REG-Carphone Warehouse Trading Statement
Released: 02/04/2007
RNS Number:1885U
Carphone Warehouse Group PLC
02 April 2007
Monday 2 April 2007
For immediate release
The Carphone Warehouse Group PLC
Fourth Quarter Trading Update
Full year outcome in line with market expectations
The Carphone Warehouse is today announcing headline KPIs for its Distribution
and Fixed Line operations for the 13 weeks to 31 March 2007, and giving initial
headline guidance for the year to March 2008. Full KPIs for the quarter and
detailed guidance for the coming year will be announced as part of the
forthcoming analysts' day on 24 April 2007.
13 weeks to 31 March 2007
- Subscription connections up 14.0% to 1.02m
- Total connections up 8.3% to 2.41m
- 2.27m broadband subscribers, with 702,000 on unbundled lines
- 1,024 exchanges unbundled, two months ahead of schedule
- Full year pre-tax profits expected to be in line with current market
expectations
Year to March 2008
- In advanced discussions with Best Buy for the further development of Best
Buy Mobile in the US and Geek Squad in the UK
- Further investment in brand development and customer recruitment for
Virgin Mobile France
- Likely combined incremental impact of approximately £10-15m in joint
venture start-up costs
- Additional broadband customer service costs of £10-15m expected to be
incurred
- All other broadband economics in line with original guidance
Charles Dunstone, Chief Executive Officer, said:
"In the mobile market, the strength of our proposition means we have continued
to increase sales and market share. As a result, despite the expected slower
growth in the overall handset market, particularly in the pre-pay segment, we
continue to show good growth year-on-year, despite last year's very strong
comparables.
"In our broadband business, we have made excellent progress both on the rate of
customer migration to unbundled lines, and the roll-out of our network of
unbundled exchanges. The delays we reported in migration earlier in the year
mean we are still a little behind our original business plan; but the current
momentum of customer recruitment and migration gives us confidence that we will
make up the lost ground by the summer. In our programme of unbundling
exchanges, we have exceeded our initial target of unbundling 1,000 exchanges two
months ahead of schedule.
"We also continue to invest in customer service as we work to further build the
service levels at TalkTalk following the problems we incurred at launch. As
ever, our goal is not to maximise immediate profitability if it compromises the
customer experience, but rather to protect the brand and proposition for the
longer term. In all other respects, the economics of our broadband business
remain in line with our original guidance.
"In our new joint ventures with Best Buy, our mobile retail trial in the US has
continued and the promising results have led us to invest further in the Best
Buy Mobile concept with our US partners. The initial reception to our Geek
Squad launch has been similarly encouraging and we see this service as a natural
bridge between our core retail proposition and our broadband service. Although
no formal agreement has yet been reached, we are in the advanced stages of
agreeing the next phase of our joint venture plans with Best Buy, with an
inevitable impact on start-up costs."
Distribution
Group connections were up 8.3% to 2.41m during the period. Subscription
connections rose 14.0% to 1.02m despite a patchy market, with our strong
customer proposition delivering further market share gains. As predicted, the
pre-pay market slowed noticeably after 18 months of extraordinary growth. A
lack of new handsets during the period contributed to the slower growth, but we
expect a number of exciting product launches in the coming months to
reinvigorate demand.
Fixed Line
We finished the period with 2.27m broadband customers across TalkTalk and AOL.
We made good progress with TalkTalk Free Broadband during the quarter. The rate
of sign-ups picked up materially from the middle of February in response to a
more targeted marketing campaign and renewed consumer confidence in the service.
The process of migrating customers to unbundled lines has improved in recent
weeks and as a result we have been able to increase the rate of line migration
significantly. At the end of March we had 375,000 TalkTalk customers on fully
unbundled lines and 327,000 AOL customers on partially unbundled lines. In
March alone we successfully migrated 120,000 TalkTalk customers to our own
network.
We have begun the integration of AOL and will provide a detailed update on
progress in the upcoming analysts' day.
Year to March 2008
Ahead of our detailed guidance for the coming year on 24 April, we are
announcing two changes to previous guidance. Customer service costs in the
TalkTalk Free Broadband business will continue to run ahead of the original
business plan for much of the coming year. However, we are confident that by
the end of the financial year, the increasing scale of our customer base and the
ongoing improvement in our processes will be delivering unit customer service
costs in line with our original plans. As a result we expect additional
customer service costs of £10-15m in the coming year. All other broadband
economics are anticipated to be in line with our original guidance.
During the year we announced two collaborations with Best Buy Co., Inc, the US
consumer electronics retailer. Our Geek Squad operation in the UK launched
recently, and our Best Buy Mobile trial in the US has been running for four
months, with promising results. We are now in advanced discussions with Best
Buy to put these initiatives onto a more formal commercial footing, with
concomitant higher levels of investment. In addition, we plan to invest further
in brand development and customer recruitment in our Virgin Mobile France joint
venture. Overall, we expect to invest an incremental £10-15m of start-up costs
in these new growth opportunities in the year ahead.
Conference call
There will be a conference call for investors and analysts at 10.00 am this
morning. The dial-in number is +44 20 8611 0015, or Freephone 1866 432 7175
for US callers. A replay will be available for seven days, for which the
dial-in number is +44 20 8196 1998, or 1866 583 1035 for US callers, and the
code is 906424.
Next trading update
The next trading update will be on 24 April 2007, when we will give a full
strategy update and detailed guidance for the coming year.
For Further Information
For analyst and institutional enquiries
Roger Taylor 07715 170 090
Peregrine Riviere 07909 907193
For media enquiries
Michelle Parrish 07736 074 579
Anthony Carlisle 07973 611 888
Citigate Dewe Rogerson 020 7638 9571
Headline KPIs
Connections
13 weeks to
31 March 2007
2007 2006 % change
Connections (000s)
Subscription 1,017 892 14.0%
Pre-pay 1,237 1,213 2.0%
SIM-free 156 121 29.1%
Group 2,410 2,226 8.3%
52 weeks to
31 March 2007
2007 2006 % change
Connections (000s)
Subscription 4,016 3,423 17.3%
Pre-pay 5,428 4,252 27.7%
SIM-free 571 516 10.7%
Group 10,014 8,191 22.3%
Fixed Line Customers (000s)
As at
31 March 2007
Broadband
AOL 1,535
TalkTalk Free 655
TalkTalk Existing 81
Total 2,271
Of which unbundled
AOL (partial) 327
TalkTalk (full) 375
Total 702
Voice
AOL 125
TalkTalk Free 740
TalkTalk Existing 1,860
Total 2,725
AOL Narrowband 505
This information is provided by RNS
The company news service from the London Stock Exchange
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