Business Watch: Carphone exceeds forecast

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Carphone

Carphone Warehouse’s stores delivered a robust set of Christmas sales figures to the market ahead of its demerger from TalkTalk in March.

Same store revenue in the three months to December 31, 2008, was up 3.7 per cent on a constant currency basis. That’s a sizeable turnaround from the last quarter, when like-for-likes fell by about two per cent at the business – which is now called Best Buy Europe, and is 50 per cent owned by Carphone.

It’s hard to tell yet how the performance compares with the market as the likes on Nokia and Motorola had yet to announce their own figures at the time of writing (more next time).

However, Enders Analysis believes that Carphone is likely to have grabbed market share once again as it expects European handset sales growth was still firmly negative over the period. “We had expected European handset sales to improve by about six percentage points in the December quarter (from -14 per cent to -8 per cent) due to improving year-on-year economic growth, which is more aggressive than Carphone’s improvement, suggesting the recovery may be a little slower than we expected.

“We expect market handset sales to return to positive growth in 2010, further boosting Carphone’s business,” wrote Enders’ analyst Ian Watt.

Such comments will be welcomed by Carphone shareholders, who are keen to see that both the Best Buy JV and TalkTalk can stand alone as attractive investment opportunities.

Carphone chief Charles Dunstone also said he now expects the
company’s share of net income from the Best Buy joint venture to be between £40-£45 million in the year to March. Those figures are well ahead of stockbroker Collins Stewart’s previous estimates. However, the broker was a little more cautious in its assessment than Enders Analysis.

“Best Buy put in a sterling performance in core retail with like-for-like revenues up 5.5 per cent (3.7 per cent on a constant currency basis) versus our expectation for +2 per cent and -1 per cent respectively,” wrote Collins Stewart analyst Morten Singleton.

Singleton added that there was particularly notable strength in the UK numbers, with like-for-like sales up 6.3 per cent. But he also noted overall revenue declined at Best Buy Europe because the German business shifted from a service provision model to a sales model where less revenue is recognised.

“There were also only 3,751 connections – fewer than we were looking for (3,849), but these were clearly higher value (no doubt the iPhone effect),” Singleton said.

Full article in Mobile News issue 456 (February 1, 2010).

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