Online electricals retailer AO World (AO.) had a better first half than the reported results suggest. It launched its German business earlier than planned, which brought forward start-up costs of £3.3m into the first half. This, along with a £1.3m charge to cover a long-term incentive plan, distorted the results. Adjust for this and operating profit more than doubled to £5.5m.
Higher volumes drove a 39 per cent increase in revenue from AO's website, while order numbers were up by a third to 607,000. "We have delivered everything we said we would and more since the IPO," says chief executive John Roberts. "Hopefully this will build confidence."
But while AO World is racing ahead, trading losses in the German business are expected to dampen earnings growth this year and next. Management won't offer guidance as to when it expects the business to become profitable, but broker Numis Securities says the base-case estimate for Germany is a £12m loss this financial year, followed by a £10m loss next year and profits starting in 2016-17. That means pre-tax profit this year should come in at around £0.9m, down from £7.9m last year.
| AO WORLD (AO.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 211p | MARKET VALUE: | £889m | |
| TOUCH: | 210-211p | 12-MONTH HIGH: | 412p | LOW: 150p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 14p* | NET CASH: | £43.9m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 174 | 2.1 | 0.4 | nil |
| 2014 | 217 | 0.8 | 0.1 | nil |
| % change | +25 | -64 | -70 | - |
Ex-div: na Payment: na *Includes intangible assets of £13.3m, or 3p a share | ||||
