Carphone shares dip in property plunge

Jun 13 2008 by Alistair Houghton, Liverpool Daily Post

SHARES in Carphone Warehouse took a pummelling on the stock market yesterday after the company warned of lower-than-expected growth in its Warrington-based Talk Talk broadband business.

Shares in the company fell by as much as 19% – touching their lowest level since October, 2005 – as it scaled back revenue forecasts due to the impact of the slowing housing market.

Carphone, which has more than 2.7m residential broadband customers, said the number of new accounts since April was lower than forecast and the company said it was taking a “cautious” view of the year ahead.

It also blamed higher mobile broadband sales for the trend, but said the dip would be offset “to some extent” by fewer customers switching as its service improves.

Landsbanki analyst Kevin Ashton said: “We still think Carphone Warehouse will remain pressured by the difficult market conditions.”

The group, which employs more than 1,200 people at its Warrington site, is the UK’s third largest broadband provider behind BT and Virgin Media, helped by its £380m acquisition of AOL UK.

Carphone’s share price closed down 11% at £2.02.

Its pre-tax profit for the year to March 29 was £216m, 75% ahead of the previous year and in line with its previous guidance of between £215m and £220m.

But the blow to top-line revenue comes after the company disappointed City expectations for broadband customer growth in its last update.

Carphone added 442,000 broadband customers last year – a gain of 19% – which gives it a 17% share of the UK market.

It is focused on its broadband and fixed-line business following a £1.1bn deal with US consumer electronics business Best Buy announced last month, to create a new pan-European electrical goods retail chain.

The US company will take a 50% stake in Carphone’s high street chain, which has more than 2,400 stores. Underlying earnings from the retail business were up 5% to £277m, Carphone said.

Chief executive Charles Dunstone said the tie-up was a “phenomenal” opportunity for the group, which left it “well- placed for a tougher consumer and trading environment”.

alistairhoughton