Carphone Warehouse 2005 Annual Report Download

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Turnover
£2,355m
2004: £1,849m
Profit before tax*
£102.1m
2004: £76.3m
*Before exceptional items and
amortisation of goodwill
Dividend per share
1.8p
2004: 1.3p
The Carphone Warehouse Group PLC
Annual Report 2005

Table of contents

  • Page 1
    The Carphone Warehouse Group PLC Annual Report 2005 Turnover £2,355m 2004: £1,849m Profit before tax* £102.1m 2004: £76.3m *Before exceptional items and amortisation of goodwill Dividend per share 1.8p 2004: 1.3p

  • Page 2
    The Carphone Warehouse Group PLC Annual Report 2005 Delivering value from organic and entrepreneurial growth Contents 2 3 4 6 9 Financial Highlights Chairman's Statement Group Overview Chief Executive Officer's Review Operating and Financial Review 10 Operational Performance 16 Financial ...

  • Page 3
    ... market share gains across Europe Total connections up 23.4% to 6.60 million 247 new stores opened TalkTalk UK base up 139.0% to 920,000 TalkTalk launched in four other European countries Recurring revenues generating 56.1% of total contribution INVESTOR RELATIONS CONTACT PEREGRINE RIVIERE GROUP...

  • Page 4
    2 The Carphone Warehouse Group PLC Annual Report 2005 Financial Highlights 2005 £m 2004 £m Turnover Headline results EBITDA Profit before tax Earnings per share Statutory results Profit before tax Earnings per share Exceptional items Dividend per share 2,355.1 154.8 102.1 9.39p 68.9 5.59p ...

  • Page 5
    ... number in the year ahead. We see numerous opportunities to continue to improve returns for shareholders through reinvestment in existing and new businesses. We are developing a business that can continue to deliver attractive rates of profits growth and cash generation over the long term Group...

  • Page 6
    ... Warehouse Group PLC Annual Report 2005 DIVISION Distribution DIVISION DESCRIPTION BUSINESS UNITS Our Distribution division comprises our Retail operations and other directly related business streams. Retail Online Insurance Ongoing The Carphone Warehouse Group Overview TURNOVER CONNECTIONS...

  • Page 7
    ...The Carphone Warehouse is a multinational group present in ten European markets. The Group operates from two core divisions: Distribution and Telecoms Services. Our European network We have over 1,400 stores in 10 countries throughout Europe United Kingdom Belgium France Germany Ireland Netherlands...

  • Page 8
    ... Retail services via direct channels, including inbound and outbound call centres, print media and the web STRATEGY To grow our market share to at least 10% in all our Retail markets by opening new stores and driving repeat business through value-added service and choice OBJECTIVES FOR 2005/6 To...

  • Page 9
    ...telecoms services OBJECTIVES FOR 2005/6 To become the number one alternative to BT in UK residential telecoms OBJECTIVES FOR 2005/6 • Launch mobile and broadband services • Develop data products • Explore new market segments • Continue to recruit new customers in all markets • Refine UK...

  • Page 10
    6 The Carphone Warehouse Group PLC Annual Report 2005 Chief Executive Officer's Review We are developing a portfolio of related businesses and services that can deliver attractive and sustainable growth in earnings and dividends Without our stores and our market share, we would not be able to ...

  • Page 11
    ... the further development of broadband, and the introduction of line rental, will both be key strategic initiatives in the coming year, and central to our aim of becoming a mass market provider of telecoms services to the home. We have set a long-term target of 2 million voice customers in the UK by...

  • Page 12
    ...The Carphone Warehouse Group PLC Annual Report 2005 Chief Executive Officer's Review continued Everything that our business-to-business and 3G MIGRATION TO BE A KEY FUTURE DRIVER CONVERGENCE OF MULTIPLE APPLICATIONS ON THE MOBILE HANDSET FURTHER BENEFITS FROM REGULATORY CHANGE IN THE UK FIXED LINE...

  • Page 13
    ... and Financial Review Trading has been excellent across the Group and we have delivered another year of good earnings growth. Our operations are based on a sound platform of good cash generation, a strong balance sheet and improving operational efficiency. Summary of results Group turnover for...

  • Page 14
    ... 52 week connections up 28.1% to 3.23m. The combination of falling prices on entry level handsets, and increased network interest in the pre-pay segment, drove demand. Our SIM-free sales recovered well from the previous year, rising 21.4% to 0.51m. We opened 306 new stores during the year and closed...

  • Page 15
    ... UP 22.2% 5 YEAR SUBSCRIPTIONS GROWTH OF 20.3% Subscription Pre-pay SIM-free Group 2,770 3,227 506 6,503 2,413 2,520 417 5,350 2,816 3,272 512 6,600 way, and delivered 52 week connections growth of 40.4%. Our Spanish management team also succeeded in opening 75 new stores during the period to...

  • Page 16
    ... Insurance business as we build out the store portfolio across Europe. Our third-party business, acting as underwriter to other organisations offering mobile phone insurance, is still in its infancy but provides a further source of long-term growth. Ongoing Ongoing represents the share in customer...

  • Page 17
    ... into two businesses, Mobile and Fixed. The Mobile business encompasses our facilities management ('FM') operations, managing customers on behalf of networks, and our own customers, including our virtual network, Fresh, and our German service provision ('SP') business, The Phone House Telecom. The...

  • Page 18
    ... promoted our Fresh proposition to maintain our status as the best value pre-pay offer in the UK market. Finally, we announced just after the year end the launch of Mobile World, a unique pre-pay service which offers very attractive rates to international destinations, designed to compete directly...

  • Page 19
    ...our non-UK TalkTalk operations in the next 12 months. Wholesale Division 2005 £m 2004 £m LINE RENTAL LAUNCH PLANNED FOR LATER THIS YEAR NON-UK FIXED LINE OPERATIONS HAVE STARTED PROMISINGLY TARGETING 10% OF THE UK RESIDENTIAL MARKET BY 2008 Turnover Contribution Support costs EBITDA Depreciation...

  • Page 20
    16 The Carphone Warehouse Group PLC Annual Report 2005 Financial Performance Eliminations HEADLINE EARNINGS PER SHARE UP 37.9% DIVIDEND UP 38.5% OPERATING CASH FLOW OF £143.1M Included within Retail revenue is £17.9m of commissions from the Group's German SP business (2004: £12.5m). This ...

  • Page 21
    ...2004, in line with the normal annual cycle as the Group invests in inventory ahead of the Christmas trading season. The Group seeks to maintain comfortable headroom on committed facilities at all times. In addition to the revolving credit facility and term loan, the Group has a number of uncommitted...

  • Page 22
    ...ficiary of the Carphone Warehouse Charity Partnership. In addition, we provide Get Connected with its accommodation, phone lines and IT support, and offer volunteers the opportunity to earn extra holiday or take matched company hours for giving up their time to help out. In 2004, in response to the...

  • Page 23
    ...Review continued www.cpwplc.com 19 As we grow and develop as a Group we have to ensure that our values and the treatment of our employees are not compromised Birchwood call centres 1,100 volunteer hours were spent on the phones fielding 5,500 calls. Tsunami On 17 January 2005 the UK's commercial...

  • Page 24
    ... awards that The Carphone Warehouse has won in the last year. • Mobile Choice Best High Street Retailer • Mobile News Best Large Retailer • Retail Week Business Excellence • Retail Week Innovative Employer • Sunday Times 4th Best Large Company to Work For • What Mobile Best High Street...

  • Page 25
    ...Carphone Warehouse is leading the way in supporting this new campaign as the first UK retailer to automatically register all of its insurance customers. Mobile phones and health The Carphone Warehouse continues to lead the industry in providing customers with all of the information on mobile phones...

  • Page 26
    ... also manages the Group's corporate finance function and has a direct involvement in strategic decisions and the appraisal process. He is a Non-Executive Director of Berkeley Scott Group PLC. Martin Dawes James Dale FCA Executive Chairman of Carphone Warehouse Insurance Age 65. Joined the Group in...

  • Page 27
    ... the Board and its committees will be reported on in next year's Annual Report. Charles Dunstone is the Chief Executive Officer, Sir Brian Pitman is the Senior Independent Director and David Ross is Deputy Chairman. All Directors are subject to election by shareholders at the first Annual General...

  • Page 28
    ...The Carphone Warehouse Group PLC Annual Report 2005 Corporate Governance continued The Senior Independent Director also met with the Non-Executive Directors, in the absence of the Chairman, to assess the Chairman's effectiveness (having taken soundings beforehand from the Executive Directors). The...

  • Page 29
    ...to shareholders are news releases (including results announcements) and Company publications. In all such communications, care is taken to ensure that no price sensitive information is released. The Chief Executive Officer and Chief Financial Officer have lead responsibility for investor relations...

  • Page 30
    ... at market median levels and to offer variable rewards which are linked to the performance of the Group. Before long-term incentive share awards are taken into account, approximately 43% of Executive Directors' remuneration earned in the year was performance related. Messrs Dunstone and Ross do...

  • Page 31
    ... year. A UK savings related share option scheme is open to all eligible employees in the UK, including Executive Directors. No Executive Director currently participates in the scheme. Performance Share Plan Senior managers, including Executive Directors, received awards of Performance Shares...

  • Page 32
    ...The Carphone Warehouse Group PLC Annual Report 2005 Remuneration Report continued Pensions* The schedule below sets out payments to defined contribution pension schemes on behalf of Executive Directors. Geoffroy Roux de Bezieux and Roger Taylor are members of a UK stakeholder pension scheme. Under...

  • Page 33
    ...used under both UK GAAP and International Accounting Standards in the calculation of Headline EPS. Executive Directors' service contracts All Executive Directors have service contracts which are terminable by the Company or the Executive Director with twelve months' notice or less. The dates of each...

  • Page 34
    30 The Carphone Warehouse Group PLC Annual Report 2005 Remuneration Report continued Fees for Non-Executive Directors The fees for each of the Non-Executive Directors are determined by the Board after considering external market research. The Non-Executive Directors do not take part in discussions...

  • Page 35
    ... information as Graph 1 but measured over the last three years. Graph 3 shows the Group's performance measured by TSR compared with a sector comparator group comprising a number of UK general retailers and European telecoms companies for the period June 2002 to 2 April 2005. A three month rolling...

  • Page 36
    ...' Report The Directors have pleasure in presenting the Annual Report and financial statements of The Carphone Warehouse Group PLC for the 53 weeks ended 2 April 2005. Principal activities The principal activity of the Group continues to be the provision of mobile communication products and services...

  • Page 37
    .... Independent Auditors' Report 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 2 April 2005 which comprise the profit and loss account, the balance sheets, the...

  • Page 38
    ...Carphone Warehouse Group PLC Annual Report 2005 Consolidated Profit and Loss Account For the 53 weeks ended 2 April 2005 Before amortisation of goodwill 53 weeks ended 2 April 2005 Notes £'000 Amortisation of goodwill 53 weeks ended 2 April 2005 £'000 After amortisation of goodwill 53 weeks ended...

  • Page 39
    ...Consolidated Balance Sheet As at 2 April 2005 Notes 2 April 2005 £'000 27 March 2004 £'000 Fixed assets Intangible assets - goodwill Tangible assets Investments Current assets Stock Debtors Short-term investments Cash at bank and in hand Creditors: Amounts falling due within one year Net current...

  • Page 40
    ...The Carphone Warehouse Group PLC Annual Report 2005 Company Balance Sheet As at 2 April 2005 Notes 2 April 2005 £'000 27 March 2004 £'000 Fixed assets Investments 15 415,402 415,402 411,952 411,952 Current assets Debtors Cash at bank and in hand Creditors: Amounts falling due within one year...

  • Page 41
    ...ended 2 April 2005 53 weeks ended 2 April 2005 £'000 52 weeks ended 27 March 2004 £'000 Notes Net cash inï¬,ow from operating activities Net cash outï¬,ow from returns on investment and servicing of finance Net cash outï¬,ow from taxation Net cash outï¬,ow from capital...of Operating Profit to Net ...

  • Page 42
    ... intrinsic value of the awards at the date of grant and is charged to the profit and loss account on a straight-line basis over the relevant performance period. The Company operates a Save As You Earn scheme that allows for the grant of share options at a discount to the market price at the date of...

  • Page 43
    .... The information above includes the following amounts in respect of acquisitions during the period: Turnover £'000 Profit (loss) before tax £'000 Net assets £'000 Distribution Telecoms Services 2,400 29,513 31,913 8 (4,802) (4,794) (4,794) 15,008 35,330 50,338 50,338 United Kingdom Details...

  • Page 44
    40 The Carphone Warehouse Group PLC Annual Report 2005 Notes to the Financial Statements continued 3 Analysis of profit and loss account Existing operations £'000 Acquisitions £'000 2005 Total £'000 2004 Total £'000 Turnover Cost of sales Gross profit Depreciation Amortisation of goodwill ...

  • Page 45
    ... of The Phone House Telecom GmbH (formerly Hutchison Telecommunications GmbH) ('HTG') in June 2003, the Group closed its support centre in Munich, closed a further 15 retail stores and commenced the integration of the retail business with HTG. A provision of £4.7m was booked to cover the cost of...

  • Page 46
    ...Carphone Warehouse Group PLC Annual Report 2005 Notes to the Financial Statements continued 8 Tax on profit on ordinary activities The tax charge comprises: 2005 £'000 2004 £'000 Current tax: UK corporation tax Overseas tax Adjustments in respect of prior periods: UK corporation tax Overseas tax...

  • Page 47
    ... before allocation of support costs. 11 Earnings per share The calculations of earnings per share are based on the following profits and numbers of shares: 2005 £'000 2004 £'000 Profit for the financial period Amortisation of goodwill Operating exceptional items (net of tax) Non-operating...

  • Page 48
    44 The Carphone Warehouse Group PLC Annual Report 2005 Notes to the Financial Statements continued 13 Intangible fixed assets - goodwill Group Total £'000 Cost At 27 March 2004 Acquisitions (see note 15) Foreign exchange At 2 April 2005 Amortisation At 27 March 2004 Charge for the period Foreign...

  • Page 49
    ... Warehouse Resources Limited The Carphone Warehouse UK Group Limited Cellcom Limited* Evergreen Services Holdings Limited MViva Limited The Phone House Holdings (UK) Limited* Storm Tide Limited* The Phone House BV *held directly by the Company. England and England and Belgium France Germany Ireland...

  • Page 50
    ...The Carphone Warehouse Group PLC Annual Report 2005 Notes to the Financial Statements continued 15 Fixed asset investments continued Acquisitions a) VarTec Telecom Europe Limited On 15 December 2004, the Group acquired 100% of the issued share capital of VarTec Telecom Europe Limited, a fixed line...

  • Page 51
    ...www.cpwplc.com 47 15 Fixed asset investments continued b) One Stop Phone Shop Limited On 1 March 2005, the Group acquired 100% of the issued share capital of One Stop Phone Shop Limited, a company registered in England and Wales that specialises in the mobile 'off-the-page' market, for an initial...

  • Page 52
    48 The Carphone Warehouse Group PLC Annual Report 2005 Notes to the Financial Statements continued 15 Fixed asset investments continued Net cash outï¬,ows in respect of these acquisitions comprised: Telequip Limited £'000 Ecocall Limited £'000 Cable Direct Limited £'000 Voice Connect Limited...

  • Page 53
    ... falling due within one year 2005 £'000 Group Restated 2004 £'000 Company 2005 £'000 2004 £'000 Loans and overdrafts Trade creditors Amounts owed to subsidiary undertakings Corporation tax Other taxes and social security costs Other creditors Accruals and deferred income Proposed dividends...

  • Page 54
    ... by 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) Unrecognised gains and losses At 2 April 2005, the Group had unrecognised...

  • Page 55
    ... charges Group Insurance £'000 Restructuring provisions £'000 Deferred tax £'000 Sales-related provisions £'000 Other £'000 Total £'000 At 27 March 2004 (restated) Acquisitions (see note 15) Net charge to profit and loss account Utilised in the period Foreign exchange At 2 April 2005 6,839...

  • Page 56
    52 The Carphone Warehouse Group PLC Annual Report 2005 Notes to the Financial Statements continued 24 Share capital Group and Company 2005 million 2004 million 2005 £'000 2004 £'000 Authorised Ordinary shares of 0.1p each Allotted, called-up and fully paid Ordinary shares of 0.1p each Movements...

  • Page 57
    ... to a bank save-as-you-earn contract for a term of three or five years with contributions from employees of an amount between £5 and £250 per month. Options may be exercised at the end of the three or five year period at a subscription price not less than 80% of the middle market quotation of...

  • Page 58
    ...The Carphone Warehouse Group PLC Annual Report 2005 Notes to the Financial Statements continued 26 Reconciliation of movements in shareholders' funds 2005 £'000 Group 2004 £'000 2005 £'000 Company 2004 £'000 Profit (loss) for the financial period Dividends Currency translation Issue of share...

  • Page 59
    ... financial statements. 32 Related party transactions On 29 March 2005, G Roux de Bezieux, a Director of the Company, acquired 5% of the issued share capital of Omer Telecom SAS ('Omer'), a subsidiary of the Group, which was set up to develop virtual networks in the French market. G Roux de Bezieux...

  • Page 60
    56 The Carphone Warehouse Group PLC Annual Report 2005 Five Year Record (unaudited) 2005 £m 2004 £m 2003 £m 2002 £m 2001 £m Headline results Turnover EBITDA PBT Assets employed Fixed assets Net current assets Creditors: Amounts falling due after more than one year Provisions for liabilities ...

  • Page 61
    www.cpwplc.com 57 Financial Calendar Key dates Results announcement Ex-dividend date Record date Dividend payment date Interim results announcement 7 June 2005 6 July 2005 8 July 2005 5 August 2005 3 November 2005 Published by Black Sun Plc +44 (0)20 7736 0011. Printed in England by SVTWO.

  • Page 62
    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