ii view: Currys primes City for bumper year

Full-year trading update to 3 May

• Like-for-like sales up 4% since early January, up from 2% over Christmas trading period
• Net cash of more than £180 million

Guidance:

• Now expects full-year profit of £162 million, up from a previous forecast of £160 million
• Expects to restart the dividend with a previously announced final payment of 1.3p per share 

Chief Executive Alex Baldock commented:

"We finished another year of strengthening performance on a high note with encouraging momentum and accelerating sales growth in both the UK&I and the Nordics. In both, we've grown profits by delivering sales growth, market share gains and gross margin increases. In the Nordics, we've also shown especially strong cost discipline in a still-challenging market.

 "Cashflow was very healthy. This further strengthening of our balance sheet ensures our resilience and allows the resumption of dividends."

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ii round-up:

Currys (LSE:CURY) trades across 708 stores and several websites in six countries including the UK.  

The FTSE 250 index constituent trades under the Currys and Mobile iD brands in the UK and Ireland and Elkjøp in the Nordics. 

For a round-up of this latest trading update announced on 21 May, please click here.

ii view:

Formerly Dixons Carphone, Currys today employs around 24,000 people. Geographically, the UK & Ireland made most adjusted profits during the first half at 56%, with the Nordics the balance of 44%. Away from its store outlets, other operations include Europe's largest technology repair facility in the UK, a product sourcing office in Hong Kong, as well as a wide distribution network for both home and store product deliveries.

For investors, management continues to summarise the Nordic market as ‘challenging’. US trade tariffs could force companies such as Apple Inc (NASDAQ:AAPL) to relocate factories to the US, driving up costs and the price of its products. A forecast price/earnings (PE) ratio above the three- and ten-year average may suggest the shares are not obviously cheap. Wage costs have increased following UK government tax changes, while the previous sale of its Greek business has reduced geographical diversity. 

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To the upside, key measures such as market share, like-for-like sales and profit are all improving. A store portfolio offers consumers the opportunity to test products and lean on the knowledge of staff before buying. New AI aided products may support a wave of product upgrades, while increased net cash held now supports an expected resumption of the dividend payment and an forecast dividend yield of around 1%.  

In all, and given both previously rejected takeover approaches and a consensus analyst estimate of fair value above 140p per share, fans of this specialist retailer are likely to remain optimistic about long-term prospects.  

Positives

• Store and online channels
• Net cash held

Negatives

• Tough economic backdrop
• Possible impact from US trade tariffs

The average rating of stock market analysts:

Buy