Dixons Carphone Merger Savings Give Retailer Cause for Optimism

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Dixons Carphone Plc, the U.K. owner of the Currys and PC World chains, pointed to further profit growth in the year ahead as benefits from the merger that created the company last year flow through to earnings.

The London-based retailer is comfortable with analyst estimates for a 17 percent increase in pretax profit, Finance Director Humphrey Singer said on a call with reporters Thursday.

“It’s a big step-up, but this year the synergies will really start to deliver incremental earnings growth,” Singer said. Dixons Carphone expects merger-related savings of at least 80 million pounds ($1235 million) a year by April 2017.

Sales at the retailer -- formed from the merger of Dixons Retail and Carphone Warehouse -- exceeded its own expectations in the first year. Opening Carphone Warehouse stores within Currys and PC World outlets has helped boost sales of mobile devices alongside products such as televisions. This year the retailer is counting on sales of ultra-high definition TVs, coffee machines and GoPro cameras to fuel further growth.

Dixons Carphone shares rose 0.8 percent to 465.3 pence as of 8:45 a.m. in London. They have gained 38 percent since the merger was completed in August last year.

Also Thursday, the retailer reported pretax profit of 381 million pounds for the 13 months ended May 2. That exceeded its own forecast of 355 million pounds to 375 million pounds and represented growth of 21 percent from the prior year on a so-called pro-forma basis.

“The shape and momentum of the business is strong,” John Kershaw, an analyst with Exane BNP Paribas, said in a note. “Dixons Carphone continues to offer sector-leading earnings growth.”

The retailer proposed a final dividend of 6 pence a share. That took the payout for the year to 8.5 pence, beating a Bloomberg forecast for a payout of 8 pence.

Total revenue for the year was 9.9 billion pounds, with group like-for-like sales rising 6 percent.