Currys could resume investor payouts next year

Currys announced it could restart shareholder distributions in the next 12 months after returning to profit last year.

The retailer scrapped its final dividend in 2023 after reporting a pre-tax loss of £450m which it blamed on weak demand, cost of living pressures and ‘ruthless competition’.

But while market conditions remained challenging, the company recovered to a pre-tax profit of £28m in the year ended April.

Profits were boosted by huge cost savings in its supply chain and service operations, a focus on more profitable sales in the UK and gross margins more than doubling at its Scandinavian operations.

On an adjusted basis, Currys profits rose 10 percent to £118 million, in line with previously raised guidance from £115 million to £120 million.

This is despite the group’s turnover falling 4 percent to £8.5 billion due to fewer purchases of computers and consumer electronics, offsetting significant demand for mobile and service products.

Sales in the British Isles, which fell by almost £100 million to around £5 billion, were also affected by lower sales of major household appliances.

However, Currys has significantly improved its balance sheet over the period, partly by selling its Greek division Kotsovolos for £175 million to Public Power Corporation, Greece’s largest electricity supplier.

As a result, it ended the year with £96m of net cash, an improvement of £193m on April 2023, and reduced its pension deficit from £249m to £171m.

Currys said this “represents a healthy position from which the company can pay required pension contributions, invest in future success and return money to shareholders.”

The company added that as long as trading is in line with its forecasts at the “early” of this fiscal year, it plans to resume investor returns “over the next twelve months.”

The FTSE 250 company expects rising profits and free cash flow this year, supported by growth in high-margin services and recurring revenue and the number of iD Mobile subscribers reaching 2 million.

Currys shares fell 6 percent to 72.4p on Thursday morning, but is still up about 43 percent since the start of the year.

The company’s share price soared in February after investment giant Elliott Advisors, owner of Waterstones bookstore chain, made a failed takeover attempt for Currys.

Elliott declined to make a higher offer after Currys rejected two proposals, valuing the offer at around £682 million and £750 million respectively due to their price.

Chinese online retailer JD.com also considered making a bid for the group but walked away, ending speculation of a bidding war.

Mark Crouch, analyst at eToro, commented: ‘Shareholders will take confidence in the fact that companies not only see value in the business, but that, perhaps boldly, the Currys board felt confident enough to reject the offer outright to point out.

‘However, fierce competition from online retailers still poses a significant threat, so it may require a change in strategy if Currys is to outsmart their rivals in the long term.’