Dixons Carphone forecasts more mobile losses, stable dividend in new year

Dixons Carphone warns mobile phone business is heading for 'significant loss'

Dixons Carphone warns mobile phone business is heading for 'significant loss'

United Kingdom phone retailer Dixons Carphone saw revenues plummet roughly 20 percent after revealing a massive drop in profits and "significant" losses in its business.

And that's not the worst of it either, as chief executive Alex Baldock forecast "more pain" of the metaphorical/financial variety in the coming year, as the company's mobile sales are expected to book a further "significant loss" while it works on renegotiating network contracts offered by its Carphone mobile division.

The UK mobile market is changing faster than expected, so the company is accelerating its strategy presented in December. The figure is expected to fall to around GBP 210 million this year due to continued losses and restructuring at its mobile business.

Dixons Carphone's annual profit slumps 22% .

'The soaring popularity of WhatsApp has shifted consumer habits away from standard text messaging, thereby removing a key sales point for mobile phone networks trying to lure customers with unlimited texts.

In a Thursday press release, Mr Baldock stated that the United Kingdom mobile industry was "changing in the way" the company mentioned in December previous year "but doing so faster". Dixons was also forced to reduce its full-year dividend from 11.25p to 6.75p.

"While it boasted of increasing market share in electrical in all its territories, UK & Ireland like-for-like growth of 1% compares unfavourably with AO.com's 5.7% growth, though it is likely to be taking some share from John Lewis, whose electrical business has been struggling".

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In its 2020 financial guidance, Dixons Carphone predicts the United Kingdom mobile business will be "significantly loss making", before (hopefully) "improving materially" in the following two years as chief executive officer Alex Baldock's turnaround efforts feed through.

Customers were also buying handsets and sim cards separately, reducing company profits, in addition to demanding more flexibility whilst buying bundles, according to Mr Baldock, prompting the company to launch its own 36-month, credit-based bundle in April 2020.

That compared to company guidance of around £300m and was down from £382m made in 2017-18.

But he insisted that "accelerating our transformation provides certainty that this year is the trough" and that integrating Mobile and Electricals into one business will provide cost benefits to enable a return to underlying profit growth in 2021 year as Mobile breaks even. The group also trades as Elkjøp, Elgiganten and Gigantti in Nordic countries and Kotsovolos in Greece.

Dixons Carphone laid out its plans for the year ahead - many of them digitally influenced - after reporting a significant sales and profit decline for the 12 months to 27 April 2019. Worldwide like-for-like revenue was up 4%.

In the UK & Ireland its mobile phone like-for-like revenue fell 4%, while its electricals revenue was up 1%.

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