Carphone Warehouse 2008 Annual Report Download - page 31

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www.cpwplc.com 19
Business Review
Cashflow and dividend
2008 2007
Summary Cash Flows £m £m
Operating cash flow 468.1 256.3
Tax and interest (55.0) (32.9)
Net operating cash flow 413.1 223.4
Property, plant and
equipment (net) (169.7) (147.8)
Intangibles (228.8) (148.1)
Acquisitions/JVs (74.2) (266.7)
Total investment (472.7) (562.6)
Dividends (31.4) (24.2)
Shares 14.0 9.1
Net dividends and shares (17.4) (15.1)
Net cash outflow (77.0) (354.3)
Opening net debt (616.9) (273.4)
Foreign exchange and
non-cash movements (148.8) 10.8
Closing net debt (842.7) (616.9)
At29 March 2008,the Group had net debt of £842.7m(2007: £616.9m).
During the year the Group generated cash from operations of £468.1m
(2007: £256.3m).
Cash generation remains a prime objective of the Group and we expect
to generate significant levels of free cash flow in the future, allowing us to
re-invest in the growth of the business and pursue a progressive dividend
policy. We are proposing a final dividend of 3.00p per share, taking the
total dividend for the financial year to 4.25pand representing growth
of 30.8% over last year’s 3.25p total dividend. This level of distribution
results in a dividend cover of 3.05 (2007: 2.33). The ex-dividend date
is Wednesday 9July 2008,with a record date of Friday 11 July 2008
and an intended payment date of Friday 8 August 2008.
Total investment decreased from £562.6m to £472.7m.There was
a reduction in net outflows on acquisitions and joint ventures from
£266.7m to £74.2m,with the largest outflow in the year being
deferred consideration of £61.5m on AOL’s UK customer base,
which was acquired in December 2006.
This reduction was partly offset by a significant increase in year-on-year
subscriber acquisition costs, from £71.8m to £146.8m,in part reflecting
our introduction of subsidised laptops into the UK broadband market,
as well as substantial growth across the UK Fixed Line and German
service provider bases.
There was also continued significant investment in the Group’s IT systems
and network infrastructure, to support the development of the UK Fixed
Line business, as well as ongoing investment in the Group’s retail estate.
Balance sheet
The investment described above, together with an increase in the value
of non-Sterling assets, resulted in an increase in non-current assets from
£1,555.3m to £1,774.3m year-on-year.
Stock increased from £161.5m to £211.6m over the year, reflecting our
strategy of improving handset availability and stocks of laptops.
Trade and other receivables rose from £743.8m to £812.5m,while trade
and other payables increased from £919.9m to £1,086.9m year-on-year,
both reflecting organic growth across the business. Provisions decreased
from £109.9m to £90.7m,largely as a result of lower “cashback”activity.
Foreign exchange
A large proportion of the Group’s borrowings are held in Euros and
Swiss Francs, as a hedge against non-Sterling assets. The significant
weakening of Sterling against these currencies from December
2007 onwards resulted in an increase of £156.6m in the value
of non-Sterling borrowings. At the end of March 2008 we had Euro
denominated borrowings of £432.9mand Swiss Franc denominated
borrowings of £446.8m.
The offset of the strengthening of the Euro and Swiss Franc is principally
seen in the values of the net assets denominated in those currencies,
which have increased in value by the same amount. To the extent that
non-Sterling borrowings do not match non-Sterling net assets on
consolidation, the offset is seen in the Translation reserve, which saw
a negative movement of £63.6m in the year, mainly due to Swiss Franc
appreciation against Sterling.
Financing and treasury
The Group’s operations are financed by committed bank facilities, retained
profits and equity. During the period, the Group arranged a new £200m
364-day facility with a one-year term-out option to provide additional
working capital headroom whilst we arranged a Sterling bond issue; this
bond issue was subsequently aborted due to the deterioration of the
bond market during summer 2007 and the facility remains available to
fund working capital until June 2009.The facility was provided by HSBC
Bank plc, Barclays PLC and The Royal Bank of Scotland Group PLC,
which were the three arrangers of the bond transaction.
In March 2008,the Group signed a new five-year £550m revolving
credit facility that replaced a similar facility maturing in September 2009.