Currys Interim Results 2024/25

Unaudited Results for the Half Year Ended 26 October 2024

Performance continues to strengthen

We Help Everyone Enjoy Amazing Technology

Summary

• Group delivered adjusted EBIT £41m, +52% YoY
• Group free cash flow £50m, +£46m YoY
• UK&I revenue growth +6%, based on market share growth and strategic initiatives performing well - including Services, B2B and iD Mobile subscribers +32% to 2.0m
• Nordics adjusted EBIT +50% YoY driven by growth in market share in a continuing difficult market
• Balance sheet further strengthened

Financial performance

• Group revenue £3,918m, +1% YoY (currency neutral +2%), driven by LFL revenue +2%
• Group adjusted profit before tax £9m, +£25m YoY; reported loss before tax £(10)m, +£34m YoY
• UK&I LFL revenue +5%, adjusted EBIT £23m, +53% YoY – strong sales and improved gross margin more than offset both investment and inflationary cost increases
• Nordics LFL revenue (2)%, adjusted EBIT £18m, +50% YoY – gross margins up +80bps with reduced operating costs
• Period end net cash of £107m – first-half cash inflow of £11m, compared to £(32)m outflow in prior year
• Period end IAS 19 pension deficit £(143)m, from £(171)m at year end

Current year outlook

• Trading since the period end has been consistent with the Board’s expectations
• Full year guidance unchanged – the Group continues to expect growth in profits and free cash flow for the year

Alex Baldock, Group Chief Executive

“We’re very encouraged by our progress. Currys’ performance continues to strengthen, with profits and cashflow growing significantly, and the Group’s balance sheet is strong.

In the UK&I, we made big improvements to both Online and Stores channels, customers continued to take more of the solutions and services that are valuable to them and to us, and such growth drivers as B2B and iD Mobile performed well. All this showed in growing sales, market share, gross margins and profits. In the Nordics, we gained market share, increased gross margins, tightly controlled costs and grew profits in a still-tough consumer environment.

Underpinning our progress in both markets is strong customer satisfaction, which increased again, and colleague engagement now firmly established in the top 10% of companies worldwide.

We were well prepared for our Peak trading period, with healthy stock and market-beating, best-ever deals that show our unmatched importance to suppliers. We’re trading in line with expectations. One highlight is rising demand for AI laptops, where we enjoy over 75% market share in the UK. AI is a trend with a lot further to run.

Looking ahead, we’re confident of continuing our progress, and expect to grow profits and cashflow as promised this year. This is despite new and unwelcome headwinds from UK government policy. These will add cost quickly and materially, depress investment and hiring, boost automation and offshoring, and make some price rises inevitable.

Still, there’s plenty we can control, including mitigating much of this headwind. We’ll keep colleague engagement world class, customer satisfaction increasing, cashflow growing for shareholders, and playing an ever-bigger role in society. We have growing momentum at Currys. As ever, I’m hugely grateful to the tens of thousands of colleagues whose brilliant work makes all this possible, and who are building this ever-stronger Currys.”

Performance Summary

Group sales increased +2% on a like-for-like basis with growth in UK&I offset by a weak Nordics environment. The Group grew market share and saw good growth from strategic initiatives.

In the UK&I, adjusted EBIT increased +53% YoY. The core technology market¹ declined (1.4)% YoY and we stabilised market share at +20bps YoY. Alongside this, we saw strong performance from Mobile and our B2B business that further boosted growth, resulting in like-for-like revenue growth of +5%. Gross margin continued to climb, growing +10bps YoY. Operating costs increased as inflationary pressures were not all offset by cost savings, while we increased investment spending and there was additional marketing to drive sales.

In the Nordics, adjusted EBIT increased +50% to £18m despite the difficult consumer demand environment. The continued high interest rates and low consumer confidence drove a market decline of (3.4)% YoY. Our business grew market share +40bps, gross margin increased +80bps and costs were kept under tight control.

As a result, Group adjusted EBIT increased +52% to £41m and operating cashflow grew +11% to £61m. Free cash inflow of £50m for the period was a +£46m improvement on last year due to the better operating cashflow coupled with lower exceptional cash costs and a much larger working capital inflow. Alongside the slight increase in pension contributions, this resulted in cash inflow for the period of £11m, a +£43m improvement compared to the same period last year.

Current year guidance

Trading during the six weeks since the period end has remained in line with the Board’s expectations and the Group expects to see growth in profits and free cash flow for the year.  This is after taking into account the in-year impact of the UK Government budget measures which will be effective for the last five weeks of the Group’s financial year.

Further guidance on current year profits will be provided in the Peak trading statement on 15 January 2025.

All aspects of cashflow guidance are unchanged, except capital expenditure which is now expected to be lower than previously forecast:

• Capital expenditure of around £80m (previously around £90m) as a higher proportion of project spending is expensed
• Net exceptional cash outflow of around £30m
• Pension contributions of £50m

Other technical guidance:

• Depreciation & amortisation around £290m
• Cash payments of leasing costs, debt & interest around £260m
• Cash tax around £10m
• Cash interest of around £20m

Additional income statement guidance:

• Total interest of around £70m (compared to £85m in 2023/24)

2024/25 is a 53-week year. This will have a small impact on sales but immaterial impact on profits and cashflows.

Looking forward

The Group has assessed the impact of recent changes to Government policy including the recent budget. The full year aggregated impact is expected to be an incremental cost to the Group of £32m, including:

• £9m increase in wages due to National Living Wage increases. This includes the direct impact and the indirect impact of protecting (at least in part) wage differentials. All UK colleagues of the same band are paid the same, so the larger increase in NLW for 18-20 year olds has no impact
• £12m increase in National Insurance contributions, of which £4m is due to the increase in the Employer NI rate to 15.0% (from 13.8%) and £8m is due to the decrease in the NI threshold from £9,100 to £5,000
• £9m impact from the pass through of these costs from some of our outsource partners
• £2m increase from the inflation-based increase in business rate taxes.

Around half of these cost increases were anticipated and there are plans in place to offset their impact. The Group will seek to mitigate the remaining impact as much as possible through further cost saving measures, including process improvement, automation, offshoring, outsourcing and overhead efficiencies. Some price rises are also inevitable.

Despite these unexpected headwinds, the Group expects the P&L to benefit from lower interest costs, and is continuing to target at least 3% adjusted EBIT margin.

Alongside this, the Group will remain focused on free cash flow generation. The Group expects to keep annual capital expenditure below £100m, for exceptional cash costs to fall and to be below £10m by 2026/27, and to keep working capital at least neutral despite continued growth of the Mobile business.

The next triennial pension valuation date is March 2025 and the current IAS 19 deficit of £143m compares to scheduled contributions of £277m across 2025/26 to 2028/29. The contributions will cease when the deficit reaches zero on a prudent technical basis and the Group is continuing to work proactively with the scheme trustees to maximise value for all stakeholders.

As we announced on 27 June 2024, providing trading continues to be in line with expectations, the strengthened balance sheet and the improving cashflow dynamics underpin the Board’s intention to announce a recommencement of shareholder returns no later than the full year results on 3 July 2025.

In the reporting of financial information, the Group uses certain measures that are not required under IFRS. These are presented in accordance with the Guidelines on APMs issued by the European Securities and Markets Authority (‘ESMA’) and are consistent with those used internally by the Group’s Chief Operating Decision Maker to evaluate trends, monitor performance, and forecast results. These APMs may not be directly comparable with other similarly titled measures of ‘adjusted’ or ‘underlying’ revenue or profit measures used by other companies, including those within our industry, and are not intended to be a substitute for, or superior to, IFRS measures. Further information and definitions can be found in the Notes to the Financial Information of this report.

Unless otherwise stated, 2023/24 figures have been restated throughout this report to exclude discontinued operations.

We Help Everyone Enjoy Amazing Technology

Chief Executive’s Review

The first half of the year saw our performance continuing its upward trajectory with significantly improved cashflow driven by a >50% adjusted EBIT improvement in both Nordics and UK&I.

In the Nordics, we controlled what we can control. The consumer demand environment remains weak but we grew market share, improved gross margin and kept costs under tight control. The business is well invested and is expected to generate materially improved cashflow this year.

In the UK&I, we stabilised (and slightly grew) our market share, and saw strong performance from Mobile and our B2B business that further boosted growth. Gross margin continued to climb, growing +10bps YoY. Operating costs reduced as a proportion of sales as cost increases were more than offset by operating leverage.

This progress continues to be built on our long-term strategy.

Our strategy starts with “capable and committed colleagues”, as it is difficult in a business like ours for the customer experience to exceed that of the colleague. We have supported colleagues with better tools, training and reward, while fostering a collaborative culture of success. In the Nordics we launched our new values “We win together, play together, grow together and are proud to be different together” to a very warm reception from colleagues. Our latest colleague engagement survey saw 78% participation across the Group and saw us maintain a score of 80, which places us firmly in the top 10% of global companies².

Next, we want to provide an “easy to shop” experience for our customers. We saw some notable improvements to both of our channels. In the UK, we re-engineered more than 80 stores, to dedicate more space to categories that are more profitable, and to allow more room for expansion into new categories. We also added electronic shelf edge labelling (ESEL) to 60 UK stores. This is an innovation that has been successful in the Nordics and creates a better customer experience, allows more nimble pricing and saves colleagues’ time. We expect to re-engineer a further 33 stores and add ESEL to 40 stores in the second half of the year. Our largest online site, currys.co.uk, which receives over 250m visits per year, has seen over 60 changes that are designed to improve the shopping journey, from easier navigation, searching and filtering, through to an easier checkout, where we now accept all payment types including Apple Pay and Google Pay digital wallets. We have improved the online journey for order & collect, which alongside better store processes has seen order & collect sales grow +15% YoY (and +55% Yo2Y), to over 27% of our online revenue.

To fulfil this easy to shop experience, we continually improve our already excellent logistics network. In October, the long-term investment in our new Nordics distribution centre started to pay back, as the facility became fully operational. Adding 91,000m² of new capacity allows us to stock kitchens in Jönköping in Sweden instead of Brno in the Czech Republic. This will lead to better lead times and fewer issues for customers, lower costs for the Group and lowers our carbon emissions for kitchens by 75%.

The third leg of our strategy is to create “customers for life” through stickier and more valuable customer relationships. At the heart of this is our unique range of services that help customers afford and enjoy amazing technology to the full, that build us valuable recurring revenue streams, and encourage repeat shopping.

We help customers afford tech through credit, and we have seen UK&I adoption climb +140bps to 21.7%, and active customer accounts grow +15% to over 2.4m. This growth has been helped by launch of Currys flexpay, as well as giving colleagues the tools to sell through credit using their in-store tablets.

We help customers get tech started, through installation and set-up. Our installation services are becoming ever more valued by customers, and 32% of UK big box deliveries now include installation, a rise of +410bps YoY.

Once they have the tech, customers want to keep it working and we give over 12m of them peace of mind through protection plans. As the only tech retailer that operates its own repair facilities, we can offer customers the protection they want at good value. Our circular capabilities enable us to do this efficiently, and during the period over 25% of the parts used in the UK’s central repairs had been previously harvested by our operation.

Finally, we help customers get the most out of their tech, with connectivity being the biggest enabler of this.

Our Mobile business is growing, profitable and cash generative. iD Mobile, our MVNO (Mobile Virtual Network Operator) in the UK, has been the standout performer this year. It has grown +32% YoY to 2.0m subscribers, achieving our year-end target well ahead of plans. The recent CMA ruling on the proposed Vodafone-Three merger provides additional confidence in sustaining our excellent trajectory in Mobile.

Our aim is to continue growing sources of higher margin, recurring revenue such as credit, protection plans and connectivity so that over time our business mixes away from single product purchases to the more predictable, recurring and higher margin revenue streams of solution sales.

Delivering on our strategy helps customers, as seen in higher customer satisfaction and increased market share, and helps us through higher gross margins.

Our gross margins climbed again during the period driven by better bundling of complete solutions, a higher adoption rate of services, continued monetisation of the improved customer experience, discipline on sales stimulation and cost savings.

Our operating costs rose in the UK&I as there was some cost inflation that was not fully offset by savings, we spent more on marketing to drive incremental sales, and we increased investment spend as planned. Over time, a greater proportion of our investment spend has moved into operating rather than capital expenditure, and we evaluate the paybacks and returns generated based on the total spend.

Alongside improved profitability, we have been focussed on cash discipline. Our capital expenditure guidance is £10m lower as we have focussed on executing our plans to maximise returns, and we saw substantial improvements in exceptional expenditure. Our working capital improved despite headwinds of iD Mobile growth and sales decline in the Nordics, as UK&I sales growth and process improvements drove significant working capital inflow. We finished the period with £107m net cash and a pension deficit of £(143)m. This £(36)m net position is by far the strongest balance sheet the Group has had in the decade since the merger.

Overall, we entered our Peak trading period in a robust position with great deals enabled by our strong supplier relationships.

Looking to next year, the UK Government budget is likely to add around £32m of annual cost to our business. We will seek to mitigate as much of this as possible through cost saving measures including process improvement, automation, offshoring, outsourcing and other overhead efficiencies. Some price rises are also inevitable. We will further update on this in due course.

Despite this unwelcome and material headwind, we remain confident. We are the clear #1 brand in all our markets, with a diversified revenue base and a strategy that is working. We remain focussed on generating more free cash flow through improved operating performance, tight working capital management and disciplined capital expenditure to support profitable growth and the long-term success of this business.

Combined with the stronger balance sheet, this will enable resumption and growth of shareholder returns. We will be a business that’s increasingly valuable for shareholders as well as colleagues, customers and society.

² Colleague engagement survey, Glint October 2024

Results call

There will be a live presentation and audio webcast followed by Q&A call for investors and analysts at 9:00am.

The presentation slides will be available via the following link: https://brrmedia.news/CURY_IR_24

To participate in the live audio Q&A session, please use the following participant access details:

UK: +44 (0) 33 0551 0200, please quote ‘Currys Interim Results’ when prompted by the operator

Next scheduled announcement

The Group is scheduled to publish its Peak trading update, covering the 10 weeks to 4 January 2025, on Wednesday 15 January 2025.

For further information

Information on Currys plc is available at www.currysplc.com
Follow us on LinkedIn and X: @currysplc

About Currys plc

Currys plc is a leading omnichannel retailer of technology products and services, operating online and through 715 stores in 6 countries. We Help Everyone Enjoy Amazing Technology, however they choose to shop with us.

In the UK & Ireland we trade as Currys and in the UK we operate our own mobile virtual network, iD Mobile. In the Nordics we trade under the Elkjøp brand. We’re the market leader in all markets, able to serve all households and employing 24,000 capable and committed colleagues.

We help everyone enjoy amazing technology. We believe in the power of technology to improve lives, helping people stay connected, productive, fit, 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.

Our full range of services and support makes it easy for our customers to discover, choose, afford and enjoy the right technology to the full. The Group’s operations include Europe’s largest technology repair facility, a sourcing office in Hong Kong and an extensive distribution network, centred on Newark in the UK and Jönköping in Sweden, enabling fast and efficient delivery to stores and homes.

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 aim to 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 X feed does not form part of this announcement and should not be relied on as such.

View the announcement in full (PDF)