Carphone Warehouse positive first quarter

Carphone Warehouse has had a strong first quarter, with revenues up across the business.

For the quarter ended 28 June, Carphone Warehouse reported the completion of the transaction with Best Buy to create a new European retail business, which the company said has provided it with a strong platform for the future.

Distribution revenues were up 4% to £735 million; up 6% excluding non-core businesses. Retail revenues went up 10% to £498 million, down 1.4% like-for-like. Retail gross profit was up 1.7% like-for-like.

Total mobile connections for the business went up 12%, to 2.6 million. Mobile subscription connections rose by 9% to 1.1 million. Best Buy Mobile continued to perform outstandingly well, the company said.

UK Fixed Line revenues went down 1% to £343 million, leaving residential revenues flat at £268 million. The business now has 2.8 million broadband customers, with 41,000 net adds in the quarter. Carphone Warehouse is now expecting 200,000 to 250,000 broadband net adds this year, with revenue growth remaining broadly flat.

Charles Dunstone, CEO at Carfone Warehouse, commented on the results: “Connections volumes have continued to grow well, driven by smartphones and mobile broadband sales. Our market share in these segments has been strong, thanks to our re-positioning of the business and the introduction of our broadened free laptop offer during the quarter. However, margin per connection was a little weaker with the shift in mix towards mobile broadband.

“As we indicated in June, growth in broadband customer numbers slowed during the quarter. Underlying growth in TalkTalk continued to be strong, with 86,000 net new TalkTalk broadband customers during the period. One of the benefits of the current environment is that churn is low and falling, making our relationship with customers increasingly valuable. We made significant progress on the AOL network and billing platform migrations, with both processes materially complete by the period end. The AOL base declined by 45,000 over the quarter, of which 12,000 were lost as a direct result of the network migration. We have successfully migrated over 1.3 million AOL customers: a further 80,000 customers, whose operating systems or hardware are incompatible with the new platform, are yet to be migrated and a proportion of these are likely to be at risk.”

He continued: “From a strategic perspective, the last few months have seen the most important developments in the Group’s history. The transaction with Best Buy has crystallised significant value and leaves the business in a strong financial position. We will provide a detailed update on our plans for the new venture in October.

“Operationally we have made further significant progress in the last three months. The reorganisation of the Group into two discrete operating divisions was successfully achieved in time for the completion of the Best Buy transaction. As noted above, the AOL network and billing platform migrations have been all but completed, ahead of schedule. We have also introduced the laptop proposition into the majority of our UK stores, supported by a major training and development initiative for all our sales consultants.

“While the second quarter has started well, with a sharp pick-up in subscription connections on the back of the iPhone 3G launch, we remain understandably cautious about the consumer environment. However, the strategic development of our Distribution business and the significant operational improvements we are making in Fixed Line leave us well placed to trade through these uncertain times and emerge as a stronger and better business on the other side,” he added.