Carphone Warehouse 2003 Annual Report Download - page 8
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Please find page 8 of the 2003 Carphone Warehouse annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Operating & Financial Review continued We exchanged contracts on HTG, a German service
provision business, in June 2003. We are confident
that our combined German operations will represent
a stable and profitable platform for future growth.
Both Sweden and The Netherlands performed very well
after disappointing results in the year to March 2002,
thanks to improved management focus and robust
competition between networks. Our businesses in the
smaller markets of Portugal and Ireland continued to trade
well, while the Swiss operation gained significant market
share over the year. We sold our small business in Poland
just before the year end.
Our business in Germany continued to make losses
but at a significantly reduced level from the previous year.
Despite some operational improvements we did not
believe that the business was a viable concern in its existing
form, so as a result we were pleased to announce our
intention to acquire Hutchison Telecommunications GmbH
(HTG) after the year end. HTG is a service provision
business managing over 500,000 high quality subscription
customers and generating significant recurring revenues.
The combined operations provide the Group with a strong
platform for future growth in the German market.
Our Online business, covering our direct sales team and
website operations, continues to make progress and
achieved 0.26m connections during the year. Revenues
grew by 14.4% to £41.9m. We continue to explore
opportunities to replicate the success of our UK direct
channel in our other markets.
Insurance
Our Insurance business enjoyed another year of good
performance. We continue to succeed in providing excellent
customer service with over 90% of claims settled, most of
them with a single phone call. At the same time the insurance
operations contribute significant profits to the Group.
During the year our Insurance customer base increased
by 12.9% to 1.06m. The rapid growth of our non-UK
operations has been very satisfying, with the base growing
by 18.9% and now representing 34.3% of the total. Insurance
revenues grew by 10.5% to £66.8m. Claims numbers have
shown an encouraging downward trend, notably since the
launch of an industry-wide initiative in the UK to clamp down
on mobile phone crime. However, contribution from Insurance
rose by only 0.9% to £22.0m, with growth in profitability held
back by an increasing proportion of higher value claims.
In the coming year we see additional opportunities arising
for this part of the business, particularly in the leverage of
our specialist underwriting and customer management
skills to develop insurance services for third parties in the
mobile sector.
Ongoing
Ongoing represents the share in customer call spend
(or ARPU) we receive as a result of connecting customers
to certain networks.
Ongoing revenues grew by 32.1% to £29.1m in the year
to March 2003. This exceptional level of growth reflects
the change in terms of trade with certain networks last year,
under which we now receive a greater share of ongoing
customer call spend in exchange for a reduced upfront
commission. We anticipate that growth in Ongoing
revenues will return to steadier levels in the coming year.
Wholesale
2003 2002
£m £m
Turnover 806.6 343.0
Contribution 7.5 6.0
Support costs (2.4) (1.7)
EBITDA 5.1 4.3
Depreciation (1.0) (0.8)
EBIT 4.1 3.5
Our Wholesale division experienced very strong growth,
with turnover more than doubling. However, margins remain
very thin in this business and the volume of trading is volatile.
Wholesale continues to benefit the retail channel through its
ability to source inventory at best prices, and to sell excess
stock back into the channel when the need arises.
Since the year end we have significantly scaled
back our European wholesale trading activities amidst
uncertainty surrounding the implications of the recent
Budget announcement on the recovery of VAT on
mobile phone trading. The announcement provides for
a consultation period on the Statement of Practice and
we have made a submission to HM Customs & Excise
setting out our interpretation of best practice and seeking
further clarity. Until such time as we receive a response to
our submission, we will continue to restrict our wholesale
trading activities.
We have also conducted a comprehensive review of all our
historical wholesale activities and procedures. As a result of
this review a potential liability has been identified relating to
6
The Carphone Warehouse Group PLC Annual Report 2003
12.4 22.9 32.2 48.0
02 030100
Contribution from
non-UK operations
(£m)
1,610 1,472 1,526
030201
Subscription
connections
per store