Dixons sales up but tumbles into the red - UPDATE



LONDON (ShareCast) - Electrical retailer Dixons' first half figures reflected the European economic divide as sales grew in the North, but took a hit in Southern (NYSE: SO - news) countries.

A rise in takings was helped by the UK and Ireland (Xetra: A0Q8L3 - news) division, which saw first half profits for the first time since 2007.

The group posted total sales of of £3.29bn over the period, up 4% on a constant currency basis.

But the company still fell into the red, reporting pre-tax losses of £22.2m and a basic loss per share of 2.5p.

This was due to faltering sales in Southern Europe, a big hit from its struggling e-commerce firm PIXmania, as well as losses on property.

Sebastian James, the group's Chief Executive, said he was cautiously optimistic abut the outlook.

"It is increasingly clear in each of our markets that our service-based, multi-channel business model is what customers want," he said.

"We are outpacing our competitors, and have seen Comet enter administration in the UK and Expert exiting the market in Sweden."

The firm's UK & Ireland division returned to first half profitability for the first time in five years.

Total (Brussels: FP.BR - news) sales there were up slightly to £1.59bn, with like-for-like sales up 3% in the half.

Underlying operating profit for the first half improved by £11.6m to £5.6m.

Dixons said here might be some disruption while Comet, which recently fell in administration, completed the 'fire-sale' of its stock in the short term.

However, it added that Currys and PC World would benefit from the consolidation.

Computing continued to be driven by tablets, the firm said, while televisions showed modest growth especially in large screen TVs (Taiwan OTC: 8264.TWO - news) .

Like-for-like sales in Northern Europe were up 11% to £1.1bn, contrasting with Southern countries, where sales were down 9% to £394.8m.

PIXmania saw life-for-like sales drop 7% to £198.3m and the firm said it had taken day-to-day control from the management and was imposing 'decisive actions' to improve its performance.

"Given the longer term outlook for PIXmania and the markets in which it operates, it is considered prudent to take a more conservative stance regarding the prospects for this business by fully impairing the PIXmania acquisition goodwill by £45.2m," the firm said.

Broker comment
In spite of the negative market reaction to the results on Thursday - shares were down 1.07% at 25.77p in afternoon trade - analysts at Panmure Gordon decided to remain upbeat with a 'buy' rating.

The broker said: "Dixons' interim results were slightly ahead of expectations and there are clear signs of potential value creation in its loss-making businesses.

"The demise of Comet and the continuing margin improvement in the UK adds clarity to the domestic profit opportunity, so we are increasing our sum of the parts valuation from 28p to 32p."