AO World (AO.) revealed another double-digit increase in sales, but earnings remain as elusive as ever for the online white goods retailer. Reported figures were held in check by a £1.2m one-off charge relating to the cessation of an unprofitable marketing contract at its troubled German business. But with the gross margin down 92 basis points on FY2018, it’s clear that there are wider issues. The contraction was partly attributable to a period of discounting designed to drive orders within its European operations, triggered by reduced price support from manufacturers.
UK growth accelerated in gross terms, with sales up 10.1 per cent to £749m, or like-for-like growth of 5.7 per cent. The three-month contribution from Mobile Phones Direct, combined with a lack of a comparator like-for-like figure, make it difficult to put the growth in context, but management said it had achieved double-digit growth in all categories except for major domestic appliances (MDA).
Late last year, the group warned of a decline in the UK’s MDA market, but it has been successfully diversifying its offering. Last December, it acquired Mobile Phones Direct for £39.6m, expanding its phone offering. The deal was partly funded by new borrowings, pushing the group into a net debt position, if only modestly.
Broker Numis is forecasting an adjusted loss per share of 0.12p for the March 2020 full year, against a loss per share of 2.6p in FY2019.
| AO WORLD (AO.) | ||||
| ORD PRICE: | 93.2p | MARKET VALUE: | £440m | |
| TOUCH: | 94.7-95.9p | 12-MONTH HIGH: | 170p | LOW: 88p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 19p* | NET DEBT: | 10% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 477 | -2.9 | -0.6 | nil |
| 2016 | 599 | -6.7 | -1.4 | nil |
| 2017 | 701 | -7.0 | -1.6 | nil |
| 2018 | 797 | -13.5 | -2.9 | nil |
| 2019 | 903 | -18.9 | -3.8 | nil |
| % change | +13 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £44.5m, or 9p a share | ||||
