Statement of Results

Thursday 16 June 2016

Statement of Results for the twelve months ended 30 April 2016

A strong performance in revenue, profit and cash

· Like-for-like sales1 up 6.1 per cent in France and 3.9 per cent for the Group.

· Web sales up 13 per cent and market share gains in both France and Belgium.

· Retail profit up 24 per cent for the Group to €93.1 million (2015: €74.9 million).

· Over €150 million improvement in cash flow and a €115 million reduction in net debt year on year.

Financial Summary for the twelve months ended 30 April 20162

· Group revenue up 4.1 per cent to €3,656.8 million (2015: €3,512.1 million). Group like-for-like sales up 3.9 per cent (2015: down 1.6 per cent).

· Group retail profit3 up 24 per cent to €93.1 million (2015: €74.9 million). Retail profit up 39 per cent in France including €21.5 million of gross property profits (2015: €6.8 million). Increased losses in the Netherlands following disruption from a new IT system.

· Exceptional items of €36.5 million (2015: €13.7 million) principally relating to asset write offs and business disruption costs in the Netherlands, restructuring in France and Offer related costs.

· Adjusted profit before tax4 up 36 per cent to €69.6 million (2015: €51.3 million). Adjusted earnings per share 7.3 cents (2015: 5.8 cents).

· Profit for the year from continuing operations was €2.1 million (2015: €15.1 million). Total profit for the period was €3.7 million (2015: €13.8 million).

· Net debt at the end of the period was down €115 million at €108.8 million (€223.8 million as at 30 April 2015) with net cash inflow including discontinued operations of €115.7 million (2015 outflow: €36.5 million).

· An interim dividend of 0.875 cents per share (2015: 0.875 cents per share) was paid but, given the terms, and current expected timing, of the offer from Groupe Fnac S.A., the company does not currently intend to recommend a final dividend.

Offer from Groupe Fnac S.A. ("Fnac")

· On 25 April 2016 Fnac announced a third increased final offer for Darty of 170 pence per Darty share or 1 new Fnac share for every 25 Darty shares held.

· The offer represents a premium of approximately:

o 110 per cent to the closing price of 81 pence per Darty share on 29 September 2015 (being the last business day before the date of Fnac's possible offer announcement);

o 61 per cent to the value of the original offer of approximately 105 pence per Darty share based on the closing price of €55.6 per Fnac share on 19 November 2015 (being the last business day before the date of the original offer).

· Phase 2 competition clearance expected July5.

· First closing date for acceptances 15 July5.

· Offer expected to be declared unconditional on or before 5 August with settlement no later than 14 days thereafter.

Chairman Alan Parker commented:

"Today we are reporting a strong set of results which represents the culmination of the Nouvelle Confiance strategy the Board set out in 2012 to restore shareholder value. This strategy involved two distinct elements. The first was the early action we took to exit loss making markets in Italy, Spain, Turkey, Czech Republic and Slovakia. The second was to grow our core markets and in particular France where our focus on developing multi-channel, growing the store network through franchises and improving the customer experience has delivered a step change in performance including a significant improvement in the cash position and balance sheet.

These actions created the circumstances that led to the interest in Darty from third parties, culminating in the recommended offer from Fnac. The share price has more than trebled since commencing our Nouvelle Confiance strategy. We have created a leading European retailer which can deliver attractive synergies for investors, benefits for our customers and development opportunities for our colleagues. Darty is now in a significantly stronger position than before and can look forward to the future with confidence."

1 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 has taken place which involves material capital expenditure are excluded. Sales through internet sites, excluding Mistergooddeal.com, are included.

2 Excluding results of discontinued operations except where stated otherwise.

3 Represents total operating profit before the share of joint venture and associates' interest and taxation, 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.

4 Represents retail profit less finance costs excluding net interest on pension schemes.

5 Based on the statements contained in Fnac's offer document published on 31 May 2016.

Please note: There will not be a conference call with analysts and institutions today.

Enquiries

France

Le Public Système

Ségolène de Saint Martin +33 1 41 34 23 31 / +33 6 16 40 90 73

Certain statements made in this announcement 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. 

CHIEF EXECUTIVE'S REPORT

"We delivered strong trading throughout the year with market share gains, significantly improved profit performance and greatly improved cash generation.

"Our growth initiatives - the franchise operation, extended kitchen offer and Mistergooddeal.com - all evolved and delivered significantly improved results. We also continued to innovate in terms of digitalisation and have further enhanced our market leading services offer."

Chief Executive Régis Schultz

'Nouvelle Confiance' delivered ahead of schedule

Following an in-depth internal review of our business, we launched our 'Nouvelle Confiance' strategic plan at the end of 2012, 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;

· develop future growth opportunities.

We completed the elimination of losses in our non-core markets in August 2014 and have since been focussed on our businesses in France, Belgium and the Netherlands where we are number one or two in our markets. These actions have led to an improvement in Group retail profit from €38.7 million in 2012/13 to €93.1 million in 2015/16 and cash generated from operations from €20.0 million in 2012/13 to €175.1 million in 2015/16.

We have created value from our market leadership as well as efficiency savings based on our '4Ds' programme:

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.

In summary, our actions over the three year period in France from 2012/13 to 2015/16 have achieved:

· Revenue growth of 10 per cent;

· An improvement in our market share by 160 basis points to 15.2 per cent;

· Growth in web sales of 37 per cent;

· 29 per cent of web sales utilising the 'Click & Collect' offer during 2015/16;

· The number one position on price with service included, home delivery and after sales (TNS Sofres); and

· The €50 million target of gross run-rate cost savings by the end of 2014/15 was delivered ahead of schedule, largely through rationalisation of head office and after-sales service infrastructures.

The growth initiatives

The growth initiatives we previously announced, a franchise store model, development of our kitchen offer and the acquisition of Mistergooddeal.com, are progressing well and are all delivering improved results.

The establishment of franchise stores has enabled us, with low investment, to increase our store network into smaller catchment areas where a typical, larger Darty store would not be economical to operate. The first franchise stores opened in March 2014 and we already have 67 stores in France, with a further seven overseas, having opened 28 during the year in France and three overseas. Sales uplifts on conversion to a Darty franchisee of these former independent stores remain very strong and those stores trading in their second year are on average seeing nearly 17 per cent like-for-like sales growth. The franchise network has now reached a scale that is profitable.

Introducing a kitchen offer into stores was a natural extension for Darty, being market leader in the home appliances market and with the leading reputation for service. We now have 82 stores with our kitchen offer, including 11 opened in the period. During the year a new catalogue was launched in print and online featuring 32 different kitchen models, supported by a nationwide TV campaign and the development of online appointment booking with the in-store kitchen specialists. Following some operational disruption last year from our accelerated opening programme, this part of the business performed better this year with total revenue up over 17 per cent and a significantly improved contribution.

Mistergooddeal.com, our online channel to serve the entry price / low service part of the market, has been completely integrated into Darty's logistics infrastructure. Customers now collect ordered products from Darty stores rather than stand-alone collection points. Revenue remained under pressure due to this integration and also due to the removal of legacy non-profitable, non-electrical product lines. However, the integration and elimination of costs has led to a breakeven performance for the year, ahead of our initial schedule.

'Confiance 4.0' - our new plan

Following the successful delivery of 'Nouvelle Confiance', we developed a new plan to secure continued, profitable growth.

Buying trends are evolving: customers want a trusted retailer for white goods with around 80 per cent of white goods purchased through specialist retailers such as Darty; they want immediate access to products and services, with over half of customers checking online for product availability before going to a store; they want tailored services with over a third of Darty customers already willing to pay a premium for a dedicated service; and, as the technology develops, they want connected home appliances, with households expected on average to each have 30 connected products by 2020.

With this in mind, our new three year plan, predominantly focussed on France, is built around four priorities:

Cash, to reinforce our financial strength and economic model,

Channels, to accelerate our multi-channel offer,

Care, to personalise our services, and

Connected, to capture connected growth opportunities.

Cash - Reinforce our financial strength and economic model

During the year we introduced a Group wide plan to strengthen our financial position. This has been achieved through a number of working capital and cost initiatives.

Payment terms have been reviewed with suppliers and where possible, better, extended payment terms have been agreed. The business has also focussed on more prompt collection of a variety of supplier incentive payments as they contractually fall due rather than being collected as a year end exercise.

We are also taking actions to optimise our cost structure. The transfer of the majority of the London head office functions to Paris was completed during the year. We have started to create a more efficient back office organisation, including reviewing all indirect procurement purchases and the roll-out of electronic billing.

After-sales service has been a major advantage for Darty, ranking well ahead of all its competitors (source: TNS Sofres) and a key criteria for customers when choosing Darty. Significant investment has been made over the years to maintain this position through remote assistance, building an extensive knowledge base on product failures and the introduction of in-store workshops.

Our ambition is now to further reinforce this leadership by reconfiguring the service operations towards a more immediate and personalised service. We have launched initiatives this year to develop service in-store including product filtering and light repair and diagnostic tools (deployed in 45 stores) resulting in a reduced number of products sent to central repair workshops. Specific efforts have been made to increase first time resolution in our call centres leading to improved service for our customers and reduced costs. New self-assistance functionalities have also been implemented on our websites.

We have also worked with a number of multimedia suppliers to increase efficiency of our central repair activity. Finally, we have improved the performance of our 'out of warranty' business through the creation of an 'all-inclusive' service offer.

The culmination of all this ongoing focus across the Group supports our medium term target to reduce average net debt by €100 million and achieve a further gross cost reduction of €50 million.

Channels - Accelerate our multi-channel offer

Darty is already ranked in the top five multi-channel retailers globally and number one in the electricals sector (source: World e-shopper 2015). We are further improving our customers' experience via our website and mobile content and in-store offer to stimulate traffic, conversion and average basket spend.

During the year we refreshed the mobile site to improve the look and feel, content and navigation and we also continued to digitalise our stores. This includes WiFi in store and equipping staff with tablets to demonstrate products from a wider range than held in store. They also provide a price comparison to competitors and, more recently, trials have commenced to also take purchase payments. During the year, a further 59 stores were digitalised and over 1,000 staff equipped with tablets bring the total number to nearly 2,200 equipped staff in 123 stores. Further digitalisation is being trialled in-store with the use of electronic tickets to provide price and product information.

We continue to improve our store network, largely by relocating selected stores to retail parks. During the year in France two stores were closed, one opened, three were extended, one was refurbished and five were relocated. The store network in France was expanded further with 28 franchise stores opened during the year, bringing the total to 67, with a further 3 overseas franchise stores, bringing the total to seven. Our target is for a total of 120 franchise stores by 2018/19.

A further 11 stores were enhanced in the year with the addition of the kitchen offer, bringing the total to 82 stores with a target of 120 stores with the kitchen offer by 2018/19. A stand-alone kitchen offer is also being introduced at Vanden Borre in Belgium in the first half of 2016/17 via a joint venture franchise operation.

Care - Personalise our services

We are developing an even better experience for our customers in terms of the range and personalisation of our offer and services.

We have evolved our fulfilment options with dedicated in-store collection points and Click & Collect lockers in high traffic stores. We have added customised delivery options, starting with same and next day delivery and installation for large appliances.

Our long established 'Contrat de Confiance' already offered a two year guarantee included within the price for the majority of products. Following the introduction of the Hamon law in France this now has to be offered for all products. Consequently the 'Contrat de Confiance' has required minimal amendment to reflect the new legislation and therefore the business has been significantly less impacted than our competitors who typically only offered a 12 months guarantee.

We have started to expand our in-store help and repair service via in-store counters and workshops to provide a more immediate resolution for our customers, rather than send products to central repair centres with consequential longer turnaround times. 18 stores now have repair desks (L'Atelier) and a further 27 stores have diagnostic kiosks. In addition, in October we launched in-store private appointments with an 'expert' for advice before purchasing a product or afterwards when picking up from 'Click and Collect'.

'Le Bouton', Darty's market leading connected service offer, has been chosen by more than 300,000 customers and during the year we extended the service to include video technology. Customers can now use their smart phone cameras for a live visual link to an adviser as well as converse with an advisor by phone, enabling Darty staff to perform an easier diagnostic.

During the year we launched a new social media initiative. In conjunction with service provider Wibilong, customers can now join online social groups dedicated to a particular product, enabling them to discuss the product before or after buying with other users.

We have improved our price perception and are now viewed as having the best prices on a service included basis against all our competitors, both stores and pure web players. With the improvements to our service proposition, according to TNS Sofres, we are now seen by customers as having the most efficient delivery and after sales service offer and we are the number one for price with service included, value for money, delivery and after sales services.

We have started to utilise our database of 10 million households to help us personalise our customers' shopping experience with tailored recommendations, automated bundles and 'one click' solutions. This year, campaigns have been run to activate dormant customers, target those moving house and to promote a number of new product categories.

We are also looking to increase customer loyalty and during the year we upgraded the existing credit offer through the Darty visa connected credit card, providing greater value beyond financing a product purchase. Transactions using the card lead to gift cards to be used against future purchases. Other benefits include free subscription to 'Le Bouton', special offers on products, VIP shopping evenings and access to flexible financing offers and free credit.

Connected - Capture connected growth opportunities

The increase in, and customer demand for, 'connected' technology provides us with the opportunity to extend our product and service offer.

We have introduced new categories and in-store displays for home ('Maison Connectée') and wearable ('Santé Connectée') connected devices. This includes such products as energy control systems, lighting, security, health tracking devices and watches. The initial connected product range generated around €5 million of additional revenue during the year.

We have broadened our product market place offer into new product categories and extended ranges in existing categories via nearly 200 third party suppliers with over 300,000 offers. During the year we also became a supplier of electrical products on the website of La Redoute, a leading French mail order company.

The market in France for the connected home and services market is estimated by 2018 to be c.€50 billion, five times the size of the current white goods market (source: Euromonitor, Machina, ADEM and Comte du Logement). We have started to capture this opportunity by launching a market place for home services. In partnership with Hellocasa, 'Darty Petits Travaux' is offering customers the ability to book online services such as plumbing, electrics, gardening and professional cleaning for a fixed price.

GROUP OVERVIEW

Results

*excluding Mistergooddeal.com

Financial review

Revised accounting estimate

At 30 April 2015, there was a €7.9m exceptional gain arising on the revised IAS 2 estimation of distribution costs in the carrying value of inventory to take account of non-storage warehouse and logistic costs. As a result of this change of estimate, from 1 May 2015 onwards there is an increase in cost of sales and a reduction in distribution costs. In the 12 months to 30 April 2016, this has resulted in a €68.1 million increase to cost of sales (equivalent to around 186 basis points reduction in reported margins) and a €68.1 million reduction in distribution costs compared to the previous IAS 2 inventory valuation basis.

Revenue and retail profit

Group revenue at €3,656.8 million was up 4.1 per cent including Mistergooddeal.com and the franchise stores. On a like-for-like basis Group revenue was up 3.9 per cent (quarterly revenue performance is provided as an Appendix to this statement). We saw strong sales in white goods in the first quarter benefitting from hot weather related purchases of refrigeration and air conditioning products. As expected vision sales were weak at the start of the financial year against a successful World Cup campaign last year but then showed an improving trend as the replacement market returned supported by the new Ultra HD and OLED models and in particular in the final quarter by the terrestrial high definition switchover in France. Growth in communication remained strong through the year and the multimedia market remained weak, although less so during a successful 'Back to School' period.

Our web-generated sales continued to grow. They were up nearly 13 per cent to nearly 16 per cent of product sales, excluding Mistergooddeal.com, driven by continued strong growth in 'Click & Collect' sales, which were up over 54 per cent.

Gross margin was impacted by ongoing product category margin pressure in promotional market conditions. This was partially offset by an improvement in margin from the mix of product sales, especially in the first quarter when there were better sales of higher margin white goods. Total gross margin, excluding the IAS 2 adjustment, was down 50 basis points. This included a positive impact of 10 basis points from Mistergooddeal.com which was more than offset by a 40 basis points dilutive impact from the lower gross margin franchise business.

Group retail profit increased 24 per cent to €93.1 million compared to €74.9 million for the same period last year, with an improvement at Darty including €21.5 million of gross property profits (2015: €6.8 million) and a breakeven performance at Mistergooddeal.com (2015: retail loss €7.7 million). Vanden Borre saw a small decline in retail profit, losses increased by €9.1 million at BCC due to warehouse system issues and central costs were reduced by €1.1 million.

Exceptional items

Exceptional items totalled €36.5 million (2015: €13.7 million). Restructuring and takeover costs of €9.5 million (2015: €8.5 million) were incurred in France relating to the reorganisation of the after sales service structure of €6.8 million and €2.7 million for pro-rata retention agreements and other HR incentives.

In the Netherlands, given the performance and current market outlook, together with the issues arising as a result of new systems implemented, a number of exceptional items arose: impairment of intangible assets of €10.8 million; impairment of property plant and equipment costs of €7.3 million; €3.5 million of business disruption costs and €0.2 million of restructuring and takeover costs. Unallocated restructuring and takeover costs of €5.2 million mainly include €3.9 million of adviser fees relating to the offer for the Group and €1.1 million relating to the transfer of specific head office functions from London to Paris.

Operating profit

Operating profit was €53.8 million (2015: €60.3 million).

Net finance costs

Net finance costs were €23.5 million (2015: €23.6 million) excluding IAS 19 pension interest of €1.9 million (2015: €3.8 million). This included interest payable on borrowings of €18.4 million (2015: €20.0 million) and loan commitment fees and amortisation of loan and bond arrangements fees of €5.1 million (2015: €4.5 million).

Adjusted profit before tax

Adjusted profit before tax was up 36 per cent to €69.6 million (2015: €51.3 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 44.7 per cent (2015: 39.3 per cent). The increase in tax rate from 2015 was primarily due to increased losses at BCC in the Netherlands where tax credits are not currently recognised on losses.

Based on a total adjusted tax charge of €27.1 million (2015: €18.7 million) the total tax rate was 92.8 per cent (2015: 55.3 per cent) on unadjusted profits, reflecting that tax relief is not recognised on all exceptional and other non-retail profit items. 

Profit for the period

The profit for the period from continuing operations was €2.1 million (2015: €15.1 million). Profit for the period from discontinued operations was €1.6 million (2015 loss: €1.3 million). Total profit for the period was €3.7 million (2015: €13.8 million).

Earnings per share

Adjusted earnings per share, excluding the IAS 19 net interest on pension schemes, increased 26 per cent to 7.3 cents (2015: 5.8 cents). Continuing basic and diluted earnings per share was 0.4 cents (2015: 2.9 cents).

Cash flow

Cash generated from operations was an inflow of €175.1 million (2015: €60.7 million), reflecting a €126.5 million improvement in working capital movements from actions to improve payment terms and focus on more prompt collection of supplier contributions. Interest paid was €21.5 million (2015: €22.9 million). Tax paid was €9.7 million (2015: €21.2 million). Net capital expenditure was €12.0 million (2015: €36.8 million) reflecting increased proceeds from property disposals of €33.3 million (2015: €13.9 million).

€3.1 million proceeds were received as part of the disposal of Comet (2015: €10.1 million proceeds relating to the sale of operations relating to Darty Turkey and Datart). Cash cost of acquisitions was €2.8 million mainly relating to the deferred payment for the acquisition of stores in the Netherlands by BCC (2015: €9.8 million costs mainly for the acquisition of stores in the Netherlands by BCC).

The total dividend payment to shareholders 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 €18.8 million (2015: €18.4 million).

Cash inflow was €115.7 million (2015 outflow: €36.5 million).

Net debt

Closing net debt was down €115 million at €108.8 million compared to €223.8 million at 30 April 2015 and average net debt was down around €60 million compared to last year. As a result as at 30 April 2016 none of the Group's €225 million revolving credit facility was drawn down (30 April 2015: €40 million drawn) in addition to the Group's outstanding €250 million High Yield Bond.

Retirement benefit obligations

The IAS 19 net pension liability reduced to €70.5 million (2015: €103.4 million), split €4.0 million (2015: €38.2 million) in the UK and €66.5 million (2015: €65.2 million) in France. The fall in the UK net liability is mainly due to falling inflation and the £10 million (€13.5 million) per annum company deficit recovery contributions made.

Dividends

An interim dividend of 0.875 cents per share (2015: 0.875 cents per share) was paid but, given the terms, and current expected timing, of the offer from Fnac the company does not currently intend to recommend a final dividend.

BUSINESS REVIEW

France

*65 in France, 7 overseas

Total revenue was up 4.9 per cent and the Darty brand again outperformed the market for the period with like-for-like sales increasing by 6.1 per cent. Darty traded well over the key summer and winter sales, 'Back to School' and Christmas periods. White goods sales remain solid, especially during the summer when we saw strong hot weather-related sales of refrigeration and air conditioning products. Vision sales were weak at the start of the period against last year's Football World Cup comparative but did improve thereafter supported by the Rugby World Cup and were particularly strong at the end of the financial year on the switchover of terrestrial channels (TNT) to high definition. This switchover impacted an estimated three million televisions, necessitating customers to either purchase a set top box or a new television. Darty was well prepared for this event, commencing a customer awareness programme towards the end of 2015 supported by dedicated technical assistants at its call centres. At the switchover deadline in early April Darty sold over 8,000 set top boxes, 3,000 HDMI cables and 800 new televisions every hour. Finally in terms of product categories, communication sales remained strong but the multimedia market remained weak, although less so during a successful 'Back to School' campaign.

As a result of our positive social relations, we were one of the first retailers able to open additional stores on Sundays, following a change in the law. Those opened in Paris delivered double digit sales growth.

Darty's web-generated sales continued to grow, up nearly 13 per cent to over 16 per cent of total product sales and to 17 per cent including Mistergooddeal.com. The 'Click & Collect' option proved increasingly popular, with sales increasing over 66 per cent, accounting for over 29 per cent of Darty's web sales compared to over 19 percent last year. This popularity was highlighted on Christmas Eve when a record 64 per cent of web sales were 'Click and Collect'. We also saw the best-ever Sunday trading on Darty.com during the Big Weekend in November and a record 1.4 million visits to Darty.com on the first day of the winter sale in January. Total visits to Darty.com rose over 11 per cent to over 188 million with total revenue exceeding €400 million for the first time.

Gross margin saw some benefit in the first quarter from a favourable product mix with a greater weighting on higher margin white goods, but was weaker at the end of the year from the very strong sales of lower margin vision products. Overall gross margin for France was down 70 basis points including 20 basis points benefit from Mistergooddeal.com and 50 basis points dilutive impact from the franchise business.

With costs under control, retail profit was up 39 per cent to €97.0 million compared to €70.0 million in the prior year. This included €21.5 million of gross property profits (2015: €6.8 million), the first significant profits from the franchise business, breakeven performance from Mistergooddeal.com (2015 retail loss: €7.7 million), and a halving of losses from the kitchens operation.

During the period one store opened, two stores closed, three were extended, one was refurbished, five relocated and we added new kitchen ranges to a further 11 stores, bringing the total number of stores with a kitchen offer to 82.

For more detail on the initiatives implemented at Darty, please refer to the strategy section on pages 3 to 6 of this document.

Belgium and the Netherlands

At Vanden Borre in Belgium and BCC in the Netherlands, overall revenue was up 1.0 per cent aided by the full year effect of the acquisition of 18 stores by BCC in February 2015. Like-for-like sales were down 3.8 per cent. Positive sales at Vanden Borre were more than offset by the sales disruption at BCC resulting from the implementation of a new warehouse IT system which impacted stock availability. Web-generated sales continued to grow strongly, up nearly 13 per cent to over 14 per cent of total product sales with enhanced delivery options, including next day delivery for large goods and evening delivery for smaller items, driving very good growth at Vanden Borre.

Overall for the period gross margin was down 20 basis points with a small improvement at BCC partially offsetting a decline at Vanden Borre in competitive market conditions. Total costs increased by six per cent reflecting the store acquisition by BCC. The retail profit for the period was €4.9 million compared to €14.8 million in the prior year. Vanden Borre saw a small decline in retail profits, while BCC's losses increased by €9.1 million due to the disruption caused by the implementation of the new IT system. A new system to correct the issues was implemented at the start of the new financial year.

During the period, at Vanden Borre we opened two new stores and refurbished four stores. Vanden Borre will open its first stand alone kitchen store in partnership with Ixina in the first half of the new financial year. At BCC we refurbished nine stores.

BOARD CHANGES

Directorate change

On 18 July 2014 Darty announced that it would be transferring a number of the central support functions based in London to Paris as it further consolidates its head office function. Dominic Platt also informed the Board of his intention to step down as Finance Director. Following completion of the 2014/15 financial year, Dominic stepped down as director of the Group on 18 June 2015 and left the Group on 30 June 2015.

On 18 November 2014 Darty announced that it had recruited Albin Jacquemont as its new Finance Director. Albin joined the Group in March 2015 and joined the Board on 18 June 2015.

APPENDIX - QUARTERLY REVENUE PERFORMANCE (UNAUDITED)

Total revenue change 2015/16

Like-for-like* 2015/16

* excluding Mistergooddeal.com

Note

a) Retail profit represents total operating profit before the share of joint venture and associates' interest and taxation, 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.

The notes on pages 20 to 34 form part of this financial information.

The notes on pages 20 to 34 form part of this financial information.

a) Restated following the adjustment of certain obligations due to the amendment to IFRIC 21 (see Note 2).

The demerger reserve represents a reserve created on demerger and is non-distributable. Other reserves comprise a reserve arising from the first time adoption of IAS 39 in February 2006, a redenomination reserve created upon the redenomination of ordinary shares in September 2010 and the hedging reserve comprising the fair value movements on forward foreign exchange contracts.

The financial statements on pages 15 to 34 were authorised for issue and approved by the Board of Directors on 15 June 2016 and signed on its behalf by:

Notes to the financial statements

1. Accounting policies

The preliminary results for the year ended 30 April 2016 have been extracted from audited accounts which have not yet been delivered to the Registrar of Companies. They have been prepared on the basis of the accounting policies set out in the Group's 2016 Financial Statements, all of which have been applied consistently throughout the year and the preceding year. The statutory accounts of the Company for the year ended 30 April 2015, on which the auditors have given an unqualified opinion, have been filed with the Registrar of Companies. The financial information set out in this Preliminary Announcement does not constitute statutory accounts for the year ended 30 April 2016 or year ended 30 April 2015 within the meaning of sections 434-436 of the Companies Act 2006. The financial information for the year ended 30 April 2015 is derived from the statutory accounts for that period. The report of the auditors on the statutory accounts for the year ended 30 April 2015 was unqualified and did not contain a statement under Section 498 of the Companies Act 2006.

Basis of preparation

These consolidated financial statements have been prepared in accordance with EU endorsed International Financial Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of foreign currency swaps, forward foreign currency contracts, available-for-sale financial assets, financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss and also on a going concern basis.

Use of adjusted measures

Darty plc believes that retail profit, adjusted profit before tax, EBITDA and adjusted earnings per share provide additional useful information on underlying trends and business performance to shareholders. Each is defined below:

- Retail profit represents total operating profit before the share of joint venture and associate's interest and taxation, 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.

- EBITDA represents earnings before interest, taxation, depreciation and amortisation and profit/(loss) on disposal of property, plant and equipment and intangible assets including write-offs.

- Adjusted profit before tax represents retail profit less finance costs excluding net interest on pension schemes.

- Adjusted earnings per share excludes the effects of discontinued operations, gain on disposal of available for sale investments, legacy UK retirement benefit scheme expenses, exceptional items, amortisation and impairment of acquisition related intangible assets, net interest on pension schemes and tax effects of exceptional and other non-retail profit items. A reconciliation of adjusted earnings per share to basic earnings per share is provided in note 7, 'Earnings per share'.

A reconciliation from retail profit to GAAP measurement of profit is provided in the Group Income Statement. A reconciliation from EBITDA to GAAP measurement of profit is provided in note 3, 'Segmental analysis'.

These measures are used by the Group for internal performance analysis and incentive compensation arrangements for employees.

These terms are not defined by IFRS and may therefore not be comparable with similarly titled profit measures reported by other companies. They are not intended to be a substitute for, or superior to, GAAP measurements of profit.

2.  Continuing Group operating profit

Total group revenue arises from the items in the table below. Revenues from services predominantly comprise those relating to customer support agreements, delivery and installation, product repairs and product support. This figure also includes royalties received totalling €6.0m (2015: €6.0m).

At 30 April 2015, there was a €7.9m exceptional gain arising from the revised IAS 2 estimation of distribution costs in the carrying value of inventory to take account of non-storage warehouse and logistic costs. As a result of this change of estimate, from 1 May 2015 onwards there is an increase in the cost of sales and a reduction in distribution costs. In the year ended 30 April 2016, this has resulted in a €68.1m (€56.0m for France and €12.1m for Belgium and the Netherlands) increase to cost of sales (equivalent to a c.186 bps reduction in the reported margin rate) and a corresponding €68.1m reduction in distribution costs compared to the previous IAS 2 inventory valuation basis.

Other income is from the sub-leasing of property.

The €1.4m prior year gain on disposal of available for sale investments arose from the sale of the Go Sport S.A. shareholding. The purchaser of these Go Sport shares completed a takeover of the rest of the company for a higher price, which triggered additional proceeds of €1.4m for the Group under the share sale contract.

IFRIC 21 (Levies) affects the recognition of certain obligations and has resulted in a €0.2m increase in opening net liabilities at 1 May 2014. The impacts on the income statement and net liabilities since the change are summarised in the table below:

3. Segmental analysis

The Group bases its internal reporting systems on certain reportable segments. These segments are used by the chief operating decision-maker, identified as the Group Chief Executive, for assessing performance and allocating resources.

The reportable segments, all of which derive their revenue primarily from the retail of electrical goods, are as follows:

- France (Darty and Mistergooddeal.com)

- Belgium & the Netherlands (Vanden Borre and BCC)

Datart was classified as a discontinued operation on 22 July 2014 following the signature of a sale and purchase agreement with SEW-1001 a.s., a company based in the Czech Republic. Its results have been excluded from the Continuing Group.

All reported sales are to external customers.  There is no material difference between revenue by origin and destination.

* EBITDA is defined as retail profit before depreciation and amortisation and profit/(loss) on disposal of property, plant and equipment and intangible assets including write-offs.

As of 30 April 2016 there is no transaction with a single customer which amounts to 10 per cent or more of each segment revenues.

The share of operating profits of the joint venture and associates included within the retail profit for France is €2.4m. The share of post tax profits of the joint venture and associates included within the operating profit of France is €1.6m.

EBITDA is net of impairment charges (including reversals) totalling €nil as of 30 April 2016.

Investments in equity accounted joint ventures and associates of €15.4m are included within the segmental assets of France and €0.1m within the segmental assets of Belgium and the Netherlands.

3. Segmental analysis (continued)

* EBITDA is defined as retail profit before depreciation and amortisation and profit/(loss) on disposal of property, plant and equipment and intangible assets including write-offs.

The share of operating profits of the joint venture and associates included within the retail profit for France is €2.3m. The share of post-tax profits of the joint venture and associates included within the operating profit of France is €0.9m.

EBITDA is net of impairment charges totalling  €0.4m, all of which are in the France segment.

a) Restated following the adjustment of certain obligations due to the amendment to IFRIC 21 (see Note 2).

Investments in equity accounted joint venture and associates of €15.1m are included within the segmental assets of France.

Segment assets include available for sale and equity accounted investments, property, plant and equipment, goodwill, intangible assets, inventories, receivables, other current assets and cash that is not held centrally. Unallocated assets include centrally held cash and other liquid assets and financial assets, as well as interest and tax related prepaid expenses and accrued income. 

Segment liabilities include operating liabilities such as accounts payable, overdrafts that are not held centrally, prepaid income, accrued expenses and provisions, excluding those relating to interest and taxes that are held centrally. Unallocated liabilities include loan and finance lease liabilities as well as interest and tax related prepaid income, accrued expenses and provisions. 

4. Continuing Group finance costs

Foreign exchange gains and losses arise on the retranslation of short term deposits and loans denominated in a currency other than the operation's functional currency.

Factors affecting tax charge for the year

The tax for the year is higher (2015: higher) than the standard rate of corporation tax. The differences are explained below:

Losses not recognised as a deferred tax asset for the current year principally include tax losses arising in BCC and UK Head office companies (2015: BCC, France and UK Head office companies).

Non-retail profit items is the sum of total operating profit less retail profit excluding share of joint venture and associates' taxation plus net interest on pensions.

The standard rate of corporation tax in the UK is 20% from 1 April 2015. The standard rate of the corporate tax in the UK will change from 20% to 19% with effect form 1 April 2017.

5. Continuing Group Income tax expense (continued)

The effect of the changes announced in the Finance Act 2013 will have no impact on the Group's deferred tax liability in the current year or in future years. This is due to management's expectation that future UK taxable profits are unlikely, with a consequence that there are no deferred tax assets / liabilities recognised in the UK tax group at the balance sheet date.

Management have assessed the potential tax risks, which takes into account ongoing tax audits underway around the Group, and have made provision accordingly. A group 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 a provision has been made based on our best estimate of the expected outcome.

6. Dividends

An interim dividend of 0.875 cents was paid to the ordinary shareholders of the Company on 30 March 2016. Under the terms of the offer from Groupe Fnac S.A., the Company is not intending to recommend a final dividend. The total dividend to shareholders remained unchanged from the prior year at 3.5 cents a share, but the strengthening of Sterling against the Euro for shareholders electing a Sterling dividend payment increased the cash payment to €18.8m (2015: €18.4m).

7. Earnings/(losses) per share

Basic earnings/(losses) per share is calculated by dividing the profits/(losses) attributable to shareholders by 527.5m shares (30 April 2015, 527.5m), being the weighted average number of ordinary shares in issue. 

There is no difference between diluted and basic losses per share because all incentive schemes are share awards and there are no dilutive share options. Supplementary adjusted earnings per share figures are presented. These exclude the effects of discontinued operations, gain on disposal of available for sale investments, legacy UK retirement benefit scheme expenses, exceptional items, amortisation and impairment of acquisition related intangible assets, net interest on pension schemes and tax effects of exceptional and other non-retail profit items.

8. Discontinued operations

Operations classified as discontinued in prior years.

Comet was classified as a discontinued operation on 9 November 2011, following the signature of a sale and purchase agreement with OpCapita LLP.

Darty Italy was classified as a discontinued operation on 1 March 2013, following the sale of the Group's Italian operations, and its results have been excluded from the Continuing Group.

Darty Spain was classified as a discontinued operation on 30 June 2013, following the closure of its stores, and its results have been excluded from the Continuing Group.

Darty Turkey was classified as a discontinued operation on 22 January 2014, following the signature of a sale and purchase agreement with Bimeks A.S., an electrical retailer in Turkey. Its results have been excluded from the Continuing Group.

Datart was classified as a discontinued operation on 22 July 2014, following the signature of a sale and purchase agreement with SEW-1001 a.s., a company based in the Czech Republic. Its results have been excluded from the Continuing Group

The results from Datart, Darty Italy, Darty Spain and Darty Turkey, classified as discontinued operations in the consolidated income statement, are stated below.

In the year, pre-tax exceptional items relating to the Continuing Group total €36.5m (2015: €13.7m) which have arisen due to the following:

In Belgium and the Netherlands, given the performance and current market outlook in the Netherlands and issues arising as a result of BCC systems implementation, the following exceptional costs have arisen:

- Intangible asset impairment of €10.8m and property, plant and equipment impairment of €7.3m.

- €3.5m of business disruption costs arising as a result of the difficulties encountered on the ERP system implementation at BCC. These costs are incremental costs to rectify both operational and IT system issues that would not have been incurred in the normal course of business or in the original project scoping.

In France there have been €6.8m of restructuring costs as a result of:

- Termination costs arising from a programme to improve both the customer service offer and productivity of after sales service. Affected employees have the right to take voluntary redundancy if there is no other suitable vacancy. A €6.8m provision has been raised based on the estimated termination cost obligation.

- €0.1m of restructuring costs arising due to the finalisation of the integration of Mistergooddeal.com into the Darty business in France.

- A net €0.1m credit relating to prior year restructuring and HR provisions. In light of new information in the year these have been released.

As a result of the possible takeover of the Group there are €7.0m of related exceptional costs as follows:

- €3.9m of advisor fees incurred and accrued at the balance sheet date, which are included in the Unallocated segment. In total, advisor fees will range between €20m and €25m if the transaction completes. If the transaction does not complete there may be 'good faith' payments made to advisors based on an evaluation of their support. At the balance sheet date, given the uncertainties inherent in the agreements with the advisors, it is not possible to reliably estimate what these good faith payments would be, although they may represent material amounts. Given the estimation uncertainty, no accrual has been made although the directors note that the good faith payments would not exceed the costs were the transaction to complete.

- €3.1m (France €2.7m, Belgium and the Netherlands €0.2m and unallocated €0.2m) relating to pro-rata retention agreements and other HR incentives.

The Unallocated segment includes €1.1m of further restructuring costs relating to the transfer of specific head office functions from London to Paris.

€35.5m of the costs are administrative costs, €0.6m are distribution costs and €0.4m are selling costs.

There is a tax credit relating to exceptional and other non-retail profit items of €4.0m.