Final Results
Carphone Warehouse Group PLC
03 June 2003
Tuesday 3 June 2003
Embargoed until 0700 hours
The Carphone Warehouse Group PLC
Preliminary Results for the 52 weeks to 29 March 2003
52 weeks ended 29 52 weeks ended 30 % growth
March 2003 March 2002
£m £m
Turnover 1,841.5 1,152.7 59.8%
Turnover (ex-Wholesale) 1,034.9 809.7 27.8%
EBITDA* 90.0 72.8 23.6%
Profit before tax* 57.0 46.8 21.8%
Headline earnings per share* 5.25p 4.41p 19.0%
Standard earnings per share 2.60p (3.39)p -
Dividend per share 1.0p - -
*Stated before exceptional items (as reconciled below) and amortisation of
goodwill
Financial Headlines
• 11.6% growth in like-for-like retail revenues and 4.8% growth in
like-for-like gross profit
• 50% of group contribution from recurring revenues
• 49% growth in non-UK contribution
• 19.0% growth in headline earnings per share
• Free cash flow of £50.8m
• 20.7% growth in connections to 4.36m
• 17.9% growth in subscription connections in Q4
• Maiden dividend of 1.0p per share proposed
Operational Headlines
• Acquisition and integration of Opal
• Successful launch of talktalk. 62,000 applications to date
• Acquisition of Hutchison Telecommunications GmbH, German service provider,
to transform our German operations
• Agreement with Sainsbury's to provide fixed line and mobile services to
their customers
• David Ross to become Deputy Chairman
Hans Roger Snook, Chairman, said:
'These are strong results, fully meeting our expectations with good growth
across the group, further improvement in the quality of our earnings and a 19%
increase in headline earnings per share.
'We have also taken further key steps in the progressive development of The
Carphone Warehouse into a communications group, serving individuals and
companies, to meet their communications needs, both mobile and fixed line. This
has significantly widened and deepened our platform for sustained profitable
growth.
'The acquisition of Opal Telecom is already proving its worth. Its business
telecoms operation continues to expand rapidly, and it has enabled our
successful entry into residential fixed line call services with the launch of
talktalk. We see considerable opportunity in this market.
'Today's announcement of the agreed acquisition of the Hutchinson
Telecommunications service provider business in Germany is strategically
important. It extends our model of recurring revenues, complements perfectly
our retail operation and gives us a platform for continued and reliable
profitable growth in Europe's biggest mobile market. It is also immediately
earnings enhancing.
'The outlook is for continued strong growth. Coupled with the group's strong
cash flows, this leads us to recommend The Carphone Warehouse Group's first
dividend and to commit to a policy of dividend growth in line with earnings
growth.'
Charles Dunstone, CEO, said:
'The group has made significant progress over the last twelve months, both in
the execution of our strategy and in the financial results we have achieved. We
continue to attract high value customers as a result of the quality and scale of
our retail proposition. The success of this approach is evidenced by the
continued growth in subscription connections, which we have grown at a compound
annual rate of over 20% over the past three years.
'This year we have augmented our strategy with a move into fixed line services.
The acquisition of Opal Telecom, and the subsequent launch of talktalk, our
residential fixed line service, present us with a substantial additional
opportunity to generate profitable growth. We are actively reviewing the
potential of other products and services that we believe are relevant and
appropriate to our mobile offer and will allow us to maximise the return from
our retail asset base.
'We anticipate that the successful execution of this strategy will deliver not
only continued growth but also ongoing improvement in the quality of our
earnings. Last year half of the Group's contribution was generated from
recurring revenue streams and we expect this proportion to increase in the
current year.
'In a separate release today we are announcing the acquisition (subject to
completion) of Hutchison Telecommunications GmbH, a German service provider
business, for a net cash consideration of £32.4m. Hutchison operates at the
quality end of the market with over 500,000 subscription customers. We believe
the combination of our German retail distribution network with HTG's recurring
revenue streams and customer service proposition creates a platform for future
profitable growth in that market.
'We are encouraged by the outlook for the coming year. We expect to see overall
retail capacity continue to contract further throughout Europe, with the
networks developing a more segmented approach to their distribution channels.
However, our continuing ability to deliver high volumes of high quality
customers means that we are benefiting from more attractive commercial terms
than many of our competitors, allowing us to price competitively while
maintaining our margins.
'Additionally the launch of MVNOs and new 3G networks is increasing the
competitive tension between our suppliers. We are now seeing a concerted effort
by both the incumbent and new networks to drive the adoption of valuable data
services. This year we expect to see picture messaging services pick up in
earnest now that network interoperability is in place. We also anticipate a
growing interest in the mobile gaming market and an ongoing convergence of
mobile phone and PDA products as mobile e-mail becomes an increasingly important
application. A strong product pipeline continues to support these new
applications.
'We see a substantial market opportunity for talktalk. Recent changes in the
regulatory environment make it much easier for residential customers to switch
from BT to an alternative provider and we intend to pursue this opportunity
vigorously. The efficiency of the Opal network allows us to be highly
competitive while still generating attractive margins. Our cost of customer
acquisition is low given our existing retail presence, and the residential
business also incurs very little marginal capital expenditure: the Opal network
is busy during weekdays serving business traffic, but idle at evenings and
weekends when the majority of residential calls are made.
'Our continued success is thanks to the dedication and expertise of all our
employees. Our business is also indebted to our strong management team and our
supportive suppliers and business partners. Over the next year, we intend to
build on our position as the leading independent retailer of mobile phones and
services in Europe and deliver further profitable growth through our existing
business and new opportunities.'
Summary of Results
Group turnover for the period was £1,841.5m compared with £1,152.7m for the
prior year. We achieved growth in turnover across all our businesses. Excluding
our Wholesale business, which grew turnover from £343.0m to £806.6m, and the
acquisition of Opal Telecom, underlying growth in turnover was 18.4%. Pre-tax
profits for the group, before exceptional items (as defined above) and goodwill
amortisation, were £57.0m, an increase of 21.8% on the year to March 2002.
Earnings per share on the same basis grew by 19.0% to 5.25p. We generated free
cash flow, excluding the costs of new stores and before acquisitions, of £50.8m,
against £0.5m last year.
Two exceptional items arose during the year. We generated an exceptional profit
of £13.2m on the sale for cash of the freehold on our London offices for £36.6m.
We also incurred a further non-cash writedown of £15.1m to the carrying value of
the investments in our wireless investment portfolio.
Distribution Division
2003 2002
£m £m
Turnover 876.1 742.4
Retail 738.3 623.2
Online 41.9 36.7
Insurance 66.8 60.5
Ongoing 29.1 22.0
Contribution 121.7 109.1
Retail 67.2 60.2
Online 3.4 5.1
Insurance 22.0 21.8
Ongoing 29.1 22.0
Support costs (52.4) (47.7)
EBITDA 69.3 61.4
Depreciation (25.3) (22.4)
EBIT 44.0 39.0
EBIT % 5.0% 5.3%
Before exceptional items and amortisation of goodwill
As highlighted in March, we have altered the presentation of our results this
year to better reflect the source of revenues and to allocate support costs and
depreciation on a divisional basis. There has been no change to individual
business stream revenue or contribution numbers as a result. Distribution now
comprises Retail, Online, Insurance and Ongoing business streams.
The Distribution division registered another year of strong performance. The
division generated revenues of £876.1m and EBIT (after full allocation of
support costs) of £44.0m, representing growth of 18.0% and 12.8% respectively on
the prior year.
Retail and Online
Including SIM-free handset sales, the group achieved 4.36m connections during
the year, up by 20.7% on the previous year. Within these figures, 0.26m
connections were made through our Online channel (inbound call centre,
interactive TV and website). We continued to achieve good growth in new
subscription connections, which are the lifeblood of our recurring revenue
businesses. Total subscription connections grew by 8.1% to 1.91m. Although the
first half was relatively slow for subscription growth, this accelerated in the
second half and growth in the fourth quarter was 17.9%.
In the first half of the year the network operators showed a renewed appetite
for pre-pay customers and some subsidy returned to that segment of the market.
As a result, pre-pay connection growth was very strong at 22.3%, although this
was flattered to some extent by a very weak comparative period. The first full
year of our SIM-free offer, where we sell a handset without a network
connection, was highly successful, with 0.48m handsets sold without a SIM card -
more than double the figure in 2002. As a result of these relative growth rates
our subscription mix reduced from 48.9% to 43.7% but this was offset by the
overall higher level of connections growth than we had anticipated.
We continued to expand and upgrade our store portfolio during the year. By March
2003 we were trading out of 1,140 stores (2002: 1,104 stores), having opened 90
stores and closed 54 underperforming stores during the year. Total average
selling space increased by 4.0% from 60,800 sqm to 63,233 sqm.
Total retail revenues grew by 18.5%. Like-for-like, revenues grew by 11.6% and
gross profit by 4.8%. This was achieved through a significant improvement in
average connections per store from 3,219 to 3,688, and a strong performance on
high value accessories such as Bluetooth headsets and camera attachments.
Revenues per connection on subscription and pre-pay rose by 4.1% and 6.4%
respectively.
Retail gross profit increased by 10.9% to £234.5m but the gross margin
deteriorated by 210 basis points to 31.8%. Average gross profit per
subscription connection fell 3.1% to £96.5 (2002: £99.6), as a result of the
change in terms of trade with certain networks near the start of the year,
whereby we exchanged an element of upfront commission for a greater share of
ongoing ARPU. This is reflected in the strong performance of Ongoing revenue
described below. Average gross profit per pre-pay connection fell 2.0% to £28.5
(2002: £29.1).
Contribution from the retail business grew by 11.7% to £67.2m, with contribution
margin decreasing from 9.7% to 9.1%. The leverage to fixed costs, achieved by
higher sales volumes, was offset by the lower gross margin and a higher cost of
customer handset repairs than in previous years.
In the UK, our store portfolio increased from 461 stores to 475 stores. Within
this net movement, we opened 42 stores and closed 28, through a series of site
upgrades and relocations. In the summer we opened Europe's largest mobile phone
store in London's Oxford Street and at Christmas a further major store in the
centre of Leeds. We expect to open a few additional 'experience' stores in major
city centres in the coming year. The bulk of our new openings in the UK will be
on retail parks, where we have been very pleased with the level of store
profitability and the rate of payback on investment.
Our retail operations outside the UK have clearly benefited this year from the
restructuring exercise we undertook in 2002. The adoption of group-wide best
practices for back office processes and retail proposition has delivered a
strong pick-up in our business across much of continental Europe, aided latterly
by a recovering market. We have continued to build on the good work started in
the previous year, particularly in the area of shared service processing.
Our business in France continued to perform well despite a weak market. We
opened 15 new stores and 5 franchise outlets, and closed 2 stores, taking the
total in France to 169, and we expect to accelerate the opening programme in the
new year both through directly operated stores and franchise outlets. We remain
under-represented in the French market relative to its population and market
size and we believe there is a significant opportunity to gain market share.
In Spain, we achieved very strong growth supported by a recovering market and
the aggressive pursuit of market share by our network partners. Spain is a key
growth market for the group and will be the focus of a significant store opening
programme in the coming year.
Both Sweden and The Netherlands performed very well after disappointing results
in the year to March 2002, thanks to improved management focus and robust
competition between network operators. Our businesses in some of the smaller
markets continued to register pleasing levels of profitability, and gained
market share over the year. We sold our three store business in Poland just
before the year end.
As previously expected, Germany continued to be loss-making but at a
significantly reduced level to the prior year. The acquisition of Hutchison
Telecommunications announced today represents an important step-change in both
the scale and quality of our German business and the combined operations will be
profitable in the current year.
Our Online business, covering our direct sales team, digital TV and website
operations, continues to make progress and achieved 0.26m connections during the
year. Revenues grew by 14.4% to £41.9m. We continue to explore opportunities to
replicate the success of our UK direct channel in our other markets.
Insurance
Our Insurance business enjoyed another year of good performance. We continue to
succeed in providing excellent customer service with over 90% of claims settled.
At the same time the insurance operations contribute significant profits to
the group.
During the year our Insurance customer base increased by 12.9% to 1.06m. The
rapid growth of our non-UK operations has been very satisfying, with the base
growing by 18.9% and now representing 34% of the total. Insurance revenues grew
by 10.5% to £66.8m. Contribution from Insurance rose by only 0.9% to £22.0m,
with growth in profitability held back by a higher average claim value. Claims
numbers have, however, shown an encouraging downward trend, most notably since
the launch of an industry-wide initiative in the UK to clamp down on mobile
phone crime.
In the coming year we see additional opportunities arising for this part of the
business, particularly in the leverage of our specialist underwriting and
customer management skills to develop insurance services for third parties in
the mobile sector.
Ongoing
Ongoing represents the share in customer call spend (or ARPU) we receive as a
result of connecting customers to certain networks.
Ongoing revenues grew by 32.1% to £29.1m in the year to March 2003. This
exceptional level of growth reflects the change in terms of trade with certain
networks last year, under which we now receive a greater share of ongoing
customer call spend in exchange for a reduced upfront commission. We anticipate
that growth in Ongoing revenues will return to steadier levels in the coming
year.
Wholesale Division
2003 2002
£m £m
Turnover 806.6 343.0
Contribution 7.5 6.0
Support costs (2.4) (1.7)
EBITDA 5.1 4.3
Depreciation (1.0) (0.8)
EBIT 4.1 3.5
EBIT % 0.5% 1.0%
Our Wholesale division experienced very strong growth, with turnover more than
doubling. However, margins remain very thin in this business and the volume of
trading is volatile. Wholesale continues to benefit the retail channel through
its ability to source inventory at best prices, and to sell excess stock back
into the channel when the need arises.
Since the year end we have significantly scaled back our European wholesale
trading activities amidst uncertainty surrounding the implications of the recent
Budget announcement on the recovery of VAT on mobile phone trading. This
uncertainty undermines the economics of what will always be a relatively low
margin activity. The announcement provides for a consultation period on the
Statement of Practice and the implications of joint and several liability. We
have therefore made a submission to HM Customs & Excise setting out our
interpretation of best practice and seeking further clarity. Until such time as
we receive a response to our submission, we will continue to restrict our
wholesale trading activities.
We have also conducted a comprehensive review of all our historical wholesale
activities and procedures. As a result of this review a potential liability has
been identified relating to inadequate VAT documentation in one of our overseas
subsidiaries from trading in 1999/2000. We believe that this could give rise to
a liability of £2.4m and have therefore provided for this amount within the
result of the Wholesale division in this financial year.
The other activities included within Wholesale, our voucher distribution
business and the wholesale shipment of trade-in handsets, continue as normal.
Telecoms Services
2003 2002
£m £m
Turnover 158.8 67.3
Mobile 82.7 67.3
Fixed 76.1 -
Contribution 26.0 13.9
Mobile 18.0 13.9
Fixed 8.0 -
Support costs (10.4) (6.7)
EBITDA 15.6 7.2
Depreciation (5.7) (3.2)
EBIT 9.9 4.0
EBIT % 6.2% 5.9%
Before exceptional items and amortisation of goodwill
The group's Telecoms Services division is split into two businesses, Mobile and
Fixed. The Mobile business encompasses our facilities management operations -
managing customers on behalf of networks - and our own customers including our
MVNO, Fresh. The Fixed business comprises Opal Telecom's core business fixed
line service and the new residential service, talktalk. Turnover for the
division grew 135.7% year-on-year, and EBIT grew 150.3%, both boosted by the
acquisition of Opal in November 2002.
Mobile
The management of customers beyond the point of sale is an important element of
our strategy to align our interests more closely with our network partners and
generate more value from our customers throughout their mobile lifetimes. We
continued to make progress in Mobile Telecoms Services during the year. Turnover
grew 22.8% to £82.7m, and contribution grew by 29.7% to £18.0m. The key drivers
of this business are the customer bases we manage, the ARPU on those bases, and
the efficiency with which we provide our management services.
Customer numbers in our FM operations increased 15.1% to 994,000. This was
achieved through the organic growth of our Vodafone and O2 customer bases in the
UK, which increased by 49.6% to 394,000. We continue to manage 600,000 customers
on behalf of Orange and SFR in France.
Average ARPU on our UK customer base increased by 20% during the year, thus
demonstrating our ability to create meaningful value for the networks.
Meanwhile we continue to improve our bad debt management, and are seeking ways
to bring more efficiency to our call centre operations.
We continue to pursue other opportunities to manage customers on behalf of third
parties in the UK and France, while also assessing potential means of developing
a similar model in some of our other major markets. The acquisition of HTG
clearly achieves this aim in the German market. Just after the year end we were
delighted to sign an agreement with Sainsbury's to provide mobile and fixed line
services for the supermarket chain's 11 million UK customers.
Our own MVNO, Fresh, had a satisfactory year. The networks demonstrated a
renewed interest in the pre-pay market, to the extent that pricing became very
competitive and our core Fresh product was a relatively less attractive customer
proposition. Nevertheless our Fresh customer base grew from 92,000 to 120,000.
Our strategy for Fresh is to avoid heavily subsidising the product, but rather
to take advantage of profitable niche opportunities in the market as and when
they arise. A further example of this strategy was the launch, just after the
year end, of a new Fresh contract product aimed at the first-time subscription
customer seeking a low monthly line rental.
Within our own customer base we have been managing a number of service provision
customers on behalf of SFR, a base we acquired as part of the acquisition of CMC
in May 2001. Just prior to the year end, this base was transferred back to SFR
as part of an arrangement made at the time of the acquisition.
Fixed
We have been delighted with the progress made by Opal since it became part of
the group in November 2002. It has continued to generate the impressive rates of
growth it had demonstrated prior to the acquisition, with significant new
business wins and growth in the number of minutes switched through the Opal
network.
New corporate customers since November include Travis Perkins, National Express
and Securicor. In March 2003, Opal's network switched over 320 million minutes -
an increase of 94% on March 2002. Revenues in Fixed were £76.1m, and
contribution was £8.0m.
A key strategic objective for acquiring Opal was to launch our own residential
fixed line service. Talktalk was launched on 3 February 2003, and as at 31 May
2003 we had 50,000 active customers and a further 12,000 pending applications to
join the service.
We are optimistic about the prospects for talktalk in the coming year, which we
will sell not only through our own stores but also through our recent agreement
with Sainsbury's, and which we will support with a major marketing campaign
commencing today. We anticipate reaching further affiliate distribution
agreements during the year.
Exceptional items
As previously announced, the following exceptional items arose in the year to 29
March 2003:
Exceptional profit on sale and leaseback of the group's London offices. The
group sold the freehold on its London offices during the year for a cash
consideration of £36.6m. The profit arising on this transaction was £13.2m.
Non-cash write off to fixed asset investments. At the year end a further £15.1m
was written off the group's share of Wireless Frontiers, an independently
managed wireless technology fund. The writedown reflects the decline in the
value of the underlying investments within the fund.
Post balance sheet event
We are pleased to announce today our intention to acquire Hutchison
Telecommunications GmbH, a mobile service provider operating in the German
market, for a net cash consideration of £32.4m. The completion of the
acquisition is subject to regulatory approval in mainland Europe. A separate
announcement issued this morning gives further details.
Interest and tax
Net interest of £1.0m was payable during the year, compared to interest
receivable of £0.3m in the prior period. This movement reflects the financing of
the Opal acquisition and the additional working capital demands made by the
increased activity in our Wholesale operations.
The effective tax rate before amortisation and exceptionals was 22%, compared to
22% in the prior period. The rate continued to benefit from the utilisation of
tax losses incurred in earlier years and the effect of profit within low tax
rate jurisdictions.
Goodwill amortisation
Goodwill of £102.1m arose during the period, of which £98.1m related to the Opal
acquisition in November 2002. The total goodwill amortisation charge for the
year to March 2003 was £20.6m, compared to £14.7m in the year to March 2002.
Included within this charge was an exceptional goodwill write-off of £3m
relating to the buy-out of minority interests in the group's wireless investment
fund.
Earnings per share (EPS)
Headline EPS, before amortisation of goodwill and exceptional items, was 5.25p,
compared with 4.41p in the previous period. Basic EPS before adjustments was
2.60p (2002: loss per share of 3.39p).
Balance sheet, cash flow and dividend
At 29th March 2003, the group had net cash and short term investments of £29.1m,
compared to £53.0m at the end of the previous period. During the year the group
generated cash flow from operations of £77.7m (2002: £29.4m), and total free
cash flow (excluding the capital cost of new stores and before acquisitions) of
£50.8m (2002: £0.5m).
The group is heavily focused on cash generation and working capital management,
as reflected in this strong performance. As a result we are delighted to be
proposing our maiden dividend for the March 2003 year of 1.0p per share, and
committing to a policy of increasing dividends in line with earnings growth.
This decision reflects confidence in our ability to generate sufficient funds
both to return cash to shareholders and to continue to invest in the future
growth of the group.
The ex-dividend date will be 2 July 2003 and the record date will be 4 July
2003. The intended payment date will be in the week following the annual
general meeting on 31 July 2003.
Board changes
David Ross, co-founder of the group and currently Chief Operating Officer, is to
be appointed to the new role of Deputy Chairman with effect from the AGM on 31
July 2003. He will pass over his direct responsibilities for mainland European
operations to the existing management team in order to be more closely involved
in the strategic development of the group.
We are pleased to announce that Martin Dawes has been appointed as a
Non-Executive Director with immediate effect. Martin has been a major figure
within the mobile telecoms industry since 1985, when he launched Martin Dawes
Telecommunications as a seller of mobile products and services. He subsequently
sold his UK service provision business, with over 1 million subscribers, to BT
Cellnet in 1999. Most recently Martin was Non-Executive Deputy Chairman of Opal
Telecom PLC until its acquisition by The Carphone Warehouse in November 2002.
Des Wilson, who will shortly have new responsibilities in the public sector,
will retire as a Non-Executive Director on 31 August 2003 after more than three
years' service on the Board.
Current trading
The group has continued to achieve good growth in connections in the first nine
weeks of the current financial year, with subscription connections continuing to
show the strong trend recorded in the fourth quarter to March 2003. As at 31
May 2003, talktalk had 50,000 active customers and 12,000 additional pending
applications.
Analysts' presentation
There will be a presentation for investors and analysts at 9.30am this morning
at the offices of Bloomberg, 39-45 Finsbury Square, London EC2A 1PQ. The
presentation slides will be available on our website, www.cpwplc.com.
Next trading update
The Group will give a full trading update for the first quarter of the current
financial year with the AGM statement on 31 July 2003.
For Further Information
The Carphone Warehouse Group PLC
Charles Dunstone
Roger Taylor 07715 170 090
Vanessa Tipple 07947 000 021
For analyst and institutional enquiries
Roger Taylor
Peregrine Riviere 07909 907 193
Citigate Dewe Rogerson 07973 611 888
Anthony Carlisle 020 7638 9571
Consolidated profit and loss account for the 52 weeks ended 29 March 2003
Before Exceptional After
exceptional items and exceptional
items and amortisation items and
amortisation of of goodwill amortisation
goodwill of goodwill
52 weeks ended 52 weeks 52 weeks 52 weeks
ended ended ended
29 March 29 March 29 March 2003 30 March
2002
2003 2003
£000 £000 £000 £000
Turnover
Existing operations 1,765,650 1,765,650 1,152,717
Acquisitions 75,875 75,875 -
1,841,525 1,841,525 1,152,717
Cost of sales (1,453,518) (1,453,518) (834,413)
Gross profit 388,007 388,007 318,304
Operating expenses (excluding amortisation (298,017) (298,017) (270,363)
and depreciation)
EBITDA 89,990 89,990 47,941
Depreciation (31,977) (31,977) (26,335)
Amortisation of goodwill (20,585) (20,585) (14,736)
Operating profit 58,013 37,428 6,870
Existing operations 52,114 33,605 6,870
Acquisitions 5,899 3,823 -
Profit (loss) on disposal of fixed assets 13,199 13,199 (6,336)
Amounts written off fixed asset (15,145) (15,145) (18,681)
investments
Cost of fundamental reorganisation - (5,210)
Profit (loss) before interest and taxation 58,013 35,482 (23,357)
Net interest (payable) receivable (995) (995) 342
Profit (loss) on ordinary activities 57,018 34,487 (23,015)
before taxation
Tax on profit on ordinary activities (12,418) (12,418) (6,162)
Profit (loss) on ordinary activities after 44,600 22,069 (29,177)
taxation
Equity minority interests - - 915
Profit (loss) for the financial period 44,600 22,069 (28,262)
Equity dividends (8,729) (8,729) -
Retained profit (loss) for the financial
period
35,871 13,340 (28,262)
Earnings (loss) per share
Basic 5.25p 2.60p (3.39)p
Diluted 5.23p 2.59p (3.39)p
Headline earnings per share
Basic 5.25p 4.41p
Diluted 5.23p 4.39p
Consolidated statement of total recognised gains and losses for the 52 weeks
ended 29 March 2003
52 weeks ended 52 weeks ended
29 March 2003 30 March 2002
£000 £000
Retained profit (loss) for the financial period 22,069 (28,262)
Currency translation 3,021 (302)
Total recognised gains and losses relating to the period 25,090 (28,564)
Prior period adjustments - (3,941)
Total gains and losses recognised since last financial statements 25,090 (32,505)
Consolidated balance sheet as at 29 March 2003
29 March 2003 30 March 2002
£000 £000
Fixed assets
Intangible assets
Goodwill 367,547 274,798
Tangible assets 133,040 111,654
Investments 15,021 30,130
Total fixed assets 515,608 416,582
Current assets
Stock 56,351 50,088
Debtors due within one year 176,981 139,238
Short-term investments 26,276 67,637
Cash at bank and in hand 46,977 20,684
Total current assets 306,585 277,647
Creditors: Amounts falling due within one year (275,311) (199,669)
Net current assets 31,274 77,978
Total assets less current liabilities 546,882 494,560
Creditors: Amounts falling due after more than one year (49,383) (39,050)
Provisions for liabilities and charges (37,956) (47,483)
Net assets 459,543 408,027
Capital and reserves
Called-up share capital 873 835
Share premium 395,476 359,305
Capital redemption reserve 30 30
Profit and loss account 63,164 47,085
Equity shareholders' funds 459,543 407,255
Equity minority interests - 772
Total capital employed 459,543 408,027
Consolidated cash flow statement for the 52 weeks ended 29 March 2003
52 weeks ended 52 weeks ended
29 March 2003 30 March 2002
£000 £000
Net cash inflow from operating activities 77,678 29,352
Net cash (outflow) inflow from returns on investments and (2,570) 342
servicing of finance
Net cash inflow (outflow) from taxation 1,059 (9,398)
Net cash inflow (outflow) from capital expenditure and financial 18,244 (48,742)
investment
Net cash outflow from acquisitions and disposals (37,892) (42,846)
Net cash inflow (outflow) before financing 56,519 (71,292)
Net cash (outflow) inflow from financing (42,623) 34,669
Increase (decrease) in cash in the period 13,896 (36,623)
Reconciliation of net cash inflow from operating activities to operating profit
52 weeks ended 52 weeks ended
29 March 2003 30 March 2002
£000 £000
Operating profit excluding exceptional items 37,428 31,733
Operating exceptional items - (24,863)
Operating profit 37,428 6,870
Depreciation of tangible fixed assets 31,977 26,335
Amortisation of goodwill 20,585 14,736
EBITDA 89,990 47,941
Profit on disposal of fixed assets (912) (646)
(Decrease) increase in provisions (12,229) 9,533
(Increase) decrease in stock (4,024) 2,700
(Increase) decrease in debtors (1,803) 26,422
Increase (decrease) in creditors 6,656 (56,598)
Net cash inflow from operating activities 77,678 29,352
Notes to the financial statements
For the 52 weeks ended 29 March 2003
Accounting policies
The financial statements have been prepared in accordance with applicable
accounting standards under the historical cost convention. The principal
accounting policies have been applied consistently throughout the period and the
preceding period.
Segmental analysis
Divisional results are analysed as follows:
2003 2002
Turnover Profit Net assets Turnover Profit Net assets
before tax (loss)
before tax
£000 £000 £000 £000 £000 £000
Distribution 876,144 44,031 441,108 742,372 39,024 379,152
Wholesale 806,624 4,096 - 343,003 3,495 -
Telecoms Services 158,757 9,886 18,435 67,342 3,950 28,875
1,841,525 58,013 459,543 1,152,717 46,469 408,027
Amortisation (20,585) (14,736)
Operating exceptional - (24,863)
items
37,428 6,870
Non-operating exceptional (1,946) (30,227)
items
Net interest (payable) (995) 342
receivable
Profit (loss) before tax 34,487 (23,015)
Results by geographical location are analysed by origin as follows:
2003 2002
Turnover Profit Net assets Turnover Profit Net assets
before tax (loss)
before tax
£000 £000 £000 £000 £000 £000
United Kingdom 1,368,244 40,537 371,668 777,872 35,372 329,639
Rest of Europe 473,281 17,476 87,875 374,845 11,097 78,388
1,841,525 58,013 459,543 1,152,717 46,469 408,027
Amortisation (20,585) (14,736)
Operating exceptional - (24,863)
items
37,428 6,870
Non-operating exceptional (1,946) (30,227)
items
Net interest (payable) (995) 342
receivable
Profit (loss) before tax 34,487 (23,015)
Acquisitions during the period generated the following turnover and profit
before tax by segment.
Turnover Profit before Net
tax liabilities
£000 £000 £000
Telecoms Services 75,875 3,540 (8,915)
United Kingdom 75,875 3,540 (8,915)
Tax on profit on ordinary activities
The tax charge for the period comprises:
2003 2002
£000 £000
UK corporation tax 4,623 6,930
Deferred tax 3,411 (1,008)
Overseas tax 4,011 2,778
Adjustments in respect of prior periods - UK (56) (2,538)
- 429 -
Overseas
12,418 6,162
Earnings per share
The calculations of earnings per share are based on the following profits or
losses and numbers of shares:
Basic and diluted
2003 2002
£000 £000
Profit (loss) for the financial period 22,069 (28,262)
Amortisation of goodwill 20,585 14,736
Operating exceptional items (net of tax and minority - 21,573
interests)
Non-operating exceptional items (net of tax and minority 1,946 28,719
interests)
Earnings before amortisation of goodwill and exceptional 44,600 36,766
items
2003 2002
Number of Number of
shares shares
000's 000's
Weighted average number of shares:
For basic earnings per share 850,273 833,382
Dilutive effect of share options 2,166 3,759
For diluted earnings per share 852,439 837,141
Basic pence per share Diluted pence per share
2003 2002 2003 2002
Earnings (loss) per share 2.60 (3.39) 2.59 (3.39)
Headline earnings per share 5.25 4.41 5.23 4.39
Headline earnings per share calculations are provided since the Directors
consider that earnings before amortisation of goodwill and exceptional items
gives a better indication of performance than standard earnings per share.
Exceptional items
Exceptional items include the following operating exceptional items,
non-operating exceptional items and amounts written off investments.
2003 2002
£000 £000
Costs of operational reorganisation
Store closures (a) - (11,956)
Business closures and reorganisation (a) - (12,907)
Exceptional operating items - (24,863)
Profit (loss) on disposal of fixed assets (b) 13,199 (6,336)
Amounts written off fixed asset investments (c) (15,145) (18,681)
Cost of fundamental reorganisation (d) - (5,210)
Total exceptional items (1,946) (55,090)
a) Costs of operational reorganisation
During the period ended 30 March 2002, the Group incurred costs in reorganising
its operations across Europe. This reorganisation comprised:
- the withdrawal from certain non-key territories;
- the closure of a significant number of under-performing retail outlets;
- the reorganisation of back office operations across the Group.
b) Profit (loss) on disposal of fixed assets
In August 2002 the Group completed the sale and leaseback of its freehold
offices in London for a consideration of £36.6m, generating a net profit on
disposal of £13.2m.
During the period ended 30 March 2002 fixed assets with a net book value of
£6.3m were written down principally as a result of the withdrawal from non-key
territories and store closures noted in (a).
c) Amounts written off fixed asset investments
During the period ended 29 March 2003 a further £15.1m (2002 - £18.7m) has been
written off the Group's holding in Wireless Frontiers, an independently managed
wireless technology fund, to reflect the diminution in the value of the fund at
29 March 2003.
d) Cost of fundamental reorganisation
A charge of £5.2m, reflecting the write-down of fixed assets and other
restructuring costs, was made during the period ended 30 March 2002, principally
in respect of the fundamental reorganisation of the Group's Data Services
division, involving a significant downscaling of wireless internet portal
activities.
Reserves
Profit and loss Share premium Capital Total
account redemption
reserve
£000 £000 £000 £000
At 30 March 2002 47,085 359,305 30 406,420
Retained profit for the financial period 13,340 - - 13,340
Currency translation 3,021 - - 3,021
Issue of share capital (282) 36,171 - 35,889
At 29 March 2003 63,164 395,476 30 458,670
Reconciliation of headline financial information to statutory information
Headline Amortisation of Exceptional Statutory
goodwill items (see
£000 above) £000
£000 £000
2003
EBITDA 89,990 - - 89,990
Profit before tax 57,018 (20,585) (1,946) 34,487
2002
EBITDA 72,804 - (24,863) 47,941
Profit before tax 46,811 (14,736) (55,090) (23,015)
Reconciliation of movements in shareholders' funds
2003 2002
£000 £000
Profit (loss) for the financial period 22,069 (28,262)
Dividends (8,729) -
Currency translation 3,021 (302)
Issue of share capital 35,927 3,002
Net movement in shareholders' funds 52,288 (25,562)
Opening shareholders' funds 407,255 432,817
Closing shareholders' funds 459,543 407,255
Director's Disclosure
Martin Dawes has not held any directorships in any public quoted company in the
previous five years. He was a director of Breathe.com Limited when it went into
creditors' voluntary liquidation in May 2002 and a director of Martin Dawes
Technologies Limited when it entered a company voluntary arrangement in May
2002. He was also a director of Euro Cellular (France) SARL within twelve
months of that company going into insolvent liquidation in December 1990. There
is no other information required by paragraphs 6F.2(b) to (g) of The Listing
Rules relating to Martin Dawes.
Preliminary Financial Information
This financial information is prepared on the basis of accounting policies set
out in the Group's statutory accounts for the 52 weeks ended 29 March 2003.
The Directors of The Carphone Warehouse Group PLC are responsible, in accordance
with the Listing Rules of the Financial Services Authority and applicable United
Kingdom accounting standards, for preparing and issuing this preliminary
announcement, which was approved on 2 June 2003.
The financial information is extracted from the Group's full financial
statements for the period ended 29 March 2003 which were approved by the
Directors on 2 June 2003 and which received an unqualified audit report. This
financial information is abridged and does not constitute statutory accounts for
the 52 weeks ended 29 March 2003 and 52 weeks ended 30 March 2002. Full
financial statements for the 52 weeks ended 29 March 2003 will be filed with the
Registrar of Companies in due course. The 2002 Annual Report and Financial
Statements on which the auditors gave an unqualified report have been filed with
the Registrar of Companies.
This information is provided by RNS
The company news service from the London Stock Exchange
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