TIDMCURY
RNS Number : 2818R
Currys PLC
04 November 2021
Interim Trading Update
Announcing GBP75m share buyback on the back of robust trading
and cash generation
Currys is today providing an interim trading update alongside
its investor event at its Staples Corner store which will focus on
the strategic progress the Group has made in creating long-term,
sustainable value for all stakeholders. Currys will outline its
refreshed capital allocation framework and its intention to
commence a GBP75m share buyback programme.
Trading update
Group trading has remained robust over the first six months of
the year with Group sales up +15% on a like-for-like basis compared
to two years ago.
Preliminary Like-for-like
---------------- -----------------------------
Sales YoY % change Yo2Y % change
---------------- ------------- --------------
UK & Ireland (3)% +11%
International 0% +19%
- Nordics (1)% +19%
- Greece +8% +19%
---------------- ------------- --------------
Group (1)% +15%
---------------- ------------- --------------
-- UK & Ireland - Like-for-like sales were up +11% compared
to two years ago as growth in Electricals was offset by the
expected decline in Mobile sales. Compared to last year
like-for-like sales were down (3)%.
In Electricals, like-for-like [1] sales were up +21% compared to
two years ago and down (1)% compared to last year. Sales were very
strong at the start of the period as we saw pent up demand from
customers choosing to shop in stores after extended lockdowns but
strong two-year growth has continued through the Summer and into
the Autumn. Our stores contributed slightly over half of sales
during the period.
-- International - In Nordics, like-for-like sales were up +19%
compared to two years ago and declined (1)% compared to last year,
with healthy trading thoughout the period. The online share of
business has increased by around 2ppts compared to last year.
In Greece, like-for-like sales were up +19% compared to two
years ago with sales at the start of the period particularly strong
due to the Government's digital care initiative. Compared to last
year like-for-like sales were up +8%.
The Group paid a full year dividend of 3p per share, GBP34m in
total, on 24 September 2021 and had an average net cash balance in
excess of GBP280m throughout the period (1H 2020/21: GBP194m).
Outlook
The Group expects to deliver a robust Peak trading season. We
have put in place measures to mitigate the well-publicised supply
chain disruption caused by industry-wide availability challenges
and labour shortages. We believe that these measures combined with
our scale, stores and expert colleagues, mean we are on track to
meet consensus expectations for full year 2021/22 PBT of GBP161m
[2] .
For the full year 2021/22 we expect the following:
-- Capital expenditure of around GBP170m (previous guidance: GBP190m)
-- Net exceptional cash costs of around GBP70m (previous guidance: less than GBP100m)
-- To finish the year with at least GBP100m of net cash (previous guidance: net cash position)
Creating long-term, sustainable value for all stakeholders
We are confident in the strength and resilience of the business
we are creating and our ability to generate sustainable free cash
flow and value for all stakeholders both today and in the
long-term.
Technology plays a more important role in our lives today than
ever. As the market leader, in every market, with the winning
Omnichannel business model, we are making the most of that.
We are delivering on our Omnichannel strategy which combines our
strong online business and the benefits of stores to give customers
the unique benefits of both channels.
There remains a significant opportunity to grow share of wallet
of existing customers, and we will continue to use the foundations
of large customer bases and our strong Services offering to build
Customers for Life.
We have made our move to one brand, Currys, in the UK &
Ireland. Alongside Elkjøp and Kotsovolos we now have a single brand
in every market making us the first choice for all things tech in
both electrical and mobile, product and services alike.
The hardest yards of our transformation are now done with 75% of
our transformation spend due to complete by the end of this year,
lowering execution risk going forward, yet with the full benefits
still to come.
Our medium-term guidance for 4% EBIT margin and over GBP1bn
cumulative free cash flow by 2023/24 remains unchanged. By that
year we expect the Group to be generating over GBP250m of annual
sustainable free cash flow. To do this, we will focus on delivering
the following financial profile over the medium term:
-- Revenue growth - A wide range of complementary initiatives
will aid sales growth and enable us to gain further market
share.
-- Gross margins stabilisation and operating costs reductions to
deliver 4% EBIT margin - We have already stabilised gross margin in
UK&I and will aim to remove a further c.GBP300m of gross
operating costs through programmes covering all aspects of the cost
base.
-- Controlled capital expenditure - The current year will be the
peak year for transformation expenditure, which will normalise to
around 1.5% of sales.
-- Minimal exceptional cash costs - After several years of high
exceptional costs as we transformed the business our plan does not
assume material exceptionals related to our transformation.
Capital allocation and share buyback programme
Over the last three years the Group's balance sheet position has
strengthened significantly. Strong cash generation has meant we've
already delivered GBP547m of our more than GBP1bn cumulative free
cash flow target. At the same time, we have reduced total average
indebtedness (including pension and lease liabilities) [3] from
GBP2.5bn in 2018/19 to GBP1.5bn in 2020/21, a material reduction of
GBP1bn.
We have undertaken a detailed review of our capital allocation
framework, with a particular focus on the appropriate balance sheet
leverage, our ongoing pension commitments, our dividend policy and
on our ability to return surplus cash to shareholders.
We intend to maintain a strong balance sheet. We will therefore
assess our financial strength on a total indebtedness basis and
will target the following metrics [4] ;
-- Fixed charge cover of greater than 1.5x
-- Indebtedness leverage of less than 2.5x
After maintaining a prudent balance sheet and paying the agreed
pension contributions ([5]) , our refreshed capital allocation
priorities are:
1. Invest to grow the business / profits / cashflow
2. Pay and grow the ordinary dividend
3. Return surplus cash to shareholders [6]
Based on these priorities, we are confident to announce a share
buyback programme, with a tranche of GBP75m of shares to be
repurchased over the next twelve months. The programme will
commence after the Group's current close period ends.
Next scheduled announcement
The Group is scheduled to publish its Interim results covering
the 26 weeks to 30 October 2021 on Wednesday 15 December 2021.
For further information
Assad Malic Corporate Affairs +44 (0)7414 191044
Dan Homan Investor Relations +44 (0)7400 401442
Chloe Walters External Communications +44 (0)7401 399609
Tim Danaher Brunswick Group +44 (0)207 4045959
=============== ========================= ===================
Information on Currys plc is available at www.currysplc.com
Follow us on Twitter: @currysplc
About Currys plc
Currys plc is a leading omnichannel retailer of technology
products and services, operating online and through 829 stores in 7
countries. We Help Everyone Enjoy Amazing Technology, however they
choose to shop with us.
In the UK&I 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 35,000 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. The Group's operations
are supported by a sourcing office in Hong Kong, state-of-the-art
repair facilities and an extensive distribution network, enabling
fast and efficient delivery to stores and homes.
Our vision, we help everyone enjoy amazing technology, has a
powerful social purpose at its heart. We believe in the power of
technology to improve lives, help people stay connected,
productive, healthy, and entertained. We're here to help everyone
enjoy those benefits and with our scale and expertise, we are
uniquely placed to do so.
We're a leader in giving technology a longer life through
repair, recycling and reuse. We're reducing our impact on the
environment in our operations and our wider value chain and we will
achieve net zero emissions by 2040. We offer customers products
that help them save energy, reduce waste and save water, and we
partner with charitable organisations to bring the benefits of
amazing technology to those who might otherwise be excluded.
Certain statements made in this announcement are
forward-looking. Such statements are based on current expectations
and are subject to a number of risks and uncertainties that could
cause actual results to differ materially from any expected future
events or results referred to in these forward-looking statements.
Unless otherwise required by applicable laws, regulations or
accounting standards, we do not undertake any obligation to update
or revise any forward-looking statements, whether as a result of
new information, future developments or otherwise. Information
contained on the Currys plc website or the Twitter feed does not
form part of this announcement and should not be relied on as
such.
[1] Following the closure of Dixons Travel, Electricals
like-for-like sales exclude Dixons Travel from both one-year and
two-year numbers
[2] Details can be found on website:
https://www.currysplc.com/investors/analyst-coverage-and-consensus/
[3] Total indebtedness is defined as year-end net cash/(debt),
pension deficit and lease liabilities, less any restricted cash.
Average indebtedness is the same definition using average net
cash/(debt)
[4] Fixed charge cover is calculated as annual operating cash
flow plus cash lease costs divided by total annual cash lease
costs, interest and pension contributions
Indebtedness leverage is defined as total indebtedness divided
by operating cash flow pls cash lease costs
[5] Monthly pension contributions of GBP6.5m are due to continue until 31 December 2028
[6] Annual cash r eturns including ordinary dividend in excess
of GBP78m per year to be matched by additional pension
contributions
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END
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