Carphone Warehouse 2005 Annual Report Download - page 10

HEADLINE OPERATING PROFIT (£m)
’05 ’04 ’03 ’02
46.558.0
81.1
106.9
REVENUE (EX WHOLESALE) (£m)
’05 ’04 ’03 ’02
810 1,035
1,671
2,223
6
Chief Executive Officer’s Review
It has been another very good year for The Carphone Warehouse. Our excellent financial performance stems
from our continued investment in growing our existing
businesses and our ability to identify and exploit new
commercial opportunities both through our existing asset
base and via acquisition. We are committed to long-term
value creation, through the development of a portfolio of
related businesses and services that can deliver attractive
and sustainable growth in earnings and dividends. Our
track record speaks for itself and the more detailed
analysis of our strategy that follows demonstrates that our
plans for the future are clear, exciting and achievable.
Developing a broad-based telecoms group
Our strategy remains essentially consistent with that
outlined in last year’s Annual Report and is built on
three core objectives:
•To continue to grow 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 and developing
additional sales channels;
•To maximise the lifetime value of our customers,
both by providing a level of service that encourages
repeat business, and by identifying relevant new
products and services where we have a sustainable
competitive advantage over other suppliers; and
•To grow our business-to-business fixed line operations
organically and through acquisition, and to invest in
our network to provide an increasing range of
communications services.
Before reporting on progress in each of these areas in
more detail, it is worth highlighting how closely integrated
the different elements of our strategy really are.
Without our stores and our market share, we would not
be able to provide such consistent levels of service and
value to our customers; without our fixed line network
and its business traffic, we would not enjoy such a
competitive advantage in the provision of residential
services; and without the combination of our mobile
network relationships, our stores and our fixed line
network, we would not have been able to launch a new
service such as Mobile World. Sustainable competitive
advantage does not come from any of these assets in
their own right, but from their unique combination.
Growing our retail presence
At the start of the year we aimed to open 200 new
stores across Europe, in a concerted drive to build on
our substantial retail platform and become a more
significant player in all of our markets. By the year end
we had succeeded in opening a record 247 stores, net
of closures. In our two biggest retail markets, the UK and
Spain, we opened 92 stores and 75 stores respectively.
We continue to generate a very attractive return on
new store openings, comfortably in excess of our two-
year payback hurdle. Our return on investment on
stores opened since 2002 has consistently been over
60%. Taking into account the lifetime value of Insurance,
Ongoing ARPU share and TalkTalk profits, the return
on investment is in excess of 140%. However, we also
enjoy other, broader effects of building our presence,
such as the growing handset purchasing benefits that
our increasing scale gives us, and our improving
position as a key partner of the mobile networks in
all our markets.
We intend to continue this strategy of rapid physical
expansion into the new financial year, and have plans
to open at least a further 250 stores by March 2006.
Once again, the UK and Spain will represent the
majority of new openings, but we see significant
expansion opportunities in all our markets. In particular,
the success of our German business since the
acquisition of Hutchison Telecommunications in
June 2003 has given us confidence to expand
our operations in that market, which represents a
significant long-term opportunity.
We are developing a portfolio of related
businesses and services that can deliver
attractive and sustainable growth in
earnings and dividends
The Carphone Warehouse Group PLC Annual Report 2005