Carphone Warehouse 2002 Annual Report Download - page 4

Chief Executive’s review The Group continues to succeed in a challenging
business environment but one that offers huge
opportunities for the future.
2The Carphone Warehouse Group PLC Annual Report 2002
Outperforming
through retail
excellence
The Carphone Warehouse's success is based on our ability to offer
customers an unrivalled retail experience through our award winning
retail network and our online channels. Our service now extends beyond
the point of sale and continues through the entire mobile life of our
customers.
In a year where the overall market for mobile phones has been
challenging, we have continued to outperform our competitors and we
continue to attract and retain high value subscription customers. Our
performance in this market environment clearly demonstrates the
strength of our retail proposition. At the same time we have seen the
Group deliver its objective set out twelve months ago to significantly
build recurring revenue streams beyond the point of sale.
Against this market backdrop, we have produced strong results for
the Group. In the twelve months ended 30 March 2002, the Group
turnover and headline post-tax earnings were £1,152.7m and £36.5m
respectively. The Group connected 3.6 million mobile phones during the
year across all of its markets. As ever the retail nature of our business
continues to influence the seasonality of our results, with over 70% of
our earnings achieved in the six months to March 2002.
In a market that has signicantly decreased we
have continued to outperform our competitors
and to attract and retain high value customers
The European market for mobile communications services has
undergone considerable change during the period. Penetration has
reached over 70% and as a result network operators have continued to
shift their focus from pure customer acquisition to the retention of high
quality, high spending subscription customers. As a result subsidies on
prepay handsets have been significantly reduced, resulting in an
increase in prepay prices by as much as £70. This market shift plays into
our hands.
In the UK, our strongest market, we have experienced an impressive
retail performance with growth in our market share from 12% in March
2001 to over 20% by the end of March 2002. This is a considerable
achievement and we aim to build on this success and increase our UK
market share further.
We have also continued to enjoy growth in our market share across
Western Europe trading under The Phone House brand. We have enjoyed
strong performances in France, Portugal and Ireland. Of particular note is
our turnaround in Spain where we have seen substantial growth in sales,
market share and profitability compared to the previous period.
In The Netherlands and Sweden we have more recently seen a
turnaround in our performance, which disappointed in the early part of
the year.
However we have continued to experience ongoing issues in the
tough German and Belgian markets, and we are taking all steps
necessary to bring these businesses to breakeven as soon as possible.
In our retail operations we have started the process of restructuring
and centralising certain operational and management functions in order
to maximise efficiency, roll out best practice and secure synergies across
the Group. Within this we are also focusing on reorganising our European
back office functions, including financial processes, logistics, purchasing
and IT, and the Group is making good use of the expertise built up within
its UK operation.
In the UK, our strongest market, we have
experienced an impressive retail performance with
growth in our market share from 12% in March
2001 to over 20% by the end of March 2002
In addition to the restructuring of our operations, we have undertaken a
comprehensive review of any part of the Group that was not generating
adequate returns. As a result we reorganised our Data services business
and have now turned that business around from losing over £5m a year
to being profitable. We also identified those retail locations that were
under-performing and made the decision to close these stores. This
review resulted in us withdrawing from non-key markets, as announced