24 Aug 2017 07:00
Dixons Carphone plc
Trading Update
(13 weeks ended 29 July 2017)
· Continued good performance in electricals in the UK & Ireland, Nordics and Greece
· Challenging conditions in the UK mobile phone market
· Receivables revaluation, largely EU roaming legislation related, expected to be negative this year
· Recent honeybee business model changes expected to lead to lower earnings this year
· As a consequence of these combined factors management now expect to deliver Group Headline PBT for 2017/18 in the range of £360m to £440m with core trading profitability in line with last year
Q1 2017/18 revenue | Reported revenues % change | Local currency % change | Like-for- like % change1 |
UK & Ireland | 1% | 1% | 4% |
Nordics | 17% | 8% | 8% |
Greece | 16% | 7% | 6% |
CWS | (24)% | (25)% | n/a |
Group | 6% | 3% | 6% |
Note: In the UK & Ireland, like-for-like revenues in the quarter improved by approximately 5% as a result of sales successfully transferred
from closed stores and sales disruptions. This mainly benefited UK&I electricals, where like-for-like revenues grew 7%.
Seb James, Group Chief Executive, said:
"As you can see from our trading statement, we continue to trade well in all geographic markets with like-for-like sales up 6% across the Group. It is good to see this performance from our UK electrical business particularly against the Euros football championship last year, as well as strong sales from our Nordic and Greek businesses. In all of these markets we have seen growth in revenues, market share and profitability with overall product margins remaining flat in electricals.
However, over the last few months we have seen a more challenging UK postpay mobile phone market. Currency fluctuations have meant that handsets have become more expensive whilst technical innovation has been more incremental. As a consequence, we have seen an increased number of people hold on to their phones for longer and while it is too early to say whether important upcoming handset launches or the natural lifecycle of phones will reverse this trend, we now believe it is prudent to plan on the basis that the overall market demand will not correct itself this year. Over the longer term we believe that the postpay market will largely return to normal but in the meantime we have taken a conscious decision to invest in our margin and proposition to maintain market share and scale so we remain in a strong position as the market leader when this happens.
Whilst this investment will cause a shortfall in profits for our phone business we do however expect overall profit in our core retail operations to be in line with last year supported by good progress in our UK & Ireland, Nordic and Greek electrical businesses.
As we highlighted at the full year results, we have, over recent years, reported a number of one-off adjustments, particularly related to our large mobile network debtor. Historically these items have mostly been net positive to the business, but, largely caused by changes in EU roaming legislation, we now believe that the outcome is likely to be net negative this year. While it is difficult with the limited data currently available to assess the precise impact of these changes, we currently estimate that the net negative effect will be a range of between £10m and £40m this year. In total, the one-off adjustments contributed a net positive, and largely non-cash, effect of £71m last year.
Additonally, we have recently decided to change the way in which we are selling our honeybee software product with a move towards software-as-a-service rather than upfront sales as we believe that this will create a business with more sustainability and higher value in the longer term. It will, however, have an impact on this year's reported profitability. Last year we sold a significant upfront contract to Sprint which will not be repeated this year, and all our new contracts are following the new model. As a result, we expect CWS this year to generate limited profits overall.
Taking the above factors into account, as well as the disposal of our Spanish business, we now expect the Group's Headline PBT for 2017/18 to be in the range of £360m to £440m."
Investor and analyst call
There will be a conference call for investors and analysts at 7:30am BST (8:30am CET) this morning.
Dial-in details - UK/International: +44(0) 20 3059 8125; passcode: 7878697
Seven-day replay - UK/International: +44(0) 121 260 4861; passcode: 6901668
Next announcement
The Group will publish its interim results on Wednesday 13 December 2017.
For further information
About Dixons Carphone Dixons Carphone plc is Europe's leading specialist electrical and telecommunications retailer and services company, employing over 41,000 people in nine countries. Focused on helping customers navigate the connected world, Dixons Carphone offers a comprehensive range of electrical and mobile products, connectivity and expert after-sales services from the Geek Squad and Team Knowhow. Dixons Carphone's primary brands include Carphone Warehouse and CurrysPCWorld in the UK & Ireland, Elkjøp, Elkjøp Phonehouse, Elgiganten, Elgiganten Phone House, Gigantti and Lefdal in the Nordic countries, Kotsovolos in Greece, Dixons Travel in a number of UK airports as well as Dublin and Oslo. Our key service brands include Team Knowhow in the UK, Ireland and the Nordics, and Geek Squad in the UK & Ireland. Business-to-business (B2B) services are provided through Connected World Services, CurrysPCWorld Business and Carphone Warehouse Business. Connected World Services aims to leverage the Group's existing expertise, operating processes and technology to provide a range of services to businesses. | |||||||||||||||
1 Like-for-like revenues are calculated based on Headline store and internet sales using constant exchange rates. New stores are included where they have been open for a full financial year both at the beginning and end of the financial period. Revenues from franchise stores are excluded and closed stores are excluded for any period of closure during either period. Customer support agreement, insurance and wholesale revenues along with revenue from Connected World Services and other non-retail businesses are excluded from like-for-like calculations. Revenues from Carphone Warehouse stores-within-a-store are included in like-for-like