Carphone Warehouse 2014 Annual Report Download - page 26

Carphone Warehouse Group plc
Annual Report 2014
24
STRATEGIC REPORT
Performance review continued
BALANCE SHEET
2014 2013
£m £m
Goodwill 481 —
Other fixed assets 226 27
Joint ventures/assets held for sale 11 537
Deferred consideration (50) —
Working capital/other 220 (20)
Net (debt) funds (8) 117
Net assets 880 661
As a result of the CPW Europe Acquisition, the Group has derecognised
its interest in the CPW Europe joint venture and consolidated the
CPW Europe balance sheet in full with effect from  June .
CPW Europe’s assets and liabilities have been consolidated at fair
value, resulting in certain differences to their book value at acquisition.
These differences relate principally to property, plant and equipment,
operating intangible assets and property leases. Property, plant and
equipment and operating intangible assets were valued by third party
experts using a replacement market cost methodology. Leases were
also valued by third party experts, comparing actual rents to market
rents at acquisition, resulting in the recognition of a liability for leases
that are deemed to be over-rented. At the same time, deferred
rent-free incentives and key money assets have been derecognised.
Acquisition intangibles with a value of £m, in relation to customer
relationships and brands, were also recognised as part of the acquisition.
Goodwill of £m arose on the acquisition, reflecting the fact that
CPW Europe’s value is based on its cash generating potential rather
than its existing assets, and the fact that many of itskey strengths,
such as scale and expertise, do not represent intangible assets
asdefined by IFRS.
DIVIDENDS
We are proposing a final dividend of .p per share, taking the total
dividend for the year to .p per share, a % increase on the previous
year (: .p). The final dividend is subject to shareholder approval
at the Company’s forthcoming annual general meeting. The ex-dividend
date is  July , with a record date of July  and an intended
payment date of  August .
OTHER KPIs
The KPIs which are relevant for the Group as a whole are those
regarding shareholder returns and profitability.
2014 2013
Headline KPIs
ROCE 11.1% 8.0%
EPS 18.4p 11.6p
Dividends for the year 6.00p 5.00p
The improvement in return on capital employed and EPS principally
reflects the CPW Europe Acquisition, which was accretive to the
Group’s earnings.
RISK MANAGEMENT
The key risks of the wholly owned Group are set out on page .
The Group does not exercise control over Virgin Mobile France
andtherefore material decisions can only be made with the consent
of our joint venture partner. Inability to reach consensus on such
decisions could have an adverse effect on the growth, business and
financial results of this business. Such risks are mitigated through
agreed strategies, defined and documented processes and
regularcommunication.
The Group is also exposed to market risks such as interest rate
riskand foreign currency risk. Further details on such risks are
provided below.
FINANCING AND TREASURY
The Group has a £m term and revolving credit facility agreement,
which matures in April . In addition, the Group also has overdraft
and uncommitted money market and factoring lines, at various banks
and in various currencies, all technically repayable on demand,
toassist with cash management efficiency.
The Group’s investment policy for surplus cash is to maximise
investment returns whilst ensuring low risk and suitable liquidity.
Cross-border funding is provided on an arm’s length basis and
currency risk is fully hedged using foreign exchange swaps and
currency borrowings, as appropriate, at all times. Other than this,
translational exposures are not hedged against movements in exchange
rates and any such movements are taken to reserves. TheGroup
isexposed to cross-border transactional trading commitments
including the purchase of stock and, where significant, these
exposures are hedged at inception.
As further described in note  to the Group financial statements,
treasury policy permits the use of long-term derivative treasury products
for the management of currency and interest rate risk, and the Group’s
exposures are monitored regularly and adjustments to levels of
hedging made as necessary. The Group does not speculate in any
financial instruments.
GOING CONCERN
A review of the Group’s business activities, together with the factors
likely to affect its future development, performance and position, are
set out within this Strategic Report, including the risk management
section. The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are shown in the balance sheet,
cash flow statement and accompanying notes to theGroup
financialstatements.
As described in note  to the Group financial statements, in their
consideration of going concern, the directors have reviewed the
future cash and profit forecasts of the Group which they consider
tobe based on prudent assumptions. Based on these forecasts,
thedirectors consider that it is appropriate to prepare the Group
financial statements on the going concern basis.
Nigel Langstaff Chief Financial Officer