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AO World plc (AO.)
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Tuesday 30 September, 2014
AO World plc
Launch of ao.de in Germany
RNS Number : 9183S
AO World plc
30 September 2014




For Release: 7am 30 September 2014



AO World plc



Auf geht's! Launch of ao.de in Germany



AO World plc (the "Company"), a leader in online retailing of electrical appliances in the UK, announces the first step in its European expansion, with the launch of ao.de; the German website of ao.com which will trade through a newly created subsidiary, AO Deutschland Limited.



ao.de



We are delighted to announce that our AO.de website - which was promised at the time of IPO to be live before the end of our financial year (31 March 15) - is expected to be live tomorrow, 6 months ahead of schedule.



The site will initially be live for pre-orders with deliveries commencing on the 14th October.



The AO.de proposition will focus only on major domestic appliances initially, but otherwise will largely mirror that of the UK operation, providing customers with market leading availability, price and speed of delivery for a significant range of products supported by major brands.



From the first day of delivery AO.de will offer nationwide next day delivery services and additional services including installation and recycling. We believe this will redefine how major domestic appliances are sold in Germany, as we have achieved in the UK.



To achieve this structural advantage we have invested in end to end resource including head office, warehouse and outbase infrastructure and our own last mile delivery capability to completely own the customer experience as we do in the UK. By replicating our UK model and leveraging the investment made in our established UK systems and processes, this infrastructure has been installed within budget and 6 months early.



Current Trading



Our financial half year ends today and we are pleased to confirm our continued progress to the plan set out at IPO, even with the backdrop of such a major project in Germany. Whilst the early launch in Germany has clearly brought forward all associated costs into the current financial year, the UK business continues to perform well with overall UK revenue growth and EBITDA on track to meet our full year expectations. We continue to drive increased market share through our differentiated service proposition and look forward to announcing our interim results for the first 6 months to 30th September 2014 on 25th November 2014.





Commenting on the launch of AO.de John Roberts, Founder and CEO said:



"I am extremely proud of our team at AO and the scale of what they have achieved in our first step in our international strategy. Over the history of our business we have invested in people we believe can make things happen and then given them the confidence to try, learn and grow. The launch of AO.de is testament to their ability to execute our promises and replicate our proven business model overseas.



Of course we have work to do and we will relish the lessons that will no doubt be forthcoming. We are as passionate about building the AO brand in Germany as we are in the UK and can't wait to start bringing German consumers a better way to buy the category, as we have for UK consumers. Germany is our stepping stone to realising our ambition to become the leading online retailer in our categories in our target markets.



I would like to extend my personal thanks to everyone that contributed to the ability to bring this live so quickly for consumers because this has been a huge team effort across all our trading partners and the AO team.



AO Auf geht's!"





Analyst/Investor conference call:



AO World plc will be hosting a conference call for analysts and investors at 8:30am (UK Time) today. Please call Alys Twinley at Instinctif Partners for dial-in details on 0207 457 2077 or email alys.twinley@instinctif.com.



A replay of this conference call will be available later today.





For further information, please contact



AO World plc


+44(0)1204 672400

John Roberts

Steve Caunce

Interim Results

Financial Highlights1

· AO Website revenue up 38.6% to £173.7m (2013: £125.3m)

· Total revenue up 25.1% to £217.1m (2013: £173.5m)

· Adjusted EBITDA2 up 115% to £7.3m (2013: £3.4m)

· Adjusted EBITDA margin increased to 3.4% (2013: 2%); 9% EBITDA on incremental sales

· Adjusted Operating Profit3 up 134% to £5.5m (2013: £2.4m)

· Operating Profit for the period £0.9m (2013: £2.4m) after German set up costs of £3.3m and Long Term Incentive Plan costs of £1.3m (2013: £nil)

· Overall number of completed orders4 up 30% to 0.61m (2013: 0.47m)

Operational Highlights

· Launched our Audio-Visual ("AV") category in May 2014

· Launched ao.de, our German website six months ahead of schedule on 1st October 2014 with first customer deliveries on 14th October

Quarter Three Trading Statement

Quarter Three Trading Statement
Strong sales and continued delivery to plan

AO World plc, the UK's leading online retailer of major domestic appliances, announces strong sales for the third quarter and continued delivery against the plan set out at IPO.

AO website revenue for the three months to 31st December 2014 was up 38%, and total revenue (including third party retail and logistics) was up 26%. These figures exclude Germany, where we launched operations on October 1st.

Operationally we managed very well over the peak trading period, maintaining our industry-leading website response times, service levels and logistics performance, in spite of large spikes in volume, particularly on "Black Friday". As a result, customer satisfaction levels remained high, reflecting our market leading proposition.

Sales of audio visual categories, launched in May 2014, built well during the period and we were particularly pleased with performance in the run up to Christmas.

In Germany we are operationally ahead of plan and sales are building well, giving us confidence to explore wider marketing opportunities to drive growth.

The outlook for the full year remains in line with expectations.

Big faller today.

Results statement this morning includes: "... despite missing our financial expectations for the year ..."

That phrase alone says enough.

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 Highlights1

· Total revenue up 23.8% to £476.7m (2014: £384.9m)

· AO Website Sales2 for the UK3 up 32.9% to £381.5m (2014: £287.1m), with total UK revenue up 22.3% to £470.8m (2014: £384.9m)

· Europe annualised exit run rate on sales of £19.8m4. Europe revenue for the six months of trading was £5.8m (2014: £nil)

· UK Adjusted EBITDA5 up 47.3% to £16.5m (2014: £11.2m), with UK Adjusted EBITDA margin6 increasing to 3.5% (2014: 2.9%)

· Europe7 Adjusted EBITDA loss of £8.0m (2014: £nil) representing trading losses in our German territory from launch bringing Group Adjusted EBITDA to £8.5m (2014: £11.2m)

· Group Operating Loss of £2.2m (2014: £7.2m) after investment in Europe start-up operations of £4.2m (2014: £nil) and Long Term Incentive Plan costs of £2.5m (2014: £0.2m)

· Group Adjusted Operating Profit8 of £4.5m (2014: £8.4m) after deducting Europe Adjusted Operating Loss of £8.2m

· Group Net Funds position9 as at 31 March 2015 was £37.9m (2014: £48.7m)

· 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 orders10 up 26.4% to 1,348k (2014: 1,066k)

· UK repeat purchase levels continued to grow from 36% to 45%

· UK NPS11 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

more....

Canaccord Genuity Hold 175.30 170.00 170.00 Reiterates

Jefferies International Buy 175.30 410.00 410.00 Reiterates

A cynic might presume that the timing and nature of Bill Holroyd's departure announcement perhaps suggests that the results are worse than he was led to believe they would be, and he doesn't want to stick around.. and that saying so within 30 minutes of the Results kinda makes the connection obvious.

--

--

Yes its hardly inspiring!

AGM and Interim Management Statement

Very noticeable that in today's update they mention only turnover, nothing else. Except a warning that they've been spending more than usual:

"..We have accelerated our investment in the AO.com brand over the quarter through tv advertising and other media, which is essential to the long term future of the business as well as growing revenue in the near-term..."

Sounds like they are laying down excuses ahead of revealing an increased loss in November.

Half Yearly Report

Financial Highlights1

· Total revenue for the period increased by 21.7% to £264.3m (2014: £217.1m).

· AO website sales2 for the UK3 up 23.7% to £214.8m (2014: £173.7m), with total UK revenue up 14.5% to £248.6m (2014: £217.1m); a further gain in market share.

· Europe4 annualised exit run rate revenue of €61.2m (based on September sales)5. Europe revenue for the period was €21.7m (2014: €nil).

· Group operating loss of £8.9m (2014: £0.9m profit) reflecting the ongoing investment in German operations and start-up costs in further Europe territories of £0.9m (2014: £3.3m).

· UK adjusted EBITDA6 of £5.1m (2014: £7.3m), with UK adjusted EBITDA margin7 decreasing to 2.0% due to investment in marketing to increase brand awareness and investment in overheads to drive margin and ensure resilience across the business (2014: 3.4%).

· Europe adjusted EBITDA loss of £9.6m (2014: £nil) representing trading losses in our European territories from launch bringing Group adjusted EBITDA to a loss of £4.5m (2014: £7.3m profit).

· Group net funds position8 as at 30 September 2015 was £29.6m (2014: £43.9m), with cash being £35.6m (2014: £50.1m).

· Loss per share of 1.58p (2014: earnings of 0.12p).

Operational Highlights

· UK NPS9 remains at its historically high level of over 80% with AO.de higher still reflecting continued high levels of customer satisfaction.

· UK repeat business metrics have continued to improve during the period, as has unprompted brand recognition, helping us grow the level of new and loyal customers we attract.

· Our UK business was awarded "Best Online Shop" by Which?

· We are pleased with the progress of our audio visual ("AV") and small domestic appliance ("SDA") categories in the UK.

· Overall UK number of completed orders10 up 23.0% to 0.73m (2014: 0.60m).

· We look forward to opening our new regional office and distribution centre in Bergheim, Germany in 2016 which will provide approximately 35,000 square metres of warehouse space.

· We are pleased to announce we expect to commence trading in the Netherlands in Spring 2016.

Outlook

· The second half has started well although we still have peak trading ahead of us, including Black Friday later this week. In the UK we are on track with our plans for the year as a whole.

· Our early success in Germany has given us the confidence to continue to invest heavily in marketing to drive revenue growth. Given this we expect to maintain at least the level of net P&L investment made in the first half of the year through the second half.

· Whilst we will incur some early set up costs for our operations in the Netherlands this financial year we do not expect a material impact to Group adjusted EBITDA.

· The business is on track with progress against its long term strategic goals.

After corkscrewing sideways for 10 weeks around that 160 line.. the chart might reasonably have been expected to show a step change (say 25p) upward or downward on issue of a half-year trading statement..

"... While the company has sought to win over investors, some commentators remain unconvinced and have warned that it could struggle to compete during Black Friday this week (27 November) because of its relatively poor brand awareness and low positioning on Google..."

(cityam.com)


As a company totally dependent on its online activity, the slightest technical glitch on this hectic Friday will hit AO harder than its rivals.

Last week I took delivery of a new AEG tall stainless steel fridge - bought from Curry's at a better price than AO, delivered promptly. AO were also not the best deal on two previous appliance purchases I made.
EDIT: AO were 5.27% dearer than Curry's on exact comparison, including same AEG cashback offer. AO's boast of being best on price because of no street presence is a myth.

At present they seem able to get away with "expansion costs" as an excuse for losses. Each time they come out with a loss they can point to another new territory, to maintain the image of ongoing growth, and convince some that it will all come good eventually.

As if getting big and famous worldwide takes priority over making and sharing profits.

from The Telegraph:


Sell AO World as shares slump on losses
The online retailer is barely making any profits despite soaring sales, says Questor

AO World [LON:AO], the online white goods retailer, slumped to a loss in the first-half sending the shares down by 15pc yesterday.
The concept of internet retailing is a nice idea. With no bricks and mortar and a low cost website the prices that can be offered beat many shop-based alternatives. Consumers should flock to the service in droves and once a dominant market position has been built up then prices can recover and the company can generate huge profits from its revenue base.
The theory is nice, but AO World is proving that the reality is somewhat different. Revenue is following the script, up 22pc to £264m in the six months to the end of September, but not much else. The company slumped to a first-half pre-tax loss of £8m, as it said the cost of expanding into Germany is proving painful

There are also worrying issues in the more mature UK business where operating profits slumped 60pc to £1.3m, on revenue of £249m, or a profit margin of half a percent.
Questor is not the only one to question the logic of this company. The shares more than halved in value this year and anyone who got involved when shares peaked at 412p on their first days trading in February last year is now nursing painful capital losses.
On top of that. there are a number of reasons why the shares could continue to fall.
Consensus forecasts estimate an adjusted pre-tax loss of £4.3m, from £596m in revenue for the year ended March. The company would need a remarkable reversal of fortunes during the crucial Christmas period to achieve those numbers.
The company is growing very fast, and profits could eventually begin to follow the sales, and rise.
However, Questor is concerned that it may take a long time to reach the profit tipping point and cash could get tight long before then. The company had net cash of £29.6m at the end of September, down from £44m at the same time last year.
We highlighted AO’s bubble valuation in April last year, and advised selling this time last year (217.3p, November 26) and that position remains. Questor would stay well away from the shares in this internet retailer as profits prove hard to come by. Sell.

The Independent:

AO World continues to prioritise growth over profits

Investors’ patience with AO World is wearing thin as the online white goods retailer continues to prioritise growth over profits. AO plunged 23p to 140p as it swung to a first-half loss of £8m from a slight profit last year after heavy investment in marketing in the UK and Germany.

Revenues rose 22 per cent to £264.3m, but news that it is launching in the Netherlands in the spring sparked concerns that the company will remain loss-making for some time yet.

Start-ups breaking untrodden ground typically put growth ahead of profits – think Twitter for example – but 15-year-old AO World is trying to crack a market with plenty of established players able to replicate the online model.

The shares have slumped since the controversial float in February last year that valued it at £1.2bn, prompting its broker Jefferies to later admit the price was “punchy”.

History repeating..

I am old enough to remember another high-flying seller of appliances -

John Bloom

AO World listed 50 years after shares in John Bloom's appliance company collapsed into liquidation.

No connection, and no direct comparison. Just an interesting memory, of someone who revolutionised the marketing of appliances.

Black Friday (tomorrow)

"Online retailer AO World is offering up to £100 off washing machines, with prices starting from £179; more than 25 per cent off American fridge freezers, starting from £399, and up to 70 per cent off vacuum cleaners (from £49) and small appliances, including microwaves from £59." (city-am)


That should briefly help turnover - and increase losses.