Dixons profits soar 11%, but group is cautious

Electrical retailer Dixons delivered an 11% rise in annual profits today following strong performances from its Currys and PC World chains.

The Group also operates 14 stores in the Republic of Ireland, trading as Dixons, Currys and PC World.

The improvement in the pre-exceptionals figure to £331.6m (€498.7m) came despite a “disappointing” showing from Dixons branded stores, where sales fell 6% in the year to May 1. In contrast, Currys grew sales by 4% and PC World by 6%.

The company said trading in the new financial year had started in line with expectations but expressed caution about the UK market because of the impact of higher interest rates and a possible slowdown in house prices.

It added that continued store expansion would create another 1,000 jobs in the UK this year, including through the further development of its XL format of Dixons outlets.

The group, based in Hemel Hempstead, Hertfordshire, said Dixons sales had suffered from the lacklustre nature of some of its key markets, particularly in games consoles and audio products.

A new management team has since been put in place, with its first step being the closure of 106 unprofitable stores, announced earlier this year. It will then have 214 Dixons outlets, mostly featuring larger sales areas.

Today’s figures show sales from the division were down 5% on a same-store, like-for-like basis, with the total figure off 6% at £798m (€1.2bn).

At Currys, sales were up 4% to £1.75bn (€2.6bn) after the group benefited from a more effective advertising strategy, supported by higher levels of product availability.

PC World sales stood at £1.33bn (€2bn) at the end of the financial year after a 2% increase in like-for-like sales – an increase that came despite significant price deflation in PC hardware.

Twelve new PC World stores opened during the year – taking the total to 138 - with a similar number of openings due this financial year.

Dixons also owns the mobile phone business The Link, which grew sales by 10% to £407m (€612m), helped by the launch of services from operator 3 and new handset developments.

Internationally, Dixons said turnover of £1.76bn (€2.6bn) followed a total increase in sales of 47% and a 4% gain on a like-for-like basis.

The company added today that its strong balance sheet meant it would return £200m (€300.8m) of surplus cash to shareholders. It will also pay a total dividend for the year of 7.32p a share – an increase of 10% on a year earlier.

Chief executive John Clare said he remained upbeat about prospects, particularly after an improved trend for sales over the second half of the year.

He added: “The new financial year has started in line with our expectations. It is too early to extrapolate this trend for the year as a whole, but I believe the group is well placed for a year of further progress.”

Including exceptional items, Dixons said pre-tax profits were #366.2 million, 33% higher than last year when results featured a 53 week trading year.

Dixons added that its finance director, Jeremy Darroch, would be leaving to take on a similar role at BSkyB. He is likely to depart in the next few weeks.