Dixons Carphone shares plunge on mobile phone woes

Shares in Dixons Carphone have plunged after it reported a full-year loss and said its mobile phone arm would make a "significant loss" this year.

The retailer lost £259m in the year to 27 April, compared with a pre-tax profit of £289m last year.

In December, the retailer wrote down the value of its mobile business, Carphone Warehouse.

It has suffered because people are renewing their handsets less often and demand for mobile contracts is down.

Last year, it announced the closure of 92 of its 700 stores.

The company - which also owns the Currys PC World chain - added that it was set to take "more pain" in the coming year amid "a deterioration in the forecast performance of the UK and Ireland mobile business".

Having plunged by about a quarter at the start of trading, Dixons Carphone shares recovered some ground to trade about 12% lower.

Group chief executive Alex Baldock said the UK mobile market was "changing in the way we described in December, but doing so faster".

"So, we're moving faster to respond."

He said the company had renegotiated all its legacy network contracts with mobile operators, developed a new "customer offer" and was accelerating the combination of its mobile and electrical goods businesses.

"This means taking more pain in the coming year, when mobile will make a significant loss," he said.

However, he added: "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."

'Life support'

Richard Hunter, head of markets at Interactive Investor, said the "rapidly evolving" nature of the mobile business had "threatened to leave Dixons behind".

"The mobile business in particular is on life support, draining capital and resources prior to its integration with the electricals business."

The loss reported by Dixons Carphone was mainly due to one-off charges of £557m, the majority of which was caused by the writedown in the value of the Carphone Warehouse business in December.

When the charges are stripped out, Dixon's Carphone made a profit of £298m - although that was still a 22% fall from the previous year.

Revenue across the group dipped 1% to £10.43bn.

The electrical goods business gained market share in all territories, and Mr Baldock said this side of the company was expected to grow sales and headline profits this year.

Emma-Lou Montgomery, associate director from Fidelity Personal Investing's share dealing service, said: "While elsewhere in the group the five-year plan is going to plan - if not a little better - the mobile phone business is under considerable strain as customers demand flexibility, are sticking with their old phones for longer and Carphone is dragged down by binding network contracts."