Carphone Warehouse 2006 Annual Report Download - page 19

Financial Performance
management and other assets, which has been
recognised in the period.
Interest and tax
Net interest of £5.7m was payable during the year,
compared to a charge of £4.8m in the prior year.
Significant investment in capital expenditure and
acquisitions were financed out of operating cash
flow and committed debt facilities now totalling £725m.
The effective tax rate on a Headline basis was
19.6% (2005: 19.3%). The tax rate benefited from the
utilisation of tax losses incurred in earlier years, and
the effect of profit within low tax rate jurisdictions.
Earnings per share (EPS)
Headline EPS was 12.38p (2005: 9.25p). Statutory
EPS was 7.99p (2005: 8.44p).
Cash flow and dividend
At 1 April 2006, the Group had net debt of £273.4m
(2005: £68.4m). During the year the Group generated
operating cash flow of £196.4m (2005: £168.6m).
Cash generation remains a prime objective of the Group,
allowing us to reinvest in the growth of the business and
pursue a progressive dividend policy. We are proposing
a final dividend of 1.75p per share, taking the total
dividend for the financial year to 2.50p and representing
growth of 38.9% over last year’s 1.80p total dividend,
slightly ahead of Headline EPS growth. The ex-dividend
date is Wednesday 5 July 2006, with a record date of
Friday 7 July 2006 and an intended payment date of
Friday 4 August 2006.
Net debt 2006 2005
£m £m
Operating cash flow 196.4 168.6
Tax and interest (19.4) (16.4)
Net operating cash flow 177.0 152.2
Property, plant and
equipment (net) (86.9) (70.6)
Intangibles (104.7) (53.8)
Acquisitions (159.5) (35.5)
Total investment (351.1) (159.9)
Dividends (17.4) (12.7)
Shares (5.1) (5.3)
Net dividends and shares (22.5) (18.0)
Net cash outflow (196.6) (25.7)
Opening net debt (68.4) (40.6)
Foreign exchange and
non-cash movements (8.3) (2.1)
(273.4) (68.4)
Conversion to International Financial
Reporting Standards (IFRS)
This is the first annual report required to be prepared
under IFRS. Details of the impact of IFRS on financial
information for 2004/05 were issued on 22 September
2005, and are available on the Group’s website
www.cpwplc.com. The adjustments made are
summarised in note 29 to the financial statements.
Acquisitions
The Group made the following acquisitions during
the year:
Intangible assets arising
Net cash Acquisition
consideration intangibles Goodwill
£m £m £m
Onetel 134.6 62.2 96.1
Tele2 UK 8.2 2.0 9.8
Hugh Symons 5.2 – 9.5
Other 9.8 4.4 3.7
157.8 68.6 119.1
Acquisition intangibles relate to customer bases and
a distribution agreement.
Amortisation of acquisition intangibles and
goodwill expense
The amortisation charge in respect of acquisition
intangibles amounted to £18.0m (2005: £7.5m), the
increase principally reflecting the Onetel acquisition.
A goodwill expense of £1.8m (2005: £1.0m) has been
recognised on acquired deferred tax assets that had
not previously been recognised. These figures are
excluded from Headline profit before tax and earnings
per share figures.
Reorganisation costs
Following the acquisition of Onetel in December 2005,
we have commenced a reorganisation programme to
integrate Onetel with the rest of the Group. The costs
of this integration are estimated at £22.3m, reflecting
redundancy and other employee costs, contract
termination costs and network and customer migration
costs. These costs have been recognised in the
reported financial year. The substantial customer
growth achieved through the acquisition of Onetel and
Tele2 UK, together with the Group’s major investment
plans in respect of local loop unbundling and billing
platforms, prompted a review during the period of the
Group’s systems and network infrastructure. This
review resulted in an accelerated amortisation charge
of £12.9m in respect of certain billing, customer
Operating and Financial Performance Review continued www.cpwplc.com 15
Operating and Financial Performance
HEADLINE EARNINGS
PER SHARE UP 33.8%
DIVIDEND UP 38.9%
OPERATING CASH FLOW
OF £196.4M