Richard Hunter, head of markets at interactive investor –
‘The anticipated 28% decline in pre-tax profit was accompanied by a drop in earnings per share, with gross margins coming under pressure. There are also wider concerns regarding the sector, with phone upgrades lessening, the UK consumer potentially retrenching when considering big ticket purchases, and Dixons Carphone’s reliance on customer facing staff an additional cost burden which digital direct businesses do not face. Meanwhile, the outlook profit number for next year has been reduced even further, as guided by the company in May.
‘All is not lost, however. As the group maintained some of its market leading positions, overall revenue edged up, there was a reduction in net debt and the Nordics region made a strong contribution. Meanwhile, the cash generative ability of the business enabled the dividend to be maintained, where a yield of 6% has clear attractions to income seekers. Double digit growth in online sales could be a positive precursor to future prospects, whilst also complementing the in-store option of knowledgeable customer facing staff.
‘Dixons Carphone is at an inflection point and, to some extent, has bought itself some time with investors by guiding down next year’s profit. Even so, the more recent improvement in the share price – a 10% hike in the last three months – cannot mask a more reflective dip of 37% over the last year, as compared to a 6% jump for the wider FTSE250. The company has much to prove in a difficult environment and the general market consensus of the shares is likely to remain stuck at a hold, albeit a strong one’