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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Ao World Plc | LSE:AO. | London | Ordinary Share | GB00BJTNFH41 | ORD 0.25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -1.80 | -1.55% | 114.20 | 114.20 | 114.60 | 116.00 | 114.00 | 115.40 | 239,355 | 16:24:12 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Elec Appliance,tv,radio-whsl | 1.17B | -2.6M | -0.0045 | -254.22 | 673.15M |
From Jul 2019 to Jul 2024
TIDMAO.
RNS Number : 8712O
AO World plc
02 June 2015
AO WORLD PLC
FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2015
AO World plc delivers significant growth and operational progress
AO World plc ("the Company" or "AO"), the United Kingdom's leading online retailer of major domestic appliances ("MDA"), today announces its audited financial results for the year ended 31 March 2015.
Financial Highlights(1)
-- Total revenue up 23.8% to GBP476.7m (2014: GBP384.9m)
-- AO Website Sales(2) for the UK(3) up 32.9% to GBP381.5m (2014: GBP287.1m), with total UK revenue up 22.3% to GBP470.8m (2014: GBP384.9m)
-- Europe annualised exit run rate on sales of GBP19.8m(4) . Europe revenue for the six months of trading was GBP5.8m (2014: GBPnil)
-- UK Adjusted EBITDA(5) up 47.3% to GBP16.5m (2014: GBP11.2m), with UK Adjusted EBITDA margin(6) increasing to 3.5% (2014: 2.9%)
-- Europe(7) Adjusted EBITDA loss of GBP8.0m (2014: GBPnil) representing trading losses in our German territory from launch bringing Group Adjusted EBITDA to GBP8.5m (2014: GBP11.2m)
-- Group Operating Loss of GBP2.2m (2014: GBP7.2m) after investment in Europe start-up operations of GBP4.2m (2014: GBPnil) and Long Term Incentive Plan costs of GBP2.5m (2014: GBP0.2m)
-- Group Adjusted Operating Profit(8) of GBP4.5m (2014: GBP8.4m) after deducting Europe Adjusted Operating Loss of GBP8.2m
-- Group Net Funds position(9) as at 31 March 2015 was GBP37.9m (2014: GBP48.7m) -- Loss per share of 0.60p (2014: 2.38p)
Operational Highlights
Hot Features
Premium
-- Launched our Audio-Visual ("AV") category in May 2014
-- Launched AO.de, our German website, on 1st October 2014 and commenced customer deliveries on 14th October 2014 with the ability to offer next day delivery to the majority of customers across the range
-- Launched consumer finance on AO.com in October 2014 -- Overall UK number of completed orders(10) up 26.4% to 1,348k (2014: 1,066k) -- UK repeat purchase levels continued to grow from 36% to 45% -- UK NPS(11) remains at its historically high level of over 80; AO.de higher still
-- Won the Deloitte Employer of the Year Award at the 2015 Retail Week Awards, the Overall Award for Excellence at the Etail Awards 2014 and Large eCommerce and best eCommerce Customer Service Award at the eCommerce Awards 2014
_______________________________
(1) The highlights are for the year ended 31 March 2015 and the comparative 2014 period. Certain financial data have been rounded. As a result of this rounding, the totals of data presented in this document may vary slightly from the actual arithmetic totals of such data.
(2) This includes AO.com and AO-branded eBay shops.
(3) UK is defined by the Group as entities operating within the United Kingdom (but excludes AO Deutschland Limited which is a company registered in England but operates in Germany and therefore is included in the Europe segment).
(4) Based on GBP1.65m monthly sales for March 2015.
(5) Adjusted EBITDA is defined by the Group as profit/loss before tax, depreciation, amortisation, net finance costs, "Adjustments" and exceptional items. Adjustments is defined by the Group as set-up costs relating to overseas expansion and share based payment charges attributable to the LTIP IPO award which the board considers one off in nature. See adjustments section of Financial Review and Note 4 of the Notes to the financial information.
(6) Adjusted EBITDA margin is defined by the Group as Adjusted EBITDA divided by revenue.
(7) Europe is defined by the Group as entities operating within the European Union but excluding the UK (which for the year under review is Germany but figures also include exploratory costs in other European territories).
(8) Adjusted Operating Profit is defined by the Group as profit/loss before tax, net finance costs, Adjustments and exceptional items but after depreciation and amortisation. Adjustments is defined by the Group as set-up costs relating to overseas expansion and share based payment charges attributable to the LTIP IPO award which the board considers one off in nature.
(9) Net Funds are defined as cash as per the consolidated statement of financial position less borrowings.
(10) Total number of orders taken to completion in connection with AO website sales and third-party website sales.
(11) NPS is defined by the Group as Net Promoter Score which is an industry measure of customer loyalty and satisfaction.
Outlook
We are on track with our plans at this early stage of the new financial year. Although the current trading environment in the UK remains challenging, we are well positioned to compete successfully given the flexibility and efficiency of our business model. Whilst there remains a lot still to do as we build scale in Germany, we are encouraged by our progress over the first 6 months of trading in our new territory and the run rate of revenues as we exited the year. This gave us a good base to start from for the current financial year and the sales momentum is gathering pace. As always, we remain focussed on the long-term - growing the business by driving profitable market share growth through providing exceptional performance, driving loyalty, reaching out to new customers, maintaining a tight control on overheads and expanding the territories in which we operate.
Commenting on these results, John Roberts, Chief Executive Officer said:
"AO is an exceptional business and I am very pleased with the achievements we have made over the year, particularly in Germany and with the successful introduction of the AV category to AO.com. Our long-term plan is on track and, despite missing our financial expectations for the year, we have continued to take market share in the UK MDA market delivering significant growth in UK sales and Adjusted EBITDA. Our customer proposition remains strong - our unbeatable prices, huge range and amazing service mean our customer satisfaction levels have remained exceptional and we will continue to focus on this in the year ahead. The passion we have for our customers, staff and all other stakeholders has never been stronger and we still believe we can change the way Europe buys its electricals, simply by caring more and executing brilliantly."
Webcast details
A results presentation hosted by John Roberts, Steve Caunce and Mark Higgins for analysts and investors will be held today, 2nd June 2015 at 8:00am (GMT) at J.P. Morgan, 1 John Carpenter Street, London, EC4Y 0JP. Please register your attendance in advance with Tulchan Communications using the contact details below.
A webcast of the presentation will be available to watch live and later in the day at www.AO.com/corporate where the results presentation can also be viewed.(1)
For further information, please contact:
AO World plc Tel: +44(0) 1204 672538 John Roberts ir@ao.com Steve Caunce Mark Higgins Tulchan Communications Tel: +44(0) 20 7353 Tom Buchanan 4200 Michelle Clarke
_______________________________
(1) The content of the AO.com website should not be considered to form a part of or be incorporated into this announcement.
AGM
This year's AGM will be held at 10.00am on Tuesday, 21 July 2015 at the Company's registered office at AO Park, 5A The Parklands, Lostock, Bolton BL6 4SD. The AGM notice and the annual report will be available to view on the Group's website in due course.
Cautionary statement
This announcement contains certain forward-looking statements (including beliefs or opinions) with respect to the operations, performance and financial condition of the Group. These statements are made in good faith and are based on current expectations or beliefs, as well as assumptions about future events. By their nature, future events and circumstances can cause results and developments to differ materially from those anticipated. Except as is required by the Listing Rules, Disclosure and Transparency Rules and applicable laws, no undertaking is given to update the forward-looking statements contained in this document, whether as a result of new information, future events or otherwise. Nothing in this document should be construed as a profit forecast or an invitation to deal in the securities of the Company. This announcement has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to AO World plc and its subsidiary undertakings when viewed as a whole.
PERFORMANCE AT A GLANCE
Summary Results(1)
Year ended (GBPm) 31 March 2015 31 March 2014 Change
--------------------------- -------------------------- ----------------- --------------------
UK Europe Total UK Total UK Total
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Income Statement
--------------------------- ------ -------- -------- ------- -------- --------- ---------
AO Website sales 381.5 5.8 387.4 287.1 287.1 32.9% 34.9%
Third-party website
sales 70.3 - 70.3 79.3 79.3 -11.4% -11.4%
Third-party logistics
services 19.0 - 19.0 18.5 18.5 2.8% 2.9%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Revenue 470.8 5.8 476.7 384.9 384.9 22.3% 23.8%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Adjusted EBITDA(2) 16.5 (8.0) 8.5 11.2 11.2 47.3% -24.3%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Adjusted EBITDA
margin(3) 3.5% -137.1% 1.8% 2.9% 2.9% +0.6ppts -1.1ppts
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Adjusted operating
profit(4) 12.7 (8.2) 4.5 8.4 8.4 51.3% -46.0%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Exceptional items(5)
IPO Costs - - - (15.4) (15.4) 100% 100%
Adjustments(6)
Europe set-up
costs(7) (1.4) (2.8) (4.2) - - - -
Share-based payment
charge (8) (2.5) - (2.5) (0.2) (0.2) 1,185.1% 1,185.1%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Operating profit/(loss) 8.8 (11.0) (2.2) (7.2) (7.2) 221.0% 69.3%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Loss per share
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Basic loss per
share (0.60p) (2.38p) 74.8%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Cash flow
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Cash (absorbed)/generated
from operating
activities (0.7) 2.0 1.3 13.6 13.6 -104.9% -90.5%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Cash generated/(absorbed)
from operating
activities before
intercompany
funding(9) 12.8 (11.5) 1.3 13.6 13.6 -6.3% -90.5%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
Year end net
funds/(debt)
position(10) 38.9 (1.1) 37.9 48.7 48.7 -20.0% -22.2%
--------------------------- ------ -------- -------- ------- -------- --------- ---------
_______________________________
(1) Certain financial data have been rounded. As a result of this
rounding, the totals of data presented in this document may vary
slightly from the actual arithmetic totals of such data.
(2) Adjusted EBITDA is defined by the Group as profit/loss before
tax, depreciation, amortisation, net finance costs, Adjustments
and Exceptional items. See Note 4 to the Notes to this financial
information.
(3) Adjusted EBITDA margin is defined by the Group as Adjusted EBITDA
divided by revenue.
(4) Adjusted operating profit is defined by the Group as profit/loss
before tax, net finance costs, Adjustments and Exceptional items
but after depreciation and amortisation.
(5) Exceptional items of GBP15.4m relate to IPO costs incurred during
the year ended 31 March 2014.
(6) Adjustments is defined by the Group as set-up costs relating
to Europe expansion and share based payment charges attributable
to the LTIP IPO award that the board considers one-off in nature.
(7) Relates to Europe set-up costs incurred by Group entities in
the UK and Europe.
(8) Share based payment charges attributable to the LTIP IPO award
which the board considers one off in nature.
(9) This eliminates the intercompany funding provided by the UK
to Europe.
(10) Net funds are defined as cash as per the consolidated statement
of financial position less borrowings.
GROUP RESULTS
The Group has delivered significant growth in UK sales and UK Adjusted EBITDA(1) over the year whilst also delivering significant strategic progress; broadening its product range, with the introduction on AO.com of audio-visual equipment and expanding internationally with the successful launch of AO.de in Germany.
Overall Group revenue increased by 23.8% to GBP476.7m (2014: GBP384.9) for the year under review, with Group Adjusted EBITDA reaching GBP8.5m (2014: GBP11.2m) after allowing for GBP8m of Europe Adjusted EBITDA losses. Group Operating Loss was GBP2.2m (2014: GBP7.2m loss), after incurring Europe Operating Losses of GBP11m.
AO Website Sales have increased by 32.9% over the year to GBP381.5m (2014: GBP287.1m). Overall UK revenue has grown by 22.3% to GBP470.8m (2014: GBP384.9m) driven by higher order volumes. Third party website sales have fallen slightly year on year as focus remains on AO.com. Third party logistics sales have increased slightly year on year, although a logistics contract was lost during the year which will impact FY16 performance in this area.
UK Adjusted EBITDA increased by 47.3% to GBP16.5m (2014: GBP11.2m) with a UK Adjusted EBITDA margin of 3.5% for the year (2014: 2.9%). The growth in UK Adjusted EBITDA margin demonstrates the operational gearing in our business, allowing us to leverage Selling, General and Administrative ("SG&A") costs as we grow.
Our German operation finished the year with an annualised sales run rate of GBP19.8m(2) and overall sales for the first year of its operations equating to GBP5.8m. As expected, overall our European operations made an EBITDA loss of GBP12.3m, which includes Germany set-up costs and trading losses as we build scale, together with costs incurred in exploring other territory opportunities in Europe. Cash generated from operating activities in the UK exceeded the cash absorbed from operating activities in Europe. We would expect this principle to continue.
The Company experienced a slowdown in sales growth in the last quarter of the accounting period. It became apparent that the growth we expected during the final quarter of the year under review was impacted by the extra IPO publicity the business received during the same period in the previous year and we were unable to maintain the year on year growth.
The Group generated a cash inflow from operating activities of GBP1.3m (2014: GBP13.6m inflow). The difference between this and Adjusted EBITDA reflects Europe set-up costs of GBP4.2m and net working capital, tax and finance costs movements of GBP3.0m.
Total capital expenditure for the year was GBP7.6m (2014: GBP7.5m), of which GBP3.4m relates to our expansion into Germany - including the establishment of the head office, warehouse and outbase infrastructure and investment in our own last mile delivery capability which enables us to own the customer experience completely as we do in the UK.
_______________________________
(1) Adjusted EBITDA is defined by the Group as profit/loss before tax, depreciation, amortisation, net finance costs, Adjustments and Exceptional items. See Note 4 to the Notes to this financial information.
(2) Based on GBP1.65m monthly sales for March 2015.
BUSINESS REVIEW
Operational Review
UK Retail and Operations
We were pleased to have continued our strategy to broaden the business with the additions made to our retail proposition during the year. In May 2014 we added the AV category, comprising televisions, sound systems and ancillary equipment to the range of products we offer to our customers. We achieved this through leveraging our existing infrastructure, tailoring our high quality service proposition to the AV market and leveraging and strengthening our existing relationships with global brand leaders while building new ones. This allows us to capitalise on the significant level of market demand for these high value items, as we offer our customers a broad range of products to include the latest in technology at competitive prices and to increase the number of opportunities our loyal customers have to buy from us. Our progress in the AV market is encouraging and our customers have welcomed our simple and straightforward description of complex technologies.
We remain the leading player in the UK online MDA market having gained further market share this year. AO remains committed to delivering excellent customer service across all its categories. We make every effort to ensure that our customers receive as much help and guidance as possible to allow them to make a truly informed purchase decision through the use of product videos (produced by our in-house video production facility), providing a comprehensive level of product, price and delivery information coupled with an impressive level of customer engagement and reviews. During the year we introduced a customer finance option to provide even more flexible payment methods for our customers. This has also enabled us to run interest-free and 'buy now-pay later' promotional campaigns, supported in part by manufacturers without any direct credit exposure for AO.
It is pleasing to report that over the twelve months to 31 March 2015 our Net Promoter Score (an industry measure of customer loyalty and satisfaction) remained at its historically very high level of over 80. Over the year repeat purchase levels continued to grow from 36% to 45% and our deliver to promise rate remained exceptional.
Customers have access to a range of ancillary services through AO.com including product protection plans, installation, disposal and connection services. Following trials in FY14 we commenced a national roll-out of our premium installation service offering delivery seven days a week. We aim to become the market leaders in the supply and installation of MDA products. These installations are performed by a team of trained specialists and are available to the vast majority of the UK population.
Once again our dedication to our customer proposition has been recognised by the industry and we are pleased to have won four awards at the Etail Awards 2014, including "Overall Award for Excellence" and four awards at the eCommerce Awards for Excellence 2014 including "Large eCommerce Retailer of the Year."
Germany Retail and Operations
In October 2014 we took the first step in our international expansion strategy and launched AO.de, the German version of AO.com. Our initial offering is concentrating solely on the MDA category as we continue to learn about customer preferences and the German market and the operating model has been largely replicated from the UK. We have invested in end to end local resource including head office, warehouse and outbase infrastructure and our own last mile delivery capability to offer next day delivery to the majority of customers and to completely control the customer experience, as has been successful in the UK. This is a unique proposition in the German market.
Since commencing trading in Germany we have continued to expand our manufacturer base, thereby increasing the amount of choice available to our German customers. Levels of traffic to the site continue to grow. We have maintained our service levels since launch and feedback in Germany has been extremely positive, as evidenced by our customer reviews and ratings on Trustpilot, Trustedshops and idealo.de. Now we have demonstrated operational effectiveness we are in a position to accelerate sales growth, drive efficiencies and continue to expand our retail offering in this new territory. Our recent progress has encouraged us to review our infrastructure requirements and we will increase logistics capacity as we build scale.
Brand
During the year we revisited national television advertising which was well received and helped to drive sales and brand awareness. Our Facebook "likes" grew over the reporting period and are now in excess of 1.6m. Notwithstanding this our brand remains in its relative infancy and continuing to build awareness remains one of our key strategic objectives. We believe that it remains a substantial area of opportunity for us.
With the exception of our 3.5 tonne premium installations fleet the vast majority of AO.com deliveries have historically been made using 7.5 tonne vehicles branded as our in-house logistics business which also makes deliveries for third parties. During the year we began to brand some of these vehicles as AO.com and we plan to extend this to more vehicles over the coming year thereby helping to promote the AO.com brand on the road.
Culture
We consistently state that our culture is at the heart of everything we do and it continues to be core to our success to date. It is of paramount importance that we continue to maintain this and do what is best for our employees against a backdrop of significant business growth and expansion.
A significant achievement over the year was witnessing how well our culture has been transferred to and is developing within our new German operation. We have welcomed some 200 new colleagues to the AO family and we have been delighted with how our values have been embraced and supported by them. There have also been some incredible examples of our UK people going the extra mile to help our German colleagues find their feet and learn our processes and strategies.
We were therefore particularly pleased to be awarded the Deloitte Employer of the Year Award at the Retail Week Awards 2015.
Financial Review
Revenue
For the year ended 31 March 2015 total Group revenue increased by 23.8% to GBP476.7m (2014: GBP384.9m) despite the impact of slower than anticipated year-on-year sales growth experienced in our final quarter as we didn't experience the benefit from our heightened publicity surrounding our IPO as we had in the previous year.
Growth achieved during the year was polarised towards our AO Websites which experienced a strong increase of 32.9% to GBP381.5m (2014: GBP287.1m). This was driven by the continued migration of consumers to the online channel as our commitment to exceptional levels of customer service continues to stimulate repeat business and attract new customers. The introduction of the AV category, broadening our product range added to this growth. Sales from our German website, AO.de, contributed GBP5.8m to our revenue. AO Website Sales (which includes AO.com, AO.de and AO branded eBay shops) now account for 81.3% of total Group revenue (2014: 74.6%).
Year ended (GBPm) 31 March 2015 31 March Change
2014
----------------------- ----------------------- -------------- ----------------
UK Europe Total UK Total UK Total
AO Website Sales 381.5 5.8 387.4 287.1 287.1 32.9% 34.9%
Third-party Website
Sales 70.3 - 70.3 79.3 79.3 -11.4% -11.4%
Third-party Logistics
Services 19.0 - 19.0 18.5 18.5 2.8% 2.9%
----------------------- ------ ------- ------ ------ ------ ------- ---------
Revenue 470.8 5.8 476.7 384.9 384.9 22.3% 23.8%
----------------------- ------ ------- ------ ------ ------ ------- ---------
During the reporting period, the total number of completed orders from AO Website Sales and Third-Party Website Sales increased by 26.4% to 1,348k (2014: 1,066k) and products per order increased slightly.
Sales from Third-Party Websites reduced to GBP70.3m (2014: GBP79.3m) as expected as our focus remains on AO.com. These sales, in part, are likely to have been cannibalised by our own branded website as AO.com continues to gain overall market share through its proposition and price offering. We experienced only a modest increase in revenue from our UK third party logistics service of 2.8% to GBP19.0m which was impacted by the loss of a contract during the year.
Gross Margin
Year ended (GBPm) 31 March 2015 31 March 2014 Change
-------------------- -------------------- --------------- ------------------
UK Europe Total UK Total UK Total
-------------------- ----- ------ ----- ------- ------ -------- --------
Gross profit/(loss) 89.7 (2.1) 87.6 74.2 74.2 20.9% 18.1%
Gross margin % 19.0% -36.1% 18.4% 19.3% 19.3% -0.3ppts -0.9ppts
Gross margin for the Group decreased to 18.4% for the reporting period, a reduction of 0.9ppts against the prior year, although gross profit grew 18.1% to GBP87.6m. In the UK margin fell slightly to 19.0% (2014: 19.3%). This was largely due to the dilutive effect of AV compared to MDA margin which is likely to increase going forward as the AV category takes an increasingly larger share of the overall business. UK Gross margin was improved by the full year effect of three outbases opened during the prior year (which increased warehousing costs below).
In Germany the gross loss of GBP2.1m reflected the early purchasing prices achieved in that operation, compounded with inefficient deliveries whilst volumes are small.
Selling, General & Administrative Expenses ("SG&A")
Total Group administrative expenses increased by 36.1% to GBP89.8m (2014: GBP66.0m). Of this increase GBP10.3m was attributable to administrative expenses incurred in connection with our European expansion, largely comprising costs in AO.de. UK administrative expenses for the year to 31 March 2015 increased by 22.6% to GBP80.9m (2014: GBP66.0m). Of this increase GBP1.4m was incurred in connection with our European expansion and GBP2.3m relates to an increase in the share based payments charge attributable to the LTIP IPO award.
Year ended (GBPm) 31 March 2015 31 March 2014 Change
-------------------------- -------------------- ------------------ --------------------
UK Europe Total UK Total UK Total
-------------------------- ----- ------ ----- --------- ------- -------- --------
Advertising and marketing 19.5 1.9 21.4 18.2 18.2 7.0% 17.5%
% of sales 4.1% 32.5% 4.5% 4.7% 4.7%
Warehousing 16.8 1.2 18.0 13.3 13.3 26.4% 35.2%
% of sales 3.6% 20.1% 3.8% 3.4% 3.4%
Other Admin 40.7 3.0 43.7 34.3 34.3 18.7% 27.4%
% of sales 8.6% 51.1% 9.2% 8.9% 8.9%
Adjustments(1) 3.9 2.8 6.8 0.2 0.2 1,922.1% 3,362.1%
% of sales 0.8% 48.0% 1.4% 0.1% 0.1%
-------------------------- ----- ------ ----- --------- ------- -------- --------
Administrative Expenses 80.9 8.9 89.8 66.0 66.0 22.6% 36.1%
% of sales 17.2% 151.8% 18.8% 17.1% 17.1%
-------------------------- ----- ------ ----- --------- ------- -------- --------
_______________________________
(1) Adjustments is defined by the Group as set-up costs relating to overseas expansion and share based payment charges attributable to
the LTIP IPO award which the board considers one off in nature. See adjustments section of Financial Review and Note 4 to these financial statements.
The reduction in UK Advertising and Marketing expenditure as a percentage of sales from 4.7% to 4.1% over the reporting period reflects the leverage in this cost category as the fixed media advertising expenditure is amortised across the larger sales base. Going forward we expect UK Advertising and Marketing costs to continue to be leveraged, with some offset as we develop our brand.
Increases in UK Warehousing expenses reflect a full year's operation of our three additional outbases opened during the prior year reporting period and the lease costs associated with our new stock holding facility based close to our existing NDC in Crewe.
UK Other Administrative expenses increased by GBP6.4m to GBP40.7m (2014: GBP34.3m). However as a percentage of sales they fell to 8.6% (2014: 8.9%) demonstrating some economies of scale in this cost category. However, costs in the fourth quarter were planned for a higher level of sales.
In our Europe segment our SG&A costs, as a percentage of sales, reflect the start-up nature of the operation. As volumes increase, we would expect these costs to fall towards the rates experienced in the UK.
Adjusted EBITDA(1)
When reviewing profitability performance, the Directors use a number of adjusted measures to give meaningful comparisons.
Group Adjusted EBITDA was GBP8.5m (2014: GBP11.2m) after allowing for GBP8m of Europe Adjusted EBITDA losses.
UK Adjusted EBITDA for the twelve months to 31 March 2015 was GBP16.5m (2014: GBP11.2m) representing an increase of 47.3% against the prior year. This increase was achieved despite a number of challenges encountered during the year, most notably the slowdown in sales growth experienced in the last quarter of our reporting period. It became apparent that the growth we expected during the final quarter of the year under review was impacted by the extra publicity the business received during our IPO process in the fourth quarter of the previous financial year and therefore the business was unable to sustain the year-on-year growth rate of the previous three quarters. As our model is based around each additional sale of MDA contributing approximately 8% to EBITDA incrementally, this shortfall of sales affected our full year profit. In addition we incurred costs in connection with the creation of our Driver Academy which we introduced during the year to mitigate the long term impact of the changes in driver legislation and we were also impacted by the effects of Black Friday which did not produce incremental sales, but changed the phasing of sales in the third quarter. All of these factors contributed to a lower than forecast level of Adjusted EBITDA.
Notwithstanding the above, we increased our UK Adjusted EBITDA margin to 3.5% (2014: 2.9%) due to the overall increase in sales achieved during the year together with maintaining tight control of our cost base.
_______________________________
(1) Adjusted EBITDA is defined by the Group as profit/loss before tax, depreciation, amortisation, net finance costs, "Adjustments" and
exceptional items. Adjustments is defined by the Group as set-up costs relating to overseas expansion and share based payment charges attributable to the LTIP IPO award which the board considers one off in nature. See adjustments section of Financial Review and Note 4 of the Notes to the financial information.
Year ended (GBPm) 31 March 2015 31 March 2014 Change
------------------------------------------- -------------------- --------------- ------------------
UK Europe Total UK Total UK Total
------------------------------------------- ---- ------- ----- ------- ------ -------- --------
Operating profit/(loss) 8.8 (11.0) (2.2) (7.2) (7.2) 221.0% 69.3%
------------------------------------------- ---- ------- ----- ------- ------ -------- --------
Add: Exceptional items:
Professional fees in relation to IPO - - - 15.4 15.4 -100% -100%
------------------------------------------- ---- ------- ----- ------- ------ -------- --------
Operating profit/(loss) before adjustments 8.8 (11.0) (2.2) 8.2 8.2 6.8% -127.1%
------------------------------------------- ---- ------- ----- ------- ------ -------- --------
Add adjustments:
Europe set up costs 1.4 2.8 4.2 - - - -
Non-cash share based payments charge 2.5 - 2.5 0.2 0.2 1,185.1% 1,185.1%
------------------------------------------- ---- ------- ----- ------- ------ -------- --------
Adjusted operating profit/(loss) 12.7 (8.2) 4.5 8.4 8.4 51.3% -46.0%
------------------------------------------- ---- ------- ----- ------- ------ -------- --------
Add: Depreciation and amortisation 3.7 0.2 3.9 2.8 2.8 35.1% 40.9%
------------------------------------------- ---- ------- ----- ------- ------ -------- --------
Adjusted EBITDA 16.5 (8.0) 8.5 11.2 11.2 47.3% -24.3%
------------------------------------------- ---- ------- ----- ------- ------ -------- --------
Adjusted EBITDA as % of revenue 3.5% -137.1% 1.8 % 2.9% 2.9%
------------------------------------------- ---- ------- ----- ------- ------ -------- --------
Exceptional items
In March 2014, AO World plc floated on the London Stock Exchange. Non-recurring IPO costs totalled GBP19.7m in the year ended 31 March 2014, of which GBP15.4m was charged to the income statement and GBP4.3m was charged to the share premium account as being directly related to newly issued shares.
Adjustments
-- Europe set-up costs
These are costs incurred in connection with our European expansion strategy prior to the "go-live" of that territory, namely the launch of AO.de and our continuing research into other further countries along with strategic post "go-live" costs.
-- Share based payment charges
At the time of the IPO, LTIP awards were made to a number of senior staff. The Board considers that the magnitude and timing of these awards are one-off in nature and so add this charge back to Adjusted EBITDA. The AO Share Save Schemes(1) charges and any future LTIP charges will be included in trading numbers.
_______________________________
(1) AO Share Save Schemes are HMRC approved save as you earn schemes in which all employees are entitled to participate subject to having 3 months' length of service.
Taxation
The tax credit for the year was GBP0.4m (2014: GBP2.0m charge). The effective rate of tax for the year was 12.6% (2014: -26.8%). The business is subject to UK taxes and through its registered branch structure for Germany is able to fully offset losses.
Loss per share
Loss per share was 0.60p (2014: 2.38p loss).
Dividend policy
In line with the Group's dividend policy no dividend has been proposed or paid during the year.
Cash resources and cash flow
The year end net funds position was GBP37.9m (2014: GBP48.7m), as cash decreased to GBP44.9m (2014: GBP55.1m) reflecting the increased stockholding for additional ranges and territories, while total borrowings increased to GBP7.1m (2014: GBP6.4m). Surplus cash balances are held with UK-based banks, in line with the Group Treasury Policy.
The Group's cash generated from operating activities was a cash inflow of GBP1.3m (2014: GBP13.6m).
Working capital
Year ended 31 March
(GBPm) 2015 2014
UK Europe Total Total
----------------------------- ------- ------- ------- -------
Inventories 28.9 2.6 31.5 15.9
As % of COGS 8% 32% 8% 5%
Trade and other receivables 44.9 2.5 47.4 33.0
As a% revenue 10% 42% 10% 9%
Trade and other payables (82.2) (4.4) (86.6) (62.9)
As a % of COGS 22% 55% 22% 20%
Net working capital (8.4) 0.6 (7.8) (14.0)
------- ------- ------- -------
Change in net working
capital 5.5 0.6 6.2 (5.0)
------- ------- ------- -------
As at 31 March 2015 UK inventories were GBP28.9m (2014: GBP15.9m). This reflects an increase in sales volumes and the change in our MDA stockholding strategy as we hold more stock in order to provide customers with same-day and next-day delivery options on an increased number of SKUs and buy more product in bulk. We have also increased our stockholding in the UK to support the AV category which is generally only bought in bulk loads. As a result UK average stock days increased to 27 days (2014: 20 days).
UK trade and other receivables were GBP44.9m as at 31 March 2015 (2014: GBP33.0m) reflecting an increase in accrued income in respect of commissions due on product protection plans as a result of higher retail volumes.
UK trade and other payables increased to GBP82.2m (2014: GBP62.9m) as manufacturers continued to extend credit on a higher volume of sales.
Capital expenditure
Total capital expenditure for the year was GBP7.6m (2014: GBP7.5m), of which GBP3.4m relates to our expansion in to Germany, including the establishment of the head office, warehouse and outbase infrastructure and investment in our own last mile delivery capability which enabled us to completely own the customer experience as we do in the UK.
John Roberts Steve Caunce CEO COO & CFO 2 June 2015 2 June 2015
CONSOLIDATED INCOME STATEMENT
For the year ended 31 March 2015
Year ended Year ended
31 March 2015 31 March 2014
Note GBP000 GBP000
Revenue 2 476,663 384,918
Cost of sales (389,095) (310,741)
--------------------------------- ---- -------------- --------------
Gross profit 87,568 74,177
Administrative expenses (89,789) (65,976)
--------------------------------- ---- -------------- --------------
Operating (loss)/profit before
exceptional items (2,221) 8,201
Exceptional items 5 - (15,441)
--------------------------------- ---- -------------- --------------
Operating loss 4 (2,221) (7,240)
Finance income 346 80
Finance costs (1,006) (391)
--------------------------------- ---- -------------- --------------
Loss before tax (2,881) (7,551)
Tax 8 364 (2,022)
--------------------------------- ---- -------------- --------------
Loss for the year (2,517) (9,573)
--------------------------------- ---- -------------- --------------
Loss per share (pence/share)
Basic and diluted loss per share
(in pence per share) 6 (0.60) (2.38)
--------------------------------- ---- -------------- --------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2015
Year ended Year ended
31 March 2015 31 March 2014
GBP000 GBP000
Loss for the year (2,517) (9,573)
Exchange differences on translation
of foreign operations 382 -
------------------------------------- -------------- --------------
Total comprehensive loss for
the year (2,135) (9,573)
------------------------------------- -------------- --------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2015
At At
31 March 31 March
2015 2014
GBP000 GBP000
------------------------------ --------- ---------
Non-current assets
Intangible assets 14,336 12,830
Property, plant and equipment 13,485 11,409
Trade and other receivables 17,103 11,255
Deferred tax asset 759 575
-------------------------------- --------- ---------
45,683 36,069
------------------------------ --------- ---------
Current assets
Inventories 31,473 15,881
Trade and other receivables 30,268 21,711
Corporation tax receivable 672 -
Cash and bank balances 44,943 55,050
107,356 92,642
------------------------------ --------- ---------
Total assets 153,039 128,711
-------------------------------- --------- ---------
Current liabilities
Trade and other payables (86,640) (62,918)
Current tax liabilities - (1,146)
Borrowings (2,132) (1,996)
Provisions (766) (209)
-------------------------------- --------- ---------
(89,538) (66,269)
------------------------------ --------- ---------
Net current assets 17,818 26,373
-------------------------------- --------- ---------
Non-current liabilities
Borrowings (4,949) (4,403)
-------------------------------- --------- ---------
Total liabilities (94,487) (70,672)
-------------------------------- --------- ---------
Net assets 58,552 58,039
-------------------------------- --------- ---------
Equity
Share capital 1,053 1,053
Merger reserve 4,368 4,368
Capital redemption reserve (1,068) (1,068)
Share premium account 55,665 55,665
Share based payments reserve 2,843 195
Translation reserve 382 -
Retained losses (4,691) (2,174)
-------------------------------- --------- ---------
Total equity 58,552 58,039
-------------------------------- --------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2015
Share
Capital Share based
Share Merger redemption Translation premium Retained payments
capital reserve reserve reserve account losses reserve Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at
1 April 2014 1,053 4,368 (1,068) - 55,665 (2,174) 195 58,039
------------------ --------- --------- ----------- ----------- -------- -------- --------- --------
Loss for the
year - - - - - (2,517) - (2,517)
Foreign currency
gains arising
on consolidation - - - 382 - - - 382
Share-based
payments charge - - - - - - 2,648 2,648
Balance at
31 March 2015 1,053 4,368 (1,068) 382 55,665 (4,691) 2,843 58,552
------------------ --------- --------- ----------- ----------- -------- -------- --------- --------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2015
2015 2014
GBP000 GBP000
--------------------------------------------------------- -------- --------
Cash flows from operating activities
Loss for the year (2,517) (9,573)
Adjustments for:
Depreciation and amortisation 3,939 2,796
Finance income (346) (80)
Finance costs 1,006 391
Profit on disposal of property, plant and equipment (13) -
Taxation (credit)/charge (364) 2,022
Exceptional items - 15,441
Increase/(decrease) in provisions 766 (647)
Share-based payment charge 2,648 195
---------------------------------------------------------- -------- --------
Operating cash flows before movement in working
capital 5,119 10,545
---------------------------------------------------------- -------- --------
Increase in inventories (15,692) (7,173)
Increase in trade and other receivables (12,404) (6,141)
Increase in trade and other payables 25,915 18,314
(2,181) 5,000
Taxation paid (1,639) (1,906)
---------------------------------------------------------- -------- --------
Cash generated from operating activities 1,299 13,639
---------------------------------------------------------- -------- --------
Cash flows from investing activities
Interest received 346 80
Proceeds from sale of property, plant and equipment 69 -
Acquisition of property, plant and equipment (4,418) (2,788)
Acquisition of intangible assets (1,709) (493)
---------------------------------------------------------- -------- --------
Cash used in investing activities (5,712) (3,201)
Cash flows from financing activities
Interest paid (442) (391)
Repayment of preference shares - (1,010)
Repayment of shareholder loan - (269)
New / (repayment of) borrowings 1,233 (1,627)
Payment of finance lease liabilities (2,047) (1,771)
Dividends paid - (2,807)
(Costs settled)/net proceeds from issue of new
shares (4,352) 40,277
---------------------------------------------------------- -------- --------
Net cash (used in)/ generated from financing
activities (5,608) 32,402
Net (decrease)/increase in cash (10,021) 42,840
Cash and cash equivalents at beginning of year 55,050 12,210
---------------------------------------------------------- -------- --------
Exchange losses on cash & cash equivalents (86) -
---------------------------------------------------------- -------- --------
Cash and cash equivalents at end of year 44,943 55,050
---------------------------------------------------------- -------- --------
NOTES TO THE FINANCIAL INFORMATION
1. Basis of preparation
The financial information has been prepared under International Financial Reporting Standards (IFRSs) issued by the IASB and as adopted by the European Union (EU).
Whilst the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs.
The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 March 2015 or 2014, but is derived from those accounts. Statutory accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 will be delivered following the Company's Annual General Meeting. The auditor has reported on those accounts; the report was unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under section 498(2) or (3) Companies Act 2006.
Certain financial data have been rounded. As a result of this rounding, the totals of data presented in this document may vary slightly from the actual arithmetic totals of such data.
Going concern
A copy of the full Group accounts that comply with IFRSs for the year ended 31 March 2015 will be published on the Group's website AO.comcorporate on or before 22 June 2015 and will be posted to shareholders later this month.
The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. This follows a review of the Group's financial projections and takes into consideration the fact that the Group still has available proceeds from the Group's IPO in March 2014. The Group continues to maintain substantial cash headroom. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements.
2. Revenue
An analysis of the Group's revenue is as follows:
Year ended
31 March
Year ended 31 March 2015 2014
GBP000 GBP000
------------------------------------------ ------------------------ ----------
Own website sales 387,386 287,109
Third-party website sales and trade sales 70,259 79,323
Third-party logistics services 19,018 18,486
476,663 384,918
------------------------------------------ ------------------------ ----------
3. Segmental analysis
IFRS 8 "Operating Segments" requires operating segments to be determined based on the Group's internal reporting to the Chief Operating Decision Maker - in our case the Executive Directors. As the Group now operates in two principal geographic regions and based on the management and internal reporting structure, it has been determined that the UK and Europe should be presented as separate segments.
Income statement
Year ended (GBP000)
31 March 2015 31 March 2014 Change
---------------------------------------- ------------------------------ -------------------- ----------------------
UK Europe Total UK Total UK Total
---------------------------------------- --------- -------- --------- --------- --------- ---------- ----------
Revenue 470,818 5,845 476,663 384,918 384,918 22.3% 23.8%
---------------------------------------- --------- -------- --------- --------- --------- ---------- ----------
Cost of sales (381,141) (7,954) (389,095) (310,741) (310,741) 22.7% 25.2%
---------------------------------------- --------- -------- --------- --------- --------- ---------- ----------
Gross profit 89,677 (2,109) 87,568 74,177 74,177 20.9% 18.1%
---------------------------------------- --------- -------- --------- --------- --------- ---------- ----------
Net finance cost (86) (574) (660) (311) (311) -72.2% 112.4%
---------------------------------------- --------- -------- --------- --------- --------- ---------- ----------
Profit /(loss) before tax 8,674 (11,555) (2,881) (7,551) (7,551) 214.9% 61.8%
---------------------------------------- --------- -------- --------- --------- --------- ---------- ----------
EBITDA 12,540 (10,822) 1,718 (4,444) (4,444) 382.2% 138.6%
---------------------------------------- --------- -------- --------- --------- --------- ---------- ----------
Add back share based payments charge
attributable to IPO LTIP 2,506 - 2,506 195 195 1,185.1% 1,185.1%
Add back Europe setup costs 1,437 2,808 4,245 - - - -
Professional fees in relation to IPO - - - 15,441 15,441 -100% -100%
---------------------------------------- --------- -------- --------- --------- --------- ---------- ----------
Adjusted EBITDA 16,483 (8,014) 8,469 11,192 11,192 47.3% -24.3%
Geographical analysis
Revenue by location is the same as that shown above by reportable segment. Information on additions to non-current assets by geographical location is shown below.
Other information
Year ended 31 March 2015
(GBP000)
Additions
Intangible PP&E Depreciation Amortisation Share-based
assets payments
------------------------- ---------- ----- ------------ ---------------------- --------------------
UK 1,434 2,736 3,587 193 2,648
Europe 287 3,109 137 22 -
------------------------- ---------- ----- ------------ ---------------------- --------------------
Total 1,721 5,845 3,724 215 2,648
Year ended 31 March 2014
(GBP000)
Additions
Intangible PP&E Depreciation Amortisation Share-based
assets payments
------------------------- ---------- ----- ------------ ---------------------- --------------------
UK 493 7,006 2,546 250 195
Europe - - - - -
------------------------- ---------- ----- ------------ ---------------------- --------------------
Total 493 7,006 2,546 250 195
Due to the nature of its activities, the Group is not reliant on any individual major customers or group of customers.
4. Profit/(loss) for the year
The Group has calculated Adjusted EBITDA by adding back those material items of income and expense which, because of the nature and expected infrequency of events giving rise to them, merit separate presentation to allow shareholders to better understand the financial performance of the Group in the year.
Adjusted EBITDA:
Year ended (GBP000)
31 March 2015 31 March 2014
================================ ========================= =================
UK Europe Total UK Total
Operating profit/(loss) 8,760 (10,981) (2,221) (7,240) (7,240)
Add: Depreciation 3,587 137 3,724 2,546 2,546
Add: Amortisation 193 22 215 250 250
================================= ====== ======== ======= ======== =======
EBITDA 12,540 (10,822) 1,718 (4,444) (4,444)
================================= ====== ======== ======= ======== =======
Exceptional items
IPO cost - - - 15,441 15,441
Adjustments
Europe set-up costs 1,437 2,808 4,245 - -
Share based payments charge 2,506 - 2,506 195 195
================================= ====== ======== ======= ======== =======
Adjusted EBITDA 16,483 (8,014) 8,469 11,192 11,192
================================= ====== ======== ======= ======== =======
5. Exceptional items
Non-recurring IPO costs
In March 2014, AO World plc floated on the London Stock Exchange. Non-recurring IPO costs totalled GBP19.7m in the year ended 31 March 2014, of which GBP15.4m was charged to the income statement and GBP4.3m was charged to the share premium account as being directly related to newly issued shares.
6. Loss per share
The calculation of the basic and diluted loss per share is based on the following data:
Year ended Year ended
31 March 31 March
2015 2014
Loss (GBP000)
---------------------------------- ------------- -------------
Loss for the purposes of basic
and diluted loss per share
being loss for the year (2,517) (9,573)
Number of shares
Weighted average number of
ordinary shares for the purposes
of basic and diluted earnings
per share 421,052,631 401,672,675
Loss per share (pence/share)
---------------------------------- ------------- -------------
Basic and diluted loss per
share (in pence per share) (0.60) (2.38)
----------------------------------- ------------- -------------
7. Dividends
A dividend was declared on 19 July 2013 totalling GBP1.9m and a further dividend was declared on 8 November 2013 for GBP0.9m taking a full dividend for the year ended March 2014 of GBP2.8m. No dividend has been declared for the year ended 31 March 2015 in line with the Group's stated policy.
8. Taxation
Year ended Year ended
31 March 31 March
2015 2014
GBP000 GBP000
---------------------------------------- ---------- ----------
Corporation tax:
Current year - 2,281
Adjustments in respect of prior years (180) 18
(180) 2,299
---------------------------------------- ---------- ----------
Deferred tax (184) (277)
---------------------------------------- ---------- ----------
(364) 2,022
---------------------------------------- ---------- ----------
Corporation tax is calculated at 21% (2014: 23%) of the estimated taxable loss for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
The (credit)/charge for the year can be reconciled to the loss in the income statement as follows:
Year ended Year ended
31 March 31 March
2015 2014
GBP000 GBP000
Loss before tax on continuing operations (2,881) (7,551)
--------------------------------------------- ---------- ----------
Tax at the UK corporation tax rate of 21%
(2014: 23%) (605) (1,737)
Ineligible expenses 421 3,702
Impact of difference in current and deferred
rates 13 44
Adjustments in respect of prior periods (193) 13
--------------------------------------------- ---------- ----------
Tax (credit)/charge for the year (364) 2,022
--------------------------------------------- ---------- ----------
9. Principal risks and uncertainties
The Company has identified certain principal risks that could prevent the Group achieving its strategic objectives and has assessed how these risks could best be mitigated through a combination of internal controls, risk management and external insurance cover purchase. These risks were last formally assessed in March 2015 and will be reviewed and updated on a regular basis.
A summary of the nature of the risks currently faced by the Group is as follows:
-- Risks relating to the effective operation of the business including the dependence on a single national distribution centre, the interdependence of our IT systems, the failure of technology or data loss and our search engine strategy;
-- Risks relating to the acceptance of our customer proposition including failure of our brand, websites and offering to receive wide acceptance, loss of third party clients and that European expansion is unsuccessful;
-- Risks relating to people, such as failure to maintain the culture and to recruit and retain AO appropriate staff, dependence on executive directors and relationships with key suppliers;
-- Risks relating to regulatory changes, such as changes to or introduction of new requirements; and
-- Risks relating to changes in the macro-economic environment such as changes in consumer demand.
RESPONSIBILITY STATEMENT
The responsibility statement below has been prepared in connection with the Company's Annual Report & Accounts for the year ended 31 March 2015. Certain parts thereof are not included within this announcement.
We confirm that to the best of our knowledge and belief:
-- The consolidated financial statements, prepared in accordance with International Financial Reporting Standards as adopted in the European Union, give a true and fair view of the assets, liabilities, financial position, cash flows and loss of the Company and Group; and
-- The management report, which is incorporated into the strategic report, includes a fair review of the development and performance of the business and the position of the Company and Group, together with a description of the principal risks and uncertainties it faces.
This responsibility statement was approved by the Board on 1 June 2015 and is signed on its behalf by:
Steve Caunce
2 June 2015
This information is provided by RNS
The company news service from the London Stock Exchange
END
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