Carphone Warehouse 2003 Annual Report Download - page 10
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Please find page 10 of the 2003 Carphone Warehouse annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Operating & Financial Review continued The Group is heavily focused on cash generation
and working capital management, as reflected in
this strong performance. As a result we are delighted
to be proposing our maiden dividend for the year
to March 2003.
New corporate customers since November include
Travis Perkins, National Express and Securicor. In March
2003, Opal’s network switched over 320 million minutes,
an increase of 94% on March 2002. Revenues at Opal
in the five months since acquisition were £75.9m and
operating profit before amortisation of goodwill was
£5.9m. Revenue growth over the equivalent period in
the prior year was 58.6%.
One of Opal’s competitive advantages is its focus on
interconnecting its network as deeply as possible into BT’s
own network, because this has a direct bearing on the rate
that BT can charge Opal for carrying its calls. The greater
the level of interconnectivity with BT, the lower the average
cost that Opal has to pay BT for carrying calls. Opal
continues to make good progress with this strategy.
A key strategic objective for the Group in acquiring
Opal was to launch its own residential fixed line service.
Regulatory change in the fixed line telecoms market has
presented a significant opportunity for new entrants to
take market share from BT. The advent of automated
Carrier Pre-Select (‘CPS’) means that customers who
wish to use an alternative provider can instruct BT to
switch their calls through another network. The customer
retains his telephone number and no longer needs to dial
a prefix number or have a dialler box installed to access
his new provider – calls are switched automatically.
To this end, we were delighted to launch talktalk™, our
simple and good value fixed line service for residential
customers, as early as February 2003. Only three months
after the acquisition of Opal, this represents a significant
achievement by all those involved and demonstrates that
Carphone Warehouse continues to have the entrepreneurial
spirit and management depth to execute rapidly and
successfully. By the year end we had received over 32,000
applications to join the service.
We are optimistic about the prospects for talktalk™in the
coming year, which we will sell not only through our own
stores but also, further to our recent agreement, through
Sainsbury’s stores. We anticipate reaching further affiliate
distribution agreements during the year.
Exceptional items
The following exceptional items arose in the year to
29 March 2003:
Exceptional profit on sale and leaseback of the Group’s
London offices
The Group sold the freehold on its London offices during
the year for a cash consideration of £36.6m. The profit
arising on this transaction was £13.2m.
Amounts written off fixed asset investments
At the year end a further £15.1m was written off the Group’s
share of Wireless Frontiers, an independently managed
wireless technology fund. The writedown reflects the decline
in the value of the underlying investments within the fund.
Post balance sheet events
As noted above, the Group has significantly scaled back
wholesale trading activities since the year end.
Additionally, the Group exchanged contracts with Orange
Holdings Limited to acquire Hutchison Telecommunications
GmbH, a mobile service provision business in Germany,
for a net cash consideration of £32.4m. The Group has
also closed a further 10 retail stores and commenced the
closure of its support centre in Munich. A restructuring
provision of £4.5m has been booked since the year end
to cover these items.
Interest and tax
Net interest of £1.0m was payable during the year,
compared to interest receivable of £0.3m in the prior
period. This movement reflects the financing of the Opal
acquisition and the additional working capital demands
made by the increased activity in our Wholesale operations.
The effective tax rate before amortisation and exceptionals
was 22%, as in the prior period. The rate continued to
benefit from the utilisation of tax losses incurred in earlier
years and the effect of profit within low tax rate jurisdictions.
Goodwill amortisation
Goodwill of £102.1m arose during the period, of which
£98.1m related to the Opal acquisition in November 2002.
The total goodwill amortisation charge for the year to
March 2003 was £20.6m, compared to £14.7m in the year
to March 2002. Included within this charge was a one-off
goodwill write-off of £3.0m relating to the buy-out of
minority interests in the Group’s wireless investment fund.
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The Carphone Warehouse Group PLC Annual Report 2003