The Carphone WarehouseInterim Results 2003

4.11.03

First Half Review

Charles Dunstone, CEO

Financial highlights

• 66.7% growth in Turnover (ex Wholesale) to £723.3m

• Organic growth of 23.7%

• 68.8% growth in pre-tax profits to £20.3m

• 61.1% growth in earnings per share to 1.74p

• 15.5% LFL retail revenue growth and 10.1% LFL retail gross profit

growth

• 62% of group contribution from recurring revenues

• Interim dividend of 0.4p per share

Retail

• 1,175 stores with 35 net new stores opened year-to-date

• Now targeting 80 for full year

• 21.0% growth in revenues to £401.2m

• 12.6% growth in contribution to £27.3m

• Total connections growth of 16.4%, subscription growth of 20.8%

• Ongoing revenues up 52.5% to £19.4m

European footprint

SwedenRetail - 53 storesInsuranceOngoing

Czech RepublicRetail - 19 stores

SwitzerlandRetail - 24 storesInsuranceOngoing

PortugalRetail - 46 storesInsuranceOngoing

FranceRetail - 171 storesInsuranceOngoingFMS – 600k customers

UKRetail - 486 storesInsuranceOngoingMVNO – 175k customersFMS – 458k customersFixed line

IrelandRetail -30 storesInsuranceOngoing

SpainRetail - 142 storesInsuranceOngoing

The NetherlandsRetail - 84 storesInsuranceOngoing

BelgiumRetail - 40 storesInsuranceOngoing

GermanyRetail - 80 storesInsuranceOngoingSP - 649k customers

Total customers under management : 1,882k

Telecoms Services - Fixed

• 94.8% growth in switched minutes, year-on-year

• Opal has a c. 20% market share of net new CPS lines each month

Opal’s share of CPS market

0

50

100

150

200

250

300

350

400

450

500

Jan-

02

Mar

-02

May

-02

Jul-0

2

Sep-0

2

Nov-0

2

Jan-

03

Mar

-03

May

-03

Jul-0

3

Sep-0

3

Opal talktalk

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Nov-02

Dec-02

Jan-03

Feb-03

Mar-03

Apr-03

May-03

Jun-03

Jul-03

Aug-03

Sep-03

0%

5%

10%

15%

20%

25%

30%

Net new lines Share of net new lines

Opal switched minutes

Min

ute

s (m

illio

ns)

talktalk

• talk70™ still the cheapest

• Activity in H1:

• 140,000 customers

• c.50 million calls

• 216m minutes

• >£2m savings over BT

Figures based on average talk70 bill for July 2003. Assumes full Calling Circle take-up.

13.8715.36 15.5

16.73 17.08

23.67

0

5

10

15

20

25

talk70 Tele2 TescoTalk

BTTogether

ReachHomecall

One.TelStandard

£

Monthly ARPU

Financial Performance

Roger Taylor - CFO

H1 '02 H1 '03

Telecoms

Wholesale

Distribution

H1 '02 H1 '03

Telecoms

Wholesale

Distribution

Group Turnover

£825.5m£861.2m

Summary performance (£m)

• 66.7% growth in turnover (ex Wholesale)

• 65.8% growth in EBIT

• 107.4% growth pre talktalk losses

£22.1m

£13.3m

Group EBIT

Distribution

£m H1’03 H1’02 % Change

Turnover 482.9 393.0 22.9%

Contribution 60.1 47.0 27.8%

Support Costs (28.3) (26.7) 5.9%

EBITDA 31.8 20.3 56.4%

Depreciation (14.5) (12.4) 17.3%

EBIT 17.3 7.9 117.4%

EBIT % 3.6% 2.0%

Retail

£m H1’03 H1’02 % Change LFL %

Turnover 401.2 331.6 21.0% 15.5%

Gross Profit 119.7 104.1 15.0% 10.1%

Gross Margin % 29.8% 31.4%

Direct Costs (92.4) (79.9) 15.7%

Contribution 27.3 24.2 12.6%

Contribution % 6.8% 7.3%

878 1,060

846964

198

214

H1 '02 H1 '03

SIM-free

Pre-pay

Subscription

• Mix improved to 47.4% from 45.7%

• Subscription connections growth of 20.8%, 24.0% in Q2

• Average connections per store rose by 13.3% from 1,639 to 1,857

1,9222,238

Group connections (000’s)

Revenue & gross profit per connection

290.7

100.1

183.8

298.9

101.2

190.7

Subscription Pre-pay Average

H1 '02

H1 '03

Average Revenue per Connection

• RPC in subscription and pre-pay has risen

• Upgrade mix has had an effect on subscription gross profit

• Mix now stabilising

• Increasing switch to Ongoing

94.8

28.7

57.7

90.8

28.9

56.9

Subscription Pre-pay Average

H1 '02

H1 '03

Average Gross Profit per Connection

Upgrades mix

• Mix has moved from c. 30% upgrade to 40% in H1 03, but stabilised in Q2

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

H1 '02/03 H2 '02/03 Q1 '03 Q2 '03

Upgrade

New sub

62,28465,094

H1 '02 H1 '03

• 35 net new stores opened year to date

• Opening programme accelerating in coming months

• Shortage of sites at reasonable rents

• Figures include 15 franchise stores (H1 2002: 6 franchises)

No. of stores at period end Average selling space for period (metres)

Sales per sq m (£)

Retail platform

5,324

6,163

H1 '02 H1 '03

1,1171,175

H1 '02 H1 '03

Online

• Strong subscription mix

• Margin impact of affinity deals

£m H1 ‘03 H1 ‘02 % Change

Connections (000s) 134 119 13.1%

Turnover 26.5 19.7 34.5%

Contribution 1.6 1.4 15.3%

Contribution % 6.1% 7.1%

Insurance

• Customer base grew by 12.8%

• Continuing strong growth in non-UK base

• Contribution margin improving from better claims trends

• Average annual premium rose 10% to £66

• Third party opportunities

£m H1 ‘03 H1 ‘02 % Change

Turnover 35.8 29.0 23.4%

Contribution 11.8 8.7 35.9%

Contribution % 32.9% 29.9%

663 726

355424

H1 '02 H1 '03UK Non-UK

Customers (000s)

Ongoing

• Strong performance driven by subscriptions growth and increasing

trend towards ongoing agreements

• Anticipating H2 flat on H1

• H1 assisted by market share triggers

£m H1 ‘03 H1 ‘02 % Change

Turnover & Contribution 19.4 12.7 52.5%

Retail/Online/Ongoing combined performance

• Strong growth in ongoing offsetting the margin reduction in Retail

• Ongoing a higher quality earnings stream

£m H1 ‘03 H1 ‘02 % Change

Turnover 447.1 364.0 22.8%

Gross profit 144.6 121.2 19.2%

Gross margin % 32.3% 33.3%

Contribution 48.3 38.3 25.9%

Contribution % 10.8% 10.5%

Wholesale

• New laws on joint and several VAT liability have curtailed activity

• Now unlikely to re-enter wholesale trading market in foreseeable future

• Voucher distribution and trade-in handset businesses continue

£m H1 ‘03 H1 ‘02 % Change

Turnover 102.2 427.5 (76.1)%

Contribution 1.0 5.1 (80.7)%

Support Costs (1.1) (0.9) 18.5%

EBITDA (0.1) 4.2 n/a

Depreciation (0.6) (0.4) 34.7%

EBIT (0.7) 3.8 n/a

EBIT % (0.7)% 0.9%

Telecoms Services

£m H1 ‘03 H1 ‘02 % Change

Turnover 240.5 40.8 489.7%

Contribution 17.8 7.1 150.9%

Support Costs (7.8) (3.8) 107.3%

EBITDA 10.0 3.3 199.8%

Depreciation (4.5) (1.7) 158.3%

EBIT 5.5 1.6 245.3%

EBIT % 2.3% 3.9%

Telecoms Services - Mobile

£m H1 ‘03 H1 ‘02 % Change

Turnover 128.2 40.8 214.4%

Ex-Hutchison 47.3 40.8 15.9%

Contribution 9.8 7.1 38.2%

Ex-Hutchison 6.0 7.1 (15.3)%

Contribution % 7.7% 17.5%

• Hutchison performing ahead of expectations so far

• Good SAC and ARPU trends

• Underlying profitability affected by loss of SFR base in March

Telecoms Services - Mobile: Customers (000s)

• Good organic growth in Voda/O2 base

135

649345

458

600

600

1234055

H1 '02 H1 '03

Fresh Sainsburys SFR HTG Voda/02 Orange

Telecoms Services - Fixed: Opal

£m H1 ‘03 H1 ‘02 % Change

Turnover 105.8 - -

Contribution 13.6 - -

Contribution % 12.8% - -

• Outstanding performance since acquisition

• Year-on-year revenue growth of 52.4%

• Contribution margin ahead of expectations

• Capex budget raised to accelerate network build-out

Opal target markets

• Directly Billed Customers

• Represents 60% of Opal contribution (62% 2002)

• New connections come from a sales force of over 80

• Corporate and SME focus

• Offer differentiated products

• Reseller Customers

• Represents 32% of Opal contribution (27% 2002)

• Over 150 active resellers

• Resellers choose Opal for network efficiency, pricing and support

• Premium Rate Services

Are margins sustainable?

• The market is competitive and there will always be pressure on

prices

• Opal’s margins have remained constant – why?

• Opal continues to extend network interconnect into BT’s network, aiming

to have 40% of calls through local exchanges by ‘03/04 and 70% by

’04/05

• Local exchanges are 27% cheaper than trunk exchanges

• Opal benefits from the annual determination of BT termination rates by

Oftel

• BT cannot make selective offers to preferred customers

Telecoms Services - Fixed: talktalk

£m H1 ‘03 H1 ‘02 % Change

Customers 140,000

Turnover 6.4 - -

Gross profit 2.9 - -

Gross margin (%) 45.3% - -

Operating profit 1.8 - -

Operating margin (%) 27.8% - -

SAC and marketing (7.3) - -

Contribution (5.5) - -

• SAC per customer £18.3 – expected to rise in H2

• talktalk expected to reach break even runrate by March 2004

Contribution from recurring revenues (£m)

• Recurring revenues accounted for 62% of group contribution in H1,up from

48% in H1 2002

19.4

8.7

8.0

12.7

11.87.1

9.8

H1 '02 H1 '03

Ongoing Insurance Mobile Fixed

Non-UK contribution (£m)

• 43% organic growth in non-UK contribution

17.5

28.8

11.9

H1 '01 H1 '02 H1 '03

Reconciliation to headline PAT and EPS

£m H1 2003 H1 2002 % Growth

Total Contribution 78.9 59.3 33.1%

Support Costs (37.2) (31.4) 18.5%

EBITDA 41.7 27.9 49.6%

Depreciation (19.6) (14.6) 34.7%

Interest (1.8) (1.3) 38.5%

Normalised PBT 20.3 12.0 68.8%

Tax (5.1) (3.0) 68.7%

Profit After Tax (PAT) 15.2 9.0 68.9%

Headline EPS 1.74 1.08 61.1%

Exceptional items (4.7) 13.2

Cash Flow (£m)

£m H1 2003 £m H1 2002 £m

EBITDA 41.7 27.9

Working capital, tax and interest (8.9) (55.4)

Capex (ex new stores) (14.5) (11.7)

Free cash flow 18.3 (39.2)

New store capex (3.6) (4.3)

Acquisitions (31.0) (0.1)

Support Centre - 36.6

Dividends (8.7) -

(25.0) (7.0)

Opening funds 29.1 34.6

FX movements (1.2) -

Closing funds 2.9 27.6

Summary

• 67% growth in turnover driven by 20% subscription growth

• 32% growth in sales per sq. ft over last 2 years

• Operational leverage in Retail and Opal

• Recurring revenues at 62% of group contribution and 71% up year

on year

• talktalk demonstrating strong pre-SAC operating margin

• European contribution growth of 64.6%

• 61% growth in headline EPS

• Operating cash flow generation of £36.6m vs £30m outflow last year

Outlook

Handset market

Nokia6600

Nokia7600

Sony EricssonP900

SamsungP400

MotorolaMPX200

Competition is intensifying

Christmas ‘02 Christmas ’03

Cheapest pre-pay £69.99 £39.99

Cheapest pre-pay colour £199.99 £69.99

Nokia 7210 on postpay £99.99 FREE

Integrated camera phone £99.99 on postpay £99.99 on pre-pay

Inclusive x-net minutes on £25 tariff 100 500

Handsets could be in short supply

Possible

Promised

Confirmed / In stock

Xmas 2003 (Blowout)

Expected Xmas 2003

Xmas 2002

Appendices

8331,058 1,147

704

864

1,091

H1 '01 H1 '02 H1 '03

Europe

UK

1,922

2,238

Group connections (000’s)

1,537

Connections by country (000s)

0

200

400

600

800

1000

1200

2002

2003

Store data

Country

UK

Belgium

Czech Republic

France

Germany

Ireland

The Netherlands

Portugal

Spain

Sweden

Switzerland

March ’03

475

41

19

169

81

29

80

44

130

51

21

Opened

21

-

-

4

8

1

4

4

15

3

3

Closed/Relocated

(10)

(1)

-

(2)

(9)

-

-

(2)

(3)

(1)

-

Sept ’03

486

40

19

171

80

30

84

46

142

53

24

Total 1,140 63 (28) 1,175