Dixons Carphone swung to a £259m loss in its latest full financial year, it revealed today, as the retailer warned investors of “more pain” to come.
The revelation that Dixons expects fresh losses from it UK mobile division sent shares down 20.5 per cent to 99p in early morning trading.
Adjusted profit before tax plummeted 22 per cent to £298m in the 12 months to the end of April. That fell from £382m the previous year, missing guidance of £300m.
Dixons also reported a statutory loss before tax of £259m as it took charges of £557m for “the changing UK mobile market”.
Revenue slipped one per cent year on year to £10.4bn.
Meanwhile cashflow fell from £172m last year to £153m as net debt creeped up to £265m, from £249m the year before.
Dixons Carphone slashed its final dividend to 4.5p per share, down from 7.75p the year before, and its full year dividend dropped from 11.25p to 6.75p per share.
Why it’s interesting
Dixons Carphone boss Alex Baldock warned shareholders of “more pain” in the current financial year when he expects the retailer’s mobile division to be “significantly loss-making”..
But he said he is restructuring the mobile arm to boost cash generation, aiming for the division to break even by 2021.
Baldock warned the UK mobile market is changing faster than Dixons anticipated, forcing the firm to accelerate changes to the division.
Dixons has been hit by customers keeping hold of their mobile phones for longer, with UK and Ireland mobile like-for-like revenue dropping four per cent in the 12 months to April.
Electricals revenue rose one per cent over the financial year.
Dixons has seen its shares drop 37 per cent during the last year.
It now expects to pull in £210m in headline profit before tax for the current financial year, far short of consensus analyst guidance of £300m.
Meanwhile Dixons expects its dividend to be flat.
Dixons took a £557m hit to its bottom line last year, with £383m of that figure put down to impairment losses and onerous leases. For the current year Dixons expects to take a hit of a relatively small figure of £80m.
Read more: Dixons sinks to £440m loss
What Dixons Carphone said
Chief executive Alex Baldock said:
“We know we have it in us to be a much more valuable business. That will take time. In December, we set out a clear strategy to help everyone enjoy amazing technology, and early progress is promising.
“In UK & Ireland electricals, we expect growing sales and headline profits this year and beyond.
“In UK mobile, the market is changing in the way we described in December, but doing so faster. So, we’re moving faster to respond: we’ve renegotiated all our legacy network contracts, we’re developing our new customer offer, and are accelerating the integration of Mobile and Electricals into one business.
“This means taking more pain in the coming year, when mobile will make a significant loss. But accelerating our transformation provides certainty that this year is the trough, as during next year the legacy contractual constraints on our Mobile business lift, and the integration cost benefits build.
“We expect mobile will at least break even within two years, and beyond that, equipped with a stronger and unconstrained offer, we will of course aim to do better. In any case, cash generation from mobile will be strong.”