ii view: Dixons Carphone returns to favour

Electrical sales are growing and tough decisions on its mobile business have been taken.

First-half results to 31 October

• Revenue up 3% to £4.86 billion
• Pre-tax profit of £45 million up from a loss of £86 million
• Net cash of £269 million up from net debt of £208 million
• No interim dividend

Guidance:

• Mobile adjusted losses to be slightly worse than 2019/20

Chief executive Alex Baldock commented:

"I'm especially proud of our colleagues today. Thanks to them, we've come through an exceptionally challenging time and emerged a better business. Our UK stores were closed for months, but our colleagues adapted fast, continuing to help millions of people enjoy the technology that's playing an ever-more vital role in their lives, and doing so safely. We've grown sales and profits, preserving our market leadership while accelerating our transformation in the UK, and continuing to power ahead internationally.

“The outlook remains uncertain, and we're still nowhere near our full potential. Much hard work lies ahead. But this year has shown this business's qualities, especially the grit and skill of our colleagues. Our strategy has been stress-tested as never before, we've had one arm tied behind our back versus our competitors, and we've responded with stronger performance and an accelerating transformation. I'm more confident than ever that we're on the right path to create a world class business for colleagues, customers, shareholders and society. "

ii round-up:

UK and international consumer electrical and mobile phone retailer Dixons Carphone (LSE:DC.) employs over 30,000 people across eight countries. It has a store portfolio of over 900 outlets along with 16 different websites. 

Its brands include Currys PC World and Carphone Warehouse in the UK & Ireland and iD Mobile in the UK.  There's also Elkjøp, Elgiganten and Gigantti in the Nordics and Kotsovolos in Greece. 

It has over 100 warehousing and logistics facilities covering 5 million square feet and recycles over 100,000 tonnes of Waste Electrical and Electronic Equipment (WEEE) each year.

For a round-up of these latest results, please click here.

ii view:

Dixons Carphone is currently a company of mixed performances. Its electrical business remains on an upward trajectory, and online market share continues to grow, now up to 22%. Overall share of market is 25%. Its UK and Irish business now sells 17,000 products and is on track to reach 40,000 in the medium term. Ongoing investment now means that its previously 5% higher average selling prices have been cut to match if not beat the competition. A mixed store and online strategy tailors to the 60% of its customers which still prefer to use both avenues.

Challenges for its mobile business have continued. Legacy deals with the network providers which generate sales commissions have left it tied, hindered by consumers reducing appetite to upgrade their phones as technological advancement has slowed. 

For investors, a recovery in its mobile business has still to be crafted, while management outlook comments still offer some caution. The previous suspension of the dividend payment has also removed a former attraction. But significant changes at its Carphone business have been made, including the closure of its standalone stores. Electrical sales are growing and a possible listing and valuation focus on its Nordic business was also previously flagged. Net cash held also adds to the positives. For now, and with its reset strategy under the current chief executive flowering, long-term investors may like the odds of further progress being made. 

Positives

• Growing electrical sales
• Geographical diversity

Negatives

• Mobile phone business losses
• Dividend suspended

The average rating of stock market analysts:

Buy