Carphone and Dixons report profits rise ahead of merger

Carphone and Dixons report profits rise ahead of merger

Carphone Warehouse and Dixons Retail have both posted significant rises in earnings ahead of their planned merger later this year

Carphone reported pre-tax profits of £67m in the year to 29 March, up from £3m a year earlier and a 59% rise in annual earnings whilst Dixons reported pre-tax profits of £133m for the year to 30 April, up 53% from £86.6m a year earlier.

Their results follow yesterday's news that the European Commission has given their merger unconditional clearance.

Carphone's main business made pro-forma earnings before interest and tax (EBIT) of £151m vs. guidance of £145-155m.

Carphone made headline earnings per share of 18.4p for its full year to March 29, compared to guidance of 17-20p and 11.6p made in the year 2012-13. It will pay a final dividend of 4p, up 20%, said the group.

Carphone’s retail operation reported like-for-like revenue growth of 5.3%.

Meanwhile Dixons recorded pre-tax profit of £166.2m for the year to April 30 against £94.5m the prior year. Total underlying group sales jumped 3% to £7.22bn.

Group online sales increased 16% to £1bn for the first time.

Carphone and Dixons announcedtheir planned merger on May 15. Carphone said the proposed merger is progressing in line with the anticipated timetable.

Speaking following the release of the full-year results, Andrew Harrison, CEO of Carphone Warehouse, said that the business has had a strong year.

‘We have delivered on our guidance, increasing pro forma Headline EBIT by 14% from £132m to £151m. Strategically and operationally, we have moved our business forward significantly, showing further progress on 4G, developing our award-winning tablet-based assisted sales tool, Pin Point, growing our Connected World Services business, and taking steps to realise value through the proposed sale of Virgin Mobile France.’

Despite the continued sharp reduction in the pre-pay market and the fall in prepay connections reducing overall connections, the business held its pre-pay market share. More important for CPW has been the strength of its post-pay sales, it said, on which it has again grown our UK market share. Carphone said it was particularly encouraged by the uptake of 4G phones. 

4G is now a major new dynamic in the mobile marketplace, Harrison said. ‘The speed, range of new devices, increased data usage and new 4G tariffs have all increased our appeal to customers, building on our long-standing reputation for impartial advice and value.’

The speed of 4G had a significant impact on data usage, and the sale of 4G devices brought with it additional data packages - leading to an overall increase in the average revenue per user.

Operationally Carphone have taken further steps forward in delivering record levels of customer satisfaction through the ‘hard work’ of its people and through introducing Pin Point.

‘Our European partnerships are helping us to gain scale and grow value within our existing markets, having signed two agreements during the year.’ The group also made some key strategic developments in its Connected World Services business, including its preferred-partner agreement with Samsung to roll out and manage their stores across Europe.

‘For some while, we have signalled that Virgin Mobile France could be for sale and, in May this year, together with our fellow shareholders, we announced an exclusivity agreement for its proposed sale to Numericable Group.’

The history of Carphone Warehouse has been one of anticipating change and positioning the business to take advantage of this change, he said.

‘Looking ahead, the shifts we see in the marketplace offer considerable opportunities to create value for our employees, our customers, our suppliers, our partners and our shareholders. From a position of strength, we are planning to take greater advantage of these developments through our proposed merger with Dixons Retail plc.’

Dixons group chief executive Sebastian James said: 'This has been a great year for the group with some excellent performances across our multichannel businesses, together with the achievement of a number of important strategic objectives. 

'Our profits are up 76% from those we reported a year ago. This not only reflects the fact we have now exited all of our non-core markets, meaning we are now a leader in all our core markets, but is also a testament to the creativity and hard work of our teams.'

He added that since year end Dixons has been “trading well” because of the World Cup which has boosted TV sales.

He added: 'But we also believe we are seeing the early glimmers of a consumer recovery. On this there is no certainty just yet, but what we know for sure is that if we maintain a tight rein on costs, [keep] our pricing sharp - against all comers - and our service levels high, customers will continue to choose us over others.'


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