Dixons Carphone confirms 'plenty of work to do'

For the 12 months to 28 April, revenue of £10.5bn was up 3% on the previous year, with like-for-like sales up 4% as UK LFL sales grew 2%, the Nordics 9% and Greece 11%. But profit before tax tumbled 24% to £382m and earnings per share fell 22% to 26.2p.

But as free cash flow only dipped 3% to £172m, the dividend was held flat at 11.25p.

PBT for the coming year is expected to fall again to around £300m, but with cash conversion remaining at a similar level.

Just over two months since he joined, chief executive Alex Baldock was remaining chipper despite having already presided over a profit warning and revealed a huge historical customer data breach, saying the leadership team was working "at pace" to set the new direction, with his main strategic update to come in December.

Budgeting for a contraction in the UK electricals market, Dixons is planning to use its scale to maintain market share, but expects cost increases to only be partially offset by improving the product range, reducing markdown and closing 92 Carphone Warehouse outlets this year. In mobile, "progress" was reported in contract discussions with the networks with the aim of improving the business model.

"Recent events have underlined that we have plenty of work to do, and it will take time, but I'm even more confident than the day I took the job in our long-term prospects.

"We're number one, maintaining or growing share in each of our markets, with people and scale multichannel capabilities no competitor can rival.

"We can make more of these strengths, by bringing clear long-term direction that sharpens our focus on our core, and that better joins up both our offer to customers and our business behind the scenes. There's nothing here that can't be done, and we expect top and bottom-line benefit of doing it."

Shares in Dixons Carphone rose 1.6% to 194.15p in the first half hour of trading on Thursday.

"The group is in a period of transition," said analysts at Liberum, making no changes to its forecasts on the back of these results. "The new CEO has started to take action, including realigning management and planning for significant additional investment into staff and the customer proposition, which we see as sensible.

"A key question remains surrounding the shape of the future Carphone Warehouse business, including (i) the model that will be adopted; (ii) how profitable it will be and how sustainable growth will be achieved; and (iii) how management ensures the business keeps its position in the value chain. Clarity and progress on this front could well drive a re-rating."

Market analyst Neil Wilson at Markets.com said the results at first glance "look a touch better than feared given the kitchen sink job" by Baldock three weeks ago.

As noted three weeks ago, in terms of sales growth Wilson felt it was a "decent performance given some tougher market conditions in the UK retail market; with the group’s scale and the impressive multichannel capability being two key factors in its ability to deliver revenue growth. Moreover, there is ample opportunity to rationalise the Carphone estate and improve profitability in mobile whilst still retaining a dominant market position."