Currys – Dividend Ditched As Profits Fall

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Currys’ (LON:CURY) full-year revenue fell 7% to £9.5bn on a like-for-like basis, with declines in all markets except Greece. This was due to a fall in consumer spending as persistent inflation and rising interest rates took their toll on consumers.

Group underlying operating profit fell 24% to £214m. The UK & Ireland division saw a 45% uplift to £170m, driven by a focus on more profitable sales and a successful cost-cutting programme. In the International division, underlying operating profit fell 73% to £44m as the market became overstocked, leading to heavily discounted products which prevented the pass-through of inflated costs.

Free cash flow fell from an inflow of £72m to an outflow of £74m, driven by lower profitability. The £44m net cash position turned to a net debt position of £97m.

Currys said the economic outlook remains “uncertain” in its main markets. No current-year guidance was given, but longer-term guidance for operating margins to reach 3% was reiterated.

The group decided not to declare a final dividend.

The shares dropped 12.1% following the announcement.

Currys’ Shares Plunge

“Currys has pulled the plug on its final dividend, which didn’t please investors and the shares plunged as the market opened. Group like-for-like sales fell by 7% last year, with consumer electronics and computing sales lagging. The bottom line is that consumers are simply struggling to justify as much discretionary spending amidst a cost-of-living crisis.

Overall, it was a tale of two regions. The strengthening UK & Ireland division showed positive signs, with gross margin improvements as consumers make use of Curry’s credit facilities. Services were another beacon of light. These are typically higher margin than goods sales, so help to relieve some of the pressure of falling revenues.

But in the Nordics region, it’s a different story. The group’s long track record of success in the Nordics was brought to an abrupt halt as underlying operating profit fell 82% to £26m. The market here is unforgiving and overstocked, leading to heavily discounted products which prevented the pass-through of inflated costs. The group maintains that the Nordics region is fundamentally healthy, but concretes signs of progress here will be needed to restore investor confidence.”

Article by Aarin Chiekrie, equity analyst at Hargreaves Lansdown