Dixons Carphone has cancelled its dividend as poor mobile sales during lockdown pushed it to another annual loss, prompting its share price to sink today.
Shares sank 7.8 per cent in early trading as a jump in online sales failed to offset a 20 per cent plunge in mobile sales during lockdown.
Dixons Carphone slumped to a £140m loss in its 2019/20 financial year, it revealed today. That was £119m less than the loss it made the previous year, as mobile store closure costs weighed down its bottom line.
And adjusted profit before tax halved to £166m year on year for the 12 months to 2 May. Dixons blamed mobile performance and coronavirus closures for the poor performance.
Revenue ticked up one per cent to £10.2bn. But Dixons Carphone’s struggling UK Mobile division booked another loss, sinking to a £282m loss after a £438m loss the previous year.
After an interim dividend of 2.25p per share (£26m total) in January, Dixons’ board today opted not to pay a final dividend.
Free cash flow dropped 29 per cent to £109m while net debt increased from £265m to £284m year on year.
Why it’s interesting
An 11 per cent surge in online sales of Dixons Carphone’s electricals products failed to offset a 20.4 per cent drop in mobile revenue owing to the near-three-month lockdown.
And the British retailer said it will review future shareholder payouts as it also declined to offer an outlook on future trading.
CEO Alex Baldock has previously said he would turn Dixons Carphone around by 2022, saying it was “nowhere near” delivering on its potential.
However, coronavirus has exacerbated the retailer’s problems. And shortly after lockdown began, Dixons lost its partnership with O2 after the mobile operator refused to accept new trading terms. Dixons has taken a percentage of the sale of any O2 handsets from its Carphone Warehouse stores over the last two decades.
Michael Hewson, chief market analyst at CMC Markets, said the share sell-off this morning was overly dramatic despite Dixons’ mobile losses.
“While losses have reduced, and the outlook set to remain uncertain, the shares have slipped sharply in early trade,” he said. “However all other areas of the business performed quite well, which suggests that investors might be overreacting to the losses in the mobile division, which Dixons is pulling away from in any case.”
What Dixons Carphone said
CEO Alex Baldock said: “The first 10 months of the year was a story of delivering on our promises and accelerating the transformation of Dixons Carphone. We gained market share online as well as in stores, grew Credit and Services, drove big improvements in customer satisfaction, took difficult but essential decisions such as closing our UK standalone mobile stores, and were on track to meet financial expectations.
“With Covid-19, our immediate priorities abruptly changed to keeping everyone safe, helping our customers and securing our future. Our colleagues have delivered on all three, and I thank every one of them for the skill and determination with which they’ve responded. I’m struck by the vital role that technology has played in helping millions of families through this crisis, and I’m proud of how our business has stepped up, online-only outside the Nordics, to provide that help. Since the year end, all our electricals businesses have continued to grow sales. Where our stores have reopened we’ve performed well, while continuing to see strong online sales growth. That said, we expect a weakening of consumer spending later this year and are being cautious in our planning.
“We’ve learned a lot during this crisis and will emerge a better business from it. We’ve pioneered new ways of shopping, empowered our colleagues to move faster, and seen how technology is set to play an ever-bigger role in everyone’s lives. We’re also more convinced than ever that Dixons Carphone has the right strategy for our customers, our colleagues and our shareholders in the years ahead.”