Carphone Warehouse 2002 Annual Report Download - page 11

Strong performance
in a challenging
market
Turnover
(£m)
Headline
EBITDA
(£m)
Turnover by division 2002 2001
£m £m
Distribution 1,061.6 1,079.1
Retail 621.5 613.6
Tandy – 35.7
Online 36.7 32.6
Insurance 60.4 49.2
Wholesale 343.0 348.0
Telecoms services 89.3 30.5
Data services 1.8 1.1
Total turnover 1,152.7 1,110.7
The Carphone Warehouse Group PLC Annual Report 2002 9
Roger Taylor, Chief Financial Officer
Trading review
The Group demonstrated a strong performance in a challenging market
environment in terms of volumes of handsets sold, growth in recurring
revenues and profitability for the 52 week period to 30 March 2002.
Group turnover for the period was £1,152.7m compared to
£1,110.7m for the 53 week period to 31 March 2001. We enjoyed growth
in turnover within most of our operations including our mobile phone
retailing business, our online business, insurance operations and also
our Telecoms and Data services divisions.
The Group increased EBITDA (pre exceptionals) by over 10% to
£72.8m for the period compared to £66.0m in the previous period. This
growth in earnings was most significant within our Telecoms services
division, which enjoys the recurring revenue generated from the
customers of our retail and other distribution businesses.
During the period the principal acquisition was Communications De
Mobile Cellulaires SA (CMC) in France, a provider of telecoms based
facilities management services, for a cash consideration of £54.3m. This
business contributed operating profit of £5.6m in the period.
The Group generated profit after tax (pre goodwill amortisation and
exceptional items) of £36.8m compared to £38.2m for the previous
period, and headline earnings per share of 4.41p, down from 5.00p last
year, in part due to an increase in the average number of shares in issue.
As announced prior to the year end we have undertaken a significant
restructuring of various parts of our organisation and have written down
our wireless investment portfolio, together giving rise to an exceptional
charge of £55.1m.
After the year end the Group sold the freehold on its London offices
for £36.6m generating a profit of £16.5m. The effect of this disposal,
together with the exceptionals above, is a net cash inflow of over £10.0m.
Distribution
Retail
The retail business operated from 1,100 stores on average during the
period, compared to 975 for the previous period, with average selling
space increasing from 54,200 sqm to 60,800 sqm year on year. As
initiated last year the Group undertook a detailed review of any loss
making operations, resulting in our withdrawal from certain non-key
markets and the closure of over 100 under-performing stores across the
Group. This reorganisation is fundamental to our future success and our
aim to increase our rate of return on shareholders’ funds.
The performance of the retail division was highly impressive for the
year with increased sales and increased operating margin, driven by
improved gross margins. Operating costs rose year on year, as the Group
continued to upgrade its store portfolio; it is however anticipated that this
investment will have a positive impact on operating margins in the future.
A significant contributing factor to our success in retail has been a
change in the Group’s mix towards higher value subscription customers. The
number of subscription customers has grown by 13% year on year to 1.8m.
Our performance further enhanced our market share in all our key
markets and most notably in the UK where we estimate our market share
has increased from 12% to over 20%. In certain mainland European
markets our growth in market share was however disappointing and in
particular we failed to make significant progress in both our German and
Belgian operations. Year on year these operations incurred additional
operating losses of £7.5m and it is against this backdrop that we should
reflect upon the strength of the retail performance elsewhere.
In addition to the store closure programme the Group appraised its
back office infrastructure across its European operations. As a result the
Group is in the process of establishing shared service operations and a
Group operational management structure, with the aim of improving our
operational efficiency and in turn reducing our support cost ratio. This
operational reorganisation is already driving increased efficiencies and will
continue to be rolled out in the next 12 months.
Insurance and online
Insurance and online sales showed growth of 23% and 13% respectively.
The rate of growth in our insurance business has exceeded that of
Distribution
operating
margin (%)
(Ex-wholesale)
Distribution
contribution
(£m)
(Ex-wholesale)
98 99 00 01 02
180
316
698
1,1111,153
98 99 00 01 02
16.0
26.1
41.4
66.0
72.8
00 01 02
57.6
86.789.5
00 01 02
10.4
11.912.5
Financial review