Thursday 12 December 2019 9:09 am

Dixons Carphone narrows losses as turnaround stings retailer

Dixons Carphone narrowed losses in its latest half-year performance but a turnaround strategy took its toll on profits, the mobile phone seller revealed today.

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The figures

Dixons Carphone pared its loss before tax back to £86m, from a deep loss of £440m this time last year.

Overall UK & Ireland electricals revenue dropped one per cent.

But mobile revenue in the UK and Ireland sank 18 per cent, hurt by a 10 per cent drop in like-for-likes.

But Dixons did slim down losses per share to 6p, a much better performance than the 39.7p hit investors took a year ago.

However, net debt rose from £274m at this point in 2018 to £290m, excluding lease liabilities it must recognise under new accounting standards.

The retailer said it will pay an interim dividend of 2.25p per share at a total cost of £26m.

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Why it’s interesting

Dixons Carphone’s share price rose 4.1 per cent in early trading to 137.4p as investors welcomed the retailer’s move to cut losses.

John Moore, senior investment manager at Brewin Dolphin, said shareholders were prepared for the ballooning losses, with the promise of a break-even date in 2022.

“From today’s results, the process appears to be underway, with mobile dragging the rest of the business down; but there are positives to be taken in online growth, customer satisfaction levels, and cost savings,” he said.

“There is undoubtedly a tough period ahead for Dixons Carphone, and an increasingly difficult retail environment will be of little help – but, it seems that the company will be a survivor where others may not.

“Provided management can execute its plan, a significant change at the mobile division coupled with stability and modest growth at Dixons Carphone’s other businesses could offer encouragement in time.”

Investors remained positive despite a two per cent drop in like-for-like electricals revenue across the second quarter, and a one per cent decline in the first half.

Retail Economics analyst Richard Lim said declines outside of its mobile business were to blame on “challenging market conditions” and waning consumer appetite for electricals amid a general downturn in consumer spending.

He said putting a fresh focus on digital will be crucial to Dixons Carphone’s success.

“Leveraging the valuable store network and seamlessly integrated it with their online and services proposition will be a key differentiating factor in their strategy to return to growth,” Lim added. “But the strategy is one thing, the clock is ticking for it to be effectively executed.”

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What Dixons Carphone said

Chief executive Alex Baldock said:

We’re on track to deliver what we promised this year, and with our longer-term transformation.

In a tough UK electricals market, we’ve gained significant share, and strengthened our market leadership. Our planned investments in the colleague and customer experience have played a big part in this resilient performance, demonstrated by sharply increased customer satisfaction scores. Our big international business also registered market share gains in every territory, with solid sales and margin improvements.

And we’ve taken important strides in our transformation. It’s easier for customers to shop how they want: we’re now gaining share online as well as in stores, where we are investing to create exciting, enticing stores. More customers can also afford the tech they want: we now won’t be beaten on price, and more are taking up our credit offer. More, too, are getting the most out of their tech through our services. 

Mobile is challenging as expected. As promised, this will be the trough year for mobile losses, and it will be break-even by 2022.

Good progress, yes, but all of us at Dixons Carphone are shareholders, and conscious that our business is still nowhere near its full potential. We’re determined to realise that potential, and confident we’re on the right path to do so.

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