REG - Currys PLC - Solid performance in a tough environment
14/12/2023 07:00
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RNS Number : 7095W Currys PLC 14 December 2023
14 December 2023
Unaudited Results for the Half Year Ended 28 October 2023
Solid performance and progress in a tough environment
We Help Everyone Enjoy Amazing Technology
Summary
· Group adjusted EBIT +7% YoY
· Further progress in UK&I, with strong momentum in Services: Credit
adoption +330bps to 20.3%, Care & Repair adoption +340bps, iD Mobile
subscriptions > 1.5m, +24% YoY
· Nordics profitability improved despite difficult consumer environment,
with gross margins back up to the levels of two years ago
· First-half free cash outflow limited to £(10)m (H1 2022/23: £(86)m)
· After period closed, agreed sale of Greece for an enterprise value of
£175m and net proceeds of £156m, representing an attractive return for
shareholders. Greece will be included in continuing operations until
transaction completes
Financial performance
· Group LFL revenue (4)%; Currency neutral revenue (4)%; Reported revenue
(7)%
· Group adjusted loss before tax £(16)m, in line with last year
· UK&I LFL revenue (3)%, adjusted EBIT £15m, (40)% YoY - profit
decline as anticipated as improved gross margin and costs savings of £53m
were more than offset by inflationary pressures and non-repeat of £11m of
mobile revaluations
· Nordics LFL revenue (6)%, adjusted EBIT £12m, +300% YoY - significant
gross margin recovery of +190bps and cost actions offset continued market
driven sales decline
· Greece LFL revenue (4)%, adjusted EBIT £4m, +300% YoY - delivering
another period of robust profits
· Group statutory loss before tax of £(46)m, from £(548)m in prior year
· Period end net debt of £(129)m - first-half cash outflow of £(32)m,
compared to £(149)m outflow in prior year
· Period end IAS 19 pension deficit £(190)m, from £(249)m at year end
Outlook
· Trading since the period end has been consistent with the Board's
expectations
· No change to previous guidance
· Greece disposal expected to receive final approvals and to complete in
first quarter of 2024
· Group expected to finish year in net cash position if disposal
completes before year end
Alex Baldock, Group Chief Executive
"Our priorities this year are simple: to get the Nordics back on track, to
keep up the UK&I's encouraging momentum, while strengthening our balance
sheet and liquidity. We're making good progress on all these in a still
challenging economic environment.
In the Nordics, our trusted brands have delivered substantial gross margin
gains, which combined with strong cost discipline have resulted in
significantly improved profits. There's still a long way back to healthy
Nordics performance, but we're on the way.
In the UK&I, profits are in line with expectations, as we focus on more
profitable sales and growing the services that drive margins and customer
lifetime value. Credit, Care & Repair and iD Mobile are all performing
strongly, while colleague engagement and customer satisfaction continue to
rise.
We've already substantially strengthened our balance sheet and liquidity this
year. The proceeds of the planned sale of Kotsovolos, at a price that
represents a very good outcome for shareholders, will strengthen us further.
We're confident we're building a business that's resilient today and fit to
prosper long term."
Performance Summary
Group sales decreased (4)% on a like-for-like basis with a decline in all
markets as consumer spending remained under pressure from persistent inflation
and rising interest rates, coupled with our increased focus on more profitable
sales to maximise operating cashflow.
Revenue H1 2023/24 H1 2022/23 Reported Currency neutral Like-for-Like
£m
£m
% change % change % change
UK & Ireland 2,215 2,292 (3)% (3)% (3)%
International 1,944 2,181 (11)% (5)% (6)%
- Nordics 1,653 1,886 (12)% (6)% (6)%
- Greece 291 295 (1)% (2)% (4)%
Group 4,159 4,473 (7)% (4)% (4)%
In the UK&I, adjusted EBIT decreased (40)% YoY. Underlying improvements to
gross margin were largely offset by the non-repeat of c.£11m of benefits in
our mobile category last year, while operating costs fell in absolute terms as
savings in property, marketing and IT more than offset inflationary cost
pressures.
In the Nordics, adjusted EBIT increased to £12m despite the market driven
sales decline. Gross margin recovered by +190bps and achieved a level only
(20)bps lower than two years ago. Costs were tightly controlled in an
inflationary environment resulting in a small increase in costs in absolute
terms.
In Greece, adjusted EBIT increased to £4m. After a strong start to the
period, sales declined, particularly in August and September due to the impact
of wildfires on customer footfall, but gross margin recovered strongly and
costs were well controlled.
As a result, Group adjusted EBIT increased slightly to £31m which was
reflected in operating cashflow that also increased slightly to £62m. Free
cash outflow of £(10)m for the period was a £76m improvement on last year
due to deliberate actions to lower capital expenditure, tighter working
capital control and lower tax payments. Alongside no dividend payment and
previously negotiated reduction in pension contributions, this resulted in
cash outflow for the period of (£32)m, a £117m improvement compared to the
same period last year.
Profit and Cash Flow Summary H1 2023/24 H1 2022/23 H1 2023/24 H1 2022/23 Reported Currency neutral
£m £m Adjusted Adjusted % change % change
£m
£m
Segmental EBIT
UK & Ireland (2) (495) 15 25 (40)% (40)%
International 10 (3) 16 4 300% 375%
- Nordics 7 (4) 12 3 300% 400%
- Greece 3 1 4 1 300% 300%
EBIT 8 (498) 31 29 7% 17%
EBIT Margin 0.2% (11.1)% 0.7% 0.6% 10 bps 20 bps
Net finance costs (54) (50) (47) (46) (2)%
(Loss) / profit before tax (46) (548) (16) (17) 6% 6%
Tax 7 (12) 4 3
(Loss) / profit after tax (39) (560) (12) (14)
(Loss) / earnings per share (3.5)p (50.8)p (1.1)p (1.3)p 15%
Operating cash flow 62 60 3% 11%
Operating cash flow margin 1.5% 1.3% 20 bps 20 bps
Cash generated from operations 172 145
Free cash flow (10) (86) 88%
Net (debt) / cash (129) (105) (23)%
Current year guidance
Trading during the six weeks since the period end has remained in line with
the Board's expectations and the Group is maintaining all guidance given at
the Full Year results on 6 July 2023.
Guidance has not been revised to reflect the expected disposal of Greece and
is based on Greece remaining in the Group for the rest of the financial year.
· Capital expenditure of around £80m
· Net exceptional cash costs around £50m
· Pension contributions of £36m
· Depreciation & amortisation of £320-330m
· Cash payments of leasing costs, debt & interest of £280-290m
· Cash interest of around £40m
· Group to finish the year with net debt better than £(97)m
The Group expects to receive the necessary final clearances and for the Greece
disposal to complete in the first quarter of 2024, and following the disposal,
the Group is expected to finish the financial year in a net cash position.
Longer term guidance
· Group continuing to target at least 3.0% adjusted EBIT margin
· Exceptional cash costs expected to fall significantly from 2024/25
onwards
· Scheduled pension contributions will rise to £50m in 2024/25 and to
£78m for the following three years before a final payment of £43m in 2028/29
Greece disposal and use of proceeds
On completion of the disposal of Kotsovolos, the Currys Group expects to
receive Net Cash Proceeds of approximately £156 million. It is the Board's
intention to use the Net Cash Proceeds to reduce the Currys Group's total
indebtedness (defined as the sum of net debt, pension deficit and lease
liabilities). This will initially involve using proceeds to reduce net debt,
and then, at the appropriate time following the completion of the Group's peak
trading period, entering into discussions with the pension trustees regarding
the funding for the Pension Scheme.
Reducing total indebtedness will provide greater flexibility to enable the
Currys Group to invest to grow profits and cashflow.
The Group will also explore the potential to return any surplus capital to
Shareholders, based on a number of factors including the underlying financial
strength of the business, prevailing market conditions, the balance of
shareholder preference, and the scale of proceeds to be returned.
This planned use of proceeds is consistent with Currys' stated capital
allocation policy, and the Board intends to provide an update on use of
proceeds to shareholders before the end of the financial year.
We Help Everyone Enjoy Amazing Technology
Chief Executive's Review
Our priorities this year are simple: to get the Nordics back on track, to keep
the UK&I's encouraging momentum going, while maintaining a strong
balance sheet and liquidity in a still-turbulent environment. We are only part
way through the year with important trading periods still ahead of us, but so
far we have made good progress in all three areas.
In the Nordics, consumer demand has remained weak as headwinds of inflation
and interest rate rises have impacted consumer confidence and driven another
year of market declines. Against this backdrop, our competitors are realising
how expensive it is to take market share away from our well established and
trusted brands as we saw from improving trends in our market share (1Q:
(130)bps, 2Q (50)bps) in the period. Crucially, gross margin has recovered
most of the deterioration we experienced last year as we have anniversaried
last year's overstocked market issues with a balanced trading stance.
Meanwhile, our cost saving initiatives have helped keep cost under control in
an inflationary environment. All this drove a significant improvement in
profits compared to last year.
In the UK&I, sales declined (3)% driven by a market decline and a (100)bps
share loss. Over half of the share loss was a result of deliberate actions to
prioritise profits over sales. We are very pleased with the continued
momentum on gross margin and customer lifetime value accretive services, with
Credit adoption rising +330bps to 20.3%, Care and Repair adoption rising
+340bps and iD Mobile subscriptions now exceeding 1.5m, +24% YoY, having added
200,000 net new subscriptions in the last six months. These are all sources of
recurring, sustainable cashflow which provide increased confidence in future
financial performance. Combined with strong cost control and further progress
on our £300m cumulative saving target, this resulted in profits above our
expectations for the period.
We have also built on our efforts to deliver Group synergies across IT,
offshoring and goods-not-for-resale (GNFR) procurement. In the period, we have
combined our UK&I and Nordics Technology functions under our Group CIO
Andy Gamble, which will enable us to use our Group scale to get ever better
terms with our large outsource partners and software providers. We have
continued to strengthen our offshoring relationship with Infosys and now have
over 1,000 Infosys colleagues. We have also started aligning our GNFR
procurement across the Group which we believe will make a significant impact
to some of our operating costs in time.
We remain passionate about our ability to give tech a longer life. We are
uniquely placed in this area as the only UK retailer that has its own repair
operations, and those repair operations being of materially greater scale and
sophistication than anything else available in our markets. This was clearly
expressed by the Prime Minister when he visited the facilities in October.
"What's great about what you do, is that is has so much impact on the country.
You are saving millions of people a fortune. When you extend the lifetime of
their laptop, their TV, or allow them to buy something refurbished - all of
that is just putting cash in their pockets.
And at the same time, you are doing something wonderful for the environment
because you are able to find every little bit of these big electronic devices
and re-use them and put them back into circulation - great for the
environment, great for people's wallets."
As well as maximising our operating cashflow, we have been prudent in
deploying cash. We have limited the usual first half free cash outflow to
£(10)m, from £(86)m last year, as we have kept tight control over capital
expenditure and working capital. Tight stock control meant we finished the
period with Group inventory down (11)% compared to last year. Our liquidity is
strong, and during the period, we have agreed an extension of our "top-up"
revolving credit facility. As a result, we have facilities of £498m until
April 2026 and a further £134m until October 2024, providing us with
significant headroom.
On 3 November, we announced the proposed disposal of Kotsovolos, a transaction
that has subsequently been approved by our shareholders. Kotsovolos is a fine
business that we've been proud to own, but a disposal at this time is in the
best interest of shareholders. Firstly, it recognises Kotsovolos's value and
accelerates its realisation. Secondly, it further strengthens the balance
sheet and the foundations on which to improve the much larger UK&I and
Nordics businesses. Finally, it creates a valuation precedent for what we can
achieve if we continue to execute on our strategy.
When this transaction completes, we expect the Group to finish the year in a
net cash position. This is a strong position compared to the £(374)m net debt
and working capital facilities the Group was utilising five years ago (27
October 2018). Alongside this, the pension deficit that has also continued
to fall and is now £(190)m on an IAS19 basis, from £(516)m on 27 October
2018. Maintaining a solid balance sheet will remain a key objective for the
Group.
The economic outlook remains challenging to forecast, but as we have shown
this year, our business is well positioned to weather any storm and well set
to prosper when conditions improve. We have market leading, trusted brands,
growing margins, controlled costs, improving cashflows and a robust balance
sheet.
The remainder of the year will see us continue our focus on three priorities:
to get the Nordics back on track, to keep the UK&I's encouraging momentum
going and to maintain a strong balance sheet.
Grow Profits
Our improvements for the colleague and customer experience must now translate
into improved profits and cash generation. We believe we can now build on our
progress on gross margins and costs while being confident in maintaining our
top-line market leadership.
· Gross margin increased by +10bps in the UK&I. This included a
c.(50)bps negative impact from the non-repeat of last year's positive impact
from the revaluation of mobile at the end of one specific MNO contract. Gross
margin has improved +280bps compared to three years ago as we have focused on
measures to improve the profitability of our sales, especially: higher
adoption of credit and services, better monetisation of the improved customer
experience, not chasing less profitable sales and supply chain and service
operation cost savings.
· In November 2021, we announced a plan to save £300m of annual costs
in the UK&I by the end of 2023/24. We are progressing well with those
initiatives and have saved over £240m on a cumulative basis as at the end of
October 2023. We are on track to save over £300m by the end of this financial
year.
· In the UK&I, our programmes drove £53m of savings with the
largest areas of cost saving including supply chain efficiencies of £21m,
store payroll of £9m and central, IT, procurement and other savings of £23m.
· In the Nordics, we have taken actions that will generate over £25m
of permanent cost savings. These actions cover several areas including
marketing, store and head office payroll, IT expenditure and consultant fees.
· During the period, we have combined our UK&I and Nordics
Technology functions under our Group CIO Andy Gamble. This integration is
already allowing more efficient sharing of best practice across the regions as
well as synergy savings and, over time, will enable us to use our Group scale
to get ever better terms with our large outsource partners and software
providers.
· We continued to build our partnership with Infosys, which delivers a
large range of services across our business functions, including IT, Data
& Analytics, E-Commerce, Finance and Commercial, for our UK&I and
Nordics businesses. The engagement has grown to around 1000 Infosys colleagues
across centres in India and Czech Republic with significant potential to
extend the partnership in the future.
· We have made progress aligning our Goods-Not-For-Resale (GNFR)
procurement across the Group, renegotiating contracts with our top 20
suppliers in the Nordics, aligning our IT procurement across the Group and
developing approaches which we believe will make a significant impact on the
efficiency of our spend across marketing and logistics.
· Lease costs continue to fall. In the UK&I we have negotiated an
average effective net rent reduction of more than 30% on the 20 leases renewed
during the period.
Capable and Committed Colleagues
Expert face-to-face help is at the heart of why customers shop with us, and
that takes skilled and engaged colleagues. We know that happy colleagues make
for happy customers, so we go above and beyond in making sure that our
colleagues are highly engaged, well trained and competitively rewarded.
· Our Group eSat ("how happy you are to work at Currys") increased to
79 (+2pts YoY) and puts Currys in the top 25% of all businesses surveyed by
Glint.
· In the UK&I, eSat has increased to 82 (+3pts YoY) with our
engagement scores trending upwards when the peer set is in decline, putting
the UK business in the top 5% of all businesses surveyed by Glint.
· Our focus on engaging our sales colleagues has reduced attrition
rates of our UK&I sales colleagues by more than 10%pts since pre-covid.
Easy To Shop
Omnichannel is the preferred model for customers in technology retail:
two-thirds of customers prefer to shop using stores, underlined by the slight
increase in our store share of business. We're continuing to build on this
advantaged business model.
· Our focus on removing pain points for our customers is continuing to
deliver results. In the UK&I, we saw improvements in customer satisfaction
at every measurable stage of the customer journey, resulting in NPS climbing a
further +5pts. In the Nordics, our "Happy or Not" measure improved slightly on
its already very high levels, with a notable improvement in the online
experience because of the improvement in our websites.
· The strength of our brands continues to resonate with consumers, and
has allowed us to reduce more expensive "pay per click" online marketing in
the UK. Two-thirds of the traffic generated by our website is direct.
· Order and collect sales have grown +35% YoY in the UK and +22% in the
Nordics, showing how much consumers value the ability to collect goods quickly
at locations that are convenient for them.
· We have continued to improve our 'sold with' solution selling in the
UK&I. Customers are happier with the complete solution of products,
accessories and services that is right for them; and our margins are improved.
In the period we've improved ranging, stock availability and bundle
proposition across both stores and online. Over the first half of the year, we
saw our overall adoption rate of these product climb >6%pts.
· We maintain a flexible store portfolio and have average lease lengths
of 4 years in the UK&I and the Nordics, and less than 5 years in Greece.
Customers For Life
We offer customers more than helping them choose a product: we help them
afford and enjoy their technology, for life. Credit and other Services help us
build longer lasting and more valuable relationships with customers.
We help customers afford amazing technology:
· UK credit adoption increased +330bps to 20.3%, well ahead of the 16%
adoption we had previously targeted for 2023/24, as active credit accounts
rose +19.4% to 2.1m. Online credit adoption increased +660bps to 24.5% and
store credit adoption increased +70bps to 17.0%. The largest increases in
adoption were from repeat customers, particularly online, as our easier to
access accounts and targeted marketing have stimulated repeat spend. We take
no direct risk on credit, as a reminder. We do benefit from credit customers'
higher average order value, and greater likelihood to return to shop at
Currys, as well as direct profit benefit from our partner bank. The
implementation of the FCA's Consumer Duty framework helps ensure all credit is
issued responsibly.
We help customers get tech started:
· Our installation services are becoming ever more valued by customers,
and our installation rate on UK big box deliveries rose +2.1%pts.
We help give tech a longer life through protection, repair, trade-in and
recycling services:
· In the UK, our Care & Repair adoption climbed +340bps compared to
last year, with improvements in-store and online as customers look to benefit
from our improved propositions. This resulted in 9.4m active plans at the end
of the period, +6% higher than the previous year.
· In the Nordics, our Priority insurance, where customers pay monthly,
grew +17% YoY with particularly strong growth online. This was in part aided
by offers of three months free insurance, which will have some impact on near
term profits but generates longer term, recurring revenue.
· In the UK, we collected over 750,000 items for recycling driven by
our "Cash for Trash" initiative. As customers become more aware of the
environmental consequences of their actions, we are there to help them as no
competitor can.
We help customers make the most out of their tech with connectivity and
subscriptions:
· iD Mobile, our award winning MVNO, grew to 1.5m subscribers, +24%
YoY, demonstrating the great value, flexibility and control it offers to our
customers. iD Mobile is a growing source of recurring, predictable revenue and
cashflow.
We will collect, protect, and use data to build more valuable customer
relationships:
· Currys Perks members represented well over half of UK sales. Perks
customers are happier, shop more frequently, have higher average order values
and greater adoption rate of credit and Care & Repair than non-Perks
customers.
· The Nordics customer club grew +13% YoY to over 8m members. Club
members spend more with us, at better margins, as increased shopping frequency
outweighs lower average order values.
Results call
There will be a live presentation and audio webcast followed by Q&A call
for investors and analysts at 9:00am.
The presentation slides will be available via the following link:
https://brrmedia.news/CURY_IR23 (https://brrmedia.news/CURY_IR23)
To participate in the live audio Q&A session, please use the following
participant access details:
UK: +44 (0) 33 0551 0200, please quote 'Currys Investor Call' when prompted by
the operator
Next scheduled announcement
The Group is scheduled to publish its Peak trading update covering the 10
weeks to 6 January 2024 on Thursday 18 January 2024.
For further information
Dan Homan Investor Relations +44 (0)7401 400442
Toby Bates Corporate Communications +44 (0)7841 037946
Tim Danaher Brunswick Group +44 (0)2074 045959
Information on Currys plc is available at www.currysplc.com
(http://www.currysplc.com)
Follow us on LinkedIn: @currysplc
Follow us on X (formerly Twitter): @currysplc
About Currys plc
Currys plc is a leading omnichannel retailer of technology products and
services, operating online and through 815 stores in 8 countries. We Help
Everyone Enjoy Amazing Technology, however they choose to shop with us.
In the UK & Ireland we trade as Currys; in the Nordics under the Elkjøp
brand and as Kotsovolos in Greece. In each of these markets we are the market
leader, employing almost 28,000 capable and committed colleagues. Our full
range of services and support makes it easy for our customers to discover,
choose, afford and enjoy the right technology for them, throughout their
lives. The Group's operations include state-of-the-art repair facilities in
Newark, UK, a sourcing office in Hong Kong and an extensive distribution
network, enabling fast and efficient delivery to stores and homes.
Our vision, We Help Everyone Enjoy Amazing Technology, has a powerful social
purpose at its heart. We believe in the power of technology to improve lives,
help people stay connected, productive, healthy, and entertained. We're here
to help everyone enjoy those benefits and with our scale and expertise, we are
uniquely placed to do so.
We're a leader in giving technology a longer life through repair, recycling
and reuse. We're reducing our impact on the environment in our operations and
our wider value chain and we will achieve net zero emissions by 2040. We offer
customers products that help them save energy, reduce waste and save water,
and we partner with charitable organisations to bring the benefits of amazing
technology to those who might otherwise be excluded.
Certain statements made in this announcement are forward-looking. Such
statements are based on current expectations and are subject to a number of
risks and uncertainties that could cause actual results to differ materially
from any expected future events or results referred to in these
forward-looking statements. Unless otherwise required by applicable laws,
regulations or accounting standards, we do not undertake any obligation to
update or revise any forward-looking statements, whether as a result of new
information, future developments or otherwise. Information contained on the
Currys plc website, LinkedIn or the X (formerly Twitter) feed does not form
part of this announcement and should not be relied on as such.
Performance Review
The business is managed and evaluated across three reporting segments: UK
& Ireland, Nordics and Greece. The table below shows the combined Group
results, with fuller explanations following under each of the individual
segments.
Subsequent to the balance sheet date, the Board and shareholders have approved
the proposed disposal of Greece. The Group expects to receive the necessary
final clearances and for the Greece disposal to complete in the first quarter
of 2024. The below performance review includes Greece as part of the ongoing
operations, pending completion.
Income Statement H1 2023/24 H1 2022/23 Reported Currency neutral
£m
£m
% change % change
Revenue 4,159 4,473 (7)% (4)%
Adjusted EBITDA 184 183 1% 5%
Adjusted EBITDA margin 4.4% 4.1% 30 bps 40 bps
Depreciation on right-of-use assets (96) (95)
Depreciation on other assets (24) (28)
Amortisation (33) (31)
Adjusted EBIT 31 29 7% 17%
Adjusted EBIT margin 0.7% 0.6% 10 bps 20 bps
Interest on lease liabilities (33) (34)
Finance income 2 1
Adjusted finance costs (16) (13)
Adjusted PBT (16) (17) 6% 6%
Adjusted PBT margin (0.4)% (0.4)% 0 bps 0 bps
Adjusted tax 4 3
Adjusted Profit after tax (12) (14)
Adjusted EPS (1.1)p (1.3)p
Statutory Reconciliation
Adjusting items to EBITDA (11) (515)
EBITDA 173 (332) 152% 155%
Adjusting items to depreciation and amortisation (12) (12)
EBIT 8 (498) 102% 102%
EBIT Margin 0.2% (11.1)% 1,130 bps 1130 bps
Adjusting items to finance costs (7) (4)
PBT (46) (548) 92% n/a
Adjusting items to tax 3 (15)
Profit after tax (39) (560)
EPS - total (3.5)p (50.8)p
Cash flow H1 2023/24 H1 2022/23 Reported Currency neutral
% change
£m £m % change
Adjusted EBITDAR 190 188 1% 5%
Adjusted EBITDAR margin 4.6% 4.2% 40 bps 40 bps
Cash payments of leasing costs, debt & interest(1) (136) (136)
Other non-cash items in EBIT 8 8
Operating cash flow(1) 62 60 3% 11%
Operating cash flow margin 1.5% 1.3% 20 bps 20 bps
Capital expenditure (28) (56)
Adjusting items to cash flow(1) (23) (25)
Free cash flow before working capital 11 (21) 152% 171%
Working capital (3) (28)
Segmental free cash flow 8 (49) 116% 136%
Cash tax paid (4) (24)
Cash interest paid (14) (13)
Free cash flow (10) (86) 88% 98%
Dividend - (24)
Purchase of own shares - share buyback - -
Purchase of own shares - employee benefit trust (2) (4)
Pension (18) (39)
Other (2) 4
Movement in net cash / (debt) (32) (149)
Net cash / (debt) (129) (105)
(1) APM defined in Glossary
UK & Ireland
28 October 2023 29 October 2022
Number of stores
UK 284 289
Ireland 16 16
Total UK&I 300 305
Selling space '000 sq. ft
UK 5,235 5,288
Ireland 207 207
Total UK&I 5,442 5,495
H1 2023/24 H1 2022/23 Reported Currency neutral % change
£m £m % change
Income Statement
Revenue 2,215 2,292 (3)% (3)%
Online share of revenue 43% 43% -
Adjusted EBITDA 92 103 (11)% (11)%
Adjusted EBITDA margin 4.2% 4.5% (30) bps (30) bps
Depreciation on right-of-use assets (48) (49)
Depreciation on other assets (9) (12)
Amortisation (20) (17)
Adjusted EBIT 15 25 (40)% (40)%
Adjusted EBIT margin 0.7% 1.1% (40) bps (40) bps
Adjusting items to EBIT (17) (520)
EBIT (2) (495) 100% 100%
EBIT margin (0.1)% (21.6)% 2,150 bps 2,150 bps
Cash flow
Adjusted EBITDAR 96 105 (9)% (9)%
Adjusted EBITDAR margin 4.3% 4.6% (30) bps (30) bps
Cash payments of leasing costs, debt & interest(1) (76) (78)
Other non-cash items in EBIT 8 6
Operating cash flow(1) 28 33 (15)% (15)%
Operating cash flow margin 1.3% 1.4% (10) bps (10) bps
Capital expenditure (12) (28)
Adjusting items to cash flow(1) (17) (24)
Free cash flow before working capital (1) (19) 95% 95%
Working capital (15) 1
Segmental free cash flow (16) (18) 11% 6%
(1) APM defined in Glossary
Total UK&I sales declined (3)%, driven by like-for-like sales decline of
(3)%. The online share of business was stable at 43%.
Mobile was the strongest performing category, growing significantly compared
to last year, helped by the strength of our iD Mobile proposition. Domestic
appliance sales were robust but consumer electronics and computing were
weaker, with both categories almost 25% smaller than two years ago.
The UK market (excluding mobile) shrank (4)% during H1 with the online market
reducing by (3)% and the store channel declining by (5)%. Our market share is
down (100)bps compared to last year as we grew share in the store channel by
+80bps while our online market share reduced by (190)bps. Over half of the
market share loss was due to continued, deliberate actions taken to prioritise
profits over sales.
Gross margins increased +10bps compared to last year as a result of all the
actions taken to improve gross margin, largely offset by £11m from the
non-repeat of mobile revaluation arising from a specific contract expiring
last year. The gross margins are up +280bps compared to three years ago as the
business has focussed on improving performance in this area. The operating
expense to sales ratio worsened by (50)bps as costs reduced in absolute terms,
but not enough to offset the decline in sales. A £(16)m headwind from wage
and other inflation was more than offset by £53m of cost savings across
supply chain, store operations and central costs as well as lower
depreciation.
Adjusted EBIT decreased to £15m at 0.7% margin, down (40)bps YoY.
In the period, adjusting items to EBIT totalled £(17)m due to £(10)m of
strategic change programmes and a net £(7)m of other items. The cash costs in
the period mainly related to ongoing strategic change and cost saving
initiatives.
H1 2023/24, £m H1 2022/23, £m
P&L Cash P&L Cash
Acquisition / disposal related items (6) - (6) -
Strategic change programmes (10) (15) (3) (24)
Impairment losses and onerous contracts - - (511) -
Regulatory 1 (2) - -
Other (2) - - -
Total (17) (17) (520) (24)
Operating cash flow was down (15)% YoY as the decline in profits was offset by
lower rent costs and higher non-cash items. Capital expenditure was less than
half of last year's level, with expenditure spread across small projects.
Adjusting items are described above. Working capital cash outflow of £(15)m
was due to the sales decline. In combination, this resulted in segmental free
cash outflow of £(16)m, £2m better than last year.
Nordics
28 October 2023 29 October 2022
Number of stores Own stores Franchise stores Total Own stores Franchise stores Total
Norway 83 61 144 88 66 154
Sweden 98 75 173 100 77 177
Denmark 45 - 45 41 - 41
Finland 20 22 42 21 21 42
Other Nordics - 16 16 - 14 14
Nordics 246 174 420 250 178 428
Selling space '000 sq ft Own stores Franchise stores Total Own stores Franchise stores Total
Norway 1,098 611 1,709 1,118 644 1,762
Sweden 1,180 389 1,569 1,175 390 1,565
Denmark 753 - 753 694 - 694
Finland 508 196 704 520 184 704
Other Nordics - 106 106 - 97 97
Nordics 3,539 1,302 4,841 3,507 1,315 4,822
H1 2023/24 H1 2022/23 Reported Currency neutral % change
£m £m % change
Income Statement
Revenue 1,653 1,886 (12)% (6)%
Online share of revenue 25% 23% +2 ppts
Adjusted EBITDA 75 67 12% 22%
Adjusted EBITDA margin 4.5% 3.6% 90 bps 100 bps
Depreciation on right-of-use assets (40) (39)
Depreciation on other assets (12) (13)
Amortisation (11) (12)
Adjusted EBIT 12 3 300% 400%
Adjusted EBIT margin 0.7% 0.2% 50 bps 60 bps
Adjusting items to EBIT (5) (7)
EBIT 7 (4) 275% 433%
EBIT margin 0.4% (0.2)% 60 bps 80 bps
Cash flow
Adjusted EBITDAR 76 69 10% 20%
Adjusted EBITDAR margin 4.6% 3.7% 90 bps 100 bps
Cash payments of leasing costs, debt & interest(1) (49) (48)
Other non-cash items in EBIT - 2
Operating cash flow 27 23 17% 38%
Operating cash flow margin 1.6% 1.2% 40 bps 50 bps
Capital expenditure (9) (24)
Adjusting items to cash flow (5) (1)
Free cash flow before working capital 13 (2) 750% 950%
Working capital 24 (47)
Segmental free cash flow 37 (49) 176% 187%
(1) APM defined in Glossary
Revenue declined by (6)% on a currency neutral basis, with a like-for-like
sales decline of (6)%. Online share of business increase slightly to 25%.
In a market that continued to trade poorly, all product categories except
small domestic appliances experienced a sales decline. Computing and consumer
electronics were again the worst performing categories, while major domestic
appliances and mobile proved more resilient.
Compared to last year, the Nordic market declined around (4)%. Our market
share was 27.1% during the half, down (90)bps compared to last year and stable
compared to the market share we held before the pandemic.
Gross margin increased +190bps and is only (20)bps below the level of two
years ago. Operating expenses increased slightly in local currency terms as
inflationary cost increases and new stores were largely offset by savings
across marketing, head office, stores and consultant fees. However, the
operating expense to sales ratio worsened by (140)bps due to operating
deleverage.
As a result, adjusted EBIT increased by £9m to £12m.
In the period, adjusting items to EBIT totalled £(5)m, this was largely due
to the amortisation of acquisition intangibles which had no cash impact. The
cash costs of £(5)m related to the strategic cost saving initiatives that
were announced and expensed in the previous financial year. EBIT increased to
£7m.
H1 2023/24, £m H1 2022/23, £m
P&L Cash P&L Cash
Acquisition / disposal related items (6) - (6) -
Strategic change programmes 1 (5) (1) (1)
Impairment losses and onerous contracts - - - -
Total (5) (5) (7) (1)
The operating cash flow increased by +17% to £27m, driven by the higher
profit outturn. Capital expenditure was £(9)m, with areas of expenditure
including our Next Generation Retail omnichannel platform and store refits.
Working capital inflow of £24m was due to an increase in creditors.
Greece
28 October 2023 29 October 2022
Number of stores Own stores Franchise stores Total Own stores Franchise stores Total
Greece 78 14 92 74 17 91
Cyprus 3 - 3 2 - 2
Greece 81 14 95 76 17 93
Selling space '000 sq ft Own stores Franchise stores Total Own stores Franchise stores Total
Greece 1,022 53 1,075 977 64 1,041
Cyprus 57 - 57 43 - 43
Greece 1,079 53 1,132 1,020 64 1,084
H1 2023/24 H1 2022/23 Reported Currency neutral % change
£m £m % change
Income Statement
Revenue 291 295 (1)% (2)%
Online share of revenue 5% 7% (2) ppts
Adjusted EBITDA 17 13 31% 21%
Adjusted EBITDA margin 5.8% 4.4% 140 bps 110 bps
Depreciation on right-of-use assets (8) (7)
Depreciation on other assets (3) (3)
Amortisation (2) (2)
Adjusted EBIT 4 1 300% 300%
Adjusted EBIT margin 1.4% 0.3% 110 bps 110 bps
Adjusting items to EBIT (1) -
EBIT 3 1 200% 200%
EBIT margin 1.0% 0.3% 70 bps 70 bps
Cash flow
Adjusted EBITDAR 18 14 29% 29%
Adjusted EBITDAR margin 6.2% 4.7% 150 bps 140 bps
Cash payments of leasing costs, debt & interest(1) (11) (10)
Other non-cash items in EBIT - -
Operating cash flow 7 4 75% 75%
Operating cash flow margin 2.4% 1.4% 100 bps 110 bps
Capital expenditure (7) (4)
Adjusting items to cash flow (1) -
Free cash flow before working capital (1) - n/a n/a
Working capital (12) 18
Segmental free cash flow (13) 18 (172)% (168)%
(1) APM defined in Glossary
Revenue decreased (2)% on a currency neutral basis, with a like-for-like sales
decline of (4)%. During the period we opened four new stores in Greece and one
new store in Cyprus. Stores performed better than online, with store share of
business growing +2pts YoY.
Mobile performed strongly mainly due to Apple phone launches. Computing sales
fell compared to the strong sales last year when sales benefited from
government subsidies for students and teachers. Consumer electronics sales
were down due to a softer market for TVs. Cooling and air conditioning sales
were aided by the government subsidy programme.
Gross margin improved by +110bps, recovering a lot of the (210)bps decline in
the first half of last year, mainly due to product mix and lower costs. The
operating expense ratio was broadly flat YoY. As a result, adjusted EBIT
increased to £4m. There were no adjusting items to EBIT.
The operating cash flow was £7m, up £3m from the prior year due to the
higher operating profit. Capital expenditure was £7m, with significant areas
of expenditure including stores, IT and distribution. Working Capital was an
£(12)m outflow driven by decreased creditors.
Finance Costs
Interest on lease liabilities was £(33)m, broadly in-line with last year; the
cash impact of this interest is included within "Cash payments of leasing
costs, debt & interest" in segmental free cash flow.
The adjusted net finance costs were higher than last year due to higher
interest rates. The net cash impact of these costs was £(14)m, from £(13)m
in the prior year.
The finance costs on the defined benefit pension scheme is an adjusting item
and was broadly flat year-on-year in line with the assumptions used in the
valuation of the pension obligations.
H1 2023/24 H1 2022/23
£m £m
Interest on lease liabilities (33) (34)
Finance income 2 1
Finance costs (16) (13)
Adjusted net finance costs (47) (46)
Finance costs on defined benefit pension schemes (5) (4)
Other finance costs (2) -
Net finance costs (54) (50)
Tax
A tax rate of 24% has been applied to the adjusted half year results. This is
higher than the prior half year adjusted rate of 20% due to a lower proportion
of International losses. The cash tax paid in the half year period was £4m,
down from £24m in the prior year which is primarily due to lower profit
levels in the Nordics.
The expected full year adjusted effective tax rate at 25% is slightly higher
than the prior full year rate of 23% due to a lower proportion of
International losses, which are taxed at a slightly lower rate than the UK.
The half year adjusting items tax credit of £3m includes the tax impact of
non-headline items in the Nordics. The adjusting items tax charge of £15m for
the half year which ended 29 October 2022, included the derecognition of UK
deferred tax assets relating to tax losses.
Cash flow
H1 2023/24 H1 2022/23 Reported Currency neutral
£m £m % change % change
Operating cash flow 62 60 3% 11%
Capital expenditure (28) (56)
Adjusting items to cash flow (23) (25)
Free cash flow before working capital 11 (21) 152% 171%
Working capital and network commissions (3) (28)
Segmental free cash flow 8 (49) 116% 136%
Cash tax paid (4) (24)
Cash interest paid (14) (13)
Free cash flow (10) (86) 88% 98%
Dividend - (24)
Purchase of own shares (2) (4)
Pension (18) (39)
Other (2) 4
Movement in net cash (32) (149)
Opening net cash / (debt) (97) 44
Closing net cash / (debt) (129) (105)
Segmental free cash flow was £8m (H1 2022/23: outflow of £(49)m) and
interest and tax outflows totalled £(18)m as described above, resulting in a
free cash outflow of £(10)m (H1 2022/23: outflow of £(86)m).
The Board prudently decided not to declare a dividend for the full year
2022/23 and therefore no dividend was paid in the period, compared to a £24m
(2.15p per share) payment in the prior year. The employee benefit trust
acquired £2m worth of shares to satisfy colleague share awards.
Pension contributions of £18m (H1 2022/23: £39m) were below last year and in
line with the contribution plan agreed with the pension fund Trustees.
Other movements predominantly relate to currency translation differences. NOK
and SEK have weakened against sterling in the period which has caused a
negative reported translation difference.
The closing net debt position was £(129)m, compared to a net debt position of
£(97)m at 29 April 2023. This included £27m of restricted cash (29 October
2022: £30m). The average net debt for the period was £(150)m, compared to an
average position of £(114)m in H1 2022/23.
Balance sheet
28 October 2023 29 October 2022 29 April 2023
£m £m £m
Goodwill 2,252 2,296 2,270
Other fixed assets 1,366 1,520 1,500
Working capital (220) (319) (230)
Net cash / (debt) (129) (105) (97)
Net lease liabilities (1,136) (1,231) (1,228)
Pension (190) (251) (249)
Deferred tax 14 23 8
Provisions (39) (44) (48)
Other (32) (42) (34)
Net assets 1,886 1,847 1,892
Goodwill declined £(18)m during the half-year ended 28 October 2023 due to
currency revaluation of the Nordics goodwill.
Other fixed assets decreased by £(134)m since 29 April 2023 as capital
expenditure and the increases in present value of leases due to lease renewals
were more than offset by depreciation and amortisation of £(165)m.
28 October 2023 29 October 2022 29 April 2023
£m £m £m
Inventory 1,564 1,750 1,151
Trade Receivables 225 361 299
Trade Payables (1,927) (2,181) (1,439)
Trade working capital (138) (70) 11
Network commission receivables & contract assets 97 161 116
Network accrued income 140 70 105
Network receivables 237 231 221
Other Receivables 372 290 259
Other Payables (700) (775) (731)
Derivatives 9 5 10
Working capital (220) (319) (230)
At period end, total working capital was £(220)m (29 October 2022: £(319)m).
Group inventory was £1,564m, (11)% lower than last year as inventory across
markets has been lowered in response to lower sales. The lower sales resulted
in stock days increasing from 63 to 64 compared to 29 October 2022. Trade
payable decreased by £254m to £(1,927)m (29 October 2022: £(2,181)m) as
stock purchases were lower and trade payables days were broadly stable.
Total network receivables are up by £16m compared to year end with a sharp
increase in iD Mobile, driven by higher volume of sales, offset by a decrease
in Vodafone. Other receivables are up by £82m year-on-year due to higher
accrued income with an offsetting decrease in trade receivables. Trade
receivables also benefitted from faster cash collection from suppliers and
franchisees. Other payables fell by £75m due to lower VAT payable and lower
accrued expenses.
Lease liabilities are £95m lower than 29 October 2022 due to store exits and
the renewal of leases at lower average rent.
The IAS 19 accounting deficit of the defined benefit pension scheme amounted
to £190m (30 April 2023: £249m). The reduction of £61m during the period
was primarily driven by £18m of contributions and £42m due to updated
assumptions on longevity and commutation, where recent experience has moved in
favour of a lower liability. The application of a higher discount rate was
favourable for the deficit, but this was entirely offset by a lower return on
assets and recent experience as the hedging structure of the scheme worked as
intended.
28 October 2023 29 October 2022 29 April 2023
£m £m £m
Net cash / (debt) (129) (105) (97)
Restricted cash (27) (30) (30)
Net lease liabilities (1,136) (1,231) (1,228)
Pension liability (190) (251) (249)
Total closing indebtedness (1,482) (1,617) (1,604)
Less: year-end net cash / (debt) 129 105 97
Add: average net cash / (debt) (150) (114) (96)
Total average indebtedness (1,503) (1,626) (1,603)
28 October 2023 29 October 2022 29 April 2023
£m £m £m
Operating cashflow (last 12 months) 270 304 268
Cash payments of leasing costs, debt & interest 285 265 283
Operating cash flow plus cash payments of leasing 555 569 551
Bank covenant ratios
Fixed charges (cash lease costs + cash interest) 312 288 309
Fixed charge cover 1.78x 1.98x 1.78x
Net (debt)/cash excluding restricted funds (156) (135) (127)
Net debt leverage 0.58x 0.44x 0.47x
Net indebtedness ratios
Fixed charges (cash lease costs + cash interest + pension contributions) 369 364 387
Total indebtedness fixed charge cover 1.50x(1) 1.56x 1.42x
Total closing indebtedness (1,482) (1,617) (1,604)
Total indebtedness leverage 2.67x 2.85x 2.91x
1. Fixed charges based on actual pension contributions. If based
on the £78m pa, indebtedness fixed charges would have been £390m and cover
would fall to 1.42x
At 28 October 2023 the Group had net debt of £(129)m (29 October 2022: net
debt of £(105m) and average net debt for the period of £(150)m (H1 2022/23:
£(114)m). The Group has access to £498m across two longer term revolving
credit facilities that expire in April 2026, and two additional short-term
credit facilities totalling £134m that have been extended and now expire in
October 2024, taking total available credit from revolving credit facilities
to £632m. The covenants on the debt facilities are net debt leverage <2.5x
(H1 2023/24: 0.58x) and fixed charge cover >1.5x (H1 2023/24: 1.78x). The
fixed charge cover covenant is due to increase to >1.75x following the
October 2024 measurement date.
Provisions primarily relate to property, reorganisation and sales provisions.
The balance reduced by £(9)m during the year as the utilisation of
reorganisation provisions for central and retail operations, sales provisions
and property related onerous contract costs for closed stores more than offset
additions. Onerous property contract costs of £2m were released during the
period following the completion of negotiations to exit previously closed
stores.
Comprehensive income / Changes in equity
Total equity for the Group decreased from £1,892m to £1,886m in the period,
driven by a loss of £(39)m, £(20)m loss from the translation of overseas
operations and purchase of own shares by the EBT of £(2)m. This was mostly
offset by the actuarial gain (net of taxation) on the defined benefit pension
deficit for the UK pensions scheme of £44m, hedging gains of £2m and
movements in relation to share schemes of £9m.
Share count
The weighted average number of shares used for basic earnings increased by 4m
to 1,108m since the previous year end due to a small decrease in the average
number of shares held by the Group EBT to satisfy colleague shareholder
schemes.
The dilutive effect of share options and other incentive schemes has not
changed as the schemes' performance against vesting conditions has not
changed.
28 October 2023 29 October 2022 29 April 2023
Million Million Million
Weighted average number of shares
Average shares in issue 1,133 1,133 1,133
Less average holding by Group EBT and treasury shares held by Company (25) (31) (29)
For basic earnings / (loss) per share 1,108 1,102 1,104
Dilutive effect of share options and other incentive schemes 18 18 20
Number of shares for diluted earnings per share 1,126 1,120 1,124
Greece disposal
Subsequent to the balance sheet date, the Board and shareholders have approved
the proposed disposal of Greece. The Group expects to receive the necessary
final clearances and for the Greece disposal to complete in the first calendar
quarter of 2024. Providing the transaction completes, or is highly probable to
go ahead, the Group will report Full Year 2023/24 Income statement and
cashflows on a continuing operations basis, with the Greece segment shown as a
single line under "discontinued operations". To provide further relevant
information to investors a more detailed breakdown of the income statement and
cashflow of Greece is included below.
Kotsovolos H1 2023/24 H1 2022/23 FY 2022/23
£m
£m £m
Income Statement
Revenue 291 295 637
Adjusted EBITDA 17 13 43
Adjusted EBITDA margin 5.8% 4.4% 6.8%
Depreciation on right-of-use assets (8) (7) (15)
Depreciation on other assets (3) (3) (6)
Amortisation (2) (2) (4)
Adjusted EBIT 4 1 18
Adjusted EBIT margin 1.4% 0.3% 2.8%
Interest on lease liabilities (3) (3) (5)
Finance income 2 1 2
Adjusted finance costs (2) (1) (3)
Adjusted PBT 1 (2) 12
Adjusted PBT margin 0.3% (0.7)% 1.9%
Adjusted tax - - (2)
Adjusted Profit after tax 1 (2) 10
Cash flow
Adjusted EBITDAR 18 14 45
Adjusted EBITDAR margin 6.2% 4.7% 7.1%
Cash payments of leasing costs, debt & interest(1) (11) (10) (22)
Other non-cash items in EBIT - - 1
Operating cash flow 7 4 24
Operating cash flow margin 2.4% 1.4% 3.8%
Capital expenditure (7) (4) (8)
Adjusting items to cash flow(1) (1) - -
Free cash flow before working capital (1) - 16
Working capital (12) 18 -
Segmental free cash flow (13) 18 16
Cash tax paid - - 2
Cash interest paid - - (1)
Free cash flow (13) 18 17
(1) APM defined in Glossary
Financial information
Consolidated income statement
Note 26 weeks ended 26 weeks ended 52 weeks
28 October 29 October ended
2023 2022 29 April
Unaudited Unaudited 2023
£m
£m
Audited
£m
Revenue 2 4,159 4,473 9,511
Profit before impairment of goodwill, interest and tax 8 13 165
Impairment of goodwill 8 - (511) (511)
Profit / (loss) before interest and tax 2 8 (498) (346)
Finance income 2 1 2
Finance costs (56) (51) (106)
Net finance costs (54) (50) (104)
Loss before tax (46) (548) (450)
Income tax credit / (expense) 7 (12) (31)
Loss after tax for the period (39) (560) (481)
Loss per share (pence) 3
Basic (3.5)p (50.8)p (43.6)p
Diluted (3.5)p (50.8)p (43.6)p
Financial information
Consolidated statement of comprehensive income
26 weeks ended 26 weeks ended 52 weeks
28 October 2023
29 October 2022
ended
Unaudited Unaudited
29 April
£m
£m
2023
Audited
£m
(Loss) after tax for the period (39) (560) (481)
Items that may be reclassified to the income statement in subsequent periods:
Cash flow hedges
Fair value movements recognised in other comprehensive income 5 14 11
Reclassified and reported in income statement 1 (5) 3
Exchange loss arising on translation of foreign operations (20) - (5)
(14) 9 9
Items that will not be reclassified to the income statement in subsequent
periods:
Actuarial gain / (loss) on defined benefit pension schemes: 47 (29) (61)
Tax on movements on defined benefit pension schemes (3) (42) (35)
44 (71) (96)
Other comprehensive income / (expense) for the period (taken to equity) 30 (62) (87)
Total comprehensive (expense) for the period (9) (622) (568)
Financial information
Consolidated balance sheet
Note 28 October 2023 Unaudited £m 29 October 2022 Unaudited 29 April 2023 Audited
£m
£m
Non-current assets
Goodwill 8 2,252 2,296 2,270
Intangible assets 317 374 350
Property, plant & equipment 138 160 155
Right-of-use assets 911 986 995
Lease receivable 4 5 4
Trade and other receivables 114 97 148
Deferred tax assets 25 228 23
3,761 4,146 3,945
Current assets
Inventory 1,564 1,750 1,151
Lease receivable 1 1 1
Trade and other receivables 720 785 631
Income tax receivable 4 - 1
Derivative assets 6 21 16 23
Cash and cash equivalents 94 138 97
2,404 2,690 1,904
Total assets 6,165 6,836 5,849
Current liabilities
Trade and other payables (2,524) (2,856) (2,067)
Derivative liabilities 6 (12) (11) (13)
Income tax payable (36) (42) (35)
Loans and other borrowings (5) (1) (16)
Lease liabilities (173) (213) (213)
Provisions (36) (36) (43)
(2,786) (3,159) (2,387)
Non-current liabilities
Trade and other payables (103) (100) (103)
Loans and other borrowings 7 (218) (242) (178)
Lease liabilities (968) (1,024) (1,020)
Retirement benefit obligations 5 (190) (251) (249)
Deferred tax liabilities (11) (205) (15)
Provisions (3) (8) (5)
(1,493) (1,830) (1,570)
Total liabilities (4,279) (4,989) (3,957)
Net assets 1,886 1,847 1,892
Capital and reserves
Share capital 1 1 1
Share premium account 2,263 2,263 2,263
Other reserves (815) (800) (804)
Accumulated profits 437 383 432
Equity attributable to equity holders of the parent company 1,886 1,847 1,892
Financial information
Consolidated statement of changes in equity
Note Share Share Other reserves Accumulated profits Total
capital
premium account
£m
£m
£m
£m equity
£m
At 29 April 2023 1 2,263 (804) 432 1,892
Loss for the period - - - (39) (39)
Other comprehensive income / (expense) recognised directly in equity - - (14) 44 30
Total comprehensive income / (expense) - - (14) 5 (9)
for the period
Amounts transferred to the carrying value of inventory purchased during the - - (4) - (4)
year
Net movement in relation to share schemes - - 9 - 9
Purchase of own shares - employee benefit trust - - (2) - (2)
Equity dividends 4 - - - - -
At 28 October 2023 1 2,263 (815) 437 1,886
Note Share Share Other reserves Accumulated profits Total
capital
premium account
£m
£m
£m
£m equity
£m
At 30 April 2022 1 2,263 (803) 1,040 2,501
Profit for the period - - - (560) (560)
Other comprehensive (expense) / income recognised directly in equity - - 9 (71) (62)
Total comprehensive (expense) / income for the period - - 9 (631) (622)
Amounts transferred to the carrying value of inventory purchased during the - - (11) - (11)
year
Amounts transferred to the income statement during the year - - (2) - (2)
Net movement in relation to share schemes - - 11 (2) 9
Purchase of own shares - employee benefit trust - - (4) - (4)
Equity dividends 4 - - - (24) (24)
At 29 October 2022 1 2,263 (800) 383 1,847
Share Share Other reserves Accumulated profits Total
capital
premium account
£m
£m
£m
£m equity
£m
At 30 April 2022 1 2,263 (803) 1,040 2,501
Profit for the period - - - (481) (481)
Other comprehensive (expense) / income recognised directly in equity - - 9 (96) (87)
Total comprehensive (expense) / income for the period - - 9 (577) (568)
Amounts transferred to the carrying value of inventory purchased during the - - (19) - (19)
year
Net movement in relation to share schemes - - 13 4 17
Purchase of own shares - employee benefit trust - - (4) - (4)
Equity dividend 4 - - - (35) (35)
At 29 April 2023 1 2,263 (804) 432 1,892
Financial information
Consolidated cash flow statement
Note 26 weeks 26 weeks 52 weeks
ended
ended
ended
28 October 2023
29 October 2022
29 April
2023
Unaudited Unaudited
£m £m Audited
£m
Operating activities
Cash generated from operations 7 172 145 386
Special contributions to defined benefit pension scheme (18) (39) (78)
Income tax paid (4) (24) (38)
Net cash flows from operating activities 150 82 270
Investing activities
Acquisition of property, plant & equipment and other intangibles (28) (56) (111)
Net cash flows from investing activities (28) (56) (111)
Financing activities
Interest paid (46) (47) (94)
Capital repayment of lease liabilities (103) (103) (216)
Purchase of own shares - employee benefit trust (2) (4) (4)
Equity dividends paid 4 - (24) (35)
Drawdown of borrowings 38 157 110
Cash inflows from derivative financial instruments 3 - 43
Facility arrangement fees paid - (1) (1)
Net cash flows from financing activities (110) (22) (197)
Increase/(decrease) in cash and cash equivalents and bank overdrafts 12 4 (38)
Cash and cash equivalents and bank overdrafts at beginning of the period 81 124 124
Currency translation differences (4) 9 (5)
Cash and cash equivalents and bank overdrafts at end of the period 89 137 81
Financial information
Notes to the financial information
1 Accounting policies
(a) Basis of preparation
The interim financial information for the 26 weeks ended 28 October 2023 was
approved by the directors on 13 December 2023. The interim financial
information, which is a condensed set of financial statements, has been
prepared in accordance with the Listing Rules of the Financial Conduct
Authority and International Accounting Standard 34 "Interim Financial
Reporting" (IAS 34) as adopted by the UK and has been prepared on the going
concern basis as described further below and in the section on risks to
achieving the Group's objectives.
The accounting policies adopted are those set out in the Group's Annual Report
and Accounts 2022/23 which were prepared in accordance with IFRS as adopted by
the UK. New accounting standards, amendments to standards and IFRIC
interpretations which became applicable during the period were either not
relevant or had no impact on the Group's net results or net assets.
The UK Endorsement Board has adopted 'International Tax Reform - Pillar Two
Model Rules (Amendments to IAS 12)' which was issued by the International
Accounting Standards Board in May 2023. The Amendments introduce a temporary
mandatory exception from accounting for deferred taxes arising from the Pillar
Two model rules. The Group confirms that this mandatory exception has been
applied.
Going Concern
Going concern is the basis of preparation of the financial statements that
assumes an entity will remain in operation for a period of at least 12 months
from the date of approval of these condensed financial statements.
In their consideration of going concern, the directors have reviewed the
Group's future cash forecasts and profit projections, which are based on
market data and past experience. Given the short to medium term macroeconomic
uncertainty, Currys has obtained a fixed charge cover covenant relaxation from
its banking syndicate covering the October 2023, April 2024, and October 2024
test periods. The debt facilities modelled in the base case total £632m of
which £134m are due for renewal in October 2024.
As a result of the uncertainties surrounding the forecasts due to the current
macroeconomic environment, the Group has also modelled a severe but plausible
downside scenario by applying a sales risk of 5% in 2023/24 declining to 2% by
2026/27. This sales risk can be offset with controllable mitigations across
various operating expense line items and hence in this severe but plausible
downside scenario, the Group does not breach any of the Group's facilities or
banking covenants. Further, this scenario cautiously assumes that £134m of
debt facilities due for renewal in October 2024 will not be extended. Finally,
the Group has numerous other mitigations available (in addition to those
applied to the severe but plausible downside scenario) which are considered
controllable should sales drop below the severe but plausible downside, before
requiring additional sources of financing in excess of those that are
committed. Such a scenario, and the sequence of events which could lead to it,
is considered to be remote.
The directors are of the opinion that the Group's forecasts and projections,
which take into account reasonably possible changes in trading performance
including the impact of increased uncertainty and inflation in the wider
economic environment, show that the Group is able to operate within its
current facilities and comply with its banking covenants for at least 12
months from the date of approval of these financial statements. In arriving at
their conclusion that the Group has adequate financial resources, the
directors considered the level of borrowings and facilities and that the Group
has a robust policy towards liquidity and cash flow management.
For this reason, the Board considers it appropriate for the Group to adopt the
going concern basis in preparing the financial information. The long-term
effect of macroeconomic factors is uncertain and should the impact on trading
conditions be more prolonged or severe than what the directors consider to be
reasonably possible, the Group would need to implement additional operational
or financial measures.
1 Accounting policies (continued)
(a) Basis of preparation (continued)
Alternative performance measures
In addition to IFRS measures, the Group uses certain alternative performance
measures that are considered to be additional informative measures of ongoing
trading performance of the Group and are consistent with how performance is
measured internally. The alternative performance measures used by the Group
are included within the glossary and definitions section. This includes
further information on the definitions, purpose and reconciliations to IFRS
measures of those alternative performance measures that are used for internal
reporting and presented to the Group's Chief Operating Decision Maker (CODM).
The CODM has been determined to be the Board.
Further information
The interim financial information uses definitions that are set out within the
glossary and definitions section of this document.
The interim financial information is unaudited and does not constitute
statutory accounts within the meaning of Section 434 of the Companies Act 2006
but has been reviewed by the auditor. The financial information for the year
ended 29 April 2023 does not constitute the company's statutory accounts for
that period but has been extracted from those accounts which have been filed
with the Registrar of Companies and are also available on the Group's
corporate website www.currysplc.com (http://www.currysplc.com) .
(b) Key sources of estimation uncertainty and critical accounting judgements
Critical accounting judgements and estimates used in the preparation of the
financial statements are continually reviewed and revised as necessary. Whilst
every effort is made to ensure that such judgements and statements are
reasonable, by their nature they are uncertain and as such changes may have a
material impact.
In preparing the condensed consolidated financial statements, the significant
judgements made by management in applying the Group's accounting policies and
key sources of estimation uncertainty include the impairment of goodwill and
the proposed disposal of Kotsovolos as disclosed below. In addition, key
sources of estimation uncertainty regarding UK defined benefit pension scheme
assumptions and critical accounting judgements related to taxation detailed in
the Group's Annual Report and Accounts 2022/23 remain relevant.
Impairment of non-financial assets - Goodwill
As required by IAS 36, goodwill is subject to an impairment review on an
annual basis, or more frequently where indicators of impairment exist. The
Group has considered if indicators of impairment exist with regard to a number
of factors, including the recent increases in the long-term risk-free
investment rates, uncertainty in the wider macroeconomic environment and
comparison of market capitalisation of the Group to the carrying value of
assets. Management concluded that some of these factors are indicators of
impairment and consequently, a full impairment review was undertaken per IAS
36 using the value in use ('VIU') method as detailed in the Group's Annual
Report and Accounts 2022/23.
As a result of the impairment review for the both the UK & Ireland
segment, where £1,329m of goodwill is allocated, and the Nordics segment,
where £923m of goodwill is allocated, no impairments have been recognised in
the 26 weeks ended 28 October 2023. The review shows material headroom above
the carrying amount of both segments. Further details on the sensitivities and
key assumptions are included in note 8.
1 Accounting policies (continued)
(b) Key sources of estimation uncertainty and critical accounting judgements
(continued)
Proposed disposal of Greek segment Kotsovolos
In October 2023 Currys began a bidding process for the disposal of its Greek
segment Kotsovolos. On 3 November 2023 the market was informed that Currys had
entered into an agreement to sell its Greek business to Public Power
Corporation (PPC). Shareholder approval was obtained on 21 November 2023.
There are further conditions to completion including merger clearance approval
from the Hellenic Competition Commission, Foreign Subsidies Regulation
clearance, acquiring consent to the disposal from involved counterparties, and
completing separation activities such as signing license and commercial
agreements.
IFRS 5.6-8 requires a judgement to determine the classification of a disposal
group as held for sale and is based on six criteria. The Group has assessed
that, as at the balance sheet date 28 October 2023, one of these criteria was
not met as the sale was not deemed highly probable within 12 months. The key
considerations in this decision were that the bid from PPC had not yet been
accepted, investor approval had not been obtained, and the regulatory and
competition clearance was outstanding (and remains so at the reporting date).
As a result, the Group determined that the sale was not highly probable and
therefore the Greek segment was not classified as held for sale.
2 Segmental analysis
The Group's operating segments reflect the segments routinely reviewed by the
CODM used to manage performance and allocate resources. This information is
predominantly based on geographical areas which are either managed separately
or have similar trading characteristics.
The Group's operating and reportable segments have therefore been identified
as follows:
· UK & Ireland; comprising operations of Currys, iD Mobile and B2B
operations;
· Nordics; operates both franchise and own stores in Norway, Sweden,
Finland and Denmark with further franchise operations in Iceland, Greenland
and Faroe Islands;
· Greece; consisting of our operations in Greece and Cyprus.
UK & Ireland, Nordics and Greece are involved in the sale of consumer
electronics and mobile technology products and services, primarily through
stores or online channels.
Transactions between segments are on an arm's length basis.
(a) Segmental results
26 weeks ended 28 October 2023
UK & Ireland Nordics Greece Total
£m £m £m £m
Revenue 2,215 1,653 291 4,159
(Loss)/profit before interest, tax and impairment of goodwill (2) 7 3 8
Impairment of goodwill - - - -
(Loss)/profit before interest and tax (2) 7 3 8
Finance income 2
Finance costs (56)
(Loss) before tax (46)
Depreciation and amortisation (83) (69) (13) (165)
2 Segmental analysis (continued)
(a) Segmental results (continued)
26 weeks ended 29 October 2022
UK & Ireland Nordics Greece Total
£m £m £m £m
Revenue 2,292 1,886 295 4,473
Profit/(loss) before interest, tax and impairment of goodwill 16 (4) 1 13
Impairment of goodwill (511) - - (511)
(Loss)/profit before interest and tax (495) (4) 1 (498)
Finance income 1
Finance costs (51)
(Loss) before tax (548)
Depreciation and amortisation (84) (70) (12) (166)
52 weeks ended 29 April 2023
UK & Ireland Nordics Greece Total
£m £m £m £m
Revenue 5,067 3,807 637 9,511
Profit/(loss) before interest, tax and impairment of goodwill 158 (11) 18 165
Impairment of goodwill (511) - - (511)
(Loss)/profit before interest and tax (353) (11) 18 (346)
Finance income 2
Finance costs (106)
(Loss) before tax (450)
Depreciation and amortisation (166) (142) (25) (333)
Segmental profit Note 26 weeks ended 26 weeks ended 52 weeks ended
28 October 29 October 29 April
2023 2022 2023
£m £m £m
UK & Ireland (loss) / profit before interest, tax and impairment of (2) 16 158
goodwill
Impairment of UK & Ireland goodwill 8 - (511) (511)
UK & Ireland (loss) before interest and tax (2) (495) (353)
Nordics 7 (4) (11)
Greece 3 1 18
Profit / (loss) before interest and tax 8 (498) (346)
Finance income 2 1 2
Finance costs (56) (51) (106)
(Loss) before tax (46) (548) (450)
(b) Seasonality
The Group's business is highly seasonal, with a substantial proportion of its
revenue and (loss) / profit before interest and tax generated during its third
quarter, which includes Black Friday and the Christmas and New Year season.
2 Segmental analysis (continued)
(c) Geographical information
Revenues are allocated to countries according to the entity's country of
domicile. Revenue by destination is not materially different to that shown by
domicile. Non-current assets exclude financial instruments and deferred tax
assets.
26 weeks ended 28 October 2023 26 weeks ended 29 October 2022
UK Norway Sweden Other Total UK Norway Sweden Other Total
£m £m £m £m £m £m £m £m £m £m
Revenue 2,140 488 528 1,003 4,159 2,219 598 652 1,004 4,473
Non-current assets at period end 2,059 491 403 706 3,659 2,163 569 436 706 3,874
52 weeks ended 29 April 2023
UK Norway Sweden Other Total
£m £m £m £m £m
Revenue 4,897 1,157 1,289 2,168 9,511
Non-current assets at period end 2,112 520 437 733 3,802
(d) Disaggregation of revenues
The Group's disaggregated revenue recognised under 'Revenue from Contracts
with Customers' in accordance with IFRS 15 relates to the following operating
segments and revenue streams:
26 weeks ended 28 October 2023 26 weeks ended 29 October 2022
UK & Ireland Nordics Greece Total UK & Nordics Greece Total
£m
£m
£m
£m
£m £m Ireland £m
£m
Sales of goods 1,901 1,512 272 3,685 1,982 1,724 268 3,974
Commission revenue 79 80 10 169 114 100 12 226
Support services revenue 114 18 4 136 117 26 6 149
Other services revenue 119 43 5 167 78 36 9 123
Other revenue 2 - - 2 1 - - 1
Total revenue 2,215 1,653 291 4,159 2,292 1,886 295 4,473
52 weeks ended 29 April 2023
UK & Nordics Greece Total
£m
£m
Ireland £m
£m
Sales of goods 4,391 3,480 588 8,459
Commission revenue 260 195 23 478
Support services revenue 242 53 12 307
Other services revenue 174 79 14 267
Other revenue - - - -
Total revenue 5,067 3,807 637 9,511
3 (Loss) / earnings per share
26 weeks ended 26 weeks ended 52 weeks
28 October 29 October ended
2023 2022 29 April
£m £m 2023
£m
Total (loss) / earnings after tax for the period (39) (560) (481)
Million Million Million
Weighted average number of shares
Average shares in issue 1,133 1,133 1,133
Less average holding by Group EBT and Treasury shares held by Company (25) (31) (29)
For basic (loss) / earnings per share 1,108 1,102 1,104
Dilutive effect of share options and other incentive schemes 18 18 20
For diluted (loss) / earnings per share 1,126 1,120 1,124
Pence Pence Pence
Basic (loss) / earnings per share (3.5) (50.8) (43.6)
Diluted (loss) / earnings per share (3.5) (50.8) (43.6)
Basic and diluted (loss) / earnings per share are based on the (loss) / profit
after tax for the period attributable to equity shareholders.
4 Dividends
26 weeks ended 26 weeks ended 52 weeks
28 October 29 October ended
2023 2022 29 April
£m £m 2023
£m
Final dividend for the period ended 30 April 2022 of 2.15p - 24 24
Interim dividend for the period ended 29 April 2023 of 1.00p per ordinary - - 11
share
Amounts recognised as distributions to equity shareholders on ordinary shares - 24 35
of 0.1p each
There is currently no proposed interim dividend for the period ending 28
October 2023.
5 Retirement benefit obligations
28 October 2023 29 October 2022 29 April
£m £m 2023
£m
Retirement benefit obligations - UK (187) (250) (247)
- Nordics (1) (1) (1)
- Greece (2) - (1)
Net obligation (190) (251) (249)
The Group operates a number of defined contribution and defined benefit
pension schemes. The principal scheme operates in the UK and includes a funded
defined benefit section, the assets of which are held in a separate trustee
administered fund. The defined benefit section of the scheme was closed to
future accrual on 30 April 2010. The net obligations of this scheme,
calculated in accordance with IAS 19 "Employee Benefits", are analysed as
follows:
UK scheme 28 October 2023 29 October 2022 29 April
£m £m 2023
£m
Fair value of plan assets 869 987 975
Present value of defined benefit obligations (1,056) (1,237) (1,222)
Net obligation (187) (250) (247)
The value of obligations is particularly sensitive to the discount rate
applied to liabilities at the assessment date as well as mortality rates. The
defined benefit obligation has declined by £166m since 29 April 2023
primarily as a result of market conditions impacting the discount rate
assumption. The value of the plan assets is also sensitive to market
conditions and has declined by £106m due to a drop in the value of
liability-driven investments (LDI), which are designed to broadly offset
movements in the defined benefit obligation. The scheme's investment strategy
and its investment objectives remain consistent with those adopted as at 29
April 2023.
The assumptions used in the valuation of obligations are listed below:
UK scheme 28 October 2023 29 October 2022 29 April
2023
Rates per annum:
Discount rate 5.70% 4.60% 4.85%
Rate of increase in pensions in payment / deferred pensions - pre April 2006 3.05% 3.05% 3.05%
- post April 2006 2.15% 2.15% 2.15%
Inflation 3.15% 3.10% 3.10%
Mortality rates are based on historical experience and standard actuarial
tables and include an allowance for future improvements in longevity.
Sensitivity testing over life expectancy is not performed at the half year as
it is not considered as variable as discount rates and inflation.
If the discount rate assumption increased by 1.0% the defined benefit
obligation would decrease by approximately £136m. If the assumption decreased
by 1.0% the defined benefit obligation would increase by approximately £157m.
If the inflation assumption increased by 1.0% the defined benefit obligation
would increase by approximately £119m. If the assumption decreased by 1.0%
the defined benefit obligation would decrease by approximately £107m.
6 Financial instruments, loans and other borrowings
The Group holds the following financial instruments at fair value:
28 October 2023 29 October 2022 29 April
£m £m 2023
£m
Derivative financial assets 21 16 23
Derivative financial liabilities (12) (11) (13)
The significant inputs required to fair value the Group's net derivatives are
observable and are classified as 'Level 2' in the fair value hierarchy. Fair
values have been arrived at by revaluing forward currency contracts to period
end market rates as appropriate to the instrument. There have been no
transfers of assets or liabilities between levels of the fair value hierarchy.
For all other financial assets and liabilities, the carrying amount
approximates their fair value.
Committed facilities
In April 2021, the Group refinanced its existing debt with two revolving
credit facilities which are due to expire in April 2026. In October 2022, the
group signed an additional two short-term revolving credit facilities which
are due to expire in October 2024. As at 28 October 2023 available facilities
totalled £632m (29 October 2022: £676m, 29 April 2023: £636m) and the Group
had drawn down on these facilities by £216m (29 October 2022: £242m, 29
April 2023: £177m). An additional £2m (29 October 2022: £nil, 29 April
2023: £1m) was drawn in Greece from the EU-supported Recovery and Resilience
Facility (RFF) scheme. The Group's available facilities are detailed below.
In April 2021, the Group signed a £200m revolving credit facility with a
number of relationship banks which was initially due to expire in April 2025.
In April 2022, this facility was extended by one year to expire in April 2026.
The interest rate payable for drawings under this facility is at a margin over
risk free rates (or other applicable interest basis) for the relevant currency
and for the appropriate period. The actual margin applicable to any drawing
depends on the fixed charges cover ratio calculated in respect of the most
recent accounting period. As a result of the short to medium term
macroeconomic uncertainty, Currys has obtained a fixed charge cover covenant
relaxation from its banking syndicate covering the October 2023, April 2024,
and October 2024 test periods. A non-utilisation fee is payable in respect of
amounts available but undrawn under this facility and a utilisation fee is
payable when aggregate drawings exceed certain levels. At 28 October 2023, the
Group had drawn down on this facility by £105m (29 October 2022: £90m, 29
April 2023: £70m).
In April 2021, the Group signed a NOK 4,036m (£298m) (29 October 2022:
£336m, 29 April 2023: £301m) revolving credit facility with a number of
relationship banks which was initially due to expire in April 2025. In April
2022, this facility was extended by one year to expire in April 2026. This is
on broadly similar terms to the £200m facility. At 28 October 2023, the Group
had drawn down on this facility by NOK 1,500m (£111m) (29 October 2022:
£152m, 29 April 2023: £107m).
In October 2022, the Group signed a £90m revolving credit facility and a NOK
600m (£44m) revolving credit facility with a number of relationship banks to
mitigate against any potential short-to-medium term macroeconomic uncertainty.
These facilities were originally for one year and were extended in October
2023 to October 2024. They are on broadly similar terms to the £200m facility
signed in April 2021. The facilities have not been drawn on since inception.
Uncommitted facilities
The Group also has overdrafts and short-term money market lines from UK and
European banks denominated in various currencies, all of which are repayable
on demand. Interest is charged at the market rates applicable in the countries
concerned and these facilities are used to assist in short term liquidity
management. Total available facilities are £93m (29 October 2022: £71m, 29
April 2023: £70m). At 28 October 2023 the Group had drawn down on the
uncommitted facilities by £5m (29 October 2022: £1m, 29 April 2023: £16m).
7 Note to the cash flow statement
26 weeks ended 26 weeks ended 52 weeks
28 October 29 October ended
2023 2022 29 April
£m £m 2023
£m
Profit / (loss) before interest and tax 8 (498) (346)
Depreciation and amortisation 165 166 333
Share-based payment charge 9 9 15
Impairments and other non-cash items 1 509 520
Operating cash flows before movements in working capital 183 186 522
Movements in working capital:
Increase in inventory (423) (469) 109
Increase in receivables (55) (67) 20
Increase in payables 477 512 (249)
Decrease in provisions (10) (17) (16)
(11) (41) (136)
Cash generated from operations 172 145 386
Restricted funds, which predominantly comprise funds held by the Group's
insurance business for regulatory reserve requirements, were £27m (29 October
2022: £30m; 29 April 2023: £30m). These restricted funds are included within
cash and cash equivalents on the face of the consolidated balance sheet.
Changes in liabilities arising from financing activities
The table below details changes in the Group's liabilities arising from
financing activities, including both cash and non-cash changes. Liabilities
arising from financing activities are those for which cash flows were, or
future cash flows will be, classified in the Group's consolidated cash flow
statement as cash flows from financing activities.
29 April Financing cash flows Lease additions, modifications and disposals Foreign Exchange Interest £m 28 October
2023 £m £m £m 2023
£m £m
Loans and other borrowings (178) (26) - (1) (13) (218)
Lease liabilities (1,233) 136 (21) 10 (33) (1,141)
Total liabilities arising from financing activities (1,411) 110 (21) 9 (46) (1,359)
30 April Financing cash flows Lease additions, modifications and disposals Foreign Exchange Interest £m 29 October
2022 £m £m £m 2022
£m £m
Loans and other borrowings (80) (150) - (5) (7) (242)
Lease liabilities (1,267) 138 (76) 2 (34) (1,237)
Total liabilities arising from financing activities (1,347) (12) (76) (3) (41) (1,479)
7 Note to the cash flow statement (continued)
30 April Financing cash flows Lease additions, modifications and disposals Foreign Exchange Interest £m 29 April
2022 £m £m £m 2023
£m £m
Loans and other borrowings (80) (92) - 11 (17) (178)
Lease liabilities (1,267) 285 (198) 15 (68) (1,233)
Total liabilities arising from financing activities (1,347) 193 (198) 26 (85) (1,411)
Lease liabilities are secured over the Group's right-of-use assets.
8 Goodwill
28 October 2023 29 October 2022 29 April
£m £m 2023
£m
Cost
Opening balance 3,006 3,039 3,039
Additions - - 2
Foreign exchange (18) (7) (35)
Closing balance 2,988 3,032 3,006
Accumulated impairment
Opening balance (736) (225) (225)
Impairment charge - (511) (511)
Closing balance (736) (736) (736)
Carrying value 2,252 2,296 2,270
(a) Carrying value of goodwill
The components of goodwill comprise the following businesses:
28 October 2023 29 October 2022 29 April
£m £m 2023
£m
UK & Ireland 1,329 1,329 1,329
Nordics 923 967 941
2,252 2,296 2,270
8 Goodwill (continued)
(b) Goodwill impairment testing
As required by IAS 36, goodwill is subject to an impairment review on an
annual basis, or more frequently where indicators of impairment exist. The
Group has considered if indicators of impairment exist with regard to a number
of factors, including the recent increases in the long-term risk-free
investment rates, uncertainty in the wider macroeconomic environment and
comparison of market capitalisation of the Group to the carrying value of
assets. Management concluded that some of these factors are indicators of
impairment and consequently, a full impairment review was undertaken per IAS
36 using the value in use ('VIU') method as detailed in the Group's Annual
Report and Accounts 2022/23.
As a result of the impairment review for the both the UK & Ireland
segment, where £1,329m of goodwill is allocated, and the Nordics segment,
where £923m of goodwill is allocated, no impairments have been recognised in
the 26 weeks ended 28 October 2023 as the review shows material headroom above
the carrying amount of both segments.
In the 52 weeks ended 29 April 2023, a non-cash impairment charge of £511m
was recognised in relation to the UK & Ireland segment (26 weeks ended
October 29 2022: £511m). In accordance with IAS 36 this will not be reversed
in subsequent periods and therefore no reversal has been recognised in the 26
weeks ended October 28 2023, despite the impairment review showing material
headroom for this segment.
Key assumptions
The key assumptions used in calculating VIU are:
· management' sales and costs projections;
· the long-term growth rate; and
· the pre-tax discount rate.
For the annual impairment test conducted in the year ended 29 April 2023 the
strategic plan covered a five-year period. Management considered the five-year
outlook to April 2028 to be the most accurate representation of the
steady-state level of return expected in the longer-term and therefore a more
appropriate basis on which to calculate the VIU. For the impairment test
conducted in the period ended 28 October 2023 the updated strategic plan
continues to cover the period to April 2028 which now constitutes a four-year
outlook as the final year of the plan is still considered to be the
steady-state level of return.
The long-term sales and cost projections are based on the Board approved
extended plan. The projections consider the outlook for addressable markets
and the relative performance of competitors, together with management's views
on the future achievable growth in market share and impact of the committed
initiatives, including the Group's commitment to long-term sustainability
targets. The likely impact of climate change on discounted cashflows has been
assessed as immaterial. In forming these projections, management draws on past
experience to forecast future performance. The cash flows include ongoing
capital expenditure required to maintain the store network and e-commerce
channels in order to operate the omnichannel businesses and to compete in
their respective markets.
8 Goodwill (continued)
(b) Goodwill impairment testing (continued)
A key component in determining the expected cash flows is the forecast
operating profit in 2027/28, which drives the terminal value in the value in
use calculation. Long-term growth rates and pre-tax discount rates have been
calculated as explained in the Group's Annual Report and Accounts 2022/23. The
values attributed to these assumptions are as follows:
28 October 2023 29 April 2023
Compound annual growth in sales Compound annual growth in costs Long term growth Pre-tax discount rate Compound annual growth in sales Compound annual growth in costs Long term growth Pre-tax discount rate
rate rate
UK & Ireland 1.7% 1.5% 1.6% 12.5% 1.4% 1.3% 1.6% 12.2%
Nordics 4.6% 4.1% 1.6% 11.0% 4.4% 3.6% 1.5% 10.8%
Sensitivity analysis
In accordance with IAS 36, the Group performed sensitivity analysis on the
estimates of recoverable amount and a summary of the sensitivities applied to
these key assumptions and the resulting headroom / (impairment) is as follows:
UK & Ireland CGU Nordics CGU
Key assumption Sensitivity applied Headroom / (Impairment) Movement Headroom / (Impairment) Movement
£m £m £m £m
Base case - 257 - 230 -
Operating profit in final year Increase of 20% 514 257 472 242
Decrease of 20% - (257) (12) (242)
Long-term growth rate Increase of 0.2% 285 28 255 25
Decrease of 0.2% 229 (28) 205 (25)
Pre-tax discount rate Increase of 2% (34) (291) (52) (282)
Decrease of 2% 683 426 663 433
9 Contingent liabilities
The Group continues to cooperate with HMRC in relation to open tax cases
arising from pre-merger legacy corporate transactions in the former Carphone
Warehouse Group. It is possible that a future economic outflow will arise from
one of these matters, and therefore a contingent liability has been disclosed.
This determination is based on the strength of third-party legal advice on the
matter and therefore the Group considers it 'more likely than not' that these
enquiries will not result in an economic outflow. The potential range of tax
exposures relating to this enquiry is estimated to be approximately £nil -
£211m excluding interest and penalties. Interest is £76m up to 28 October
2023. Penalties could range from nil to 30% of the principal amount of any
tax. Any potential cash outflow would occur in greater than one year and less
than five years.
The Group received a Spanish tax assessment connected to a business that was
disposed of by the legacy Carphone Warehouse Group in 2014. This issue will
enter litigation and is likely to take a minimum of three years to reach
resolution. The Group considers that it is not probable the claim will result
in an economic outflow based on third-party legal advice. The maximum
potential exposure as a result of the claim is £10m.
10 Related party transactions
Transactions between the Group's subsidiary undertakings, which are related
parties, have been eliminated on consolidation and accordingly are not
disclosed.
The Group had the following transactions and balances with its associates:
26 weeks ended 26 weeks ended 52 weeks ended
28 October 29 October 29 April
2023 2022 2023
£m £m £m
Revenue from sale of goods and services 6 7 13
Amounts owed to the Group 1 1 1
All transactions entered into with related parties were completed on an arm's
length basis.
11 Events after the balance sheet date
As described in note 1b the disposal process for the Greek segment Kotsovolos
has progressed after the balance sheet date. This includes announcement to the
market on 3 November 2023 confirming the proposed buyer Public Power
Corporation (PPC). Shareholders also approved the proposal on 21 November
2023. Further key steps are required to complete the disposal including merger
clearance approval from the Hellenic Competition Commission, Foreign Subsidies
Regulation clearance, acquiring consent to the disposal from involved
counterparties, and completing separation activities such as signing license
and commercial agreements. The judgement not to classify the segment as held
for sale at the half year has been described in note 1b and follows the
assessment that the sale was not deemed highly probable as at the balance
sheet date, given the steps required to complete.
Risks to achieving the Group's objectives
The Board continually reviews and monitors the risks and uncertainties which
could have a material effect on the Group's results. The Group's risks, and
the factors which mitigate them, are set out in more detail in the Principal
risks and uncertainties section of the Annual Report and Accounts 2022/23 and
remain relevant, but have evolved, in the current period.
The updated risks and uncertainties are listed below:
1. Supply Chain Resilience risk covers broad external supply chain
related challenges for sourcing which, if not managed adequately, could result
in a deterioration of financial performance;
2. Failure to deliver an effective business transformation programme
in response to a changing consumer environment could result in a loss of
competitive advantage impacting financial performance;
3. Failure to comply with Financial Services regulation could result
in reputational damage, customer compensation, financial penalties and a
resultant deterioration in financial performance;
4. Failure in appropriately safeguarding sensitive information and
failure to comply with legislation could result in reputational damage,
financial penalties and a resultant deterioration in financial performance;
5. Failure to adequately invest in and integrate the Group's IT
systems and infrastructure could result in restricted growth and reputational
damage impacting financial performance;
6. Failure to appropriately safeguard against cyber risks and
associated attacks could result in reputational damage, customer compensation,
financial penalties and a resultant deterioration in financial performance;
7. Failure to action appropriate Health and Safety measures
resulting in injury could give rise to reputational damage and financial
penalties;
8. Business continuity plans are not effective and major incident
response is inadequate resulting in reputational damage and a loss of
competitive advantage;
9. Crystallisation of potential tax exposures resulting from legacy
corporate transactions, employee and sales taxes arising from periodic tax
audits and investigations across various jurisdictions in which the Group
operates may impact cash flows for the Group;
10. Failure to employ adequate procedures and due diligence regarding
product quality and safety could result in the provision of products which
pose a risk to customer health, resulting in fines, prosecution and
significant reputational damage;
11. Failure to either deliver or adequately communicate our commitment
to sustainability and being a good corporate citizen could result in reduced
cash flow, reputational damage and loss of competitive advantage; and
12. Failure to successfully navigate an increasingly pervasive set of
externally driven factors, inflation and cost of living pressures could result
in a deterioration in financial performance.
13. Failure to manage Currys' access to sufficient liquidity at any
given time may impact the Group's ability to meet its financial obligations
and support business growth plans.
The directors have prepared the preliminary Financial Information on a going
concern basis. In considering the going concern basis, the directors have
considered the above-mentioned principal risks and uncertainties, especially
in the context of a highly competitive consumer and retail environment as well
as the wider macroeconomic environment and how these factors might influence
the Group's objectives and strategy.
In their consideration of going concern, the directors have reviewed the
Group's future cash forecasts and profit projections, which are based on
market data and past experience. The directors are of the opinion that the
Group's forecasts and projections, which take into account reasonably possible
changes in trading performance including the impact of increased uncertainty
and inflation in the wider economic environment, show that the Group is able
to operate within its current facilities and comply with its banking covenants
for at least 12 months from the date of approval of these condensed financial
statements. In arriving at their conclusion that the Group has adequate
financial resources, the directors considered the level of borrowings and
facilities and that the Group has a robust policy towards liquidity and cash
flow management.
As a result, the Board believes that the Group is well placed to manage its
financing and other significant risks satisfactorily and that the Group will
be able to operate within the level of its facilities for at least 12 months
from the date of approval of these condensed financial statements. For this
reason, the Board considers it appropriate for the Group to adopt the going
concern basis in preparing the financial information.
Statement of directors' responsibilities
The directors confirm that to the best of their knowledge:
• the interim financial information has been prepared in accordance
with IAS 34 as adopted by the UK;
• the financial highlights, performance review and interim financial
information include a fair review of the information required by DTR 4.2.7R
(indication of important events during the first 26 weeks and description of
principal risks and uncertainties for the remaining 26 weeks of the year); and
• the financial highlights and performance review includes a fair
review of the information required by DTR 4.2.8R (disclosure of related party
transactions and changes therein).
At the date of this statement, the directors are those listed in the Group's
Annual Report and Accounts 2022/23.
By order of the Board
Alex Baldock Bruce Marsh
Group Chief Executive Group Chief Financial Officer
13 December 2023 13 December 2023
Independent review report
To Currys plc
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the 26 weeks ended 28
October 2023 which comprises the consolidated income statement, the
consolidated balance sheet, the consolidated statement of changes in equity,
the consolidated cash flow statement and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the 26 weeks ended 28 October 2023 is not prepared, in
all material respects, in accordance with IAS 34 Interim Financial Reporting
as adopted for use in the UK and the Disclosure Guidance and Transparency
Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK
FCA").
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK) 2410") issued for use in the
UK. A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. We read the other
information contained in the half-yearly financial report and consider whether
it contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an
audit opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis of conclusion section of this report,
nothing has come to our attention that causes us to believe that the directors
have inappropriately adopted the going concern basis of accounting, or that
the directors have identified material uncertainties relating to going concern
that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However, future events or conditions may cause the group to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the group will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with UK-adopted international accounting standards.
The directors are responsible for preparing the condensed set of financial
statements included in the half-yearly financial report in accordance with IAS
34 as adopted for use in the UK.
In preparing the condensed set of financial statements, the directors are
responsible for assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the group or to cease operations, or have no realistic alternative
but to do so.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. Our conclusion, including our conclusions relating to going concern,
are based on procedures that are less extensive than audit procedures, as
described in the Basis for conclusion section of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the DTR of the
UK FCA. Our review has been undertaken so that we might state to the company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work, for this
report, or for the conclusions we have reached.
Mark Flanagan
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London, E14 5GL
13 December 2023
Retail store data (unaudited)
Number of stores
At 28 October 2023 At 29 April 2023
Own stores Franchise stores Total Own stores Franchise stores Total
UK 284 - 284 285 - 285
Ireland 16 - 16 16 - 16
Total UK & Ireland 300 - 300 301 - 301
Norway 83 61 144 87 63 150
Sweden 98 75 173 99 76 175
Denmark 45 - 45 44 - 44
Finland 21 22 43 21 21 42
Other Nordics - 16 16 - 15 15
Nordics 247 174 421 251 175 426
Greece 78 14 92 81 15 96
Cyprus 3 - 3 - - -
Greece 81 14 95 81 15 96
Total 628 188 816 633 190 823
Selling space '000 sq ft
At 28 October 2023 At 29 April 2023
Own stores Franchise stores Total Own stores Franchise stores Total
UK 5,235 - 5,235 5,262 - 5,262
Ireland 207 - 207 207 - 207
Total UK & Ireland 5,442 - 5,442 5,469 - 5,469
Norway 1,098 611 1,709 1,100 616 1,716
Sweden 1,180 389 1,569 1,182 389 1,571
Denmark 753 - 753 734 - 734
Finland 508 196 704 520 184 704
Other Nordics - 106 106 - 105 105
Nordics 3,539 1,302 4,841 3,536 1,294 4,830
Greece 1,022 53 1,075 1,093 56 1,149
Cyprus 57 - 57 - - -
Greece 1,079 53 1,132 1,093 56 1,149
Total 10,060 1,355 11,415 10,098 1,350 11,448
Glossary and Definitions
Alternative performance measures ('APMs')
In the reporting of financial information, the Group uses certain measures
that are not required under IFRS. These are presented in accordance with the
Guidelines on APMs issued by the European Securities and Markets Authority
('ESMA'). These measures are consistent with those used internally by the
Group's Chief Operating Decision Maker ('CODM') in order to evaluate trends,
monitor performance and forecast results.
These APMs may not be directly comparable with other similarly titled measures
of 'adjusted' or 'underlying' revenue or profit measures used by other
companies, including those within our industry, and are not intended to be a
substitute for, or superior to, IFRS measures.
We consider these additional measures to provide additional information on the
performance of the business and trends to shareholders. The below, and
supplementary notes to the APMs, provides further information on the
definitions, purpose and reconciliations to IFRS measures of those APMs that
are used internally in order to provide parity and transparency between the
users of this financial information and the CODM in assessing the core results
of the business in conjunction with IFRS measures.
Adjusted results
Included within our APMs the Group reports a number of adjusted profit and
earnings measures, all of which are described throughout this section. The
Group subsequently refers to adjusted results as those which reflect the
in-period trading performance of the ongoing omnichannel retail operations
(referred to below as underlying operations and trade) and excludes from IFRS
measures certain items that are significant in size or volatility or by nature
are non-trading or highly infrequent.
Adjusting items
When determining whether an item is to be classified as adjusting, and the
departure from IFRS measures is more useful for the users of the financial
statements than the additional disclosure requirements for material items
under IAS 1, the project or item must:
- be one-off in nature and have a significant impact on amounts
presented in either the statutory income statement or statutory cash flow
statement in any set of annual Group financial statements; or
- recur for a finite number of years and not reflect the underlying
trading performance of the business.
Management will classify items as adjusting where these criteria are met and
it is considered more useful for the users of the financial statements to
depart from IFRS measures.
Items excluded from adjusted results can evolve from one financial year to the
next depending on the nature of exceptional items or one-off type activities.
Below highlights the grouping in which management allocate adjusting items and
provides further detail on how management consider such items to meet the
criteria set out above. Further information on the adjusting items recognised
in the current and comparative periods can be found in note A4.
Acquisition and disposal related items
Includes costs incurred in relation to the acquisition, and income for the
disposal of business operations, as the related costs and income reflect
significant changes to the Group's underlying business operations and trading
performance. Adjusted results do not exclude the related revenues or costs
that have been earned in relation to previous acquisitions, with the exception
of the amortisation of intangibles, such as brands, that would not have been
recognised prior to their acquisition. Where practically possible amounts are
restated in comparative periods to reflect where a business operation has
subsequently been disposed.
Alternative performance measures ('APMs') (continued)
Strategic change programmes
Primarily relate to material one-off costs incurred for the execution and
delivery of a change in strategic direction, such as; severance and other
direct employee costs incurred following the announcement of detailed formal
restructuring plans as they are considered one-off; property rationalisation
programmes where a business decision is made to rebase the store estate as
this is considered one-off in nature and to cause a significant change in the
underlying business operations; and implementation costs for strategic change
delivery projects that are considered one-off in nature. Such costs incurred
do not reflect the Group's underlying trading performance. Results are
therefore adjusted to exclude such items in order to aid comparability between
periods.
Regulatory costs
The Group includes material costs related to data incidents and regulatory
challenge within adjusting items so far as on the basis of internal or
external legal advice, it has been determined that it is more than possible
that a material outflow will be required to settle the obligation (legal or
constructive) and subsequently recognised a provision in accordance with IAS
37.
Impairment losses and onerous contracts
In order to aid comparability, costs incurred for material non-cash
impairments (or reversals of previously recognised impairments) and onerous
contracts are included within adjusting items where they have a significant
impact on amounts presented in either the statutory income statement or
statutory cash flow statement in any set of annual Group financial statements.
When considering the threshold, management will consider whether the gross
impairment charge and gross reversal of previously recognised impairment in
any one reportable operating segment is above the material threshold for that
financial year.
While the recognition of such is considered to be one-off in nature, the
unavoidable costs for those contracts considered onerous is continuously
reviewed and therefore based on readily available information at the reporting
date as well as managements historical experience of similar transactions. As
a result, future cash outflows and total charges to the income statement may
fluctuate in future periods. If these changes are material they will be
recognised in adjusting items.
Other items
Other items include those items that are one-off in nature that are material
enough to distort the underlying results of the business but do not fall into
the categories disclosed above. Such items include the settlement of legal
cases and other contractual disputes where the corresponding income, or costs,
would be considered to distort users understanding of trading performance
during the period.
Net interest income / (costs)
Included within adjusting interest income / (costs) are net pension interest
costs on the defined benefit pension scheme within the UK and other
exceptional items considered so one-off or material that they distort
underlying finance costs of the Group (including legacy tax cases).
The net interest charge on defined benefit pension schemes represents the
non-cash remeasurement calculated by applying the corporate bond yield rates
applicable on the last day of the previous financial year to the net defined
benefit obligation. As a non-cash remeasurement cost which is unrepresentative
of the actual investment gains or losses made or the liabilities paid and
payable, and given the defined benefit section of the scheme having closed to
future accrual on 30 April 2010, the accounting effect of this is excluded
from adjusted results.
Tax
Included within taxation is the tax impact on those items defined above as
adjusting. The exclusion from adjusted results ensures that users, and
management, can assess the overall performance of the Groups underlying
operations.
Alternative performance measures ('APMs') (continued)
Tax (continued)
Where the Group is cooperating with tax authorities in relation to legacy tax
cases and is applying tax treatments to changes in underlying business
operations as a result of acquisition, divestiture or closure of operations,
the respective costs will also be included within adjusting items. Management
considers it appropriate to divert from IFRS measures in such circumstance as
the one-off charges related to prior periods could distort users understanding
of the Group's ongoing operational performance.
The Group also includes the movement of un-recognised deferred tax assets
relating to unused tax losses and other deductible temporary differences
within adjusting items. Management considers that the exclusion from adjusted
results aids users in the determination of current period performance as the
recognition and derecognition of deferred tax is impacted by management's
forecast of future performance and the ability to utilise unused tax losses
and other deductible temporary differences.
Definitions, purpose and reconciliations
In line with the Guidelines on Alternative Performance Measures issued by
ESMA, we have provided additional information on the APMs used by the Group
below, including full reconciliations back to the closest equivalent statutory
measure.
EBIT / EBITDA
In the key highlights and performance review we reference financial metrics
such as EBIT and EBITDA. We would like to draw to the user's attention that
these are shown to aid comparison of our adjusted measures to the closest IFRS
measure. We acknowledge that the terminology of EBIT and EBITDA are not IFRS
defined labels but are compiled directly from the IFRS measures of profit
without making any adjustments for adjusting items explained above. These
measures are: profit / (loss) for the year before deducting interest and tax,
termed as EBIT; and profit / (loss) for the year before deducting interest,
tax, depreciation, and amortisation, termed as EBITDA. These metrics are
further explained and reconciled within notes A2 and A3 below.
Currency neutral
Some comparative performance measures are translated at constant exchange
rates, called 'currency neutral' measures. This restates the prior period
results at a common exchange rate to the current year in order to provide
appropriate year-on-year movement measures without the impact of foreign
exchange movements.
Like-for-like (LFL) % change
Like-for-like revenue is calculated based on adjusted store and online revenue
(including Order & Collect, Online In-Store and ShopLive) using constant
exchange rates consistent with the currency neutral % change measure detailed
above. New stores are included where they have been open for a full financial
year both at the beginning and end of the financial period. Revenue from
franchise stores is excluded and closed stores are excluded for any period of
closure during either period. Customer support agreement, insurance and
wholesale revenues along with revenue from other non-retail businesses are
excluded from like-for-like calculations. We consider that LFL revenue
represents a useful measure of the trading performance of our underlying and
ongoing store and online portfolio.
A1 Reconciliation from (loss) / profit before interest and tax to adjusted
EBIT and adjusted PBT
Adjusted EBIT and adjusted PBT are measures of profitability that are adjusted
from IFRS measures to remove adjusting items, the nature of which are
disclosed above. A description of costs included within adjusting items during
the period and comparative periods is further disclosed in note A4.
As discussed above, the Group uses adjusted profit measures in order to
provide a useful measure of the ongoing performance of the Group.
The below reconciles (loss) / profit before tax and (loss) / profit before
interest and tax, which are considered to be the closest equivalent IFRS
measures to adjusted EBIT and adjusted PBT.
26 weeks ended 28 October 2023
Total Acquisition / disposal related items Strategic change programmes Impairment losses and onerous contracts Other Interest Adjusted
(loss) /
profit /
£m £m £m £m Regulatory Income £m
profit
(loss)
£m
£m £m
UK & Ireland (2) 6 10 - 2 (1) - 15
Nordics 7 6 (1) - - - - 12
Greece 3 - 1 - - - - 4
EBIT 8 12 10 - 2 (1) - 31
Finance income 2 - - - - - - 2
Finance costs (56) - - - - - 7 (49)
Loss before tax (46) 12 10 - 2 (1) 7 (16)
26 weeks ended 29 October 2022
Total (loss) / Acquisition / disposal related items Strategic change programmes Other Interest Adjusted
profit
profit / (loss)
£m £m Impairment losses and onerous contracts £m £m
£m
£m
£m
Regulatory Income
£m
UK & Ireland (495) 6 3 511 - - - 25
Nordics (4) 6 1 - - - - 3
Greece 1 - - - - - - 1
EBIT (498) 12 4 511 - - - 29
Finance income 1 - - - - - - 1
Finance costs (51) - - - - - 4 (47)
Loss before tax (548) 12 4 511 - - 4 (17)
A1 Reconciliation from (loss) / profit before interest and tax to adjusted
EBIT and adjusted PBT (continued)
52 weeks ended 29 April 2023
Total (loss) / Acquisition / disposal related items Strategic change programmes Impairment losses and onerous contracts Regulatory income Adjusted
profit
profit
£m £m £m £m
£m
£m
Other Interest
£m £m
UK & Ireland (353) 11 8 511 - (7) - 170
Nordics (11) 12 18 7 - - - 26
Greece 18 - - - - - - 18
EBIT (346) 23 26 518 - (7) - 214
Finance income 2 - - - - - - 2
Finance costs (106) - - - - - 9 (97)
Profit before tax (450) 23 26 518 - (7) 9 119
A2 Reconciliation from statutory profit / (loss) before interest and tax to
EBITDA
EBITDA represents earnings before interest, tax, depreciation and
amortisation. It provides a useful measure of profitability for users as it is
a commonly used metric to compare profitability between businesses that have
differing capital asset structures.
The below reconciles profit before interest and tax, which is considered to be
the closest equivalent IFRS measures, to EBITDA.
26 weeks ended 26 weeks ended 52 weeks ended
28 October 29 October 29 April
2023 2022 2023
£m £m £m
Profit / (loss) before interest and tax 8 (498) (346)
Depreciation 120 123 246
Amortisation 45 43 87
EBITDA 173 (332) (13)
A3 Reconciliation from adjusted EBIT to adjusted EBITDA and adjusted EBITDAR
Adjusted EBITDA represents earnings before interest, tax, depreciation and
amortisation. This measure also excludes adjusting items, the nature of which
are disclosed above and with further detail in note A4. It provides a useful
measure of profitability for users by adjusting for the items noted in A1 as
well as depreciation and amortisation expense noted in A2.
The depreciation adjusted within adjusted EBITDA includes right-of-use asset
depreciation on leased assets in accordance with IFRS 16. Some leasing costs,
including those on short-term or low value leases, or variable lease payments
not included in the measurement of the lease liability, are also included
within EBITDA. A similar measure, EBITDAR, provides a measure of profitability
based on the above EBITDA definition as well as deducting for leasing costs in
EBITDA.
A3 Reconciliation from adjusted EBIT to adjusted EBITDA and adjusted EBITDAR
(continued)
The below reconciles adjusted EBIT to adjusted EBITDA and adjusted EBITDAR.
The closest equivalent IFRS measures are considered to be profit / (loss)
before interest and tax, the reconciliation of such from adjusted EBIT can be
found in note A1.
26 weeks ended 26 weeks ended 52 weeks ended
28 October 29 October 29 April
2023 2022 2023
£m £m £m
Adjusted EBIT 31 29 214
Depreciation 120 123 246
Amortisation 33 31 64
Adjusted EBITDA 184 183 524
Leasing costs in EBITDA 6 5 12
Adjusted EBITDAR 190 188 536
A4 Further information on the adjusting items between IFRS measures to
adjusted profit measures noted above
Note 26 weeks ended 26 weeks ended 52 weeks ended
28 October 29 October 29 April
2023 2022 2023
£m £m £m
Included in (loss) / profit before interest and tax:
Acquisition / disposal related items (i) 12 12 23
Strategic change programmes (ii) 10 4 26
Impairment losses and onerous contracts (iii) - 511 518
Regulatory income (iv) (1) - (7)
Other (v) 2 - -
23 527 560
Included in net finance costs:
Net non-cash finance costs on defined benefit pension schemes (vi) 5 4 7
Other interest (vii) 2 - 2
Total impact on (loss) / profit before tax 30 531 569
Tax on other adjusting items (viii) (3) 15 4
Total impact on (loss) /profit after tax 27 546 573
A4 Further information on the adjusting items between IFRS measures to
adjusted profit measures noted above (continued)
(i) Acquisition / disposal related
items:
A charge of £12m (26 weeks ended 29 October 2022: £12m, 52 weeks ended 29
April 2023: £23m) relates to amortisation of acquisition intangibles arising
on the Dixons Retail Merger.
(ii) Strategic change programmes:
During the period a further £10m of costs have been incurred as the Group
continues to deliver the long-term strategic plan. This relates to the
following programmes:
· £10m one off implementation costs of transferring service centre
operations to a third-party (26 weeks ended 29 October 2022: £7m, 52 weeks
ended 29 April 2023: £10m).
· £2m of costs related to the proposed sale of Kotsovolos.
· £1m credit from a provision release related to the restructuring of
Nordics central operations and retail business due to successful contract
negotiations (26 weeks ended 29 October 2022: £nil, 52 weeks ended 29 April
2023: £17m cost).
· £1m credit that primarily relates to the release of property
provisions (26 weeks ended 29 October 2022: £5m credit, 52 weeks ended 29
April 2023: £4m credit) following successful early exit negotiations on
stores included within previously announced rationalisation and closure
programmes.
(iii) Impairment losses and onerous
contracts:
No impairment charges have been recognised during the 26 weeks ended 28
October 2023.
During the 52 weeks ended 29 April 2023 a non-cash impairment charge of £511m
was recognised over the goodwill recognised in the UK & Ireland operating
segment (26 weeks ended 29 October 2022: £511m). Further explanation is
provided within note 8 to the financial information.
In the 52 weeks ended 29 April 2023 fixed asset impairment charges of £7m
were recognised over assets held in the Nordics component of the group (26
weeks ended October 30 2022: £nil), following the announcement of the
restructuring of the Nordics central operations and retail business.
(iv) Regulatory income:
In periods prior, the Group provided for redress related to the mis-selling of
Geek Squad mobile phone insurance policies following the FCA investigation for
periods preceding June 2015. All customer claims are carefully considered by
the Group on a case-by-case basis with the majority of claims received being
invalid. During the 52 weeks ended 29 April 2023, the Group received
confirmation that further action was highly unlikely and as a result, the
Group reduced the provision in relation to redress by £7m (26 weeks ended 29
October 2022: £nil). During the 26 weeks ended 28 October 2023, a further
£1m was released.
(v) Other:
During the 26 weeks ended 28 October 2023, £2m of foreign exchange losses
were recognised in relation to the translation of a historic non-operating
intercompany balance which was capitalised in the period.
(vi) Net non-cash financing costs on defined
benefit pension schemes:
The net interest charge on defined benefit pension schemes represents the
non-cash remeasurement calculated by applying the corporate bond yield rates
applicable on the last day of the previous financial year to the net defined
benefit obligation.
A4 Further information on the adjusting items between IFRS measures to
adjusted profit measures noted above (continued)
(vii) Other interest:
The Group continues to cooperate with HMRC in relation to open tax cases
arising from pre-merger legacy transactions in the Carphone Warehouse Group as
detailed in the 2022/23 Annual Report. The Group has risk assessed that
certain cases have a probable chance of resulting in cash outflows to HMRC
that are measured at £60m as at 28 October 2023 (comprising the amount of tax
payable and interest up to 28 October 2023) (52 weeks ended 29 April 2023:
£59m). During the period, interest of £2m accrued in relation to these cases
which is based upon HMRC's prevailing interest rates (26 weeks ended 29
October 2022: £nil, 52 weeks ended 29 April 2023: £2m).
(viii) Tax on other adjusting items:
The effective tax rate on adjusting items is 11%. Included within tax on other
adjusting items is a £5m charge relating to the movement in relation to
un-recognised deferred tax assets in the UK, which were reassessed during
2022/23 given the current elevated macroeconomic uncertainty and a £8m credit
reflecting the tax effect on adjusting items explained above.
A5 Adjusted effective tax rate
Tax charged on adjusted profits within the 26 weeks ended 28 October 2023 has
been calculated by applying the effective rate of tax which is expected to
apply to the Group for the year ending 27 April 2024 using rates substantively
enacted at the reporting date as required by IAS 34 'Interim Financial
Reporting'.
The Group's adjusted effective rate of taxation for the full year has been
estimated at 25% (2022/23: 23%). A rate of 24% has been applied to the
adjusted half year results due to the weighting of profit in different
jurisdictions.
The effective tax rate measures provide a useful indication of the tax rate of
the Group. Adjusted effective tax is the rate of tax recognised on adjusting
earnings, and total effective tax is the rate of tax recognised on total
earnings.
A6 Reconciliation from statutory (loss) / earnings per share to adjusted
(loss) / earnings per share
Earnings per share ('EPS') measures are adjusted in order to show an adjusted
EPS figure which reflects the adjusted earnings per share of the Group. We
consider the adjusted EPS provides a useful measure of the ongoing earnings of
the underlying Group.
The below table shows a reconciliation of statutory basic EPS to adjusted
basic EPS as this is considered to be the closest IFRS equivalent.
26 weeks ended 26 weeks ended 52 weeks ended
28 October 29 October 29 April
2023 2022 2023
£m £m £m
Adjusted (loss) / profit after tax (12) (14) 92
Total loss after tax (39) (560) (481)
Million Million Million
Average shares in issue 1,133 1,133 1,133
Less average holding by Group EBT (25) (31) (29)
Weighted average number of shares 1,108 1,102 1,104
Pence Pence Pence
Basic loss per share (3.5) (50.8) (43.6)
Adjustments (net of taxation) 2.4 49.5 51.9
Adjusted basic (loss) / earnings per share (1.1) (1.3) 8.3
Basic (loss) / earnings per share is based on the (loss) / profit for the
period attributable to equity shareholders. Adjusted (loss) / earnings per
share is presented in order to show the underlying performance of the Group.
Adjustments used to determine adjusted (loss) / profit are described further
in note A4.
A7 Reconciliation of cash generated from operations to free cash flow
The below provides a reconciliation of cash generated from operations, which
is considered the closest equivalent IFRS measure, to operating cash flow and
free cash flow.
Reconciliation of cash inflow from operations to free cash flow 26 weeks ended 26 weeks ended 52 weeks ended
28 October 29 October 29 April
2023 2022 2023
£m £m £m
Cash generated from operations 172 145 386
Capital repayment of leases cost and interest (135) (137) (284)
Less adjusting items to cash flow 23 25 40
Less movements in working capital presented within the performance review 3 28 127
(note A9)
Facility arrangement fees - (1) (1)
Other (1) - -
Operating cash flow 62 60 268
Capital expenditure (28) (56) (111)
Add back adjusting items to cash flow (23) (25) (40)
Taxation (4) (24) (38)
Cash interest paid (14) (13) (26)
Add back movements in working capital presented within the performance review (3) (28) (127)
(note A9)
Free cash flow (10) (86) (74)
Reconciliation of adjusted EBIT to free cash flow 26 weeks ended 26 weeks ended 52 weeks
28 October 29 October ended
2023 2022 29 April
£m £m 2023
£m
Adjusted EBIT (note A1) 31 29 214
Depreciation and amortisation (note A3) 153 154 310
Working capital presented within the performance review (note A9) (3) (28) (127)
Capital expenditure (28) (56) (111)
Taxation (4) (24) (38)
Interest (14) (13) (26)
Repayment of leases* (130) (131) (271)
Other non-cash items in EBIT** 8 8 15
Free cash flow before adjusting items to cash flow 13 (61) (34)
Adjusting items to cash flow (23) (25) (40)
Free cash flow (10) (86) (74)
* Repayment of leases excludes the impact of non-trading leases, which are
presented within adjusting items to cash flow
** Other non-cash items in EBIT, as disclosed within the Summary of
Performance section, comprise share-based payments, profit/loss on disposal of
fixed assets, impairments and other non-cash items.
A8 Reconciliation from liabilities arising from financing activities to total
indebtedness and net (debt)/ cash
Total indebtedness is a measure which represents period end net (debt) / cash,
pension deficit and lease liabilities, less any restricted cash. The purpose
of this is to evaluate the liquidity of the Group with the inclusion of all
interest-bearing liabilities.
Net (debt) / cash comprises cash and cash equivalents and short-term deposits,
less loans and other borrowings. We consider that this provides a useful
alternative measure of the indebtedness of the Group and is used within our
banking covenants as part of the leverage ratio.
The below provides a reconciliation of total liabilities from financing
activities, which is considered the closest equivalent IFRS measure, to total
indebtedness and net (debt) / cash.
28 October 2023 29 October 2022 29 April
£m £m 2023
£m
Loans and other borrowings (218) (242) (178)
Lease liabilities* (1,141) (1,237) (1,233)
Total liabilities from financing activities (note 7) (1,359) (1,479) (1,411)
Cash and cash equivalents less restricted cash 67 108 67
Overdrafts (5) (1) (16)
Lease receivables* 5 6 5
Pension liability (190) (251) (249)
Total indebtedness (1,482) (1,617) (1,604)
Restricted cash 27 30 30
Add back pension liability 190 251 249
Add back lease liabilities* 1,141 1,237 1,233
Less lease receivables* (5) (6) (5)
Net (debt) / cash (129) (105) (97)
* Net lease liabilities within the performance review relates to lease
liabilities less lease receivables.
Within the performance review management also refer to average net (debt) /
cash. Average net (debt) / cash comprises the same items included in net
(debt) / cash as defined above, however calculated as the average between
April - October for the interim reporting period and April - April for the
full year to align to the Group's Remuneration Committee calculation and as
reported internally.
A9 Reconciliation of movements in statutory working capital to working capital
presented within the performance review
Within the performance review a reconciliation of the adjusted EBIT to free
cash flow is provided. Within this, the working capital balance of £(3)m (26
weeks ended 29 October 2022 £(28)m, year ended 29 April 2023 £(127)m)
differs to the statutory working capital balance as cash flows on adjusting
items are separately disclosed.
Working capital presented within the performance review is a measure of
working capital that is adjusted from total IFRS measures to remove the
working capital on adjusting items. A description of costs included within
adjusting items during the period and comparative periods is further disclosed
in note A4.
As discussed above, the Group uses adjusted profit measures in order to
provide a useful measure of the ongoing performance of the Group. A
reconciliation of the disclosed working capital balance is as follows:
26 weeks ended 26 weeks ended 52 weeks ended
28 October 29 October 29 April
2023 2022 2023
£m £m £m
Movements in working capital (note 7) (11) (41) (136)
Adjusting items provisions 8 14 10
Exceptional receivable - legal settlement - - -
Facility arrangement fees - (1) (1)
Working capital presented within the performance review (3) (28) (127)
Other definitions
The following definitions may apply throughout this interim statement and the
Annual Report and Accounts 2022/23 previously published:
Acquisition intangibles Acquired intangible assets such as customer bases, brands and other intangible
assets acquired through a business combination capitalised separately from
goodwill.
B2B Business to business.
Board The Board of Directors of the Company.
Carphone Warehouse Group The Carphone Warehouse Group prior to the Merger on 6 August 2014.
CGU Cash-generating Unit.
CODM Chief Operating Decision Maker.
Company or the Company Currys plc (incorporated in England & Wales under the Act, with registered
number 07105905), whose registered office is at 1 Portal Way, London W3
6RS.
Credit adoption Sales on Credit as a proportion of total sales.
Currys plc or Group The Company, its subsidiaries and other investments.
Dixons Retail Merger or Merger The all share merger of Dixons Retail plc and Carphone Warehouse plc which
occurred on 6 August 2014.
EBT Employee benefit trust.
HMRC His Majesty's Revenue and Customs.
IFRS International Financial Reporting Standards as adopted by the UK.
Market position Ranking against competitors in the electrical and mobile retail market,
measured by market share. Market share is measured for each of the Group's
markets by comparing data for revenue or volume of units sold relative to
similar metrics for competitors in the same market.
MVNO Mobile Virtual Network Operator.
Net zero Net zero emissions includes our Scope 1, 2 and 3 emissions. In 2020, we
collaborated with The British Retail Consortium and other major retailers on
the development of a Climate Action Roadmap to decarbonise the retail industry
and its supply chains. The plan aims to bring the retail industry and its
supply chains to Net Zero by 2040. Our commitment to net zero meets a number
of the criteria of the SBTi Corporate Net-Zero Standard but is not fully
aligned or validated against this standard. We will develop and publish a
robust net zero emissions roadmap for the Group which will provide detail on
carbon abatement for key emissions sources and neutralisation plans of any
source of residual emissions that remain unfeasible to remove.
NPS Net promoter score, a rating used by the Group to measure customers'
likelihood to recommend its operations.
Online Online sales and Online market share relate to all sales where the journey is
completed via the website or app. This includes online home delivered, order
& collect, Online In-Store and ShopLive UK.
Online in-store Sales that are generated through in-store tablets for products that are not
stocked in the store.
Order & collect Sales where the sale is made via the website or app and collected in store.
Peak Peak refers to the 10-week trading period ending on 6 January 2024 as to be
announced in the Group's Christmas Trading statement in January 2024.
ShopLive UK The Group's own video shopping service where store colleagues can assist,
advise and demonstrate the use of products to customers online face-to-face.
Store Store sales, Store market share, and Store share of business relate to all
sales where the journey is completed in store. This excludes online home
delivered, order & collect, Online in-store and ShopLive UK.
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