People aren’t just buying comfortable clothes online for lockdown. Electrical retailer AO World (AO.) believes the Covid-19 pandemic has had a “seismic impact” on how people make purchases, converting some consumers permanently to internet shopping. As investors note that trend, the company’s share price has risen more than 90 per cent since the start of the year.
AO World was making progress even before the recent stampede to online marketplaces. Its earnings for the 12 months to 31 March were a marked improvement on the previous year, while cash generated from operating activities moved into the black to £14m, even with a £32m uptick in receivables. In the all-important ‘major domestic appliances’ category, sales increased by 20 per cent year-on-year in the March quarter, against claimed market growth of just 3 per cent.
The UK division accounted for almost 90 per cent of total sales last year, at £902m, and Germany is now the sole Continental European operation after the closure of its Dutch business. AO World expects a major improvement out of Germany this year, forecasting revenue will increase by almost three-quarters to €250m (£227m).
Despite the shift to buying more appliances online, AO World has warned of potential headwinds in the coming months that could delay the purchase of ‘big-ticket’ items – falling consumer confidence, fewer housing transactions and the possibility of a hard Brexit.
Numis forecasts an adjusted pre-tax profit of £25m this year, compared with a £2m loss in 2020.
| AO WORLD (AO) | |||||
| ORD PRICE: | 164p | MARKET VALUE: | £784m | ||
| TOUCH: | 163-165p | 12-MONTH HIGH: | 179p | LOW: | 47p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | ||
| NET ASSET VALUE: | 17p* | NET DEBT | 123%** | ||
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p)** | |
| 2016 | 0.60 | -6.7 | -1.4 | nil | |
| 2017 | 0.70 | -7.0 | -1.6 | nil | |
| 2018 | 0.80 | -13.5 | -2.9 | nil | |
| 2019 (restated) | 0.90 | -20.2 | -4.0 | nil | |
| 2020 | 1.05 | 1.5 | 0.38 | nil | |
| +16 | - | - | - | ||
| Ex Div: | na | ||||
| Payment: | na | ||||
| *Includes intangible assets of £44m or 9.2p per share **Includes lease liabilities of £84.1m | |||||
