Darty plc Annual report 2014/15

Transcription

1 Darty plc Annual report /15

2 Contents Overview 01 Welcome 02 Highlights 03 Chairman s statement Strategic report 05 Our markets 06 Our business model 07 Strategy 09 Chief Executive s review 17 Operating review 18 Financial review 21 Principal risks 23 Corporate responsibility Directors report 28 Board of Directors 30 Directors report Corporate governance 34 Corporate governance 40 Report on Directors remuneration and related matters 52 Statement of Directors responsibilities Financial statements and notes (IFRS) 53 Independent auditors report to the members of Darty plc 58 Group income statement 59 Group statement of comprehensive income 60 Group statement of changes in equity 61 Group balance sheet 62 Group cash flow statement 63 Notes to the financial statements Successful franchise operation Online growth Strong kitchens offer 26 Reducing environmental impact Darty brand development Improved customer offer Expansion in the Netherlands Darty plc (UK GAAP) 110 Independent auditors report to the members of Darty plc 112 Company balance sheet 113 Notes to the Company financial statements Other information 119 Shareholder information 120 Group five-year summary Certain statements made in this report are forward looking statements. 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 results in forward looking statements. Unless otherwise required by applicable laws, regulations or accounting standards, Darty plc does not undertake any obligation to update or revise any forward looking statements, whether as a result of new information, future developments or otherwise.

3 Overview Welcome The Darty Group is a multi-channel electrical retailer trading from over 400 stores and websites. We sell a full range of electrical products from major home and small domestic appliances to all the latest vision and multimedia products. This is supported by our leading customer service offer in-store, online, for home delivery and after-sales. We operate as Darty and Mistergooddeal.com in France, Vanden Borre in Belgium and BCC in the Netherlands. France * Revenue () Revenue growth Retail profit ( m) Number of stores** Selling space sqm (000s) 2, % Web sales (% of total sales) Belgium and the Netherlands Revenue ( m) Revenue growth Retail profit ( m) Number of stores Selling space sqm (000s) % Web sales (% of total sales) * Including Mistergooddeal.com ** Including 43 franchise stores Darty plc Annual report /15 01

4 Overview Highlights Delivering our strategic plan Nouvelle Confiance Investment in our growth initiatives: 39 franchise stores opened in the year delivering strong sales uplifts; Over 22 per cent increase in web generated sales in France following the acquisition of Mistergooddeal.com, bringing web penetration to over 17 per cent of product sales; Expanded the kitchen offer into 16 further stores to a total of 71 stores; and Built on an improved performance at BCC with the acquisition of 18 profitable stores to become the leading multi-channel retailer in the Netherlands. Market outperformance in both France and the Netherlands. Completed the elimination of losses in our non-core markets with the sale of our shareholding in Datart in the Czech Republic and Slovakia. The Board is recommending a final dividend of cents per share (: cents) bringing the total dividend for the year to 3.5 cents per share (: 3.5 cents). Financial summary for the 12 months ended 30 April Group / /14 restated 1 Revenue 3,512.1m 3,404.4m LfL sales (1.6)% 1.9% Retail profit m 85.5m Operating profit 60.3m 53.4m Adjusted PBT m 72.1m Profit/(loss) for the year 13.8m (6.6)m Adjusted EPS cents 6.5 cents Basic EPS 2.7 cents (0.6) cents Net debt 223.8m 185.2m Total dividend 3.5 cents 3.5 cents 1 Restated following the sale of Datart, now classified as discontinued operations, the CVAE reclassification from operating profit to taxation and the legacy UK retirement benefit scheme expenses from finance costs to operating profit. 2 Retail profit represents total operating profit before the share of joint venture and associates interest and taxation, the movement in options and related charges over non-controlling interests, gain on disposal of available-for-sale investments, legacy UK retirement benefit scheme expenses, exceptional items and amortisation and impairment of acquisition related intangible assets. 3 Excludes the share of joint venture and associates interest and taxation, the movement in options and related charges over non-controlling interests, gain on disposal of available-for-sale investments, legacy UK retirement benefit scheme expenses, exceptional items, net interest on pension schemes and amortisation and impairment of acquisition related intangible assets. 02 Darty plc Annual report /15

5 Overview Chairman s statement We have delivered on our Nouvelle Confiance plan and have a strong platform for the future. We launched Nouvelle Confiance, our three stage strategic plan to restore shareholder value, nearly three years ago and we have successfully executed all the key components on schedule. The first stage was to identify and eliminate the losses at our non core businesses in Italy, Spain, Turkey and the Czech Republic and Slovakia to refocus on our core markets in France, Belgium and the Netherlands. This process was completed in July with the disposal of Datart in the Czech Republic and Slovakia. Having refocused the Group, we set out to create value from our market leadership position, drive greater efficiency and reduce costs and we devised a four point action plan (the 4Ds ) to: Drive trading by delivering on promise to customers; Digitalise Darty by further enhancing our multi-channel offer and leading websites; Develop our brand by improving our product and market leading service offerings as well as expanding our customer base; and Deliver cost efficiencies. I am pleased with the continued success we have had and a full account of our activities and achievements can be found in the Chief Executive s review. The third component of the plan was to identify future growth opportunities. We announced last year our initiatives to expand the Darty portfolio through a franchise operation, extend our low price offer through the acquisition of Mistergooddeal.com and a progamme to increase the number of stores in France with the kitchen offer. We have been busy implementing all three programmes and I am pleased that during the last year we opened 39 franchise stores, integrated the Mistergooddeal.com business into Darty France helping us increase web generated sales by over 22 per cent and expanded the kitchen offer by a further 16 stores to 71 stores. We still have more to do to ensure growth in shareholder value but we have a strong platform for the future. Given the progress we have made, the Board is recommending a final dividend of cents per share, bringing the total dividend for the year to 3.5 cents per share, reflecting our confidence in our ability to deliver improved results in the medium term. Dominic Platt, our Finance Director for over five years, will be leaving the Group on 30 June and I would like to thank him for his valuable contribution to the business and wish him every success for the future. His successor Albin Jacquemont joined the Group in March and joins the Board as Finance Director on 18 June. He is already making a positive impact and I look forward to working with him over the coming years. Finally I must thank all our colleagues across the Group for their hard work and loyalty, particularly in these difficult trading times. Alan Parker CBE Chairman Darty plc Annual report /15 03

6 Typically my sales are up by per cent every month so I am very pleased to have joined the Darty store network. Successful franchise operation Our franchise programme is proving extremely successful and popular with both the franchisees and their customers. The store owners are enjoying the benefit of the Darty brand with wider ranges, access to the full Darty service offer and Darty.com. We now have over 40 stores in operation and are on track for 100 by 2016/ Darty plc Annual report /15

7 Strategic report Our markets We are the third largest specialist electricals retailer in Europe by sales. As of 30 April, we continue to hold leading positions in the markets in which we operate. In France, we are the market leader, based on industry reports by GfK, with a 14.7 per cent share of the French electricals retail market, with an additional 0.4 per cent share coming from the acquisition of Mistergooddeal. com. In Belgium we have 10 per cent share of the electricals retail market and in the Netherlands we have 5.6 per cent share of the Dutch electricals retail market. In the Netherlands following the acquisition of 18 stores from a competitor we are a leading multi-channel electricals retailer in the market. In terms of product categories our brands tend to have a higher share in major home and small domestic appliances than vision, communication and multi-media product ranges. We believe that our leading brand position in France, and in our other core markets, results from a combination of factors, including our reputation for quality and convenience, the range and diversity of our products and our extensive network of stores situated in high traffic areas and leading websites. In France, our primary market, Darty is the most widely recognised electricals retail brand (Source: TNS Sofres, March ). It also has a significantly better image than its competitors for its stores and sales staff, choice of products and quality of service. Our strong brand recognition and the fact that consumers associate our brand with choice, service and price competitiveness are key drivers of consumer interest in our products, visits to our stores and websites and our ability to generate high sales volumes and attractive margins. Our strong brand recognition also provides us with a solid platform to further expand both our product and service offering and our network of stores and e-commerce platforms. France Belgium Netherlands Market size 17.7 billion Market size 3.9 billion Market size 6.1 billion Market share % 2012/ /14 / / /14 / / /14 / Darty plc Annual report /15 05

8 Strategic report Our business model We are the number one electricals retailer in France, the number two electricals retailer in Belgium and, following our recent acquisition, we are a leading multi-channel player in the Netherlands, our core markets. We operate under some of the most highly established brands in our sector. We display, sell, distribute and provide after-sales support for a wide range of electrical products and associated accessories and services, from major home and small domestic appliances to the latest vision and audio and telecommunication and multimedia products. We market and distribute our products through our network of 400 stores and leading websites and mobile applications. Business model Strategy /15 progress Future opportunities KPIs Market leading brands in our core markets in France, Belgium and the Netherlands Identify and eliminate losses in non-core businesses and strengthen leadership positions in core markets Completed the disposal of Datart in the Czech Republic and Slovakia Acquired 18 profitable stores in Holland Successfully opened 39 franchise stores Ongoing review of market consolidation opportunities Further roll-out of the Franchise model Retail profit m Number of franchise stores Unrivalled service offer before, during and after-sales Drive trading by further improving our value added service proposition Trialled and rolled out the successful new after-sales service initiative Le Bouton Launched same day delivery and after sales service intervention Continue to assess opportunities for extended service offers LFL sales Market share Fully integrated multi-channel platforms comprising stores, websites and mobile applications Digitalise Darty by further enhancing our websites and driving web generated sales Expanded Click and collect offer Programme to equip staff with tablets and provide in-store WiFi Information screens introduced to larger stores Continue to exploit opportunities from new technology Roll-out use of tablets for staff and in-store WiFi availability Internet sales growth Webgenerated sales Extensive offer of all electrical products and accessories with all major brands and own-label and licensed ranges Develop our brand by improving our product offerings and expanding our customer base Integrated Mistergooddeal.com into the main Darty operation Rolled out the kitchen offer to a further 16 stores Further roll-out of the kitchen offer Number of stores with the kitchen offer Cost effective operations Deliver cost efficiencies by implementing cost saving initiatives Completed 50 million cost saving programme on schedule Ongoing cost efficiency with focus on after-sales service Retail profit margin A more detailed description of progress made during the year ended 30 April and our opportunities for growth can be found in the Chief Executive s review on pages 9 to Darty plc Annual report /15

9 Strategic report Strategy In December 2012, we launched our Nouvelle Confiance strategic plan, the principal components of which were to: identify and eliminate losses at our non-core businesses and refocus on core markets; create value from our market leadership and efficiency savings; and identify future growth opportunities. Following our exit from our businesses in the UK, Italy, Spain and Turkey, we completed the elimination of losses in our non-core markets with the disposal of our majority shareholding in Datart in the Czech Republic and Slovakia in August. We are now totally focused on our core businesses in France, Belgium and the Netherlands. In February, our business in the Netherlands, BCC, completed the acquisition of 18 profitable stores from HiM Retail, strengthening its market position. The stores geographically complement the current portfolio and bring the total number of BCC stores to 75, making it the leading multi-channel electrical retailer in the market. Most stores have now been rebranded to BCC and are showing on average a 15 per cent sales uplift. The 4Ds In order to create value from our market leadership, drive greater efficiency and reduce costs, we developed a four-point plan ( 4Ds ), focusing on our principal business in France to: Drive trading by delivering on our promise to customers; Digitalise Darty by further enhancing our multi-channel offer and leading websites; Develop our brand by improving our product and market-leading service offerings as well as expanding our customer base; and Deliver cost efficiency by implementing cost savings. Multi-channel retailing We want our customers to have a choice of how to research, buy and receive the products they want from our stores, websites and mobile apps. Research online from PCs, laptops, tablets and mobile phones or in-store. I WANT TO BUY A WASHING MACHINE RESEARCH Buy online, in-store or on the phone via our call centres. Delivery Home delivery, collect from our stores or collection points or take away from the store on purchase. SEE STORE TOUCH EXPERT ADVICE WIDER CHOICE ONLINE PC TABLET MOBILE PRICE COMPARISON Being a multi-channel retailer we can reach more customers outside of our stores and we make more efficient use of the infrastructure of our stock, warehousing and home delivery, whatever the type of purchase. INSTORE DELIVERY INSTALLATION ONLINE PC TABLET MOBILE TAKE AWAY OLD APPLIANCE INSTORE CLICK AND COLLECT COLLECTION POINTS Darty plc Annual report /15 07

10 A new after-sales service initiative Le Bouton was launched in October offering customers immediate support at the touch of a button. Darty brand development This year we celebrated 40 years of the famous Contrat de Confiance, Darty s price, choice and service promise to its customers. We took the opportunity to evolve this long heritage for service and modernised the brand s image in keeping with the changing expectations of our customers and to raise our awareness even further. We have introduced a number of initiatives including instore Wifi availability, a very contemporary and widespread marketing campaign, a series of instore events and Le Bouton. 08 Darty plc Annual report /15

11 Strategic report Chief Executive s review Across the Group we delivered on new initiatives to improve our multi-channel proposition which led to market share gains in France and the Netherlands. The 4Ds 1 Drive trading In a market that saw a small decline in France over the year we delivered further market share gains, kept footfall stable and improved our store conversion rate. During the period Darty held a number of events to drive trading. A successful World Cup campaign helped deliver strong vision sales during May and June and the July Sale received a positive response from customers. The Back to school campaign run from late August through September, delivered sales below expectation due to limited stock and the January Sale was impacted by events in Paris at the beginning of the month. We supported these campaigns by weekly monitoring of our instore and online prices to confirm our competitiveness. On a service included basis we continue to compare very favourably against all store based retailers and all web pure players and we have recovered our number one position in the TNS Sofres survey. In addition, during the year we celebrated 40 years of Contrat du Confiance, our price, choice and service promise to our customers, and we took the opportunity to simplify and modernise the Contrat providing us with a unique marketing platform. As part of the Darty service offer, delivery, installation and after-sales service have historically been included for free with the majority of product purchases. A premium paid for delivery is now available for specific two hour time slots from 7am to 9am, and 5pm to 9pm and Chronopost next day delivery if ordered by 1pm for non-bulky items. In March we enhanced the service offer with paid for same day delivery for large appliances in the Paris and Lyon regions, if ordered before 4pm and delivered by 9pm, and in Paris same day after-sales service intervention if contacted by 4pm. As a result we have regained the leading position in home delivery and extended our lead against all our competitors for after-sales service (source: TNS survey). After the end of the financial year we launched a new Store card, Carte de credit connectée, with the objective of providing customers with greater value beyond purely a financing solution. For a 15 annual fee, which is subsequently refunded in Darty vouchers, customers receive a Visa debit/credit card which is also a loyalty card. Every time a customer uses the card to complete three transactions worth over 50 each at Darty they will be given a 10 gift card. Additional benefits include free subscription to Le Bouton, our new 24/7 after-sales service initiative launched last year, special offers on products, VIP shopping evenings and access to flexible financing offers and free credit. 2 Digitalise Darty As a successful multi-channel retailer, we continue to develop a seamless approach between our websites and stores. During the period we continued the programme of digitalising the store network which includes free WiFi, equipping sales staff with tablets to demonstrate products and provide price and availability and large display screens. By the end of the financial year we had digitalised 64 stores including two franchises, with over 1200 tablets being utilised by staff, and we had over 340 screens across 30 stores. Throughout the year we saw an improvement in the level of sales made utilising a tablet to 14 per cent of store sales, with the best stores approaching 40 per cent. We plan to digitalise a further 60 stores during /16. Visits to Darty.com grew over 22 per cent for the year to over 160 million and towards the end of the period the website was refreshed to improve its look, feel and content, making it more modern, clear and user friendly. Régis Schultz Chief Executive Darty plc Annual report /15 09

12 This year in France we achieved a 22 per cent uplift in web generated sales bringing web penetration to over 17 per cent of total products sales. Online growth We have successfully grown our online business with a 22 per cent increase in web generated sales. The acquisition last year of Mistergooddeal.com is enabling us to offer a wider choice of price-entry products, attracting a more diverse customer base. We have integrated the business into Darty, utilising our infrastructure and creating greater cost efficiencies. 10 Darty plc Annual report /15

13 Strategic report Chief Executive s review 20 PER CENT penetration of Click and collect increased to 20 per cent of total web sales. During the year we saw significant increases in penetration of our Click and collect service, where customers can reserve online and collect an hour later from their chosen store, or from a Click and collect locker in certain high traffic stores. Penetration of Click and collect increased by 540 basis points to 20 per cent of web sales, with penetration reaching 30 per cent in the peak trading month of December compared to just over 20 per cent the prior year. 3 Develop our brand Building on Darty s long heritage for service and its famous Contrat de Confiance, a new initiative, Le Bouton, was launched nationwide in October. By pushing a dedicated wireless button or via a mobile app, customers can make direct contact with Darty s market leading after-sales service support, 24 hours a day, seven days a week. We aim for a service assistant to call the customer back within two minutes to assess and solve the problem either over the phone or by a subsequent home visit. The service is available for all electrical products but for those not originally bought from Darty or out of warranty there is a charge for any repairs required. The service is available for a small monthly subscription of 3/month, or 8/month including multimedia products, plus 25 for the wireless button. Over 35,000 buttons had been issued by the end of the year, including six, 12 or 24 month subscription bundled with an extended warranty purchase. Our intention is to fully integrate the button into the extended warranty offer. As market leader in France we continue to receive support from leading manufacturers in gaining access to exclusive products, with particular emphasis on being first to market for new products. During the period this was evidenced by significant sales of large screen OLED and Ultra HD/4K televisions, particularly ahead of the football World Cup in May and June. Increasingly connected products and dedicated areas in-store and online are being introduced into the offer for both the home and health, such as connected security, lighting, thermostats and fitness trackers. As recognition for the recent progress we have made with the brand, our net promoter score increased over the second half of the year. We also won a number of awards during the year including one from LSA for our Click & Collect service, the Nuit des Rois digital marketing award for Le Bouton and the IREF Satisfactions Clients award for the electricals sector. In addition, we have seen improving colleague engagement through our annual staff opinion survey. Darty plc Annual report /15 11

14 Over the last year in France we have recorded 73 million visits to our stores and over 165 million visits to our websites. Customer information is gathered to provide a database for more specific and tailored marketing purposes. Improved customer offer We continually improve our offer to build customer loyalty and increase web and store traffic to keep one step ahead of the competition with a seamless approach between our websites and stores. We are a true multi-channel retailer. Our customers can research for a product online or in our stores; buy online, in-store or by phone; and then obtain their product via either home delivery, collect from our stores or collection points or takeaway from our stores on purchase. 12 Darty plc Annual report /15

15 Strategic report Chief Executive s review We are focused on building on our achievements to date by investing in our customer proposition, reducing the cost base and delivering improved profitability through our growth initiatives. 4 Deliver cost efficiency Throughout the Group, we had targeted annual gross cost savings over three years of 50 million per annum by /16, from delivering a more efficient operating model, continuing to adapt our cost structure and leveraging synergies between our operating companies. To accelerate the achievement of the savings by /15, a social plan was implemented in France last year and proceeded as planned. 30 million of benefits were achieved over the prior two years with the final benefit of 20 million achieved in full this financial year. Total Group underlying costs (excluding the Mistergooddeal.com acquisition) were down over 2 per cent ( 27 million) despite incremental costs related to our increased store activity. While this major programme has now been completed, we continue to work on all opportunities to improve cost efficiency in the business, with a particular focus in France in /16 on the after-sales service infrastructure and increasing Click and collect penetration to further reduce home delivery costs. We also continue to manage our freehold property to ensure maximum value to the Group. Following over 45 million of total proceeds in the prior two years, 13.9 million was delivered this financial year, with a similar amount expected in /16. Growth initiatives In 2013 we identified and introduced initiatives to help secure our future growth, including: expanding the Darty portfolio into smaller catchment areas with the opening of franchise stores; extending our low price/pay-as-you-go services offer through the Mistergooddeal.com channel; and a programme to increase the number of stores in France with the kitchen offer. Franchise stores Darty is the market leader in France with 70 per cent of consumers within a 30-minute drive time of a store. The remaining 30 per cent of consumers represent an opportunity to further exploit the existing infrastructure of our multi-channel offer. Typically these consumers will reside in smaller catchment areas, usually below 100,000 inhabitants where it is uneconomic to open a typical Darty store. To address these smaller catchment areas we established a franchise operation last financial year. The independent owner invests to refurbish their own store to a Darty store, consistent in terms of both branding and offer with the rest of the store portfolio. We charge the franchisee for the supply of product ranges and provision of home delivery and after-sales services. A franchise fee is also charged for use of the brand and marketing support. At the end of the financial year we had opened 43 stores including four overseas. Performance has been encouraging with significant sales uplifts and a net promoter score above the Darty average. We expect to open around 25 additional stores in /16, bringing the total to around 70 stores. 70 PER CENT of consumers are within a 30-minute drive time of a Darty store. Darty plc Annual report /15 13

16 The service and quality of Darty Kitchens is excellent. The price is good and the after-sales service and installation is very efficient and smooth. Strong kitchens offer Thanks to improving the density of our merchandising in all other product categories, we now offer our bespoke kitchen range and service in over 70 stores, making sure we are capitalising on this fast growing area of the market. Our medium term aim for the offer to be in 120 stores, in all catchments of over 200,000 inhabitants, is well on track. 14 Darty plc Annual report /15

17 Strategic report Chief Executive s review Mistergooddeal.com To increase Darty s share of the fast growing market for an entry price offer, we acquired Mistergooddeal.com towards the end of the last financial year. Mistergooddeal.com is a leading French electricals website, predominantly in white goods at the price entry end of the market, with no service included. We have retained the brand name and are extending the product offer with the introduction of our own label brands. Darty s existing service infrastructure is now being used to offer Mistergooddeal. com customers additional services on a pay-as-you-go basis, with home delivery being offered from October and all suitable Darty stores can now be used as customer collection points. Initial trading was weaker than expected due to very competitive activity in the entry price end of the market. With a new management team in place from October we deepened and accelerated the integration of the business into the main Darty operation to help speed up and deliver further cost savings. The head office was integrated in January followed by the IT and warehousing in April. A new look website was launched at the end of the year, on Darty s IT platform. We also made changes to the product offer, exiting non-core categories such as furniture and extending small domestic appliance and vision ranges. The retail loss for /15 was 7.7 million but with the actions being taken commercially and particularly on the cost base, we expect to approach breakeven for /16. Kitchens Our kitchens business in France is an example of our ability to continually develop the Darty brand further, and move into a new, related product area, build a relevant market position and drive profitability. The kitchen market has solid fundamentals with the fitted kitchen equipment rate in France being only 62 per cent compared to a European average of around 80 per cent and a growing electricals built-in market. At the same time, competitors are consolidating and, as Darty builds scale, consumer recognition of our kitchens offer is consistently improving year-on-year. As a result of increasing the density of merchandising in other product categories, we are now able to install the kitchen offer in smaller stores in the portfolio. We now have 71 stores with the offer generating over 80 million of revenue. Commercial initiatives during the year included interest free credit offers as well as a partnership with house builder, Bouygues Immobilier for customers to select a Darty kitchen to be installed in their new property. Given the acceleration of openings in the year, the time to reach maturity and pre-opening costs incurred ahead of the initial customer orders, a loss was made in /15 of 4 million. At the end of the period a new catalogue was launched in print and online, featuring 32 different kitchen models, supported by a TV campaign from early May. With a further 13 stores planned to have the offer in /16, together with changes to the management team, infrastructure and planned productivity improvements, we expect to move to profitability in the current financial year. Outlook Whilst we have started to see signs of improvement in consumer confidence, the product cycle will continue to have an impact on our markets which are expected to remain challenging. We are focused on building on what we have achieved through Nouvelle Confiance by investing in our customer proposition in all our businesses, reducing the cost base and delivering improved profitability. Régis Schultz Chief Executive 16 FURTHER STORES expanded the kitchen offer into 16 further stores increasing the total to 71 stores. Darty plc Annual report /15 15

18 We now have 75 stores in the BCC chain and have become a leading multi-channel electrical retailer in the market. Expansion in the Netherlands Our business in the Netherlands, BCC, has seen much better results recently and we have driven this further forward with the acquisition of 18 profitable stores from a competitor. All these stores geographically complement the existing portfolio. They have already been refitted and branded as BCC and are leveraging the existing store and after-sales service support infrastructure in the Netherlands. 16 Darty plc Annual report /15

19 Strategic report Operating review 18 NEW STORES We acquired 18 profitable stores in the Netherlands making us the leading multi-channel retailer in that market. France Total revenue was up 3.5 per cent including Mistergooddeal.com and the franchise business and the Darty brand again outperformed the market for the period. Like-for-like sales fell 2.0 per cent with trading up against strong comparatives from the prior year (like-for-like sales up 2.8 per cent), particularly in the second half. We saw continued strong growth in communications and white goods were also positive. The rate of decline in vision slowed significantly, with growth in May and June reflecting a successful football World Cup campaign with strong sales of new technologies (OLED and Ultra HD) and large screen sizes. We saw a fall in multimedia due to declining volumes and average selling prices for tablets and a poor digital camera market. Overall web-generated sales continued to grow, albeit in a slower market, to over 15 per cent of total product sales, and to over 17 per cent including Mistergooddeal.com. Click and collect at Darty.com was increasingly popular with customers, rising over 40 per cent to 20 per cent of web sales. Underlying gross margin was down around 90 basis points reflecting competitive French market conditions not fully offset by an improving product mix. Overall gross margin for France was down around 180 basis points after taking account of the lower margin franchise and Mistergooddeal.com operations which had an impact on gross margin of 70 and 20 basis points, respectively. Underlying total costs (excluding Mistergooddeal.com) reduced by 25 million, 3 per cent, reflecting the benefit of the cost programme implemented last year. Total costs were broadly flat. Retail profit was 70.0 million compared to 87.2 million in the prior year. This included 7.7 million (: 0.9 million) retail loss for Mistergooddeal.com, a loss of around 4 million for the kitchen business, and a break-even performance from the franchise operation. During the period five stores were opened, six closed, five relocated, three extended and three rightsized or refurbished. We also opened 39 franchise stores and added the kitchen offer to 16 additional stores. Plans for /16 are for six relocations, five refurbishments and four rightsizings. We expect to open around 25 more franchise stores and introduce the kitchen offer to a further 13 stores. Belgium and the Netherlands At Vanden Borre in Belgium and BCC in the Netherlands overall revenue was up 1.7 per cent, and down 0.3 per cent on a like-for-like basis. Web-generated sales continued to grow strongly, up over 20 per cent, to over 13 per cent of total product sales, with Click and collect sales up 10 per cent to over 27 per cent of web sales. With a new local management team in place, BCC saw a continued improvement in performance, first seen at the end of last year. We saw positive like-for-like sales in store and particularly on the web, market share gains in all major product categories and an improved gross margin. The acquisition of 18 profitable stores from a competitor completed in February, with the majority of stores converted to BCC by the year end. The acquired stores accounted for 8.0 million revenue in /15 and are expected to contribute around 45 million revenue in /16. Earlier in the period Vanden Borre focused trading on margin in a more promotional market with, inevitably, some impact on revenue against a strong performance last year. The like-for-like sales trend improved in the second half of the year and web sales saw strong growth following the introduction of next and same day delivery. Overall gross margin saw a small improvement of 20 basis points, with total costs flat. Retail profit improved to 14.8 million compared to 9.3 million in the prior year with a strong reduction in losses at BCC, even after incurring some acquired stores integration costs, and a further growth in profits at Vanden Borre. Excluding the acquired stores there was one store closure at BCC and one new store opening at Vanden Borre. For /16 we plan to close one store at BCC and open one at Vanden Borre. Darty plc Annual report /15 17

20 Strategic report Financial review Group revenue, including Mistergooddeal.com and the franchise operation, increased by over three per cent to 3,512.1 million. Dominic Platt Finance Director Revenue and retail profit Group revenue at 3,512.1 million, was up 3.2 per cent including Mistergooddeal. com and the franchise stores. On a like-for-like basis Group revenue was down 1.6 per cent, with slower second and third quarters against much stronger comparatives from the prior year. In terms of product categories we saw continued strong growth in communications and white goods was also positive. The rate of decline in vision slowed significantly, with growth in May and June reflecting a successful football World Cup campaign with strong sales of new technologies (OLED and Ultra HD) and large screen sizes. We saw a significant fall in multimedia due to declining volumes and average selling prices for tablets and a poor digital camera market. Our web-generated sales continued to grow and including Mistergooddeal.com were up over 22 per cent, now representing over 16 per cent of total product sales. Click and collect was increasingly popular with customers and represented over 24 per cent of all web sales. Underlying gross margin declined by around 80 basis points for the period where we started to see some benefit from an improving product mix, but was insufficient to off-set ongoing product category margin pressure in challenging and promotional market conditions. After taking into account the business mix effect of the lower margin Mistergooddeal.com and franchise operations, total gross margin was down 150 basis points. Underlying costs, excluding Mistergooddeal.com, were down 27 million, over 2 per cent, reflecting the benefits of our cost savings programme in France. Total costs including Mistergooddeal.com were broadly flat. Group retail profit was 74.9 million compared to 85.5 million for the same period last year, including losses of 7.7 million from Mistergooddeal.com (: Retail loss 0.9m), an improvement in Belgium and the Netherlands from 9.3 million to 14.8 million and a reduction in head office costs from 11.0 million to 9.9 million. Exceptional items Exceptional items totalled 13.7 million (: 29.4 million) million related to property charges and impairment costs in France, mainly as a result of a programme to improve store portfolio performance. 7.1 million related to reorganisation costs associated with integrating Mistergooddeal.com into the Darty business ( 4.8 million) and other reorganisation costs mainly relating to the transfer of some head office functions from London to Paris ( 2.3 million). In addition, there was a 7.9 million exceptional gain ( 6.4 million in France and 1.5 million in Belgium and the Netherlands) arising following the review of absorption of distribution costs into the carrying value of inventory. Operating profit Operating profit was 60.3 million (: 53.4 million) with reduced exceptional charges off-setting a decline in retail profit. 18 Darty plc Annual report /15

21 Net finance costs The net finance costs were 23.6 million (: 13.4 million) excluding IAS 19 pension interest of 3.8 million (: 2.6 million). The net finance cost increase reflects the full year impact of the refinancing of the Group in February. Adjusted profit before tax The adjusted profit before tax was 51.3 million (: 72.1 million). Taxation The effective tax rate for the Continuing Group on adjusted profit before exceptional items, including the share of joint venture and associates tax was 23.2 per cent (: 44.4 per cent) and including the CVAE reclassification of 10.7 million (: 11.1 million) from operating profit to taxation was 39.3 per cent (: 52.6 per cent). The decrease in tax rate from is due primarily to lower French group profits which being taxed at a higher rate than the group tax rate has a beneficial impact on the group tax rate. This impact is partially offset by an improved performance in the Netherlands where tax credits are not currently recognised on losses. The Company has received a demand from the French Tax Authority, claiming up to 15.3 million in unpaid taxes and penalties relating to the Group s holding company structure. Extensive professional advice has been obtained and the Company believes it has a very strong defence and much of the claim is without merit. A provision has been made based on our best estimate of the expected outcome. Based on a total charge of 18.7 million (: 27.4 million) the total tax rate is 55.3 per cent (: 71.7 per cent) on unadjusted profits, reflecting that tax relief is not recognised on all exceptional and other non-retail profit items. The effective tax rate for the continuing Group on adjusted profit before exceptional items, including the share of joint venture and associates tax is expected to be mid 30s per cent in /16 including the CVAE charge of around 11 million. Profit for the period The profit for the period from continuing operations increased to 15.1 million (: 10.8 million). Loss for the period from discontinued operations reduced to 1.3 million (: loss 17.4 million). Total profit for the period increased to 13.8 million (: loss 6.6 million). Earnings per share Adjusted earnings per share, excluding the IAS 19 net interest on pension schemes, was 5.8 cents (: 6.5 cents). Continuing basic and diluted earnings per share was 2.9 cents (: 2.1 cents). Cash flow Cash generated from operations was 60.7 million (: 18.4 million) principally as a result of a reduction in cash outflows related to discontinued operations. Net capital expenditure was 36.8 million (: 32.2 million), reflecting lower proceeds from property disposals of 13.9 million (: 29.7 million). Proceeds from the sale of operations relating to the sale of Darty Turkey and Datart was 10.1 million. Cash costs of acquisitions mainly for stores at BCC in the Netherlands was 9.8 million. Interest paid was 22.9 million (: 21.4 million) and tax paid was 21.2 million (: 9.9 million) reflecting phasing of payments in France. The dividend payment remained unchanged at 3.5 cents per share, but the strengthening of sterling against the euro for shareholders electing a sterling dividend payment increased the cash payment to 18.4 million (: 18.0 million). Net cash outflow from continuing operations was 30.9 million (: net cash inflow 18.0 million). Net cash outflow from the discontinued operations was 5.6 million (: 57.5 million). Total net cash outflow was 36.5 million (: 39.5 million). Net debt Closing net debt was million compared to million on 30 April. As at 30 April, 57 million was drawn under the Group s committed facilities (30 April : 20 million) in addition to the Group s 250 million High Yield Bond. Retirement benefit obligations The IAS 19 net pension liability was million (: million), split 38.2 million (: 60.1 million) in the UK and 65.2 million (: 44.5 million) in France. The movement in the UK net liability benefitted from the performance of the assets outstripping liabilities. The deficit of the UK scheme in sterling was 27.9 million. The increase in the net liability in the French schemes mainly reflects a fall in corporate bond yields. The cash cost of the UK scheme was 12.9 million and the French scheme was 0.9 million. Balance sheet Following the disposal and closure of discontinued operations from 2012 onwards including Comet, Darty Italy, Darty Spain and Darty Turkey and exceptional items from recent restructuring, we have reported net liabilities. At 30 April net liabilities totalled million (: million). Under our accounting policies, freehold property is carried at cost. Our freehold property portfolio in France, representing in the main around one third of the store portfolio, has a carrying value of 102 million, compared with a market valuation of approximately 350 million. In addition we carry no internally generated goodwill for our market leading brands. Dividends The Board is recommending an unchanged final dividend of cents per share. The ex-dividend date will be 22 October, the record date will be 23 October and the payment date will be 13 November. Financial presentation Datart has been reclassified as a discontinued operation following the signature of a sale and purchase agreement with SEW-1001 a.s. to sell the Group s 60 per cent shareholding on 22 July. The prior year comparatives have been restated accordingly. Two accounting treatments are possible for the business tax, CVAE (Cotisation sur la Valeur Ajoutée des Entreprises) either as an operating expense or as income tax. In line with the treatment adopted by French retail listed peers the decision has been taken to reclassify from an operational expense in the retail profit of the France reported segment, to income tax. CVAE was 10.7 million for the year ended 30 April (: 11.1 million). In addition, having reviewed possible treatments under IAS19 Revised, retirement benefit scheme expenses of 1.3 million (: 1.4 million) relating to the legacy UK pension scheme have been reclassified from finance costs to operating profit in line with most common practice. These costs have been reclassified as an operating cost, outside of retail profit, as they relate to Comet, a discontinued business. Darty plc Annual report /15 19

22 Strategic report Financial review Key performance indicators Definition/source Sales: Total revenue growth Like-for-like sales growth Like-for-like sales are calculated based on stores that have been open for a full year and the first full four weeks of trading have passed. Stores where retail space has been added or where a complete format redesign (including addition of a mezzanine floor) has taken place, which involves material capital expenditure are excluded from like-for-like sales calculations. Sales through internet sites are included. Internet sales growth Percentage increase in web-generated sales. Multi-channel sales Web-generated sales as a percentage of total product sales. Performance : 3.2% : (1.6)% : 22.2% : 16.1% : 0.8% 1 : 1.9% 1 : 12.2% 1 : 14.3% 1 Profitability: Retail profit Retail profit represents continuing Group total operating profit before the share of joint venture and associates interest and taxation, movement in options and related charges over non- controlling interests, impairment of available-for-sale financial assets, exceptional costs and amortisation and impairment of acquisition related intangible assets. Retail profit margin Retail profit as a percentage of total revenue. Adjusted earnings per share Excludes the effects of movement in options and related charges over non-controlling interests, realised losses on available-for-sale financial assets, exceptional costs, exceptional finance costs, tax effects of exceptional items, discontinued operations and amortisation of acquisition related intangible assets. Cash flow: Free retail cash flow Free cash flow is defined as cash generated from operations and net sale of business operations and subsidiary less net capital expenditure and investments. : 74.9m : 85.5m 1 : 2.1% : 2.5% 1 : 5.8 cents : 6.5 cents 1 : 25.6m : ( 1.2)m Non-financial: Market share Share of the total electricals market in each country (source: GfK). Franchise stores Number of Darty franchise stores. Kitchens Number of Darty stores with a kitchen offer. France : 14.3% : 14.7% : 4 : 43 : 55 : 71 Belgium : 10.5% : 10.0% Netherlands : 5.2% : 5.6% 1 Restated following the sale of Datart, now classified as discontinued operations, the CVAE reclassification from operating profit to taxation and the legacy UK retirement benefit scheme expenses from finance costs to operating profit. The Group manages its performance using these key performance indicators in place at a Group and business level. Prior year KPIs have been restated for the new continuing Group to ensure like-for-like comparison. The Group also has a set of non-financial KPIs; details of these are set out in the Corporate responsibility report on pages 23 to 27. Dominic Platt Finance Director 20 Darty plc Annual report /15

23 Strategic report Principal risks The taking of risk is an inherent part of doing business and the skill in business is to manage risk effectively. The Board and senior management have invested time to identify and assess the key risks facing the business and actively manages those risks. Risk management is performed from both a top-down and a bottom-up perspective, ensuring that strategic and operational risks are appropriately addressed. The principal risks and uncertainties to delivering our strategy are set out below together with an illustration of what actions are being taken to mitigate the effect of those risks on the business and its customers. Risk Actions taken Actions to be taken Legislative and regulatory risks The Group s operations are subject to extensive regulatory requirements, particularly in relation to its buying and selling products and after-sales services, its advertising, marketing and sales practices, its employment and pensions policies and planning and environmental issues. Changes in laws and regulations and their enforcement may adversely impact the Group s operations in terms of costs, changes to business practices, and restrictions on activities. The Group s businesses may also be adversely affected by changes in tax laws and increasing reviews by tax authorities of corporate tax plans. Potential changes to legislation and regulatory requirements are monitored with the help of external advisers, and the business model and processes have been adapted to seek to minimise the impact of these changes. Have sought to ensure governmental and regulatory bodies understand the impact of current and proposed legislation on both the business and its customers. Implemented packages for our customers, providing them with a wider range of services, not only repair services but also assistance in usage such as our Pack Serenity multimedia assistance service and Le Bouton. Briefing sessions for key executives on the likely impact of legislative and regulatory change so there is sufficient time to develop action plans to mitigate any adverse effects. Continue to ensure legislators and regulators are aware of the potential impact of their policies. Further development of additional service packages for our customers. Economic environment The economic environment can influence the level of consumer expenditure on electrical goods in a number of ways. It can also affect the level of promotional activity in the market, which impacts prices and margins. Other economic factors that may adversely affect sales include interest rates, government economic policy and levels of personal debt. Deteriorating market conditions could adversely impact profitability and cash generation, and delay the delivery of growth in our core businesses. Organisational and business change There are a large number of initiatives across the Group following implementation of the strategic review that could disrupt the business. The implementation of all of the initiatives may be delayed or hindered by a complex regulatory environment, social unrest and project management issues. The implementation of the 4Ds strategy has improved store footfall. Launched initiatives such as Darty Days, Les Immediats and digital stores to improve trading. Offset some of the adverse effects by trading across a number of categories, as well as by further introducing new channels such as franchising. Acquired Mistergooddeal.com to help address the increased demand for lower quartile products. By taking corporate action, the losses incurred in Italy, Spain, Turkey and the Czech Republic and Slovakia have been eliminated. Losses in the Netherlands have been reduced. Completed a refinancing of the Group s debt facilities to secure long-term funding to support our future growth plans. Continued to explore ways to improve our cash generation. Implemented improved change and project management processes. Ongoing dialogue with employees and unions. Continued roll-out of the 4Ds strategy. Review of the store portfolio with a view to relocating poorly located stores. Continued roll-out of the franchising initiative. Further integration of Mistergooddeal. com into Darty France. Seek solutions to ensure all businesses are more profitable. Improve prioritising of initiatives. Improved internal communications. Darty plc Annual report /15 21