Carphone reorg sees flat forecast

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Carphone Warehouse predicts a decline in profitability of its retail operation during 2009/10, as well as costs incurred by roll out of large format Carphone Warehouse and Best Buy stores from Spring 2010.

But it said these will be offset in the coming year by cost cutting and revenue from its US operation.

It said it will take £30-40 million from the 50/50 Best Buy Europe joint venture in the coming 12 months, flat year-on-year, and now expects to generate operating free cashflow of approximately £50 million after all capital expenditure and roll-out costs.

Previously, it forecast £50 million cashflow before investment in its new ‘big box’ programme.

It expects to generate £20-£25 million over the next 12 months from its US Best Buy Mobile venture.

It said it expects 125,000-175,000 net broadband additions from its TalkTalk operation, and revenue growth to remain “relatively” flat.

It said working capital will remain around £80 million for the year. TalkTalk is expected to generate over £100 million of operating free cash flow during the year.

Carphone plans to open 30-40 larger format ‘wireless world’ stores, as well as five big box Best Buy stores on retail parks.

Dunnstone said: “Best Buy Europe’s plans to enter the consumer electronics market with Big Box stores are progressing well. We are benefiting from the availability of significantly improved sites at considerably lower rental costs, and we aim to launch the initial stores, coupled with a national web offer, by Spring next year.

“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.”

So far, Carphone’s redundancy and reorganisation costs, which saw it earmark 450 head office roles for redundancy, are £8-12 million in the TalkTalk Group and £5-7 million in its Bewst Buy Europe joint venture share.

It said the cuts will see it save £10 million and £50 million in TalkTalk and Best Buy Europe, respectively, before tax.

 

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