Carphone Warehouse 2009 Annual Report Download - page 26

22 The Carphone Warehouse Group PLC Annual Report 2009
Directors’ Report – Business Review
Other Financial Information – continued
Funding of our subsidiaries is arranged
centrally with an emphasis on tight cash
control and efcient cash management.
All funding is provided on an arm’s length
basis and currency risk is ordinarily
hedged using foreign exchange swaps
or currency borrowings. Other than
intercompany loans and capital funding,
balance sheet translational risk is not
hedged against adverse movements in
exchange rates and the results of any
such movements are taken to reserves.
The Group is exposed to limited cross-
border transactional commitments and,
where signicant, these are hedged at
inception using forward currency
contracts.
Group committed debt facilities have
been used to provide a £475m RCF
to Best Buy Europe. This RCF has terms
that are broadly similar to the Group’s
main external facilities, including a
debt:EBITDA covenant, and its nal
maturity date is 13 March 2013.
Under this RCF 50% of drawings are
guaranteed by Best Buy Co., Inc.
Treasury policy permits the use of
long-term derivative treasury products
for the management of currency and
interest rate risk and the Group’s interest
rate exposures are monitored regularly.
More generally, the Group treasury
function seeks to follow treasury best
practice as recommended by the
Association of Corporate Treasurers
and adheres at all times to their Ethical
Code. The Group does not trade or
speculate in any nancial instruments.
Going concern
A review of the Group’s business
activities, together with the factors likely
to affect its future development,
performance and position are set out
elsewhere within this Business Review,
including the Risks and Uncertainties
section. The nancial position of the
Group, its cash ows, liquidity position
and borrowing facilities are shown in the
balance sheet, cash ow statement and
accompanying notes to the nancial
statements. Further information
concerning the Group’s nancing
arrangement and policies are set out
in the Financing and treasury section
above. Further details of the Group’s
nancial risk management arrangements
are provided in note 22 to the nancial
statements.
The Directors, in their consideration
of going concern, have reviewed the
Group’s future cash forecasts and
revenue projections, which they believe
are based on prudent assumptions,
and based on those forecasts and
projections, that it is appropriate to
prepare the nancial statements of the
Group on the going concern basis.
In arriving at this conclusion, they have
noted that at 31 March 2009 there was
substantial headroom against committed
banking facilities and that these facilities
do not start to mature until 2012.
Return on capital employed
Total shareholders’ funds at March 2009
were £1,116m, compared to £651m at
March 2008. After taking into account
average net debt, excluding debt used
to fund Best Buy Europe, and adjusting
for the amortisation of acquisition
intangibles and exceptional items, the
Group generated a return on capital
employed from continuing operations
of 8.4% (2008: 2.2%). The return on
capital employed from continuing
and discontinued operations was
8.4% (2008: 12.0%).
Assuming a weighted average cost
of capital for the period of 5.8%
(2008: 6.5%), this represents an
economic value added in respect of
continuing operations of £36m
(2008: -£60m) or 2.6% (2008: -4.3%).
Economic value added for all operations
on the same basis was £36m (2008:
£76m) or 2.6% (2008: 5.5%).