CPW Europe boosted by Best Buy sale

CPW Europe boosted by Best Buy sale

Profits at Carphone Warehouse Group have surged to £762.2m, thanks to its disposal of Best Buy Mobile.

The business made £813m from the sale of its interest but said Best Buy UK made a loss of £72.5m in the year to 31 March. Closing the ill-fated UK venture cost Carphone Warehouse Group £60.5m.

Earnings before interest and tax (EBIT) were £135m, at the lower end of its previous prediction of between £130m and £150m. It was up marginally on its EBIT of £134.6m last year. However, sales were down 5.5% to £3.31bn. CPW Group blamed this on regulatory cuts to mobile termination rates (MTRs) in the first half of its financial year. It said these cuts lead operators to cut subsidies on prepay handsets, resulting in a drop of 30-40% in prepay connection volumes. The company claimed the fall in prepay sales was partially offest by a 15% increase in non-cellular revenues.

While still a small part of the business, Carphone said it sees significant potential in products such as tablets and accessories. It said the shift from 18 to 24 month contracts in the UK lead to a drop in high margin contract connections in the first half of the financial year.

Sales and margin were hit in the second half of the year, due to pressure on network average revenue per unit from regulation, competition and 'the challenging consumer environment'. However, the company said these effects were countered by the benefits of new commercial terms agreed with operators in 2009-10, where the retailer gets more share of customer spend after the initial contract term. Smartphone penetration in contracts was up, with a knock-on effect on average revenue per connection, the retailer said.

Looking ahead, CPW Europe predicted headline EBIT to be flat compared to this year. Carphone Warehouse Europe CEO Roger Taylor said: 'Our core businesses have performed well during the year, delivering a robust performance in a challenging environment. CPW Europe continues to take advantage of its positioning in the Connected World, focusing on its newly designed store format, wider product and service proposition and strong relationships with network partners, all of which have enabled us to meet our EBIT target for the year... Looking ahead, we expect the consumer environment in Europe to remain difficult, but we see opportunities as well as challenges and we are confident in our strategic positioning and operational execution.'

Editor: Graeme Neill

Written by Mobile Today
Mobile Today

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