6th Jul 2023 10:56
(Alliance News) - Currys PLC was the worst performer in London's FTSE 250 on Thursday morning after the electrical goods retailer pulled its dividend amid continued trouble in the Nordics region.
Shares in Currys dropped 12% to 47.14 pence on Thursday morning in London. Over the past 12 months, the stock is down 29%.
Richard Hunter, head of markets at interactive investor, said the results were something of a "curate's egg," summarised with the "no holds barred" title of the report: "Strengthening [UK & Ireland] offset by poor Nordics performance".
"The comment captures the group's difficulties in a nutshell, and even within the UK business which accounts for most of group revenues, there are hurdles which are far from being overcome," Hunter said.
Currys swung to a pretax loss of GBP450 million in the year ended April 29, from a profit of GBP126 million the year prior.
The company said this loss was caused by a non-cash impairment of GBP511 million of UK & Ireland goodwill arising out of the Dixons Carphone merger in 2014.
Currys noted that its adjusted pretax profit of GBP119 million was at the top end of guidance for the year, though it was down 38% from GBP192 million the year prior.
Revenue decreased by 6.2% to GBP9.51 billion, from GBP10.14 billion.
ii's Hunter explained that the Nordics region was proving to be a particular thorn in the side for Currys.
"The unit accounts for 40% of overall revenues and has seen a rapid deterioration in consumer spending. This has resulted in the market being overstocked, leading to extremely heavy discounting from competitors who are selling at basement (and virtually unprofitable) prices, leaving Currys on the sidelines," Hunter said.
"The group expects that the situation will abate, without being able to put a timeframe on a return to normality. In the meantime, unable to pass on much of the costs of inflation to consumers and with lower sales, adjusted earnings for the region declined by 82% in the period."
Chief Executive Alex Baldock admitted on Thursday that the Nordics have been experiencing a "painful period" with softer demand coupled with cost of goods sold inflation. This situation was also being exacerbated by excess stock and some competitions pursuing strategies focussed on growth at the expense of profit or cashflow, the CEO said.
As a result of the difficulties, Currys declared no final dividend for its financial year. Last year, Currys paid out 2.15p per share.
"Cognisant of the uncertain economic outlook, the board has decided not to declare a final dividend for the 2023 financial year. Our capital allocation priorities remain unchanged," Currys said.
Russ Mould, investment director at AJ Bell, said the "big frustration" for Currys is it has made decent strides in getting its business in the UK and Ireland on track, despite the difficult consumer backdrop putting pressure on sales.
"Profit in this part of the business was up by an eye-catching 45% as it eked out significant cost savings to compensate for lower volumes," Mould said.
By Heather Rydings, Alliance News senior economics reporter
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