Carphone Warehouse 2009 Annual Report Download - page 24

Joint ventures and associates
Alongside the results of Best Buy Europe
since the transaction with Best Buy, the
Group’s share of results of joint ventures
and associates in the income statement
includes our share of post-tax losses
from Virgin Mobile, our French MVNO.
Virgin Mobile had a second successful
year of customer growth, adding over
300,000 customers and bringing its base
to over 1.1m customers, of whom 44%
are subscription. Our share of losses
for the year was £8m. The business
continued to invest signicantly in
brand-building and customer recruitment,
and while it will record further losses in
2009-10, broadly in line with 2008-09
levels, as it continues to invest in growth,
we expect it to move to protability at the
EBITDA level on a monthly basis in the
second half of this year.
Exceptional items
The disposal of 50% of the Group’s
retail and distribution business gave
rise to a net gain after tax of £608m,
which is reected in the results of
discontinued operations. Indirect
costs of £6m after tax also arose as
a result of the transaction. Further
to the new partnership, Best Buy
Europe commenced the disposal of
approximately 100 stores, and
accelerated a shift in its range of retail
stock away from mobile phones towards
laptops and other products, resulting in
an exceptional charge. Exceptional costs
associated with these programmes are
reected in a post-tax charge of £11m
through the results of joint ventures.
Prior to the transaction with Best Buy,
the Group conducted a review of its
central support structures, particularly
in relation to its retail and distribution
business, to achieve greater divisional
autonomy and efciency. This review
resulted in a reorganisation programme
that is expected to yield savings of
£7m per annum. Redundancy and other
restructuring costs that have arisen as
a result of the programme are reected
in a post-tax charge of £9m in
discontinued operations.
Further to the divisionalisation process,
both TalkTalk Group and Best Buy
Europe have undertaken comprehensive
reorganisation programmes in the
second half of the year. The TalkTalk
Group programme is expected to
generate annualised savings of
approximately £10m per annum, and
has resulted in redundancy and other
restructuring costs of £10m, which are
reected in exceptional operating
expenses. The Best Buy Europe
reorganisation is expected to yield
annualised savings for the joint venture of
up to £50m per annum, and has resulted
in a post-tax charge through the results
of joint ventures of £7m. TalkTalk Group
also completed the transfer of its AOL
network operations, hosting, billing
and customer management from a
transitional platform provided by AOL
Time Warner onto the Group’s own
systems, at a cost of £16m, shown
within exceptional operating expenses.
Additionally, an exceptional foreign
exchange loss of £85m has arisen in the
year following a change in the functional
currency of the Group’s brand company
from Swiss Francs to Sterling. The
transaction with Best Buy necessitated
a change in the operations of the brand
company, which in turn made Sterling
the appropriate functional currency.
As a result of the change, movements
on the brand company’s Swiss Franc
borrowings, which would have previously
been recognised through reserves,
were thereafter reected in the income
statement. These borrowings were
converted into Sterling before 31 March
2009. A tax credit of £24m has been
recognised in respect of this loss.
“ ”
Whilst profitability has
suered against the
economic environment,
we have areas of
substantial progress
for the Group to report.
Roger Taylor, Chief Financial Officer
Directors’ Report – Business Review
Other Financial Information
20 The Carphone Warehouse Group PLC Annual Report 2009