DC..L Regulatory News (DC.)

28 July 2020

ANNUAL REPORT AND NOTICE OF ANNUAL GENERAL MEETING

Dixons Carphone plc (the 'Company') has today published its Annual Report and Accounts 2019/20 and Notice of Annual General Meeting 2020. These documents are available to view on the Company's website at www.dixonscarphone.com/investors. In addition, along with the Form of Proxy for the Annual General Meeting 2020, they have been posted or otherwise made available to shareholders depending on their elected method of communication.

In accordance with Listing Rule 9.6.1, the Annual Report and Accounts 2019/20, Notice of Annual General Meeting 2020 and Form of Proxy have been submitted to the National Storage Mechanism, where they will shortly be available for inspection at

https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

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.

The information included in the Appendix to this announcement has been extracted from the Annual Report and Accounts 2019/20 and is reproduced here solely for the purposes of complying with the requirements of Disclosure Guidance and Transparency Rule ('DTR') 6.3.5 in respect of how to make annual financial reports available to the public.

The content of this announcement, including the Appendix, should be read in conjunction with the Company's Preliminary Results announcement, which was released on 15 July 2020 and is available on the Company's website at

https://otp.tools.investis.com/clients/uk/dixons_carphone_plc2/rns/regulatory-story.aspx?cid=1408&newsid=1402305 

Together, these announcements constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full Annual Report and Accounts 2019/20. Defined terms used in the Appendix refer to terms as defined in the Annual Report and Accounts 2019/20. Page numbers and cross references in the Appendix refer to pages and sections of the Annual Report and Accounts 2019/20.

Appendix

A. Principal risks to achieving the Group's objectives (pages 20 to 23)

The Group recognises that taking risks is an inherent part of doing business and that competitive advantage can be gained through effectively managing risk. The Group continues to develop robust risk management processes, integrating risk management into business decision-making. The Group's approach to risk management is set out in the Corporate Governance Report on pages 56 to 67. The risks are linked to the strategy 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

Risk owner: Chief Commercial Officer

Risk category: Strategic

What is the risk?

The Group is dependent on relationships with key suppliers to source products on which availability may be limited.

What is the impact?

· Reduced revenue and profitability

· Deteriorating cash flow

· Reduced market share

How we manage it

Ensuring alignment of key suppliers to Group strategic priorities.

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.

Changes since last report

This risk has remained stable over 2019/20.

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.

What is the impact?

· Reduced revenue and profitability

· Deteriorating cash flow

· Reduced market share

How we manage it

· Continuous monitoring of developments.

· Brexit Steering Committee and Crisis Management Committee.

· Strategic and business planning.

· Contingency planning to address potential operational impacts changes

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.

Business Transformation

Risk owner: Group Financial Officer

Risk category: Strategic

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.

Failure to respond to changes in consumer preferences and behaviours.

What is the impact?

· Reduced revenue and profitability

· Deteriorating cash flow

· Reduced market share

How we manage it

· Continued strengthening of Executive Committee and leadership team.

· Transformation Programme office established and delivering key strategic objectives.

· Future Mobile Strategy.

· Development of customer credit propositions

· Development of e-commerce capabilities

· Enhancement of data analytics capabilities.

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.

Non-compliance with Financial Conduct Authority ('FCA') and other financial services regulation

Risk owner: Chief Customer Officer

Risk category: Regulatory

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 Company's culture puts 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.

Changes since last report

This risk has remained stable over 2019/20.

Data Protection

Risk owner: Chief Customer Officer

Risk category: Regulatory

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').

What is the impact?

· Reputational damage

· Financial penalties

· Reduced revenue and profitability

· Deteriorating cash flow

· Loss of competitive advantage

· Customer compensation

How we manage it

· The operation of a Data Management Function to 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.

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.

IT systems and infrastructure

Risk owner: Chief Operating Officer

Risk category: Technology

What is the risk?

A key system becomes unavailable for a period of time.

What is the impact?

· Reduced revenue and profitability

· Deteriorating cash flow

· Loss of competitive advantage

· Restricted growth and adaptability

· Reputational damage

How we manage it

· Ongoing IT transformation to align IT infrastructure to Group strategic priorities.

· Peak planning and preparation to ensure system 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.

Changes since last report

This risk has remained stable over 2019/20.

Information security

Risk owner: Chief Operating Officer

Risk category: Risk Operational

What is the risk?

Vulnerability to attack, malware, and associated cyber risks.

What is the impact?

· Reputational damage

· Financial penalties

· Reduced revenue and profitability

· Deteriorating cash flow

· Customer compensation

· Loss of competitive advantage

How we manage it

· Investment in information security safeguards, IT security controls, monitoring, in-house expertise and resources as part of a managed information security improvement plan.

· Information Security and Data Protection Committee comprising senior management, 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.

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.

Health and Safety

Risk owner: Chief Operating Officer

Risk category: Operational

What is the risk?

Failure to effectively protect customers and / or colleagues and / or contractors from injury or loss of life.

What is the impact?

· Employee / customer injury or loss of life

· Reputational damage

· Financial penalties

· Legal action

How we manage it

· Covid-19 actions to protect colleagues in the workplace and customers in the retail estate.

· Group Health and Safety strategy.

· 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

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.

Business Continuity

Risk owner: Chief Operating Officer

Risk category: Operational

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.

What is the impact?

· Reduced revenue and profitability

· Deteriorating cash flow

· Reputational damage

· Loss of competitive advantage

How we manage it

· Business continuity and crisis management plans in place and tested for key business locations.

· Disaster recovery plans in place and tested for key IT systems and data centres.

· Crisis team appointed to manage response to significant events.

· Major risks insured.

Changes since last report

This risk has remained stable over 2019/20.

Tax liabilities

Risk owner: Group Chief Financial Officer

Risk category: Financial

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.

What is the impact?

· Financial penalties

· Reduced cash flow

· Reputational damage

How we manage it

· Board and internal committee oversight that actively monitors tax strategy implementation.

· Appropriate engagement of third-party specialists to provide independent advice where deemed appropriate.

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.

Product Safety

Risk owner: Chief Operating Officer

Risk category: Operational

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.

What is the impact?

· Financial penalties

· Reduced cash flow

· Reputational damage

How we manage it

· Factory Audits conducted over OEM suppliers.

· Technical Evaluation of OEM products prior to 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.

Changes since last report

This risk has remained stable over 2019/20.

Long term and diversification of funding

Risk owner: Group Chief Financial Officer

Risk category: Financial

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 adaptability

· Reputational damage

How we manage it

· Existing unsecured credit/loan facilities.

· Securing additional £266m revolving credit facility to 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.

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.

B. Responsibility Statement (page 112)

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

Jonny Mason, Group Chief Financial Officer

28 July 2020

* The directors of Dixons Carphone plc as at 28 July 2020 are listed on pages 54 and 55 of the Annual Report and Accounts 2019/20.

ENDS

For further information:

Nigel Paterson General Counsel and Company Secretary +44 (0)7843 634 505

Assad Malic Group Corporate Affairs Director +44 (0)7414 191 044