ii view: investors back confident Dixons Carphone

Electrical online sales double to £4.7 billion and the dividend starts again. Buy, sell or hold? 

Full-year results to 1 May

• Revenue up 2% to £10.34 billion
• Pre-tax profit of £34 million, up from a loss of £140 million
• Net cash of £169 million, up from net debt of £204 million
• Final dividend payment of 3p per share

Chief executive Alex Baldock commented:

“Technology has become even more central to people's lives. As the market leader, with the winning omnichannel business model, we can make the most of that. The past year has seen us do so, growing a big online business and adding it to our in-store strengths. 

“This year, we move to one brand in the UK (as we have in each international market), and Currys can become ever-more the first choice for all things tech, electrical and mobile, products and services alike. The start of the financial year has seen continued strong trading in all our markets and I'm more confident than ever in our prospects."

ii round-up:

UK and international consumer electrical and mobile phone retailer Dixons Carphone (LSE:DC.) employs over 30,000 people across 7 countries. 

It has a store portfolio of just over 820 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. Elkjøp, Elgiganten and Gigantti in the Nordics and Kotsovolos in Greece. 

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

ii view:

Performance at Dixons Carphone has proved mixed for some time. Progress for its electricals business has been countered by store closures and challenges for its mobile phone business. But the four strategic priorities of omnichannel, credit, services and mobile transformation under the current chief executive remain ongoing. 

Omnichannel, or online, growth has been aided by continued investment and required temporary store closures under Covid-19. Online sales have grown impressively across all its markets, with a doubling in online sales to £4.7 billion made during this latest year. Sales of credit for its UK business rose 8% over the year with total active customers up by a fifth. Service sales suffered given closed stores, although a return to growth is expected going forward. 

As for the mobile phone business, there looks to be light at the end of the tunnel. It now has no minimum volume commitments with the network operators and full control over what it sells. Its own mobile phone offering is being launched with the business expected to become smaller but profitable going forward. 

For investors, growth at the mobile business has not yet been achieved. Both Carphone Warehouse Ireland and Dixons Travel have been exited, while pandemic related uncertainty for its store operations also cannot be completely removed.  

But a major transformation is now largely complete, with confidence in both its finances and the outlook arguably being expressed by both a restarting of the dividend payment and cancelling of a previously proposed listing of its Nordic business. Dixons now has net cash, and an estimated forward price/earnings (PE) ratio of under 20 is comfortably below that of rival AO World (LSE:AO.). In all, and with Dixons potentially back firing on all cylinders soon, we believe that there's scope to continue accumulating holdings. 

Positives

• Growing electrical sales
• Restarted dividend payment

Negatives

• Mobile phone business losses
• Covid and economic outlook uncertainty

The average rating of stock market analysts:

Cautious buy