What factors led Dixons Carphone to increase its online sales amid lockdown scenario?

Summary

• Dixons Carphone Plc has reported a 3.0% surge in revenue during H1 FY21.
• The Company has shown electricals online sales growth of 114% during H1 FY21.
• The Company has around 4.3 million members in Nordics Customer Club as of 31 October 2020.
• The Company has achieved 16% LFL revenue growth for six weeks ended on 12 December 2020.

Dixons Carphone Plc (LON: DC.) is the LSE listed consumer discretionary stock. Based on its 1-year performance, shares of DC. have generated a return of about negative 15.83%. Shares of DC were up by close to 4.75% from the last closing price (as on 17 December 2020, before the market close at 08:30 AM GMT).

Dixons Carphone Plc is the FTSE 250 listed company, which is an electrical and telecommunications retailer and services. The Company has four geographic business segments – UK & Ireland, Nordics, Southern Europe and Connected World Services. The Company is the market leader in the UK & Ireland. The Company is headquartered in London and formed on 07 August 2014.

Recent Developments -  The Company will announce its trading statement covering ten-weeks period ended on 09 January 2021 on 20 January 2021.

Electronics industry overview

This industry encapsulates companies which manufacture, assemble and service electronic products. The key products of this industry are TV, smartphones, personal computers, laptops etc. The industry is boosted by creativity and innovation as a lot of funds are put into research and development, focusing on design and enhancement in the manufacturing process. The Companies across this industry are competitive in nature due to the large pool of players already existed in this industry, putting additional pressure on engineering and design team to always dig deep and come up with something innovative. The several broad categories of this industry are –

• Semiconductor supply and manufacturing services
• Industrial Equipment
• Network and Communication Equipment
• Computer and Office Products
• Medical devices
• Consumer Electronics and Home appliances

Financial Highlights (for six months ended on 31 October 2020 as on 16 December 2020)

(Source: Company result)

• The Company has reported a 3.0% growth in revenue from £4.71 billion for H1 FY20 to £4.85 billion during H1 FY21, and electrical revenue went up by 15% to £4.48 billion during H1 FY21.
• The Company has shown electricals online sales growth of 114% to £1.8 billion for H1 FY21.
• The Company has achieved exceptional profitability as the adjusted profit before tax has witnessed a significant increase to £89 million during H1 FY21, while it was £2 million during H1 FY20.
• The furlough payments to colleagues and business rates relief was £103 million during H1 FY21.
• With regards to its financial position, the Company is having a net cash balance of £269 million during H1 FY21 ended on 31 October 2020.
• The Company has generated £499 million of free cash flow during H1 FY21 ended on 31 October 2020, in comparison to £77 million generated during H1 FY20.
• The Company has not declared any interim dividend amid uncertainty around Covid-19 pandemic.

Strategic Review (for six months ended on 31 October 2020 as on 16 December 2020)

Omnichannel -  The Company has delivered online sales growth of 145% in the UK & Ireland, with additional sales of approximately £800 million during H1 FY21. The online sales grew by 58% in Nordics driven by an increase in traffic and a significant rise in average basket value. The Collect@store online sales grew by 65% and accounted for 41% of all online sales. The online sales in Greece went up by 84% during H1 FY21 ended on 31 October 2020.

Credit  -  The Company has reported a significant increase of 60 basis points to 11.5% towards Credit adoption in the UK. The number of active credit customers has increased by 31% and reached above 1.3 million during H1 FY21. The credit sales have demonstrated a 25% growth during H1 FY21.

Services  -  The Company has delivered 15 million products encapsulating almost 5 million large products through a two-person delivery network. The Company has installed over 1.3 million products with 600,000 technical installations and 700,000 product for customers. The Company would be the first specialist electricals retailer present in the UK to make commitments regarding net-zero carbon by 2040 and to electric vehicles by 2030. The Company has around 4.3 million members in Nordics Customer Club as of 31 October 2020, which contributed around 38% of the sales.

Mobile  -  The Company has reported a 54% decline in UK & Ireland mobile sales considering permanent closure of standalone Carphone Warehouse UK stores announced in March 2020. The Contract with EE had expired in September 2020. The only volume-based contract left is with Vodafone. The Company is going to launch its mobile offer during spring next year.

Share Price Performance Analysis of Dixons Carphone Plc

(Source: EODHD/Others, chart created by Kalkine group)

Shares of Dixons Carphone Plc were trading at GBX 127.80 and were up by close to 4.75% against the previous closing price as on 17 December 2020, (before the market close at 08:30 AM GMT). DC.’s 52-week High and Low were GBX 154.60 and GBX 53.50, respectively. Dixons Carphone Plc had a market capitalization of around £1.42 billion.

Business Outlook

The Company has achieved 16% LFL revenue growth for the six-weeks period ended on 12 December 2020 despite the closure of stores in the UK and Greece. The cash flow from the mobile business segment is estimated to be negative during FY21, and group capital expenditure is anticipated to be around £175 million. The Company is expecting cashflow from UK&I mobile to remain positive in the range from £125 million to £175 million in the medium term.

The Company remained cautious regarding its prospects and accepted that they are still short of reaching its optimum potential. The Company has highlighted the further consequences of Covid-19 pandemic as it may cause further closure of stores and continued restrictions on international travel. The Company has also discussed regarding the feasibility of listing a minority stake of Nordics business going forward in 2021. The Company is anticipating accumulated cash flow of more than £1 billion from FY20 to FY24. The annual pension contributions will be increased to £78 million from FY22, while it was £46 million during this year. Regarding the profitability, the Company is expecting to maintain at least 3.5% of EBIT margin during the medium term.