Dixons Carphone posts annual loss after mobile business write-down

(Image credit: Dixons Carphone)
(Image credit: Dixons Carphone)

Dixons Carphone has reported a pre-tax statutory loss of £259 million for the past 12 months, largely thanks to a write-down in the value of its mobile business last December.

Carphone Warehouse is the UK’s largest mobile phone retailer, but it has struggled to cope with changing consumer habits.

A saturated market and longer refresh cycles are lowering contract renewal rates, making SIM-Only tariffs and SIM-free handsets more popular, squeezing margins.

Dixons Carphone profits

CEO Alex Baldock is currently leading a transformation of the business, expressing a desire to “reset” Dixons Carphone’s relationship with operators so they are more sustainable and believes that combined with plans to improve its technology, train staff and offer credit services, the firm can revitalise its mobile business and drive online sales.

In addition, Dixons Carphone says it has identified £200 million worth of cost savings that can be achieved through efficiency measures, while 92 of its 700 stores are set to be closed.

UK and Ireland mobile revenues fell by a reported 11 per cent over the past 12 months, but there was good news in the electrical sector where it increased market share and revenues.

It’s also worth pointing out that once the write-down is taken out of account, pre-tax profits for the entire group are £298 million – although this is lower than the £382 million it posted last year.

Baldock told investors he as happy with the ongoing transformation but warned them to expect more pain in the coming months before the turnaround was complete.

“In UK mobile, the market is changing in the way we described in December, but doing so faster,” he said. “So, we’re moving faster to respond: we’ve renegotiated all our legacy network contracts, we’re developing our new customer offer, and are accelerating the integration of Mobile and Electricals into one business.

“This means taking more pain in the coming year, when Mobile will make a significant loss. But accelerating our transformation provides certainty that this year is the trough, as during next year the legacy contractual constraints on our Mobile business lift, and the integration cost benefits build. We expect Mobile will at least break even within two years, and beyond that, equipped with a stronger and unconstrained offer, we will of course aim to do better.