Carphone hit by slowdown warning

Carphone says its deal with Best Buy gives it a huge opportunity

Carphone Warehouse investors have reacted with a sell-off after the firm warned of lower-than-expected growth in its broadband business.

Its shares closed 11% lower after it warned the slowing housing market would have an impact on revenues.

Carphone has seen a strong rise in annual profits despite the slowdown in the European mobile market.

Pre-tax profits including exceptional items rose 81% to �124m in the twelve months to 29 March.

The number of new mobile connections rose 15% while broadband customers rose by 19% to more than 2.7 million.

But the firm said it was "cautious" about prospects for the year ahead.

It said the sales environment in Europe was "increasingly challenging", with the broadband take-up in the UK since the start of the year lower than expected.

Customer service

Carphone recently announced a major tie-up with US retailer Best Buy which it hopes will transform its growth in the US.

Carphone boss Charles Dunstone said that, by all measures, the firm had had a good year.

We remain cautious in our outlook for the year ahead Charles Dunstone, Carphone Warehouse chief executive

Operational performance had improved "significantly", he said, following increased investment in customer service while the transfer of the bulk of broadband users to the firm's own network had boosted profits.

Excluding one-off charges related to the acquisition of AOL's UK business last year, profits rose by 75% to �216m.

Carphone was well placed to exploit growing demand for mobile data services in the coming year, Mr Dunstone added.

However, he stressed that retail conditions were the toughest seen for "many years".

"We remain cautious in our outlook for the year ahead, given the poor economic climate and inflationary pressures on European consumers," he said.

"We believe that new areas of growth in the market and our own focus on evolving our retail proposition will help us offset some of the risks to consumption presented by the tougher economic environment."

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