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Asos rises as profits dive

Slowing sales and a rising number of costs led to a substantial fall in half-year profits
April 10, 2019

Asos's (ASC) bosses lamented this half-year performance, admitting the group was "capable of achieving more". It’s not hard to see why the board is disappointed: pre-tax profits fell a whopping 87 per cent as disappointing sales growth and a slew of investments aimed at expanding technological and logistical capabilities took their toll. 

IC TIP: Hold at 3,559p

It might come as some surprise, then, that these numbers were greeted enthusiastically by the market, which sent the shares up strongly on results day. That might be because the company managed to maintain full-year guidance for 15 per cent sales growth and a capital expenditure bill of £200m. Broker Numis also held its forecasts for adjusted EPS of 50.7p in 2019, moving up to 87.5p in FY2020. 

Capex reached £103m during the period, although the full-year bill of £200m will still mark a stepdown from the £242m reported in FY2018. It should also fall to around £150m in the 2020 financial year. Management said the benefits would start to be felt in the second half of this year, after logistical shortfalls hit sales growth in the US. 

Retail sales actually grew across all geographies, although each division had its challenges. Across continental Europe, the group experienced weaker French and German markets, while the US was held back after inadequate staffing at its Atlanta-based warehouse led to a severe backlog in orders. 

ASOS (ASC)    
ORD PRICE:3,564pMARKET VALUE:£2.99bn
TOUCH:3,559-3,564p12-MONTH HIGH:7,138pLOW: 2,114p
DIVIDEND YIELD:nilPE RATIO:49
NET ASSET VALUE:564p*NET DEBT:8%
Half-year to 28 FebTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20181.1629.929.4nil
20191.314.003.60nil
% change+14-87-88-
Ex-div:na   
Payment:na   
*Includes intangible assets of £292m, or 348p a share