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Carphone revenue growth driven by UK performance

Paul Withers
June 26, 2013

UK revenue grows 10 per cent in the year to March 31, with increased market share in both the contract and prepay segments

Carphone Warehouse Europe saw revenues rise 11.5 per cent to £3.69 billion in the year to March 31, driven by like-for-like revenue growth in the UK of 10 per cent.

The retailer said the rise in revenue reflected significant contract growth in its UK business. It added its ‘Smart Deal’ promotions and propositions on key handsets, coupled with investment in store environment and online platforms, have increased its share in both the contract and prepay segments.

Gross margin fell to 24.7 per cent from 28.6 per cent. Carphone said this was due to increased dealer activity, which drives scale benefits but operates at very low gross margins.

Operating expenses decreased by 4.1 per cent year-on-year to £697.8 million. Carphone said this largely reflects the effects of a weaker Euro and the absence of operating expenses from Phone House Belgium, together with the first affect of the Group’s restructuring programme.

Headline EBIT increased from £135 million to £136.6 million with headline EBIT margin reducing from 4.1 per cent to 3.7 per cent.

The retailer also announced that it has finalised the deal to acquire the 50 per cent stake held by Best Buy as part of its European joint venture for £471 million.

Carphone said in the year to March 2014, it expects the consumer environment in Europe to remain challenging. However, it said the widespread development and promotion of 4G may provide a stimulus to the handset replacement cycle and an opportunity for operators to develop pricing structures to reflect higher quality services and higher levels of data consumption.

The retailer is forecasting further like-for-like growth in the contract segment. It also plans to continue to develop the tablet category, both through standalone sales and handset/tablet bundles.

Carphone Warehouse CEO Roger Taylor (pictured) said: “Carphone Warehouse has had another good year, during which we made key strategic moves and delivered on our guidance. In the UK, we have grown our market share in both the postpay and prepay segments through ‘Smart Deals’ and excellent customer service, continuing to build our trusted brand. The acquisition of Best Buy’s 50% share of CPW Europe is now complete and we are excited to regain full control of the business, with the clarity and focus of management that the business deserves.

“Looking ahead, we see many opportunities for which I believe the business is well-positioned, including a continued focus on growing market share, replicating the UK’s excellent operational execution across Europe and delivering on our strategy of bringing our Connected World capabilities to other business partners.”

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