ii view: Currys continues to put on a brave face

Battling tough overseas competition but offering an estimated future dividend yield of more than 4%. Buy, sell, or hold?

First-half results to 29 October

• Revenue down 7% to £4.47 billion
• Headline loss of £548 million, down from a profit of £48 million
• Interim dividend unchanged at 1p per share
• Net debt of £105 million from year-end net cash of £44 million

Guidance:

• Now expects full-year pre-tax profit of £100-125 million, down from a previous £130-150 million

Chief Executive Alex Baldock commented:

"Currys UK&I performance continues to strengthen, and is showing real momentum, reflecting good progress in our transformation. International, however, has had a tough period, and faces short-term but intense pressures from a disrupted market.

"It's a tough environment, and we are planning for that to continue. Still, we expect to maintain the trajectory of improving UK&I profitability and a robust recovery in international profits. We have a strong balance sheet and a strategy that's working."

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ii round-up:

Currys (LSE:CURY) trades across more than 820 stores and several websites in eight countries including the UK. Its brand names have been whittled down to Currys in the UK and Ireland, Elkjøp in the Nordics and Kotsovolos in Greece. 

For a round-up of these latest results announced on 15 December, please click here.

ii view:

Formerly Dixons Carphone, Currys today employs around 30,000 people. Its operations also include product repair facilities in Newark in the UK, a sourcing office in Hong Kong and a wide distribution network for both home and store deliveries. 

Just over half its sales are generated in the UK and Ireland, with Sweden and Norway together accounting for a further quarter. Strategic focuses for the FTSE 250 company include building sales both in store and online, along with offering customer credit and services such as product repair and recycling.  

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For investors, intense competition at its Scandinavian business is currently hindering profits. Rising interest rates and a cost-of-living crisis also offer a challenging backdrop, costs such as energy have risen, while a previous net cash holding has swung to a net debt position. 

More favourably, diversity in both geographical and sales channel terms are held, unlike at rival AO World (LSE:AO.). Product sales advice is available which compares favourably with retail rivals such as Amazon (NASDAQ:AMZN), costs continue to be tackled, while revolving credit facilities of over £600 million remain available. 

Investors must consider the potential of the business with the current economic environment where consumers are unlikely to spend like they have previously. Currys is a solid business and should do well when conditions improve, making the shares an interesting choice for risk takers. However, a looming recession will likely prompt others to wait and see how Currys copes.

Positives

• Cost reduction programme
• Attractive dividend (not guaranteed)

Negatives

• Tough outlook for consumers
• Global supply chain challenges

The average rating of stock market analysts:

Hold