Dixons Carphone – Full Year Results – 15 July 2020 Presentation Alex Baldock Chief Executive Officer, Dixons Carphone Alex Baldock: Good morning everybody. What you're going to hear from Jonny and I this morning, before we take your questions, is a story of a business that was on track pre-crisis. On track both with the five major legs of the transformation, with which you are all familiar, but also on track to meet financial expectations for performance in the year. Then the crisis hit, and we pivoted abruptly to a new set of priorities: to keep everyone safe, to help millions of customers through the crisis, and to secure the business' future. And it fills me with pride the work that thousands of colleagues did and the success with which we fulfilled those three imperatives. Nevertheless, COVID has impacted the business and you see that reflected in the financial performance that Jonny will take you through later. It also, even though we have traded strongly wherever we've been open through the crisis, and even though we have started the new financial year trading strongly as well, we do expect a weakening of consumer demand later this year and we are being cautious in all of our planning. Nonetheless, we look forward now to raising our gaze beyond this crisis and to resuming a transformation that was visibly working. So, let's get into that. Let's get into the fact that we did what we said we would do pre-crisis and that it was visibly working. Online and in-stores together, omnichannel. We were making good progress online. We were gaining market share online before the crisis, 240 basis points of market share gained. We were growing, 25% up year on year in our online business. We did that by doing what we said we'd do. By making it easier for customers to find and buy stuff online, by increasing the size of the range by 2,000 SKUs for example, by making significant improvements to the online customer experience in areas like search, recommendations, checkout, and site speed. By improving the experience after customers bought in areas like delivery where we saw a nine-point jump in customer satisfaction. But it's not all about online, it was about stores as well. And we've got behind, as we said we would, the 300 big 3-in-1 stores in the UK. We've invested tens of millions of pounds in those stores, remodelling 121 of them before the crisis hit. And it's still in online and stores together that we see our future. We're starting to do some quite interesting things in bringing the two together. We saw, for example, a 64% year-on- year increase in online stock sold in the store. And we've done some quite interesting innovation in areas like ShopLive, as you will see. So good progress online and good progress in stores and that's reflected in online growing, that’s reflected in online growing as a share of business and growing in market share as well. Not just online, credit is another big profitable growth driver as you will recall. Credit is important because with it, customers buy more, they come back more often, and they're more satisfied – 18 points happier.
Dixons Carphone – Full Year Results – 15 July 2020 And we made good progress there as well, whether it's credit sales up by 27% in the year and whether it's credit customer numbers up by 30 something per cent. Good, important progress on credit. Likewise, progress on services, another important means of getting the stickier and more valuable customer relationship that we want. We said we would focus on the most important of those services such as protection, which is warranty and insurance, and so we did. We improved customers ’ adoption of our protection products during the year and we launched a new market-leading and regulator-friendly warranty and insurance product during the year. So we did what we said we'd do there as well. So good progress on services, but much more to come. For example, in Customer Club, which we launched first in the Nordics, it's grown quite nicely from one to over three million members in 18 months. The benefits to customers are clear. They get exclusive content and deals, and the benefits to us are clear as well: much better data, higher sales, and improved margins for Club Customers. So, a good start on the Club as well, as we head towards stickier and more valuable customers. And to achieve that, it's also important not to give customers reasons to go anywhere else, to make their end-to-end experience easier. And we said we'd do that as well. The hard, unglamorous yards of eking out marginal gains in the end-to-end customer experience has been reflected in significant, for the most part, double- digit year-on-year improvements in customer satisfaction as well. And finally, mobile, as we know was challenging but was on track pre-crisis. We know the issue in mobile, that the business has been geared to a declining post-pay segment, but we were on track in doing what we said we would do about it. Whether it was in network renegotiations and widening the range of networks – we weren't able to reach an acceptable deal with O2, but we were with the likes of Virgin and Voxi and a much-improved ID Mobile, our own proposition, as well. Meanwhile, we managed to lower the volume commitments without completely getting rid of them. So, we did what we said we'd do on the network renegotiations. Likewise, on improving the offer – our future mobile offer, our own credit-based bundle – was on track for delivery as planned in FY21. And the cost reductions totalling £200 million of central and IT cost reductions, so important for the mobile economics, were also on track for FY21. So, we were on track. For a mobile business that once we were free of the legacy constraints, the contracts, and of costs, we were on track for a mobile business that would be smaller but would be profitable, cash generative, and an integrated category. Then the crisis hit. And in Mobile, it hit us in two ways. First of all, on the sales line because with the enforced closure of the large 3-in- 1 stores, we weren’t as successful in Mobile as we have been in UK Electricals. That's transferring those lost store sales online. The investment online, you will recall, was deliberately focused on UK Electricals. So that did hit us. And also, as a response to the crisis, we paused large chunks of our transformation with the CapEx spend. That, in two areas, has set us back in Mobile, on the development of the future mobile offer and on aspects of the systems integration, the two into one, and that will make us around six to 12 months late on the transformation here.
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