Unaudited Results for the Half Year Ended 30 October 2021
Strong trading and cash generation as strategic progress continues
We Help Everyone Enjoy Amazing Technology
- Strong UK market share gains, mitigating industry-wide supply chain challenges
- Maintaining previous profit expectations despite a softer market in the Christmas run-up
- Strong colleague engagement and customer satisfaction continues
- Now under one market-leading brand in each country with successful move to single ‘Currys’ brand in UK & Ireland
- One of only two UK retailers to receive ‘A’ score from CDP for our work to combat climate change
- Group LFL (1)% (Yo2Y +15%)
- Group total Revenue (2)% (Yo2Y +2%)
- Group adjusted Profit before tax £48m (H1 2020/21: £40m, H1 2019/20: £2m)
- Group Profit before tax £48m (H1 2020/21: £45m, H1 2019/20: £(86)m)
- Free cash flow £185m (H1 2020/21: £499m, H1 2019/20: £77m)
- Period end net cash £250m (H1 2020/21: £269m, FY 2020/21: £169m)
- £75m share buyback commencing in January, interim dividend of 1.00p declared
All figures are year-on-year unless stated. There are a number of non-GAAP measures and alternative proﬁt measures "APMs" discussed within this announcement. Adjusted results are consistent with how business performance is measured internally and presented to aid comparability of performance. Refer to the glossary and definitions section set out at the end of this report for further details on definition, purpose, and reconciliation to nearest statutory measure as well as information on the restatement of the comparative interim results announced on 8 October 2021.
Alex Baldock, Group Chief Executive:
“We’ve had a strong first half of the year. We grew colleague engagement and customer satisfaction, gained market share and stabilised gross margins in the UK, grew profits and generated strong cash flow.
Technology is now more important than ever to people’s lives, and we’re best-placed to make the most of that. More and more, we are doing so.
We have strategic clarity, aligned behind a common purpose: “We Help Everyone Enjoy Amazing Technology”. We’re a simpler, more focused business, and have completed the hardest yards of our transformation, with big legacy issues now behind us, and the pandemic so far successfully navigated. Our big international business has continued to shine, and we can now put our weight behind a single, market leading brand in every country.
Above all, we’re showing that in technology retail omnichannel wins. Yes, more customers are shopping online, and our hard work to build a strong online business has seen us thrive here. But most customers buy tech through both online and stores, our sweet spot, where we’ve worked hard to build on our strengths. That’s paying off.
Our market has been softer over recent weeks, and we may face into further headwinds from omicron and associated restrictions, but the stronger business we’ve built can ride out both the industry-wide disruption to supply chains and bumpy demand. After the strong first half, we remain on track to meet the expectations we set out a month ago for full year adjusted PBT of around £160m.
We owe all this to our tens of thousands of capable and committed colleagues, 16,000 of whom will receive £1,000 of free shares in February, as we continue to make all colleagues shareholders. It’s their skill and will that’s keeping us on track for another successful year, and that’s transforming Currys into a business to be proud of. I’m proud to be their colleague.”
- UK&I Revenue (4)%, LFL (3)% (Yo2Y Revenue (9)%, LFL +11%). Adjusted EBIT £23m, +£13m YoY (EBIT £33m)
Electricals LFL (1)%, Yo2Y LFL +21%
Adjusted EBIT growth of +130% driven by +110bps gross margin improvement and cost reductions
Nordics Revenue +3%, LFL (1)% (Yo2Y Revenue +20%, LFL +19%). Adjusted EBIT £57m, £(17)m YoY (EBIT £51m)
Online sales +9% (ccy neutral), contributing 24% of sales, +2ppts year-on-year
Adjusted EBIT +10% Yo2Y but down (23)% YoY due to gross margin decline and planned transformation costs
Greece Revenue +15%, LFL +8% (Yo2Y Revenue +28%, LFL +19%). Adjusted EBIT £11m, +£4m YoY (EBIT £11m)
Adjusted EBIT +£4m YoY due to strong sales growth and improved gross margin
Group sales were flat YoY on a currency neutral basis, as +4% growth in our international business was offset by the decline in UK&I sales and the Carphone Warehouse Ireland closures.
UK & Ireland
Group adjusted EBIT was flat YoY. UK&I EBIT margins increased due to higher mix of store sales and continuing cost reductions. This was offset by lower Nordic profits due to a decline in gross margin after the strong performance last year, planned transformation cost and additional costs to mitigate supply chain headwinds.
Operating cash flow was in-line with last year. Capital expenditure and exceptional cash costs were lower than last year but as expected, working capital inflow was substantially lower for the half, resulting in lower free cash flow.
Profit and Cash Flow Summary
UK & Ireland
Net finance costs
|Profit before tax||48||45||48||40||20%|
|Profit after tax||42||17||32||28|
EPS - continuing operations
Operating cash flow
Operating cash flow margin
Free cash flow
Current Trading & Outlook
During the last few months, well-publicised global supply chain challenges have affected the industry. We have coped with these challenges well, mitigating the impact for our customers by making the most of the strength of our supplier relationships to maintain market leading product availability. Nevertheless, there are costs associated with some of these mitigations, and there has been some impact on our product availability and on sales of some in-demand products.
After a strong sales performance in the first half of the year, market demand has softened in the run-up to Christmas. Against this backdrop, we have taken market share in the UK, margins have remained stable and customer satisfaction has further improved.
The immediate outlook has become more uncertain, with the omicron Covid-19 variant and associated government restrictions potentially further dampening market demand. Nevertheless, the strong first half performance from a stronger business means we remain on track to meet expectations outlined at our Capital Markets Day last month for full year adjusted PBT of around £160m.
Current year guidance – as previously guided:
- Capital expenditure of around £170m
- Net exceptional cash costs of around £70m
- To finish the year with at least £100m of net cash
- £75m annual buyback to commence when close period ends in January 2022
Medium term guidance – as previously guided:
- Group to generate cumulative free cash flow of more than £1bn over 2019/20 to 2023/24
- Group expects at least 4.0% adjusted EBIT margin by 2023/24
Capital structure and allocation – as previously guided:
As announced at our Capital Markets Day on 4 November, reviewed 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’ll therefore assess our financial strength on a total indebtedness basis and will target the following metrics1 ;
- 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 contributions2, our refreshed capital allocation priorities are:
- Invest to grow the business, profits, cash flow
- Pay and grow the ordinary dividend
- Return surplus cash to shareholders3
1 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 plus cash lease costs
2 Monthly pension contributions of £6.5m are due to continue until 31 December 2028
3 Annual cash returns including ordinary dividend in excess of £78m per year to be matched by additional pension contributions
There will be a live Q&A call for investors and analysts at 9:00am.
Dial-in: +44 (0)330 336 9434, Confirmation code: 7960441
Next scheduled announcement
The Group is scheduled to publish its Peak trading update covering the 10 weeks to 8 January 2022 on Friday 14 January 2022.
For further information:
+44 (0)7414 191044
+44 (0)7400 401442
+44 (0)7794 468663
Tim Danaher, Sam Chiene
+44 (0)207 4045959
About Currys plc
Currys plc is a leading omnichannel retailer of technology products and services, operating online and through 832 stores in 8 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 33,000 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.