Originally published Tuesday, November 18, 2008 at 6:30 AM
Carphone Warehouse 1H profits up, but outlook weak
Carphone Warehouse Group PLC's reported Tuesday a jump in first-half net profit on a one-time gain on asset sales. But shares plunged over 17 percent as the company gave a gloomy forecast and said it might split its profitable landline telephone and broadband business from its retail operations.
AP Business Writer
Carphone Warehouse Group PLC's reported Tuesday a jump in first-half net profit on a one-time gain on asset sales. But shares plunged over 17 percent as the company gave a gloomy forecast and said it might split its profitable landline telephone and broadband business from its retail operations.
Europe's largest mobile phone retailer said net profit for the 26 weeks through Sept. 27 was 601 million pounds ($904 million) - up dramatically from 12 million pounds a year earlier.
The company, which sells the iPhone in Britain, said the rise was the result of a one-time 613 million pound ($922 million) gain from the sale of half of its retail and distribution business.
Profit excluding this exceptional gain, other one-time items and amortization was 39 million pounds ($59 million), down 11 percent from a year earlier. Revenue for the period fell 2 percent to 697 million pounds ($1 billion).
The results were broadly in line with analysts' expectations, but the company's share price plummeted 17 percent to 108 pence ($1.62) because the company also said it was considering demerging its profitable TalkTalk business, and warned that the coming year would be the hardest ever.
Carphone Warehouse said it could split TalkTalk off from its retail business to allow the group's joint venture with U.S. electronics retailer Best Buy Co., which was launched over the summer, to develop separately.
"The structure of the group may now no longer be appropriate for the optimal development of the two businesses," said Chief Executive Charles Dunstone. "The board has therefore initiated a formal review of the group's corporate structure and capital requirements, which may lead to a separation of the two businesses."
The demerging of TalkTalk would be a hit to shareholders, as the unit is performing well. Its first-half earnings before interest, tax, depreciation and amortization were 120 million pounds ($180 million) - 46 percent more than the same period last year.
Dunstone also warned that making money in the coming year would be difficult as shoppers rein in spending amid the economic downturn.
"The next 12 months are likely to represent the most challenging economic climate we have ever operated in," he said.
Copyright © 2008 The Seattle Times Company
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