This means Dixons could potentially take a sizeable chunk out of Comet's 5 per cent market share, worth £1.2bn of UK sales, securing its place as one of the last remaining major specialists on the country's high streets. It comes at an opportune time as the group's UK and Ireland operation has just returned to profitability for the first time in five years, reporting a 3 per cent increase in like-for-like sales in the latest half-year, while underlying operating profit of £5.6m was a marked improvement on the £6m loss last year. The main profit centre, northern Europe, continues to perform well, reporting like-for-like sales up 11 per cent and adjusted profits up 6.3 per cent to £40.4m as the business has been aggressively taking market share.
Broker Seymour Pierce expects full-year pre-tax profits of £89.5m and EPS of 1.8p, rising to £154m and EPS of 2.8p, respectively, the year after (from £70.8m and 1.1p in 2012).
| DIXONS (DXNS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 25.36p | MARKET VALUE: | £917m | |
| TOUCH: | 25.31-25.36p | 12-MONTH HIGH: | 27.5p | LOW: 9.1p |
| DIVIDEND YIELD: | nil | PE RATIO: | NA | |
| NET ASSET VALUE: | 8p* | NET DEBT: | 4% | |
IC VIEW
Dixons share price has risen by 30 per cent since the demise of Comet, but the retailer still faces big problems. The southern European business is lossmaking and its Pixmania arm reported miserable underlying losses of £17.1m. Short-term margin pressure is a risk, too, as Comet's administrators complete a fire sale of its stock. On a 2014 forward PE ratio of 9, the shares rate a hold.
Last IC view: Hold, 17.2p, 21 Jun 2012
visible-status-Standard story-url-Dixons future looking brighter.xml
