Dixons Retail profits fall but finances looking up

Despite a fall in annual sales and profits, Dixons Retail is rapidly clearing its debts and could be set up for a bumper year...

by Michael Northcott
Last Updated: 19 Aug 2013

The owner of consumer electronics retailers Currys, PC World and Dixons has announced results that show its fortunes could be looking up. Underlying pre-tax profits totalling £70.8m for the 2011-2012 financial year were down from £85.3m the previous year, but were more than analysts were expecting, and total sales for the group remained flat at £8.19bn, a slight increase on the previous year’s £8.15bn.

There’s nothing exciting in this so far, but the final quarter of the group’s year had a spark in it: like-for-like sales were up 8% on the previous quarter, prompting chief executive Sebastian James to describe the business as ‘well positioned for the year ahead’. Don’t get ahead of yourself there, Seb: those sales are going to need consistent growth to keep your creditors happy…

But debt is an area where the retailer is starting to make some real headway. The retailer cleared almost half of its £206.8m net debt finishing the financial year with £104m, and in a statement the firm claimed it is on target to repay £160m worth of bonds due in November 2012. Such progress in getting the business back onto sound financial footing is reflected in the shiny new £300m credit facility extended to the group by its banks towards the end of last month. A sure sign of confidence in the retailer, right?

Meanwhile, across the Channel, Europe's third largest consumer electronics retailer, Kesa, says it does not expect the economic gloom to clear any time soon: yesterday it announced a 42% drop in full-year profits and cut its dividend. Still not much appetite for those big-ticket purchases on the continent. Consumer electronics (given how expensive they are) were always going to take a hit when the purse strings tightened...

High street electronics retailers have struggled against a rising tide of online competitors in recent years. Compounding the problem, many of the most popular consumer gadgets such as Apple’s iPad and myriad other tablets PCs and mobiles are principally available in Apple stores or the retail outlets of mobile network operators. 
Dixons is only just started to bite back: it has stocked its shelves with iPads, run a big Currys/PC World advertising campaign on TV, and having cleared a load of debt, it could now find itself in a powerful springboard for the next twelve months.

And with yesterday’s unemployment figures showing the job market is gradually improving, UK plc might have a bit more money to splash out on that new Blu-Ray player…

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