Currys Cuts Profit Guidance, Swings to H1 Pre-Tax Loss

Currys (LON: CURY) shares tumbled Thursday after the company swung to a loss, saw revenue dip, and cut guidance when it reported its results for the first half of the year.

In the half year ended October 29, Currys reported a goodwill impairment charge of £511 million, which the company said was “predominantly due to increased discount rates as a result of the recent increases in UK gilt yields.”

The impairment charge resulted in Currys reporting a statutory loss before tax of £548 million, with the company's adjusted loss before tax being £17 million, down from a profit of £45 million the previous year. Meanwhile, revenue for the period came in at £4.47 billion, falling 7% from the same period last year.

The company said that while its UK and Ireland profits rose from increased gross margins and strong cost discipline, its international business “has had a tough period and faces short-term but intense pressures from a disrupted market.”

“Our International business, which has consistently delivered growth in sales and profits over many years, has had a difficult first half with margins sharply down. Lower demand has left domestic competitors with excess stock, which they're now heavily discounting,” said Alex Baldock, Currys Chief Executive. “This has substantially disrupted the market, and required margin investment to keep our sales strong.”

However, the company said they expect the pressures to be temporary with demand normalising, excess stock “washing through,” and competitors finding unprofitable aggression hard to sustain.

Even so, Currys cut its guidance for full-year pre-tax profit, which it now expects to be in the range of £100 million to £125 million, down from previous guidance of £125 million to £145 million.

“Of course, our customers are feeling real cost of living pressure and our job is to help them get hold of the technology that's more essential to their lives than ever,” added Baldock. “It's a tough environment, and we are planning for that to continue. Still, we expect to maintain the trajectory of improving UK&I profitability and a robust recovery in International profits.”