Cautious Dixons limits return of capital to £200m

Dixons Group yesterday unveiled plans to hand back £200m to shareholders as it confirmed that its finance director, Jeremy Darroch, had quit to join BSkyB.

Dixons Group yesterday unveiled plans to hand back £200m to shareholders as it confirmed that its finance director, Jeremy Darroch, had quit to join BSkyB.

Analysts had estimated the group had scope to return up to twice as much cash, given its net funds of £342m. Dixons' shares rose 3.5p to 162.75p.

John Clare, the chief executive, admitted £200m was "relatively cautious" but said the company wanted to retain scope to pursue bolt-on acquisitions and maintain a "robust" balance sheet in the event of an economic downturn. "As God made little apples, there will be a consumer downturn in this economy again that will affect consumer electricals," he said.

The group said it had yet to reach an agreement about when Mr Darroch would leave. Mr Clare was informed about Mr Darroch's intentions only at the end of last week.

Mr Darroch, who was paid a total of £392,000 last year, said BskyB was "an interesting business at a very interesting stage of development. Plus it's one of the biggest companies in the UK by market capitalisation." He signed a contract with the satellite TV broadcaster yesterday morning.

Dixons' decision to hand back cash to investors, via a share buyback, follows the sale of its stake in Wanadoo, the French internet business formerly known as Freeserve, and the disposal of its European property development business. Mr Clare estimated the group had netted £1bn in cash from the sale of Freeserve. It has already returned a slice of the cash to investors.

Mr Clare said the consumer economy looked "reasonably set fair". Its biggest threat remains competition from the supermarkets' non-food operations and deflation. The falling prices of old technology contributed to the 5 per cent underlying sales decline at its flagship Dixons chain. This prompted its decision to close one-third of its high street stores, although Mr Clare insisted he remained confident about the chain's long-term prospects. The group plans to expand into a number of "different product categories" in some of its larger Dixons xL stores.

Profits before tax and exceptionals rose 11 per cent to £332m on group sales that rose 13 per cent to £6.5bn. Its UK underlying sales rose by 2 per cent while European same-store sales increased by 4 per cent.