Carphone, Dixons profits rise ahead of planned merger

Thursday 26 June 2014 17.11
Dixons last month agreed an all-share merger with Carphone Warehouse
Dixons last month agreed an all-share merger with Carphone Warehouse

Carphone Warehouse, Europe's largest independent mobile phone company, and Dixons Retail, Europe's second biggest consumer electronics retailer, today both posted big jumps in earnings ahead of their planned merger later this year. 

Carphone reported annual earnings up 59%, while Dixons' profit increased 76%. 

Last month the two firms agreed an all-share merger to create Dixons Carphone, worth £3.6 billion at yesterday's closing prices, seeking to tap-in to an increasing convergence of smartphones and consumer electronics in people's lives. 

However, the May 15 deal announcement prompted a 10% fall in Dixons' share price and an 8% slide in Carphone's. 

Analysts said they were disappointed with targeted annual cost savings and synergies of at least £80m by 2017-18.

Some expressed concern about a possible top-heavy management structure and what they perceived to be the defensive nature of the deal with both firms facing increasing online competition. 

But shares in both firms have rallied since, up 3% over the last month. 

The merger deal, which would create a business with turnover of about £12 billion, 2,900 stores and 45,000 staff, is scheduled to complete in the third quarter of 2014, with the combined group likely to enter Britain's FTSE 100 index of leading companies. 

The firms said the merger was progressing in line with the anticipated timetable. The deal received the unconditional approval ofthe European Commission earlier this week. 
              
Carphone said today that it made headline earnings per share of 18.4 pence for the year to March 29. That compares to company guidance of 17-20 pence and 11.6 pence made in the 2012-13 year. 

Carphone's main CPW business made pro-forma earnings before interest and tax (EBIT) of £151m compared to guidance of £145-155m. 

The group is paying a final dividend of 4 pence, making 6 pence for the year, up 20%.
              
Dixons, home to the Currys and PC World chains in Ireland and the UK, Elkjop in Nordic countries and Kotsovolos in Greece, said today it made an underlying profit before tax of £166.2m in the year to April 30. That compares to company guidance of about £160m and £94.5m made in the 2012-13 year. 

Dixons said the new financial year had started well, with an uplift in TV sales driven by the World Cup and early glimmers of a consumer recovery in its main markets.