The big news in Asos's (ASC) interim results wasn't the 22 per cent decline in pre-tax profit or the 34 per cent surge in retail sales - both had been widely expected thanks to a trading statement two weeks before - but a more detailed run down of the company's expected capital spending over the next two years.
Investment this financial year will total £68m, higher than the £55m previously anticipated. Management has had to speed up expansion of its global logistics network to deal with faster-than-expected growth - warehousing volumes rose 39 per cent in the first half alone. The investment will more than double sales capacity, funding a new warehouse in Berlin - due to be operational from June - a machinery upgrade at the UK's Barnsley hub and warehousing in China and the US.
The disruption at Barnsley has temporarily added 23 per cent to warehouse labour costs per unit (of clothing), which reached 76p. Completion is due in October, but the additional costs will be incurred until the first half of the next financial year. However, by the second half of fiscal 2015 it should be business as usual, and this major capital investment programme will have created a global warehousing footprint with capacity for £2.5bn-worth of annual sales.
Meanwhile, start-up costs in China reached £4m in the first half, and are expected to reach £9m for the full year. Having launched a Chinese website in November, the second half will see Asos join China's Tmall e-commerce platform, which chief executive Nick Robertson likens to "Amazon and ebay on steroids". He believes China will take up to four years to become profitable, however.
Numis Securities expects adjusted pre-tax profit of £64m for the full year, giving EPS of 58.7p, up from £54.7m and 49.2p in 2013.
ASOS (ASC) | ||||
---|---|---|---|---|
ORD PRICE: | 5,148p | MARKET VALUE: | £4.3bn | |
TOUCH: | 5,143-5,153p | 12-MONTH HIGH: | 7,195p | LOW: 2,959p |
DIVIDEND YIELD: | nil | PE RATIO: | 114 | |
NET ASSET VALUE: | 208p* | NET CASH: | £37m |
Half-year to 28 Feb | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
---|---|---|---|---|
2013 | 360 | 25.7 | 23.7 | nil |
2014 | 482 | 20.1 | 18.6 | nil |
% change | +34 | -22 | -22 | - |
*Includes intangible assets of £51.6m, or 62p a share |