Dixons Carphone is facing pressure from the government to explain the state of its pension scheme in light of a profit warning last week that sparked a tumble in its share prices.
The Work and Pensions Committee is set to deliver a letter to Dixons Carphone over pension fund deficit fears and to seek assurance that its pension fund would be well-funded despite financial woes.
Dixon Carphone share value plunged by almost 20 per cent last week, after warnings that headline pretax profit for its 2018/2019 financial year would come in at around £300 million, 21 per cent behind the £382 million it forecast for the 12 months ending April 28.
The committee expressed concert about its pensions scheme after Dixon Carphone’s annual report showed that the UK deficit of its defined benefit pension scheme expanded by £117 million to £589 million.
This has now shrunk to £492 million.
According to City AM, the committee’s letter – which the retailer is expected to received today – also seeks to clarify what Dixons Carphone is doing to tackle the pension deficit.
“What we’re anxious about is [to make sure] that the pensions regulator can develop a plan, so that in these circumstances, [Dixons Carphone] meets with the chairman of trustees and can meet a payment schedule that the trustees and regulator are happy with,” committee chairman Frank Field MP told City AM.
“[Dixons Carphone] is obviously going through a difficult time, and there’s no question that it’s going to be alright, but there’s no point for a regulator waiting to act.”
The Dixons and Carphone Warehouse merger in 2014 was valued at £3.8 billion, and Field said his committee was now seeking to draw their attention to mergers showing signs of strain.
“Mergers don’t always result in the gains they hope for when two companies come together, and that is why I am concerned for the pensions side of this business,” he told The Telegraph.
A spokesperson from Dixons Carphone said: “Dixons Carphone can reassure the committee that our pension scheme is well funded with annual contributions of £46 million.
“Revenues increased last year which underpins our robust balance sheet, falling net debt and strong cashflow.
“We expect to make approximately £300 million of pre-tax profit in 2018/19.”
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