Belfast Telegraph

Dixons Carphone shares tumble 30% as cost of new handsets rise

By Business Reporters

Dixons Carphone went into freefall yesterday with the firm issuing a profit warning as the soaring costs of new mobile phones means people are holding on to older models for longer.

In an unscheduled trading update, the electricals giant said the pound's collapse following the country's decision to leave the European Union has meant an increase in shop prices for mobile devices and bemoaned "challenging conditions".

Dixons Carphone, which operates more than 30 outlets in Northern Ireland and was formed as a merger of Dixons Retail and Carphone Warehouse, now expects headline pre-tax profit for the full year to be in the range of £360m to £440m.

This is down from analyst forecasts of between £460m and £485m and well below the £501m booked last year.

Shares collapsed by around 30% as investors digested the news.

Boss Seb James said: "Over the last few months we have seen a more challenging UK post-pay mobile phone market.

"Currency fluctuations have meant that handsets have become more expensive while technical innovation has been more incremental.

"As a consequence, we have seen an increased number of people hold on to their phones for longer. While it is too early to say whether important upcoming handset launches or the natural life cycle of phones will reverse this trend, we now believe it is prudent to plan on the basis that the overall market demand will not correct itself this year."

The pound has crashed 14% against the dollar and 17% against the euro since the referendum.

The net result has been an increase in import costs for retailers, who have then passed this on to already hard-pressed consumers.

Dixons Carphone also said it would take a £10m to £40m hit from changes to EU roaming legislation.

Mobile phone retailers take a cut of additional charges levied by telecoms firms, including roaming, however the EU's decision to scrap roaming charges means they will now miss out.

To complete a miserable update, the retailer said changes to the way it sells its honeybee software product will also dent profits.

The trading update showed that UK like-for-like sales were up 4% in the period, while total sales rose 1%.

Across the phone and electrical products group, which also operates in Scandinavia and Greece, sales were up 6%.

Mr James said he was encouraged by the UK performance in light of strong comparative sales following last year's European football championship.

Belfast Telegraph

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