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Carphone Warehouse plans for split after pre-tax loss

Sprawling company still in 'good shape'

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Carphone Warehouse boss Charles Dunstone has launched a "formal review of the group's corporate structure" which could lead to the breakup of the telecoms group.

Dunstone confirmed a split was possible as the firm unveiled interim results which showed a pre-tax loss and "headline" profits falling across the company's businesses.

The results for the last six months show revenue for the group down two per cent, to £697m, as the broadband market becomes increasingly competitive and the company gets used to owning AOL.

The firm made a pre-tax loss of £11m, compared to last year's loss of £38m. However, it preferred to emphasise earnings before amortization and exceptionals which came in at £47m. And once a gain of £607m from disposals was factored in, it declared net post-tax profits of £601m. It said "headline" post tax profit was £39m compared to £44m last year.

CPW said revenue from the Best Buy Europe venture, which CPW has a 50 per cent share in, is up to £1,617m, but earnings before interest and tax were down 20 per cent to £37m.

The transition from mobile phone supplier to all-things-laptop is taking its toll, with shops clearing old stock to make space for small, cheap, computers and staff getting trained up to join the "geek squad". Not that there are quite so many shops - CPW spent £26m closing 100 stores, though Best Buy Europe spent £50m opening new ones.

The integration of AOL customers saw 93,000 of them disappear. 48,000 of these were just entries in the billing system and the remainder will be migrated onto TalkTalk as quickly as possible.

TalkTalk gets personalised too, with myTalkTalk: a service that will allow punters to pay four quid a month for an additional lump of bandwidth, voice calling or security software, without contractual obligation.

Splitting the company into retail and service provision is certainly on the table, with a "formal review" due to be completed by the end of Spring next year. Any split will still see Dunstone in charge of both halves, though.

"We recognise, however, that the structure of the Group may now no longer be appropriate for the optimal development of the two businesses," he said. "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. In this instance I would remain closely involved with both companies."

Given the uncertainty of the world economy it probably makes sense to sit still for a while and see how things develop. Carphone Warehouse is confident that it has the balance sheet to manage the down-turn and be ready to take advantage of the recovery when it happens.

As Dunstone puts it: "The next 12 months are likely to represent the most challenging economic climate we have ever operated in. With little debt and £900m of facilities, the Group is very well positioned to withstand the financial turmoil." ®

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