Currys store exterior
Currys reiterated year-to-April 2024 guidance, suggesting the Christmas selling period is off to a decent start / Image source: Currys
  • H1 EBIT beats expectations
  • FY24 2024 guidance reiterated
  • Nordics profitability improves

Shares in technology products retailer Currys (CURY) rallied 11% to 50.25p after the TV, washing machine and laptop seller reported a ‘solid’ first-half performance in a tough environment and confirmed its full-year to April 2024 guidance.

This suggests the Christmas trading period is off to a decent start at Currys.

RESILIENT FIRST-HALF TRADING

Whilst consumer spending remains under pressure from persistent inflation and rising interest rates, the electricals purveyor reported progress both at home and abroad, with profitability massively improved in the challenged Nordics region.

News of a significant narrowing of the group-level statutory loss before tax from £548 million to £46 million also sparked life into the lately-unloved share price.

Despite a 4% group sales decrease in the half ended 28 October, and a 40% drop in UK & Ireland earnings before interest and tax (EBIT), overall group EBIT rose 7% to £31 million, ahead of the £25 million Liberum Capital was looking for and giving management the confidence to reiterate full year guidance.

A tough market backdrop meant UK & Ireland like-for-like sales were down 3% and EBIT declined by 40% to £15 million as improved gross margins and cost savings were more than offset by inflationary pressures and the non-repeat of last year’s £11 million of benefits from Currys’ mobile business.

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Nevertheless, chief executive Alex Baldock stressed domestic profits were in line with expectations thanks to Currys’ focus on ‘more profitable sales and growing the services that drive margins and customer lifetime value’.

Credit, Care & Repair and iD Mobile ‘are all performing strongly, while colleague engagement and customer satisfaction continue to rise’, he explained.

NORDICS PROGRESS IMPRESSES

‘There’s still a long way back to healthy Nordics performance, but we’re on the way’, commented Baldock. Like-for-like sales fell 6% in the Nordics, where consumer demand remains weak.

However, Currys delivered a year-on-year surge in EBIT from £3 million to £12 million with gross margins back up to the levels of two years ago. This reflected the success of self-help measures, and reassured investors a return to historic levels of profitability is on the cards once the tough Nordics market backdrop begins to improve.

Baldock stressed: ‘Our priorities this year are simple: to get the Nordics back on track, to keep up the UK & Ireland’s encouraging momentum, while strengthening our balance sheet and liquidity. We’re making good progress on all these in a still challenging economic environment.’

Currys has already substantially strengthened its balance sheet and liquidity this year and is selling its Greece and Cyprus retail business, which trades as Kotsovolos, to Public Power Corporation for net proceeds of £156 million, which has initially been earmarked for debt reduction.

The retailer expects to finish the year with a net cash position if the disposal completes before the April year-end.

THE EXPERT’S VIEW

AJ Bell investment director Russ Mould said Currys’ latest announcement, while not unblemished, certainly represented progress from the electronics retailer.

‘For more than a year Currys has been a tale of Nordic noir as its previously reliable Scandinavian business has been beset by competitive pressures. Margins for this region being back at their level from two years ago will reassure shareholders that Currys is starting to put its problems behind it.’

Mould continued: ‘Revenue is under pressure across the board, and the company chalked up a first-half loss, but it is telling it felt confident enough to stick with full-year guidance – hinting the Christmas trading period must be off to a solid enough start.

‘There may be no return to the lockdown period when people had the means and motivation to snap up new electronic goods but Currys will hope as pressures on household budgets start to ease, appetite for buying larger ticket items will return.’

DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Ian Conway) own shares in AJ Bell.

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Issue Date: 14 Dec 2023