Thursday, 22 June 2017

Carphone Warehouse posts 1H report

Carphone Warehouse
Thursday 15 November 12

Roger Taylor, CEO said: "We have delivered a good performance in a dynamic mobile market, with sales benefitting from our renewed focus and specific investment initiatives. As a result, we have substantially increased our market share of UK postpay volumes and, while the prepay market remains weak, we hope for an improvement in the second half as the product pipeline continues to broaden. In Continental Europe, we have also been exploring growth opportunities for the business through potentially long-term strategic partnerships. Virgin Mobile France has grown its revenue and postpay customer base, despite intense competition, and is starting to benefit as it moves its customers onto its Full MVNO infrastructure…

Roger Taylor, CEO said:

"We have delivered a good performance in a dynamic mobile market, with sales benefitting from our renewed focus and specific investment initiatives. As a result, we have substantially increased our market share of UK postpay volumes and, while the prepay market remains weak, we hope for an improvement in the second half as the product pipeline continues to broaden. In Continental Europe, we have also been exploring growth opportunities for the business through potentially long-term strategic partnerships. Virgin Mobile France has grown its revenue and postpay customer base, despite intense competition, and is starting to benefit as it moves its customers onto its Full MVNO infrastructure.

"Looking ahead, we reiterate our full year guidance, we continue to focus on operational execution across the business and we remain well-placed to benefit from a strong product cycle."

Overview

The Group has worked hard on a number of initiatives over the past 6 months.

In our core business we have continued to drive postpay volumes with substantial market share gains in the UK, through our weekly 'Smart Deals' and key product launches. Postpay connections for the Group grew in H1 (with a particularly strong performance in Q2). Volume gains have been driven by investment in the proposition and this supports our strategy of long-term value creation through increasing scale. Although the prepay market remains weak (down 30-40% over the past 12 months), we expect an improvement in prepay for the second half of the year as the product pipeline continues to broaden. Total connections for the Group were down 11.5% in H1, affected by weak prepay, with the decline in connections abating in Q2 (down 5.6%) as compared with Q1 (down 17.8%).

As important as the product pipeline is to our performance, our in-store operational execution is imperative and here too we have been making significant progress.

By Christmas we will have c.280 Wireless World stores in the UK and key elements of the Wireless World format in the remaining 500 UK stores. Customer satisfaction scores are at an all-time high proving that the look and feel of our stores and the in-store service are resonating well with our customers.

We have also made significant progress with the reorganisation of CPW Europe in order to reshape the business and focus on our core proposition. Following the creation of an autonomous UK and Ireland business and standalone European markets, group functions have been reduced, resulting in considerable cost savings.

Virgin Mobile France grew revenue and its postpay customer base during the period despite intense competition. The business continues to transfer customers to its Full MVNO infrastructure with over 300,000 customers on this platform at the end of September.

Outlook

In CPW Europe we are encouraged by our market share gains and strong like-for-like performance in the first half and we reiterate guidance for the full year of £130m - £150m Headline EBIT as we continue to invest in the proposition and build on the momentum we are already seeing within the business.

While the industry and economic environment remain challenging, we have reasons to be optimistic. The product pipeline in postpay continues to excite consumers as smartphone technology further evolves, with good visibility now of 4G development across Europe. We are also hopeful of higher penetration of smartphones into the prepay category this Christmas as the range broadens and prices become more attractive.

CPW Europe is undergoing a restructuring process, mentioned above. We expect the reorganisation to bring significant benefits with annualised pre-tax savings of between £20m and £25m. The programme is expected to give rise to exceptional charges in the second half of the financial year, with provisional estimates of one-off pre-tax cash costs of between £20m and £25m, together with asset write-downs of between £5m and £10m, both of which will be excluded from Headline earnings.

In Europe we have been exploring growth opportunities for the business through partnerships. We have a number of trial stores running with potential partners and we are pleased with the performance of these stores so far. We will continue to explore these opportunities to gain scale in a number of our mainland European markets.

Virgin Mobile France's migration to Full MVNO continues to go well, providing the opportunity to enhance revenue, reduce costs and provide a more flexible strategic platform.

Analysts' presentation and webcast

There will be a presentation for investors and analysts at 9.00 am this morning at the offices of UBS Investment Bank, 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.

Dial-in details - UK/International: +44 (0)20 3140 8286, USA: +1 646 254 3361, passcode 9448446
Seven day replay - UK/International: +44 (0)20 3427 0598, USA: +1 347 366 9565, passcode 9448446#.

Next announcement
The Group will provide an interim management statement for the third quarter of the current financial year on Thursday 24 January 2013.


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