Currys beats annual profit forecast as robust sales, cost control offset pressures

Currys PLC reported stronger-than-expected annual results, with adjusted pre-tax profit of £162 million, exceeding consensus, on 3% group revenue growth to £8.71 billion and an 82% surge in free cash flow to £149 million. This performance, driven by solid sales growth and tight cost control, allowed the electronics retailer to propose a 1.5p final dividend. While the company anticipates future headwinds including UK budget-driven cost increases and currency pressures, it remains comfortable with current market expectations and targets an adjusted EBIT margin of at least 3% in key regions, aiming to maintain neutral working capital and consistent shareholder distributions.

Analysis

Currys PLC delivered stronger-than-expected annual results, with adjusted pre-tax profit of £162 million surpassing the consensus forecast of £159 million. This performance was underpinned by a 3% year-on-year increase in group revenue to £8.71 billion, driven by a 2% rise in like-for-like sales and effective cost controls that successfully mitigated inflationary pressures. A key highlight is the 82% surge in free cash flow to £149 million, which supports the board's proposed 1.5p final dividend and its commitment to consistent shareholder returns. The U.K. and Ireland division was a notable driver of strength, posting 6% revenue growth fueled by market share gains and significant expansion in higher-margin services, where revenue rose 12%, and credit sales, which climbed 14%. While the company has guided for future headwinds, including UK budget-related cost increases, general inflation, and currency pressure from a weaker Norwegian Kroner, management remains comfortable with market expectations. Future financial discipline is underscored by clear targets, including an adjusted EBIT margin of at least 3%, annual capital expenditure below £100 million, and a plan to reduce exceptional cash costs to below £10 million by fiscal 2026/27.

Key Decisions for Investors

• The strong beat on profit, coupled with an 82% surge in free cash flow and a confirmed dividend, signals robust operational execution and should be viewed as a positive catalyst.
• Investors should closely monitor the flagged headwinds, particularly the impact of the weak Norwegian Kroner on the Nordic region's profitability and the potential for UK inflation to pressure consumer demand and margins in the current fiscal year.
• Management's clear long-term targets for EBIT margin, capital expenditure, and cost reduction provide a solid framework for assessing future performance; tracking progress against these goals will be critical to validating the investment thesis.