There's little fault to be found in white goods specialist AO World 's (AO.) figures, as far as the UK is concerned. Increased buying power translated into better gross margins which, combined with fewer advertising expenses, helped cash profits grow from £5.1m to £13.1m. But getting the European business to a similar point will take longer; chief executive John Roberts reckons he will be able to report inaugural profits from Europe by 2020.
Some City analysts were clearly disappointed by this - the shares dipped at open before recovering ground. There's wider concern that AO World will have to work hard to maintain margins as it admitted that suppliers had already started turning the screws on prices in order to offset the recent devaluation of sterling.
Mr Roberts is fairly sanguine. If price increases cause a structural change in the market "it will affect everybody", he said. What's more, AO World doesn't have to manage the costs associated with physical stores. But he refused to put a number on how much European expansion is going to cost, suffice to say he expects investment to moderate over time.
Analysts at Numis expect losses to narrow to £6.9m for the year ending March 2017, compared with losses of £8.4m in FY2016.
| AO WORLD (AO.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 166p | MARKET VALUE: | £699m | |
| TOUCH: | 165.6-166p | 12-MONTH HIGH: | 198p | LOW: 120p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 11p* | NET CASH: | £21.3m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 264 | -8.0 | -1.6 | nil |
| 2016 | 325 | 2.3 | 0.1 | nil |
| % change | +23 | - | - | - |
Ex-div: na Payment: na *Includes intangible assets of £15.5m, or 3.7p a share | ||||
