Interim Results
Carphone Warehouse Group PLC
08 November 2007
Thursday 8 November 2007
For immediate release
The Carphone Warehouse Group PLC
Interim Results for the 26 weeks to 29 September 2007
Group revenues up 18%
Dividend up 25%
Financial Headlines
• Group revenues up 18% to £2,140m
• Distribution revenues up 8% to £1,457m
• Retail revenue up 1.6% like-for-like, gross profit up 2.1% like-for-like
• UK Fixed Line revenues up 49% to £697m
• Headline pre-tax profit £56m (2006: £14m)
• Cash flow from operations of £107m (2006: £15m)
Operational Headlines
• IPhone launches tomorrow in 786 Carphone Warehouse stores
• 193 net new stores opened
• Further acceleration of Best Buy Mobile roll-out - 1,000 stores by 2009
• 2.5m broadband customers
• 1.4m broadband customers now unbundled - 55% of total broadband base
• 2,212 exchanges unbundled
• Reorganisation costs of £7m relating to AOL integration
26 weeks ended 29 26 weeks ended % growth
September 2007 30 September 2006
£m £m
Revenue 2,140 1,809 18%
EBITDA* 169 83 104%
Headline profit before tax** 56 14 N/M
Reorganisation costs 7 - -
Earnings per share** 4.97p 1.56p N/M
Dividend per share 1.25p 1.00p 25%
* before reorganisation costs
** before amortisation of acquisition intangibles and reorganisation costs
Charles Dunstone, CEO, said:
'We have made good progress across the Group in the first half. The Retail
business continues to prosper across Europe, and we are announcing today a major
roll-out of our US venture. In our UK Fixed Line operations, the majority of
our broadband customers are now on our own network, with profitability and
quality of service improving all the time.
'We expect a good second half in the retail business, with new product launches
and the rising interest in mobile data services driving consumer demand. We are
delighted to be the only independent distributor selected by Apple to launch the
iPhone. It goes on sale from 6pm tomorrow and has already attracted widespread
customer interest. In UK Fixed Line, we are confident of growing our market
share in a growing market, while our unique network asset is set to deliver
significant progress in profitability. This confidence in the future is
reflected by the Board's decision to increase the interim dividend by 25%.'
Overview
Group revenue for the period was £2,140m compared with £1,809m for the prior
year, representing growth of 18%. Headline pre-tax profits before amortisation
of acquisition intangibles were £56m (2006: £14m).
Within Distribution, we have achieved further good growth over the last six
months, and the strength of our proposition and the depth of our presence has
enabled us to continue to grow our market share significantly. Our store
opening programme is proceeding in line with plan and, in addition, we are
relocating a number of stores in key areas to much larger premises to improve
the customer experience and grow our share further. Our US trial has continued
to go well, giving us the confidence to pursue a roll-out to 1,000 Best Buy
stores over the next two years.
As previously highlighted, the UK off-the-page market has been much slower in
the first half of the year, with a noticeable effect on overall subscriptions
growth. While we see no signs yet of an improvement in this channel, its
weighting within the business is typically smaller through the second half of
the financial year given the seasonal strength of the stores over Christmas.
Growth in Distribution's main recurring revenue streams, Insurance and Ongoing,
continues to be very strong, driven by our track record of subscriptions growth,
and enhancing the quality of our earnings.
Within our Mobile operations, our German service provision business, The Phone
House Telecom, is making steady progress in a competitive market. Our MVNO
operations are expanding, with launches in a number of European countries over
the last 12 months and our recent introduction of a subscription service in the
UK. Virgin Mobile France is well on the way to its target of one million
customers, with losses reflecting the ongoing investment in brand marketing and
customer recruitment.
On the UK Fixed Line side, it has been a period of considerable operational
achievement. CPW Networks has extended its reach, such that we now have over
2,200 exchanges unbundled and already 55% of our broadband customer base is on
our own network. By the end of the financial year this will be over 70%, with
further progress expected in future years. At the same time, we have continued
to grow our broadband customer base in line with our aspirations, and have made
significant progress on the integration of the AOL acquisition. As a result of
this process we have incurred reorganisation costs of approximately £7m in the
first half, with additional costs of £10-15m expected in the second half.
Fixed Line B2B has had a good six months in a stable marketplace. While revenue
growth has been held back by a slowdown in low margin premium rate services, the
improvement in underlying profitability is beginning to reflect the efficiency
of our unbundled network, as well as a fairer allocation of network costs
between Residential and B2B operations.
Outlook
The outlook for continued growth is good. We see considerable scope for further
physical expansion, both in Europe and the US, over the coming years. At the
same time, the evolution of the Distribution model towards the broader provision
of connectivity services addresses a growing customer need as technologies
converge. In the shorter term, the launch of the iPhone and the mass adoption
of mobile data services are likely to stimulate market growth.
In our UK Fixed Line operations, our focus on operational execution is
delivering increasing visibility of future profitable growth. Our network
coverage now allows us to address more of the population profitably than any
other alternative provider in a market that continues to offer attractive growth
opportunities, and our unique success with full unbundling gives us a
significant cost advantage. As a result, we are confident that we will meet our
medium term customer targets while achieving material margin improvements and
improving cash generation.
Distribution
2007 2006
£m £m
Revenue 1,457 1,347
Retail inc Online 957 866
Insurance 80 64
Ongoing 40 32
Mobile 259 246
Non-UK Fixed Line 51 54
Dealer 91 101
Eliminations (20) (17)
EBITDA 105 94
Depreciation and amortisation (49) (40)
EBIT 56 54
EBIT % 3.8% 4.0%
The Distribution division generated revenues of £1,457m and EBIT of £56m,
representing growth of 8% and 4% respectively on the prior year. The EBIT
margin fell 20 basis points, with the slowdown in the UK off-the-page retail
market offsetting a good performance from the stores and strong growth in higher
margin ancillary revenue streams.
Retail (including Online)
Total connections grew 20% to 5.2m. Subscription connections were up 12% to
2.0m. Although market growth was slower, we made significant market share gains
over the period as we continued to improve and refine our retail proposition.
Overall subscriptions growth was depressed by a much more subdued off-the-page
market in the UK, whereas the stores continued to trade well, with subscriptions
growth excluding Online of 18%. Pre-pay connections were up 26% to 2.9m, as the
pre-pay segment of the market continued to be buoyant.
We opened 258 stores (including the acquisition of Osfone in Portugal in April
2007, with 73 stores) and relocated or closed 65 in the first half, taking the
total number of stores in the portfolio to 2,337, of which 196 are franchise
stores (2006: 167 franchise stores). We expect to open a net 350 stores in
total in the current financial year, including the acquisition of Osfone. Total
average selling space in all stores grew by 20% to 120,000 sqm (2006: 100,000
sqm). Excluding franchise stores, average space was up 19% to 111,000 sqm
(2006: 93,000 sqm).
Total Retail revenues grew 11% to £957m. Retail like-for-like revenue growth
was 1.6%. Subscription revenue per connection fell 7%, reflecting a greater
weighting to non-UK subscription sales and the growth in mobile data
subscriptions. Pre-pay revenue per connection was flat year-on-year. Retail
like-for-like gross profit growth was 2.1%. Subscription gross profit per
connection was down 3% at £94 (2006: £97), again reflecting the change in
geographical mix. Gross profit per connection on pre-pay remained flat
year-on-year at £23.
Aside from the weakness in the off-the-page market, the UK continued to trade
well. We have made good progress with our new store format, opening or
relocating 42 stores during the period. We have started to introduce a wider
range of products and services as we evolve our proposition to a broader
connectivity offering. During the period, we launched the Broadband Shop, our
multi-carrier proposition giving advice across a range of DSL, cable and mobile
data offerings, with the latter in particular beginning to show very strong
customer interest.
Outside the UK, trading was for the most part good, with continued strong
performances in Sweden and Spain, and a very encouraging recovery in the
Netherlands. Switzerland continued to suffer from being sub-scale, and our
French business was contending with a strong comparative period last year.
Insurance
Insurance revenues grew 25% year-on-year to £80m (2006: £64m). The customer
base was up 14% to 2.4m, driven by the continued growth in subscription
connections.
Ongoing
Growth in Ongoing revenues, our ARPU-sharing agreements with mobile networks,
also continued to be supported by subscription connections growth, and an
increasing trend towards revenue-sharing on the part of mobile networks.
Ongoing revenues grew 25% to £40m (2006: £32m).
Mobile
Mobile revenues rose 5% to £259m (2006: £246m). Within these figures, revenues
at The Phone House Telecom, our German service provision business, were up 4% to
£186m (2006: £180m), reflecting continued growth in the customer base, offset by
a fall in the blended ARPU. The subscription base rose 8% to 933,000 and the
pre-pay base rose 59% to 700,000. Subscription ARPU fell 6% year-on-year to
£23.2.
In the balance of our Mobile operations, revenues were up 9% to £72m. Excluding
the partial disposal of our French facilities management business in April 2007,
revenues rose 33%. Our wholly-owned MVNO operations across Europe performed
well, with renewed customer growth in the UK supplemented by some promising
progress in other markets, particularly Spain. After the period end, we
announced a new subscription MVNO service in the UK, Talk Mobile, targeted at
lower end contract customers.
UK Fixed Line
2007 2006
£m £m
Revenue 697 469
Residential 542 316
B2B 155 153
EBITDA* 83 4
Residential 65 (10)
B2B 18 14
Depreciation and amortisation** (44) (16)
EBIT 39 (11)
EBIT % 5.6% -
* excluding reorganisation costs
** excluding amortisation of acquisition intangibles
The UK Fixed Line division generated revenues of £697m and EBIT of £39m,
compared to revenues of £469m and a loss of £11m last year. Excluding the AOL
acquisition, revenues grew 7%, primarily reflecting continued growth in the
residential customer base and rising blended ARPU.
Residential
Total Residential revenues were up 72% to £542m (2006: £316m). Excluding AOL
revenues of £196m, revenue growth was 10%. During the period we combined our
ongoing focus on broadband customer recruitment with our major exchange
unbundling programme, delivering both continued top line growth and improving
margins.
We added 215,000 net new broadband customers during the period, taking our total
customer base to 2.5m, equivalent to a share of approximately 17% of the UK
broadband market. The AOL base declined during the period, as we focused on
recruiting customers only within our exchange footprint through geographical
pricing variations. However, towards the end of the period, as our AOL
footprint extended rapidly and we introduced our free Dell laptop offer, the AOL
base stabilised. The TalkTalk base made further good progress, reaching one
million customers within 18 months of the launch of Free Broadband. Blended
broadband ARPU for the first half was £21.7, ahead of our expectations and
reflecting a higher proportion of TalkTalk customers and good sell-through of
voice services to AOL customers.
During the period we added a further 675,000 broadband customers to our own
network, taking the total to 1.4m or 55% of our broadband customer base. Our
business now accounts for 43% of all unbundled lines in the UK market.
Our base of other billed customers, comprising voice-only and AOL dial-up
accounts, declined to 2.1m, as expected, as customers migrated to broadband and
bundled services or churned off. The blended ARPU from this base was £17.8.
The total voice base, including voice-only customers and those taking voice
services as part of a broadband bundle, stood at 2.7m at the end of September.
Residential EBITDA was £65m, compared to a loss of £10m in the prior period.
The increase in EBITDA reflects the acquisition of the AOL business, the
underlying growth in our customer base and ARPU, and the significant cost
efficiency created by migrating customers onto our own network. We expect to
make further material margin progress in the second half and the subsequent
financial year, as excess customer service costs decline and a higher proportion
of the base is serviced off our own network.
The integration of the AOL acquisition has proceeded very well. We now have
shared backhaul across relevant exchange sites, and CPW Networks has
successfully overseen the AOL exchange roll-out programme. Looking ahead, we
have further work to do on migrating AOL's customers onto our own systems, which
we expect to take place over the next 12 months. At this stage, we anticipate a
total reorganisation cost of approximately £17-22m, of which £7m has been
incurred in the interim period.
B2B
B2B revenues were up 1% to £155m (2006: £153m), with EBITDA up 26% to £18m
(2006: £14m). Excluding Premium Rate Services, where revenue was down 47% to
£12m, revenues were up 10%. The core business continued to perform in line with
expectations in a stable market, with management increasingly looking to focus
on expanding its range of services to customers, on the back of the LLU network
investment. The strong growth in EBITDA partly reflects a good operational
performance, but has also been enhanced by a more accurate allocation of shared
overhead between the Residential and B2B operations this year.
Associate operations
During the period, we formalised the terms of our commercial agreement with Best
Buy for the development of our US mobile retail venture, Best Buy Mobile. Under
the agreement, Best Buy will fund the operation, with the venture paying a
financing charge to Best Buy for the cost of funds. Carphone Warehouse will
receive a share of incremental profits above the historical profitability of
Best Buy's mobile retail operations, based on a sliding scale.
The US trial has continued to progress well and by the end of September we had
70 Best Buy Mobile outlets open. We are now planning for a more extensive
roll-out of the concept across Best Buy's store portfolio in the US, and aim to
have up to 1,000 outlets within existing Best Buy stores in operation during
2009, as well as a growing number of stand alone stores. In addition, we are
exploring opportunities to expand the venture into other markets where Best Buy
has a presence.
We expect Carphone Warehouse to make a small loss from the venture in the
current financial year and to break even in the year to March 2009, with the
potential for significant profitable growth thereafter.
Also in partnership with Best Buy, we launched the Geek Squad, a home technology
support service, in the UK in March. We are currently offering home visits in
the Greater London area and are steadily rolling out to other centres in the UK.
We offer a remote service across the whole of the country. Customer reception
has been very positive and we are now developing the brand across a range of our
after-sales services, as we build it into an integral part of our strategy to
offer customers a full service across a range of connectivity applications. The
Geek Squad will launch in Spain in January 2008, with other territories to
follow.
Our French MVNO in partnership with Virgin, Virgin Mobile France, is making good
progress. We now have well over half a million active customers, of whom
approximately 60% are subscription customers. We continue to invest in building
the brand and customer recruitment, with underlying economics supporting the
future profitability of the business.
Total losses from joint ventures and associates, principally comprising The Geek
Squad and Virgin Mobile France, amounted to £4m (2006: £5m loss).
Central costs
Central costs not directly allocable to business units amounted to £19m, a rise
of 24% year-on-year (2006: £16m). The increase reflects further investment in
providing central support for our operating businesses, and a higher non-cash
charge for share-based compensation.
Amortisation of acquisition intangibles
The amortisation charge on acquisition intangibles was £39m (2006: £19m), the
increase reflecting intangible assets arising on the acquisition of AOL's UK
business in December 2006. The Group receives UK tax relief on the amortisation
charge.
Cash flow, interest and dividend
At 29 September 2007, the Group had net debt of £763m, compared to net debt of
£617m at the last financial year end. The net interest charge for the period
was £16m (2006: £8m), the increase reflecting higher average levels of net debt
after the broadband investment and AOL acquisition, and higher interest rates.
During the period the Group generated cash flow from operations of £107m (2006:
£15m). Total capex investment during the period was £130m (2006: £105m), of
which £33m related to the store portfolio and £68m related to telecoms
infrastructure, with the balance being predominantly IT spend. Total
capitalised SAC for the period was £56m (2006: £24m). The Group invested £41m
in acquisitions during the period, primarily being deferred consideration in
respect of AOL, and received £11m in relation to the disposal of 62% of one of
its French subsidiaries, The Phone House Services Telecoms SAS. We continue to
expect net debt at March 2008 to be approximately £600-650m.
The Board has declared an interim dividend of 1.25p per share (2006: 1.00p per
share), up 25%. Subject to performance in the second half of the year, we
expect the total pay-out for the year to represent an increase of approximately
30% over last year's distribution.
The ex-dividend date will be 14 November 2007 and the record date will be 16
November 2007. The intended payment date will be 7 December 2007.
Analysts' presentation and webcast
There will be a presentation for investors and analysts at 8.30 am this morning
at the offices of UBS, 1 Finsbury Avenue, London EC2M 2PP. The event will be
audio webcast and the presentation slides will be available on our website,
www.cpwplc.com.
Next trading update
The Group will give a full trading update, including revenues, connections and
customer bases, for the third quarter of the current financial year on 18
January 2008.
For Further Information
For analyst and institutional enquiries
Roger Taylor 07715 170 090
Peregrine Riviere 07909 907193
For media enquiries
Shane Conway 07932 199 659
Anthony Carlisle 07973 611 888
Citigate Dewe Rogerson 020 7638 9571
FINANCIAL REVIEW
Consolidated income statement for the 26 weeks ended 29 September 2007
With 26 weeks ended 30 September 2006 comparatives
Before Amortisation After Before Amortisation After
amortisation of amortisation of amortisation of amortisation
acquisition of acquisition of acquisition of
intangibles and acquisition intangibles and acquisition intangibles acquisition
reorganisation intangibles reorganisation intangibles intangibles
costs and costs
reorganisation
costs
(see note 3)
26 weeks ended 29 September 2007 26 weeks ended 30 September 2006
(Unaudited) (Unaudited)
Notes £m £m £m £m £m £m
Continuing operations
Revenue 2 2,140.3 - 2,140.3 1,809.4 - 1,809.4
Cost of sales (1,330.5) - (1,330.5) (1,239.1) - (1,239.1)
Gross profit 809.8 - 809.8 570.3 - 570.3
Operating expenses (640.6) (7.3) (647.9) (487.1) - (487.1)
excluding amortisation
and depreciation
EBITDA 169.2 (7.3) 161.9 83.2 - 83.2
Depreciation (37.6) - (37.6) (29.0) - (29.0)
Amortisation (55.9) (39.0) (94.9) (27.5) (18.8) (46.3)
Share of results of (3.9) - (3.9) (4.6) - (4.6)
joint ventures and
associates
Profit before interest 2 71.8 (46.3) 25.5 22.1 (18.8) 3.3
and taxation
Interest payable (21.1) - (21.1) (10.4) - (10.4)
Interest receivable 5.2 - 5.2 2.4 - 2.4
Profit (loss) before 55.9 (46.3) 9.6 14.1 (18.8) (4.7)
taxation
Taxation 4 (11.2) 13.9 2.7 (0.2) 5.6 5.4
Net profit for the 44.7 (32.4) 12.3 13.9 (13.2) 0.7
financial period
Earnings per share
Basic 5 4.97p 1.36p 1.56p 0.08p
Diluted 5 4.65p 1.28p 1.48p 0.07p
Consolidated income statement for the 26 weeks ended 29 September 2007
With 52 weeks ended 31 March 2007 comparatives
Before Amortisation After Before Amortisation After
amortisation of of acquisition amortisation of amortisation of amortisation
acquisition intangibles acquisition of acquisition of
intangibles and and intangibles and acquisition intangibles acquisition
reorganisation reorganisation reorganisation intangibles and goodwill intangibles
costs costs costs and goodwill expense and goodwill
(see note 3) expense expense
26 weeks ended 29 September 2007 52 weeks ended 31 March 2007
(Unaudited) (Audited)
Notes £m £m £m £m £m £m
Continuing operations
Revenue 2 2,140.3 - 2,140.3 3,991.5 - 3,991.5
Cost of sales (1,330.5) - (1,330.5) (2,731.3) - (2,731.3)
Gross profit 809.8 - 809.8 1,260.2 - 1,260.2
Operating expenses (640.6) (7.3) (647.9) (966.2) - (966.2)
excluding amortisation
and depreciation
EBITDA 169.2 (7.3) 161.9 294.0 - 294.0
Depreciation (37.6) - (37.6) (65.9) - (65.9)
Amortisation (55.9) (39.0) (94.9) (68.7) (54.3) (123.0)
Goodwill expense - - - - (0.5) (0.5)
Share of results of (3.9) - (3.9) (9.9) - (9.9)
joint ventures and associates
Profit before interest 2 71.8 (46.3) 25.5 149.5 (54.8) 94.7
and taxation
Interest payable (21.1) - (21.1) (32.4) - (32.4)
Interest receivable 5.2 - 5.2 6.1 - 6.1
Profit (loss) before 55.9 (46.3) 9.6 123.2 (54.8) 68.4
taxation
Taxation 4 (11.2) 13.9 2.7 (17.7) 16.3 (1.4)
Net profit for the 44.7 (32.4) 12.3 105.5 (38.5) 67.0
financial period
Earnings per share
Basic 5 4.97p 1.36p 11.82p 7.51p
Diluted 5 4.65p 1.28p 11.20p 7.11p
Consolidated statement of changes in equity for the 26 weeks ended 29 September 2007
26 weeks 26 weeks 52 weeks
ended ended ended
29 September 30 September 31 March
2007 2006 2007
Notes (Unaudited) (Unaudited) (Audited)
£m £m £m
At the beginning of the period 689.6 619.0 619.0
Net profit for the financial period 12.3 0.7 67.0
Currency translation (0.6) (2.1) (0.2)
Tax on items recognised directly in reserves 9.9 4.8 3.2
Net change in available-for-sale investments (2.9) (0.1) 3.6
Unrealised gain on disposal of subsidiary - 1.7 1.7
Net cost of share-based payments 5.1 3.3 10.4
Total recognised income and expense for the period 23.8 8.3 85.7
Issue of share capital 26.5 4.5 8.5
Net (purchase) sale of own shares (14.6) 0.3 0.6
Equity dividends 8 (20.1) (15.4) (24.2)
At the end of the period 705.2 616.7 689.6
Consolidated balance sheet as at 29 September 2007
29 September 30 September 31 March
2007 2006 2007
Notes (Unaudited) (Unaudited) (Audited)
£m £m £m
Non-current assets
Goodwill 641.5 559.9 639.0
Other intangible assets 518.2 167.8 513.6
Property, plant and equipment 385.0 287.4 337.4
Non-current asset investments 5.3 10.8 14.5
Interests in joint ventures 1.9 - 1.4
Investment in associate 5.3 - -
Deferred tax assets 52.3 41.4 51.6
1,609.5 1,067.3 1,557.5
Current assets
Stock 213.2 166.9 161.5
Trade and other receivables 846.2 696.7 743.8
Current asset investments 7.5 3.9 2.3
Cash and cash equivalents 114.5 117.1 111.1
1,181.4 984.6 1,018.7
Total assets 2,790.9 2,051.9 2,576.2
Current liabilities
Trade and other payables (1,048.5) (737.5) (922.1)
Corporation tax liabilities (39.7) (40.1) (52.7)
Loans and other borrowings (0.7) (9.2) (22.7)
Provisions (111.4) (117.4) (109.9)
(1,200.3) (904.2) (1,107.4)
Non-current liabilities
Trade and other payables (1.0) (6.7) (71.6)
Loans and other borrowings (884.4) (523.2) (707.6)
Interests in joint ventures - (1.1) -
(885.4) (531.0) (779.2)
Total liabilities (2,085.7) (1,435.2) (1,886.6)
Total assets and liabilities 705.2 616.7 689.6
Equity
Share capital 6 0.9 0.9 0.9
Share premium reserve 6 453.3 425.7 426.8
Capital redemption reserve 6 - - -
Translation reserve 6 1.3 - 1.9
Accumulated profits 6 249.7 190.1 260.0
Funds attributable to equity shareholders 705.2 616.7 689.6
Approved by the Board of The Carphone Warehouse Group PLC
7 November 2007
Consolidated cash flow statement for the 26 weeks ended 29 September 2007
26 weeks 26 weeks 52 weeks
ended ended ended
29 September 30 September 31 March
2007 2006 2007
(Unaudited) (Unaudited) (Audited)
£m £m £m
Operating activities
Profit before interest and taxation 25.5 3.3 94.7
Adjustments for non-cash items:
Share-based payments 5.1 3.3 10.4
Non-cash movements on joint ventures and 3.9 3.2 8.0
associates
Depreciation 37.6 29.0 65.9
Amortisation 94.9 46.3 123.0
Goodwill expense - - 0.5
Operating cash flows before movements in working capital 167.0 85.1 302.5
(Profit) loss on disposal of property, plant and (0.1) 0.1 (3.7)
equipment and intangible assets
Increase in trade and other receivables (90.4) (148.3) (175.4)
Increase in stock (51.6) (32.0) (26.4)
Increase in trade and other payables 84.2 115.9 180.4
Decrease in provisions (2.1) (5.7) (21.1)
Cash generated from operations 107.0 15.1 256.3
Taxation (paid) received (1.1) 0.1 (6.5)
Net cash generated from operating activities 105.9 15.2 249.8
Investing activities
Proceeds from sale of property, plant and equipment and 0.4 0.1 13.5
intangible assets
Acquisition of subsidiaries, net of cash acquired (40.7) (14.4) (258.3)
Disposal of subsidiary, net of cash disposed 11.1 - -
Interest received 5.2 2.4 6.1
Acquisition of intangible assets (97.1) (51.6) (148.1)
Acquisition of property, plant and equipment (88.8) (77.3) (161.4)
Acquisition of non-current asset investments (0.3) - -
Investment in joint ventures (4.6) (0.6) (8.3)
Cash flows from investing activities (214.8) (141.4) (556.5)
Financing activities
Proceeds from the issue of share capital 26.5 4.5 8.5
Net (purchase) sale of own shares (14.6) 0.3 0.6
Increase in borrowings 152.3 186.6 374.1
Receipts from current asset investments 1.4 0.7 2.3
Interest paid (21.1) (10.4) (32.4)
Dividends paid (20.1) (15.4) (24.2)
Cash flows from financing activities 124.4 166.3 328.9
Net increase in cash and cash equivalents 15.5 40.1 22.2
Cash and cash equivalents at the start of the period 98.9 77.0 77.0
Effect of exchange rate fluctuations - (0.3) (0.3)
Cash and cash equivalents at the end of the period 114.4 116.8 98.9
Cash and cash equivalents for the purposes of this statement comprise:
Cash and cash equivalents 114.5 117.1 111.1
Bank overdrafts (0.1) (0.3) (12.2)
114.4 116.8 98.9
1 Basis of preparation and accounting policies
The interim report has been prepared using accounting policies and methods of
computation consistent with those set out on pages 37 to 40 of The Carphone
Warehouse Group PLC annual report for the 52 weeks ended 31 March 2007. The
financial information for the 26 weeks ended 29 September 2007 and the 26 weeks
ended 30 September 2006 has not been subject to audit or review by the Group's
auditors. The Group has adopted IAS34 'Interim Financial Statements' in this
interim report.
The information set out in this interim report for the 26 weeks ended 29
September 2007 does not comprise statutory accounts within the meaning of
section 240 of the Companies Act 1985. The statutory accounts for the 52 weeks
ended 31 March 2007, incorporating the unqualified auditor's report, have been
filed with the Registrar of Companies.
2 Segmental reporting
Divisional results are analysed as follows:
Revenue Profit before interest and taxation
26 weeks ended 26 weeks 52 weeks 26 weeks ended 26 weeks 52 weeks
29 September ended ended 29 September ended ended
2007 30 September 31 March 2007 30 September 31 March
2006 2007 2006 2007
£m £m £m £m £m £m
Distribution
- Headline results 1,457.4 1,346.9 2,917.8 55.9 53.6 176.9
- Goodwill expense - - (0.5)
Total Distribution 1,457.4 1,346.9 2,917.8 55.9 53.6 176.4
UK Fixed Line
- Headline results 697.3 469.1 1,084.3 39.1 (11.4) 19.7
- Amortisation of (39.0) (18.8) (54.3)
acquisition intangibles
- Reorganisation costs (7.3) - -
Total UK Fixed Line 697.3 469.1 1,084.3 (7.2) (30.2) (34.6)
- Central costs (19.3) (15.5) (37.2)
- Share of results of (3.9) (4.6) (9.9)
joint ventures and associates
- Elimination of (14.4) (6.6) (10.6) - - -
intra-group transactions
Total Group 2,140.3 1,809.4 3,991.5 25.5 3.3 94.7
Headline results are shown before amortisation of acquisition intangibles and
goodwill expense and before reorganisation costs. Headline information is
provided because the Directors consider that it provides assistance in
understanding underlying performance.
The Group has changed the way it reports divisional results, both internally and
externally, with effect from the current period. The comparative periods have
been restated to reflect this divisional structure.
3 Reorganisation costs
The Group acquired AOL's UK internet access business in December 2006. During
the period ended 29 September 2007, the Group commenced the reorganisation of
the business, initially through a programme to transfer network operations,
hosting, billing and customer management away from a transitional platform
provided by AOL Time Warner onto the Group's own systems and infrastructure.
Reorganisation costs of £7.3m were incurred in the period and have been
separately disclosed given their size and one-off nature.
4 Taxation
Taxation has been provided using the estimated effective rate of taxation on
Headline results for the 52 weeks ending 29 March 2008 of 20% (52 weeks ended 31
March 2007: 14%).
The charge on Headline earnings is offset by a credit of 30% (2006: 30%) on the
amortisation of acquisition intangibles and reorganisation costs.
5 Earnings per share
26 weeks ended 26 weeks ended 52 weeks ended
29 September 30 September 31 March
2007 2006 2007
Headline earnings (£m) 44.7 13.9 105.5
Amortisation of acquisition intangibles (£m) (39.0) (18.8) (54.3)
Goodwill expense (£m) - - (0.5)
Reorganisation costs (£m) (7.3) - -
Tax thereon (£m) 13.9 5.6 16.3
Statutory earnings (£m) 12.3 0.7 67.0
Weighted average number of shares (millions)
For basic earnings per share 899.5 889.4 892.1
Dilutive effect of share options 60.5 46.3 49.1
For diluted earnings per share 960.0 935.7 941.2
Basic
Earnings per share (pence) 1.36 0.08 7.51
Headline earnings per share (pence) 4.97 1.56 11.82
Diluted
Earnings per share (pence) 1.28 0.07 7.11
Headline earnings per share (pence) 4.65 1.48 11.20
6 Reserves
Share Share Capital Translation Accumulated Total
capital premium redemption reserve profits
reserve reserve
£m £m £m £m £m £m
At 31 March 2007 0.9 426.8 - 1.9 260.0 689.6
Net profit for the financial period - - - - 12.3 12.3
Currency translation - - - (0.6) - (0.6)
Tax on items recognised directly in - - - - 9.9 9.9
reserves
Net change in available-for-sale - - - - (2.9) (2.9)
investments
Issue of share capital - 26.5 - - - 26.5
Net purchase of own shares - - - - (14.6) (14.6)
Net cost of share-based payments - - - - 5.1 5.1
Equity dividends - - - - (20.1) (20.1)
At 29 September 2007 0.9 453.3 - 1.3 249.7 705.2
Movements in share capital in the period arose from the sale of 6 million shares
to the Group's Employee Share Ownership Trust and the exercise of employee share
options.
7 Movements on net debt
At Cash flows Exchange Non-cash At
31 March differences movements 29 September
2007 2007
£m £m £m £m £m
Cash and cash equivalents 111.1 3.4 - - 114.5
Bank overdrafts (12.2) 12.1 - - (0.1)
98.9 15.5 - - 114.4
Current loans and other borrowings (10.5) 9.9 - - (0.6)
Non-current loans and other (707.6) (162.2) (14.6) - (884.4)
borrowings
(718.1) (152.3) (14.6) - (885.0)
Current asset investments 2.3 (1.4) - 6.6 7.5
Total (616.9) (138.2) (14.6) 6.6 (763.1)
8 Equity dividends
26 weeks 26 weeks 52 weeks ended
ended ended
29 September 30 September 31 March
2007 2006 2007
£m £m £m
Final dividend for the period ended 1 April 2006 of 1.75p per - 15.4 15.4
ordinary share
Interim dividend for the period ended 31 March 2007 of 1.00p per - - 8.8
ordinary share
Final dividend for the period ended 31 March 2007 of 2.25p per 20.1 - -
ordinary share
20.1 15.4 24.2
Proposed interim dividend for the period ending 29 March 2008 of 11.3
1.25p per ordinary share
9 Capital commitments
29 September 30 September 31 March
2007 2006 2007
£m £m £m
Expenditure contracted, but not provided for in the financial 21.5 28.2 23.0
statements
10 Related party transactions
During the period, the Group had transactions with Virgin Mobile France, a
company in which the Group has an interest of 48.5%, comprising the sale of
stock of £7.5m (30 September 2006: £7.7m) and the provision of services with a
value of £0.6m (30 September 2006: £2.1m). At 29 September 2007 the Group was
owed £8.6m from Virgin Mobile France (30 September 2006: £4.4m). All products
and services were provided at market rates.
Risks and uncertainties
The Board continuously assesses and monitors the key risks of the business. The
key risks that could affect the Group's medium-term performance, and the factors
which mitigate these risks, have not changed from those set out on page 17 of
the Group's 2007 Annual Report, a copy of which is available on the Group's
website www.cpwplc.com. The Chief executive's Review includes consideration of
uncertainties affecting the Group in the remaining six months of the year.
Statement of Directors' responsibilities
The condensed financial statements have been prepared in accordance with IAS 34,
as adopted by the European Union, and the interim management report herein
includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8.
The Directors of The Carphone Warehouse Group PLC are listed on page 21 of the
Group's 2007 Annual Report and on the Group's website www.cpwplc.com .
By order of the Board
Roger Taylor
Chief Financial Officer
7 November 2007
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