18th Mar 2024 12:37
(Alliance News) - Currys PLC's trading update on Monday vindicates its decision to fight off takeover interest, according to AJ Bell investment director Russ Mould.
Currys raised full-year profit guidance on the back of stronger-than-expected sales.
The London-based consumer electronics retailer expects full-year adjusted pretax profit to be "at least" GBP115 million, ahead of previous guidance of GBP105 million to GBP115 million. Currys' financial year runs to the end of April.
On Monday last week, Elliott Advisors UK said it did not intend to make a bid for Currys after having a 67 per share proposal rejected. On Friday, JD.Com, another potential bidder for Currys, also said it would not be making a bid. Currys confirmed both withdrawals on Monday.
Shares in Currys were up 5.0% to 59.40 pence each in London on Monday.
AJ Bell's Mould noted Currys argued Elliott's bids undervalued the business, implying they didn't reflect the progress it had made in turning its fortunes around.
"Currys is now punching its fists in the air by revealing that sales have been better than expected," he said.
"Investors would have been annoyed had it not delivered such a strong update as that would have strengthened the argument to accept a bid." he commented.
"Fortunately for Chief Executive Alex Baldock, he's been able to stump up the goods to show that Currys is doing perfectly fine on its own and doesn't need to be swallowed up by a third party," Mould added.
But Mould noted comments by Currys of 'still-challenging markets', were a reminder that it will have to work hard to keep growing profit.
"High interest rates and an uncertain economic backdrop equate to a cautious consumer who is watching every penny," he explained.
He suggested Currys might want to lean harder on its services arm to encourage people to get broken electricals fixed, as shifting new products is not going to be easy.
Analysts at Liberum said "bids aside", Currys "remains far too cheap, giving no credit for any upside from current depressed earnings, especially as macro signs improve".
The investment bank raised its 2024 financial year pretax profit forecast for Currys by GBP5 million to GBP115 million.
This follows a 6% increase in January giving cumulative upgrades of around 11% year-to-date, the broker said.
Liberum reiterated a 'buy' rating on Currys and a 135p share price target.
By Jeremy Cutler, Alliance News reporter
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