EE phone home, JJB out of puff

Everything Everywhere posts results worth phoning home about, while JJB lags behind rival Sports Direct in the race for high street sports spend.

by Rebecca Burn-Callander
Last Updated: 20 Feb 2014

The future is certainly bright for the owner of the T-Mobile and Orange mobile networks. In the three months to 31 December, Everything Everywhere sold 313,000 new contracts, mostly off the back of the smartphone frenzy. Data-happy consumers are upgrading old handsets faster than you can say, ‘iPhone 4S’.

The best deals on mobile data (downloads, browsing, streaming etc) are usually found on contracts – otherwise your surfing habit could cost you dear. But for Everything Everywhere, these pay-monthly contracts are three times more profitable than pay-as-you-go. As a result, EBITDA margins for the full year stand at over 20%. ‘We are seeing good commercial momentum and are capitalising on the smartphone and data opportunity to drive underlying growth,’ says CEO Olaf Swantee.

It’s a fine old turnaround for the company, which axed 550 jobs across the UK last year to try and get back into the black. Net savings notched up as a result of these cost-cutting measures? £278m last year. But there are signs that while the Orange and T-Mobile networks are in good financial health, their customer service record has received a few black marks of late. Orange, in particular, came bottom of the list in a recent Which? survey.

Still, MT bets JJB wishes it had that kind of cash in the bank, customer complaints or no. The sports goods retailer has reported a 5.7% decline in like-for-like sales for the five weeks to the end of its financial year on January 29. Over 2011 as a whole, revenues are down 13.1%, better than its 2010 showing, but worse that its promised ‘low single-digit percentage growth’ – a promise that saw investors plumb £65m into the firm in the middle of last year.  

But while turnover is falling, profits are edging up. The ‘mass discounting’ strategy has been junked, and gross profit margins show a like-for-like rise of 32.1% over the period. Sales of Olympics-inspired goods could also boost earnings by around 10% this year, but it’s not nearly enough to reverse the decline. Numis Securities, JJB house broker, anticipates its full-year loss will hit around £54m.
But every sector is seeing polarised winners and losers in this financial climate. JJB rival, Sports Direct, is definitely a winner. Last week it posted third-quarter profits of £184.4m, up 10% on its £167.3m earnings in 2010. While EE’s fellow mobile network leviathan Vodafone took a hit from the weak euro in its third-quarter results. Just a few tiny tweaks in strategy make all the difference at the moment – as many firms are learning the hard way.

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