Dixons Carphone profits drop 22%, warns “more pain” ahead

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Dixons Carphone fine
// Dixons Carphone posts 22% drop in FY profits
// Expects “significant loss” to come from mobile sales
// Shares down 27% this morning

Dixons Carphone on Thursday revealed a 22 per cent drop in full year profits, as it warned there would be “more pain” to come from its UK mobile sales.

Britain’s biggest seller of electrical and mobile phones said it made an underlying pretax profit of £298 million in the year to April 27.

That’s beneath company guidance of around £300 million and a sizeable drop from the £382 million in achieved in 2017-2018.

The group, which trades as Currys, PC World and Carphone Warehouse, said underlying pretax profit would likely come in at around £210 million in 2019-2020.

After that, it expects to see the benefits of its turnaround plans beginning to feed through. 

Analysts’ previous consensus forecast for its 2019-2020 year had been around £300 million prior to the update on Thursday.

“In UK mobile, the market is changing in the way we described in December, but doing so faster,” warned Dixon Carphone group chief executive Alex Baldock.

“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.”

Shares fell 27 per cent when the market opened this morning, as investors heard how “it will take time” for Dixons Carphone to become a more valuable business.

“Overall, with investment in our transformation underpinning UK & Ireland electricals and International growth in sales and headline profits, and accelerating the changes in mobile, we’re confident to bring forward our long-term ambitions,” said Baldock.

“We still commit to over £1 billion of Group free cash flow over the five year plan, but also to accelerate our £200 million cost reduction promise by two years, and our promise of at least 3.5% Group EBIT margins by a year,” he added.

Back in December the group posted a £440 million pre-tax loss for its half year to October 27, 2018, compared to profits of £54 million for the same period the year before.

It attributed the results to charges of £490 million, largely due to a writedown on the value of its loss-making Carphone Warehouse mobile business and store estate.

Dixons Carphone noted a statutory loss before tax of £259 million for the year to 27 April as a result, compared to a profit of £289 million in the previous 12 months.

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