Dixons Carphone to shake up smartphone business as profits tumble

Lloyd Doyle
December 13, 2017

Statutory pretax profit for the six months to October 28 fell to GBP42.0 million from GBP111.0 million, though this was partly due to a GBP58.0 million hit from a change in receivables valuations and insurance contract terms, as previously indicated by the company.

Dixons Carphone said that the steep fall in profitability was largely a result of issues in its mobile phone business, which it planned to "reposition to deliver a simpler, less capital-intensive business".

The late launch of the iPhone X, which fell outside this half-year for the company, also affected sales.

Group headline profit before tax of £61m was down 60% on the £154m previous year, mostly due to an expected one-off £58m accounting change, but with efforts to drive mobile sales and retain market share hitting profitability.

Dixons Carphone PLC said Wednesday it will simplify its Mobile division after poor performance in the first half of its financial year, as group profit more than halved year-on-year. That compares to analysts' average forecast of £63m and £144m made the same time past year.

Revenue rose 3.0% at reported currency rates to GBP4.87 billion from GBP4.72 billion, with like-for-like growth of 4.0%.

This trend has continued, dragging down mobile sales in the first half by three per cent.

James said the United Kingdom postpay mobile phone market was "tougher", with a combination of "higher handset costs and relatively incremental technology growth" continuing to cause customers to hold on to their handsets for longer and some to choose a SIM-only deal ("in the meantime", he added, hopefully).

Chief executive Seb James said the company had made "a very conscious decision to fight hard to drive sales" in its mobile business, retaining its position as the United Kingdom market leader, but the move had hit profitability.

The group said it expected to deliver full year 2017-18 underlying pretax profit of 360-400 million pounds versus guidance in August of 360-440 million pounds.

"With over 700 Carphone stores in a total estate in excess of 1,000 across the group, there is ample opportunity to rationalise the Carphone estate and improve profitability in mobile while still retaining a dominant market position".

Other reports by Iphone Fresh

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