JVs boost CPW results in H1 2010

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Joint ventures improve Carphone Warehouse Group results in first half to September 30

Carphone Warehouse Group’s joint ventures with Best Buy and Virgin helped the Group’s profitability more than treble in the first half of the 2010/11 financial year to September 30.

While group revenue remained stable at £3 million, group profit after tax increased from £7 million to £25 million, primarily as its share of the Virgin Mobile France JV turned from a £7 million loss in the previous year’s first half into a £6 million gain in 2010/11.

Virgin Mobile France revenue increased from £88 million to £158 million, although subscriber numbers fell to 1.68 million compared to 1.71 million as of March 2010 as the business concentrated on the integration of Tele2.

Carphone Warehouse Group said it expects growth to return as the integration of Tele2 is completed and new sales channels and a broader product offering make the MVNO more attractive to customers.

The Best Buy Europe joint venture, which includes Carphone Warehouse Europe, Best Buy UK and a profit-sharing agreement in Best Buy Mobile US, saw Carphone Warehouse Group’s share of profit increase from £15 million to £19 million year-on-year.

Best Buy Mobile US was a particularly strong performer for the Best Buy Europe JV, with profit growing from £11 million to £43 million over the six months and over 25 per cent more connections, three million in total, put through than the comparable period.

As a result, the Group’s full-year profit share guidance for Best Buy Mobile US has risen from £53-55 million to £85-95 million.

Best Buy UK saw a worsening in its profitability, from a loss of £7 million to a loss of £29 million, although this was cited by Carphone Warehouse Group as being due to continued investment in establishing the ‘Big Box’ stores, IT and e-commerce platforms and other central infrastructure. Four Best Buy UK stores opened during the reported half, with a further two opened by the time it reported its results.

The Group said it expected to see an operating loss of between £50-55 million for the full financial year for Best Buy UK.

Carphone Warehouse Europe profit jumped 56 per cent from £28 million to £44 million, although connection volumes declined, primarily due to a fall in prepay activity due to a lack of smartphones available at lower price points according to the Group, and store numbers fell by six to 2,424 against the total as of March 2010.

As a result of the overall combined performance, Carphone Warehouse Group full-year earnings per share guidance has been increased from 11.5-11.9p to 13.5-14p.

Carphone Warehouse Group chief executive officer Roger Taylor (pictured) said: “We have delivered a strong first half with good performances across all our businesses, and we are raising our guidance for the full year.

“A key growth driver is the increasing popularity of smartphones and customers’ growing interest in the ‘Connected World’, coupled with their recognition of our heritage of expertise and independent advice in explaining complex technologies. In the US, Best Buy Mobile is performing even better than we had expected with Best Buy Mobile’s US market share now around five per cent, compared to around one per cent when the venture started in 2006.

“Customer response to our Best Buy branded ‘Big Box’ stores has been overwhelmingly positive, with the sixth store opening in Derby today (November 5). With yesterday’s launch of its transactional website, Best Buy gains national reach and is able to compete as a truly multi-channel retailer.

“In Virgin Mobile France, we have focused on the integration of Tele2, which is now broadly complete. In the second half, this business will turn its attention back to growing customer numbers.”

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