Currys PLC
LSE:CURY
Earnings Call Analysis
Q2-2024 Analysis
Currys PLC
The company is navigating a challenging environment where total revenue declined by 7% year-on-year to GBP 4.2 billion, attributed to a softer market and external factors such as wildfires in Greece. Despite this, the adjusted earnings before interest and taxes (EBIT) grew by 7%, showcasing the company’s ability to improve profitability amidst declining sales. The improvement in net debt by GBP 117 million, resulting in total indebtedness of GBP 1,482 million, emphasizes a better financial position and execution of debt management strategies.
In the U.K., revenue dipped by 3% on a like-for-like basis, reaching GBP 2.2 billion. Adjusted EBIT faced a reduction, partially due to a loss of mobile settlements. The company is, however, making notable strides in the Nordic regions with a reported significant enhancement in EBIT and free cash flow, despite a 6% revenue decline. Greece showed a remarkable improvement in EBIT and witnessed a rise in gross margins, which supports the company's resilience in changing and challenging markets.
The company’s outlook remains unchanged for the current year, echoing consistent trade aligned with Board expectations. The anticipation is to end the year with net debt better than the GBP 97 million it started with, signifying a strong grip on financial health. A disposal expected to be cleared in Q1 of 2024 indicates the possibility of transitioning to a net cash position during the final quarter, indicating strategic asset management and a potential bolster to the balance sheet.
Targeting enhancements in services and customer experience, the company has adopted strategies of solution selling—bundling products, accessories, and services, which led to a 6-point improvement in customer adoption rates. Services such as Credit and Care & Repair also contributed positively to the margins, with gross margin drivers including monetization of the customer experience and disciplined sales approach contributing positively to the company's profitability. The company aims to achieve GBP 300 million in cost savings and enhance customer lifetime value through strategic service offerings.
There is an emphasis on maintaining high levels of employee engagement and customer satisfaction, both seen as lead indicators for future success. With measures like 'Happy or Not' scores in the Nordics, customer satisfaction levels are improving, and engagement scores reflect an energized workforce. Additionally, insurance services have seen increased adoption online, contributing positively to margins and customer satisfaction.
The company has secured lower pension contribution commitments for the next few years, an essential move to safeguard liquidity. This reduction aligns with a wider strategic aim to keep the balance sheet strong, especially crucial during uncertain times. Looking ahead, the potential proceeds from a transaction related to the Greek market will be assessed thoughtfully to decide the most appropriate use, with an overarching goal of maintaining financial prudence and maximizing shareholder value.
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Good morning, and welcome to Currys' Interim Results.I will now hand over to CEO, Alex Baldock.
Thanks, Jess. Good morning, everybody. We'll be quick. Bruce is going to take you through the numbers of a solid first half performance, and I'll say a few words on what's behind those numbers, and then we'll get straight into your questions. Bruce?
Thank you, Alex. Good morning, everyone. So in a tough economic period and a soft market, we believe our first half results have been robust. Revenue at GBP 4.2 billion is down 7% on a year-on-year basis, minus 4% on a like-for-like. But despite the sales mix, our adjusted EBIT of GBP 31 million is up by 7% year-on-year, and our adjusted EPS has improved by 15%. Our free cash flow in the first half, which is generally an outflow is an outflow of GBP 10 million, which is GBP 76 million better year-on-year. Our movement in debt -- net debt is minus GBP 32 million, that's GBP 117 million better. And our total indebtedness of GBP 1,482 million has improved by GBP 135 million year-on-year.So stepping through each market, starting with the U.K. Revenue in the U.K. was GBP 2.2 billion. That's minus 3% on a like-for-like basis to reflect the soft market. Our online share of business is flat, and our adjusted EBIT is down by GBP 10 million from GBP 25 million to GBP 15 million, partly as a result of lower sales, but most noticeably because of a loss of mobile settlement that went into our numbers in half 1 last year. Operating cash flow is back GBP 5 million at GBP 28 million. And segmental free cash flow after working capital is an outflow of GBP 16 million due to working capital movements. Stepping through the U.K. EBIT bridge. Our gross margin continues to improve in the U.K. for our third consecutive year. As you can see, a step forward of 10 basis points, and that's despite the fact that we had GBP 11 million of mobile settlement last year, which is part of the GBP 35 million that we described to you at year-end.Excluding that, our margin would have been up by 50 basis points. In terms of where is that coming from? Well, it's the same factors we've talked about before, driving service adoption through Care & Repair and Credit continuing to monetize our customer experience by charging for delivery, for example, not chasing less profitable sales and continued great progress in reducing our supply chain costs. Our operating expense to sales ratio has moved adverse by 50 basis points. However, our total costs are down in absolute terms. We've made cost savings of GBP 32 million in the period from an operating cost perspective, but those costs aren't enough to match the drop-off in sales.Moving on to the Nordics. Nordic revenue has fallen more steeply, down 6% on a like-for-like basis. We have seen an improvement within our online share, and that's through some of the improvements our Nordic business have made to the online website. Pleasingly, we've seen a big step forward in our EBIT, notwithstanding the drop-off in sales, increasing from GBP 3 million to GBP 12 million. We've seen operating cash flow improve by GBP 4 million. And very pleasingly, we've seen a healthy step forward in segmental free cash flow as we've seen an inflow from working capital despite the drop-off in sales. In terms of our Nordic EBIT bridge, probably the most important development in our first half results is seeing Nordic gross margin recover, up 190 basis points and pretty much offsetting all of the 200 basis points drop that we saw last year. That's come through a better balance of trading, a more orderly market, and obviously, we don't have the excess stocks that we had in the first half last year.Offsetting the margin recovery is a operating expense to sales ratio adverse movement of 140 basis points. Within the Nordics, our costs are broadly flat in absolute terms, but it's been offset by the fall in sales. That's due to inflationary headwinds that we're seeing and some new store openings offset by substantial cost savings across the Nordic business. Finally, in terms of Greece, which we're treating as a continuing operation in our first half results, we've seen revenues step back after a couple of periods with revenue stepping forward aggressively. It was partly impacted some -- by some wildfires during the summer, but also we're anniversarying some rich government incentives during the course of last year. In terms of adjusted EBIT, a big step forward, up to GBP 4 million in the first half as we've seen gross margins improve by over 100 basis points. Operating cash flow has stepped forward from GBP 4 million to GBP 7 million, and segmental free cash flow is an outflow of GBP 13 million impacted by adverse working capital movements.Moving on to cash generation. We've seen some significant improvements as we planned, not only is operating cash flow improving as a result of our higher profits, we've also halved the level of CapEx in the first half, down to GBP 28 million, as we talked about, tight cost control and lower transformation spend. Our adjusting items of GBP 23 million are down GBP 2 million. All of our restructuring -- all of our adjusting items relate to restructuring and property items. We've seen a substantial drop-off in cash tax paid. You might remember that in half 1 last year, there was a substantial amount related to the preceding year. This year with lower profit, our cash outflow is GBP 4 million. And cash interest paid has stepped up by GBP 1 million because of higher interest rates. Finally, in terms of working capital, we've worked really hard in this space. Obviously, with dropping sales and our general positive net day stock, we would expect to see working capital move adverse in the first half and with sales declining. The fact that we're only at minus GBP 3 million, I think reflects a really good performance.And that's after an impact from the growth of our iD business, which is cash negative. After distributions, our closing net debt moved from minus GBP 97 million to minus GBP 129 million. Our balance sheet remains robust via both strong cash management and a reduction within our pension deficit. I've already described the drop-off within our total indebtedness. And we've seen our pension deficit improved by circa GBP 60 million to below GBP 200 million, helped by an increase in discount rate, but also an improvement within demographic assumptions.So to conclude, in terms of our current year outlook, our full year view is unchanged. We're trading since the end of the period being consistent with Board expectations, but recognizing we've still got 3 really important weeks to go, and obviously, we'll be talking about outlook more in January. In terms of our cash guidance broadly remains the same. Capital expenditure of around GBP 80 million. Net exceptional cash costs on a full year basis of GBP 50 million. We're obviously now contracted with a lower pension contribution at GBP 36 million, and we expect to finish the year with net debt better than the GBP 97 million that we started the year. In terms of the Greek disposal, we expect to receive clearance of the disposal in the first quarter of 2024. And following the disposal, we expect to finish the year in a net cash position if that happens during our final quarter 4.Let me now hand back to Alex.
Thanks, Bruce. Just to pull out a few highlights. I mean we said we'd do 3 things. And the first of them is to get the Nordics back on track, and we're on with that. And we are now on the road to recovery. Now we don't want to get too excited about a quadrupling of profits of such a low base. But the gross margin improvements behind it, we are pleased with, with the 190 basis point improvement that you heard about from Bruce, that's important self-help in a market that's got no better yet, and that's self-help in gross margins from the better adoption rates of margin-accretive services, in particular, but also accessories and the discipline not to chase less profitable sales and taking some supply chain and service operations costs out and other cost reduction has been successful as well.And the highlight there I draw out is making more of group synergies in areas like IT and outsourcing and GNFR procurement are big contributors towards that GBP 25 million a year of permanent cost-out that we've seen in the Nordics. And it's worth saying that this self-help from the Nordics management team has extended to the longer-term drivers of valuable business like colleague engagement and customer satisfaction, both of which showed sharp improvements over the half. We're a long way from healthy Nordics performance. There's a long way back to go, but we are on the way there, and that is pleasing.The second thing we'd said we'd do is keep up the encouraging momentum in the UK&I and in a still tough market, we're doing so. You've heard that profits steady year-on-year after the mobile one-off. And gross margins, again, stepping forward, even in the face of that one-off headwind is pleasing. 280 basis points up year-on-3-year, and we owe that, in particular, to growing services, the services that are good for gross margin now, but also for customer lifetime value later. And the highlights there, Credit now over 20% of sales, Care & Repair customer numbers up to over 9 million now, and mobile subscriptions in iD up 24%. All of these good for margins, good for customer lifetime value.Bruce mentioned some other margin drivers you've heard about before, monetizing the customer experience, not chasing less profitable sales. But there's one that we haven't talked so much about, which is sold with solution selling, basically selling everything the customer needs rather than just the hardware. And we've worked hard on this, and we've been rewarded with a 6-point improvement in customer adoption rates over online and stores. A long way to go there, but plenty more upside to come from selling to customers the complete solution of products, accessories and services. The U.K. has seen no letup on costs either. I mean we're -- as you heard, we're on track towards that GBP 300 million of cost-out. And the U.K. has continued to have more engaged colleagues and more satisfied customers as well. More engaged colleagues up [ 3 to 82 ]. Top 5% of global companies, Glint now say that we are. And that's no small contributor to more satisfied customers. NPS up fully 500 basis points year-on-year with all of the customer touch points improving.Third, we said we'd keep the balance sheet strong and liquidity strong and especially important in a turbulent environment, and we are. And as you've heard, if [indiscernible] goes through to expect to be in a net cash position at the year-end with GBP 0.5 billion of undrawn facilities that leaves us well set. And it's that strong balance sheet and liquidity. That's one reason why we're overall quite pleased with our progress. These are solid results where we are doing what we said we'd do. Nordics is off the bottom and on the road back. The UK&I's solid performance shows our momentum continuing there with services growing especially well. And that leaves us, we believe in a Currys that's resilient today and well set to prosper longer term.And with that, we'll pause and go to your questions.
[Operator Instructions] The first question comes from the line of Matthew Abraham from Berenberg.
Congrats on a strong result. So first query is just in reference to the cost savings targets you've got for the full year. Are the announced and implemented measures in H1 sufficient to meet that target or is there going to be the need to introduce and implement new initiatives? The second query is in reference to that step forward in the U.K. and Ireland's gross margin that expanded in H1. Can you just talk to the materiality of these services as part of that gross margin expansion? And given that, that is in growth as you called out, how material might be year-on-year gross margin expansion fee as services continues to grow?
Yes. Thanks for the questions, Matthew. So in terms of our costs, as we called out in the statement, over the cumulative 3 years where we set ourselves a target of GBP 300 million, as of the half year, we're at GBP 240 million. Our expectation is to get to or to get incredibly close to that GBP 300 million. And if we don't quite get there, the delta would be in relation to the full year effect of the initiatives. We continue to add new initiatives all the time, new opportunities. Alex talked about some of them, for example, outsourcing procurement, the work that we're doing across our store network and our supply chain network as well. So we are making good progress.In terms of the gross margin improvement, we don't break out the individual components of the bridge that causes that, but services is a very important lever that we pull. Care & Repair and the progression that we've made in terms of adoption rates is key. The step forward that we've enjoyed in Credit is important. And charging, for example, for delivery and installation are all key parts of our service offer and all playing an important part in that step forward.
The only thing I'd add to that, Matthew, is you want to look forward on gross margins and reasons to believe in continuing improvement. You can find them. I mean, Care & Repair was certainly not calling a ceiling on adoption rates, particularly online, which accounts for over 40% of our sales, as you know, and where adoption rates currently are much lower, but the significant year-on-year improvements show that we're on track to continue to narrow the gap between stores and online adoption levels. We're certainly not calling a ceiling on iD either, healthy though it's 24% year-on-year subscriber growth has been. And there's particular upside to come from solution selling, the sold with solution selling I touched on before. We're very encouraged by how that's going. We've worked hard, and we've seen particular success in stores on solution selling and early promising results online, which we're going to continue to build on.
The next question comes from the line of Richard Chamberlain from RBC.
Three from me, please, if that's okay. Just a couple of quick ones on the Nordics. I just wondered, Alex, if you can just give us an update on sort of Net Promoter Scores there or how you're thinking about sort of customer service and satisfaction? And it sounds like sort of mirroring the U.K., Priority Insurance saw good growth online. How does that sort of penetration rate now compare with in-store and where it was a few years ago, presumably it's going up? And then on the pension, Bruce, so just wondered, have you had any sort of conversations with the trustees recently? I just wonder whether they're sort of sympathetic to the idea of lower contributions now assuming Greece goes through early next year and when those lower contributions could potentially start to come through?
Thanks, Richard. Let me take the Nordics questions first. I mean, in common with the U.K., what we've seen is more engaged colleagues and more satisfied customers in the Nordics. We measure it slightly differently. It's Happy or Not, not NPS, but that's up 40 basis points year-on-year and 210 basis points year-on-3-year. So we're confident that the already very high levels of customer satisfaction are continuing to nudge upwards. And colleague engagement, we're particularly pleased with, which is obviously a big driver of customer satisfaction. That's up 5 points, [ 72 to 77 ].And in the year just passed, I mean you can imagine the rollercoaster emotions that our Nordics colleagues have felt over the past 12 months, we're quite satisfied that, that shows a leadership team that's not just got the right grip, clarity and energy in dealing with the issues there, but also doing it in a pretty engaging way. So we're quite pleased with the colleague engagement and customer satisfaction picture in the Nordics. That bodes well for the future. They're good lead indicators, as you know. You asked about services growth online in the Nordics, and insurance is the one where we focused on and made the most progress. There's been some systemic improvements online in the Nordics that have allowed a significant jump in insurance adoption. We don't break it out yet anyway. But we -- again, we're quietly quite pleased, by the way, that increased services adoption, including online, has contributed towards this big jump in Nordics gross margin that you've seen.
Richard, Yes, so on the pensions point, as you know, we received great support from the pension trustees when we were looking at ways to protect the balance sheet and improve our liquidity. And we've agreed over the next 3 years to reduce contributions, GBP 36 million this year, GBP 50 million next year and GBP 78 million. So quite a substantial reduction from where the contribution sat previously. Obviously, those 3 years lead us through to the next triennial review 2025. And as part of that normal process, we will look at the level of deficit at that point and obviously, have a discussion with the trustees about what an appropriate level of contribution will be going forward.Now the Greek proceeds, I guess is a separate point, and as we discussed when we did the announcement a month or so ago. We're not going to rush, assuming the transaction goes through to our expectations, it will allow us to put the money on our balance sheet and we will then bide our time. We'll look at peak trading and make a decision what the most appropriate use of those funds are.
The next question comes from the line of Adam Tomlinson from Liberum.
Three questions from me, please. The first one, just delving into the Nordics a bit more with that gross margin improvement. Obviously, a lot of self-help going on there. But can you maybe just talk a little bit about competitive behavior and how much confidence you have that rationalities return to the market there? And ultimately, the confidence you have and the scope that gives you to return as the market recovers towards historic levels of profitability? That's the first question on the Nordics. Second question, just on the U.K., noting the detail you've given there around iD Mobile and the subscription base up 24% year-on-year. Just interested in your thoughts on what's driving that and whether that changes at all your view in terms of the relative value of mobile operations within the group? And then finally, just the third question on stock, a little bit of color, if that's okay, please, on the GBP 200 million stock reduction year-on-year and how you're thinking about stock planning for the year ahead? That's the 3 questions.
Thanks, Adam. I'll take the first 2 and pass over to Bruce for the third. On Nordics gross margin and competitive behavior, we're not assuming the market gets any easier on any of the dimensions that we talked about before. I mean demand is still quite soft and very soft by historical standards. The inflationary pressures are persistent and the competition remains intense. And so the improvement that we've seen in Nordics gross margins and profit have not come from a more benign competitive environment. They've come from self-help.Now looking forward, what do we expect? I mean there are 2 of the big competitors in the Nordics, Verkkokauppa and NetOnNet, Komplett, who publicly said, they're listed companies publicly available information, they've said that they're going to solve for more profit and cash and less for growth in the future, we'll see. But we're not counting on it, and we intend to continue the self-help actions that are no regrets. And as and when economic rationality and gravity reasserts itself, which it has to in time, we'll be happy to benefit from that. But we're not sitting here waiting for it. We're going to continue with the gross margin and the cost self-help that seen us well so far and get on a better trajectory.You asked about iD. Yes, we're pleased. I mean, to be -- we're pleased with the whole of the mobile category, which is, as you know, has historically been quite a troubled one for us. We said we'd -- this will be a significantly smaller but integrated and profitable and cash-generative category for Currys. And we've done all the hard work to make that. So we've got good partnerships with 3 and with Vodafone to offer connectivity. iD via 3 is growing nicely, and that gives us -- strategically, it gives us guaranteed connectivity. It gives us a nice negotiating leverage with other networks, but it also -- it's also very value additive over the long-term.Yes, as Bruce said, it's -- you take a bit of a year 1 hit on profit and cash as you grow iD, but we're happy to do it because it's a valuable asset that we're building. Now your area of expertise rather than mine, Adam, but people tell us that what the asset that we're building here with over 1.5 million subscribers by any market valuation probably isn't fully reflected within the current market capitalization of the group. I mean that's for others to -- that's for others to worry about, what we're concerned with is continuing to profitably grow a really attractive asset here.
Yes. So you're right, our stock is down almost GBP 200 million year-on-year. That's down 11%. And I guess underpinning that, there's 2 factors. The first was in anticipation that volumes were going to be lower. And as we've seen, that was absolutely the case. But at the same time, we've done it in a careful way to make sure that we've got strong availability on the categories that really matter. And therefore, our focus has been to look at working capital in the same way we have cost and CapEx, which is to really focus on running this business for cash, make more rational decisions, chase and clear aged stock and excess stock in the business.And I have to say that teams across all of our markets are absolutely doing that. And you said regarding the future, there is much more of that to come. So there a whole part of work taking place across the entire group. We're not ready to talk about it yet because we will talk about it when we've got some clear results to share. But lots and lots of work to continue to improve our working capital position.
The next question comes from the line of Ben Hunt from Investec.
Just wanted to sort of focus a bit more on the U.K. gross margin. You've mentioned many tailwinds there getting ahead of unprofitable sales, the Care & Repair services elements, and it seems to be a much more rational market as we've seen from [indiscernible]. Is there anything that's been restrained in the gross margin improvement there? It's up obviously, but it's not a huge amount in this period. And I think one of the things you alluded to in the statement is a loss of share in online, and you referenced higher paid click costs within that. Do you see a way of potentially getting some cost savings through the online channel to make it -- to make unit economics more sustainable? And then I have another question on cost savings after that.
I'll take the online question, but Bruce can go first on gross margin.
Yes. So in terms of online gross margin specifically, obviously, we've taken a number of actions over the last 6 months, in fact, the last 12 months to improve our margins. The most obvious example of that is charging for delivery. And that has improved the relative profitability of our online and indeed, our store business when the customer wants the product delivering to their home. Part of the focus on making more rational choices has been, for example, to reduce or not chase PPC advertising, where it's around products don't matter, and that's clearly a direct impact on our online business.And we continue through our supply chain and our service business to look to take costs out wherever we can. There's then service adoption, credit adoption, both of them improving within our online channel specifically. So pretty much the full list of things that we talked about, which are improving the U.K. margin. You can take a read across and say those are improving our online margins as well.
Ben, was your question also about what's holding back total U.K. gross margins, the headwinds to that?
Well, yes. I mean you mentioned all the tailwinds there, but it's sort of not giving you -- I mean it's a modest improvement, I guess, in the gross margin. So has there been any sort of anything holding it back?
Yes. I mean, well, there are 2 factors, and both of them are in the mobile space. So one I've already described. We had an GBP 11 million -- so of the GBP 35 million year-on-year headwind caused by mobile revaluations. So RPI, mobile settlements with the networks, et cetera, we anticipated GBP 35 million impact or headwind into this year, GBP 11 million of that was in the first half. So that, as I described, is why, on the face of it, it's a 10 basis points improvement, but actually somewhere between 50 basis points and 60 basis points improvement on an underlying basis. The other factor is iD Mobile. So as Alex has said, we've dramatically increased our base of iD customers.And as you're probably aware, we own those customers. And therefore, based on the accounting, it means that we take quite a substantial loss in the month that we sell the mobile phone. And it takes us between 16 months and 18 months to get that to be breakeven over the life of the contracts. Now of course, over 24 months, we do make a profit, and all of those are iD sales. They're really important to us. And therefore, as that part of the business is growing, that creates a headwind within our gross margin.
And I think...
And what is -- sorry, just on that, sorry, Bruce, what's the attachment on subscribers, how many of them are actually getting a mobile phone on top of their connectivity?
It's roughly half.
So Ben, I think the second part of your question was also touching on U.K. online market share. Have I got that -- did I understand that right?
Yes. It's, I mean, given that you are -- that seems to be where the market share loss is high, and you've alluded to the fact that it's the higher cost per clicks that's making it less economic. Are there any ways you can improve the unit economics there?
Well, okay, it's an interesting question. I'd probably approach the answer in a slightly different way. So I mean the first thing to say is online as in store, we're not solving for market share, we're solving for sustainable cash flows and profits. That's the first thing to say. And that's true online just as it is in store. So you rightly observed more than 100% of our market share decline has been online with gained share in stores. And -- but when you look at the market share online, most of the decline has been the result of deliberate actions. You talk about PPC and we're much more efficient now on our digital marketing, but there's also the impact of delivery charging, the decision we stand by and pricing and promotional discipline, which is -- again, we would do given our time again.And then finally, there's a mix effect. Getting -- if you look at the market, the market has generally mixed towards lower ticket and smaller box, which play against our category mix ourselves. So that's what's going on. Now even though we're not solving for market share, we don't like losing market share, we enjoy the benefits of being #1. And so what we're working hard, not so much to -- on the unit economics, but we're working hard to make the customer experience easier online to take friction out of the conversion funnel. And all of the good work that we've done on site speed, on checkout, on helping the customers find and buy the right product for them, better recommendations, but also on sold with solutions, which I touched on earlier. They're good for margin, of course, but they're also good for sales, and our early progress in online are doing a better job of selling the complete solution to customers is quite promising for the future, and we're going to build on it. So again, we're -- to be [ clear ], we're not solving for market share, but there are actions underway that give us some confidence that these trends don't need to be permanent funds.
The next question comes from the line of Nicolas Champ from Barclays.
I have 2. To follow up on the market share erosion in the U.K., I mean, do you expect this trend will continue over the coming months? And do you see any potential negative impact on your buying conditions from suppliers at some point? And the second one is about your working cap improvement in H1. I mean I appreciate visibility is limited, but could you help us a bit on maybe what we could expect for the year-end? I mean, is it sensible to forecast a working cap inflow this year given again the improvement you achieved in H1?
So I'll take the first part of that, Nicolas. I mean it's a good question on the impact of the U.K. market share. The short answer is no. We're not seeing and nor do we expect it to reduce our importance to suppliers. And there's a couple of reasons for that. First, as I just touched on, the market share loss is in online versus in stores and our stores are very important reasons for all the obvious brand showcasing reasons for -- for suppliers to give us concrete support. The second is that the market share loss is skewed towards the smaller ticket and smaller box electricals products where we're less strong.And again, that's -- those are not the core strength categories. The core strength categories in Currys, as you know, are laptops, mobile phones, fridge freezers, washing machines, large screen TVs and the like, where our position has remained strong. And finally, as I mentioned before, we're not solving for market share, we would be happy to see market share declines if we believe that was the route towards maximizing sustainable free cash flows. But we're attentive to market share as well, partly for the reason that you give. So no, we're not flagging these as permanent trends.
So yes, from a working capital perspective, as I've already reflected, we will continue to make efforts to improve our working capital position, and we expect to continue to make progress in the second half. We're not in a position that we want to guide to that, but predominantly, because there are 2 factors that go the other way. As you know, when volumes fall, there is an impact on our working capital. So that's an outstanding question. And as we've already reflected, there's quite a substantial negative cash impact from iD Mobile. So we expect to continue to make progress. We face into a couple of headwinds. And I guess we will be able to provide you guidance as we get towards year-end.
The next question comes from the line of Warwick Okines from BNP Paribas.
Two quick questions. I know you -- firstly, I know you've answered a lot of questions about the Nordic gross margin already. But just help us for the second half, is there any real reason why you shouldn't see a similar increase in the second half as you've seen in the first half? I think the sort of base of comparison is quite similar. And then secondly, you've not said much about the -- about products really. So maybe you could say a bit more about the replacement cycle and an innovation cycle you're seeing at the moment?
So on the first question, our anticipation is that the progress that we've made on gross margin on an underlying basis will continue. The -- I think the only point to be wary of is that some of the self-help that we're seeing helping us in the first half really did start to land in quarter 4 of last year. So on that basis, perhaps the comparatives are going to be a little bit tougher in terms of the improvement, but the activities will remain the same.
And to give you a bit of color on products, Warwick, I mean some of the things that -- and as you know, we're going to give a proper trading update in January. So all we'll say overall is that since the end of the half year, we've traded in line with expectations. But you asked about some color. In gaming, we've seen both consoles and AAA console games go well, whether it's PS5s or Xbox 5s or Call of Duty games, as an increasing proportion of the customers' entertainment budget continues to be spent at home. Likewise, it appears that a larger proportion of the customers' hair care budget was spent at home over the Black Friday period, and we've seen a -- we saw a good performance in hair care tech to show for that.Plenty of customers seem to be redirecting coffee spend from the [ 375 ] [indiscernible] that you get on the High Street to having their own machines at home and bean to cup coffee machines, again, had a good Black Friday period. And surveys show that 60% fewer customers will be eating out this Christmas, and that's been reflected in a still strong air fryer trend. I don't know, Warwick, whether you've got the bigger and better dual zone product, but if you haven't, I suspect and I suggest you get to Currys immediately after this call because they're selling out fast. And that market is in good shape. But also in our more conventional market windows, computing is going well, over here, headphones going well and A-rated kitchen appliances are going well, as customers who care about lower total cost of ownership as well as sustainability see the benefits of spending a bit more upfront.So those are some highlights. I mean you asked about the replacement cycle. And if you wind back to COVID, we saw a big boost in sales of technology as customers, so technology matter more to them in their lives. We still see technology playing a bigger role in people's lives. That obviously hasn't been reflected in the market staying strong. The market is still down year-on-year this year. Longer term, we will see because there is a lot -- there is a larger installed base of product in customers' homes and Currys having 80% of U.K. households as customers should be well placed to benefit from that. But clearly, the market is not in a strong place right now.
[Operator Instructions] And the next question comes from the line of Simon Bowler from Numis.
Two for myself, if okay. One, obviously, assuming the Greek cash comes in at the start of next calendar year at some point. Can -- and that's just you kind of improve the strength of the balance sheet. Can you just tell us how we should be thinking about the impact that will have on your net finance charges for fiscal year '25? And then secondly, can you just remind us where you are on kind of employee pay versus the National Living Wage and relative sensitive subjects? But any thoughts you may have around how you plan to manage that as you come through to that impacting in April?
So on your first question in terms of the impact of the excess cash at current interest rates, we estimate around GBP 10 million on a full year basis.
And on the -- you asked about the employee pay. As we've said before, we are paying our frontline colleagues 37% more than we did 5 years ago. So we're -- and that's one of the reasons that we've got the world-class engagement scores that we've got with frontline colleagues. That said, we didn't sign up to the National Living Wage Foundation because this is an important part of our costs, and we think it's our job to keep control of those costs. We'll see what we do in response to the big spike in the minimum wage that the government's just announced and -- but we have the flexibility to respond. I mean clearly, we'll pay above national minimum wage, but whether or not we go the whole hog towards the National Living Wage, we will see. And there will be a balance of controlling our costs with the -- maintaining the colleague engagement and retention that matters a lot to us.
Okay. Great. And then sorry, one final really geeky one. We don't necessarily go in full details of it now. Can you just kind of touch on the iD Mobile accounting? I just want to fully understand why that the gross margin headwind attached. So I presume your COGS effectively is the cost of that phone. And what are you recognizing in terms of revenue on day 1? Is that some sort of estimate of future [ gold ] spend or how this -- how that part work on an IT contract?
Yes, that's right. So basically, we take an element of the revenue upfront to reflect the balance between the cost of the handset and the total cost of provisions. So it's not as if we simply take [ 1/24th ] of the revenue each month, but there is nevertheless an upfront loss that we make from a P&L perspective. We then recognize the remainder of the revenue over the life of the contract. Does that make sense?
The next question comes from the line of Nick Coulter from Citi.
Two very quick questions, please. I'm not sure that the granularity is available. But are you able to share your relative market share performance in the categories that matter to Currys, please? It does sound like you're winning where you choose to play. Now I guess following on from that and more generally, how do you see the U.K. consumer at this point? I guess, as Simon touched on it, there seems to be some degree of wage inflation that will noticeably continue to play through.
Yes. Nick, we -- as you may know, we don't break out the market share at that level of detail. But what we can say is that we get -- if you look at it through a channel lens, we've gained market share in stores at the same time as we've lost share online. And online, both in the market and for us is disproportionately weighted towards the smaller box and smaller ticket categories where we are less strong and which matter less to us economically. So if you wanted to infer from that, that our market share has held up better in our core categories than it has overall, then you'd be right.The broadening out to your -- broadening out to your question on the U.K. consumer, it's clearly very hard to read. And you could take 2 different points of view on it. One, the more prudent point of view, which is the basis of our planning, by the way, is that consumer confidence remains fragile. The housing market is in the doldrums. Disposable income is still under pressure. The -- only about 50% of the impact of increased interest rates has hit the consumer so far. So we've been well advised to plan prudently for the year ahead, which is what we've done. And the basis of our budgeting and our 3-year planning does not assume a recovery in the U.K. consumer or in our market. So that's the sensible basis for planning.There is a slightly more cheerful point of view that shows that disposable income has risen. The latest [ asset ] tracker is in better shape. The overall trend with some bumps in consumer confidence is up over the past 6 months that employment remains high, which is important and retained savings for the stage of the cycle are pretty strong. So you could, if you wanted to construct a more encouraging scenario, looking forward for the U.K. consumer. That would be great. We'll benefit from it as conditions improve, but we're not depending on that. We're focused on the self-help that seen us get this far.
There are no further questions in the queue. So I'll now turn the call back over to your host for some closing remarks.
Well, thank you very much. My first closing remark will be to remind this group of high net worth individuals that there's plenty of time left for Christmas shopping. And Currys has some fantastic deals, which themselves have acknowledged to be by far the best deals in the market, beating all of our competitors into a cocked hat on the deals that we've been offering, and we're not done yet. So for those of you who are a bit late thinking about your loved ones Christmas presence, I -- you know where to go. As for the results, we're not getting carried away. This is a solid performance and it's another -- it's another step towards the Currys that we know is our full potential, but we're doing what we said we do. We're getting the Nordics back on track. We're continuing the U.K.'s momentum. The business balance sheet liquidity remains strong, and we intend to build from there.So thank you all, and have a good day and a great Christmas.