Another volatile session and a mixed bag of results has made for some significant price moves Thursday. City writer Graeme Evans focuses on some of the biggest.
A Currys (LSE:CURY) valuation similar to the darkest days of Covid continues to frustrate investors as the electricals chain today revealed no let up in tough trading conditions in the Nordics.
Shares in the FTSE 250-listed company hit 80p earlier this month but are now back at 67p, which is where they stood during the initial pandemic sell-off in March and April 2020.
Chief executive Alex Baldock has been praised for the resilience of the core UK operation, but he admitted today that the Nordics business is not “where we want or expect it to be” as the chain comes under pressure from “unrelenting” competition.
Baldock vowed to go further and faster in an effort to improve the performance, including the appointment of a new chief executive to run the operation that trades under the Elkjøp brand.
Further cost savings are also planned, but these will lead to restructuring costs of £15-20 million that will mainly be incurred in the 2023-24 financial year.
Currys added that profits for the financial year due to end next month will be at the lower end of the £100-£125 million guidance given in its Christmas trading update, albeit broadly in line with the current City consensus for around £104 million.
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Working capital headwinds driven by the weaker Nordics performance means year-end net debt is also expected to be £100-£150 million, more than previously forecast.
House broker Liberum left its price target unchanged at 135p following the update, adding that the current valuation gave Currys next to no credit as the group makes progress towards medium-term margin and cash generation targets. It also highlighted a stronger financial position, with total indebtedness falling 40% since the early days of the pandemic.
The broker said: “The green shoots of a recovery in the Nordics are not yet visible and the market is remaining tougher than anticipated. That said, there are still good reasons as to why these dynamics should prove temporary.”
At the right end of the FTSE 250 index, shares in the specialist lending and retail savings business OSB Group (LSE:OSB) reversed this week’s slump as full-year underlying profits of £591 million beat the City consensus by 3.7%.
The company, which is better known as OneSavings Bank, also declared a buyback of £150 million alongside a £50 million special dividend of 11.7p a share and a final dividend of 21.8p a share for payment on 17 May.
OSB was able to do so after its capital buffer ended the year at 18.3%, well above the management target of 14%.
Shares rose 32.6p to 508p, but Peel Hunt had a price target of 691p prior to reviewing its estimates in light of today’s results. The broker said OSB was attractively priced and that current valuation multiples failed to recognise the capital and growth dynamics.
It said that OSB traded with a forward earnings multiple of less than five times and a yield based on the ordinary dividend of above 6%.
For 2023, the company is targeting underlying net loan book growth of 5% and a broadly flat net interest margin of 3%. It also remains mindful of the potential impact of the higher cost of living and borrowing on the mortgage market and affordability.
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Chief executive Andy Golding said: “We are building a healthy pipeline of new business and have a proven track record of retaining customers, attracting new business and working with high quality borrowers.”
Among other stocks on the FTSE 250 risers board, Helios Towers (LSE:HTWS) lifted 5p to 109.6p as the telecoms infrastructure company reported a 25% increase in revenues to $560.7 million (£463.5 million), driven by a record increase in both tenancies and sites.
Analysts at Berenberg said the group had overcome supply chain issues and economic uncertainty to demonstrate the resilience of its business model — one that can weather difficult periods due to its long-term inflation-protected contracted revenue profile.
The company, which owns and operates over 13,500 tower sites in Africa and the Middle East, said underlying earnings rose 18% to $282.8 million (£233.8 million) while 71% cash conversion was better than 65-70% guidance.
Berenberg has a price target of 170p and Numis Securities is at 280p, noting that Helios deserved a multiple of 13.8 times forecast earnings rather than 7.9 times currently.
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