Dixons profits down

Demand for mobile phones and DVD players was high

Strong demand for mobile phones and digital goods helped boost sales at the UK's biggest electrical retailer Dixons over the Christmas period.

But the sales surge came too late to prevent the retailer, which also owns Currys, PC World and The Link, recording a decline in half-year profits.

The company blamed the weaker market for computer games, September's petrol crisis and the autumn floods.

But Dixons said that since the end of the half year sales had risen strongly.

Freeserve bill

In the eight weeks to 8 January overall sales rose 19%. Stripping out income from new stores, sales rose by 6% during that period.

The company said it had benefited from high demand for DVD players and mobile phones.

But that sales growth came too late for the half year to 11 November, when pre-tax profits dipped to £51.9m from £299.4m, at the same point last year.

This decline included a £37m pre-tax loss from Freeserve, the internet service provider Dixons is selling to French firm Wanadoo.

Freeserve's loss was an increase on the £13.6m loss during the same period a year earlier.

The results were also distorted by a £219m one-off gain in the 1999 accounts - the proceeds from Freeserve's flotation on the London Stock Exchange.

Taking these factors out of the equation, underlying pre-tax profits in the period were £90.8m, against £92.5m.

Share boost

Company watchers in the City had been expected a drop in underlying profits to around £82m and were pleasantly surprised by Wednesday's results.

Investors were also impressed by Dixons' Christmas trading figures.

After half an hour of trading on Wednesday, Dixons shares were up 4.5p to 253.5p.

The amount of business Dixons turns over has doubled since 1996, as the PC and internet boom gripped the UK.

Its turnover has gone from £1,919m in 1996 to £3,889m on the most recent figures, for the year to April 2000.

Dixone share price has also risen sharply over this time - between 1991 and 1995, the shares drifted either side of the 50p mark, then started to climb to around 120p at the end of 1998.

After that date, Dixons shares started to behave more like tech stocks than retail stocks, as the company entered the ISP market with Freeserve.

Over the last 52 weeks, the shares have hit a high of 400p and a low of 176p; they're now between the two, but closer to the low than the high.

'Buy' advice

The City view on Dixons is positive.

Seven teams of analysts are advising their clients to stock up on the shares.

Three are telling them to sit tight - hold the shares in you've already got them, but don't buy any more.

Only one team of company watchers is telling clients to sell the stock.