18th Aug 2022 08:11
(Alliance News) - Online electricals retailer AO World on Thursday revealed a swing to annual loss as it now looks to a year of "realignment for the business".
Revenue in the year to March 31 fell 6.3% to GBP1.56 billion from GBP1.66 billion. AO swung to a pretax loss of GBP37.2 million from a GBP20.2 million profit.
Adjusted earnings before interest, tax, depreciation and amortisation of GBP8.5 million was down sharply from GBP64.4 million the year before, which the firm blamed on increased staff costs as well as higher marketing and logistics expenses.
"The new financial year marks a period of realignment for the business as we execute a strategic pivot to focus on cash and profit generation," AO said.
Pressure on AO World has grown in recent months.
In late-April, shares were hit when the company warned about supply chain issues and a squeeze on consumer incomes.
In July, it issued a statement on its liquidity position, after a report from the Sunday Times that a credit insurer cut its cover for the online retailer's suppliers. Credit cover is a crucial aspect of the retail supply chain. It provides cover for firms should customers not pay debts in time or at all. Without cover, suppliers would usually require upfront payments to be made.
AO has also recently closed its German operation, after kicking off a strategic review of the unit earlier this year.
Chief Executive John Roberts said on Thursday: "The past 12 months has been a turbulent time for business and for retail in particular, and AO hasn't been immune to those effects. Looking ahead, we certainly have more volatility to navigate, but the core fundamentals of our business remain strong. We entered the new financial year with a period of strategic realignment, and a focus on cash and profit generation."
In the short-term, the company said its "strategic pivot" will reduce both sales and costs, but eyes average revenue growth in excess of 10% per year in the medium-term.
For the 2023 financial year, which so far is tracking to plan, it expects revenue between GBP1 billion and GBP1.25 billion. Adjusted earnings before interest, tax, depreciation and amortisation are expected around GBP20 million to GBP30 million - which would be up significantly on the 2022 financial year.
Shares in AO World were up 10% in early dealings.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.2% at 7,504.67
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Hang Seng: down 1.0% at 19,734.06
Nikkei 225: closed down 1.0% at 28,942.14
S&P/ASX 200: closed down 0.2% at 7,112.80
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DJIA: closed down 171.69 points, or 0.5%, at 33,980.32
S&P 500: closed down 31.16 points, or 0.7%, at 4,274.04
Nasdaq Composite: closed down 164.43 points, or 1.3%, at 12,938.12
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EUR: firm at USD1.0158 (USD1.0155)
GBP: down at USD1.2012 (USD1.2040)
USD: down at JPY135.30 (JPY135.44)
Gold: up at USD1,761.83 per ounce (USD1,753.55)
Oil (Brent): up at USD93.52 a barrel (USD93.38)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Thursday's key economic events still to come
1100 CEST EU CPI
1100 CEST EU construction output
0830 EDT US Philadelphia Fed survey
0830 EDT US unemployment claims
0830 EDT US export sales
1000 EDT US leading indicators
1000 EDT US home sales
1030 EDT US EIA natural gas storage report
1100 CDT US Fed Kansas City President Esther George speaks
1245 CDT US Fed Minneapolis President Neel Kashkari participates in Q&A
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The US Federal Reserve reaffirmed its commitment to reducing historically high levels of inflation but could rein in the pace of interest rate increases "at some point", minutes from its latest policy meeting showed on Wednesday. In the minutes of the July policy meeting, Fed officials said it will take some time to bring "unacceptably high" inflation back down near 2.0% target levels. Policymakers at the Fed noted there was little evidence to date that inflation pressures were subsiding. Further, participants judged that inflation would respond to monetary policy tightening and the associated moderation in economic activity with a delay and would likely stay "uncomfortably high for some time". However, participants stressed that moving to an "appropriately restrictive stance of policy was essential for avoiding an unanchoring of inflation expectations", once high levels on inflation were under control.
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The US and Taiwan announced on Wednesday objectives for trade negotiations set for the early autumn in another step to boost ties even as tensions soar with China over the self-ruled island. The negotiations would cover a variety of areas, including agriculture, digital trade, good regulatory practices and removing trade barriers, the Office of the US Trade Representative said in a statement. The negotiations "will deepen our trade and investment relationship, advance mutual trade priorities based on shared values, and promote innovation and inclusive economic growth for our workers and businesses," said Deputy US Trade Representative Sarah Bianchi. "We plan to pursue an ambitious schedule for achieving high-standard commitments and meaningful outcomes covering the eleven trade areas in the negotiating mandate that will help build a fairer, more prosperous and resilient 21st century economy."
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BROKER RATING CHANGES
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Jefferies raises AO World to 'buy' (hold) - price target 65 (45) pence
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Berenberg raises Devolver Digital to 'buy' (hold) - price target 80 pence
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COMPANIES - FTSE 250
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Africa-focused mobile phone tower developer Helios Towers reported revenue of USD265.4 million for the half-year to June 30, up 25% from GBP212.4 million. However, its pretax loss ballooned to USD122.2 million from USD43.6 million. Finance costs surged to USD104.7 million from USD64.5 million. Adjusted earnings before interest, tax, depreciation and amortisation rose 19% to USD136.1 million from USD114.2 million a year earlier. Tenancies grew 20% year-on-year to 20,549. A tenant is a mobile network operator that leases space on a tower. "Despite broader global macroeconomic uncertainty, our uniquely positioned platform, highly visible base of quality earnings and unparalleled structural growth continues to drive sustainable value creation for all of our stakeholders," Chief Executive Tom Greenwood said. Looking ahead, it backed guidance of 1,200 to 1,700 organic tenancy additions. It still expects an adjusted Ebitda margin between 51% and 53% in 2022, down from 53.6% in 2021. The first half adjusted Ebitda margin fell to 51% from 54% a year prior.
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Marshalls hailed a "robust" first half but is mindful of economic uncertainty. Revenue in the first half of 2022 climbed 17% to GBP348.4 million from GBP298.1 million a year earlier. However, its pretax profit dropped 38% year-on-year to GBP23.9 million from GBP38.9 million. Net operating costs climbed by a quarter to GBP321.1 million. Marshalls upped its dividend by a third to 5.7 pence per share from 4.3p. CEO Martyn Coffey said: "Looking forward, the board acknowledges that the macro outlook is becoming less certain due to geopolitical events driving up inflation and adversely impacting consumer confidence. Notwithstanding this, the board's expectations for the group as a whole remain in line with market expectations for the full year, with the more positive backdrop within Marshalls Building Products and Marley expected to balance the continuation of tougher trading conditions in Marshalls Landscape Products, which has greater exposure to the discretionary element of private housing RMI." Back in April, Marshalls agreed to buy pitched roof system manufacturer Marley for GBP535 million. The acquisition was completed later that month.
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COMPANIES - SMALL CAP
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Online furniture retailer Made.com in a short statement said it is "considering all options" to bolster its balance sheet. Made.com said on Thursday: "Made confirms that these options include a potential equity capital raise. Made continues to consider its options and a further announcement will be made if and when appropriate." Late Wednesday, Sky News reported the sofa seller has hired PricewaterhouseCoopers to help with repairing its balance sheet, including plans for a share sale to raise around GBP50 million. Made.com has a market capitalisation of GBP39.1 million. According to Sky News sources, the furniture retailer is advancing plans to raise funds a month after announcing that it was exploring ways to bolster its financial position. Sky News reported that the launch of a cash call is expected to take the form of a placing which would require shareholder approval. Made shares debuted in June last year at 200 pence each, valuing it around GBP775 million on admission. The stock closed 5.0% lower at 9.88p each in London on Wednesday, down 95% from its IPO price.
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Also in the UK retail sector, specialist fishing tackle retailer Angling Direct warned annual revenue will fall short of market expectations. For the first half ended July 31, it expects to report revenue of GBP38.9 million, up 1.3% year-on-year from GBP38.4 million. Angling said it has faced an "inevitable impact" from cost of living pressures, falling consumer confidence and inflation. It has also felt the heat from recent hot weather. "More recently, adverse fishing conditions caused by the heatwave and its resulting effect on river levels and fish health has also impacted trading in the usually busy month of August. In addition, the same factors have impacted sales growth and profitability to a similar extent in Europe as the company continues to invest in the early stages of its European rollout," Angling said. It now expects revenue "marginally below current market expectations" for financial 2023. Its pre-IFRS 16 Ebitda will be "materially behind current market expectations" and land in the region of GBP3.0 million and GBP3.4 million.
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COMPANIES - GLOBAL
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SMC said it has ceased all imports and exports within Russia and has suspended any new investments in the country. The Tokyo-based firm produces pneumatic control devices used in actuators, valves, vacuum products and sensors. It has customers in the automotive, mining, packaging and energy efficiency fields. SMC said it has made a commitment to assist in the evacuation and relocation of its employees and their families in Ukraine and Russia. "We have operated in Russia for over 30 years and employ nearly 480 associates who have become a part of the SMC family. We will continue to support them, but to remain neutral is not an option," the company said. "We stand firmly with the people of Ukraine and will continue to dedicate resources and support to aiding those impacted by these horrific events," it affirmed.
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A federal judge ordered Walmart, Walgreens Boots and CVS to pay USD650.6 million to two Ohio counties plagued by the US opioid crisis. The penalties will account for the companies' "roles in failing to control the spread of deadly and addictive prescription opioids," said plaintiffs' lawyers at the Lanier Law Firm. More than 500 opioid overdose deaths in the two counties between 2015 and 2019 "could be directly or indirectly linked" to prescription opioids or prescription painkillers, the Lanier firm said, citing testimony presented during the litigation. The order from US District Judge Dan Polster follows a November 2021 jury verdict against the same companies that found the three acted illegally in creating an "oversupply" of the drugs. The case had been the first instance in which distributors of the addictive painkillers – rather than manufacturers – were found liable for the health crisis that has claimed more than 500,000 lives in the US over the last two decades. Walmart said it will appeal the penalty.
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Thursday's shareholder meetings
Artemis Resources Ltd - GM directors fees, share options
Artemis Resources Ltd - AGM
LoopUp Group PLC - GM resolutions to the annual report and accounts that were not put in AGM
NextEnergy Solar Fund Ltd - AGM
Oryx International Growth Fund Ltd - AGM
SIMEC AtlantisEnergy - AGM
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By Lucy Heming; [email protected]
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