RE: Another offer20 Feb 2024 01:50
Seems 1bn is a realistic target.
https://www.theguardian.com/business/2024/feb/19/currys-board-bidders-us-hedge-fund-elliott
The board of Currys rightly rejected that effort as a “significant” undervaluation, and one hopes the directors will say the same about offers several rungs up the ladder. Yes, the shares, up 38% at 65p on Monday, traded at 47p last week but broker Peel Hunt, for one, reckons there’s no need for the board to engage at anything less than 80p. Over at Investec, analysts had a 78p target price before the fun even started.
None of which is to deny that Currys has frustrated its long-term owners. The Carphone merger was one of the worst deals in modern retailing history – the mobile phone market shifted and all the standalone phone shops were closed in 2020. Then, after the Covid surge in demand for electrical goods, the previously reliable Nordic business ran into stiffer local competition and Currys was caught half asleep. The point, though, is that the position now looks stable. The chief executive, Alex Baldock, last month nudged up this year’s pre-tax profits guidance to £105m-£115m.
A complication in the background is a deficit in the pension fund of about £250m that will require top-up payments for several years, limiting cash for dividends. On the other side of the ledger, the group should soon be debt-free after agreeing the sale of its Greek business for £156m. If the ambition to achieve a 3% profit margin in the core operations is credible – it ought to be – the germ of a turnaround story is in place. The consumer weather should also improve when interest rates start to fall.
At 62p, Currys would have been valued at just seven times next year’s projected earnings, on Peel Hunt’s numbers. Even in a soggy retail sector, that’s a miserable rating. There will be several more rounds of this saga to come, one suspects, but the job of Currys’ board is to play hardball. If the opportunistic bidders can’t be pushed close to £1bn, there is no shame in staying independent.
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