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Dixons future looking brighter

RESULTS: Comet's exit from the UK market could give Dixons a big boost, but there is still a lot of work to be done.
November 30, 2012

Dixons (DXNS) posted a small underlying loss in its seasonally weak first half, but it would have been far worse had some of its biggest rivals, electrical retailer Comet in the UK and Expert in the Nordics, not gone into administration this autumn.

IC TIP: Hold at 25p

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:25.36pMARKET VALUE:£917m
TOUCH:25.31-25.36p12-MONTH HIGH:27.5pLOW: 9.1p
DIVIDEND YIELD:nilPE RATIO:NA
NET ASSET VALUE:8p*NET DEBT:4%

Half-year to 13 OctTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20113.292.40.10nil
20123.28-79.5-2.50nil
% change----
*Includes intangible assets of £796m, or 22p a share