Carphone Warehouse 2009 Annual Report Download - page 23

Download and view the complete annual report

Please find page 23 of the 2009 Carphone Warehouse annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 98

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98

Directors’ Report –
Business Review
www.cpwplc.com 19
Outlook
The short-term outlook for Best Buy
Europe is inevitably uncertain.
Economies across Europe are set to be
in recession throughout 2009, and we
do not expect the handset market to
be immune to these wider pressures.
We have set our budgets for the year
with this in mind.
Overall we expect revenues to be broadly
at in 2009-10, excluding currency
effects. We estimate that the handset
market will fall slightly but that we will
continue to make market share gains,
with connections approximately at.
In addition, the evolution of the retail
proposition should see an increasing
proportion of non-connection related
revenue within the mix, with the result
that from the following year, connections
will become a less reliable proxy for
revenue growth.
We expect gross margin to decline by
25-50 basis points. This reects a
continuation of our trading strategy
and further increases of hardware sales
within the revenue mix. However, the
cost saving programme which we
have undertaken during 2008-09 is
expected to offset the impact of the
gross margin deterioration at the
EBITDA level.
We are planning for a minimal increase
in the overall store count. Our focus will
be on further developing the retail
proposition and opening 30-40 of our
new, mid-sized format stores. This
should result in around 1-2% growth
in average space for the year.
Our plans for the Big Box store openings
will accelerate through the year and will
result in start-up costs of approximately
£30m, in line with the gure we indicated
in October 2008. This primarily reects
the costs of the team, research and
consultancy fees and the pre-opening
rents on the new stores.
Best Buy Mobile is set to grow prots
strongly in the coming year, enjoying a
full year’s trading out of all Big Box stores
and further standalone store openings.
Best Buy Europe’s share of prots is
expected to rise to £20-25m.
The impact of all of these effects is
expected to result in an EBIT margin of
2.5-3.0%. The Group’s share of the taxed
prots of the division is anticipated to be
in the £30-40m range.
Cash ow for the division will be a major
focus for the year and we are targeting
an operating free cash ow gure of
£50m, after Big Box investments and
start-up costs. Capex for the core
business is set to fall with the decline in
new store openings, and we aim to
reduce working capital outow materially
year-on-year.
Longer term, the outlook is very positive.
Tough trading conditions are effective at
taking out spare capacity and our
competitive position is improving. We
have made signicant progress in
developing our retail model, and see
good prospects of material prots
growth from Best Buy Mobile and Best
Buy Big Box stores in the UK over the
next ve years.
Mobile Life Report 2008
We established Mobile Life in 2006
to better understand the impact of
mobile phones on our customers’
daily lives. Mobile Life provides our
business with invaluable insights
which enable us to respond better
to our customers’ needs across the
business, to deliver better product
solutions, to improve advice, and to
provide superior customer care.
For the full document visit:
www.cpwplc.com