ANALYSTS said Dixons was in “great shape” ahead of its planned merger with Carphone Warehouse after the electrical goods retailer unveiled a better-than-expected 76 per cent surge in annual profits today.
The owner of Currys and PC World, which is due to complete its £3.6 billion tie-up with Carphone in August, said its new financial year had started well, with an uplift in television sales driven by the World Cup in Brazil.
Chief executive Sebastian James, who will take charge of the enlarged group, noted there were “early glimmers” of a recovery in consumer sentiment.
He added: “On this there is no certainty just yet, but what we know for sure is that if we maintain a tight rein on costs, our pricing sharp – against all comers – and our service levels high, customers will continue to choose us over others.”
Underlying pre-tax profits rose to £166.2 million for the year to 30 April, up from £94.5m the previous year and ahead of the company’s guidance of about £160m.
Total underlying sales rose 3 per cent to £7.2 billion, with takings over the internet growing 16 per cent to £1bn.
Investec analyst Kate Calvert said the figures showed Dixons “remains in great shape” as it prepares to join forces with Carphone.
The all-share deal has already been cleared by European competition regulators.
She added: “We see strategic logic in the merger given the way the industry is moving, with increasing convergence in technologies and interconnectivity.”
However, Richard Hunter, head of equities at Hargreaves Lansdown, said the enlarged entity may need to do more to attract shareholders seeking an income from their investments, as “Dixons currently pays no dividend, Carphone yields just 1.6 per cent and the proposed future dividend policy is to follow the Carphone route”.
Carphone Warehouse said it was approaching the tie-up from a “position of strength” as the mobile phone chain also delivered its last set of annual results as a separate company.
It said a 14 per cent rise in its underlying earnings to £151m was in line with guidance for the year to 29 March after like-for-like revenues grew 5.3 per cent, helped by strong uptake of 4G mobile phone services.
The retailer, which is led by chief executive Andrew Harrison, reported good performances in Ireland, Spain and the UK, although this was offset by tougher mainland European markets including the Netherlands and Germany.
Harrison said: “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.”
The new group, to be called Dixons Carphone, will have combined sales of £12bn and more than 43,000 staff at almost 3,000 stores, including more than 1,300 in the UK.