AO World (AO.) boss John Roberts admits brand awareness was the white goods retailer's "biggest weakness" at the time of its IPO last year. But he also thinks it's the company's biggest opportunity as it ploughs cash into marketing at the expense of profits. "If I was our competitors," says Mr Roberts, "I wouldn't want us to grow".
In the first half, total UK revenues grew 15 per cent to £245m, while UK website sales increased by 24 per cent to £215m. But increased marketing spend, along with inefficiencies at the logistics and call-centre earlier in the year, led to a 30 per cent drop in adjusted cash profits to £5.1m. Mr Roberts admitted heavy marketing had driven top-line growth but "naturally" had a cost impact to the bottom line. However, he defended this long-term investment, which should help the company benefit from repeat purchases in the future.
Expanding into northern Europe - specifically Germany and soon, the Netherlands - is also proving costly. Losses of £9.6m overseas dragged group cash profits into the red compared with a profit of £7.3m this time last year.
Brokerage Numis expects losses of £11.9m for the year ending March 2016, which equates to a loss per share of 2.2p, compared with pre-tax profits of £1.6m and EPS of 0.29p in FY2015.
| AO WORLD (AO.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 160p | MARKET VALUE: | £673m | |
| TOUCH: | 159.9-160p | 12-MONTH HIGH: | 336p | LOW: 119p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 13p* | NET CASH: | £29.6m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 217 | 0.8 | 0.1 | nil |
| 2015 | 264 | -8.0 | -1.6 | nil |
| % change | +22 | -1,100 | -1,417 | - |
Ex-div: na Payment: na *Includes intangible assets of £14.4m, or 3.4p a share | ||||
