4/22/2009 1:20:00 PM
Carphone unveils £150m in cashflow
The objectives Carphone Warehouse’s retail business set out during the run-up to Christmas 2008 to improve cashflow and cut costs appear to have been realised.
The retailer unveiled £150m in free cashflow, and said it would continue with its reviews that have led to redundancies, costing Carphone between £5m and £7m in redundancies, but the savings are expected to create savings of £50m over the year.
The cost-savings and cashflow appear critical as the retail business is expected to see a revenue drop by 3% or, at best, stay the same. Gross margins are expected to drop by up between ‘25 and 50 basis points’ as Carphone adopts less lucrative categories such as dongles, gaming, laptops and prepay.
Traditional high margin mobile phone contract sales appear set to play a much smaller role in the overall business.
The company saw phone sales up 12% in the quarter to 3 million, largely thanks to a 20% improvement in prepay sales, while contract saw a more modest 2% increase to 1.1 million.
The retail business is also expecting profits to remain flat, between £60m and £80, with Carphone taking half of that, and BestBuy the other.
Dunstone said: ‘The macro environment will undoubtedly present challenges in the year ahead but at this stage we are not seeing it deteriorate further. We are well funded, and have clear and simple strategies for our two businesses which balance growth with tight operational efficiency and cash generation.’
The company expects cashflow to be at the £50m level for Best Buy Europe given the investment required to fund the out-of-town Big Box sites set to open in Spring 2010 and take on the likes of Comet and Curry’s. Carphone stressed that the current depressed retail property market was allowing Carphone to secure cut-price deals with landlords for sites.