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Asos: hard to find fault at the full-year stage

The fast fashion etailer has released a great set of results, but investors are banking the profit
October 18, 2016

It's perhaps too easy to put the 7 per cent slip in the Asos (ASC) share price following the company's full-year results announcement down to profit-taking. But the stock is up by more than two-thirds over the past 12 months, making it one of the best performers on the London market since the referendum. True, the statutory profit figures don't look great, but that's largely down to a £20.9m one-off charge relating to a legal settlement over trademark infringement to cycle wear manufacturer Assos of Switzerland and German menswear retailer Anson's Herrenhaus in September. Excluding this, pre-tax profits actually soared 37 per cent to £63.7m. The group has also adjusted its figures to account for its discontinued operations in China, which incurred one-off closure costs of £6.5m.

IC TIP: Buy at 4,920p

Otherwise, there really isn't a lot to fault. Retail sales grew 26 per cent, with strong performances across all major markets, including the UK (up 27 per cent), the US (up 50 per cent) and the Europe (up 28 per cent). The home market was boosted by the launch of its A-List loyalty programme, while delivery improvements and price investment drove sales on the continent and across the Atlantic.

Asos released full-year results on the same day the Office for National Statistics reported a 1 per cent year-on-year rise in UK inflation in September, largely as a result of higher clothes and oil prices. But Mr Beighton said the company was still focused on keeping prices competitive - especially for international customers - which helps explain the 30 basis point drop in retail gross margins. To be fair, the group has done well to reduce operating costs as a proportion of sales, while its international customer base should insulate it from ongoing swings in global exchange rates. Mr Beighton is also excited about the launch of an Asos activewear range, although the first products won't hit the website until after Christmas.

Broker Peel Hunt still expects pre-tax profits of £80.4m for the year ending August 2017, giving EPS of 76.5p, compared with £63.7m and 61.8p in FY2016.

 

ASOS (ASC)
ORD PRICE:4,920pMARKET VALUE:£4.1bn
TOUCH:4,913-4,922p12-MONTH HIGH:5,343pLOW: 2,557p
DIVIDEND YIELD:nilPE RATIO:118
NET ASSET VALUE:240p*NET CASH:£173m

Year to 31 AugustTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20120.2413.212.5nil
20130.7754.750.1nil
20140.9846.944.6nil
2015 (adjusted)1.1452.749.4nil
20161.4442.841.8nil
% change+26-19-15-

*Includes intangible assets of £113.5m, or 136p a share