview.co.uk and registering online.
Corporate Website
Shareholders are encouraged to visit the Dixons Carphone
website at dixonscarphone.com. The website includes
information about the organisation, its strategy and
business performance, latest news and press releases and
the Group’s approach to corporate governance.
The investors section provides a comprehensive
breakdown of Dixons Carphone investor proposition,
share price, financial results, shareholder meetings and
dividends.
Auditor
Deloitte LLP
1 New Street Square
London
EC4A 3BZ
www.deloitte.com
Joint Stockbrokers
Deutsche Bank AG
London
EC2N 2DB
www.db.com
Citigroup Global Markets Limited
33 Canada Square
Canary Wharf
London
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)
Shareholder enquiries
Any queries that shareholders have regarding their
shareholdings, such as a change of name or address,
transfer of shares or lost share certificates, should be
referred to the Registrar using the contact details above.
The Shareholder Helpline is available (phone numbers
above) on UK business days between 9.00am and 5.00pm
(UK time), excluding public holidays in England and Wales.
Managing shares online
Shareholders can manage their holdings online by
registering with an electronic communications service
called Shareview at www.shareview.co.uk. This is a secure
online platform which is provided by the Registrar Equiniti.
To register, you will need your shareholder reference
number, which can be found on your share certificate,
dividend confirmation or form of proxy.
Unauthorised brokers (boiler room scams)
Dixons Carphone plc is legally obliged to make its
share register available to the general public in certain
circumstances. Consequently, some shareholders may
receive unsolicited phone calls or correspondence
concerning investment matters which may imply a
connection to the company concerned. These are typically
from overseas-based ‘brokers’ who target UK shareholders
offering to buy their shares or sell them what can turn
out to be worthless or high-risk shares in US or UK
investments. These communications can be persistent and
extremely persuasive.
Share fraud includes scams where investors are called
out of the blue and offered shares that often turn out to be
worthless or non-existent, or an inflated price for shares
they own. These calls come from fraudsters operating in
‘boiler rooms’ that are mostly based abroad. While high
profits are promised, those who buy or sell shares in this
way usually lose their money.
If you are approached about a share scam you should tell
the FCA using the share fraud reporting form at
www.fca.org.uk/scams where you can find out about the
200
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedInvestor Information
Shareholder and
Corporate
Information
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.
Registered office / Head office
1 Portal Way
London
W3 6RS
United Kingdom
www.dixonscarphone.com
Company registration number
07105905
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
For Deutsche Bank Shareholder Services:
American Stock Transfer & Trust Company (‘AST’)
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)
Company Secretary
Enquiries should be directed to:
Nigel Paterson,
General Counsel and Company Secretary
cosec@dixonscarphone.com
Investor relations
Enquiries should be directed to:
Dan Homan,
Head of Investor Relations
ir@dixonscarphone.com
201
Dixons Carphone plc Annual Report and Accounts 2019/20Investor Information Glossary and
Definitions
Glossary and
Definitions
Alternative performance measures (‘APMs’)
In the reporting of financial information, and as set out in the Strategic Report, the Group uses certain measures that
are not required under IFRS. These are presented in accordance with the Guidelines on APMs issued by the European
Securities and Markets Authority (“ESMA”). 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.
Adjusting items
Included within our APMs we report adjusted revenue, adjusted PBT, adjusted EBIT, and adjusted EPS. These measures
exclude items which are significant in size or volatility or by nature are non-trading or highly infrequent. Adjusted 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 material that they distort underlying
performance (such as reorganisation costs, impairment charges and property rationalisation costs, out of period mobile
network debtor revaluations and non-recurring charges), income from previously disposed operations and net pension
interest costs. There are no adjustments made to exclude the impact of Covid-19. 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 / or operations of the Group.
Impact of IFRS 16: ‘Leases’
The Group adopted IFRS 16: ‘Leases’ using the modified retrospective method which means prior year comparatives
are not restated. In order to aid comparability with prior year measures, the impact of IFRS 16 has been included within
adjusting items within the current period. The directors believe this adjustment is helpful in the current year in aiding
shareholders in comparability with prior periods, which are reported under IAS 17. This will not be disclosed as an
adjusting item in future years given comparatives will be under IFRS 16.
Out of period network debtor revaluations
Following the separation of the UK & Ireland Mobile reporting segment in the prior year, those performance measures,
internal targets and KPIs included in the information reviewed by the board and performance guidance given to the
external stakeholders have evolved to provide greater transparency over in year trading results. To reflect this, current year
adjusting items also include the impact of out of period network debtor revaluations. When we recognise transactions,
we do not expect material revaluations. If they arise it is because of unanticipated one-off changes in the external
environment, for example changes in regulation. These out of period revaluations can be either positive or negative. They
are explained in detail within note 15, below the network commission contract assets and receivables reconciliation table in
footnote (iv), to the financial statements. Our treatment for these revaluations is to exclude from our APMs, changes in the
expected consideration related to revenue recognised from performance obligations satisfied in previous years. In contrast,
whether positive or negative, for the changes to expected revenue where the point of sale (i.e. the initial recognition of
commission) was within the current financial year we recognise these changes within our APMs for that year.
The removal of these out of period network debtor revaluations is considered to be additional useful information to aid
the understanding of current year trading. Comparative period performance measures have been included accordingly as
disclosed below.
As explained within note 1t to the financial statements, the network commission receivables are increased each year
in line with RPI. As part of the variable revenue constraint, the Group does not include this RPI estimate in the revenue
recognised at point of sale. This revenue is recognised once a year when the RPI figure is confirmed. In addition to
this, there are other out of period amounts settled in relation to historical transactions that are not included in the initial
estimate of revenue at point of sale. As the Group does not recognise an estimate of these amounts within revenue at the
point of sale, they are recognised in revenue within each financial year once the amounts for that period are known and
our treatment is to include these items within our APMs. They are explained in detail within note 15, below the network
commission contract assets and receivables reconciliation table in footnote (v), to the financial statements.
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.
202
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Definitions
Definitions and reconciliations
In line with the Guidelines on Alternative Performance Measures issued by the European Securities and Markets Authority
(‘ESMA’), we have provided additional information on the APMs used by the Group below, including full reconciliations
back to the closest equivalent statutory measure.
Alternative performance
measure
Revenue measures
Closest equivalent GAAP
measure
Note reference showing
reconciliation to IFRS
measure
Definition and purpose
Adjusted revenue
Revenue
See note A1
Like-for-like (LFL) %
change
No direct equivalent Not applicable
Local currency % change Revenue compared
Not applicable
to prior period
consolidated at a
constant exchange
rate.
Profit / (loss) before
tax, Profit / (loss)
before interest and
tax.
Profit / (loss) before
interest and tax
Profit measures
Adjusted profit / (loss)
before tax, EBIT
EBIT
Adjusted EBITDA
Profit / (loss) before
interest and tax
See note A4
Adjusted revenues are adjusted to remove out of
period mobile network debtor revaluations and
the revenues of those operations which the Group
classifies as exited or to be exited but do not meet
the definition of discontinued in accordance with
IFRS 5: ‘Non-Current Assets Held for Sale and
Discontinued Operations’.
Like-for-like revenue is calculated based on
adjusted store and online 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 (where closed by the Company’s
decision and not where closed due to government
imposed restrictions related to the global Covid-19
pandemic) 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.
Reflects total revenues on a constant currency and
period basis. Provides a measure of performance
excluding the impact of foreign exchange rate
movements.
See note A2 and A5 As discussed above, the Group uses adjusted profit
measures in order to provide a useful measure of
the ongoing performance of the Group. These are
adjusted from total measures to remove adjusting
items, the nature of which are disclosed above.
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.
As discussed above, the Group uses adjusted profit
measures in order to provide a useful measure of
the ongoing performance of the Group. These are
adjusted from total measures to remove adjusting
items, the nature of which are disclosed above.
203
Dixons Carphone plc Annual Report and Accounts 2019/20Investor Information continued
Glossary and
Definitions continued
Alternative performance
measure
Closest equivalent GAAP
measure
EBITDA
Profit / (loss) before
interest and tax
Note reference showing
reconciliation to IFRS
measure
See note A3
Definition and purpose
Earnings before interest, tax, depreciation and
amortisation (EBITDA). Provides a measure of
profitability based on profit / (loss) before tax, and
after adding back depreciation and amortisation
expense.
The terminology used is consistent with that used
historically and in external communications.
Other earnings measures
Adjusted net finance
costs
Net finance costs
Adjusted income tax
expense / (credit)
Income tax expense
/ (credit)
See note A5 and A6 Adjusted net finance costs exclude certain adjusted
finance costs from total finance costs. The adjusting
items include the impact of IFRS 16, the finance
charge of business 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 adjusted
earnings measure in order to remove this non-cash
volatility.
See note A5 and A7 Adjusted income tax expense / (credit) represents
the income tax on adjusted earnings. Income tax
expense / (credit) on adjusting items represents
the tax on items classified as ‘adjusted’, either in
the current year, or the current year effect of prior
year tax adjustments on items previously classified
as adjusted. We consider the adjusted income
tax measures represent a useful measure of the
ongoing tax charge / credit of the Group.
Adjusted / Total effective
tax rate
No direct equivalent Not applicable
The effective tax rate measures provide a useful
indication of the tax rate of the Group. Adjusted
effective tax is the rate of tax recognised on
headline earnings, and total effective tax is the rate
of tax recognised on total earnings.
204
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedInvestor Information continued
Alternative performance
measure
Closest equivalent GAAP
measure
Reconciliation to IFRS
measure
Definition and purpose
Earnings per share measures
Adjusted basic EPS –
continuing operations,
adjusted diluted EPS
– continuing operations,
adjusted basic EPS –
total, adjusted diluted
EPS – total
Cash flow measures
Free cash flow
Statutory EPS
figures
See note A8
Cash generated
from operations
See note A9
Net debt
No direct equivalent See note A10
EPS measures are presented to reflect the impact
of adjusting items in order to show an adjusted
EPS figure, which reflects the adjusted earnings per
share of the Group. We consider the adjusted EPS
provides a useful measure of the ongoing earnings
of the underlying Group.
Free cash flow comprises cash generated from
/ (utilised by) continuing operations including
restructuring costs, but before cash generated
from / (utilised by) businesses exited / to be exited,
less net finance expense, less income tax paid,
less net capital expenditure and before any special
pension contributions and dividends. Free cash flow
is derived from adjusted EBIT which excludes the
impact of IFRS 16 and other adjusting items.
Comprises cash and cash equivalents and short-
term deposits, less borrowings and before the
incremental impact of IFRS 16 lease liabilities. The
impact of previous finance lease liabilities under
the scope of IAS 17 are included. We consider that
this provides a useful measure of the indebtedness
of the Group and a comparable measure with prior
periods.
205
Dixons Carphone plc Annual Report and Accounts 2019/20Investor Information Glossary and
Definitions continued
A1 Reconciliation from Statutory to adjusted revenue
Statutory external revenue
Out of period mobile network debtor revaluations
Adjusted external revenue
Inter-segmental revenue
Total adjusted revenue
Year ended 2 May 2020
UK &
Ireland
Electricals
£m
4,538
—
4,538
86
4,624
UK &
Ireland
Mobile
£m
1,589
47
1,636
98
1,734
Nordics
£m
Greece
£m
Eliminations
£m
Total
£m
3,573
—
3,573
—
3,573
470
—
470
—
470
— 10,170
—
47
— 10,217
—
10,217
(184)
(184)
Adjusted EBIT
162
(104)
116
20
—
194
Statutory external revenue
Out of period mobile network debtor revaluations
Adjusted external revenue*
Inter-segmental revenue
Total adjusted revenue*
UK &
Ireland
Electricals
£m
4,475
—
4,475
79
4,554
UK & Ireland
Mobile
£m
1,998
41
2,039
90
2,129
Year ended 27 April 2019 (restated)
Nordics
£m
3,501
—
3,501
—
3,501
Greece
£m
Eliminations
£m
Total
£m
459
—
459
—
459
— 10,433
—
41
— 10,474
—
10,474
(169)
(169)
Adjusted EBIT*
180
50
112
21
—
363
*
Adjusted results have been restated for the year ended 27 April 2019 to exclude the out of period mobile network debtor revaluations to
reflect the performance measures reported to the board, who are considered the Chief Operating Decision Maker under IFRS 8: ‘Operating
Segments’. IFRS 16, as further described in note 32 has been adopted using the modified retrospective approach and as such prior year
results have not been restated.
A2 Reconciliation from Statutory loss before interest and tax to adjusted EBIT and adjusted PBT
Mobile
network
debtor
revaluations
£m
Acquisition
/ disposal
related
items
£m
Strategic
change
programmes
£m
Total profit /
(loss) £m
Regulatory
costs
£m
Impairment
losses
£m
Impact of
IFRS 16
£m
UK & Ireland
Electricals
UK & Ireland Mobile
Nordics
Greece
EBIT
Finance income
Finance costs
(Loss) / profit
before tax
119
(282)
115
20
(28)
10
(122)
(140)
—
47
—
—
47
—
—
47
14
1
11
—
26
—
—
26
13
107
—
1
121
—
—
121
—
30
—
—
30
—
—
30
18
—
—
—
18
—
—
18
(2)
(7)
(10)
(1)
(20)
—
70
50
Year ended 2 May 2020
Pension
scheme
interest
£m
Adjusted
profit / (loss)
£m
—
—
—
—
—
—
14
14
162
(104)
116
20
194
10
(38)
166
206
HEAD_0 1st lineHEAD_0 2nd lineDixons Carphone plc Annual Report and Accounts 2019/20HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line continuedInvestor Information
A2 Reconciliation from Statutory loss before interest and tax to adjusted EBIT and adjusted PBT continued
Total profit /
(loss)
£m
Mobile
network
debtor
revaluations
£m
Acquisition
/ disposal
related items
£m
Strategic
change
programmes
£m
Data
incident
costs
£m
Regulatory
costs
£m
Year ended 27 April 2019 (restated)
Impairment
losses and
onerous
leases
£m
Pension
scheme
interest
£m
Adjusted
profit /
(loss)*
£m
UK & Ireland Electricals
UK & Ireland Mobile
Nordics
Greece
EBIT
Finance income
Finance costs
(Loss) / profit before tax
94
(438)
100
21
(223)
11
(47)
(259)
—
41
—
—
41
—
—
41
14
(3)
12
—
23
—
—
23
44
23
—
—
67
—
—
67
12
8
—
—
20
—
—
20
16
36
—
—
52
—
—
52
—
383
—
—
383
—
—
383
—
—
—
—
—
—
12
12
180
50
112
21
363
11
(35)
339
*
Adjusted results have been restated for the year ended 27 April 2019 to exclude the out of period mobile network debtor revaluations to
reflect the performance measures reported to the board, who are considered the Chief Operating Decision Maker under IFRS 8: ‘Operating
Segments’. IFRS 16, as further described in note 32 has been adopted using the modified retrospective approach and as such prior year
results have not been restated.
A3 Reconciliation from Statutory loss before interest and tax to EBITDA
Loss before interest and tax
Depreciation*
Amortisation
EBITDA
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
(28)
298
69
339
(223)
91
83
(49)
*
During the period the Group has adopted IFRS 16: ‘Leases’, which requires depreciation of right-of-use assets to be recognised in the
income statement. The Group has adopted IFRS 16 using the modified retrospective approach. As a result, prior year comparative numbers
have not been restated. Depreciation and amortisation can be found in note 3 of the Group financial statements.
A4 Reconciliation from Adjusted EBIT to Adjusted EBITDA
Adjusted EBIT
Depreciation
Amortisation
Adjusted EBITDA
Year ended
2 May
2020
£m
Year ended
27 April
2019
(restated)*
£m
194
84
44
322
363
91
55
509
*
Adjusted results have been restated for the year ended 27 April 2019 to exclude the out of period mobile network debtor revaluations to
reflect the performance measures reported to the board, who are considered the Chief Operating Decision Maker under IFRS 8: ‘Operating
Segments’. IFRS 16, as further described in note 32 has been adopted using the modified retrospective approach and as such prior year
results have not been restated. Depreciation and amortisation can be found in note 3 of the Group financial statements. As disclosed in note
A5, adjusted results exclude amortisation of acquisition intangibles and depreciation on right of-use assets recognised in accordance with
IFRS 16 but includes £3m of depreciation on right-of-use assets that were previously capitalised as they met the definition of a finance lease
under IAS 17.
207
Dixons Carphone plc Annual Report and Accounts 2019/20Investor Information
Glossary and
Definitions continued
A5 Further information on the adjusting items between statutory profit to adjusted profit measures noted above
Included in revenue
Mobile network debtor revaluation*
Included in (loss) / profit before interest and tax:
Mobile network debtor revaluation*
Acquisition / disposal related items
Strategic change programmes
Data incident costs
Regulatory costs
Impairment losses and onerous leases
Impact of IFRS 16
Included in net finance costs:
Impact of IFRS 16
Net non-cash finance costs on defined benefit pension schemes
Total impact on (loss) / profit before tax
Tax regulatory matters
Tax on other adjusting items
Total impact on (loss) / profit after tax — continuing operations
Discontinued operations
Total impact on (loss) / profit after tax
Year ended
2 May
2020
£m
Year ended
27 April
2019
(restated)*
£m
47
47
47
26
121
—
30
18
(20)
222
70
14
84
306
(17)
(3)
286
2
288
41
41
41
23
67
20
52
383
—
586
—
12
12
598
46
(64)
580
9
589
Note
(i)
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(vii)
(viii)
(ix)
(x)
25
*
Adjusted results have been restated for the year ended 27 April 2019 to exclude the out of period mobile network debtor revaluations to
reflect the performance measures reported to the board, who are considered the Chief Operating Decision Maker under IFRS 8: ‘Operating
Segments’.
(i) Mobile network debtor revaluations
Changes in consumer behaviour and legislative impacts on previously recognised transactions have led to negative
revaluations of network receivables of £47m (2018/19: £41m). Further information can be found in footnote (iv) of the
network commission receivables and contract assets reconciliation table within note 15 to the Group financial statements.
(ii) Acquisition / disposal related items
Amortisation of acquisition intangibles:
A charge of £26m (2018/19: £28m) relates primarily to amortisation of acquisition intangibles arising on the Dixons Retail
Merger. The prior period includes intangibles recognised on the CPW Europe and Simplify Digital acquisitions which were
subsequently impaired at 27 October 2018.
Acquisition related:
During the prior period, acquisition related income of £5m primarily relates to the release of deferred consideration for a
previous acquisition no longer payable given the strategic change of the business.
(iii) Strategic change programmes:
During the current year the Group continued with the previously announced strategic change programme. As part of this
strategy, the Group took the next steps in the turnaround of the mobile business by announcing on 17 March 2020 that
it would be closing the Carphone Warehouse UK store estate and continue to focus on selling devices and connectivity
through its shop-in-shops in 305 big Currys PCWorld stores and online. Further information on the announcement can
be found here: https://www.dixonscarphone.com/en/news-and-media/press-releases/year/2020/dixons-carphone-takes-
essential-next-stepturnaround-uk.
208
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A5 Further information on the adjusting items between statutory profit to adjusted profit measures noted above
continued
As a result of the change, 531 stores under the Carphone Warehouse brand have closed.
During the current period, one-off implementation costs and redundancy costs of £56m (2018/19: £49m) have been
incurred in relation to this Group strategic change programme.
In addition to this, property rationalisation costs related to this strategic change programme, specifically in the UK & Ireland
Mobile operating segment have been recorded as follows:
– An additional £24m property closure and dilapidations provisions related to the closure of the Carphone Warehouse
standalone stores;
– £32m of right-of-use asset impairment related to the Carphone Warehouse store estate;
– £15m of asset impairments, primarily relating to software development costs and store assets.
£6m of property provisions recognised within the UK & Ireland Electricals operating segment from previously announced
strategic change programmes have been released in the period.
(iv) Data incident costs:
During the year ended 27 April 2019, costs associated with the data incident announced on 13 June 2018 of £20m were
recorded.
(v) Regulatory costs:
The Group operates in a regulated environment and failure to manage the business in line with regulation could expose the
Group to financial penalties.
In the year ended 27 April 2019 the Group reported that it was subject to a £29m fine imposed by the FCA following the
conclusion of an investigation into historical Geek Squad mobile phone insurance selling processes. This fine related to a
period prior to June 2015. Historical regulatory investigations may be subject to potential future claims and subsequent
payments that may take several years to complete and evaluate. The Group ran two voluntary redress programmes which
led to the refund of £1.5m.
Nonetheless, the Group has subsequently received claims from a number of customers who believe they were mis-sold
Geek Squad policies. These claims are carefully considered by the Group on a case by case basis. The majority of claims
received have been invalid. The Group has paid a total of £16m in respect of customer compensation.
Following the relatively small proportion of customers who have made claims, the volume and the value of any potential
future claims is uncertain. Despite this level of uncertainty, the Group has recorded an additional regulatory costs provision
of £30m in the period.
For the year ended 27 April 2019, £15m of additional pension related costs following the High Court judgement on the
GMP Lloyds Banking Group case and £1m of redress for ongoing employee related matters for historical periods were also
recognised.
(vi) Impairment losses and onerous leases (prior year):
Following the unprecedented effects of Covid-19 and the closure of stores across the UK & Ireland, an impairment
indicator was identified, and an impairment review was performed over the store estate. Management considered future
cash flow forecasts derived from the board-approved budget and strategic plan and adjusted to model the negative impact
of Covid-19. This resulted in an impairment of £18m being recorded over right-of-use assets in UK & Ireland Electricals
operating segment.
In the prior year, a strategic review was performed by the Group which led to the separation of the previously reported
UK & Ireland operating segment into separate UK & Ireland Electricals and Mobile operating segments. As a result of the
change, the goodwill previously allocated to the UK & Ireland group of cash generating units (CGUs) was separated into
the UK & Ireland Electricals and UK & Ireland Mobile CGUs. This identified a material non-cash impairment charge to be
recorded in the UK & Ireland Mobile segment of £383m for the year ended 27 April 2019.
(vii) Impact of IFRS 16
During the period the Group has adopted IFRS 16: ‘Leases’ using the modified retrospective approach, as a result prior
year comparative numbers have not been restated. The impact of adoption is included as an adjusting item for the year
ended 2 May 2020 as the directors believe this adjustment is helpful to users in aiding comparability of adjusted results
against prior periods which are reported under IAS 17. The impact of IFRS 16 results in a net credit of £20m to profit / loss
before interest and tax and a charge of £70m in net finance costs on a statutory basis.
209
Dixons Carphone plc Annual Report and Accounts 2019/20Investor Information Glossary and
Definitions continued
A5 Further information on the adjusting items between statutory profit to adjusted profit measures noted above
continued
(viii) Net non-cash financing costs on defined benefit pension schemes:
The net interest charge on defined benefit pension schemes represents the non-cash remeasurement calculated by
applying the corporate bond yield rates applicable on the last day of the previous financial year to the net defined benefit
obligation. As a non-cash remeasurement cost which is unrepresentative of the actual investment gains or losses made or
the liabilities paid and payable, the accounting effect of this is excluded from adjusted earnings.
(ix) Tax regulatory matters:
As previously disclosed, the Group has been co-operating with HMRC in relation to the tax treatment of certain pre-merger
legacy corporate transactions. The Group maintains the tax treatment was appropriate, however, the likelihood of litigation,
and therefore risk associated with this matter was such that a provision was recognised in the year ended 27 April 2019.
The provision has been adjusted in the current period to reflect the current status of discussions (see note 6b(iii)).
(x) Taxation:
The effective tax rate on adjusting items is 7%. The rate of relief is lower than the UK statutory rate of 19% predominantly
due to a release of part of the provision recognised in relation to pre-merger legacy corporate transactions (see note 6b(iii)).
For the year ended 27 April 2019, the effective tax rate on adjusting items was 3% predominantly due to non-deductible
goodwill impairment and the creation of the provision for tax regulatory matters.
A6 Reconciliation from Statutory Net finance costs to adjusted net finance costs
Total net finance costs
Impact of IFRS 16
Net interest on defined benefit pension obligations
Adjusted total net finance costs
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
(112)
(36)
70
14
(28)
—
12
(24)
*
The total IFRS 16 lease interest is £80m, of which £5m relates to previously held finance leases under IAS 17. The incremental impact of
IFRS 16 excludes the previously held finance leases and the unwind of discounting on IFRS 3 fair value provisions held on balance sheet
prior to the adoption of IFRS 16. These items are excluded as adjusted net finance costs is on a pre-IFRS 16 basis as explained in the
definitions.
210
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A7 Adjusted tax expense
Tax expense
a)
The corporation tax charge comprises:
Current tax
UK corporation tax at 19% (2018/19: 19% )
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
Adjusted tax charge*
– Adjusted
– Adjusting
– Adjusted
– Adjusting
– Adjusted
– Adjusting
– Adjusted
– Adjusting
– Adjusted
– Adjusting
– Adjusted
– Adjusting
– Adjusted
– Adjusted
Year ended
2 May
2020
£m
Year ended
27 April
2019
(restated)
£m
13
(4)
26
(2)
33
12
(17)
1
—
(4)
29
(9)
6
6
(3)
—
(4)
(4)
(8)
(8)
21
41
34
17
29
—
80
(5)
(5)
(4)
(1)
(15)
65
11
(27)
3
(2)
(15)
2
—
2
(13)
52
70
*
Adjusted results have been restated for the year ended 27 April 2019 to exclude the out of period mobile network debtor revaluations to
reflect the performance measures reported to the board, who are considered the Chief Operating Decision Maker under IFRS 8: ‘Operating
Segments’ as disclosed on page 202. The restatement has no impact on statutory reported results.
Tax related to discontinued operations is included in the figures set out in note 25 to the consolidated financial statements.
211
Dixons Carphone plc Annual Report and Accounts 2019/20Investor Information
Glossary and
Definitions continued
A7 Adjusted tax expense 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:
Year ended 2 May 2020
Adjusted
£m
Adjusting
items
£m
Statutory
£m
Adjusted*
£m
Year ended 27 April 2019
(restated)
Adjusting
items*
£m
Statutory
£m
Profit / (loss) before taxation
166
(306)
(140)
339
(598)
(259)
Tax at UK statutory rate of 19% (2018/19: 19%)
Items attracting no tax relief or liability
Movement in unprovided deferred tax
Effect of change in statutory tax rate
Differences in effective overseas tax rates
Adjustments in respect of prior years – provision
Adjustments in respect of prior years
Other
Total tax charge / (credit)
31
3
—
(2)
4
—
5
—
41
(58)
3
52
(1)
(1)
(17)
—
2
(20)
(27)
6
52
(3)
3
(17)
5
2
21
64
7
(1)
1
5
—
(6)
—
70
(113)
98
—
3
—
—
(6)
—
(18)
(49)
105
(1)
4
5
—
(12)
—
52
*
Adjusted results have been restated for the year ended 27 April 2019 to exclude the out of period mobile network debtor revaluations to
reflect the performance measures reported to the board, who are considered the Chief Operating Decision Maker under IFRS 8: ‘Operating
Segments’ as disclosed on page 202. The restatement has no impact on statutory reported results.
The effective tax rate on adjusted earnings for the year ended 2 May 2020 is 25% (2018/19: 21%).
(i)
Items attracting no tax relief or liability relate mainly to non-deductible depreciation in the UK business. Adjustments in
respect of prior periods relate to the reversal of an expected historical tax credit that is no longer available in the UK.
The effective tax rate on adjusting items is 7% (2018/19: 3%).
(ii) Deferred tax assets relating principally to tax losses in the UK business have not been recognised due to uncertainty
over the group’s ability to utilise the losses in the future.
(iii) As disclosed within the key sources of estimation uncertainty in note 1t, the Group is currently cooperating with HMRC
in relation to open tax enquiries arising from pre-merger legacy corporate transactions in the Carphone Warehouse
group. One of the underlying pre-merger transactions under enquiry is considered to have a “more likely than not”
chance of resulting in settlement. Due to this level of risk, a provision was recognised in the prior period. This enquiry is
still open and a release of £17m has been made during the period to reflect the current status of discussions.
The future effective tax rate is likely to be impacted by the geographical mix of profits and the Group’s ability to take
advantage of currently unrecognised deferred tax assets.
212
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A8 Adjusted earnings per share
Adjusted earnings
Continuing operations
Total 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 — continuing operations (net of taxation)
Adjusted basic earnings per share
Diluted earnings per share
Total (continuing and discontinued operations)
Adjustment in respect of discontinued operations
Continuing operations
Adjustments— continuing operations (net of taxation)
Adjusted diluted earnings per share
Year ended
2 May
2020
£m
Year ended
27 April
2019
(restated)
£m
125
269
(161)
(2)
(163)
(311)
(9)
(320)
Million
Million
1,162
(5)
1,157
25
1,182
1,160
(1)
1,159
9
1,168
Pence
Pence
(14.1)
0.2
(13.9)
24.7
10.8
(14.1)
0.2
(13.9)
24.5
10.6
(27.6)
0.8
(26.8)
50.0
23.2
(27.6)
0.8
(26.8)
49.8
23.0
Basic and diluted earnings per share are based on the profit for the period attributable to equity shareholders. Adjusted
earnings per share is presented in order to show the underlying performance of the Group. Adjustments used to determine
adjusted earnings are described further in note A5.
213
Dixons Carphone plc Annual Report and Accounts 2019/20Investor Information
Glossary and
Definitions continued
A9 Reconciliation of cash inflow from operations to free cash flow
Cash inflow from operations
Operating cash flows from discontinued operations(i)
Taxation
Interest, facility arrangement fees and repayment of finance leases(ii)
IFRS 16 impact(iii)
Capital expenditure
Proceeds from disposal of fixed assets
Other movements
Free cash flow
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
649
1
(20)
(39)
(291)
(191)
—
—
109
377
8
(45)
(30)
—
(166)
9
—
153
(i)
(ii)
Operating cash flows from discontinued operations are removed in the above reconciliation as free cash flow is presented on a continuing
basis.
Current period excludes cash interest on leases and repayment of leases now within the scope of IFRS 16. Prior period interest and capital
repayment on lease obligations relate solely to finance leases recognised in accordance with IAS 17.
(iii) In the comparative periods cash inflow from operations includes rental expenses on leases that now fall under the scope of IFRS 16 and
are therefore now included within cash flows from financing activities within the current period. As part of the reconciliation of free cash
flow, the cash flows arising from leases have been reclassified into free cash flow in the current period. See note 32 for details of transitional
impacts.
Reconciliation of adjusted EBIT to free cash flow
Within the performance review we include a reconciliation from adjusted EBIT to free cash flow. Both of these APMs are on
a pre-IFRS16 basis as explained within the definitions.
Adjusted EBIT (note A2)
Depreciation and amortisation (note A4)
Working capital (note A11)
Capital expenditure
Taxation
Interest(i)
Other
Free cash flow before exceptional items
Exceptional items(ii)
Free cash flow
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
194
128
108
(191)
(20)
(31)
—
188
(79)
109
363
146
(17)
(166)
(45)
(30)
9
260
(107)
153
(i)
(ii)
Interest per the cash flow statement is £106m, this differs to the above interest due to the incremental impact of IFRS 16 interest. The total
IFRS 16 lease interest is £80m, of which £5m relates to previously held finance leases under IAS 17.
Relates to the cash flows on the adjusting items that are described in note A5.
214
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A10 Reconciliation from liabilities arising from financing activities to net debt
Loans and other borrowings (note 19)*
Lease liabilities (note 20)
Total liabilities from financing activities (note 27b)
Cash and cash equivalents (note 16)*
Overdrafts (note 19)*
Add back lease liabilities excluding previous IAS 17 finance leases**
Net (debt)
2 May
2020
£m
(324)
(1,444)
(1,768)
660
(540)
1,364
(284)
27 April
2019
(restated)
£m
(288)
(83)
(371)
665
(559)
—
(265)
*
**
Cash and cash equivalents and loans and other borrowings have been restated to meet the presentational requirements of IAS 32 as further
described in note 1. This has had no impact on net assets or net debt.
During the period the Group has adopted IFRS 16 using the modified retrospective approach, as a result prior year comparative numbers
have not been restated. Prior period lease liabilities relate solely to finance leases recognised in accordance with IAS 17. See note 32 for
details of transitional impacts.
As described above, the Group has lease liabilities of £1,444m. To aid comparability with prior periods, net debt for the year ended 2 May
2020 includes £80m (2018/19: £83m) of lease liabilities that fell within the definition of finance lease liabilities in accordance IAS 17 and
excludes the incremental impact of lease liabilities of £1,364 that fall within the scope of IFRS 16.
A11 Reconciliation of statutory working capital cash inflow to adjusted working capital cash inflow
Within the performance review on page 24, a reconciliation of the adjusted EBIT to free cash flow is provided. Within this,
working capital balance of £108m (2018/19: -£17m) differs to the statutory working capital balance of £235m (2018/19:
£72m) as cash flows on adjusting items are separately disclosed. A reconciliation of the disclosed working capital balance
is as follows:
Working capital cash inflow (Note 27a)
Share based payments
Discontinued Operations
Exceptional provisions
GMP equalisation
Network debtor out of period revaluation
IFRS16
Facility arrangement fees
Working capital inflow within free cash flow
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
235
23
—
(43)
—
(47)
(56)
(4)
108
72
21
1
(55)
(15)
(41)
—
—
(17)
215
Dixons Carphone plc Annual Report and Accounts 2019/20Investor Information
Glossary and
Definitions continued
A12 Summary of working capital presented within the performance review
Within the performance review on page 24, a summary balance sheet is provided which includes a working capital balance
of -£795m (2018/19: -£956m). The below table provides a breakdown of how the summary working capital balance ties
through to the statutory balance sheet. Network commission receivables are excluded from the breakdown as they are
presented separately. Further information on network commission receivables can be found in note 15.
Non-current assets
Trade and other receivables*
Current assets
Inventory
Trade and other receivables*
Derivative assets
Current liabilities
Trade and other payables
Derivative liabilities
Provisions
Non-current liabilities
Trade and other payables
Provisions
Working capital presented within the performance review
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
35
34
970
474
76
1,156
595
18
(2,017)
(52)
(114)
(2,350)
(6)
(86)
(131)
(36)
(795)
(252)
(65)
(956)
Note
15
14
15
26
17
26
21
17
21
*
Trade and other receivables excludes network commission receivables and contract assets of £616m (2018/19: £797m) as these are
presented separately within the condensed balance sheet in the performance review.
A13 Summary IFRS 16 leases presented within the performance review
Within the performance review, a summary balance sheet is provided which includes an IFRS 16 leases balance of
-£1,359m. The below table provides a breakdown of how the summary IFRS 16 leases balance ties through to the statutory
balance sheet. Comparative year is nil as IFRS 16 was not adopted until 28 April 2019.
Lease receivables
Lease liabilities
Exclude IAS 17 finance lease liabilities (included in net debt)
IFRS 16 leases presented within the performance review
Year ended
2 May
2020
£m
Year ended
27 April
2019
£m
5
(1,444)
80
(1,359)
—
—
—
—
The lease receivables and lease liabilities are included on the face of the statutory balance sheet. The IAS 17 finance leases
that were previously on balance sheet before the adoption of IFRS 16 are then excluded as they are included within the net
debt line within the summary balance sheet in the performance review in order to aid comparability with prior periods.
216
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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 adjusted earnings measures in order to increase comparability
between segments.
Active credit customers
Customers with an open “Your Plan” account
ADRs
ARPU
B2B
Board
Businesses to be exited
American Depositary Receipts
Average monthly revenue per user
Business to business
The Board of Directors of the Company
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
Colleague engagement
Measured using ‘Make a Difference’ survey in Greece and UK & Ireland and a
colleague engagement survey in the Nordics
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
The continuing business of the Carphone Group
CPW Europe Acquisition
The Company’s acquisition of Best Buy’s interest in CPW Europe, which completed
on 26 June 2013
Credit adoption
Sales on Credit as a proportion of total sales
CRM
CWS
Customer Relationship Management
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 plc which
occurred on 6 August 2014
EBT
Electricals
HMRC
honeybee
Employee benefit trust
Represents the combination of our UK & Ireland Electricals, Nordics, and Greece
operating segments
Her Majesty’s Revenue and Customs
honeybee was our proprietary IT software operation for which an asset sale was
completed on 31 May 2018
217
Dixons Carphone plc Annual Report and Accounts 2019/20Investor Information Glossary and
Definitions continued
GfK
IFRS
Market position
MNO
Mobile
MVNO
NPS
Online-in-store
Peak / post peak
Growth from Knowledge
International Financial Reporting Standards as adopted by the European Union
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
Represents sales made from legacy Carphone brands, iD Mobile and SimplifyDigital
Mobile virtual network operator
Net Promoter Score, a rating used by the Group to measure customers’ likelihood to
recommend its operations
Online-in-store is the term used for sales that are generated through in-store tablets
for product that is not stocked in the store
Peak refers to the 10 week trading period ending on 4 January 2020 as reported in
the Group’s Christmas Trading statement on 21 January 2020. Post peak refers to the
trading period from 5 January 2020 to the Group’s year-end on 2 May 2020
RCF
Revolving credit facility
Sharesave or SAYE
Save as you earn share scheme
SIMO
SWAS
TSR
Sales of SIM-only contracts, without attached handset
Stores-within-a-store
Total shareholder return
UK GAAP
United Kingdom Accounting Standards and applicable law
Virgin Mobile France
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
1 Portal Way
London
W3 6RS
United Kingdom
Telephone: +44 (0) 203 110 3251
Email: ir@dixonscarphone.com
www.dixonscarphone.com