Currys (LON:CURY) reported stronger annual profit, free cash flow and net cash, with management saying the electricals retailer is benefiting from improving momentum in both the U.K. and the Nordics.
Group CEO Alex Baldock said the results showed “a strong and strengthening performance” across the group, supported by a strategy that he said is “clearly working.” Group CFO Bruce Marsh said like-for-like sales rose 4% for the year, helping profit before tax increase 18% to GBP 191 million. Free cash flow rose to GBP 157 million, and the company ended the year with GBP 176 million of net cash.
U.K. and Nordics both contribute to growth
In the U.K. and Ireland, like-for-like sales rose 3%, marking a second consecutive year of like-for-like growth and market share growth, according to Marsh. Recurring service revenue grew faster than overall sales, rising 7%.
Adjusted EBIT in the U.K. and Ireland increased by GBP 5 million to GBP 158 million, while the EBIT margin remained flat at 2.9%. Marsh said gross margin improved by 20 basis points, helped by “solution selling, driving services, and not chasing less profitable sales.” Operating expenses as a percentage of sales moved 20 basis points in the other direction, as cost savings were not enough to offset higher national insurance and living wage costs.
The Nordics delivered stronger top-line growth, with like-for-like sales up 6% and recurring service revenue up 8%. Adjusted EBIT in the region increased 26%, while the EBIT margin improved 40 basis points.
Marsh said the Nordic gross margin fell 60 basis points, but attributed most of that decline to foreign exchange effects from forward hedging, particularly after a strengthening of the Norwegian krone. Operating expenses improved by 100 basis points as a ratio of sales, with local-currency costs broadly flat despite inflation.
Cash flow supports lower pension burden and shareholder returns
Currys generated GBP 157 million of free cash flow, up GBP 8 million year over year. Marsh said higher cash profit was the main driver, while capital expenditure was broadly flat at GBP 79 million.
The company made an GBP 82 million contribution to its pension scheme, which Marsh described as the “last big payment” as the deficit approaches zero. The pension deficit stood at GBP 6 million at year-end, leaving Currys in a net cash position of GBP 170 million after accounting for pension obligations.
Currys also returned GBP 74 million to shareholders during the year, including GBP 24 million in dividends and GBP 50 million through share buybacks. It made a further GBP 23 million of buybacks for its employee benefit trust to support colleague share awards.
For the new financial year, Marsh said the annual pension contribution is expected to fall from GBP 82 million to GBP 13 million. Currys also expects exceptional cash flows to decline to GBP 15 million from GBP 35 million. The company plans GBP 85 million of shareholder returns, made up of a GBP 35 million dividend cost and a further GBP 50 million buyback.
Outlook: solid early trading, higher CapEx
Marsh said trading in the first part of the new financial year has been “very solid,” while acknowledging continued macroeconomic uncertainty. He said the group is comfortable with market consensus.
For modeling purposes, Marsh outlined several expectations:
- Total interest expense is expected to be broadly flat at GBP 60 million to GBP 65 million.
- Capital expenditure is expected to rise by about GBP 20 million to GBP 95 million.
- Exceptional cash flows are expected to decline to GBP 15 million.
- Pension contributions are expected to fall sharply under the company’s contract with the pension scheme.
Marsh said Currys’ medium-term objective remains to achieve “at least 3%” EBIT margins. The U.K. business is already close to that level at 2.9%, while the Nordics have improved for three consecutive years and are moving back toward pre-pandemic profitability.
Management highlights growth in B2B, services and data
Baldock said Currys has expanded its accessible market in the U.K. by moving into adjacent areas, including small and medium-sized business customers, new technology categories and services. He said the company is seeing “healthy double-digit” growth in areas it has identified for expansion.
B2B sales rose 20% in the U.K. and 16% in the Nordics, according to Baldock. Currys aims to at least double the size of its U.K. B2B business over the next three years and grow the Nordic B2B business by at least 40% over the next four years.
Baldock also pointed to growth in new and emerging categories, including wearables, smart glasses, robot vacuums, e-mobility and pet technology. In the Nordics, he said the kitchens business is also strengthening.
Services remain a major focus. Baldock said more than 30% of U.K. revenues are now recurring, which he said adds “stabilizers” to the profit and loss account. iD Mobile reached 2.6 million subscribers, with subscriber numbers up 18% in the year. Credit adoption through the company’s Flexpay product is approaching 24% of Currys sales.
The company is also investing in data and personalization. Baldock said Currys now has a single customer view in the U.K., bringing together large consented customer bases across iD Mobile, credit, perks and care and repair. In the Nordics, he said personalization could drive at least 5% of sales over the next three years, although he noted that the contribution is currently negligible.
Q&A focuses on competition, chips and capital allocation
Asked about the U.K. competitive environment and JD.com’s Joybuy, Baldock said Currys expects JD to become a serious competitor but noted the company already operates in a “viciously competitive” market. He cited Currys’ omni-channel scale, services and colleague engagement as competitive advantages.
On potential chip shortages and pricing, Marsh said the issue is “a real thing” and that Currys had taken action to prepare. He said stock on the balance sheet was GBP 140 million higher than the prior year, partly due to forward buys in laptops and mobile. Baldock said Currys expects to have enough stock through the back-to-school period and will work to shield consumers from as much price inflation as possible.
Analysts also asked about the company’s cash position and the potential for additional buybacks. Marsh said the GBP 100 million net cash level is a base rather than a target, and that Currys wants to preserve optionality for investment, small infill M&A or further shareholder returns. If the company cannot find better uses for excess cash, he said, “we’ll do more buybacks.”
Baldock, who referenced the coming transition to new leadership under Fredrik, said he was leaving the business with momentum across colleague, customer and financial measures. “I’m confident that they can not just continue, but accelerate this momentum,” he said.
About Currys (LON:CURY)
Currys plc is a leading omnichannel retailer of technology products and services, operating online and through over 800
stores in 8 countries. We Help Everyone Enjoy Amazing Technology, however they choose to shop with us.
In the UK & Ireland we trade as Currys; in the Nordics under the Elkjøp brand and as Kotsovolos in Greece. In each of
these markets we are the market leader, employing 28,000 capable and committed colleagues. Our full range of services
and support makes it easy for our customers to discover, choose, afford and enjoy the right technology for them,
throughout their lives.
