Carphone's profits fall 11% year on year

Carphone's profits fall 11% year on year
Carphone Warehouse reported its revenues of £697m had fallen by 2% in the six months to the end of September this year compared to last year for the group as a whole.

Headline profit fell by 11% year-on-year to £44m, although EBITDA grew to £112m at the same time by 51%. The difference in the two profit measures is due to the Best Buy deal earlier this year.

After the sale of half of Carphone's business to Best Buy earlier this year, the company paid off some of its debts and, instead of paying interest and receiving tax relief, Carphone had to pay tax on interest they received. The fact that Carphone only got half of the earnings from the retail business, with the other half now going to Best Buy, also lowered total earnings compared to last year.

Despite the slump in revenues, the company reported EBITDA (before exceptional items) growth of 51% to £112m, but headline profit after tax fell by 11% year-on-year from £44m to £39m.

For Best Buy in the UK, revenues were up 8% from last year at £779m, mainly driven by the success of the iPhone and increased demand in mobile broadband. Mobile connections were up 11% at 5.7 million. Contract sales were up 15% at 2.3 million and prepay connections were up 8% at 3.1 million.

In October, Carphone revealed a new concept store in the newly-opened Westfield shopping center in London, which offers a much wider range of laptops as well as new areas for gaming, on-demand TV and Apple products, alongside mobile phones.

The introduction of new products came at a cost, however. According to the third quarter report the company incurred losses of £8m in disposing of the products that had been de-ranged.

The company announced it is looking into separating the TalkTalk fixed line broadband business from the rest of the company. TalkTalk added 168,000 customers during the period, with churn continuing to fall.

Carphone expects a tough Christmas market. CEO Charles Dunstone said: ‘The immediate consumer outlook remains very uncertain. In the short-term, Best Buy Europe is a well-positioned relative to its competitors, with an excellent line-up of exclusive products as we approach Christmas.

'So far this year, we have outperformed our expectations in subscription connections, but underperformed in pre-pay. As the Christmas marketplace has proportionately a much higher pre-pay share, predicting the outcome of the next six weeks of sales is very difficult.’

‘Further out, the development of our big-box consumer electronics format is an exciting new growth avenue for the business.’

Due to the economic downturn Dunstone also believes that next year will be tough. He said: ‘The next 12 months are likely to represent the most challenging economic climate we have ever operated in. With little debt and £900m of facilities, the group is very well positioned to withstand the financial turmoil.’
Written by Mobile Today
Mobile Today


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