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Dixons eyes growth options
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July 7, 1999: 7:54 a.m. ET
CEO says share buyback or split possible; profits up 9% ahead of Freeserve float
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LONDON (CNNfn) - The head of Britain's leading electronics retailer, Dixons, said Wednesday he plans to make his company more nimble in a high-tech future dominated by the Internet and electronic commerce.
Dixons' chief executive John Clare made his comments to CNN shortly after Dixons reported a nine percent increase in pretax profit in 1998 to 237.1 million pounds ($372.2 million), up from 217.6 million pounds ($341.6 million) the previous year.
Per-share earnings, on a diluted basis, rose 11 percent to 38.7 pence from 34.8 pence.
Clare said the forthcoming float of nearly 20 percent of Dixons' Internet service provider unit, Freeserve, would generate "useful currency" for joint ventures, some of which are already in the pipeline.
"A free ISP does not create a business you can float," Clare said Wednesday. "It is really e-commerce that can drive a business. We have to turn these customers into revenue."
Among the items under consideration for the company's future strategy are a share buyback or a share split, Clare said.
The allusion was to the 1.25 million active subscribers who have flocked to Freeserve since its launch last September.
The ISP's meteoric early success has catapulted Freeserve to the top position among British ISPs and prompted a raft of copycats - from a supermarket to a football club - to set up their own "free" Internet access services. There are currently an estimated 70 to 100 free ISPs in the U.K.
AOL Europe, the former market leader whose position has been usurped by Freeserve, has begun to offer its own no-fee service in a tacit nod to the strategy's consumer appeal.
Critics counter that the ISP's claim to "free" Internet access is misleading since users must pay for the phone call.
Analysts value Freeserve at between 1.7 billion pounds and 2.4 billion pounds. That would value Dixons' planned 18.75 percent float of Freeserve at around 450 million pounds ($720 million).
Hinting at the hurdles awaiting Freeserve as it makes its debut on the open market, Clare called the ISP a "difficult and entrepreneurial" business.
In separate comments to Reuters news service, Dixons' finance director, Ian Livingston, said Dixons was exploring options for a capital restructuring that could give a boost to its core businesses.
Dixons is already Britain's largest electronics retailer, operating 950 stores through a network of four chains. The flagship chain sells consumer electronics products. Dixons also sells computers through its retail chain, PC World, and mobile phones through The Link.
Livingston said Dixons was considering a capital restructuring, but did not specify what form this may take.
"We said we'd be looking at a restructuring of the group to give ourselves more flexibility to pursue various options and that's exactly what we're looking to do," he told Reuters.
Dixons said same-store sales had climbed 2 percent in 1998, and 6 percent in the second half. The group said it had created 3,000 new jobs across the Dixons businesses last year and expected to add an equal number of positions this year.
Clare said that while completely free Internet access may be possible in the United Kingdom in the future, regulatory restrictions made such a model difficult for the time being.
Livingston said the company was keeping close tabs on the development of toll-free Internet services to see whether they prove viable over the long term.
--from staff and wire reports
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