Carphone shares plunge on cautious outlook

Carphone shares plunge on cautious outlook
By Philip Stafford
Published: June 12 2008 08:37 Last updated: June 12 2008 15:50

Carphone Warehouse shares hit their lowest level in more than two years after the telecoms and retail group sounded a cautious note on mobile phone sales and broadband subscriptions because of the weakening economy.
UK Daily View: Carphone Warehouse’s gloomy outlook

Philip Stafford on the telecoms company’s results
Unveiling a sharp rise in profits for the year to March, Charles Dunstone, chief executive, said he still hoped mobile phone sales would grow 8-10 per cent in the coming year. Mobile sales rose 12 per cent in April, May and June.
However, Mr Dunstone warned that the European handset market “has been flat or marginally down year-on-year” and this could affect Carphone’s growth.
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In the year to March 31, mobile phone sales rose 15 per cent to 11.5m.
Annual revenues from its residential business, which includes broadband, rose 42 per cent to £1bn. However, Mr Dunstone said broadband connections in the new financial year were below expectations, which he blamed on a slowdown in the housing market and increased use of wireless broadband.
“If these trends continue, we expect lower revenue growth this year than previously indicated, compensated by improved margins,” Mr Dunstone said.
The comments caused the shares to fall more than 10 per cent, or 27¾p, to 200p.
Carphone remains keen to expand its broadband business. Roger Taylor, finance director, said that Carphone remained in the auction to buy Tiscali. The Italian internet company indicated in May that the UK group had been excluded from a shortlist of would-be buyers.
Mr Dunstone revealed few details about a proposed joint venture with Best Buy, a US consumer electronics retailer. Carphone expects to send out a prospectus for the proposed deal, which will see it transfer control of its retail business into a 50:50 joint venture, and complete the deal by the end of the month.
The BestBuy deal will be Carphone’s most radical strategic shake-up in its 19-year history, moving it from selling mobile phones and talk plans to selling laptops, broadband packages and a range of consumer electronics.
The shares have fallen by a third since the deal was announced, partly because of concerns about its new strategic direction.
The financial results for the year to March 31 were marginally below consensus forecasts. Sales rose 12 per cent to £4.4bn, while pre-tax profits rose 81 per cent to £124m.
Copyright The Financial Times Limited 2008