"They don't give a s**t about me and I don’t give a s**t about them," was the brash reaction of AO World (AO.) chief executive John Roberts to investors who short-sold the shares for a quick buck soon after the company floated earlier this year. The point he was making, as the online purveyor of white goods unveiled its maiden full-year results, was that his interest is solely in driving long-term returns for serious shareholders who have bought into AO World's growth story. "We take very seriously our obligation to key shareholders. They are happy with our business and progress and are not trying to flip us in eight weeks," he added.
The AO World story is a compelling one, based on volume-driven growth through exemplary customer service. Management's goals this year are to expand into Europe by replicating the UK model in Germany, and to further strengthen UK television sales, which were introduced in May. A third objective is to improve website conversion, which stands at just 3.4 per cent. The company is targeting 25 per cent sales growth in the UK, and an 8 to 10 per cent cash profit margin.
Last year was all about laying the groundwork for this push. Apart from the IPO, this included a major rebrand, a TV advertising campaign, three new warehouse hubs, better delivery options - such as same day - and an improved installation service. The associated costs depressed underling operating profit slightly to £8.2m. A further £15.4m of charges from the IPO resulted in a £7.2m loss. But strip out these one-off items and cash profits rose 11 per cent to £11.2m, representing a cash conversion rate of 121 per cent.
As for the big push into Germany, the programme is on track, with the lion's share of the work already complete. Mr Roberts reckons AO needs 1 to 2 per cent of the German market to be profitable and £120m of sales to break-even. Broker Numis Securities expects pre-tax profit of £13.6m and cash profits of £18.6m in 2014-15.
| AO WORLD (AO.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 253p | MARKET VALUE: | £1.07bn | |
| TOUCH: | 253-254p | 12-MONTH HIGH: | 412p | LOW: 218p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 14p* | NET CASH: | $48.6m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 164 | 3.69 | na | na |
| 2012 | 209 | -1.70 | na | na |
| 2013 | 275 | 8.15 | 1.6 | na |
| 2014 | 385 | -7.55 | -2.4 | nil |
| % change | +40 | - | - | - |
Ex-div: na Payment: na *Includes intangible assets of £12.8m, or 3p a share | ||||
