Dixons Retail PLC Final Results -3-
June 26 2014 - 2:01AM
UK Regulatory
under its Support360 brand, as well as opportunities to extend
its franchise network across Greece. We are confident, therefore,
that the outlook for Kotsovolos is improving and the management
team are focused on returning the business to profitability.
Proposed merger with Carphone Warehouse
Our proposed merger with Carphone Warehouse will bring together
two strong businesses to provide customers with a great offer
across electrical, mobile, connectivity and services for the
connected world that is already upon us. Our two businesses are
coming together from positions of strength which will enable us to
focus on adding value in the following ways.
Firstly, in bringing two sizeable companies together we can
leverage significant synergies from the combination. We believe
that we can deliver at least GBP80 million of synergies on a
recurring basis, with delivery expected in the 2017/18 financial
year. These are a combination of costs, revenue opportunities from
putting a Carphone Warehouse mobile offering in all of our stores
as well as some benefits from having increased scale in
administrative purchasing, such as marketing. We confirm that the
synergy statements that were set out in our joint merger
announcement with Carphone Warehouse on 15 May 2014 remain valid.
Deloitte LLP and Deutsche Bank AG, London Branch reported on these
synergy statements in that joint announcement and we expect them to
confirm to Carphone Warehouse on publication of the shareholder
documentation relating to the merger that their reports continue to
apply.
In addition, by being a unique place for customers to experience
new products that will make up the connected world as well as get
advice from our highly trained colleagues we can truly be the go to
expert for this new, exciting and complex world for customers. Not
only can we help them in navigating their way to a truly connected
home, we can bring existing and new services to them to keep their
world functioning and connected. This will not only open up new
products and services for us, but can take our relationship with
our customers from a transactional one, to a longer term
relationship.
Further, both we and Carphone Warehouse have started to explore
how we can leverage the platforms we have created that support our
core retailing and services expertise to further benefit our
shareholders. Carphone Warehouse have made great strides in this
field with their Connected World Services business that provides a
selection of services to support retailers wishing to add
connectivity to their offering. We already provide two man delivery
logistics for certain manufacturers in the UK and are in
discussions to leverage our Hong Kong white label product sourcing
operations for other retailers around the World. Together we can
offer a full range of services to businesses customers with the
potential to build a significant operation across the Globe, adding
real value for our shareholders.
Financial position
The Group has again delivered a very robust performance against
the financial priorities of profitability and strengthening its
financial position:
-- The Group delivered a GBP28.8 million increase in net funds
at year end, to GBP70.9 million.
-- Exit of loss making businesses of Electroworld Turkey,
Unieuro Italy and PIXmania completed, with disposal of Central
Europe expected to complete around the end of the first quarter of
2014/15.
-- The increase in net funds was delivered after incurring cash
costs of GBP156.6 million in respect of trading losses and exit
costs of the discontinued operations.
-- Return on capital employed of 16.3%, up from 14.9% in the prior year.
-- Positive Free Cash Flow, before restructuring items, of GBP207.3 million was generated.
-- Costs reduced by GBP45 million in the year, as part of the
two year GBP90 million cost reduction programme.
-- The RCF has remained undrawn since October 2011.
Free Cash Flow
Year Year
ended ended
30 April 30 April
2014 2013
GBPmillion GBPmillion
------------------------------------------ ------------ ------------
Underlying profit before tax 166.2 151.0
Depreciation and amortisation 116.4 114.0
Working capital 41.3 104.9
Taxation (49.0) (19.9)
Capital expenditure (79.7) (75.9)
Settlement of historical currency hedges - (62.6)
Other items 12.1 2.1
------------------------------------------ ------------ ------------
Free Cash Flow before restructuring items 207.3 213.6
Net restructuring (6.8) (5.8)
------------------------------------------ ------------ ------------
Free Cash Flow 200.5 207.8
------------------------------------------ ------------ ------------
Free Cash Flow was GBP200.5 million (2012/13 GBP207.8 million).
The working capital result in the prior year benefited from the
timing of payments around year end as previously announced, and in
this context the positive working capital result this year reflects
a strong underlying performance. Cash tax costs increased mainly
reflecting higher taxable profits.
Funding
At 30 April 2014 the Group had net funds of GBP70.9 million,
compared with net funds of GBP42.1 million at 30 April 2013.
Year Year
ended ended
30 April 30 April
2014 2013
GBPmillion GBPmillion
------------------------------ ------- ----------- ------- -----------
Opening net funds / (debt) 42.1 (104.0)
Free Cash Flow 200.5 207.8
Special pension contributions (20.0) (20.0)
Discontinued Operations (156.6) (60.5)
Other items 4.9 18.8
------- -------
Other movements in net funds (171.7) (61.7)
------------------------------ ------- ----------- ------- -----------
Closing net funds 70.9 42.1
------------------------------ ------- ----------- ------- -----------
Net funds are stated inclusive of restricted funds of GBP103.3
million (2012/13 GBP110.2 million), which predominantly comprise
funds held under trust for potential customer support agreement
liabilities. The improvement in the net funding position was due to
the Free Cash Flow generated, partly offset by the trading losses
and exit costs associated with the discontinued operations, as well
as the ongoing payments to the UK defined benefit pension scheme
under the terms of the deficit reduction plan.
Adjustments to underlying results
Underlying profit before tax is reported before net
non-underlying charges before tax of GBP33.3 million.
Year ended Year ended
30 April 30 April
2014 2013
Re-presented(1)
GBPmillion GBPmillion
--------------------------------- ------- ------------ ------- -----------------
Underlying profit before tax 166.2 151.0
Add / (deduct) non- underlying
items:
Net restructuring charges
(2) (8.7) (24.8)
Business impairments - (9.1)
Other operating items (4.8) (1.9)
Loss on sale of business - (9.6)
Financing items:
Bond redemption related costs - (4.3)
Net pension interest (17.1) (13.1)
Other financing items (2.7) (1.6)
--------------------------------- ------- ------------ ------- -----------------
Total net non-underlying
charges (33.3) (64.4)
--------------------------------- ------- ------------ ------- -----------------
Profit before tax (3) 132.9 86.6
--------------------------------- ------- ------------ ------- -----------------
(1) Underlying figures for the year ended 30 April 2013 have
been restated for the impact of the amendment to IAS 19 "Employee
Benefits" and re-presented to exclude discontinued operations.
(2) Net restructuring charges relate to the impairment of system
costs following a revision in strategy following the business
disposals.
(3) Continuing operations
Discontinued operations
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