TIDMAO.
RNS Number : 2039H
AO World plc
06 June 2017
6 June 2017
AO WORLD PLC
FULL YEAR RESULTS FOR THE YEARED 31 MARCH 2017
BUILDING FOR GROWTH; 40+% INCREASE IN UK ADJUSTED EBITDA Y-O-Y
FROM GBP17.2M TO GBP24.4M;
GAINING MARKET SHARE IN ALL CATEGORIES AND COUNTRIES
AO World plc ("the Company" or "AO"), a leading European online
electrical retailer, today announces its audited financial results
for the year ended 31 March 2017.
Financial Highlights(1)
-- Total revenue for the period increased by 17.0% to GBP701.2m
(2016: GBP599.2m) with both the UK and Europe businesses growing
sales:
o AO website sales(2) for the UK(3) up 14.5% to GBP557.9m (2016:
GBP487.1m), with total UK revenue up 12.7% to GBP629.7m (2016:
GBP558.5m) demonstrating further market share gains.
o Europe(4) revenue for the year was GBP71.5m/EUR84.7m (2016:
GBP40.7m/EUR55.6m), up 52.3% in constant currency, as The AO way
gained excellent traction with customer and reflecting a full year
of trading in The Netherlands.
-- UK profitability improved significantly, contributing to
Group Adjusted EBITDA(5) losses reducing by 46.2% to GBP2.1m from
losses of GBP3.9m:
o UK Adjusted EBITDA was up 41.7% to GBP24.4m (2016: GBP17.2m),
with UK Adjusted EBITDA margin(6) of 3.9% (2016: 3.1%) due to
increased sales and improvements in gross margin.
o Europe Adjusted EBITDA losses increased by 25.5% to
GBP26.5m/EUR31.5 (2016: GBP21.1m/EUR30.4) reflecting losses in The
Netherlands over its first full year of trading and further trading
losses in Germany as we build scale.
-- Group operating loss of GBP12.0m (2016: GBP10.6m) reflecting
further trading losses incurred in Germany and The Netherlands with
operating profit for the UK up 25.9% to GBP15.6m (2016: GBP12.4m)
and operating losses for Europe increasing to GBP27.6m (2016:
GBP23.0m).
-- Group net funds position(7) as at 31 March 2017 was GBP12.0m
(2016: GBP25.4m), with cash being GBP29.4m (2016: GBP33.4m) and the
balance sheet was strengthened further after year end through the
placing of 9% of existing share capital, raising gross proceeds of
GBP50m.
-- Basic loss per share of 1.56p (2016: 1.44p). (8) Diluted loss
per share of 1.55p (2016: 1.44p).
Operational Highlights
-- Continued to grow market share in all our categories across all our countries.
-- Launched the computing category in the UK and AV in Germany
and saw an encouraging customer response.
-- Excellent customer experience metrics which demonstrate the
amazing service we provide through simply caring more:
o Industry leading scores on customer review websites (UK
Trustpilot 9.5/10; Germany trusted shops 4.8/5; Netherlands
Trustpilot 9.6/10).
o Excellent net promoter scores (UK: over 80, Europe: over 85).
(9)
-- Opened Bergheim, our regional distribution centre and head
office which services our European operations and will allow us to
drive further growth.
-- Built a state of the art recycling facility in Telford in the
UK, providing vertical integration, capacity to process all AO WEEE
and further opportunities for new revenue streams.
Outlook
The challenging trading environment we saw in the UK in the
second half of last year has continued into the start of our new
financial year. Accordingly, these macro-economic factors combined
with strong comparables in Q1FY17(10) (driven by changes to stamp
duty at the end of March 2016) means we expect our UK Q1 growth
rate to slow significantly year on year, but overall we continue to
expect to fall within the range of market expectations.
In spite of the uncertainties in the market the drivers for
success of our business are unchanged; our customer service metrics
remain exceptional and we continue to innovate to create a customer
experience for tomorrow. Following the placing we have strengthened
our balance sheet to support the Group's growth notwithstanding
market conditions.
Trading in Europe in our new financial year has started well and
we are on track with our plans for this year, confident in the
long-term prospects of our overseas territories (as set out in at
our Capital Markets Day).
We remain relentless in pursuing our goal to be the best
electrical retailer in Europe and, through focussing on our 4 C's
strategy (culture, customers, categories and countries), we are
confident we can deliver against that objective.
Commenting on these results, Steve Caunce, Chief Executive
Officer said:
"It's been another year of great progress for AO with the UK
seeing improved profitability and we have continued to build a
solid platform for future growth. In Europe, we opened our new
regional distribution centre in Bergheim which will enable us to
scale our European operations profitably in the years to come and
have improved our gross margin, building on our relationship with
suppliers. We have built a state-of the art recycling facility in
the UK, we have added new categories to our offering in both the UK
and Europe and, in launching computing, we have developed systems
and infrastructure to operate a different distribution model, which
we can leverage for future category roll-out across
territories.
Our customer service metrics remain exceptional across all of
the countries in which we operate because we make it our mission to
care more and we continue to innovate to create the best customer
experience for tomorrow. This has helped us to continue to gain
market share in our categories and countries, notwithstanding the
challenging trading environment in the UK.
We remain as committed as ever to doing business The AO Way and
continuing to deliver outstanding results for our customers, our
people, our supplier partners and our investors. I would like to
thank every single AO'er for their passion and dedication over the
year and look forward to working together to grow the business
further in the year ahead."
Webcast details
A results presentation hosted by Steve Caunce and Mark Higgins
for analysts and investors will be held today, 6 June 2017 at
9:00am (GMT) at the London Stock Exchange, 10 Paternoster Square,
London, EC4M 7LS. 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 or the presentation can be heard
live by dialling in on +44 20 3713 5011 using access code
492-915-541.(11)
For further information, please contact:
AO World plc Tel: +44(0) 1204
Steve Caunce 672403
Mark Higgins ir@ao.com
Tulchan Communications Tel: +44(0) 20
Susanna Voyle 7353 4200
Michelle Clarke ao@tulchangroup.com
______________________________
(1) The highlights are for the year ended 31 March 2017 and the
comparative 2016 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 the UK AO-branded eBay shops.
(3) UK is defined by the Group as entities operating within the
United Kingdom. (It excludes AO Deutschland Limited which is a
company registered in England but operates in Germany and therefore
is included in the Europe segment).
(4) Europe is defined by the Group as entities operating within
the European Union but excluding the UK and also includes
exploratory costs in other European territories.
(5) Adjusted EBITDA is defined by the Group as profit/(loss)
before tax, depreciation, amortisation, profit on disposal of fixed
assets, net finance income, "adjustments" and exceptional items.
Adjustments is defined by the Group as (i) set-up costs relating to
overseas expansion namely strategic post go-live costs incurred in
connection with our European expansion strategy of GBP0.7m (2016:
GBP2.3m) and (ii) share-based payment charges of GBP3.6m (2016:
GBP0.4m credits) attributable to the exceptional LTIP awards which
the Board considers one-off in nature.
(6) Adjusted EBITDA margin is defined by the Group as Adjusted
EBITDA divided by revenue.
(7) Net funds are defined by the Group as cash as per the
consolidated statement of financial position less borrowings.
(8) Please refer to the Earnings Per Share paragraph on page 13
of this announcement for further information.
(9) Net Promoter Score is an industry measure of customer
loyalty and satisfaction.
(10) For the first quarter of the year ended 31 March 2017, AO
branded UK sales delivered 29% growth against the same quarter for
the year ended 31 March 2016, with total UK revenue growing 25%
against the same period. For the full financial year ended 31 March
2017, growth against the prior year was 14.5% for AO branded UK
sales and 12.7% for total UK sales respectively.
(11) The content of the AO.com website should not be considered
to form a part of or be incorporated into this announcement.
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, Guidance 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)
31 March 2017 31 March 2016 Change
---------------------- --------------------------- ------------------------- -------------------------------------
UK Europe(2) Total UK Europe Total UK Europe Total
---------------------- ------ ---------- ------- ------ -------- ------- ----------- ---------- ----------
Income Statement
---------------------- ------ ---------- ------- ------ -------- ------- ----------- ---------- ------------
AO website
sales 557.9 71.5 629.4 487.1 40.7 527.8 14.5% 75.9% 19.3%
Third-party
website sales 46.0 - 46.0 53.6 - 53.6 (14.2%) n/a (14.2%)
Other(3) 25.8 - 25.8 17.8 - 17.8 44.9% n/a 44.9%
---------------------- ------ ---------- ------- ------ -------- ------- ----------- ---------- ------------
Revenue 629.7 71.5 701.2 558.5 40.7 599.2 12.7% 75.9% 17.0%
---------------------- ------ ---------- ------- ------ -------- ------- ----------- ---------- ------------
41.7
Adjusted EBITDA(4) 24.4 (26.5) (2.1) 17.2 (21.1) (3.9) % 25.5% 46.2%
---------------------- ------ ---------- ------- ------ -------- ------- ----------- ---------- ------------
Adjusted EBITDA
margin(5) 3.9% (37.0%) (0.3%) 3.1% (51.9%) (0.7%) +0.8ppts +14.9ppts +0.4ppts
---------------------- ------ ---------- ------- ------ -------- ------- ----------- ---------- ------------
Adjusted operating
profit/(loss)(6) 19.9 (27.6) (7.7) 13.1 (21.8) (8.7) 51.6% 26.7% 10.9%
---------------------- ------ ---------- ------- ------ -------- ------- ----------- ---------- ------------
Adjustments(7)
Europe set-up
costs(8) (0.7) - (0.7) (1.1) (1.2) (2.3) (43.9%) n/a (73.2%)
Non-cash share-based
payment
(charge)/credit
(9) (3.6) - (3.6) 0.4 - 0.4 (1008.3%) n/a (1008.3%)
---------------------- ------ ---------- ------- ------ -------- ------- ----------- ---------- ------------
Operating
profit/(loss) 15.6 (27.6) (12.0) 12.4 (23.0) (10.6) 25.9% 20.1% 13.2%
---------------------- ------ ---------- ------- ------ -------- ------- ----------- ---------- ------------
Loss per share
(pence)
---------------------- ------ ---------- ------- ------ -------- ------- ----------- ---------- ------------
Basic loss
per share (1.56) (1.44) 8.1%
Diluted loss
per share (1.55) (1.44) 7.8%
Adjusted loss
per share(10) (2.62) (2.07) 26.9%
---------------------- ------ ---------- ------- ------ -------- ------- ----------- ---------- ------------
Cash flow
---------------------- ------ ---------- ------- ------ -------- ------- ----------- ---------- ------------
Cash
generated/(absorbed)
from operating
activities 3.2 0.3 3.5 (7.0) 3.4 (3.6) (144.6%) (90.5%) (195.7%)
---------------------- ------ ---------- ------- ------ -------- ------- ----------- ---------- ------------
Cash generated/
(absorbed)
from operating
activities
before intercompany
funding(11) 31.2 (23.3) 7.9 2.4 (20.4) (18.0) 1201.2% 14.4% (143.8%)
---------------------- ------ ---------- ------- ------ -------- ------- ----------- ---------- ------------
Period end
net funds/(debt)
position(12) 15.5 (3.5) 12.0 26.7 (1.3) 25.4 (42.2%) 169.0% (53.0%)
---------------------- ------ ---------- ------- ------ -------- ------- ----------- ---------- ------------
_______________________________
(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) Europe is defined by the Group as entities
operating within Europe but excluding the UK and
also includes exploratory costs in other European
territories.
(3) Other revenue relates to Third party logistics
revenue and recycling revenue.
(4) Adjusted EBITDA is defined by the Group as
profit/(loss) before tax, depreciation, amortisation,
profit on disposal of fixed assets, net finance
income, "adjustments" and exceptional items.
(5) Adjusted EBITDA margin is defined by the Group
as Adjusted EBITDA divided by revenue.
(6) Adjusted operating profit/(loss) is defined
by the Group as profit/(loss) before tax, net
finance income, "adjustments" and exceptional
items but after depreciation, amortisation and
profit on disposal of fixed assets.
(7) Adjustments is defined by the Group as (i)
set-up costs relating to overseas expansion namely
strategic post go-live costs incurred in connection
with our European expansion strategy of GBP0.7m
(2016: GBP2.3m) and (ii) share-based payment charges
of GBP3.6m (2016: GBP0.4m credits) attributable
to the exceptional LTIP awards which the Board
considers one-off in nature.
(8) Relates to Europe post go-live strategy costs
incurred by UK.
(9) Share-based payment charges or credits attributable
to exceptional LTIP awards which the Board considers
one-off in nature, due to the magnitude and timing
of the awards. The credit in 2016 reflects the
cumulative adjustment to the LTIP charge based
on the assessment of the achievement of certain
performance criteria.
(10) Adjusted loss per share is basic earnings
per share plus foreign exchange gains arising
from inter-group funding. See note 6 on page 26.
(11) This eliminates the intercompany funding
provided by the UK to Europe.
(12) Net funds/ (debt) are defined as cash as
per the consolidated statement of financial position
less borrowings.
Chief Executive Officer's Review
Looking back at the year, we have strengthened our foundations
for future growth. In Europe, we opened our new regional
distribution centre in Bergheim, near Dusseldorf; we have built a
state-of the art recycling facility in the UK, we have added new
categories to our offering in both the UK and Europe and, in
launching computing, we have developed systems and infrastructure
to operate a different distribution model, which we can leverage
for future category roll-out across territories.
Trading this year has been mixed (particularly for our UK
business). In the first half of the year, in the UK, our investment
in marketing and brand translated into encouraging sales growth
with some tailwinds from stamp duty changes in March 16. In the
second half of the year, trading in the UK became more challenging
as we began to feel the impacts of dampening consumer confidence
following the UK's vote to leave the EU, subsequent price inflation
and a slow-down in the UK housing market.
However, our customer service metrics remain exceptional across
all of the countries in which we operate and we continue to
innovate to create the best customer experience for tomorrow. This
has helped us to continue to gain market share in our categories
and countries, notwithstanding the challenging trading environment
in the UK.
We remain as committed as ever to doing business The AO Way and
continuing to deliver outstanding results for our customers, our
people, our supplier partners and our investors. Our online
market-leading proposition and the solid foundation we have built
in mainland Europe have positioned us well for the future. Since
year end we completed a share placing which will ensure our balance
sheet is suitably capitalised to support our continued growth and
increasing scale as we deliver our strategy. We will continue to be
bold but responsible on where we allocate our resource.
In the past year we have demonstrated how to scale up in new
countries and how to expand and grow product categories. When the
time is right, we will replicate this approach in new geographies
and categories. We have strengthened our foundations for growth and
in line with our strategy we will continue to focus on and drive AO
own-branded sales. Although our brand awareness has continued to
grow during the period, it remains our greatest challenge and the
key to longer-term success; we must push to drive this metric. We
will achieve this through highlighting and explaining why customers
should shop with AO: it's simply that we care more. Going forward
we will continue to work hard to ensure that AO becomes a household
name and the obvious choice when shopping for electricals.
Progress against our strategic objectives
AO has continued on its mission to become the best electrical
retailer in Europe delivering on all aspects of its four pillar
strategy, the "4 Cs":
-- Developing and protecting our unique culture that underpins our brand;
-- Delivering a market leading proposition to customers;
-- Rolling out new categories in existing and new countries; and
-- Developing new countries.
Culture and Brand
-- UK
Building brand awareness remains our biggest opportunity. During
the year we continued to grow overall brand awareness and develop
our brand strategy.
AO has historically been known for selling white goods and so,
during the year, we have focussed on educating our customers that
AO is a multi-category electrical retailer, building momentum as we
add more categories and products to our range. We sought to
increase the effectiveness of our brand investment as we honed our
TV adverts to illustrate the strong customer testimonials we
receive. We also explored new advertising channels including radio,
both national and local, together with print media through press
advertising, billboards and other large formats. In the early part
of the financial year we invested in those audiences where our
sales profile was under-indexed, in particular in Greater London
and amongst male shoppers.
Towards the end of the year we also commenced the process of
significantly increasing the level of branding on our 3.5 tonne
delivery truck fleet. This will continue to promote our brand on a
daily basis across the country.
As a result of the initiatives highlighted above our brand
awareness continued to improve slightly over the period (including
spontaneous and prompted awareness), although we have seen a slight
dip in the final quarter as marketing was postponed in anticipation
of our Britain's Got Talent sponsorship. Our strong customer
advocacy together with manufacturer endorsement (through joint
advertisings campaigns) have helped build trust in our brand and
have helped to drive revenue growth. Our customer acquisition costs
continued to fall during the 12 months to 31 March 2017 as we
refined our online advertising strategy, improved our SEO (Search
Engine Optimisation) rankings and benefited from an increase in
direct traffic following our improved brand awareness and customer
recommendations.
However, more work needs to be done; our biggest opportunity
remains for us to grow our brand to the recognition levels enjoyed
by our competitors, and so, in March 2017 prior to our year-end, we
agreed to sponsor the 11th series of Britain's Got Talent ("BGT").
The series has been aired over the past two months and our
sponsorship deal included on-air and mobile companion app branding,
plus numerous other opportunities to bring our sponsorship to life
outside of the BGT TV show. This investment is designed to build
long-term brand awareness rather than drive short-term sales as we
seek to develop and instil trust and confidence. Going forward we
must use our brand investment to very clearly highlight the
difference of AO to the customer.
Our culture goes to the heart of our brand and is our greatest
asset, providing us with a real advantage over our competitors; we
continue to protect it fiercely. To achieve our goal we need to
nurture it, attracting the best people who live our values and
then, retaining them. That means being the best employer we can be
for our people, so high employee engagement and development is
fundamental to the growth of our brand, and ultimately, to the
Group. Our emerging talent schemes, such as our Future and Star
Programmes, Apprenticeship Schemes and Duke of Edinburgh scheme all
progressed during the year. Each is sponsored by a member of the
Group Executive Team ("GET") in order to identify and develop our
talent and ensure our winning team gets even stronger in the
future. Following my appointment as CEO we implemented some changes
to the structure of our GET and senior management teams to ensure
that we remain robust and scalable as our business continues to
grow.
-- Europe
As planned, we limited our promotional activity during our
period of consolidation with no TV exposure from April to October
2016. In the second half of the year we resumed limited activity
such as joint TV advertising campaigns with manufacturers alongside
some print media advertising and continued use of AO branded fleet,
but beyond that advertising has been limited. Accordingly, there
has been modest growth in brand awareness during the year to 31
March 2017. Despite this, our customer base is growing well, our
direct traffic statistics are encouraging and repeat purchases are
already coming through. Our sales growth is being driven by the
strength of the customer recommendations we are receiving,
replicating the evolution of our UK business, albeit at a faster
pace.
We are pleased that our culture and values have been fully
embedded into our operations in Germany and The Netherlands, thanks
in part to the use of a recruitment process focussed on our central
values. Our European team has also been restructured and during the
year we were pleased to welcome a new European retail director into
the team who is already making a difference to both culture and
performance.
Customers
We are continuing to drive our market-leading proposition
forward. Our key offering remains strong; our unbeatable prices,
huge range, wide availability, smart and innovative web content and
amazing service mean our customer satisfaction levels remain
exceptional. Repeat customer metrics are healthy as are the number
of new customers we are attracting to our brand.
-- UK
We made good progress with our customer metrics over the
reporting period. AO's customer base is now a huge asset to the
business as we approach four million UK customers (defined as an
individual customer who has purchased from us) giving us a
fantastic foundation from which to leverage our growth. Our repeat
business remains very healthy and we continue to attract new
customers. Notwithstanding progress this year whilst customers
continue to repeat the time taken to repeat has fallen slightly
which we think, in part, is driven by market dynamics.
Growth in traffic remained encouraging during the 12 months to
31 March 2017 and we experienced particularly strong growth in
visits to our mobile site, although we have some work to do to
increase our conversion rates to levels similar with those on
Desktop and Tablet devices.
We have worked hard to make the customer journey as easy and
effortless as possible, whilst remaining personal. Our Customer
Labs allow us to thoroughly research and understand our customers'
needs. In order to work towards our best service goal, we have
continued to develop and enhance the retail experience. During the
year we launched our app "MyAO". This currently provides "track
your order" functionality and will be developed further to provide
transactional capability and to tie into the "My Account" feature
launched last year. We have also streamlined our interactive voice
response ("IVR") system to take the customer through the most
efficient route of service, based on the stage of the customer's
journey. This maximises efficiency and is part of our developing
self-service strategy, should customers choose to shop that way and
we continue to ensure we have the best staff at the end of the
phone to give a bit more of a personal touch. The use of functions
such as Live and Nano chat (an automated alternative to live chat)
together with the learnings identified from our Customer Labs
really help us to understand our customers so we can meet their
needs and tailor our offering appropriately. The way in which
consumers shop is ever evolving and we must work hard to keep up
with changing preferences.
During the year we invested further in our digital content team,
which is now 40+ strong as we evolve our content strategy and apply
the learnings from our Customer Lab sessions. The team creates
innovative and essential content, for example through 3D video's
and features, as we continue with our goal for our website to be
the destination for information for customers. This content adds
value to the customer journey and to the manufacturers we buy from
and we are investing in rolling this out further.
Our CRM strategy continues to evolve and we are keen to build on
all aspects of the customer life cycle, not just the point of
purchase. AO Life, our online lifestyle magazine, together with
social media and personalised email programmes provide handy hints
on how to use and maintain products. We have also been working on
how to improve what happens when, unfortunately, products break
down and to this end have renegotiated a deal with Domestic and
General ("D&G"), our extended warranty partner. Our new
pan-European 10 year deal [signed yesterday] will see some exciting
developments in the extended warranties that we can offer to
customers (as agent for D&G) that demonstrate our values and
excels in service delivery and care, whilst at the same time
ensuring that customers really do get value for money from this
type of product.
We added two additional outbases to our UK logistics
infrastructure over the reporting period, one in Slough and the
other in Dundee. This will help ensure resilience in our delivery
network and maintain market-leading product availability for
customers, whilst reducing stem mileage and improving efficiencies
in our logistics. Our premier fleet has grown significantly as we
respond to increasing demand for more complex installation
services. In addition to developing a trainee programme for
newly-qualified engineers, some of our self-employed subcontractors
now have the skillset to connect electric cookers and integrated
products.
Further, as part of our responsible retailing programme, we have
now completed the build of our recycling facility at Telford. The
official launch of AO Recycling will happen later in 2017, but our
state-of-the art recycling plant is now operational and ensures
WEEE is safely and properly disposed of and that re-use is
optimised. This vertical integration ensures further end-to-end
control of our reverse supply chain with the associated
environmental benefits. It is another great example of how we have
applied The AO Way to an underinvested section of the market which
we believe can make a very exciting contribution to the business in
the future.
The results of the above initiatives can be seen in our Net
Promoter Score ("NPS" an industry measure of customer loyalty and
satisfaction) which over the year has been maintained at a
consistently high level of over 80 and our UK Trustpilot score was
an excellent 9.5 at the period end. In addition, we were proud to
be voted 2nd best online retailer in the UK in the annual Which?
Survey in October 2016 and just after our year end AO was named
Best UK Retailer by the public in GlobalData's 2017 Customer
Satisfaction Awards (previously the Verdict Retail Awards). There
is no better testament to our service than the feedback from our
customers and this award highlights the continuing strength of our
commitment to ensure our customers receive the best possible
service.
-- Europe
We are enjoying good customer feedback in both territories with
NPS scores remaining outstanding at over 85. AO.de had a Trusted
Shops score of 4.81 out of 5 and AO.nl had a Trustpilot score of
9.6 out of 10 at our year end and repeat business is already
building momentum.
Our brand new regional distribution centre (RDC) in Bergheim,
serving Germany and The Netherlands, became fully operational in
September 2016. With 35,000m2 of warehouse space, the RDC allows us
to improve product availability for our customers and promote brand
awareness. The RDC comprises a head office allowing the retail and
logistics divisions to become more cohesive, drive efficiencies and
embed a consistent AO culture. With a capacity of five times our
previous facility we are well resourced to fulfil our future
growth.
We have partnered with third party logistics firms to better
serve customers in more remote areas while also reducing delivery
costs, working closely with them to ensure that their service meets
our high expectations. As we increase scale and drive efficiencies,
we plan to add additional outbases to our existing infrastructure,
replicating our UK model.
To improve the customer proposition further during the year, we
introduced electrical premium installations in Germany and plan to
extend this offering in The Netherlands during the current
financial year. We have also introduced Live Chat functionality and
have launched the MyAO app. As in the UK, we also intend to
implement Customer Labs into our European operations as we seek to
understand customer needs and behaviours in these territories and
tailor our offering accordingly.
As reported at the half year, the warranty product we offer on
behalf of D&G has not achieved the volumes we were expecting in
Europe, but as part of our new agreement with D&G, we are
seeking to work together to develop the product and its promotion
to be more effective in and promote a more appropriate product for
this market. We will also look to launch a Dutch warranty offering
during the course of the year ahead.
Categories
AO is now an electrical retailer; not just a white goods one. We
have continued to extend our MDA model to the SDA and AV categories
in the UK and this year we have launched computing in the UK. In
Europe we now sell the AV category in addition to MDA and
Floorcare. We believe we can replicate the model further and we are
exploring other categories within the "electricals" sphere where we
can leverage our existing relationships with the brands and also
our infrastructure.
-- UK
One of our greatest achievements during the reporting period was
the successful launch of our computing category. We are delighted
by our progress so far, leveraging the investments we have
previously made in our web content, IT and product teams to add the
category seamlessly to ao.com.
Customers tend to shop this category differently to others and
we therefore had to develop ways of demystifying products to make
them easier to understand to give customers the best choice, whilst
changing our back-end operations to utilise drop-ship vendor
methodology. Additionally, as there are different pre and
post-sales requirements, we had to ensure that our call centre
staff were trained to handle and deal with specific and sometimes
rather technical queries. Product information and customer advice
are the key areas where we believe AO can demonstrate a difference
to the existing market and hardware and software brands have been
supportive of our different approach to the category.
We are now in the process of defining the next stage of the
Computing category, making logical additions to our existing range.
Research into new complementary areas continues and we are
confident we can utilise the disciplines we have learnt from the
launch of computing to bring more value to customers in the
future.
We have seen some challenges in the MDA category over the past
few months with market data suggesting the market in the UK has
decreased year-on-year. However, we have continued to gain market
share and our increasing importance as a channel to market for the
leading brands has helped us grow product margin in this category.
Whilst we had a strong performance in the first half of the year,
in the second half MDA margin was under pressure following price
inflation.
We have gained further market share in both SDA and AV as our
credibility and authority, with both customer and manufacturers, in
these categories continues to build momentum. We now have all major
manufacturers on board in the SDA category and have grown further
market share in the floorcare sub-set of this category.
In the UK sales in our AV category have significantly increased
year on year, helped by a wider product range including premium
models with cutting-edge technologies and some exclusive branded
products. We have also expanded the audio offering this year adding
ultra-HD Blu-ray and turntables into our range.
-- Europe
We have made significant progress with our product manufacturers
over the period as our local strategy gains momentum and
relationships continue to improve. During the current financial
year we will continue to build on our partnerships with them and
further educate them about The AO Way. We will increase marketing
campaigns to produce engaging content for their customers, build
marketing support and leverage group-wide media assets.
Category development has continued with the launch of AV on
ao.de in early October 2016. We now sell TVs, home cinema
equipment, satellite receivers and Blu-ray players and sales to
date have been encouraging. We continue to build on the range,
adding new brands and recently expanded the category to include
audio headphones. We were able to apply our learnings from our
roll-out in the UK: ensuring local to local supplier engagement
with an AO industry expert, leveraging and utilising UK content at
a low cost and drawing on UK knowledge and experience. The ability
to utilise our existing UK content should help us attract
additional support from the manufactures as we look to expand our
categories and ranges.
Countries
Our ultimate goal is to become the best electrical retailer in
Europe and we now operate in three countries, the UK, Germany and
The Netherlands. Progress in Germany and The Netherlands gives us
further confidence that the model can be successfully replicated
and gives a very strong platform for future growth.
We are continuing to drive our European operation responsibly
with controlled growth. It has been a year of consolidation and
whilst financial performance has not met our expectations (with
investment losses being more than internally planned), we are
nonetheless pleased with the strategic progress made and now have a
firm foundation from which to further build our German and Dutch
market offerings.
Our new territories are taking the same journey that our UK
operation experienced in its infancy, which we communicated to
analysts and investors at our Capital Markets Day in February. The
strategy across Europe is identical to the focus we have in the UK;
to develop the customer proposition, categories, culture and brand,
to build and deliver a sustainable business.
We launched in The Netherlands in March 2016 and have been
extremely pleased with the way our brand has resonated with our
Dutch customers over the full year of trading. We applied the
learnings from our launch in Germany for example in terms of
supplier engagement, the recruitment of key personnel and customer
acquisition. This resulted in a smooth launch and we hit the ground
running, giving us the confidence to replicate this bolt-on model
in other territories when appropriate.
Chief Financial Officer's Review
During the year we maintained our focus on delivering value for
all our stakeholders through our 4C's strategy and have made good
progress against all these objectives. Furthermore we have
continued to grow Group revenue, increased profits across our core
UK business and ensured we are suitably capitalised to continue to
accelerate our growth across Europe. Going forward we will continue
to increase sales and profits by leveraging the assets we have
built, driving out further efficiencies and, in the short to medium
term, reinvesting our free cash flow in the growth of our European
operations.
We experienced a strong start to our financial year, driven in
part by the stamp duty change in March 2016 which had a positive
impact on the overall MDA market. During the second half we began
to feel the impacts of dampening consumer confidence and a
reduction in consumer spending power as a result of growing
inflationary pressures. Sterling deflation in our market saw cost
prices increase by 10-15% through 2016. Despite these factors and
the impact of lower trading days against the prior year (due to
2016 being a leap year), we achieved a 17.0% increase in Group
revenue to GBP701.2m.
In the first half of the year the Group made a profit (on an
Adjusted EBITDA basis) with UK profits exceeding Europe losses,
however with margin pressures in the UK in the second half of the
year our UK profitability growth reduced and Europe losses exceeded
such profit giving an overall Group Adjusted EBITDA loss for the
year.
Nonetheless, we have grown market share across all countries and
categories and have achieved a gross margin improvement of 0.7%
across the Group due to product margin gains and increased
efficiencies in our delivery network in Europe as our volumes
build. We are confident that we will be able to drive further
efficiencies and build margin by leveraging our increased scale,
although in the UK product margins are under pressure as we enter
the new financial year.
In the UK, our focus on educating our customers that AO is a
multi-category electrical retailer began to deliver results as we
experienced particularly strong performances in our SDA category
where we have continued to expand our range. Sales in our new
Computing category performed better than we initially anticipated
further highlighting that our innovative way of retailing and
demystifying products is resonating well with our customers and we
continued to see ancillary sales (including that of product
protection plans) perform well.
This financial year was a period of physical consolidation for
our European operations as we commenced operations from our new
regional distribution centre in Bergheim. This resulted in us
investing more than we had anticipated in Europe with operating
losses increasing to GBP27.6m (2016: GBP23.0m). The gross loss in
Europe reduced from GBP4.9m in 2016 to GBP4.0m in 2017, reflecting
the significant progress we have made with our supplier
relationships and improvements in delivery costs. Our increasing
scale has helped to leverage European SG&A Costs which have
reduced to 33.2% of revenue (2016: 44.4%), and we expect to make
further progress in the year ahead as volumes increase.
Over the next few years we will continue to apply our UK
learnings in Europe and undertake initiatives to continue to
improve product margins to a mature state, make supply chain and
cost-to-deliver efficiencies and utilise our UK assets where
possible, leveraging our cost base through growth, as we set out at
the Capital Markets Day in February 2017.
In March 2017 we announced that we had raised GBP50m of gross
proceeds via a placing of new shares in the Company from both new
and existing investors. The new shares were admitted to trading on
3 April 2017 which was outside our reporting period and therefore
the proceeds are not included in the balance sheet as at 31 March
2017 but are detailed within the "Events after the reporting
period" note on page 28. The placing was undertaken to suitably
capitalise the business to support our continued growth and
increasing scale, providing us with the flexibility to react to
market opportunities and changes whilst we capitalise on our
increased brand awareness.
Our customer base and repeat purchase metrics are healthy,
highlighting the benefits of our model which will help drive
continued growth across our new territories. Our expanding range
and categories ensures resilience as we broaden our revenue
streams. This, together with our strong balance sheet and
outstanding customer proposition, will ensure that we are well
positioned to trade well through possible challenging market
conditions.
Revenue (see Table 1)
For the year ended 31 March 2017 total Group revenue increased
by 17.0% to GBP701.2m (2016: GBP599.2m) missing our internal
expectations.
Revenue in the UK increased by 12.7% to GBP629.7m (2016:
GBP558.5m) largely driven by a 14.5% increase in "AO" website
sales, which includes AO.com and AO branded eBay shops which
accounted for GBP557.9m of revenue (2016: GBP487.1m). This growth
has been achieved through continuing to attract new customers to
the website and our existing customers continuing to repeat, our
investment to continue to raise awareness of the AO brand and our
consistently strong customer proposition, all of which have helped
ensure a good mix of demand from both new and repeat customers. It
has however, been hampered by some challenges in the major domestic
appliance ("MDA") category in the final few months of the year with
overall market data suggesting the free-standing market in the UK
has decreased year-on-year.
In Europe, AO website sales from our German website, AO.de, and
also our Netherlands website, AO.nl, totalled revenues of GBP71.5m
(2016: GBP40.7m) equating to EUR84.7m (2016: EUR55.6m) and an
increase of 52.3% on a constant currency basis. This growth
reflects (i) a full year of trading in The Netherlands (with AO.nl
only being launched in March 2016) and (ii) growth in our AO.de
sales. Growth in the German operation is particularly pleasing as
it has been achieved despite a low level of promotional activity
during the year as we consolidated our cost base and opened our new
regional distribution centre in Bergheim, currently serving both
our German and Dutch markets. Growth in sales was therefore largely
driven by the strong testimonials received from customers who have
experienced The AO Way of shopping and digital marketing (Google,
affiliates etc).
AO branded website sales (including AO.com, AO.de, AO.nl and AO
branded eBay shops) now account for 89.8% of total Group revenue
(2016: 88.1%).
Sales from third-party websites in the UK reduced to GBP46.0m
(2016: GBP53.6m) as our focus remains on promoting the AO.com
brand, eroding the market share of some of these clients and
indicating the overall challenging market conditions.
Included within "Other sales" is revenue from UK third-party
logistics services and, from this year, our recycling business.
This segment experienced a 44.9% increase in revenue to GBP25.8m
(2016: GBP17.8m) driven by revenue from the recycling business and
as we benefitted from the extension of a short term logistics
contract which commenced in the final quarter of the previous
financial year. This contract has now expired and going forward we
would expect to see revenue from third party logistics services
fall. Recycling income includes revenue from the sale of evidence
notes following our treatment of WEEE, packaging recycling income
and revenue from the sale of materials derived from the recycling
process. The new plant at Telford became operational towards the
end of the year and therefore we would expect revenue from this
operation to increase going forward although it will be very small
part of overall Group revenue.
"AO website sales" and, for the UK, "Third-party website sales"
includes revenue earned from the sale of physical products and also
ancillary services such as delivery, the installation of products,
unpack, inspect, together with commission earned from the promotion
of Domestic and General's product protection plans and, in the UK,
customer finance. Revenue from such ancillary service sales in the
period achieved growth consistent with product sales representing
11.6% of total sales at GBP81.0m (2016: 10.6%, GBP63.7m).
Table 1
2017 2016 % change
-------------------- -------------------- ------------------------
UK Europe Total UK Europe Total UK Europe Total
AO website sales 557.9 71.5 629.4 487.1 40.7 527.8 14.5% 75.9% 19.3%
----------------- ----- ------ ----- ----- ------ ----- ------ ------ ------
Third-party
website sales 46.0 - 46.0 53.6 - 53.6 -14.2% n/a -14.2%
----------------- ----- ------ ----- ----- ------ ----- ------ ------ ------
Other sales 25.8 - 25.8 17.8 - 17.8 44.9% n/a 44.9%
----------------- ----- ------ ----- ----- ------ ----- ------ ------ ------
Revenue 629.7 71.5 701.2 558.5 40.7 599.2 12.7% 75.9% 17.0%
----------------- ----- ------ ----- ----- ------ ----- ------ ------ ------
Gross margin (see table 2)
Gross margin for the Group, which includes product margin,
delivery costs, commissions from selling product protection plans
and other ancillaries (which attract a higher margin as a
percentage of revenue than product sales) grew to 18.4% for the
reporting period. This was an improvement of 0.7ppts against the
prior year with gross profit increasing by 22.0% to GBP129.2m
(2016: GBP105.9m), largely driven by leverage in Europe.
In the UK, gross margin increased by 1.4ppts to 21.2% (2016:
19.8%). The improvement was predominately due to improved supplier
product margin in our MDA and AV categories reflecting
strengthening relationships with our product manufacturers and our
ability to leverage our brand and scale. We also benefitted from
continuing volume efficiencies realised from our delivery bases as
we continue to grow. However, we had margin headwinds during the
second half of the year due to supplier pricing pressures following
adverse currency movements post the Brexit referendum.
In line with the increase in revenue relative to the prior
period, in the UK the contribution from ancillaries increased
slightly with additional next day delivery charges. The
contribution to profit relative to revenue from other ancillaries
increased slightly year-on-year reflecting the increase in delivery
income described above. The contribution to profit from product
protection plans and other ancillaries (excluding delivery)
relative to revenue remained consistent with the previous year.
In Europe the gross loss reduced by 18.2% to GBP4.0m (2016:
GBP4.9m) and gross margin improved by 6.5ppts to -5.6% (2016:
-12.1%), with the losses and negative margin continuing to
represent the early stage of these operations (with relatively low
product margins and higher costs to deliver due to low drop
densities at our current scale). However, during the period we have
made significant progress with our supplier relationships resulting
in solid improvements in product margin. In addition, our
individual costs of delivery have improved following (i) internal
efficiency drives (ii) a full year's trading in The Netherlands
which leverages our German infrastructure cost base (iii)
increasing order levels which improved our drop densities and (iv)
the use of a third party logistics delivery model in areas with
very low population density.
Table 2
2017 2016 % change
-------------------- -------------------- -------------------- --------------------
Year ended
31 March (GBPm) UK Europe Total UK Europe Total UK Europe Total
-------------------- ----- ------ ----- ----- ------ ----- ----- ------ -----
Gross profit/(loss) 133.2 (4.0) 129.2 110.8 (4.9) 105.9 20.2% -18.2% 22.0%
-------------------- ----- ------ ----- ----- ------ ----- ----- ------ -----
Gross margin
% 21.2% -5.6% 18.4% 19.8% -12.1% 17.7% 1.4 6.5 0.7
-------------------- ----- ------ ----- ----- ------ ----- ----- ------ -----
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.
Selling, General & Administrative Expenses ("SG&A") (see
Table 3)
Total Group SG&A expenses increased by 22.2% over the year
by GBP25.9m to GBP142.4m (2016: GBP116.5m).
UK SG&A expenses for the year to 31 March 2017 increased by
20.6% to GBP118.6m (2016: GBP98.4m) and represented 18.8% of sales
(2016: 17.6%). UK advertising and marketing expenditure as a
percentage of revenue remained broadly unchanged year on year at
4.1% (2016: 4.3%) as we continue our strategy to grow brand
awareness. We achieved a strong reduction across our traditional
customer acquisition costs as a result of an increase in direct
traffic (following improved brand awareness), improved efficiencies
and improved Search Engine Optimisation ("SEO") performance. This
has enabled us to further invest in TV and other advertising costs
to accelerate our brand awareness strategy, which has continued
into the new financial year with the sponsorship of Britain's Got
Talent.
UK warehousing costs increased by GBP6.2m to GBP27.3m (2016:
GBP21.1m) representing 4.3% of revenue (2016: 3.8%) as we incurred
a full year of trading from our second warehouse in Crewe and
strengthened our distribution network via the opening of two new
stockless outbases in Slough and Dundee. The additional outbases
helped to reduce stem mileage thus creating further efficiencies in
delivery costs reflected in gross margin and part of the cost of
the second warehouse in Crewe was offset by the sub-let of part of
it (the income from which sits in other Operating Income). As we
continue to grow we should achieve greater efficiencies due to
scale.
"UK Other administration" expenses increased by GBP9.0m to
GBP61.4m (2016: GBP52.4m) and as a percentage of sales increased
moderately to 9.7% (2016: 9.4%). The increase is largely related to
investments made in trading teams for our new categories, our
multi-media and IT teams in advance of anticipated further
growth.
UK Administrative expenses also includes GBP4.3m of costs in
relation to (i) share based payment charges which relate to a three
year scheme introduced during the year (which the Board considers
one-off in nature) and (ii) European set-up costs (namely strategic
post-go-live costs) (2016: GBP0.7m, which included a share based
payment credit of GBP0.4m).
Our increasing scale has helped to leverage European SG&A
costs which have reduced to 33.2% of revenue (2016: 44.4%). Whilst
this level of costs still reflects the relatively young nature of
these operations we expect to make further progress in the year
ahead as volumes increase and we continue to apply our well
established UK business model, for example in respect of customer
acquisition costs. We expect that such costs will not rise
significantly going forward and we are ready for growth.
Europe advertising and marketing expenses have been held in line
with the prior year at GBP6.2m (2016: GBP6.2m). This was a
conscious decision by the Group to ensure a smooth transition as we
consolidated our European operations. Warehousing costs incurred in
our European operations increased by GBP1.8m in the period to
GBP4.0m (2016: GBP2.2m) reflecting the opening of our Bergheim
facility (although one chamber of the warehouse is currently
sub-let) and we will continue to leverage this asset as we grow our
volume. Other administration expenses increased by 59.8% to
GBP13.6m (2016: GBP8.5m) as our headcount increased to a level
ready for our next phase of growth.
Table 3
2017 2016 % change
-------------------- -------------------- -----------------------
Year ended 31
March (GBPm) UK Europe Total UK Europe Total UK Europe Total
Advertising and
marketing 25.7 6.2 31.9 24.2 6.2 30.4 6.2% -0.7% 4.8%
--------------------- ----- ------ ----- ----- ------ ----- ------ ------- ------
% of revenue 4.1% 8.6% 4.5% 4.3% 15.3% 5.1%
--------------------- ----- ------ ----- ----- ------ ----- ------ ------- ------
Warehousing 27.3 4.0 31.3 21.1 2.2 23.3 29.4% 82.3% 34.4%
--------------------- ----- ------ ----- ----- ------ ----- ------ ------- ------
% of revenue 4.3% 5.6% 4.5% 3.8% 5.5% 3.9%
--------------------- ----- ------ ----- ----- ------ ----- ------ ------- ------
Other administration 61.4 13.6 75.0 52.4 8.5 60.9 17.1% 59.8% 23.1%
--------------------- ----- ------ ----- ----- ------ ----- ------ ------- ------
% of revenue 9.7% 19.0% 10.7% 9.4% 20.8% 10.2%
--------------------- ----- ------ ----- ----- ------ ----- ------ ------- ------
Adjustments(1) 4.3 - 4.3 0.7 1.2 1.9 507.2% -100.0% 123.7%
--------------------- ----- ------ ----- ----- ------ ----- ------ ------- ------
% of revenue 0.7% n/a 0.6% 0.1% 2.8% 0.3%
--------------------- ----- ------ ----- ----- ------ ----- ------ ------- ------
Administrative
expenses 118.6 23.8 142.4 98.4 18.1 116.5 20.6% 31.2% 22.2%
--------------------- ----- ------ ----- ----- ------ ----- ------ ------- ------
% of revenue 18.8% 33.2% 20.3% 17.6% 44.4% 19.4%
--------------------- ----- ------ ----- ----- ------ ----- ------ ------- ------
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.
1 Adjustments is defined by the Group as (i) set-up costs
relating to overseas expansion namely strategic post go-live costs
incurred in connection with our European expansion strategy of
GBP0.7m (2016: GBP2.3m) and (ii) share-based payment charges of
GBP3.6m (2016: GBP0.4m credits) attributable to the exceptional
LTIP awards which the Board considers one-off in nature.
Operating Loss and Adjusted EBITDA (see Table 4)
Our operating loss was GBP12m for the period, with operating
losses increasing by GBP1.4m against the prior period.
However, when reviewing profitability, the Directors use an
adjusted measure of EBITDA in order to give a meaningful
year-on-year comparison and it is a performance criteria for the
purposes of both the Executive management's annual bonus and recent
LTIP awards. Whilst we recognise that the measure is an alternative
(non-Generally Accepted Accounting Practice ("non-GAAP"))
performance measure which is also not defined within IFRS, this
measure is important and should be considered alongside the IFRS
measures. The adjustments are separately disclosed below.
Group Adjusted EBITDA losses reduced to GBP2.1m (2016: GBP3.9m
losses) after allowing for GBP26.5m of Europe Adjusted EBITDA
losses (2016: GBP21.1m). In local currency (removing the impact of
foreign exchange movements), European losses increased by 3.3% to
EUR31.5m (2016: EUR30.4m), reflecting losses incurred in The
Netherlands operation in its early stages of trading and further
losses in the German business as we continue on our journey to
build critical mass.
UK Adjusted EBITDA for the 12 months to 31 March 2017 was
GBP24.4m (2016: GBP17.2m) representing a significant increase of
41.7% against the prior year period following growth in sales and
improvement in gross margin.
Overall, Group Adjusted EBITDA missed our internal expectations
but fell within our guided range.
Table 4
2017 2016 % change
--------------------- --------------------- -------------------------------
Year ended 31
March (GBPm) UK Europe Total UK Europe Total UK Europe Total
Operating profit/(loss) 15.6 (27.6) (12.0) 12.4 (23.0) (10.6) 25.9% 20.1% 13.2%
-------------------------- ----- ------ ------ ----- ------ ------ --------- --------- ---------
Add adjustments:
Europe set-up
costs 0.7 - 0.7 1.1 1.2 2.3 -43.9% -100% -73.2%
-------------------------- ----- ------ ------ ----- ------ ------ --------- --------- ---------
Non-cash share-based
payments charge/(credit)
for exceptional
LTIP awards 3.6 - 3.6 (0.4) - (0.4) -1,008.3% N/A -1,008.3%
-------------------------- ----- ------ ------ ----- ------ ------ --------- --------- ---------
Adjusted operating
profit 19.8 (27.6) (7.8) 13.1 (21.8) (8.7) 51.6% 26.7% -10.9%
-------------------------- ----- ------ ------ ----- ------ ------ --------- --------- ---------
Add: Depreciation
and amortisation 4.9 1.1 6.0 4.1 0.7 4.8 17.3% 62.9% 23.9%
-------------------------- ----- ------ ------ ----- ------ ------ --------- --------- ---------
Less: Profit
on disposal (0.3) - (0.3) 0.0 0.0 0.0 N/A N/A N/A
-------------------------- ----- ------ ------ ----- ------ ------ --------- --------- ---------
Adjusted EBITDA 24.4 (26.5) (2.1) 17.2 (21.1) (3.9) 41.7% 25.5% -46.7%
-------------------------- ----- ------ ------ ----- ------ ------ --------- --------- ---------
Adjusted EBITDA
as % of revenue 3.9% -37.0% -0.3% 3.1% -51.9% -0.7% 0.8ppts -14.9ppts 0.4ppts
-------------------------- ----- ------ ------ ----- ------ ------ --------- --------- ---------
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.
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 AO.nl and our continuing research into
other further countries along with strategic post "go-live"
costs.
Exceptional share-based payment charges/ (credits)
LTIP awards were made to a number of senior staff under the
Performance Share Plan at the time of the Company's IPO in 2014 and
also under the Employee Reward Plan (ERP) in July 2016. The Board
considers that the magnitude and timing of these awards are one-off
in nature and so add-back any charge/ (credit) in arriving at
Adjusted EBITDA. The difference in the add-back year on year
reflects the cumulative adjustment to the LTIP charge based on the
assessment of certain performance criteria during the period (with
the credit in 2016's numbers reflecting the likelihood that the IPO
award would not vest, whilst the charge this year relates to the
ERP which, having been granted during the year under review, was
not in the previous year).
AO Sharesave scheme charges and LTIP charges relating to the
LTIP awards which are not considered to be one-off in nature are
included in trading numbers.
Depreciation, amortisation and profit on disposal of fixed
assets
These are non-cash costs in relation to the Group's tangible and
intangible fixed assets which are added back to operating profit to
arrive at EBITDA which is considered to be a relevant proxy for
"cash operating profit". Profit on disposal of GBP0.3m (2016:
GBPnil) represents the gain on the disposal of the Group's existing
trailers as part of our trailer replacement programme.
Taxation
The tax charge for the year was GBP0.4m (2016: tax credit of
GBP0.6m). The effective rate of tax for the year was -6.3% (2016:
9.2%).
The Group is subject to taxes in the UK, Germany and The
Netherlands. Through its registered branch structure in Germany,
the Group is able to fully offset its German losses against profits
within the UK. Tax losses for prior years remain as carried forward
losses within Germany. Due to the start-up nature and losses in
Germany and The Netherlands, no overseas tax was attributable to
the period. Losses to date not utilised that are subject to
overseas tax are not recognised for deferred tax purposes on the
basis that the Group does not expect these territories to be
profitable until 2020. The above, along with the release of the
deferred tax asset in connection with the 2014 IPO LTIP scheme
results in a small Group tax charge despite the overall Group
loss.
Retained loss for the year and loss per share
Retained loss for the year was GBP7.4m (2016: GBP6.1m). Basic
loss per share was 1.56p (2016: 1.44p loss) which is positively
affected by a foreign exchange gain of GBP4.4m (2016: GBP2.7m)
arising from intra-group funding arrangements.
The foreign exchange gain has arisen as a result of the
significant movement in the exchange rate between Sterling and the
Euro in the period. This has impacted the value of intra-group
loans held in GBP in the European entities and EUR loans held in
the UK giving rise to the GBP4.4m gain referenced above.
Below shows the adjusted basic loss per share excluding the
foreign exchange gain mentioned above.
Year ended 2016
31 March (GBPm) 2017
--------------------------------------- ------------ ------------
Loss
Loss attributable to owners
of the parent company (6.6) (6.0)
Foreign exchange gains on intra-group
loans (4.4) (2.7)
Adjusted loss attributable to
owners of the parent company (11.0) (8.7)
--------------------------------------- ------------ ------------
Number of shares
Basic and adjusted weighted
average number of ordinary shares 421,052,631 421,052,631
--------------------------------------- ------------ ------------
Loss per share (in pence)
Basic loss per share (1.56) (1.44)
Adjusted basic loss per share (2.62) (2.07)
--------------------------------------- ------------ ------------
Cash resources and cash flow
Year-end net funds position was GBP12.0m (2016: GBP25.4m), as
cash decreased to GBP29.4m (2016: GBP33.4m) principally reflecting
capital expenditure in the UK and investment in the new RDC in
Bergheim offset partly by a positive operating cash-flow of GBP3.5m
(2016: outflow of GBP3.5m), whilst total borrowings (comprising
asset finance and bank borrowings) increased to GBP17.4m from
GBP8.0m in 2016. The increase principally reflects the funding for
investment in the UK's logistics fleet and the new recycling plant
in the UK.
In June 2016, the Group put in place a revolving credit facility
of GBP30m with Lloyds Bank Plc and Barclays Bank Plc in order to
fund UK working capital movements.
Working capital (see Table 5)
At 31 March 2017, the Group had net current liabilities of
GBP28.5m (31 March 2016: net current liabilities of GBP8.7m)
principally as a result of improved terms with the Group's
suppliers offsetting an increase in inventories.
As at 31 March 2017 UK inventories were GBP35.7m (2016:
GBP30.9m) reflecting an increase in sales volumes and an increase
in our stock-holding to support the AV category which is generally
only bought in bulk loads and to lock in prices prior to supplier
price increases. As a result UK average stock days increased to 31
days (2016: 29 days).
UK trade and other receivables (both non-current and current)
were GBP76.9m as at 31 March 2017 (2016: GBP59.3m) reflecting an
increase in accrued income in respect of commissions due on product
protection plans as a result of the higher retail volumes. UK trade
and other payables increased to GBP129.0m (2016: GBP102.8m)
reflecting increased inventory and manufacturers continuing to
extend credit on the higher volume of sales.
At 31 March 2017, European inventories were GBP9.1m (2016:
GBP3.1m) principally as a result of the increase in sales volumes
in both territories during the year. This is also reflected in the
increase in trade and other payables from GBP6.3m to GBP11.2m.
Trade and other receivables remained broadly in line with the prior
year at GBP4.0m (2016: GBP4.6m) with the increase in trade being
offset by improvement in terms with certain payment providers.
Table 5
2017 2016
------------------------ ------------------------
Year ended 31 March (GBPm) UK Europe Total UK Europe Total
Inventories 35.7 9.1 44.8 30.9 3.1 34.0
------------------------------ ------- ------ ------- ------- ------ -------
As % of COGS 7.2% 11.9% 7.8% 6.9% 6.8% 6.9%
------------------------------ ------- ------ ------- ------- ------ -------
Trade and other receivables 76.9 4.0 80.9 59.3 4.6 63.9
------------------------------ ------- ------ ------- ------- ------ -------
As a % of revenue 12.2% 5.6% 11.5% 10.6% 11.2% 10.7%
------------------------------ ------- ------ ------- ------- ------ -------
Trade and other payables (129.0) (11.2) (140.2) (102.8) (6.3) (109.0)
------------------------------ ------- ------ ------- ------- ------ -------
As a % of COGS 26.0% 14.8% 24.5% 23.0% 13.7% 22.1%
------------------------------ ------- ------ ------- ------- ------ -------
Net working capital (16.3) 1.8 (14.5) (12.6) 1.4 (11.2)
------------------------------ ------- ------ ------- ------- ------ -------
Change in net working capital (3.7) 0.4 (3.3) (4.2) 0.8 (3.4)
------------------------------ ------- ------ ------- ------- ------ -------
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.
Capital expenditure
Total capital expenditure for the year was GBP16.9m (2016:
GBP8.7m), which comprised expenditure in relation to our new
distribution centre in Bergheim and two new outbases in the UK, our
recycling facility at AO recycling in Telford and the refresh of
trailers in our logistics operation. GBP10.9m of such expenditure
has been funded by finance leases.
Events after the reporting period
On 3 April 2017 we completed a placing of new shares in the
Company to raise GBP50m gross proceeds to suitably capitalise the
business to support our continued growth and increasing scale.
Steve Caunce Mark Higgins
CEO CFO
6 June 2017
CONSOLIDATED INCOME STATEMENT
For the year ended 31 March 2017
31 March 31 March
2017 2016
Note GBPm GBPm
Revenue 2 701.2 599.2
Cost of sales (572.0) (493.3)
------------------------------- ---- ---------- ----------
Gross profit 129.2 105.9
Administrative expenses (142.4) (116.5)
Other operating income 1.2 -
------------------------------- ---- ---------- ----------
Operating loss (12.0) (10.6)
Finance income 4 6.8 4.2
Finance costs 5 (1.8) (0.3)
------------------------------- ---- ---------- ----------
Loss before tax (7.0) (6.7)
Tax (charge)/credit 7 (0.4) 0.6
------------------------------- ---- ---------- ----------
Loss for the period (7.4) (6.1)
------------------------------- ---- ---------- ----------
Loss for the year attributable
to:
Owners of the parent company (6.6) (6.0)
Non-controlling interest (0.8) (0.1)
------------------------------- ---- ---------- ----------
(7.4) (6.1)
------------------------------- ---- ---------- ----------
Loss per share (pence)
Basic loss per share 6 (1.56) (1.44)
Diluted loss per share 6 (1.55) (1.44)
------------------------------- ---- ---------- ----------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2017
31 March 31 March
2017 2016
GBPm GBPm
Loss for the period (7.4) (6.1)
------------------------------------- ---------- -------------------------
Items that may be subsequently
recycled to Income Statement
Exchange differences on translation
of foreign operations (3.5) (2.5)
------------------------------------- ---------- -------------------------
Total comprehensive loss for
the period (10.9) (8.6)
------------------------------------- ---------- -------------------------
Loss for the year attributable
to:
Owners of the parent company (10.1) (8.5)
Non-controlling interest (0.8) (0.1)
------------------------------------- ---------- -------------------------
(10.9) (8.6)
------------------------------------ ---------- -------------------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2017
At At
31 March 31 March
2017 2016
GBPm GBPm
------------------------------ --------- ---------
Non-current assets
Goodwill 13.5 13.5
Other intangible assets 1.8 2.1
Property, plant and equipment 29.3 18.0
Trade and other receivables 39.8 29.5
Derivative financial
asset 1.3 0.8
Deferred tax asset 1.8 1.5
-------------------------------- --------- ---------
87.5 65.4
------------------------------ --------- ---------
Current assets
Inventories 44.8 34.0
Trade and other receivables 41.1 34.4
Corporation tax receivable 0.2 0.7
Cash and cash equivalents 8 29.4 33.4
115.5 102.5
------------------------------ --------- ---------
Total assets 203.0 167.9
-------------------------------- --------- ---------
Current liabilities
Trade and other payables (140.2) (109.0)
Borrowings 8 (3.7) (2.2)
Provisions (0.1) -
-------------------------------- --------- ---------
(144.0) (111.2)
------------------------------ --------- ---------
Net current liabilities (28.5) (8.7)
-------------------------------- --------- ---------
Non-current liabilities
Borrowings 8 (13.7) (5.8)
Derivative financial
liability (3.4) (2.7)
Provisions (1.4) (0.8)
Total liabilities (162.5) (120.5)
-------------------------------- --------- ---------
Net assets 40.5 47.4
-------------------------------- --------- ---------
Equity attributable to
owners of the parent
Share capital 1.1 1.1
Share premium account 55.7 55.7
Other reserves 1.0 3.8
Retained losses (15.6) (12.3)
-------------------------------- --------- ---------
Total 42.2 48.3
-------------------------------- --------- ---------
Non-controlling interest (1.7) (0.9)
-------------------------------- --------- ---------
Total equity 40.5 47.4
-------------------------------- --------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2017
Other reserves
-------------------------------------------------------
Share Capital Share-based
Share premium Merger redemption payments Translation Other Retained Non-controlling
capital account reserve reserve reserve reserve reserve losses Total interest Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------- ------- ------- ---------- ----------- ----------- -------- --------- ----- --------------- -------
Balance at
1 April 2015 1.1 55.7 4.4 (1.1) 2.8 0.4 - (4.7) 58.6 - 58.6
---------------- ------- ------- ------- ---------- ----------- ----------- -------- --------- ----- --------------- -------
Loss for
the year - - - - - - - (6.0) (6.0) (0.1) (6.1)
Foreign currency
gains arising
on
consolidation - - - - - (2.5) - - (2.5) - (2.5)
Share-based
payments
charge net
of tax - - - - 0.3 - - - 0.3 - 0.3
Put option
over
non-controlling
interest - - - - - - (2.1) - (2.1) - (2.1)
Transfer
between
reserves - - - 1.6 - - - (1.6) - - -
Acquisition
of subsidiary - - - - - - - - - (0.8) (0.8)
---------------- ------- ------- ------- ---------- ----------- ----------- -------- --------- ----- --------------- -------
Balance at
1 April 2016 1.1 55.7 4.4 0.5 3.1 (2.1) (2.1) (12.3) 48.3 (0.9) 47.4
---------------- ------- ------- ------- ---------- ----------- ----------- -------- --------- ----- --------------- -------
Loss for
the year - - - - - - - (6.6) (6.6) (0.8) (7.4)
Share-based
payments
charge net
of tax - - - - 4.0 - - - 4.0 - 4.0
Foreign currency
gain on
consolidation - - - - - (3.5) - - (3.5) - (3.5)
Movement
between
reserves - - - - (3.3) - - 3.3 - - -
---------------- ------- ------- ------- ---------- ----------- ----------- -------- --------- ----- --------------- -------
Balance at
31 March
2017 1.1 55.7 4.4 0.5 3.8 (5.6) (2.1) (15.6) 42.2 (1.7) 40.5
---------------- ------- ------- ------- ---------- ----------- ----------- -------- --------- ----- --------------- -------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2017
2016
2017 GBPm
GBPm
----------------------------------------------- ------ ------
Cash flows from operating activities
Loss for the period (7.4) (6.1)
Adjustments for:
Depreciation and amortisation 6.0 4.8
Finance income (6.8) (4.2)
Finance costs 1.8 0.3
Profit on disposal of property, plant
and equipment (0.3) -
Taxation charge/(credit) 0.4 (0.6)
Increase in provisions 0.7 -
Share-based payment charge 4.0 0.2
------------------------------------------------ ------ ------
Operating cash flows before movement
in working capital (1.6) (5.6)
------------------------------------------------ ------ ------
Increase in inventories (10.3) (2.4)
Increase in trade and other receivables (13.3) (15.8)
Increase in trade and other payables 28.9 20.3
5.3 2.1
Taxation paid (0.2) -
------------------------------------------------ ------ ------
Cash generated from/(absorbed by)
operating activities 3.5 (3.5)
------------------------------------------------ ------ ------
Cash flows from investing activities
Interest received 0.2 0.2
Proceeds from sale of property,
plant and equipment 0.9 -
Acquisition of property, plant and
equipment (5.7) (6.1)
Acquisition of intangible assets (0.3) (0.5)
Cash used in investing activities (4.9) (6.4)
------------------------------------------------ ------ ------
Cash flows from financing activities
Proceeds from new borrowings 8.1 0.9
Interest paid (1.1) (0.3)
Repayments of borrowings (6.4) -
Payment of finance lease liabilities (3.4) (2.4)
Net cash used in financing activities (2.8) (1.8)
------------------------------------------------ ------ ------
Net decrease in cash (4.2) (11.7)
Cash and cash equivalents at beginning
of period 33.4 44.9
------------------------------------------------ ------ ------
Exchange gains on cash & cash equivalents 0.2 0.2
------------------------------------------------ ------ ------
Cash and cash equivalents at end
of period 29.4 33.4
------------------------------------------------ ------ ------
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 2017 or
2016, but is derived from those accounts. Statutory accounts for
2016 have been delivered to the Registrar of Companies and those
for 2017 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
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 takes into consideration the
forecasted cash flow of the Group, the availability of a GBP30m
Revolving Credit Facility and the net proceeds of the share placing
which raised GBP50.0m gross. Thus they continue to adopt the going
concern basis of accounting in preparing the financial
statements.
Non statutory measures
One of the Group's key performance indicators is Adjusted
EBITDA. EBITDA is adjusted for one off items that do not reflect
the underlying trading of the business. Such adjustments
include:
-- 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 AO.nl and our continuing research into
other further countries along with strategic post "go-live"
costs.
-- Exceptional share-based payment charges/ (credits)
LTIP awards were made to a number of senior staff under the
Performance Share Plan at the time of the Company's IPO in 2014 and
also under the Employee Reward Plan (ERP) in July 2016. The Board
considers that the magnitude and timing of these awards are one-off
in nature and so add-back any charge/ (credit) in arriving at
Adjusted EBITDA. The difference in the add-back year on year
reflects the cumulative adjustment to the LTIP charge based on the
assessment of certain performance criteria during the period (with
the credit in 2016's numbers reflecting the likelihood that the IPO
award would not vest, whilst the charge this year relates to the
ERP which, having been granted during the year under review, was
not in the previous year).
AO Sharesave scheme charges and LTIP charges relating to the
LTIP awards which are not considered to be one-off in nature are
included in trading numbers.
2. Revenue
An analysis of the Group's revenue is as follows:
Year ended 31 March (GBPm) 2017 2016
--------------------------- ----- -----
Own website sales 629.4 527.8
Third-party website sales 46.0 53.6
Other sales 25.8 17.8
--------------------------- ----- -----
701.2 599.2
--------------------------- ----- -----
Year ended 31
March (GBPm) 2017 2016
--------------- ----------------------- -------------------------
UK Europe Total UK Europe Total
--------------- ------ ------- ------ ------ ------- ------
Product sales 552.5 67.7 620.2 497.6 37.9 535.5
Service sales 77.2 3.8 81.0 60.9 2.8 63.7
--------------- ------ ------- ------ ------ ------- ------
629.7 71.5 701.2 558.5 40.7 599.2
--------------- ------ ------- ------ ------ ------- ------
3. Segmental analysis
The Group has two reportable segments, online retailing of
domestic appliances to customers in the UK and online retailing of
domestic appliances to customers in Europe (excluding the UK).
Operating segments are determined by the internal reporting
regularly provided to the Group's Chief Operating Decision Maker.
The Chief Operating Decision Maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Executive Directors and has
determined that the primary segmental reporting format of the Group
is geographical by customer location, based on the Group's
management and internal reporting structure.
a. Income statement
The following is an analysis of the Group's revenue and results
by reportable segments.
Year ended 31 March (GBPm) 2017 2016
--------------------------- ------------------------ ------------------------
UK Europe Total UK Europe Total
--------------------------- ------- ------ ------- ------- ------ -------
AO website sales 557.9 71.5 629.4 487.1 40.7 527.8
Third-party website sales 46.0 - 46.0 53.6 - 53.6
Other sales 25.8 - 25.8 17.8 - 17.8
--------------------------- ------- ------ ------- ------- ------ -------
Total revenue 629.7 71.5 701.2 558.5 40.7 599.2
--------------------------- ------- ------ ------- ------- ------ -------
Cost of sales (496.5) (75.5) (572.0) (447.7) (45.6) (493.3)
--------------------------- ------- ------ ------- ------- ------ -------
Gross profit/(loss) 133.2 (4.0) 129.2 110.8 (4.9) 105.9
--------------------------- ------- ------ ------- ------- ------ -------
Administrative expenses (118.6) (23.8) (142.4) (98.4) (18.1) (116.5)
--------------------------- ------- ------ ------- ------- ------ -------
Other operating income 1.1 0.1 1.2 - - -
--------------------------- ------- ------ ------- ------- ------ -------
Operating profit/(loss) 15.6 (27.6) (12.0) 12.4 (23.0) (10.6)
--------------------------- ------- ------ ------- ------- ------ -------
Finance income 3.3 3.5 6.8 1.5 2.7 4.2
--------------------------- ------- ------ ------- ------- ------ -------
Finance cost (1.7) (0.1) (1.8) (0.3) - (0.3)
--------------------------- ------- ------ ------- ------- ------ -------
Profit/(loss) before tax 17.2 (24.2) (7.0) 13.6 (20.3) (6.7)
--------------------------- ------- ------ ------- ------- ------ -------
Tax (charge)/credit (0.5) 0.1 (0.4) 0.5 0.1 0.6
--------------------------- ------- ------ ------- ------- ------ -------
Profit/(loss) after tax 16.7 (24.1) (7.4) 14.1 (20.2) (6.1)
--------------------------- ------- ------ ------- ------- ------ -------
One of the Group's key performance indictors is Adjusted EBITDA
and each segment is measured by the Chief Operating Decision Maker
on this basis. Adjusted EBITDA is calculated 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 period.
The adjustments include:
-- 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 AO.nl and our continuing research into
other further countries along with strategic post "go-live"
costs.
-- Exceptional share-based payment charges/ (credits)
LTIP awards were made to a number of senior staff under the
Performance Share Plan at the time of the Company's IPO in 2014 and
also under the Employee Reward Plan (ERP) in July 2016. The Board
considers that the magnitude and timing of these awards are one-off
in nature and so add-back any charge/ (credit) in arriving at
Adjusted EBITDA. The difference in the add-back year on year
reflects the cumulative adjustment to the LTIP charge based on the
assessment of certain performance criteria during the period (with
the credit in 2016's numbers reflecting the likelihood that the IPO
award would not vest, whilst the charge this year relates to the
ERP which, having been granted during the year under review, was
not in the previous year).
AO Sharesave scheme charges and LTIP charges relating to the
LTIP awards which are not considered to be one-off in nature are
included in trading numbers.
Adjusted EBITDA 31 March 2017 31 March 2016
Operating profit/(loss) 15.6 (27.6) (12.0) 12.4 (23.0) (10.6)
Depreciation 4.3 1.0 5.3 3.8 0.5 4.3
Amortisation 0.6 0.1 0.7 0.3 0.2 0.5
Profit on disposal (0.3) - (0.3) - - -
--------------------------------------------------- ----- ------ ------ ------ -------------- --------------
EBITDA 20.1 (26.5) (6.4) 16.5 (22.3) (5.8)
--------------------------------------------------- ----- ------ ------ ------ -------------- --------------
Share-based payments (credit)/charge attributable
to exceptional LTIP awards 3.6 - 3.6 (0.4) - (0.4)
Europe set-up costs 0.7 - 0.7 1.1 1.2 2.3
--------------------------------------------------- ----- ------ ------ ------ -------------- --------------
Adjusted EBITDA 24.4 (26.5) (2.1) 17.2 (21.1) (3.9)
--------------------------------------------------- ----- ------ ------ ------ -------------- --------------
b. Geographical analysis
Revenue by location is the same as that shown in section (a) by
reportable segment. Information on non-current assets by
geographical location is shown in section (c).
c. Other information
Additions
----------------
2017 (GBPm) Intangible PP&E Depreciation Amortisation Profit
assets on disposal
------------ ---------- ---- ------------ ------------ -------------
UK 0.2 14.1 4.3 0.6 (0.3)
Europe - 2.6 1.0 0.1 -
------------ ---------- ---- ------------ ------------ -------------
0.2 16.7 5.3 0.7 (0.3)
------------ ---------- ---- ------------ ------------ -------------
Additions
----------------
2016 (GBPm) Intangible PP&E Depreciation Amortisation
assets
------------ ---------- ---- ------------ ------------
UK 0.4 4.4 3.8 0.3
Europe 0.1 3.8 0.5 0.2
------------ ---------- ---- ------------ ------------
0.5 8.2 4.3 0.5
------------ ---------- ---- ------------ ------------
Due to the nature of its activities, the Group is not reliant on
any individual major customers or group of customers.
No analysis of the assets and liabilities of each operating
segment is provided to the Chief Operating Decision Maker in the
monthly board presentation, therefore no measure of segmental
assets or liabilities is disclosed in this note.
4. Finance income
Year ended 31 March (GBPm) 2017 2016
---------------------------- ----- ---------
Bank interest 0.2 0.2
Foreign exchange gains
on intra-group loans 4.4 2.7
Movement in valuation of
put and call option 0.5 0.2
Unwind of discounting on
long term receivables 1.7 1.1
---------------------------- ----- ---------
Total 6.8 4.2
---------------------------- ----- ---------
5. Finance costs
Year ended 31 March (GBPm) 2017 2016
---------------------------- ----- -----
Interest on obligations
under finance leases 0.5 0.3
Other Interest 0.6 -
Movement in valuation of 0.7 -
put and call option
---------------------------- ----- -----
Total 1.8 0.3
---------------------------- ----- -----
6. Loss per share
The calculation of the basic and diluted loss per share is based
on the following data:
Year ended 31 March (GBPm) 2017 2016
Loss
------------------------------------ ------------- -------------
Loss for the purposes of
basic and diluted earnings
per share being loss attributable
to the owners of the parent
company (6.6) (6.0)
------------------------------------ ------------- -------------
Number of shares
Weighted average number of
ordinary shares for the purposes
of basic loss per share 421,052,631 421,052,631
Potentially dilutive shares
options 1,337,071 -
Weighted average number of
diluted ordinary shares 422,389,702 421,052,631
Loss per share (pence)
------------------------------------ ------------- -------------
Basic loss per share (1.56) (1.44)
------------------------------------ ------------- -------------
Diluted loss per share (1.55) (1.44)
------------------------------------ ------------- -------------
Adjusted loss per share
The basic loss per share is positively affected by foreign
exchange gains arising from intra-group funding arrangements
therefore an adjusted loss per share has been calculated below
excluding this impact. The foreign exchange gain has arisen as a
result of the significant movement in the exchange rate between
Sterling and the Euro in the period. This has impacted the value of
intra-group loans held in GBP in the European entities and EUR
loans held in the UK giving rise to the GBP4.4m gain referenced
below.
Year ended 31 March (GBPm) 2017 2016
--------------------------------------------- ------------ ------------
Loss
Loss attributable to owners of the parent
company (6.6) (6.0)
Foreign exchange gains on intra-group
loans (4.4) (2.7)
Adjusted loss attributable to owners
of the parent company (11.0) (8.7)
--------------------------------------------- ------------ ------------
Number of shares
Basic, and adjusted weighted average
number of ordinary shares 421,052,631 421,052,631
Potentially dilutive shares options 1,337,071 -
Weighted average number of diluted ordinary
shares 422,389,702 421,052,631
--------------------------------------------- ------------ ------------
Loss per share (in pence)
Basic loss per share (1.56) (1.44)
Diluted loss per share (1.55) (1.44)
Adjusted basic loss per share (2.62) (2.07)
--------------------------------------------- ------------ ------------
7. Taxation
Year ended 31 March (GBPm) 2017 2016
Corporation tax:
Current year 0.6 -
0.6 -
Deferred tax (0.2) (0.6)
---------------------------- ------ ------
Total tax charge/(credit) 0.4 (0.6)
---------------------------- ------ ------
Corporation tax is calculated at 20% (2016: 20%) of the taxable
loss for the year. Taxation for other jurisdictions is calculated
at the rates prevailing in the respective jurisdictions.
The credit for the year can be reconciled to the loss in the
income statement as follows:
Year ended 31 March (GBPm) 2017 2016
--------------------------------- ------ ------
Loss before tax on continuing
operations (7.0) (6.7)
--------------------------------- ------ ------
Tax at the UK corporation
tax rate of 20% (2016: 20%) (1.4) (1.3)
Ineligible expenses/non-taxable
income 0.3 0.2
Movement in unrecognised
tax 1.7 0.5
Difference in overseas and
UK tax rates (0.3) (0.1)
Impact of difference in current
and deferred tax rates 0.1 0.1
--------------------------------- ------ ------
Tax charge/(credit) for the
year 0.4 (0.6)
--------------------------------- ------ ------
8. Net Funds
2017 2016
GBPm GBPm
Cash and cash equivalents at year end 29.4 33.4
Borrowings - Repayable within one year (3.7) (2.2)
Borrowings - Repayable after one year (13.7) (5.8)
---------------------------------------- ------- ------
Net funds 12.0 25.4
---------------------------------------- ------- ------
Reconciliation of net cash flow to movement in net funds:
2017 2016
GBPm GBPm
----------------------------------------------------------- ------- -------
Net decrease in cash and equivalents (4.0) (11.6)
Net decrease in debt and lease financing 9.8 2.4
New loans in the year (8.1) (0.9)
Acquired debt on acquisition - (0.4)
Non cash movements
* Asset acquired under finance leases (10.9) (1.9)
* Foreign exchange on cash and cash equivalents (0.2) (0.1)
----------------------------------------------------------- ------- -------
Movement in net debt (13.4) (12.5)
----------------------------------------------------------- ------- -------
Opening net funds 25.4 37.9
----------------------------------------------------------- ------- -------
Net funds at the year end 12.0 25.4
----------------------------------------------------------- ------- -------
9. Events after the reporting period
On 3 April 2017 the Company completed a placing of new shares
(37,735,849 ordinary shares) in the Company to raise GBP50.0m of
gross proceeds to suitably capitalise the business to support our
continued growth and increasing scale.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR KELFBDQFLBBL
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