Carphone Warehouse 2004 Annual Report Download - page 6

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www.cpwplc.com
The Carphone Warehouse has changed significantly over
the last five years, from a company that generated almost all
of its income from its UK retail operations, to a multinational
retail group making profits from a range of related services
across ten geographical markets. We are now able to
achieve increasing returns on our fixed cost base and
invested capital by extending our customer relationships
beyond the point of sale. As a result, the Group now has
a much more stable base from which to pursue consistent
long-term profitable growth and the maximisation of
shareholder value.
Throughout this period of change, the retail portfolio
has remained at the heart of everything we do. With the
continued proliferation of handsets, networks and services
making the purchasing decision more complex than ever,
our customers are quite rightly making increasingly rigorous
demands on our sales consultants’ knowledge. In this
context it has been another year of strong growth and
rapid development for the Group. Our continued focus
on impartial advice and customer service is translating
into continued 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.
Developing a broad-based telecoms group
We have a clear strategy designed to build on our track
record in retailing and to allow us to move quickly when
we see new market opportunities arise, as befits our
entrepreneurial roots. Our objective at all times remains
the creation of significant and sustainable shareholder
value. There are three key elements of our Group strategy:
•To continue to grow retail market share in all our
geographical markets both by investing in new store
openings and by generating like-for-like growth from
our existing estate;
•To develop incremental income streams from our customer
relationships. We have achieved this historically through
our insurance services and network revenue sharing
agreements, and now see a significant opportunity
in residential fixed line services; and
•To grow our business-to-business fixed line operations
organically and through acquisition.
I am pleased to report that we have made good progress
on each part of this strategy during the last twelve months,
as I will outline below.
Growing our retail presence
Our retail business had a very strong year. Undoubtedly
we benefited from buoyant markets across much of
Europe, but without exception we outperformed these
markets and made good progress in our market share.
Further market share gains remain at the top of the
strategic agenda because of the additional influence
this gives us in our commercial agreements with mobile
operators and handset manufacturers.
We connected 5.35m mobile phones during the period,
an increase of 22.6% on 2003. More significantly, we
achieved 26.4% growth in subscription connections to
2.41m, extending our track record to 21.8% compound
growth over the last four years.
We also continued to invest heavily in our store portfolio,
and opened a total of 74 new stores, net of closures and
disposals. In the coming year we intend to accelerate our
store opening programme with a particular focus on our
biggest markets – the UK, Spain and France. New stores
are generating very strong incremental returns on capital,
and the growing profile of our brand outside the UK is
speeding up the rate of payback.
Developing incremental revenue streams from
customer relationships
We launched TalkTalk, our UK residential fixed line service,
in February 2003. By March 2004 we had attracted
385,000 customers, with the rate of customer acquisition
accelerating throughout the year. Our goal is to become
the natural alternative to BT in the fixed line market, and
we anticipate that our introduction of unlimited free calls
between all TalkTalk customers from April 2004 will help
us achieve this.
Our fixed line aspirations are not limited to the UK as we
see an opportunity to leverage our retail presence and
brand in other markets by introducing a similar service.
Towards the year end we completed acquisitions in Spain
and Switzerland that will allow us to tackle those residential
markets, and we have also negotiated terms to enter the
French market as a pure reseller.
Chief Executive’s Review
“Our focus on impartial advice and
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
3,603 3,615 4,364 5,350
03 040201
Total connections
Retail and Online (000s)
1,557 1,767 1,909 2,413
03 040201
Subscription connections
Retail and Online (000s)