Dixons' sale of Pixmania and Electroworld: What the analysts say

The big news from Dixon’s Q1 update is the disposal of PIXmania, its pure on-line European business, which lost £31.3m in FY13 and also its Turkish operations, which lost £9m at the retail level. Dixons will provide €69m of cash to mutares AG (N/C) to support its plans and will receive £2m over two years from Bimeks in Turkey when it expects to complete the disposal at the end of 2013. In terms of trading, management confirmed that the strong growth in its core markets seen at the end of last financial year has continued into this year helped by consolidation. Dixons shares have rallied into the trading update having underperformed the sector over the previous three months. The market will welcome the news on PIXmania and be reassured that trading remains positive in its two key markets. We expect consensus forecasts to rise as a result of the elimination of losses from the disposal of PIXmania and Turkey. We are forecasting FY14 profit before tax of £132m including pension cost of £7.8m – Kate Calvert, Cantor Research

All the progress in the UK and Nordics has been frittered away by the persistent losses in these peripheral businesses, so it is encouraging to see that underlying momentum remains good, with Currys and PC World still picking up a lot of Comet’s former market share and delivered a pleasing +6% like-for=-like in Q1, whilst the “jewel in the crown”, the Nordics business, delivered better than expected +5% like-for-like sales, despite more price competition. Profit forecasts will move up on the back of this and the shares are expected to be at least 5% up first thing, as the 8am conf call gets underway - Nick Bubb, independent analyst

The ‘irrevocable’ offer on the e-commerce business, PIXmania, whose loss-making activity has been a persistent drag on Dixons’ group performance, and the agreed sale of ElectroWorld, which operates in the difficult Turkish marketplace, will enable Dixons to focus on driving growth in the healthier UK and Northern European territories. At home, Dixons has posted like-for-likes of +6% in the face of tough comparatives - driven by last year’s summer of sport - and against an uncharacteristically hot July, which in general depressed electronics sales. Moreover, customer advocacy continues to improve off the back of investment in pricing, service and instore environments, as targeted by Dixons’ Renewal and Transformation Plan. While Dixons remains ‘cautious’ concerning the market over the year ahead, this is another strong set of results that stands it in good stead to profit from longer term recovery of the housing market and consumer confidence – Liz Faulkner, Conlumino