Dixons Carphone keeping the tills ringing

++ the share hunter ++ george salmon ++ harg re aV esl ans DoWn ++

SHARES in Dixons Carphone bounced 4.5 per cent on Wednesday, after the group released a strong trading update.

The group enjoyed a strong end to the year, with fourth quarter revenues up 6 per cent. While this was flattered by the weakness of the pound, the group could still report growth of 2 per cent at constant exchange rates. This growth included resilient like-for-like sales growth of 2 per cent in the UK, with a slightly better performance in the group’s other main geographies, the Nordics and southern Europe. This performance is impressive, especially as it was achieved despite the delay of the launch of the Samsung S8.

As a result, the group narrowed its profit guidance to £485-£490million, towards the top end of previous expectations. The demise of High Street rivals such as Comet and Phones4u means Dixons Carphone is in the enviable position of being the last man standing. Add in the fact that tech is an increasingly important part of our daily lives and it’s easy to see the upside.

The Connected World Services business, which helps retailers around the world develop their sales platforms is growing rapidly, too. Partners include Samsung and TalkTalk, and there is plenty of scope for more contracts to be won. Analysts expect earnings to grow by more than 20 per cent from 2016-19, with the dividend – which currently offers a yield of 3.5 per cent – increasing by around 30 per cent. However, these are uncertain times for the group, reflected in the fact that the shares currently trade at 10 times expected earnings. Back in 2015, 17 times was the going rate.

Some of the worries centre on the fact that sterling weakness following the EU referendum means the cost of imported goods looks set to rise. While we have yet to see much evidence that the gloomier predictions about the UK’s economy will prove accurate, if it does splutter, Dixons would surely be exposed.

Nonetheless, there are still plenty out there who don’t mind paying a touch more if they get a bit of help from a friendly store assistant. If Dixons’ in-store service is good enough to keep customers happy, this could yet prove its trump card. “This article is designed for investors who make their own decisions without advice, if unsure whether an investment is right for you, you should seek advice. Shares can rise and fall in value so you could get back less than you invest.”