Trading Statement

Carphone Warehouse Group PLC
14 April 2005



Thursday 14 April 2005

Embargoed until 0700 hours

The Carphone Warehouse Group PLC

Fourth Quarter Trading Update

Full year results at the upper end of market expectations


The Carphone Warehouse announces its fourth quarter trading update and guidance
for the year to March 2006.  The group has continued to perform well and we
expect to report profit before tax and earnings per share at the upper end of
the market forecast range for the current year.


Fourth quarter highlights*



  • 16.6% growth in connections to 1.68m
  • 9.9% growth in subscription connections to 0.73m
  • 920,000 TalkTalk UK customers
  • 61.9% growth in switched minutes through Opal, with business traffic
    growth accelerating
  • 37 stores opened, with 1,461 stores at period end
  • 24.3% growth in The Phone House Telecom Germany base to 0.86m



* all connections data is reported on a like-for-like 13 week basis.  Telecoms
customer numbers and Opal traffic are on a calendar month basis.



Guidance for the year to March 2006



  • Confident of continued strong performance
  • Investing £80-90m in capex to enhance long term growth platform
  • 250 new stores planned, including 50 franchise stores
  • Mobile connections growth in line with new space growth
  • TalkTalk UK targeting 2m customers by March 2008


Charles Dunstone, Chief Executive Officer, said:


'We are delighted to report another robust performance across the group.  We
have achieved strong connections growth despite exceptional trading in the
comparative period.  We anticipate that full year profits will be at the upper
end of market forecasts, and are excited about the investment and growth
opportunities in the coming year.'



Distribution

In the fourth quarter connections grew 16.6% to 1.68m as we continued to benefit
from competitive mobile market conditions.  Subscription connections grew 9.9%
to 0.73m, a higher rate of growth than in the third quarter.  Pre-pay
connections (including SIM-free sales) were up by 22.4% to 0.95m.



We opened 37 new stores during the period, taking the total across the group to
1,461.  Of these, 70 are franchise stores.



Our insurance base continued to grow strongly, driven by subscription
connections.  During the period we added 79,000 new customers, taking the base
to 1.65m.



Telecoms Services

Traffic over the Opal network grew by 61.9% to 2.89bn minutes in the quarter.
Excluding TalkTalk, traffic grew by 25.7% to 1.58bn minutes, an improvement on
the rate of growth achieved in the third quarter.


The TalkTalk UK customer base grew by 158,000 to 920,000 in the quarter, as we
continued to grow our market share of the CPS market.  ARPU, margin and customer
acquisition costs were in line with expectations.  Our customer base in our
other European markets now stands at over 170,000.


Our Mobile customer base grew by 14.6% to 2.26m.  This was mainly driven by
continued strong growth at The Phone House Telecom in Germany, where the
subscription customer base is now 0.64m and the pre-pay base is 0.22m.



Outlook and guidance for the year to March 2006

As part of our presentation to analysts and investors today, we will be giving
updated financial guidance for certain business areas in the coming year.  For
the group as a whole we are confident of delivering further strong growth.  The
key elements of this guidance are set out below.



We are optimistic about the prospects for the Distribution business and aim to
build on the rapid store roll-out of the last 12 months by opening a further 250
stores in the coming year.  The UK and Spain will represent the bulk of new
openings but we intend to expand our presence in all our major markets,
including Germany.  Approximately 50 of the new stores will be franchises,
mainly in The Netherlands, Spain and Germany.



We expect mobile connections to grow in line with new space in the coming year,
with similar levels of growth in subscription and pre-pay.  Our confidence to
invest in further rapid physical expansion derives from the continued strong
demand for customers from mobile networks and manufacturers, and our ability to
grow market share.  Our guidance for a broadly flat like-for-like gross profit
outcome is based on a cautious view of the UK consumer outlook and does not
assume rapid acceleration in the replacement cycle from a more aggressive
migration to 3G services.



In Mobile Telecoms Services we expect good profits growth.  The Phone House
Telecom Germany is set to continue its successful strategy of customer
acquisition, supported by a renewed expansion of its distribution platform
through new store openings and the recruitment of new dealers.  Our MVNO
strategy continues to be one of identifying and exploiting market niches, as our
recent launch of Mobile World demonstrates.  Although still a very small
contributor to group profitability, we are excited about the long term prospects
for these new services in several of our markets.



At Opal we expect revenue growth of approximately 15%, driven by organic growth
and the impact of the acquisitions made during the past year.  This growth will,
however, be weighted towards the second half when the effects of last
September's cut in mobile termination rates annualise.  We expect some continued
margin erosion as the market remains competitive and as we invest in new areas
such as business broadband, but are confident of delivering growth in profits.



Our residential broadband service, launched in November, has now attracted
nearly 50,000 subscribers, which is well ahead of our original expectations.  At
present the stand alone economics of broadband remain marginal although there
are benefits from extending our range of services to voice customers.  At the
current runrate we expect to grow the broadband base to 100-150,000 customers by
March 2006, but as the year progresses we will seek to evolve our broadband
strategy to take full advantage of this growth opportunity.



We are very focused on making TalkTalk UK the clear number one alternative in
the residential telecoms market and are targeting 2 million customers by March
2008.  The provision of a workable wholesale line rental product and the
adoption of a more strategic approach to broadband will be central to this goal,
and we will continue to monitor OFCOM's pronouncements on these areas over the
next few months.  Overall we expect a contribution margin on TalkTalk UK
customers of 7-8% after all SAC and marketing costs, and a small loss on our
broadband operations.



Our TalkTalk activities outside the UK continue to grow steadily as we refine
our propositions in each market.  Overall these businesses are likely to make a
small positive contribution to group profitability, with a further strong
performance in Switzerland offset by small losses in other territories.



In order to take advantage of the growth opportunities available to us, we will
continue to make significant investments in capital and people.  As a result we
expect capex for the coming year to be approximately £80-90m, driven
predominantly by investment in IT projects, the store portfolio, and fixed line
network infrastructure.  In turn, we anticipate that support costs and
depreciation will both increase in line with underlying profitability.



Presentation

There is a presentation for investors and analysts on the group strategy and
guidance for the coming year at the offices of Deutsche Bank, 1 Great Winchester
Street, London EC2, starting at 9am this morning.



Next announcement

The group will publish its preliminary results for the year to March 2005 on 7
June 2005.



For Further Information



For analyst and institutional enquiries

Roger Taylor                                  07715 170 090
Peregrine Riviere                             07909 907193


For media enquiries
Vanessa Tipple                                 07947 000 021


Anthony Carlisle (Citigate Dewe Rogerson)      07973 611 888
                                               020 7638 9571

Operating Statistics


•   Connections, mix and store numbers


                                              13 weeks to                14 weeks to 2 April
                                             26 March 2005                      2005
                                             
                                    2005         2004        % change           2005
Connections (000s)
Subscription                             728          663           9.9%                 775
Pre-pay                                  835          694          20.3%                 879
SIM-free                                 113           80          40.6%                 119
Group                                  1,676        1,437          16.6%               1,773

Store numbers
Directly operated                      1,391        1,188          17.1%
Franchises                                70           26         169.2%
Group                                  1,461        1,214          20.3%


                                              52 weeks to                53 weeks to 2 April
                                             26 March 2005                       2005
                                             
                                    2005         2004        % change            2005
Connections (000s)
Subscription                           2,770        2,413          14.8%               2,816
Pre-pay                                3,227        2,520          28.1%               3,272
SIM-free                                 506          417          21.4%                 512
Group                                  6,503        5,350          21.6%               6,600


Customer bases

                                                         As at March 2005

(000s)                                         2005            2004          % change

Insurance                                           1,645           1,324           24.3%
Telecoms Services - Mobile                          2,262           1,973           14.6%
TalkTalk                                              920             385          139.0%



Pro forma switched minutes


                            4th Quarter to March                           Year to March


(m)                   2005         2004        % change        2005          2004           % change
Opal                     1,583         1,260         25.7%         5,451         4,508              20.9%
TalkTalk                 1,303           523        149.0%         4,112         1,009             307.7%
Total                    2,886         1,783         61.9%         9,563         5,517              73.4%










                      This information is provided by RNS
            The company news service from the London Stock Exchange