13.12.2024
Yesterday’s results from Currys (LON:CURY) were very well received by the market, with its shares shooting up 17.28% in reaction.
The headline being grabbed in the media is that the group has an extra £32m of costs to its operations following the latest Budget increases.
On the face of it, the well-copied headlining of that note by the company is too negative a response.
However, the group’s accompanying statement with the Interim Results was very positive and, in my view, totally illustrates its potential over the next year or so.
I believe that yesterday’s upward price push to close at 92.80p, the highest level for the last year, in fact since April 2022, could well be part of a momentum that will take them back above the 100p barrier very soon.
That price was last seen in February 2022, having been up to 160p the previous April.
A lot has transpired over the intervening period and this week’s report I believe indicates a strong prospect of a healthy valuation increase over the next couple of years.
Brokers Upgrade
Analysis of the Interim Results by analysts Wayne Brown and Anubhav Malhotra, at Panmure Gordon, brought about a series of upgrades – with the brokers now increasing their Target Price from 135p to 155p.
They comment that:
“The shares have been good performers over the last year but have remained flattish in the last six months.
Heading into these results the budget, the softish consumer landscape (well at least softer than we had hoped for) have weighed on consumer sentiment.
Management is proactively managing the business and dealing head on with the challenges that are in its control.
To this end upgrades are a unique characteristic across our coverage, and this should lead to further outperformance.”
For the current year to end-April 2025, the brokers estimate sales revenues of £8,498m (£8,476m), with pre-tax profits of £144.7m (£118.0m), earnings of 9.6p (7.9p) and returning to the dividends list with a 0.5p per share payment.
For 2026 they see £8,668m sales, £154.2m profits, earnings of 10.3p, and a 0.7p per share dividend.
They look for even better figures for the year to end April 2027, with £8,841m revenues, £176.7m profits, 11.8p earnings and a 1.0p per share dividend.
Management Comment
With yesterday’s results CEO Alex Baldock stated that:
"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.”
In My View
As we go into 2025, this group’s shares look to me to be a really excellent Buy.
We will get further news on Wednesday 15th January, when the group issues its Peak Trading Update – by then is it possible that the 100p level will have been breached?
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