Dixons Carphone share price plummets 30 per cent after warning profits are to fall

Oliver Gill
Follow Oliver
Dixons Carphone said a number of factors were making handsets more expensive (Source: Getty)

Dixons Carphone shares tanked this morning after the group warned full-year profits would fall due to a trio of problems.

The firm said customers were hanging onto mobile handsets for longer, it would take a hit from changes to EU roaming charges and income would be spread over a longer period from software sales.

Shares fell almost 20 per cent in early trading and were down more than 29 per cent at the time of writing. Almost £800m was wiped off the firm's market capitalisation within the first hour of trading.

Read more: City analysts blame Brexit for Dixons Carphone share price dive

Full-year profits will fall to between £360m and £440m compared with the £501m posted last year, the firm said in a trading statement.

Chief executive Seb James said:

Over the last few months we have seen a more challenging UK postpay mobile phone market. Currency fluctuations have meant that handsets have become more expensive whilst technical innovation has been more incremental.

Read more: Dixons Carphone double downgrade sends stock tumbling

Dixons Carphone said one-off adjustments to money owed by mobile networks have historically boosted profits.

But because of changes to EU roaming legislation, where customers can use data and minutes in EU countries as they would in the UK, this adjustment will hit in the current year.

"While it is difficult with the limited data currently available to assess the precise impact of these changes, we currently estimate that the net negative effect will be a range of between £10m and £40m this year," said James.

The third problematic area relates to Dixons Carphone's honeybee software. The firm plans to sell the software as required rather than billing customers up front in order to "create a business with more sustainability and higher value in the longer term".

However, James said this approach will "have an impact on this year's reported profitability".

"Last year we sold a significant upfront contract to Sprint which will not be repeated this year, and all our new contracts are following the new model," he added.

Read more: Dixons Carphone celebrates record results despite "challenging" market

Related articles