Users on hold hit Carphone

SHARES in Dixons Carphone plunged by 23 per cent to their lowest for nearly five years yesterday as it warned of a sharp reverse charge in profits as mobile phone users held on to them for longer.

About £640million was wiped from the FTSE 250 electricals and mobile phone retailer, which blamed the weak pound for driving up the price of handsets, as well as a lack of new products with innovative features.

It will take a further hit of between £10million and £40million from the scrapping of European Union roaming charges because it takes a share of the lifetime value of a customer’s mobile phone contract, which includes additional spending such as data charges from overseas usage.

The group, which trades as Currys, PC World and Carphone Warehouse, said it expects annual pre-tax profits of between £360million and £440million, compared with analysts’ forecasts of about £495million. Last year it made £501million. Chief executive Sebastian James, pictured, said: “People are holding on to handsets longer, on average four to five months longer. Currency fluctuations have meant that handsets have become more expensive while technical innovation has been more incremental.” He says users are typically replacing handsets after 29 months rather than 24.

James is hoping that new products such as the Samsung Galaxy Note8 and the soon-to-be launched iPhone 8 will reignite demand.

He said: “We know that for half of the premium market, which is the bit that we like, the Apple base more or less rejected the iPhone 7.

“We are optimistic that the iPhone 8 will be a good release for Apple, significantly better than the 7. Demand is very much there and we think it will come back.”

James said its electricals business had performed well here and abroad as group same-store sales rose by 6 per cent in the 13 weeks to July 29. Shares fell 54½p to 180¾p.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “Currency movements will have made new phones more expensive but since the same should be true in the electronics business, which is faring well, we suspect the lack of significant innovation is a bigger problem. Unfortunately that’s not something Carphone Warehouse can do a great deal about.”