FTSE 100 gains but Dixons Carphone weighs on British mid-caps

Stop losses avoiding share-price disasters is where active fund managers should come into their own

Pricier smartphones and lower European Union roaming charges will dampen Dixons Carphone's bottom line, the retailer's CEO warned today in an unscheduled trading update that sent its share price crashing by 30 per cent.

He added: "Whilst this investment will cause a shortfall in profits for our phone business we do however expect overall profit in our core retail operations to be in line with previous year supported by good progress in our UK & Ireland, Nordic and Greek electrical businesses". Annual profits are now expected to be considerably down on previous year.

The weakness of sterling since last year's Brexit vote has pushed the price of new handsets up by as much as a fifth. Shares fell by up to 32%, as more expensive phones and a lack of new, hot products deterred Brits from upgrading handsets.

Chief executive Seb James said: "Over the last few months we have seen a more challenging United Kingdom post-pay mobile phone market".

"The smartphone market is now more dependent on new devices that offer something different, as users are extending their purchasing cycles and need to be enticed to make a replacement", said research group Gartner. Analysts had on average been forecasting a profit of £495m.

In an unscheduled statement, Dixons Carphone said it has seen a "more challenging" environment in the British cellphone market as a result of currency fluctuations that have made handsets more expensive and a slower pace in technical innovation.

The launch of Apple's iPhone 8 is expected to be more fruitful than its direct predecessor but perhaps not as much of a pull as the sixth generation.

"U.S.ad spend might come back if Trump growth hopes are delivered, and consumer goods companies may increase spend again but structural concerns remain", analysts at Investec said in a note.

"This is just simply because we believe the iPhone 8 to be a much better phone than the current version".

The company had dismissed the Brexit effect on its business in previous communications with investors some months ago, despite tech vendors including Dell, HP and Lenovo raising prices due to the weakened state of the British pound relative to the USA dollar.



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