Carphone Warehouse 2012 Annual Report Download - page 27

Carphone Warehouse Group plc Annual Report 2012 23
Overview Business review Governance Financial statements
2012 2011
Headline income statement (100% basis)* £m £m
Revenue 390.2 328.4
EBITDA 25.7 24.3
Depreciation and amortisation (4.2) (3.7)
EBIT 21.5 20.6
EBIT % 5.5% 6.3%
Interest (2.5) (2.9)
Taxation (6.7) (0.7)
PAT 12.3 17.0
Group share 6.1 8.2
* Revenue excludes contributions towards subscriber acquisition costs from
network operators and customers to avoid distorting underlying performance.
These items are netted off against acquisition costs within Headline EBITDA.
The amortisation of fees payable to network operators in return for preferential
rates is recognised as a cost of sales within Headline EBITDA but in amortisation
in the joint venture’s statutory accounts. See note 13 to the Group financial
statements for further details.
Virgin Mobile France revenue increased by 18.8% year‑on‑year to
£390.2m (2011: £328.4m) reflecting a higher customer base during
the year, an improvement in the quality of customers on the base
and the first impact of mobile termination revenue towards the
endof the year. Revenue growth at a constant currency was 17.5%.
The closing customer base was flat year‑on‑year at 1.92m customers;
however the quality of the base improved substantially with the
postpay base increasing by 7.6% year‑on‑year to 1.34m as the
business benefited from good availability of exciting smartphones
and an array of competitive offers.
In the final quarter of the year Iliad launched its mobile offer in France,
offering low cost postpay SIM‑only propositions. While Virgin Mobile
France experienced an initial spike in churn, the impact was limited
and the postpay base returned to growth within weeks of Iliad's launch.
The business produced a Headline EBIT margin of 5.5% (2011: 6.3%)
with the decrease year‑on‑year reflecting increased investment in
higher value postpay customers, which will help to drive both
earnings and value over time. Interest decreased year‑on‑year
from £2.9m to £2.5m, reflecting lower average debt as the business
continued to repay shareholder loans during the year. The tax charge
of £6.7m (2011: £0.7m) reflects the rate temporarily applicable
inFrance of 36.1% (standard rate 34.4%) although the impact of
theincrease in rate is partly reduced by the utilisation ofbrought
forward losses. The prior year benefited from a one‑off credit
inrelation to brought forward losses.
Virgin Mobile France recorded amortisation on acquisition intangibles
arising on the acquisition of Tele2 France, of which the Group’s
post‑tax share is £1.3m (2011: £2.2m). This charge is excluded
fromHeadline results to avoid distortion of underlying performance.
A year of substantial revenue growth and continued earnings
improvement, despite ahighly competitive market.
2012 2011
Cash flow (100% basis) £m £m
EBITDA 25.7 24.3
Working capital 8.9 2.6
Capex (12.5) (6.8)
Operating free cash flow 22.1 20.1
Other 1.1 4.5
Movement in net debt 23.2 24.6
Opening net debt (63.6) (88.2)
Closing net debt* (40.4) (63.6)
* Comprises shareholder loans of £50.5m (2011: £74.3m) and net cash of £10.1m
(2011: £10.7m).
EBITDA increased from £24.3m to £25.7m for the reasons described
above. Capex increased year‑on‑year to £12.5m (2011:£6.8m)
reflecting investment in the Full MVNO infrastructure.
The working capital inflow of £8.9m (2011: £2.6m) reflected some
one‑off items which are not expected to be repeated. Other cash
flows reflect interest paid and the impact of foreign exchange.
Other cash flows in the prior year include an inflow of £6.7m in
relation to thefinalisation of the Tele2 France purchase price.
OUTLOOK
Virgin Mobile France will continue to focus on growing its postpay
base and its revenues in the year ahead. While the business is not
immune to downward pressure on market ARPUs, we will see the
increasing benefit of termination revenues in the coming year,
andare targeting year‑on‑year revenue growth of 5–10%.
We will continue to move customers onto our Full MVNO infrastructure,
which provides us with greater strategic flexibility and improved
margins. We aim to have at least half of our customers on the
newinfrastructure by the end of the year.
These improved margins help to counter downward pressure
onARPUs, and as a result, we expect to maintain earnings
forthecore business at a similar level to 2011–12.
Since the end of last year, Virgin Mobile France has launched
aquad‑play proposition, providing broadband, landline and TV
alongside mobile services. This proposition is in its infancy, but
mayhelp the business to attract and retain higher value customers.
Investment in this venture is expected to be limited in the coming
year, but will be reported separately to provide visibility.
The year ahead will require continued investment in capex,
bothinrelation to the roll‑out of Full MVNO infrastructure and
onquad‑play equipment, which will in turn result in lower levels
ofcash generation than in 2011–12.
PERFORMANCE REVIEW
VIRGIN MOBILE FRANCE