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The Carphone Warehouse Group PLC
Annual Report 2004

Table of contents

  • Page 1
    The Carphone Warehouse Group PLC Annual Report 2004

  • Page 2
    The Carphone Warehouse is Europe's leading independent retailer of mobile phones and services, with over 1,200 stores in 10 countries. Our strategy builds on our track record in retailing and allows us to move quickly when we see new market opportunities arise. Our objective at all times remains ...

  • Page 3
    ...Carphone Warehouse Group PLC Annual Report 2004 *Headline figures are shown before exceptional items and amortisation of goodwill (see note 10 to the financial statements). Operational Highlights Further strong growth in profits and earnings per share Continued market share growth across Europe...

  • Page 4
    ...is now sharing in the lifetime value of the customers it recruits and will break even this year if its current progress continues. During the year the Group underwent an important internal restructuring, with the UK and non-UK distribution operations now being managed as a single unit under Geoffroy...

  • Page 5
    ...). The Carphone Warehouse Group PLC Annual Report 2004 Telecoms Services - Mobile Telecoms Services - Residential Fixed Line The provision of services to mobile phone customers through both our own service provision business and contracts to manage customers on behalf of network operators. The...

  • Page 6
    ... customer service is translating into ongoing market share gains and increasing levels of repeat business. Our move into fixed line has been decisive and successful and provides the Group with a further avenue for long-term growth." Charles Dunstone, Chief Executive Officer I am pleased to report...

  • Page 7
    ... exciting times. I am confident that over the next year we will extend our position as the leading independent mobile phone retailer in Europe, continue to execute on our fixed line strategy, and deliver further profitable growth. 5 The Carphone Warehouse Group PLC Annual Report 2004 Charles...

  • Page 8
    ... 10 countries, selling mobile phones, accessories, insurance, and fixed line services. Major physical expansion in 2004/5. Online All direct operations, including inbound call centres, web, and 'off the page' activities. Looking to expand from the UK into other markets. Insurance The provision of...

  • Page 9
    ... driven by the greater store base, a significant number of rent reviews, and higher levels of commission payments to our sales consultants in the strong market environment. 7 The Carphone Warehouse Group PLC Annual Report 2004 Subscription Pre-pay SIM-free Total Of which Online 2,413 2,520 417...

  • Page 10
    ... The management time and effort invested in improving retail and operational processes across Europe is beginning to pay dividends and we are very excited about the long-term growth prospects that many of these markets now offer the Group. The recent move to combine overall responsibility for UK and...

  • Page 11
    ...." David Goldie, Chief Operating Officer, Telecoms 9 The Carphone Warehouse Group PLC Annual Report 2004 Overview Fixed: Opal Providing voice telecoms and valueadded services to SMEs in the UK, and providing the network infrastructure for TalkTalk. Fixed: TalkTalk Residential fixed line services...

  • Page 12
    ... switches - is leased from a number of operators. There continues to be significant excess fibre capacity in the UK market and the cost customers, including our virtual network, Fresh, and our German service provision business, Hutchison (now renamed The Phone House Telecom). The Fixed business...

  • Page 13
    ... network terms in France to develop our own reseller business, which was launched in May 2004. We expect our non-UK residential operations to break even in the year to March 2005. Wholesale 2004 £m 2003 £m The Carphone Warehouse Group PLC Annual Report 2004 Turnover Contribution Support costs...

  • Page 14
    ... portfolio. The carrying value of this fund on the balance sheet is now £5.4m. Eliminations Included within Retail revenue is £12.5m of commissions from the Group's German service provision business for customers connected onto our own base. Retail revenue is reported gross to avoid distortion...

  • Page 15
    ... Financial Reporting Standards (IFRS) for the year ending 1 April 2006. The Group will continue to assess the impact of adopting IFRS on an ongoing basis given that both UK and International Standards are undergoing a period of rapid change to assist harmonisation. Return of capital employed...

  • Page 16
    ... and fundraising, marketing and service provision support. This has enabled Get Connected to increase its user base by 30% since the relationship started and to increase the small employee team by 75%. This unique relationship was named Corporate Partnership of the Year at the UK Charity Awards 2003...

  • Page 17
    ... now blacklisting mobile phone identity numbers, known as IMEIs, across all networks, rendering stolen handsets useless. In addition to spearheading the campaign, The Carphone Warehouse set up a central customer information line, providing details of how to report stolen handsets. In April 2004, we...

  • Page 18
    ... terms of hours, times or place of work. 2004 will see the fifth year of Backchat, a comprehensive survey of Carphone Warehouse employees across the Group, soliciting their views on many issues, from work / life balance to understanding Group aims. There was an unprecedented 85% participation rate...

  • Page 19
    ... Carphone Warehouse Group PLC Annual Report 2004 17 ADVISORS Bankers HSBC Bank PLC ING Bank NV - London Branch Deutsche Bank AG - London Branch Legal Advisors Ashurst Morris Crisp Clyde & Co DLA Osborne Clarke Corporate Brokers Credit Suisse First Boston (Europe) Limited 1 Cabot Square London E14...

  • Page 20
    ... next year's Annual Report, the information in this Report is given in relation to the version of the Combined Code applicable for the period ended 27 March 2004. Board The Company has a well-balanced Board. There are five Executive Directors and five Non-Executive Directors. Directors' names and...

  • Page 21
    ... Annual Report and Accounts. This process is reviewed annually by the Board. The process includes the following: • Review of the external and internal audit work plans; • Regular review by the Board of a detailed risk management report; • Consideration of reports from management and internal...

  • Page 22
    ...% of their annual salaries. Salaries & benefits Executive Directors' base salaries are reviewed annually and take into account the roles, responsibilities, performance and experience of the individuals and information obtained from published market data on the salary rates for similar positions. As...

  • Page 23
    ... this Report. No Executive Director or member of senior management has elected to defer their bonus for the period ended 27 March 2004. Share options The Company has a performance related share option scheme, previously under The Carphone Warehouse Group PLC Executive Incentive Scheme and currently...

  • Page 24
    ... Notice of the Annual General Meeting accompanying this Report. Amendments to share option schemes The Board is seeking approval for amendments to The Carphone Warehouse Group Company Share Option Plan and to The Carphone Warehouse Group PLC Executive Incentive Scheme ('the Schemes'). At the Annual...

  • Page 25
    ... shares by way of gift into The Charles Dunstone Charitable Trust and D P J Ross sold 15,000,000 shares. Otherwise there were no movements in the shareholdings above between 27 March 2004 and 3 June 2004. The Carphone Warehouse Group PLC Annual Report 2004 Performance graphs Graph 1 shows the Group...

  • Page 26
    ... and informal meetings and through the Group's internal publications. Members of the management team regularly visit all Group locations and discuss matters of current interest and concern with employees. Supplier payment policy The Group's policy is to agree terms of transactions, including payment...

  • Page 27
    ... Warehouse Group PLC Annual Report 2004 Independent Auditors' Report to the members of The Carphone Warehouse Group PLC We have audited the financial statements of The Carphone Warehouse Group PLC for the period ended 27 March 2004 which comprise the profit and loss account, the balance sheets...

  • Page 28
    ... of goodwill 52 weeks ended 52 weeks ended 52 weeks ended 27 March 2004 27 March 2004 27 March 2004 Notes £'000 £'000 £'000 52 weeks ended 29 March 2003 £'000 Turnover Existing operations Acquisitions Cost of sales Gross profit Operating expenses excluding amortisation and depreciation...

  • Page 29
    ... integral part of this consolidated balance sheet. 13 14 15 403,191 403,191 195,594 5,897 604,682 367,547 367,547 133,040 11,072 511,659 56,351 176,981 26,276 46,977 306,585 (275,311) 31,274 542,933 (49,383) (37,956) 455,594 The Carphone Warehouse Group PLC Annual Report 2004 16...

  • Page 30
    ... liabilities Creditors: Amounts falling due after more than one year Net assets Capital and reserves Called-up share capital Share premium Profit and loss account Total capital employed The accompanying notes are an integral part of this balance sheet. www.cpwplc.com 15 411,952 411,952 264...

  • Page 31
    ...56,519 (42,623) 13,896 27e 29 Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities 2004 £'000 2003 £'000 The Carphone Warehouse Group PLC Annual Report 2004 Operating profit including exceptional items Depreciation of tangible fixed assets Amortisation of goodwill...

  • Page 32
    ... at the lower of cost and net realisable value. g) Leases Rental payments under operating leases are charged to the profit and loss account on a straight line basis over the period of the lease. h) Taxation Current tax, including UK corporation tax and overseas tax, is provided at amounts expected...

  • Page 33
    ...analysed by origin as follows: 2004 Turnover £'000 Profit before tax £'000 Net assets £'000 Turnover £'000 Profit before tax £'000 2003 Restated Net assets £'000 The Carphone Warehouse Group PLC Annual Report 2004 United Kingdom Rest of Europe Amortisation of goodwill Operating exceptional...

  • Page 34
    ... £'000 Wages and salaries Social security costs Other pension costs www.cpwplc.com 194,614 33,147 1,749 229,510 144,568 24,691 947 170,206 The average monthly number of people employed by the Group during the period was: 2004 Number 2003 Number Administration Selling and distribution 1,631...

  • Page 35
    ... corporation tax Overseas tax Total current tax Deferred tax: Origination and reversal of timing differences Total deferred tax Total tax on profit on ordinary activities 11,144 3,247 14,391 1,677 (2,088) 13,980 4,623 4,011 8,634 (56) 429 9,007 The Carphone Warehouse Group PLC Annual Report 2004...

  • Page 36
    ... in an Employee Share Ownership Trust from investments to reserves. 13 Intangible fixed assets - goodwill Group Cost At 29 March 2003 Acquisitions (see note 15) Foreign exchange At 27 March 2004 Amortisation At 29 March 2003 Charge for the period Foreign exchange At 27 March 2004 Net book value At...

  • Page 37
    ... share capital and give the Group an effective holding of 100% on consolidation. Name Country of incorporation or registration Nature of business The Carphone Warehouse Group PLC Annual Report 2004 The Carphone Warehouse Limited* The Carphone Warehouse UK Limited The Phone House SA The Phone House...

  • Page 38
    ... the Financial Statements continued 15 Fixed asset investments continued Acquisitions a) Hutchison Telecommunications GmbH On 2 June 2003, the Group acquired 100% of the issued share capital of Hutchison Telecommunications GmbH ('HTG'), a mobile telecoms service provider registered in Germany, for...

  • Page 39
    ...Cash acquired 13,579 (164) 13,415 Fair value adjustments relate to unrecorded potential liabilities. c) Xtra Telecom SA On 8 March 2004, the Group acquired 100% of the issued share capital of Xtra Telecom SA, a fixed line service provider registered in Spain, for an initial gross consideration of...

  • Page 40
    Notes to the Financial Statements continued 15 Fixed asset investments continued d) E2Save.com Limited On 1 January 2004, the Group acquired 100% of the issued share capital of E2save.com Limited, a company registered in England, for an initial gross consideration of £1.4m, with a further ...

  • Page 41
    ... 2004 £'000 Group 2003 £'000 Finished goods and goods for resale There is no material difference between the balance sheet value of stock and its replacement cost. 78,298 56,351 17 Debtors 2004 £'000 Group 2003 £'000 2004 £'000 Company 2003 £'000 Amounts falling due within one year: Trade...

  • Page 42
    ... the scope of these disclosures. a) Interest rate and currency profile of financial assets and liabilities The Group's financial assets include cash and short-term deposits, mainly denominated in Sterling, Euro and US Dollars. Foreign exchange swaps, used for hedging purposes, create an asset and...

  • Page 43
    ... with reference to market values; other fair values have been arrived at by discounting future cashï¬,ows, assuming no early redemption, or marking deals to period-end market rates or rates as appropriate to the instrument. f) Gains and losses on hedges At 27 March 2004, the Group had unrecognised...

  • Page 44
    ... and store closure programme launched in the period ended 30 March 2002. As detailed in note 6a, during the period the Group provided for the exceptional cost of reorganising its operations in Germany following the acquisition of Hutchison Telecommunications GmbH, including provision for...

  • Page 45
    ... shares of 0.1p each Movements in share capital in the period arose from the exercise of share options. Share options The Group has issued the following options to purchase ordinary shares in the Company: a) Executive share option schemes Date options granted Exercise price per share £ Number...

  • Page 46
    ...) in the Company for the benefit of the Group's employees. None of the shares held by the ESOT were under option or conditionally gifted at 27 March 2004 (2003 - Nil). No dividends have been waived on shares held by the ESOT in either period. At 27 March 2004 the shares had a market value of £2.8m...

  • Page 47
    ...) (5,335) (37,892) The Carphone Warehouse Group PLC Annual Report 2004 928 95,668 96,596 102 (42,725) (42,623) Currency translation £'000 At 27 March 2004 £'000 Cash at bank and in hand Overdrafts Debt due within one year Debt due after more than one year Net funds (debt) g) Reconciliation of...

  • Page 48
    ...statements of the Group 6,564 5,729 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 £1.7m...

  • Page 49
    ....1 0.6 (22.3) (34.6) 42.8 471.8 - 471.8 6.8p 6.7p 455.6 - 455.6 5.3p 5.2p 403.3 0.8 404.1 4.4p 4.4p 428.9 1.7 430.6 5.0p 4.9p 43.6 (0.8) 42.8 3.7p 3.5p 47 The Carphone Warehouse Group PLC Annual Report 2004

  • Page 50
    Financial Calendar Key dates Results announcement Ex-dividend date Record date Dividend payment date 3 June 2004 7 July 2004 9 July 2004 6 August 2004 48 www.cpwplc.com

  • Page 51
    Published by Black Sun plc +44 (0)20 7736 0011. Printed in England by CTD Printers Ltd.

  • Page 52
    The Carphone Warehouse Group PLC 1 Portal Way London W3 6RS Tel +44 (0)20 8896 5000 Fax +44 (0)20 8753 8009 Email [email protected] Registered no. 3253714 www.cpwplc.com