Carphone Warehouse 2011 Annual Report Download - page 31

Carphone Warehouse Group plc Annual Report 2011 27
BUSINESS REVIEW
Dividends
As previously communicated, the Board
is commencing a progressive dividend
policy, with the aim of maintaining a
dividend cover of at least three times,
generally based on Headline earnings.
Accordingly, we are proposing a dividend
for the year of 5.0p per share. The ex-
dividend date is Wednesday 6 July 2011,
with a record date of Friday 8 July 2011
and an intended payment date of Friday
5 August 2011.
Other KPIs
The Group’s principal KPIs relate to its joint
venture operations and are reported in the
relevant sections of the Business Review.
The KPIs which are relevant for the Group
as a whole are those regarding shareholder
return, profitability and growth.
Headline KPIs 2011 2010
ROCE 9.4% 5.4%
EPS 15.0p 8.3p
The improvements in return on capital
employed and EPS reflect the growth in
profitability already detailed in this report.
Risk
The key risks of the Group relate to its joint
venture operations and such risks are
described on pages 20 and 25. The Group
does not exercise control over Best Buy
Europe or Virgin Mobile France and
therefore material decisions can only
be made with the consent of the relevant
joint venture partner. Inability to reach
consensus on such decisions could have
an adverse effect on the growth, business
and financial results of these operations.
Such risks are mitigated through agreed
strategies, defined and documented
processes and regular communication.
The Group is also exposed to market risks
such as interest rate risk and foreign
currency risk. Further details on such
risks are provided below.
Capital structure, financing
and treasury
The Group is funded entirely by equity,
which at 31 March 2011 totalled £758.0m
(2010: £690.5m). The Group had net funds
including loans to joint ventures of £156.3m
(2010: £150.8m) and an unused bank
facility of £50m (2010: £50m). This facility
is backed by the Group’s property assets
and matures in July 2012. The Group’s
funds and facilities cover potential funding
obligations to its joint ventures, which
include an RCF of £62.5m to Best Buy
Europe which expires in March 2013,
and a further formal commitment to
Best Buy Europe of £50m. Best Buy
provides an equal RCF and commitment
to Best Buy Europe.
Best Buy Europe has a Receivables
Financing Agreement (“RFA”) provided
by a syndicate of banks, which enables
it to borrow up to £350m against certain
trade receivables. This facility is used
to finance working capital and other
requirements during the year, and is
supplemented by the committed
shareholder RCF of £125m noted
above. The RFA matures in July 2012.
Virgin Mobile France is funded entirely
through equity and shareholder loans,
which are provided by its shareholders
in proportion to their shareholding.
As indicated by the proposed dividend
for the year just ended, it is the Board’s
intention to return any excess cash to
shareholders as it becomes available.
The Group’s investment policy is to
maximise investment returns whilst
ensuring low risk and suitable liquidity.
Treasury policies permit the use of
long-term derivative products for the
management of currency and interest
rate risk and the Group’s exposures
are monitored regularly. The Group
does not trade or speculate in any
financial instruments.
Except for a Euro denominated loan
provided to Virgin Mobile France, the
Group has limited direct exposure to
foreign currency fluctuations. The Group
ceased net investment hedging in May 2010
but continues to hedge its loan to Virgin
Mobile France in order to prevent income
statement fluctuations arising from foreign
currency movements.
The Group is more significantly affected
by foreign currency fluctuations through
the results of its joint ventures. All of Virgin
Mobile France’s profits arise in Euros,
while those of Best Buy Europe are
materially affected by both the Euro and
the US Dollar. Best Buy Europe may hedge
a proportion of its non-Sterling earnings to
provide certainty of their value. Best Buy
Europe provides some funding to its
subsidiaries in currencies other than
Sterling, giving it limited exposure within
net funds to currency fluctuations.
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 Risk
sections. The financial position of the
Group, its cash flows, liquidity position
and borrowing facilities are shown in the
balance sheet, cash flow statement and
accompanying notes to the Group financial
statements.
The directors, in their consideration of
going concern, have reviewed the future
cash and profit forecasts of the Group’s
joint venture investments and other
businesses. The directors consider that
these forecasts are based on prudent
assumptions, and based on these
forecasts, that it is appropriate to prepare
the Group financial statements on the
going concern basis. In arriving at this
conclusion, they have noted that at
31 March 2011 there were net funds
of £120.6m and an unused committed
facility of £50m which does not mature
until July 2012.
Market
value
£74m
Current
rental income
£5.6m
Book
value
£68m
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