http://www.investegate.co.uk/article.as ... 1790K&fe=1
New vision and strategy launched
• Transformation plan underway to deliver a more valuable business
• Focusing on the core; two big growth opportunities in online and credit; revitalising our mobile business; and giving customers an easy experience
• Over 30,000 colleagues to become shareholders through new share awards, aligning business behind strategy
Results Summary
• Gained market share in electricals in all territories
• Group H1 like-for-like revenue(3) up 2%; Q2 like-for-like up 4%
• Group headline PBT(1) of £50 million (2017/18: £73 million)
• Statutory loss before tax of £440 million (2017/18: profit before tax of £54 million), including non-headline charges of £490 million (2017/18: £19 million), primarily relating to non-cash impairments, mainly goodwill(4)
• Free cash flow(5) of £116 million (2017/18: £174 million), with different working capital phasing year-on-year
• Net debt(6) of £274 million (2017/18: £206 million)
Financial Guidance(7)
• 2018/19 headline PBT guidance of around £300 million unchanged
• Transformation plan targeting:
o Market share gains and LFL sales growth
o Group EBIT margin improvement to at least 3.5%(8) over 5 years
o £200 million of identified gross cost savings available for reinvestment and margin progression
o Additional £200 million of capex over 3 years, to accelerate transformation, funded by working capital improvement
• Board committed to maintaining a strong balance sheet and investing in the colleague and customer experience to deliver long term shareholder value
o For 2018/19, dividend rebased to 3 times earnings cover; expected to grow dividends from this level
o Interim dividend 2.25p (2017/18: 3.5p)
• Expect to generate more than £1bn of free cash flow over 5 years
Capital Structure and allocation
We intend to maintain a strong balance sheet throughout this business transformation. We believe that net debt is at about the right level now.
We expect next year, FY20, to be the low point of cash flow generation, because the additional capex for transformation of £200m will be front-end loaded, whilst working capital reduction will take time to build.
We plan to increase pension fund contributions next year, following the next triennial valuation, in agreement with the trustees, to reduce the recovery period to less than the current 12 years.
We will revert to the previous policy of 3 times cover for dividend, which will lead to a reduction of approximately 40% in the dividend this year. This is intended to allow the dividend and the pension fund contributions to be at least covered by free cash flow, which we consider to be prudent.
Going forward, our cash flow will build and we will apply it according to the following priorities, to maximise long-term shareholder returns:
1. Invest to grow the core business
2. Pay and grow the ordinary dividend and fund the pension deficit recovery plan agreed with the trustees
3. Any appropriate strategic investment to enhance the core business
4. Any surplus available for distribution to shareholders
Dividends
The Board has declared an interim dividend of 2.25p per share. The ex-dividend date is 27 December 2018, with a record date of 28 December 2018 and an intended payment date of 25 January 2019.
Unfortunately I recently topped up so the 40% divi cut is a little unwelcome.