Dixons eyes possible bid for Kingfisher electricals

Dixons, Britain's biggest electricals retailer, said yesterday that it was monitoring developments at the rival Kingfisher group, which is demerging its electrical division, but said it had not made an approach regarding a possible bid.

Speaking as Dixons reported a 7 per cent underlying increase in full-year profits to £297m, its chief executive, John Clare, said: "Clearly here is a major electrical retail opportunity in Europe and we are keeping an eye on things as you'd expect us to."

Mr Clare admitted that he is an admirer of Darty, Kingfisher's French electricals operation, which would be valued at around £1bn, but said it was not a "must have" deal. "It is a business I admire," he said. "However, it is within an electricals business that has a lot of operations we would not be interested in."

He pointed to Kingfisher's loss-making electrical operations in Germany, Holland, Belgium, the Czech Republic and Slovakia as examples, adding that Dixons would be barred by the competition authorities from buying Comet, Kingfisher's UK electricals business.

Though analysts believe Dixons may see Darty as too good an opportunity to miss, Mr Clare said: "I can tell you that we are not getting excited about Kingfisher electricals, full stop. I'm interested in shareholder value and if that means never being in France then I wouldn't lose any sleep over it." He said other buyers could include overseas rivals such as Karstadt Quelle, Pinault Printemps Redoute and Best Buy.

The comments came as Dixons reported a modest increase in profits for the full year, which has seen strong growth in DVDs and wide-screen televisions held back by falling sales of mobile phones and personal computers.

Like-for-like sales were flat on the previous year though this masked widely differing performances. Currys was the star performer with like-for-like sales up 5 per cent. But The Link, Dixons' mobile phone chain, saw underlying sales plunge 23 per cent due to falling sales of pay-as-you-go handsets.

Current trading is in line with expectations. "The combined effects of the World Cup and relative weakness in May last year have helped year- on-year performance," the company said. However, Mr Clare added: "If you look forward we think the strength of the consumer economy will unwind."

Profits from the international division slipped to £15m from £22m due to investment in new markets such as Spain and Hungary. Dixons has the option of buying out the remaining 75 per cent stake in Unieuro of Italy for £250m in July next year.

Dixons shares slipped 3.25p to 198.5p in a market unsettled by the WorldCom scandal. WestLB Panmure raised its recommendation on the shares from "neutral" to "outperform" with a 220p price target.