Carphone Warehouse 2014 Annual Report Download - page 8

Carphone Warehouse Group plc
Annual Report 2014
06
STRATEGIC REPORT
Chief Executive Officer’s statement continued
CPW continued
All retailers are affected by the growth of the internet and online
shopping. We have adapted our business accordingly and are a true
multi-channel retailer. The number of visitors to our website last
year was a record, in particular around Christmas. Whilst the majority
of mobile shoppers conduct their research online, our retail channels
continue to remain the key part of the mobile phone purchase journey.
Customers generally want to see and hold the device, ensure they
understand its functionality, transfer their contacts and leave the
store with their phone working.
Our growth last year was the result of strong performances
incountries such as the UK, Ireland and Spain, balanced by challenges
in some of our Mainland European markets. In the Netherlands,
weexperienced aweak consumer market, while in Germany, our
performance was affected by challenges in the wholesale market.
However, we are encouraged by other business ventures in both of
these markets, such as partnership opportunities in the Netherlands
and a growing connections services business in Germany.
The exit process from the French retail market is now substantially
complete, and we are delighted to have been able to transfer the
majority of our employees to third parties as part of this process.
The costs of exit, together with French operating losses, have been
recorded as non-Headline items, along with net costs associated
with the CPW Europe Acquisition and the amortisation of acquisition
intangibles which arose on the transaction. Including these items,
statutory earnings for the year are £m (: £m).
EUROPEAN PARTNERSHIPS
Our European partnerships are helping us to gain scale and grow
value within our existing markets. In the Netherlands we concluded
our partnership with Media-Markt Saturn and are on track to complete
the roll-out of our store-in-store format across their estate bythe
end of September .
In Germany we have made good progress developing our
relationship with the Metro Group and continue to work with
themon a more tailored BB offering.
In Ireland, we completed the roll-out of stores within all 
HarveyNorman stores.
Discussions continue with Media-Markt Saturn and with other
partners across targeted territories and we believe that these
partnerships offer amutually beneficial way of expanding the
salesof connected products and services.
CONNECTED WORLD SERVICES
Connected World Services is our growing BB business, which
aimsto leverage our core expertise and systems to provide a range
of services to third parties, as set out on pages  to  of this
annual report.
Connected World Services was established around  months ago
and has made real progress during the year. In partnership with
Accenture, we have developed our omni-channel platform, honeyBee.
We have been extremely encouraged by the initial response from
manufacturers, networks and retailers across the globe to the wide
range of expertise and services that CPW can provide. We entered
into a preferred-partner agreement to operate Samsung Experience
Stores in Europe, and we have now opened  Samsung stores
inseven countries.
Over time, we see Connected World Services as a means to take
Carphone Warehouse global, in a low-risk way, with limited
demands on capital expenditure.
VIRGIN MOBILE FRANCE
In a very tough French marketplace, Virgin Mobile France delivered
aresilient performance, substantially maintaining its contract
customer base and continuing to migrate this base onto its Full
MVNO platform. This reflects extremely well on the quality and
commitment ofourFrench management team.
It was clear to us, however, that Virgin Mobile France’s future would
be best served by being part of a larger organisation. Subsequent to
the year end, in May, we and our joint venture partner, Virgin Group,
together with management shareholders, announced an exclusivity
agreement for the sale of Virgin Mobile France to Numericable Group.
PROPOSED MERGER
On  May , we announced our proposal to merge with Dixons
Retail plc. The relevant shareholder documents will be made available
to shareholders for the general meeting to be held on  July .
Subject to shareholder approval, this merger is expected tocomplete
in August .
This is a merger of equals, a merger of complementary organisations
and a merger for growth. It anticipates the ways in which our
marketplace is converging and changing, and it positions us to be
able to take advantage of this. Hardware innovation, mobile broadband
developments such as G, content evolution and cloud-based storage
have advanced at a rapid pace and are converging to create a
phenomenon known as the Internet of Things. Having access to the
Internet of Things, including all the services needed to get working and
stay working, creates a powerful and compelling story for our customers.
Coming together will give us greater scale and reach, enabling us
toinvest more efficiently in our systems, employees and customer
proposition, and enhancing our combined relevance for our
suppliers and network operators alike.
We believe that the combined group will be able to achieve integrated
mobile retailing and procurement synergies, together with cost savings,
of at least £m on a recurring basis, which are expected to be delivered
in full in the financial year –.
Lastly, this is a story about growth. We see real opportunities to tap
into a services market that we feel is ripe with potential. Both of our
businesses have growing services platforms and the proposed merger
will enhance opportunities to develop this further for consumers
andbusinesses. We are the leading independent European provider
of connectivity, and Dixons Retail plc is a leading European retailer
of electrical products. Both of us share a commitment to customer
service and impartial advice. Put us together and we create a new
digital retailer for a new digital age.
OUTLOOK
We have worked incredibly hard over the past year, focusing on our
customer proposition, improving our operational excellence, driving
G penetration, forging new partnerships in Europe with leading
retailers and developing our Connected World Services business.
Ibelieve all this provides us with significant potential for growth
over the future years.
We currently face and continue to expect challenges in Mainland
Europe, but our outlook remains positive.
The history of Carphone Warehouse has been anticipating change
and positioning the business to take advantage of this change. The
changes we see in the marketplace offer considerable opportunities to
create value for our employees, our customers, our partners and our
shareholders. From a position of strength, we are planning to take
advantage of these changes through our proposed merger.
Andrew Harrison Chief Executive Officer