26 Mar 2020 07:00
26 March 2020
COVID-19 Trading Update
As a result of the rapidly changing situation regarding COVID-19, Dixons Carphone is issuing an update on trading, further to the update issued on 17 March 2020.
In line with Government guidance we closed our stores across the UK and Ireland from 24 March. This follows store closures in Greece from 18 March. At present almost all stores in the Nordics continue to trade.
Our large Online operations remain open. Online trading has been very strong in all countries over the last two weeks as people have been preparing to work from home and use essential technology to continue their lives during the Coronavirus outbreak. Early signs are that this strong trading has continued since stores closed and will help to compensate for lost store sales.
There is no bigger concern for our business than our colleague safety. Over recent weeks we have been taking additional steps to protect colleagues as we work to satisfy high customer demand for essential technology products and services. We will stand by our colleagues throughout this crisis and, with the Government's help, we expect to keep paying those who work in our stores during these temporary closures.
We remain committed to our ongoing strategic transformation and we are determined to continue to create an even better business as we emerge from this period of uncertainty.
Recent trading
In the 11 weeks from 5 January to 21 March, our Group Electricals LFL is +8%, which includes a strong recent uplift, with Electricals LFL sales growth running at +23% in the last three weeks.
We have seen very good sales of equipment for home working (laptops, printers), for home entertainment (TVs, Gaming) and for home living (fridges, freezers, kitchen appliances).
Like-for-like growth | 8 Weeks to 29 Feb | 3 Weeks to 21 Mar | 11 Weeks to 21 Mar |
UK&I Electricals | 2% | 35% | 10% |
- UK&I Online growth | 6% | 72% | 23% |
International | 4% | 7% | 5% |
- Nordics | 5% | 8% | 5% |
- Nordics Online growth | 8% | 36% | 15% |
- Greece | 0% | -2% | 0% |
Electricals | 3% | 23% | 8% |
UK&I Mobile | -11% | -24% | -15% |
Group | 0% | 13% | 4% |
Financial guidance
The stores that are now closed were expected to contribute sales of c.£400m for the rest of the year. There will be some recovery through Online operations but overall the loss of sales will adversely impact our full year profitability and cash position, therefore we will not achieve our previous guidance for current year adjusted PBT of £210m or for net debt to be lower year-on-year.
The COVID-19 situation continues to develop and is likely to remain uncertain for some time. We will therefore not update current year or medium-term guidance until the impact of COVID-19 becomes clearer.
Cash control measures
Over the long-term, we do not expect disruption from COVID-19 to affect the transformation of the business and our ability to drive future value for our customers, our colleagues, our suppliers and our shareholders.
However, in the nearer term, because of disruption to sales, we are aware of the need to preserve cash and have been taking sensible and prudent measures to do so:
· Government cost support: Government actions across Europe including store business rates suspension, payroll support and lowering of taxes will lower net operating costs. In the UK we expect to lower costs at a rate of over £200m p.a. from the suspension of business rates and the support of our colleague salaries.
· Discretionary spend control: We have already acted to reduce non-essential spending, including variable operating costs, marketing and other overheads. The run rate of these items could total over £200m p.a.
· Capital expenditure commitment: In the current year our Group capital expenditure will be under our previous guidance of £200m. This spend can be reduced very significantly in 1H 2020/21 which would cause some delays to the transformation plans but will have no lasting impact on the long-term success of the business.
· Working capital: We have reduced our stock ordering significantly and are in discussion with suppliers to push out delivery dates. We are also moving mostly to monthly rent payments, in line with many others in the retail industry.
· Tax deferral: The UK Government is allowing deferral of VAT which reduces our near-term cash outflow by around c.£140m, and various tax deferrals in International will reduce near term outflow by a further c.£50m.
· Dividend: The Group has already declared and paid an interim dividend for a total of £26m. The final dividend is not payable until September, the Board will consider whether it is prudent to pay a final dividend at its full years' results when it has a clearer view on the scale and duration of the impact of COVID-19 on the business.
These measures represent a substantial amount of discretionary cashflow that the Group can preserve in order to meet our liquidity requirements.
Liquidity
The Group has two Revolving Credit Facilities totalling £1,050m provided by major banks which expire in October 2022 and a term loan of €50m which expires in October 2020. As at 20 March 2020, the Group had access to a total of over £700m of unutilised facilities.
The Group also has significant headroom compared to its fixed charge cover (1.75x) and net debt to EBITDA (2.5x) covenants on the RCF and expects to comply with these at the next measurement date in April 2020.
The Group has modelled a wide range of scenarios regarding the potential impact on liquidity and covenants of the COVID-19 disruption and has detailed action plans in place to respond to each. We believe that we have sufficient funding capacity available to meet our obligations over the foreseeable future.
This release contains inside information.
Next scheduled announcement
The Group is scheduled to publish its full year results on Thursday 25 June 2020.
For further information
Assad Malic | Group Strategy & Corporate Affairs Director | +44 (0)7414 191044 |
Dan Homan | Head of Investor Relations | +44 (0)7400 401442 |
Tim Danaher | Brunswick Group | +44 (0)207 4045959 |
Information on Dixons Carphone plc is available at www.dixonscarphone.com
Follow us on Twitter: @dixonscarphone
About Dixons Carphone
Dixons Carphone plc is a leading omnichannel retailer of technology products and services, operating through 1,000 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 28,000 capable and committed colleagues in the UK & Ireland and 42,000 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 PCWorld 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.
Certain statements made in this announcement are forward-looking. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future events or results referred to in these forward-looking statements. Unless otherwise required by applicable laws, regulations or accounting standards, we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. Information contained on the Dixons Carphone plc website or the Twitter feed does not form part of this announcement and should not be relied on as such.