· Update wipes £420m off value of group
· Restructuring pushes six-month profits down 25%
DSG, formerly known as Dixons, surprised investors yesterday with worse than expected Christmas trading in Italy and France, poor sales at its core Currys chain and declining profit margins.
The gloomy update wiped more than £420m off the value of the electricals company as the shares lost 12%. They closed down 23.25p at 171p – their lowest level for more than nine months. The group was the day’s worst performer among the FTSE 100. The damage was the result of problems at the group’s UniEuro division in Italy, where like-for-like sales were down 7%, and at its PC City business in France.
In the UK slow sales of big-ticket items like flat-screen TVs in the weeks before Christmas hit progress at Currys. Like-for-like sales in the eight weeks to January 6 advanced by only 1%, despite the chain recording record sales in the week after Christmas as shoppers came out hunting for bargains. City analysts had expected Currys to grow by some 4%.
DSG also unveiled profits for the six months to November 11 down 25% at £79m after substantial restructuring costs. On an underlying basis the bottom line was flat at £97m. The group’s chief executive, John Clare, said any profits growth for the full year would be “offset by the very disappointing year in Italy”.
Dixons has installed new management at the Italian chain, which brings in 10% of group sales, in an attempt to turn the ailing business around. Mr Clare has blamed structural problems ranging from poor stores to distribution issues, together with wider political and economic problems that have sapped consumer confidence. Yesterday he said: “Right now we have a priority to get Italy fixed.”
DSG maintained its profit margins but Europe-wide margins were down 0.7%.
Mr Clare, however, insisted there were some reasons to be cheerful: e-commerce sales, through the group’s Dixonx.co.uk and Pixmania websites, were “very encouraging” and account for 10% of group sales. The chief executive also pointed to new products that will boost sales, such as the new Playstation 3 console, Apple’s iPhone and the Windows Vista operating system.
Julia Finch, city editor
Thursday January 18, 2007
The Guardian