Carphone Warehouse 2002 Annual Report Download - page 12

Divisional contribution 2002 2001
and headline EBITDA £m £m
Contribution
Distribution
Ex-Wholesale 89.5 86.7
Wholesale 5.9 14.5
Telecoms services 35.9 18.1
Data services (2.4) (5.3)
Total contribution 128.9 114.0
Support costs (56.1) (48.0)
EBITDA 72.8 66.0
00 01 02
9.7
18.1
35.9
00 01 02
20.3
38.4
57.7
Recurring
revenue
streams
(£m)
Telecoms
contribution
(£m)
10 The Carphone Warehouse Group PLC Annual Report 2002
Financial review continued
Impressive growth in
recurring revenues
our retail business following our decision to roll out insurance products
to all our key markets. Its performance has been assisted by our
continued success in attracting a strong subscription customer mix
through our distribution channels.
We have continued to develop our online operations during the
period. The business has enjoyed a strong performance in turnover,
gross margin and operating margin and accounted for over 5% of our
connections, reflecting the strength of our online proposition and
logistics infrastructure.
Wholesale
Our wholesale operation was directly affected by the reduction in
handset sales volumes across Western Europe and while reduced
handset turnover was compensated by a growth in low margin prepay
voucher wholesale trading, the net contribution from wholesale
operations fell sharply from £14.5m to £5.9m year on year.
Telecoms services
As the Group continues to deliver an increasing number of subscription
customers through its retail and online operations the Telecoms services
division enjoys growth in both its ongoing revenues and its facilities
management activities.
In the period, ongoing revenue grew from £14.6m to £22.0m as a
result of the increasing number of customers from whom we earn a share
of spend each month. This income stream has no associated cost base.
Another part of our Telecoms services business, where we provide
facilities management services to various networks in both France and
the UK, also enjoyed substantial growth both organically and through
the acquisition of CMC in France. The number of customers for whom
these services are provided increased from 146,000 to 864,000 and
turnover grew from £4.6m to £26.4m.
The Group also generates revenue and profits from its own virtual
network and customers managed under a service provision contract.
There were 155,000 such customers at the end of the period, compared
to 68,000 at 31 March 2001. These activities generated £40.9m of
revenue in the period compared to £11.3m for the previous period.
Operating efficiencies ensured continued improvement in operating
margins, with Telecoms services contribution, excluding ongoing
revenue, growing from £3.5m to £13.9m.
Exceptional items
The following exceptional items arose in the period to 30 March 2002:
• Reorganisation of European operations
Following the detailed review of our retail operations across Europe in
the early part of 2001, the Group committed to closing under-performing
stores, withdrawing from certain non-key territories and reorganising its
back office operations to drive increased efficiencies. On this latter point,
the Group is establishing shared service operations and introducing a
Group management functional structure where appropriate. As a result
of this reorganisation the Group has recognised exceptional charges in
the period of £31.2m.
The one-off substantial store closure program is separate from our
continued activity of improving our store portfolio. This will from time to
time include relocations and property trading activities and the income and
expenditure resulting from these is included within operating profit.
• Costs of fundamental reorganisation
A charge of £5.2m has arisen following the fundamental reorganisation
of the Data services division, including the write-off of wireless portal
assets in light of poor visibility of revenue in a number of countries in
which it was established.
• Amounts written off fixed asset investments
At 30 March 2002 £18.7m has been written off the Group’s share of
Wireless Frontiers, an independently managed wireless investment fund,
upon reflection of current market values of investments held by the fund.
Post balance sheet event
After the year end the Group exchanged contracts on the sale and lease
back of its London offices for a cash consideration of £36.6m. This has in
turn generated an exceptional profit of £16.5m. The net cash impact of
this and the above exceptional items is a cash inflow of over £10.0m.
Interest and tax
Net interest receivable of £0.3m was generated in the period compared
to £2.4m in the previous period. This movement is predominantly
explained by the utilisation of cash to acquire CMC in May 2001.
The effective tax rate before amortisation and exceptionals for the
period to 30 March 2002 was 22% compared to 27% in the previous
period following the adoption of FRS 19. The rate for the period
benefited from the use of prior year tax losses and the effect of profit
within low tax rate jurisdictions.
Goodwill amortisation
Goodwill of £57.9m arose during the period, of which £50.7m was as a
result of the acquisition of CMC. The goodwill amortisation charge for the
period was £14.7m compared to £8.8m in the previous period. A goodwill