Dixons Carphone slumps to £440m loss in the first half of the year

Electrical retailer Dixons Carphone cut its dividend and warned its turnaround plan would take time after slumping to a £440 million first-half loss, sending its shares sharply lower.

Shares in the group, which trades as Currys PC World and Carphone Warehouse, tumbled 17.3 per cent, taking their fall for the year to over 37 per cent, before recovering some ground to close just 6 per cent weaker.

Dixons Carphone has been hurt by tougher conditions in the mobile phone market as customers keep their handsets longer. While it is still market leader in Britain and Ireland, reduced sales of handsets have resulted in a declining share and a loss-making business.

Chief executive Alex Baldock, who joined only in April and has been critical of previous management, plans to restore the mobile business to profit by putting its relationships with network operators on to a more sustainable footing, with increased handset choice and improved terms.

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Other elements of his strategy include focusing on its core electricals business and the growth areas of online and credit.

“There are headwinds and uncertainty facing any business serving the UK consumer. We’ve had our own challenges, and our plan will take time,” said Mr Baldock.

Store closures

Mr Baldock told reporters the group had no current plans for store closures beyond the 102 already announced.

The chief executive is targeting an operating margin improvement to at least 3.5 per cent over five years, an additional £200 million of cost savings and an additional £200 million of capital expenditure over three years.

He also wants to get Dixons Carphone’s workforce of 30,000 behind the strategy by awarding each of them at least £1,000 of shares.

Dixons Carphone’s statutory pretax loss of £440 million for the 26 weeks to October 27th reflected the booking of £490 million of exceptional charges, mainly related to writing-off goodwill in the mobile business. It posted a pretax profit of £54 million pounds a year earlier.

‘Prudent’

The group said it was taking the “prudent” measure of cutting its dividend by about 40 per cent this year so that the payout and pension fund contributions are covered by free cash flow. Its interim payout was cut to 2.25 pence from 3.5 pence last time. – Reuters