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Relief rally for Asos shares

Shares in Asos soared 18 per cent after the group's pre-tax profit came in just slightly ahead of consensus forecasts
October 21, 2014

Shares in online retailer Asos (ASC) surged 18 per cent after the group's pre-tax profit for the full year came in a touch ahead of consensus forecasts at £46.9m - down 14 per cent on last year. The share price reaction might appear out of line with the results, but it demonstrates just how sensitive this stock is to any iota of news, good or bad. The market was probably also relieved that the outlook statement contained no new profit warning

IC TIP: Hold at 2292p

Asos is in the middle of a massive investment programme to cope with rising sales. That's disrupting trading and increasing costs, but should yield significant benefits in the future. Last year, the group invested £32.1m in warehousing infrastructure - which should eventually slash labour costs per unit to 50p from 75p - and spent £8.6m launching in China. Over the next two years it will also funnel £75m into technological innovation, launching functions such as zonal pricing and local apps.

Prices in many overseas territories will soon be slashed to make the products more competitive. Separately, Asos also announced that finance director Nick Beighton has been promoted to chief operating officer. Broker Numis Securities expects pre-tax profit of £45.8m for the current financial year, giving EPS of 43p.

ASOS (ASC)
ORD PRICE:2,292pMARKET VALUE:£1.9bn
TOUCH:2,289-2,294p12-MONTH HIGH:7,195pLOW: 1,742p
DIVIDEND YIELD:nilPE RATIO:51
NET ASSET VALUE:232p*NET CASH:£74.3m

Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201249530.313.2nil
Year to 31 Aug(£m)(£m)(p)(p)
2012**23813.212.5nil
201376954.750.1nil
201497546.944.6nil
% change+27-14-11-

Ex-div: na

Payment: na

*Includes intangible assets of £63.9m, or 77p a share