TIDMAO.
RNS Number : 8712O
AO World plc
02 June 2015
AO WORLD PLC
FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2015
AO World plc delivers significant growth and operational
progress
AO World plc ("the Company" or "AO"), the United Kingdom's
leading online retailer of major domestic appliances ("MDA"), today
announces its audited financial results for the year ended 31 March
2015.
Financial Highlights(1)
-- Total revenue up 23.8% to GBP476.7m (2014: GBP384.9m)
-- AO Website Sales(2) for the UK(3) up 32.9% to GBP381.5m
(2014: GBP287.1m), with total UK revenue up 22.3% to GBP470.8m
(2014: GBP384.9m)
-- Europe annualised exit run rate on sales of GBP19.8m(4) .
Europe revenue for the six months of trading was GBP5.8m (2014:
GBPnil)
-- UK Adjusted EBITDA(5) up 47.3% to GBP16.5m (2014: GBP11.2m),
with UK Adjusted EBITDA margin(6) increasing to 3.5% (2014:
2.9%)
-- Europe(7) Adjusted EBITDA loss of GBP8.0m (2014: GBPnil)
representing trading losses in our German territory from launch
bringing Group Adjusted EBITDA to GBP8.5m (2014: GBP11.2m)
-- Group Operating Loss of GBP2.2m (2014: GBP7.2m) after
investment in Europe start-up operations of GBP4.2m (2014: GBPnil)
and Long Term Incentive Plan costs of GBP2.5m (2014: GBP0.2m)
-- Group Adjusted Operating Profit(8) of GBP4.5m (2014: GBP8.4m)
after deducting Europe Adjusted Operating Loss of GBP8.2m
-- Group Net Funds position(9) as at 31 March 2015 was GBP37.9m (2014: GBP48.7m)
-- Loss per share of 0.60p (2014: 2.38p)
Operational Highlights
-- Launched our Audio-Visual ("AV") category in May 2014
-- Launched AO.de, our German website, on 1st October 2014 and
commenced customer deliveries on 14th October 2014 with the ability
to offer next day delivery to the majority of customers across the
range
-- Launched consumer finance on AO.com in October 2014
-- Overall UK number of completed orders(10) up 26.4% to 1,348k (2014: 1,066k)
-- UK repeat purchase levels continued to grow from 36% to 45%
-- UK NPS(11) remains at its historically high level of over 80; AO.de higher still
-- Won the Deloitte Employer of the Year Award at the 2015
Retail Week Awards, the Overall Award for Excellence at the Etail
Awards 2014 and Large eCommerce and best eCommerce Customer Service
Award at the eCommerce Awards 2014
_______________________________
(1) The highlights are for the year ended 31 March 2015 and the
comparative 2014 period. Certain financial data have been rounded.
As a result of this rounding, the totals of data presented in this
document may vary slightly from the actual arithmetic totals of
such data.
(2) This includes AO.com and AO-branded eBay shops.
(3) UK is defined by the Group as entities operating within the
United Kingdom (but excludes AO Deutschland Limited which is a
company registered in England but operates in Germany and therefore
is included in the Europe segment).
(4) Based on GBP1.65m monthly sales for March 2015.
(5) Adjusted EBITDA is defined by the Group as profit/loss
before tax, depreciation, amortisation, net finance costs,
"Adjustments" and exceptional items. Adjustments is defined by the
Group as set-up costs relating to overseas expansion and share
based payment charges attributable to the LTIP IPO award which the
board considers one off in nature. See adjustments section of
Financial Review and Note 4 of the Notes to the financial
information.
(6) Adjusted EBITDA margin is defined by the Group as Adjusted
EBITDA divided by revenue.
(7) Europe is defined by the Group as entities operating within
the European Union but excluding the UK (which for the year under
review is Germany but figures also include exploratory costs in
other European territories).
(8) Adjusted Operating Profit is defined by the Group as
profit/loss before tax, net finance costs, Adjustments and
exceptional items but after depreciation and amortisation.
Adjustments is defined by the Group as set-up costs relating to
overseas expansion and share based payment charges attributable to
the LTIP IPO award which the board considers one off in nature.
(9) Net Funds are defined as cash as per the consolidated
statement of financial position less borrowings.
(10) Total number of orders taken to completion in connection
with AO website sales and third-party website sales.
(11) NPS is defined by the Group as Net Promoter Score which is
an industry measure of customer loyalty and satisfaction.
Outlook
We are on track with our plans at this early stage of the new
financial year. Although the current trading environment in the UK
remains challenging, we are well positioned to compete successfully
given the flexibility and efficiency of our business model. Whilst
there remains a lot still to do as we build scale in Germany, we
are encouraged by our progress over the first 6 months of trading
in our new territory and the run rate of revenues as we exited the
year. This gave us a good base to start from for the current
financial year and the sales momentum is gathering pace. As always,
we remain focussed on the long-term - growing the business by
driving profitable market share growth through providing
exceptional performance, driving loyalty, reaching out to new
customers, maintaining a tight control on overheads and expanding
the territories in which we operate.
Commenting on these results, John Roberts, Chief Executive
Officer said:
"AO is an exceptional business and I am very pleased with the
achievements we have made over the year, particularly in Germany
and with the successful introduction of the AV category to AO.com.
Our long-term plan is on track and, despite missing our financial
expectations for the year, we have continued to take market share
in the UK MDA market delivering significant growth in UK sales and
Adjusted EBITDA. Our customer proposition remains strong - our
unbeatable prices, huge range and amazing service mean our customer
satisfaction levels have remained exceptional and we will continue
to focus on this in the year ahead. The passion we have for our
customers, staff and all other stakeholders has never been stronger
and we still believe we can change the way Europe buys its
electricals, simply by caring more and executing brilliantly."
Webcast details
A results presentation hosted by John Roberts, Steve Caunce and
Mark Higgins for analysts and investors will be held today, 2nd
June 2015 at 8:00am (GMT) at J.P. Morgan, 1 John Carpenter Street,
London, EC4Y 0JP. Please register your attendance in advance with
Tulchan Communications using the contact details below.
A webcast of the presentation will be available to watch live
and later in the day at www.AO.com/corporate where the results
presentation can also be viewed.(1)
For further information, please contact:
AO World plc Tel: +44(0) 1204 672538
John Roberts ir@ao.com
Steve Caunce
Mark Higgins
Tulchan Communications Tel: +44(0) 20 7353
Tom Buchanan 4200
Michelle Clarke
_______________________________
(1) The content of the AO.com website should not be considered
to form a part of or be incorporated into this announcement.
AGM
This year's AGM will be held at 10.00am on Tuesday, 21 July 2015
at the Company's registered office at AO Park, 5A The Parklands,
Lostock, Bolton BL6 4SD. The AGM notice and the annual report will
be available to view on the Group's website in due course.
Cautionary statement
This announcement contains certain forward-looking statements
(including beliefs or opinions) with respect to the operations,
performance and financial condition of the Group. These statements
are made in good faith and are based on current expectations or
beliefs, as well as assumptions about future events. By their
nature, future events and circumstances can cause results and
developments to differ materially from those anticipated. Except as
is required by the Listing Rules, Disclosure and Transparency Rules
and applicable laws, no undertaking is given to update the
forward-looking statements contained in this document, whether as a
result of new information, future events or otherwise. Nothing in
this document should be construed as a profit forecast or an
invitation to deal in the securities of the Company. This
announcement has been prepared for the Group as a whole and
therefore gives greater emphasis to those matters which are
significant to AO World plc and its subsidiary undertakings when
viewed as a whole.
PERFORMANCE AT A GLANCE
Summary Results(1)
Year ended (GBPm) 31 March 2015 31 March 2014 Change
--------------------------- -------------------------- ----------------- --------------------
UK Europe Total UK Total UK Total
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Income Statement
--------------------------- ------ -------- -------- ------- -------- --------- ---------
AO Website sales 381.5 5.8 387.4 287.1 287.1 32.9% 34.9%
Third-party website
sales 70.3 - 70.3 79.3 79.3 -11.4% -11.4%
Third-party logistics
services 19.0 - 19.0 18.5 18.5 2.8% 2.9%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Revenue 470.8 5.8 476.7 384.9 384.9 22.3% 23.8%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Adjusted EBITDA(2) 16.5 (8.0) 8.5 11.2 11.2 47.3% -24.3%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Adjusted EBITDA
margin(3) 3.5% -137.1% 1.8% 2.9% 2.9% +0.6ppts -1.1ppts
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Adjusted operating
profit(4) 12.7 (8.2) 4.5 8.4 8.4 51.3% -46.0%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Exceptional items(5)
IPO Costs - - - (15.4) (15.4) 100% 100%
Adjustments(6)
Europe set-up
costs(7) (1.4) (2.8) (4.2) - - - -
Share-based payment
charge (8) (2.5) - (2.5) (0.2) (0.2) 1,185.1% 1,185.1%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Operating profit/(loss) 8.8 (11.0) (2.2) (7.2) (7.2) 221.0% 69.3%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Loss per share
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Basic loss per
share (0.60p) (2.38p) 74.8%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Cash flow
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Cash (absorbed)/generated
from operating
activities (0.7) 2.0 1.3 13.6 13.6 -104.9% -90.5%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Cash generated/(absorbed)
from operating
activities before
intercompany
funding(9) 12.8 (11.5) 1.3 13.6 13.6 -6.3% -90.5%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Year end net
funds/(debt)
position(10) 38.9 (1.1) 37.9 48.7 48.7 -20.0% -22.2%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
_______________________________
(1) Certain financial data have been rounded. As a result of this
rounding, the totals of data presented in this document may vary
slightly from the actual arithmetic totals of such data.
(2) Adjusted EBITDA is defined by the Group as profit/loss before
tax, depreciation, amortisation, net finance costs, Adjustments
and Exceptional items. See Note 4 to the Notes to this financial
information.
(3) Adjusted EBITDA margin is defined by the Group as Adjusted EBITDA
divided by revenue.
(4) Adjusted operating profit is defined by the Group as profit/loss
before tax, net finance costs, Adjustments and Exceptional items
but after depreciation and amortisation.
(5) Exceptional items of GBP15.4m relate to IPO costs incurred during
the year ended 31 March 2014.
(6) Adjustments is defined by the Group as set-up costs relating
to Europe expansion and share based payment charges attributable
to the LTIP IPO award that the board considers one-off in nature.
(7) Relates to Europe set-up costs incurred by Group entities in
the UK and Europe.
(8) Share based payment charges attributable to the LTIP IPO award
which the board considers one off in nature.
(9) This eliminates the intercompany funding provided by the UK
to Europe.
(10) Net funds are defined as cash as per the consolidated statement
of financial position less borrowings.
GROUP RESULTS
The Group has delivered significant growth in UK sales and UK
Adjusted EBITDA(1) over the year whilst also delivering significant
strategic progress; broadening its product range, with the
introduction on AO.com of audio-visual equipment and expanding
internationally with the successful launch of AO.de in Germany.
Overall Group revenue increased by 23.8% to GBP476.7m (2014:
GBP384.9) for the year under review, with Group Adjusted EBITDA
reaching GBP8.5m (2014: GBP11.2m) after allowing for GBP8m of
Europe Adjusted EBITDA losses. Group Operating Loss was GBP2.2m
(2014: GBP7.2m loss), after incurring Europe Operating Losses of
GBP11m.
AO Website Sales have increased by 32.9% over the year to
GBP381.5m (2014: GBP287.1m). Overall UK revenue has grown by 22.3%
to GBP470.8m (2014: GBP384.9m) driven by higher order volumes.
Third party website sales have fallen slightly year on year as
focus remains on AO.com. Third party logistics sales have increased
slightly year on year, although a logistics contract was lost
during the year which will impact FY16 performance in this
area.
UK Adjusted EBITDA increased by 47.3% to GBP16.5m (2014:
GBP11.2m) with a UK Adjusted EBITDA margin of 3.5% for the year
(2014: 2.9%). The growth in UK Adjusted EBITDA margin demonstrates
the operational gearing in our business, allowing us to leverage
Selling, General and Administrative ("SG&A") costs as we
grow.
Our German operation finished the year with an annualised sales
run rate of GBP19.8m(2) and overall sales for the first year of its
operations equating to GBP5.8m. As expected, overall our European
operations made an EBITDA loss of GBP12.3m, which includes Germany
set-up costs and trading losses as we build scale, together with
costs incurred in exploring other territory opportunities in
Europe. Cash generated from operating activities in the UK exceeded
the cash absorbed from operating activities in Europe. We would
expect this principle to continue.
The Company experienced a slowdown in sales growth in the last
quarter of the accounting period. It became apparent that the
growth we expected during the final quarter of the year under
review was impacted by the extra IPO publicity the business
received during the same period in the previous year and we were
unable to maintain the year on year growth.
The Group generated a cash inflow from operating activities of
GBP1.3m (2014: GBP13.6m inflow). The difference between this and
Adjusted EBITDA reflects Europe set-up costs of GBP4.2m and net
working capital, tax and finance costs movements of GBP3.0m.
Total capital expenditure for the year was GBP7.6m (2014:
GBP7.5m), of which GBP3.4m relates to our expansion into Germany -
including the establishment of the head office, warehouse and
outbase infrastructure and investment in our own last mile delivery
capability which enables us to own the customer experience
completely as we do in the UK.
_______________________________
(1) Adjusted EBITDA is defined by the Group as profit/loss
before tax, depreciation, amortisation, net finance costs,
Adjustments and Exceptional items. See Note 4 to the Notes to this
financial information.
(2) Based on GBP1.65m monthly sales for March 2015.
BUSINESS REVIEW
Operational Review
UK Retail and Operations
We were pleased to have continued our strategy to broaden the
business with the additions made to our retail proposition during
the year. In May 2014 we added the AV category, comprising
televisions, sound systems and ancillary equipment to the range of
products we offer to our customers. We achieved this through
leveraging our existing infrastructure, tailoring our high quality
service proposition to the AV market and leveraging and
strengthening our existing relationships with global brand leaders
while building new ones. This allows us to capitalise on the
significant level of market demand for these high value items, as
we offer our customers a broad range of products to include the
latest in technology at competitive prices and to increase the
number of opportunities our loyal customers have to buy from us.
Our progress in the AV market is encouraging and our customers have
welcomed our simple and straightforward description of complex
technologies.
We remain the leading player in the UK online MDA market having
gained further market share this year. AO remains committed to
delivering excellent customer service across all its categories. We
make every effort to ensure that our customers receive as much help
and guidance as possible to allow them to make a truly informed
purchase decision through the use of product videos (produced by
our in-house video production facility), providing a comprehensive
level of product, price and delivery information coupled with an
impressive level of customer engagement and reviews. During the
year we introduced a customer finance option to provide even more
flexible payment methods for our customers. This has also enabled
us to run interest-free and 'buy now-pay later' promotional
campaigns, supported in part by manufacturers without any direct
credit exposure for AO.
It is pleasing to report that over the twelve months to 31 March
2015 our Net Promoter Score (an industry measure of customer
loyalty and satisfaction) remained at its historically very high
level of over 80. Over the year repeat purchase levels continued to
grow from 36% to 45% and our deliver to promise rate remained
exceptional.
Customers have access to a range of ancillary services through
AO.com including product protection plans, installation, disposal
and connection services. Following trials in FY14 we commenced a
national roll-out of our premium installation service offering
delivery seven days a week. We aim to become the market leaders in
the supply and installation of MDA products. These installations
are performed by a team of trained specialists and are available to
the vast majority of the UK population.
Once again our dedication to our customer proposition has been
recognised by the industry and we are pleased to have won four
awards at the Etail Awards 2014, including "Overall Award for
Excellence" and four awards at the eCommerce Awards for Excellence
2014 including "Large eCommerce Retailer of the Year."
Germany Retail and Operations
In October 2014 we took the first step in our international
expansion strategy and launched AO.de, the German version of
AO.com. Our initial offering is concentrating solely on the MDA
category as we continue to learn about customer preferences and the
German market and the operating model has been largely replicated
from the UK. We have invested in end to end local resource
including head office, warehouse and outbase infrastructure and our
own last mile delivery capability to offer next day delivery to the
majority of customers and to completely control the customer
experience, as has been successful in the UK. This is a unique
proposition in the German market.
Since commencing trading in Germany we have continued to expand
our manufacturer base, thereby increasing the amount of choice
available to our German customers. Levels of traffic to the site
continue to grow. We have maintained our service levels since
launch and feedback in Germany has been extremely positive, as
evidenced by our customer reviews and ratings on Trustpilot,
Trustedshops and idealo.de. Now we have demonstrated operational
effectiveness we are in a position to accelerate sales growth,
drive efficiencies and continue to expand our retail offering in
this new territory. Our recent progress has encouraged us to review
our infrastructure requirements and we will increase logistics
capacity as we build scale.
Brand
During the year we revisited national television advertising
which was well received and helped to drive sales and brand
awareness. Our Facebook "likes" grew over the reporting period and
are now in excess of 1.6m. Notwithstanding this our brand remains
in its relative infancy and continuing to build awareness remains
one of our key strategic objectives. We believe that it remains a
substantial area of opportunity for us.
With the exception of our 3.5 tonne premium installations fleet
the vast majority of AO.com deliveries have historically been made
using 7.5 tonne vehicles branded as our in-house logistics business
which also makes deliveries for third parties. During the year we
began to brand some of these vehicles as AO.com and we plan to
extend this to more vehicles over the coming year thereby helping
to promote the AO.com brand on the road.
Culture
We consistently state that our culture is at the heart of
everything we do and it continues to be core to our success to
date. It is of paramount importance that we continue to maintain
this and do what is best for our employees against a backdrop of
significant business growth and expansion.
A significant achievement over the year was witnessing how well
our culture has been transferred to and is developing within our
new German operation. We have welcomed some 200 new colleagues to
the AO family and we have been delighted with how our values have
been embraced and supported by them. There have also been some
incredible examples of our UK people going the extra mile to help
our German colleagues find their feet and learn our processes and
strategies.
We were therefore particularly pleased to be awarded the
Deloitte Employer of the Year Award at the Retail Week Awards
2015.
Financial Review
Revenue
For the year ended 31 March 2015 total Group revenue increased
by 23.8% to GBP476.7m (2014: GBP384.9m) despite the impact of
slower than anticipated year-on-year sales growth experienced in
our final quarter as we didn't experience the benefit from our
heightened publicity surrounding our IPO as we had in the previous
year.
Growth achieved during the year was polarised towards our AO
Websites which experienced a strong increase of 32.9% to GBP381.5m
(2014: GBP287.1m). This was driven by the continued migration of
consumers to the online channel as our commitment to exceptional
levels of customer service continues to stimulate repeat business
and attract new customers. The introduction of the AV category,
broadening our product range added to this growth. Sales from our
German website, AO.de, contributed GBP5.8m to our revenue. AO
Website Sales (which includes AO.com, AO.de and AO branded eBay
shops) now account for 81.3% of total Group revenue (2014:
74.6%).
Year ended (GBPm) 31 March 2015 31 March Change
2014
----------------------- ----------------------- -------------- ----------------
UK Europe Total UK Total UK Total
AO Website Sales 381.5 5.8 387.4 287.1 287.1 32.9% 34.9%
Third-party Website
Sales 70.3 - 70.3 79.3 79.3 -11.4% -11.4%
Third-party Logistics
Services 19.0 - 19.0 18.5 18.5 2.8% 2.9%
----------------------- ------ ------- ------ ------ ------ ------- ---------
Revenue 470.8 5.8 476.7 384.9 384.9 22.3% 23.8%
----------------------- ------ ------- ------ ------ ------ ------- ---------
During the reporting period, the total number of completed
orders from AO Website Sales and Third-Party Website Sales
increased by 26.4% to 1,348k (2014: 1,066k) and products per order
increased slightly.
Sales from Third-Party Websites reduced to GBP70.3m (2014:
GBP79.3m) as expected as our focus remains on AO.com. These sales,
in part, are likely to have been cannibalised by our own branded
website as AO.com continues to gain overall market share through
its proposition and price offering. We experienced only a modest
increase in revenue from our UK third party logistics service of
2.8% to GBP19.0m which was impacted by the loss of a contract
during the year.
Gross Margin
Year ended (GBPm) 31 March 2015 31 March 2014 Change
-------------------- -------------------- --------------- ------------------
UK Europe Total UK Total UK Total
-------------------- ----- ------ ----- ------- ------ -------- --------
Gross profit/(loss) 89.7 (2.1) 87.6 74.2 74.2 20.9% 18.1%
Gross margin % 19.0% -36.1% 18.4% 19.3% 19.3% -0.3ppts -0.9ppts
Gross margin for the Group decreased to 18.4% for the reporting
period, a reduction of 0.9ppts against the prior year, although
gross profit grew 18.1% to GBP87.6m. In the UK margin fell slightly
to 19.0% (2014: 19.3%). This was largely due to the dilutive effect
of AV compared to MDA margin which is likely to increase going
forward as the AV category takes an increasingly larger share of
the overall business. UK Gross margin was improved by the full year
effect of three outbases opened during the prior year (which
increased warehousing costs below).
In Germany the gross loss of GBP2.1m reflected the early
purchasing prices achieved in that operation, compounded with
inefficient deliveries whilst volumes are small.
Selling, General & Administrative Expenses ("SG&A")
Total Group administrative expenses increased by 36.1% to
GBP89.8m (2014: GBP66.0m). Of this increase GBP10.3m was
attributable to administrative expenses incurred in connection with
our European expansion, largely comprising costs in AO.de. UK
administrative expenses for the year to 31 March 2015 increased by
22.6% to GBP80.9m (2014: GBP66.0m). Of this increase GBP1.4m was
incurred in connection with our European expansion and GBP2.3m
relates to an increase in the share based payments charge
attributable to the LTIP IPO award.
Year ended (GBPm) 31 March 2015 31 March 2014 Change
-------------------------- -------------------- ------------------ --------------------
UK Europe Total UK Total UK Total
-------------------------- ----- ------ ----- --------- ------- -------- --------
Advertising and marketing 19.5 1.9 21.4 18.2 18.2 7.0% 17.5%
% of sales 4.1% 32.5% 4.5% 4.7% 4.7%
Warehousing 16.8 1.2 18.0 13.3 13.3 26.4% 35.2%
% of sales 3.6% 20.1% 3.8% 3.4% 3.4%
Other Admin 40.7 3.0 43.7 34.3 34.3 18.7% 27.4%
% of sales 8.6% 51.1% 9.2% 8.9% 8.9%
Adjustments(1) 3.9 2.8 6.8 0.2 0.2 1,922.1% 3,362.1%
% of sales 0.8% 48.0% 1.4% 0.1% 0.1%
-------------------------- ----- ------ ----- --------- ------- -------- --------
Administrative Expenses 80.9 8.9 89.8 66.0 66.0 22.6% 36.1%
% of sales 17.2% 151.8% 18.8% 17.1% 17.1%
-------------------------- ----- ------ ----- --------- ------- -------- --------
_______________________________
(1) Adjustments is defined by the Group as set-up costs relating
to overseas expansion and share based payment charges attributable
to
the LTIP IPO award which the board considers one off in nature.
See adjustments section of Financial Review and Note 4 to these
financial statements.
The reduction in UK Advertising and Marketing expenditure as a
percentage of sales from 4.7% to 4.1% over the reporting period
reflects the leverage in this cost category as the fixed media
advertising expenditure is amortised across the larger sales base.
Going forward we expect UK Advertising and Marketing costs to
continue to be leveraged, with some offset as we develop our
brand.
Increases in UK Warehousing expenses reflect a full year's
operation of our three additional outbases opened during the prior
year reporting period and the lease costs associated with our new
stock holding facility based close to our existing NDC in
Crewe.
UK Other Administrative expenses increased by GBP6.4m to
GBP40.7m (2014: GBP34.3m). However as a percentage of sales they
fell to 8.6% (2014: 8.9%) demonstrating some economies of scale in
this cost category. However, costs in the fourth quarter were
planned for a higher level of sales.
In our Europe segment our SG&A costs, as a percentage of
sales, reflect the start-up nature of the operation. As volumes
increase, we would expect these costs to fall towards the rates
experienced in the UK.
Adjusted EBITDA(1)
When reviewing profitability performance, the Directors use a
number of adjusted measures to give meaningful comparisons.
Group Adjusted EBITDA was GBP8.5m (2014: GBP11.2m) after
allowing for GBP8m of Europe Adjusted EBITDA losses.
UK Adjusted EBITDA for the twelve months to 31 March 2015 was
GBP16.5m (2014: GBP11.2m) representing an increase of 47.3% against
the prior year. This increase was achieved despite a number of
challenges encountered during the year, most notably the slowdown
in sales growth experienced in the last quarter of our reporting
period. It became apparent that the growth we expected during the
final quarter of the year under review was impacted by the extra
publicity the business received during our IPO process in the
fourth quarter of the previous financial year and therefore the
business was unable to sustain the year-on-year growth rate of the
previous three quarters. As our model is based around each
additional sale of MDA contributing approximately 8% to EBITDA
incrementally, this shortfall of sales affected our full year
profit. In addition we incurred costs in connection with the
creation of our Driver Academy which we introduced during the year
to mitigate the long term impact of the changes in driver
legislation and we were also impacted by the effects of Black
Friday which did not produce incremental sales, but changed the
phasing of sales in the third quarter. All of these factors
contributed to a lower than forecast level of Adjusted EBITDA.
Notwithstanding the above, we increased our UK Adjusted EBITDA
margin to 3.5% (2014: 2.9%) due to the overall increase in sales
achieved during the year together with maintaining tight control of
our cost base.
_______________________________
(1) Adjusted EBITDA is defined by the Group as profit/loss
before tax, depreciation, amortisation, net finance costs,
"Adjustments" and
exceptional items. Adjustments is defined by the Group as set-up
costs relating to overseas expansion and share based payment
charges attributable to the LTIP IPO award which the board
considers one off in nature. See adjustments section of Financial
Review and Note 4 of the Notes to the financial information.
Year ended (GBPm) 31 March 2015 31 March 2014 Change
------------------------------------------- -------------------- --------------- ------------------
UK Europe Total UK Total UK Total
------------------------------------------- ---- ------- ----- ------- ------ -------- --------
Operating profit/(loss) 8.8 (11.0) (2.2) (7.2) (7.2) 221.0% 69.3%
------------------------------------------- ---- ------- ----- ------- ------ -------- --------
Add: Exceptional items:
Professional fees in relation to IPO - - - 15.4 15.4 -100% -100%
------------------------------------------- ---- ------- ----- ------- ------ -------- --------
Operating profit/(loss) before adjustments 8.8 (11.0) (2.2) 8.2 8.2 6.8% -127.1%
------------------------------------------- ---- ------- ----- ------- ------ -------- --------
Add adjustments:
Europe set up costs 1.4 2.8 4.2 - - - -
Non-cash share based payments charge 2.5 - 2.5 0.2 0.2 1,185.1% 1,185.1%
------------------------------------------- ---- ------- ----- ------- ------ -------- --------
Adjusted operating profit/(loss) 12.7 (8.2) 4.5 8.4 8.4 51.3% -46.0%
------------------------------------------- ---- ------- ----- ------- ------ -------- --------
Add: Depreciation and amortisation 3.7 0.2 3.9 2.8 2.8 35.1% 40.9%
------------------------------------------- ---- ------- ----- ------- ------ -------- --------
Adjusted EBITDA 16.5 (8.0) 8.5 11.2 11.2 47.3% -24.3%
------------------------------------------- ---- ------- ----- ------- ------ -------- --------
Adjusted EBITDA as % of revenue 3.5% -137.1% 1.8 % 2.9% 2.9%
------------------------------------------- ---- ------- ----- ------- ------ -------- --------
Exceptional items
In March 2014, AO World plc floated on the London Stock
Exchange. Non-recurring IPO costs totalled GBP19.7m in the year
ended 31 March 2014, of which GBP15.4m was charged to the income
statement and GBP4.3m was charged to the share premium account as
being directly related to newly issued shares.
Adjustments
-- Europe set-up costs
These are costs incurred in connection with our European
expansion strategy prior to the "go-live" of that territory, namely
the launch of AO.de and our continuing research into other further
countries along with strategic post "go-live" costs.
-- Share based payment charges
At the time of the IPO, LTIP awards were made to a number of
senior staff. The Board considers that the magnitude and timing of
these awards are one-off in nature and so add this charge back to
Adjusted EBITDA. The AO Share Save Schemes(1) charges and any
future LTIP charges will be included in trading numbers.
_______________________________
(1) AO Share Save Schemes are HMRC approved save as you earn
schemes in which all employees are entitled to participate subject
to having 3 months' length of service.
Taxation
The tax credit for the year was GBP0.4m (2014: GBP2.0m charge).
The effective rate of tax for the year was 12.6% (2014: -26.8%).
The business is subject to UK taxes and through its registered
branch structure for Germany is able to fully offset losses.
Loss per share
Loss per share was 0.60p (2014: 2.38p loss).
Dividend policy
In line with the Group's dividend policy no dividend has been
proposed or paid during the year.
Cash resources and cash flow
The year end net funds position was GBP37.9m (2014: GBP48.7m),
as cash decreased to GBP44.9m (2014: GBP55.1m) reflecting the
increased stockholding for additional ranges and territories, while
total borrowings increased to GBP7.1m (2014: GBP6.4m). Surplus cash
balances are held with UK-based banks, in line with the Group
Treasury Policy.
The Group's cash generated from operating activities was a cash
inflow of GBP1.3m (2014: GBP13.6m).
Working capital
Year ended 31 March
(GBPm) 2015 2014
UK Europe Total Total
----------------------------- ------- ------- ------- -------
Inventories 28.9 2.6 31.5 15.9
As % of COGS 8% 32% 8% 5%
Trade and other receivables 44.9 2.5 47.4 33.0
As a% revenue 10% 42% 10% 9%
Trade and other payables (82.2) (4.4) (86.6) (62.9)
As a % of COGS 22% 55% 22% 20%
Net working capital (8.4) 0.6 (7.8) (14.0)
------- ------- ------- -------
Change in net working
capital 5.5 0.6 6.2 (5.0)
------- ------- ------- -------
As at 31 March 2015 UK inventories were GBP28.9m (2014:
GBP15.9m). This reflects an increase in sales volumes and the
change in our MDA stockholding strategy as we hold more stock in
order to provide customers with same-day and next-day delivery
options on an increased number of SKUs and buy more product in
bulk. We have also increased our stockholding in the UK to support
the AV category which is generally only bought in bulk loads. As a
result UK average stock days increased to 27 days (2014: 20
days).
UK trade and other receivables were GBP44.9m as at 31 March 2015
(2014: GBP33.0m) reflecting an increase in accrued income in
respect of commissions due on product protection plans as a result
of higher retail volumes.
UK trade and other payables increased to GBP82.2m (2014:
GBP62.9m) as manufacturers continued to extend credit on a higher
volume of sales.
Capital expenditure
Total capital expenditure for the year was GBP7.6m (2014:
GBP7.5m), of which GBP3.4m relates to our expansion in to Germany,
including the establishment of the head office, warehouse and
outbase infrastructure and investment in our own last mile delivery
capability which enabled us to completely own the customer
experience as we do in the UK.
John Roberts Steve Caunce
CEO COO & CFO
2 June 2015 2 June 2015
CONSOLIDATED INCOME STATEMENT
For the year ended 31 March 2015
Year ended Year ended
31 March 2015 31 March 2014
Note GBP000 GBP000
Revenue 2 476,663 384,918
Cost of sales (389,095) (310,741)
--------------------------------- ---- -------------- --------------
Gross profit 87,568 74,177
Administrative expenses (89,789) (65,976)
--------------------------------- ---- -------------- --------------
Operating (loss)/profit before
exceptional items (2,221) 8,201
Exceptional items 5 - (15,441)
--------------------------------- ---- -------------- --------------
Operating loss 4 (2,221) (7,240)
Finance income 346 80
Finance costs (1,006) (391)
--------------------------------- ---- -------------- --------------
Loss before tax (2,881) (7,551)
Tax 8 364 (2,022)
--------------------------------- ---- -------------- --------------
Loss for the year (2,517) (9,573)
--------------------------------- ---- -------------- --------------
Loss per share (pence/share)
Basic and diluted loss per share
(in pence per share) 6 (0.60) (2.38)
--------------------------------- ---- -------------- --------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2015
Year ended Year ended
31 March 2015 31 March 2014
GBP000 GBP000
Loss for the year (2,517) (9,573)
Exchange differences on translation
of foreign operations 382 -
------------------------------------- -------------- --------------
Total comprehensive loss for
the year (2,135) (9,573)
------------------------------------- -------------- --------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2015
At At
31 March 31 March
2015 2014
GBP000 GBP000
------------------------------ --------- ---------
Non-current assets
Intangible assets 14,336 12,830
Property, plant and equipment 13,485 11,409
Trade and other receivables 17,103 11,255
Deferred tax asset 759 575
-------------------------------- --------- ---------
45,683 36,069
------------------------------ --------- ---------
Current assets
Inventories 31,473 15,881
Trade and other receivables 30,268 21,711
Corporation tax receivable 672 -
Cash and bank balances 44,943 55,050
107,356 92,642
------------------------------ --------- ---------
Total assets 153,039 128,711
-------------------------------- --------- ---------
Current liabilities
Trade and other payables (86,640) (62,918)
Current tax liabilities - (1,146)
Borrowings (2,132) (1,996)
Provisions (766) (209)
-------------------------------- --------- ---------
(89,538) (66,269)
------------------------------ --------- ---------
Net current assets 17,818 26,373
-------------------------------- --------- ---------
Non-current liabilities
Borrowings (4,949) (4,403)
-------------------------------- --------- ---------
Total liabilities (94,487) (70,672)
-------------------------------- --------- ---------
Net assets 58,552 58,039
-------------------------------- --------- ---------
Equity
Share capital 1,053 1,053
Merger reserve 4,368 4,368
Capital redemption reserve (1,068) (1,068)
Share premium account 55,665 55,665
Share based payments reserve 2,843 195
Translation reserve 382 -
Retained losses (4,691) (2,174)
-------------------------------- --------- ---------
Total equity 58,552 58,039
-------------------------------- --------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2015
Share
Capital Share based
Share Merger redemption Translation premium Retained payments
capital reserve reserve reserve account losses reserve Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at
1 April 2014 1,053 4,368 (1,068) - 55,665 (2,174) 195 58,039
------------------ --------- --------- ----------- ----------- -------- -------- --------- --------
Loss for the
year - - - - - (2,517) - (2,517)
Foreign currency
gains arising
on consolidation - - - 382 - - - 382
Share-based
payments charge - - - - - - 2,648 2,648
Balance at
31 March 2015 1,053 4,368 (1,068) 382 55,665 (4,691) 2,843 58,552
------------------ --------- --------- ----------- ----------- -------- -------- --------- --------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2015
2015 2014
GBP000 GBP000
--------------------------------------------------------- -------- --------
Cash flows from operating activities
Loss for the year (2,517) (9,573)
Adjustments for:
Depreciation and amortisation 3,939 2,796
Finance income (346) (80)
Finance costs 1,006 391
Profit on disposal of property, plant and equipment (13) -
Taxation (credit)/charge (364) 2,022
Exceptional items - 15,441
Increase/(decrease) in provisions 766 (647)
Share-based payment charge 2,648 195
---------------------------------------------------------- -------- --------
Operating cash flows before movement in working
capital 5,119 10,545
---------------------------------------------------------- -------- --------
Increase in inventories (15,692) (7,173)
Increase in trade and other receivables (12,404) (6,141)
Increase in trade and other payables 25,915 18,314
(2,181) 5,000
Taxation paid (1,639) (1,906)
---------------------------------------------------------- -------- --------
Cash generated from operating activities 1,299 13,639
---------------------------------------------------------- -------- --------
Cash flows from investing activities
Interest received 346 80
Proceeds from sale of property, plant and equipment 69 -
Acquisition of property, plant and equipment (4,418) (2,788)
Acquisition of intangible assets (1,709) (493)
---------------------------------------------------------- -------- --------
Cash used in investing activities (5,712) (3,201)
Cash flows from financing activities
Interest paid (442) (391)
Repayment of preference shares - (1,010)
Repayment of shareholder loan - (269)
New / (repayment of) borrowings 1,233 (1,627)
Payment of finance lease liabilities (2,047) (1,771)
Dividends paid - (2,807)
(Costs settled)/net proceeds from issue of new
shares (4,352) 40,277
---------------------------------------------------------- -------- --------
Net cash (used in)/ generated from financing
activities (5,608) 32,402
Net (decrease)/increase in cash (10,021) 42,840
Cash and cash equivalents at beginning of year 55,050 12,210
---------------------------------------------------------- -------- --------
Exchange losses on cash & cash equivalents (86) -
---------------------------------------------------------- -------- --------
Cash and cash equivalents at end of year 44,943 55,050
---------------------------------------------------------- -------- --------
NOTES TO THE FINANCIAL INFORMATION
1. Basis of preparation
The financial information has been prepared under International
Financial Reporting Standards (IFRSs) issued by the IASB and as
adopted by the European Union (EU).
Whilst the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards (IFRSs), this announcement does not itself contain
sufficient information to comply with IFRSs.
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 March 2015 or
2014, but is derived from those accounts. Statutory accounts for
2014 have been delivered to the Registrar of Companies and those
for 2015 will be delivered following the Company's Annual General
Meeting. The auditor has reported on those accounts; the report was
unqualified, did not draw attention to any matters by way of
emphasis and did not contain statements under section 498(2) or (3)
Companies Act 2006.
Certain financial data have been rounded. As a result of this
rounding, the totals of data presented in this document may vary
slightly from the actual arithmetic totals of such data.
Going concern
A copy of the full Group accounts that comply with IFRSs for the
year ended 31 March 2015 will be published on the Group's website
AO.comcorporate on or before 22 June 2015 and will be posted to
shareholders later this month.
The Directors have, at the time of approving the financial
statements, a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for
the foreseeable future. This follows a review of the Group's
financial projections and takes into consideration the fact that
the Group still has available proceeds from the Group's IPO in
March 2014. The Group continues to maintain substantial cash
headroom. Thus they continue to adopt the going concern basis of
accounting in preparing the financial statements.
2. Revenue
An analysis of the Group's revenue is as follows:
Year ended
31 March
Year ended 31 March 2015 2014
GBP000 GBP000
------------------------------------------ ------------------------ ----------
Own website sales 387,386 287,109
Third-party website sales and trade sales 70,259 79,323
Third-party logistics services 19,018 18,486
476,663 384,918
------------------------------------------ ------------------------ ----------
3. Segmental analysis
IFRS 8 "Operating Segments" requires operating segments to be
determined based on the Group's internal reporting to the Chief
Operating Decision Maker - in our case the Executive Directors. As
the Group now operates in two principal geographic regions and
based on the management and internal reporting structure, it has
been determined that the UK and Europe should be presented as
separate segments.
Income statement
Year ended (GBP000)
31 March 2015 31 March 2014 Change
---------------------------------------- ------------------------------ -------------------- ----------------------
UK Europe Total UK Total UK Total
---------------------------------------- --------- -------- --------- --------- --------- ---------- ----------
Revenue 470,818 5,845 476,663 384,918 384,918 22.3% 23.8%
---------------------------------------- --------- -------- --------- --------- --------- ---------- ----------
Cost of sales (381,141) (7,954) (389,095) (310,741) (310,741) 22.7% 25.2%
---------------------------------------- --------- -------- --------- --------- --------- ---------- ----------
Gross profit 89,677 (2,109) 87,568 74,177 74,177 20.9% 18.1%
---------------------------------------- --------- -------- --------- --------- --------- ---------- ----------
Net finance cost (86) (574) (660) (311) (311) -72.2% 112.4%
---------------------------------------- --------- -------- --------- --------- --------- ---------- ----------
Profit /(loss) before tax 8,674 (11,555) (2,881) (7,551) (7,551) 214.9% 61.8%
---------------------------------------- --------- -------- --------- --------- --------- ---------- ----------
EBITDA 12,540 (10,822) 1,718 (4,444) (4,444) 382.2% 138.6%
---------------------------------------- --------- -------- --------- --------- --------- ---------- ----------
Add back share based payments charge
attributable to IPO LTIP 2,506 - 2,506 195 195 1,185.1% 1,185.1%
Add back Europe setup costs 1,437 2,808 4,245 - - - -
Professional fees in relation to IPO - - - 15,441 15,441 -100% -100%
---------------------------------------- --------- -------- --------- --------- --------- ---------- ----------
Adjusted EBITDA 16,483 (8,014) 8,469 11,192 11,192 47.3% -24.3%
Geographical analysis
Revenue by location is the same as that shown above by
reportable segment. Information on additions to non-current assets
by geographical location is shown below.
Other information
Year ended 31 March 2015
(GBP000)
Additions
Intangible PP&E Depreciation Amortisation Share-based
assets payments
------------------------- ---------- ----- ------------ ---------------------- --------------------
UK 1,434 2,736 3,587 193 2,648
Europe 287 3,109 137 22 -
------------------------- ---------- ----- ------------ ---------------------- --------------------
Total 1,721 5,845 3,724 215 2,648
Year ended 31 March 2014
(GBP000)
Additions
Intangible PP&E Depreciation Amortisation Share-based
assets payments
------------------------- ---------- ----- ------------ ---------------------- --------------------
UK 493 7,006 2,546 250 195
Europe - - - - -
------------------------- ---------- ----- ------------ ---------------------- --------------------
Total 493 7,006 2,546 250 195
Due to the nature of its activities, the Group is not reliant on
any individual major customers or group of customers.
4. Profit/(loss) for the year
The Group has calculated Adjusted EBITDA by adding back those
material items of income and expense which, because of the nature
and expected infrequency of events giving rise to them, merit
separate presentation to allow shareholders to better understand
the financial performance of the Group in the year.
Adjusted EBITDA:
Year ended (GBP000)
31 March 2015 31 March 2014
================================ ========================= =================
UK Europe Total UK Total
Operating profit/(loss) 8,760 (10,981) (2,221) (7,240) (7,240)
Add: Depreciation 3,587 137 3,724 2,546 2,546
Add: Amortisation 193 22 215 250 250
================================= ====== ======== ======= ======== =======
EBITDA 12,540 (10,822) 1,718 (4,444) (4,444)
================================= ====== ======== ======= ======== =======
Exceptional items
IPO cost - - - 15,441 15,441
Adjustments
Europe set-up costs 1,437 2,808 4,245 - -
Share based payments charge 2,506 - 2,506 195 195
================================= ====== ======== ======= ======== =======
Adjusted EBITDA 16,483 (8,014) 8,469 11,192 11,192
================================= ====== ======== ======= ======== =======
5. Exceptional items
Non-recurring IPO costs
In March 2014, AO World plc floated on the London Stock
Exchange. Non-recurring IPO costs totalled GBP19.7m in the year
ended 31 March 2014, of which GBP15.4m was charged to the income
statement and GBP4.3m was charged to the share premium account as
being directly related to newly issued shares.
6. Loss per share
The calculation of the basic and diluted loss per share is based
on the following data:
Year ended Year ended
31 March 31 March
2015 2014
Loss (GBP000)
---------------------------------- ------------- -------------
Loss for the purposes of basic
and diluted loss per share
being loss for the year (2,517) (9,573)
Number of shares
Weighted average number of
ordinary shares for the purposes
of basic and diluted earnings
per share 421,052,631 401,672,675
Loss per share (pence/share)
---------------------------------- ------------- -------------
Basic and diluted loss per
share (in pence per share) (0.60) (2.38)
----------------------------------- ------------- -------------
7. Dividends
A dividend was declared on 19 July 2013 totalling GBP1.9m and a
further dividend was declared on 8 November 2013 for GBP0.9m taking
a full dividend for the year ended March 2014 of GBP2.8m. No
dividend has been declared for the year ended 31 March 2015 in line
with the Group's stated policy.
8. Taxation
Year ended Year ended
31 March 31 March
2015 2014
GBP000 GBP000
---------------------------------------- ---------- ----------
Corporation tax:
Current year - 2,281
Adjustments in respect of prior years (180) 18
(180) 2,299
---------------------------------------- ---------- ----------
Deferred tax (184) (277)
---------------------------------------- ---------- ----------
(364) 2,022
---------------------------------------- ---------- ----------
Corporation tax is calculated at 21% (2014: 23%) of the
estimated taxable loss for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
The (credit)/charge for the year can be reconciled to the loss
in the income statement as follows:
Year ended Year ended
31 March 31 March
2015 2014
GBP000 GBP000
Loss before tax on continuing operations (2,881) (7,551)
--------------------------------------------- ---------- ----------
Tax at the UK corporation tax rate of 21%
(2014: 23%) (605) (1,737)
Ineligible expenses 421 3,702
Impact of difference in current and deferred
rates 13 44
Adjustments in respect of prior periods (193) 13
--------------------------------------------- ---------- ----------
Tax (credit)/charge for the year (364) 2,022
--------------------------------------------- ---------- ----------
9. Principal risks and uncertainties
The Company has identified certain principal risks that could
prevent the Group achieving its strategic objectives and has
assessed how these risks could best be mitigated through a
combination of internal controls, risk management and external
insurance cover purchase. These risks were last formally assessed
in March 2015 and will be reviewed and updated on a regular
basis.
A summary of the nature of the risks currently faced by the
Group is as follows:
-- Risks relating to the effective operation of the business
including the dependence on a single national distribution centre,
the interdependence of our IT systems, the failure of technology or
data loss and our search engine strategy;
-- Risks relating to the acceptance of our customer proposition
including failure of our brand, websites and offering to receive
wide acceptance, loss of third party clients and that European
expansion is unsuccessful;
-- Risks relating to people, such as failure to maintain the
culture and to recruit and retain AO appropriate staff, dependence
on executive directors and relationships with key suppliers;
-- Risks relating to regulatory changes, such as changes to or
introduction of new requirements; and
-- Risks relating to changes in the macro-economic environment
such as changes in consumer demand.
RESPONSIBILITY STATEMENT
The responsibility statement below has been prepared in
connection with the Company's Annual Report & Accounts for the
year ended 31 March 2015. Certain parts thereof are not included
within this announcement.
We confirm that to the best of our knowledge and belief:
-- The consolidated financial statements, prepared in accordance
with International Financial Reporting Standards as adopted in the
European Union, give a true and fair view of the assets,
liabilities, financial position, cash flows and loss of the Company
and Group; and
-- The management report, which is incorporated into the
strategic report, includes a fair review of the development and
performance of the business and the position of the Company and
Group, together with a description of the principal risks and
uncertainties it faces.
This responsibility statement was approved by the Board on 1
June 2015 and is signed on its behalf by:
Steve Caunce
2 June 2015
This information is provided by RNS
The company news service from the London Stock Exchange
END
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