Carphone Warehouse 2003 Annual Report Download - page 40

Notes to the Financial Statements continued
38
The Carphone Warehouse Group PLC Annual Report 2003
27 Analysis of cash flows continued
g. Reconciliation of net cash inflow (outflow) to movements in net funds (debt)
2003 2002
£’000 £’000
Increase (decrease) in cash in the period 13,896 (36,623)
Cash outflow (inflow) from decrease (increase) in loans 42,725 (34,597)
Change in net funds (debt) 56,621 (71,220)
Loans acquired with subsidiary undertakings (24,136) –
Currency retranslation (14,989) –
Movement in net funds (debt) in the period 17,496 (71,220)
Net (debt) funds brought forward (14,674) 56,546
Net funds (debt) carried forward 2,822 (14,674)
h. Acquisitions
Companies acquired in the period contributed £14.9m to the Group’s net operating cashflows, paid £0.3m in respect of net returns on investments
and servicing of finance, and utilised £5.7m for capital expenditure.
28 Commitments under operating leases
The Group’s annual commitments under non-cancellable operating leases, all of which relate to land and buildings, are as follows:
2003 2002
£’000 £’000
Operating leases which expire:
Within one year 6,138 4,115
In two to five years 14,983 10,583
After five years 27,345 22,260
48,466 36,958
29 Capital commitments
2003 2002
£’000 £’000
Expenditure contracted, but not provided for in the financial statements of the Group 5,729 620
30 Pension arrangements
The Group provides various pension schemes for the benefit of a significant number of its employees:
Defined contribution schemes
The Group operates a number of defined contribution schemes for which the cost for the period was £0.9m (2002 – £1.6m).
Defined benefit schemes
On 5 April 2000 the Group commenced the winding up of a defined benefit pension scheme. Based on actuarial advice, the assets of the scheme
are anticipated to be sufficient to meet the levels required by the Government’s Minimum Funding Requirements calculations. On completion of the
winding up of the scheme, the Group will retain no obligations in relation to the funding of scheme benefits.
Other schemes
The Group provides pensions to a number of employees through a self-administered scheme, the costs of which are assessed in accordance with
actuarial advice. Contributions to the scheme during the period were £nil (2002 – £49,000).
31 Post balance sheet events
Wholesale
Since the period end, the Group has significantly scaled back its European wholesale trading activities, amidst uncertainty surrounding the implications
of the recent UK budget announcement on the recovery of VAT on mobile phone trading. This uncertainty undermines the economics of what will always
be a relatively low margin activity. The budget announcement provides for a consultation period on the UK Government’s Statement of Practice and the
implications of joint and several liability. The Group has therefore made a submission to UK Customs & Excise setting out its interpretation of best
practice and seeking further clarity. Until such time as a response to this request has been received, the Group will continue to restrict its wholesale
trading activities.
The Group has also conducted a comprehensive review of all its wholesale activities and procedures across Europe throughout the past few years. Whilst
impracticable to precisely quantify any potential liabilities, the review has identified a potential exposure in one of the Group’s overseas subsidiaries, relating
to inadequate VAT documentation in respect of wholesale trading in the period ended 25 March 2000. A provision of £2.4m has been made in the period
within the Wholesale division in respect of this exposure. As a result of this review the Directors believe that no unprovided liability is likely.
Germany
On 2 June 2003, the Group exchanged contracts with Orange Holdings Limited to acquire 100% of the issued share capital of Hutchison
Telecommunications GmbH, a mobile service provision business incorporated in Germany, for a net cash consideration of £32.4m. Completion is
subject to appropriate regulatory and other authority approvals being received by 31 August 2003. The Group has also closed a further 10 retail stores
and commenced the closure of its support centre in Munich. A provision of £4.5m has been booked since the period end to cover these items.