Ignore Brexit bogeyman and buy Dixons

As a retailer of big-ticket electrical items and white goods, it's true that Dixons could prove particularly vulnerable to a Brexit-induced recession. However, the possibility of an imminent major downturn has started to look less and less likely as the referendum ripples subside. And Dixons itself hasn't reported anything to cause investors anxiety.

Looking back at the company's annual results - which were released just four days after the Brexit vote - there were some immediate positives to take away. These included a 5 per cent improvement in like-for-like revenue, driven by an increased share of the mobile phone market and good growth in electricals. There was also a 17 per cent rise in adjusted pre-tax profit to £447m, and a better than expected net debt position of £267m.

At the time, chief executive Seb James mused that Brexit could even offer Dixons an opportunity to consolidate its position as the market leader in the UK. He also promised that it wouldn't detract from Dixons' European plans, including the establishment of a new, modern distribution centre in EU member state Sweden and operating businesses in Greece and Spain. Meanwhile, the Norwegian operation, a country outside of the EU but within the European Economic Area, grew 6 per cent last year on a local currency basis.

Fat forward to last week's first-quarter update and like-for-like revenues grew 4 per cent (well ahead of consensus expectations of 2.5 per cent) over the 13 weeks ended 30 July, with a particularly strong performance across the UK and Ireland. Mr James said he saw "no detectable impact" on trading since the referendum. The launch of Apple's (US:AAPL) new iPhone 7 should benefit the rest of the year, too. Click and collect is now available in more than 500 Carphone Warehouse stores, drawing customers into shops. Elsewhere, the group also reported market share gains and sales growth across all geographies, including the Nordics (up 2 per cent) and southern Europe.

The currency impact of Brexit is not expected to have a major impact, either, despite the possibility of increased overseas sourcing costs. Analysts say this could actually have a beneficial impact in the UK with consumers taking the burden, thus helping to ease the deflationary environment. What's more, Dixons should benefit from its competitive pricing as the company estimates its products now carry only a 1 per cent overall price disadvantage compared with Amazon, against 20 per cent in 2011.

Meanwhile Dixons should continue to benefit from ongoing improvements to its estate, including plans for more three-in-one stores that merge PC World, Currys and Carphone Warehouse. While no profit benefit is expected from this investment this year, a £20m uplift is predicted in 2018. What's more, as investment programmes reach completion in 2018, capital expenditure should reduce sharply, which will boost free cash flow. While the group's £474m pension deficit is a consideration, broker Liberum predicts that Dixons could in theory make special payouts totalling £930m - a fifth of the current market cap - between now and 2020, while maintaining net-debt-to-cash-profits at just one times.