The Week Ahead: Figures due from Dixons, Carphone Warehouse, Carpetright, Stagecoach and Hornby
- Credit: Archant
The merger of Carphone Warehouse and Dixons Retail Group will be in the spotlight this week when the pair announce results covering the last year.
Dixons, owner of Currys and PC World, and Carphone will provide more details on the prospects for their new and enlarged company on Thursday.
The deal, which is worth £3.6billion, is set to be completed before the end of September. The merged business will be called Dixons Carphone and aims to plug into the way technology is transforming modern households by fusing together the mobile phone and electrical goods sectors amid an increasing focus on the “Internet of Things”.
This is a new world where smartphones, tablets and rapid internet speeds will mean washing machines, fridges and boilers are controlled by the touch of a mobile device.
Dixons head Sebastian James will be chief executive of the new group, which will have combined sales of £12bn, more than 43,000 staff across Europe and nearly 3,000 stores, including more than 1,300 in the UK, while Carphone Warehouse founder and chairman Sir Charles Dunstone will lead the board.
The merger is expected to deliver combined yearly savings of £80m although there will be restructuring costs of £55m to £60m and extra investment of £70m to £80m.
Dixons has already said in a trading statement that it expects to post underlying pre-tax profits at the top end of market expectations of £150m to £160m.
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Brokers at Morgan Stanley said that Dixons had fought back against stiff competition from online sellers in recent years and that Carphone Warehouse shareholders would benefit from the deal.
Cenkos said growth in the UK business was the “star” performer at Dixons, aided by growing employment and a recovery in the housing market.
The market expects Carphone Warehouse to report full-year earnings of £150m, compared to £137m a year ago, according to analysts at Exane BNP Paribas.
Brokers at Morgan Stanley add that Carphone Warehouse has produced no “top-line” growth in recent years, with its profits coming from an “impressive” cost cutting programme.
Earnings at Stagecoach are expected to gather steam when the bus and South West Trains rail operator posts its full-year results on Wednesday, with analysts at Investec expecting the firm to post pre-tax profits of £180.1m, up from £171.6m a year ago.
Stagecoach, which operates 8,000 buses serving 2.5 million people a day, saw its regional bus arm’s like-for-like sales lift 4.8% in the 48 weeks to the end of March, while rail like-for-like revenue grew by 4.5%.
The group, led by chairman and founder Brian Souter, received a major boost when Virgin Trains, in which Stagecoach has a 49% stake, won the right to continue running trains on the West Coast mainline until March 2017.
Virgin previously lost out in 2012 to FirstGroup in the battle for a new 13-year West Coast franchise, but the process was scrapped by the Department for Transport due to errors in the bidding process.
Brokers at Morgan Stanley are also upbeat about Stagecoach’s rail prospects because it is on a number of rail franchise shortlists in 2014 that present opportunities for growth.
Carpetright executive chairman Lord Harris of Peckham will present his last set of annual results on Tuesday at the retailer he founded 25 years ago.
The business, which warned over profits for the third time in nine months in March after admitting it has yet to benefit from the housing market recovery, is expected to post annual profits of £4.5m, against £9.7m a year ago.
The housing market has been boosted this year, helped by Government initiatives such as Help to Buy. However, Carpetright said its like-for-like sales in the eight weeks to March 22 grew just 0.2%, which was a slowdown from the previous quarter when like-for-like sales were 1.9% higher.
The downturn took broker N+1 Singer by surprise. It said: “The anticipated tailwind from improving UK housing market activity has yet materialise as we and management had expected.”
In May the firm appointed betting industry boss Wilf Walsh as chief executive, which means Lord Harris will become non-executive chairman from July and will then retire from the board at the company’s annual meeting on September 4.
It is the second time Lord Harris has attempted to step aside from the business. He resumed day-to-day involvement last October after then chief executive Darren Shapland left the business after just 18 months in the wake of a profits warning.
Mr Walsh was until recently chairman of central European betting business Fortuna Entertainment, having previously been managing director of bookmaker Coral.
Analysts at Peel Hunt said changes at the top of the business and Mr Walsh’s lack of home retailing experience would “unnerve shareholders.”
Toy firm Hornby’s supply chain and foreign exchange difficulties are set to hit the business when it reports its full-year results on Friday.
Hornby said in April that it would break even on an underlying basis, compared with a small profit of £200,000 a year earlier.
But the business, whose brands also include Airfix, Scalextric and Corgi, said that a further foreign exchange loss of £200,000 would bring it to an overall deficit of £1.2mn for the year.
Hornby’s troubles stem from supply chain woes involving a major model railway manufacturer in China. It said in April those ties were due to be cut and that it expects a “gradual improvement” in its reliability and quality this calendar year.
The problems first struck in 2012 after its biggest manufacturer shut a factory producing the group’s model railways in a year that also saw it suffer slower-than-expected demand for Olympic-themed products.
Since then it has been broadening its supplier base, moving production to other Chinese firms and in India as well as bringing some manufacturing back to Britain.
The business has also seen its debt climb from £6.5m in December to around £7.3m in April. The firm said it was in talks with its banks over new facilities and expects to update the market on their conclusion on Friday.
The results will be the first set presented by new chief executive Richard Ames, a former Ladbrokes and Dixons director, who joined the group in April.