Carphone Warehouse 2014 Annual Report Download - page 25

Carphone Warehouse Group plc
Annual Report 2014 23
STRATEGIC REPORT
A tax charge of £m arose in the year (: £m) increasing in line
with pre-tax profitability from wholly owned operations.
Improved pro forma Headline EBIT in CPW, together with the benefits
of consolidating % of CPW Europe from  June , resulted in
anincrease in Group net earnings from £m to £m. This in turn
resulted in an increase in Headline EPS to .p (:.p) for the year.
Since Virgin Mobile France is now treated as a discontinued operation,
the Group’s share of its prior year post-tax profits are shown separately
in the income statement. The Group’s share of its post-tax profits
inthe current year is nil. Profit after tax for continuing operations
istherefore £m (: £m) and EPS on the same basis
is.p(: .p).
NON-HEADLINE ITEMS
2014 2013
£m £m
Headline PAT 102 55
French operations (in process of closure) (29) (45)
CPW Europe Acquisition (12) —
CPW Europe Reorganisation —(5)
Amortisation of acquisition intangibles (13) (1)
Statutory PAT 48 4
Statutory EPS (basic) 8.6p 0.9p
Non-Headline items in the current year comprise losses associated
with our French retail business during our exit from that market,
together with the results of France for comparative periods, items
associated with the CPW Europe Acquisition, and the amortisation
of acquisition intangibles.
The exit process from the French retail market is now substantially
complete. The large majority of our own store leases have been
transferred to third parties and all of our franchise contracts have
been terminated. We have made every effort to minimise redundancies
and have been able to transfer the majority of our employees
tothird parties.
The non-Headline results of France include the Group’s post-tax share
of operating losses, asset write-downs and provisions for closure
costs, recorded prior to the CPW Europe Acquisition, totalling £m.
Since the CPW Europe Acquisition, the French business incurred
further EBIT losses of £m.
Non-Headline items also include net costs of £m in relation to the
CPWEurope Acquisition, against which a tax credit of £m has been
recognised. These costs represent banking and professional fees onthe
transaction and cash and non-cash charges associated with employee
incentive schemes. This was partially offset by gains on the revaluation
of CPW Europe and on the disposal of the consideration shares
issued to Best Buy in relation to the CPW Europe Acquisition.
The Group's results also include an amortisation charge of £m,
against which a tax credit of £m has been recognised, on acquisition
intangibles arising on the CPW Europe Acquisition.
Statutory profit after tax, including non-Headline items, was £m
(: £m) and EPS on the same basis increased from .p to .p.
MOVEMENTS ON NET FUNDS (DEBT)*
2014 2013
£m £m
Operating free cash flow 73 236
CPW Europe Acquisition (361) —
Net proceeds on shares 126 —
Distributions to shareholders (30) (56)
Other (54) (15)
Movement in net (debt) funds (246) 165
Opening net (debt) funds 238 73
Closing net (debt) funds (8) 238
* This summary aggregates the net funds (debt) of the Group and CPW Europe
at the start of each year, to enable a complete understanding of cash flows.
The operating free cash inflow was £m (: £m) for the
reasons described in the CPW section on page .
Cash outflows relating to the CPW Europe Acquisition were £m,
comprising net upfront cash consideration of £m, cash costs of
incentive schemes of £m, and banking and professional fees of £m.
Net proceeds on shares comprise £m raised through the placing
in April  of m shares at a price of £. per share and £m
received in July  on the disposal of the consideration shares
issued to Best Buy in respect of the CPW Europe Acquisition.
Distributions to shareholders of £m (: £m) represent
ordinary dividends, together with £m in the prior year returned
toshareholders through the deferred capital option of the B/C Share
Scheme following the disposal of Best Buy Mobile in January .
Other cash flows include operating losses and other cash exit costs
of £m in relation to our French business. Further cash costs in
the region of £m, which have been provided in full at March ,
areanticipated in the coming year, principally in relation to final
redundancy payments and lease exit costs. Within our previous
expectations ofnet cash exit costs, we had anticipated the disposal
ofour French insurance business. However, it has become apparent
that our expertise in this area represents an opportunity to develop a
new Connected World Services business in France, focusing initially
on insurance, as we did inBelgium. Since the year end, we have put
in place a team todevelop this business, which has already secured
two third party clients and is actively engaged in tenders for other
business. While the value of the run-off base, in the absence of the
retail infrastructure to support it, is clearly uncertain, we will aim
touseitto grow the Connected World Services business as part
ofcontinuing operations goingforward.
Other cash flows also include proceeds on the disposal of CPW
Europe’s fixed line operations in Switzerland and the disposal of
theGroup’s remaining freehold in Acton, both of which completed
inApril, offset by working capital movements in France, tax and
interestpayments, and the purchase of the Group’s own shares.
Other cash flows in the prior period reflect exceptional cash costs
associated with Best Buy UK, offset by EBITDA from the French
business, and other cash flows reported by the wholly owned Group
in that period.