Retailer Dixons Carphone reported headline pretax profit of GBP 298 million for its fiscal year to April, in line with its outlook of around GBP 300 million but down from GBP 382 million a year earlier. The figure is expected to fall to around GBP 210 million this year due to continued losses and restructuring at its mobile business.
The headline figure excludes impairment charges on the struggling UK mobile business, which led to a reported pretax loss of GBP 259 million for the year, versus a profit of GBP 289 million a year earlier.
Total revenues fell 1 percent to GBP 10.43 billion. This was due mainly to a 4 percent like-for-like fall in mobile revenue in the UK and Ireland. Electricals revenue in its home market was up 1 percent, and international revenue rose 4 percent on a comparable basis.
The company maintained positive free cash flow of GBP 153 million, down from GBP 172 million a year earlier. The final dividend was reduced to 4.5 pence per share from 7.75 pence a year ago.
Significant loss in mobile
Dixons Carphone said the mobile business is expected to make a "significant loss" this year as it works to integrate the business with its Eletricals activities in the UK and Ireland. The latter is expected to continue to grow sales and headline profits, supported by expansion in financing and online sales.
The UK mobile market is changing faster than expected, so the company is accelerating its strategy presented in December. It's renegotiated all its legacy network contracts and is developing a new customer offer, while accelerating the integration of Mobile and Electricals into one business.
Dixons Carphone said this year should be the trough for the mobile business, as next year the legacy contractual constraints lift, and the integration cost benefits should come through. The aim is to have Mobile at least break even within two years, while maintaining strong cash generation.
Stable dividend
The strong cash flow should help the company deliver a stable dividend this year and a peak in capex of GBP 275 million. One-off cash costs are estimated at GBP 80 million.
The accelerated restructuring prompted the company to bring forward some of its five-year targets. The group headline EBIT margin should be at least 3.5 percent by FY23, a year earlier than originally planned, and the GBP 200 million in cost savings will be delivered two years earlier by FY22.
