Dixons Carphone slashing costs after plunging to loss on mobile phone woes

Curry's PC World

Retailer Dixons Carphone has said it will slash costs by £200 million after tumbling to a half-year loss following mammoth write-downs on the value of its mobile phone business.

The group, which also owns Currys PC World, saw shares fall 7% having initially plunged as much as 17% after it posted losses of £440 million for the half-year to October 27 against profits of £54 million a year earlier.

Results were knocked as it booked charges of £490 million after slashing the value of its troubled Carphone Warehouse arm and warned over “uncertainty” in the UK market.

But the group offered a dose of cheer to staff with plans for more than 30,000 employees to be given at least £1,000 in shares each over the next three years.

Group chief executive Alex Baldock outlined his strategy overhaul to turn around the fortunes of its loss-making Carphone Warehouse mobile phone chain and trim £200 million of cost savings.

He said job losses are not expected as a result of the efforts, with the savings due to come from moves to merge IT systems and reduce supplier costs.

He added that Dixons Carphone remains committed to having stores and has no current plans to shut more than the 102 shop closures already announced this financial year.

He said: “We like stores and we get a lot of benefit from our scale and intend for that to continue.”

Dixons Carphone said it expects a full-year loss from its struggling Carphone business, but confirmed it remains on track for underlying profit guidance of £300 million in 2018-19.

Carphone Warehouse made a £31 million underlying loss in its first half, while the electrical division saw profits slump 40% to £42 million.

The group also said it was set to see full-year one-off costs surge to £100 million – including a £17 million hit from the cyber attack revealed in June that saw 5.9 million bank card details and 10 million personal data records hacked last year.

Mr Baldock said: “There are headwinds and uncertainty facing any business serving the UK consumer, we’ve had our own challenges, and our plan will take time.

“But with this plan, we can now see the way to unleashing the true potential of this business.”

Watch our Group Chief Executive, Alex Baldock, share our new vision in this video: We Help Everyone Enjoy Amazing Technology https://t.co/tj4wHcEOyK

— Dixons Carphone plc (@DixonsCarphone) December 12, 2018

As well as cutting costs and turning around the mobile division, he wants to focus more on online, as well as credit offerings for customers.

Half-year results showed on an underlying basis, interim pre-tax profits dropped to £50 million from £73 million a year earlier.

The group saw like-for-like electricals sales rise 2% in the first half, while UK and Ireland mobile sales remained flat as customers are hanging on to their phones for longer.

Richard Hunter, head of markets at Interactive Investor, said: “Unfortunately, this statement has laid bare the fact that Dixons Carphone has many plates to spin at a time when competition in the sector is intensifying.”