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The Carphone Warehouse Interim Results 2003

The Carphone Warehouse Interim Results 2003. 4.11.03. First Half Review. Charles Dunstone, CEO. Financial highlights. 66.7% growth in Turnover (ex Wholesale) to £723.3m Organic growth of 23.7% 68.8% growth in pre-tax profits to £20.3m 61.1% growth in earnings per share to 1.74p

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The Carphone Warehouse Interim Results 2003

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  1. The Carphone WarehouseInterim Results 2003 4.11.03

  2. First Half Review Charles Dunstone, CEO

  3. Financial highlights • 66.7% growth in Turnover (ex Wholesale) to £723.3m • Organic growth of 23.7% • 68.8% growth in pre-tax profits to £20.3m • 61.1% growth in earnings per share to 1.74p • 15.5% LFL retail revenue growth and 10.1% LFL retail gross profit growth • 62% of group contribution from recurring revenues • Interim dividend of 0.4p per share

  4. Retail • 1,175 stores with 35 net new stores opened year-to-date • Now targeting 80 for full year • 21.0% growth in revenues to £401.2m • 12.6% growth in contribution to £27.3m • Total connections growth of 16.4%, subscription growth of 20.8% • Ongoing revenues up 52.5% to £19.4m

  5. European footprint Germany Retail - 80 stores Insurance Ongoing SP - 649k customers UK Retail - 486 stores Insurance Ongoing MVNO – 175k customers FMS – 458k customers Fixed line Ireland Retail -30 stores Insurance Ongoing Sweden Retail - 53 stores Insurance Ongoing The Netherlands Retail - 84 stores Insurance Ongoing Belgium Retail - 40 stores Insurance Ongoing Czech Republic Retail - 19 stores France Retail - 171 stores Insurance Ongoing FMS – 600k customers Switzerland Retail - 24 stores Insurance Ongoing Total customers under management : 1,882k Portugal Retail - 46 stores Insurance Ongoing Spain Retail - 142 stores Insurance Ongoing

  6. Telecoms Services - Fixed • 94.8% growth in switched minutes, year-on-year • Opal has a c. 20% market share of net new CPS lines each month Opal switched minutes Opal’s share of CPS market Minutes (millions)

  7. talktalk • talk70™ still the cheapest • Activity in H1: • 140,000 customers • c.50 million calls • 216m minutes • >£2m savings over BT Monthly ARPU £ Figures based on average talk70 bill for July 2003. Assumes full Calling Circle take-up.

  8. Financial Performance Roger Taylor - CFO

  9. Summary performance (£m) • 66.7% growth in turnover (ex Wholesale) • 65.8% growth in EBIT • 107.4% growth pre talktalk losses Group Turnover Group EBIT £861.2m £22.1m £825.5m £13.3m

  10. Distribution

  11. Retail

  12. Group connections (000’s) • Mix improved to 47.4% from 45.7% • Subscription connections growth of 20.8%, 24.0% in Q2 • Average connections per store rose by 13.3% from 1,639 to 1,857 2,238 1,922

  13. Revenue & gross profit per connection • RPC in subscription and pre-pay has risen • Upgrade mix has had an effect on subscription gross profit • Mix now stabilising • Increasing switch to Ongoing Average Revenue per Connection Average Gross Profit per Connection

  14. Upgrades mix • Mix has moved from c. 30% upgrade to 40% in H1 03, but stabilised in Q2

  15. Retail platform • 35 net new stores opened year to date • Opening programme accelerating in coming months • Shortage of sites at reasonable rents • Figures include 15 franchise stores (H1 2002: 6 franchises) No. of stores at period end Average selling space for period (metres) Sales per sq m (£)

  16. Online • Strong subscription mix • Margin impact of affinity deals

  17. Insurance • Customer base grew by 12.8% • Continuing strong growth in non-UK base • Contribution margin improving from better claims trends • Average annual premium rose 10% to £66 • Third party opportunities Customers (000s)

  18. Ongoing • Strong performance driven by subscriptions growth and increasing trend towards ongoing agreements • Anticipating H2 flat on H1 • H1 assisted by market share triggers

  19. Retail/Online/Ongoing combined performance • Strong growth in ongoing offsetting the margin reduction in Retail • Ongoing a higher quality earnings stream

  20. Wholesale • New laws on joint and several VAT liability have curtailed activity • Now unlikely to re-enter wholesale trading market in foreseeable future • Voucher distribution and trade-in handset businesses continue

  21. Telecoms Services

  22. Telecoms Services - Mobile • Hutchison performing ahead of expectations so far • Good SAC and ARPU trends • Underlying profitability affected by loss of SFR base in March

  23. Telecoms Services - Mobile: Customers (000s) • Good organic growth in Voda/O2 base

  24. Telecoms Services - Fixed: Opal • Outstanding performance since acquisition • Year-on-year revenue growth of 52.4% • Contribution margin ahead of expectations • Capex budget raised to accelerate network build-out

  25. Opal target markets • Directly Billed Customers • Represents 60% of Opal contribution (62% 2002) • New connections come from a sales force of over 80 • Corporate and SME focus • Offer differentiated products • Reseller Customers • Represents 32% of Opal contribution (27% 2002) • Over 150 active resellers • Resellers choose Opal for network efficiency, pricing and support • Premium Rate Services

  26. Are margins sustainable? • The market is competitive and there will always be pressure on prices • Opal’s margins have remained constant – why? • Opal continues to extend network interconnect into BT’s network, aiming to have 40% of calls through local exchanges by ‘03/04 and 70% by ’04/05 • Local exchanges are 27% cheaper than trunk exchanges • Opal benefits from the annual determination of BT termination rates by Oftel • BT cannot make selective offers to preferred customers

  27. Telecoms Services - Fixed: talktalk • SAC per customer £18.3 – expected to rise in H2 • talktalk expected to reach break even runrate by March 2004

  28. Contribution from recurring revenues (£m) • Recurring revenues accounted for 62% of group contribution in H1,up from 48% in H1 2002

  29. Non-UK contribution (£m) • 43% organic growth in non-UK contribution

  30. Reconciliation to headline PAT and EPS

  31. Cash Flow (£m)

  32. Summary • 67% growth in turnover driven by 20% subscription growth • 32% growth in sales per sq. ft over last 2 years • Operational leverage in Retail and Opal • Recurring revenues at 62% of group contribution and 71% up year on year • talktalk demonstrating strong pre-SAC operating margin • European contribution growth of 64.6% • 61% growth in headline EPS • Operating cash flow generation of £36.6m vs £30m outflow last year

  33. Outlook

  34. Handset market Samsung P400 Nokia 6600 Motorola MPX200 Nokia 7600 Sony Ericsson P900

  35. Competition is intensifying

  36. Xmas 2003 (Blowout) Expected Xmas 2003 Xmas 2002 Handsets could be in short supply Possible Promised Confirmed / In stock

  37. Appendices

  38. Group connections (000’s) 2,238 1,922 1,537

  39. Connections by country (000s)

  40. Store data

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