The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
.......cont....
The Chesterfield-based company had sales of £52 million last year.
Advertisement
Roberts is a prime exponent of the “growth today, profits tomorrow” mantra touted by e-commerce evangelists. The problem is that growth is slowing and profits are getting harder to come by.
The predominance of branded suppliers makes selling electrical goods profitably a tough task — and for AO it is even tougher. Delivering and installing bulky appliances such as washing machines and ovens requires AO to assign two members of staff for most deliveries. Its exposure to the cost of fuel is also making life painful. Meanwhile, as high street chains routinely secure 50 per cent cuts in rent on their shops, AO and its peers are being hit by huge increases in digital marketing costs, partly driven by Apple’s decision to allow iOS users to stop apps tracking their web browsing.
Even critics of Roberts would acknowledge, though, that he has transformed his industry’s approach to customer service. AO’s mantra of treating customers “as if they were your gran” has helped the retailer earn a rating of 4.6 out of 5 on the review site Trustpilot, based on more than 350,000 reviews.
Roberts once boldly predicted that European expansion could see AO raking in £15 billion of sales within a few years and put its profits on a par with Tesco’s. Costly misadventures in Germany and the Netherlands have put paid to those ambitions. Despite more than quadrupling sales since its float to £1.66 billion, AO has delivered investors cumulative pre-tax losses of £36 million.
So, what is there for investors to be excited about? Alongside its capital raise, AO announced plans to strip out £25 million of annual costs. About 600 staff, 15 per cent of its workforce, have been axed in the past year. It has reduced its warehouse space by 1 million sq feet.
Roberts expects AO’s focus on white goods, rather than more discretionary products such as gaming consoles and audio equipment, will help insulate it from the squeeze on spending. In the medium term, AO is targeting sales growth of at least 10 per cent and underlying profit margins of at least 5 per cent in its domestic market.
“The people who know the business best have all invested,” Roberts said, eager to put a positive spin on our coverage in the Sunday Times last week: “I was having a laugh with an investor, that you have created an incredible opportunity for them!”
Time will tell if he is right. For now, AO’s ebullient chief remains undimmed.
cont....
Credit insurance is critical in retail supply chains, protecting suppliers from the risk of a retailer failing to pay for goods. Without such cover, suppliers often demand payment on delivery, which can drain a retailer’s cash reserves.
Advertisement
Two insurers dominate the electricals market — Allianz Trade, formerly known as Euler Hermes, and Atradius, owned by Spain’s Grupo Catalana Occidente. Their attitude towards supply cover can determine whether or not a company makes it through tough times. Credit insurers sounded the death knell for Comet when they pulled cover for its suppliers in 2012, leaving the chain unable to buy stock for Christmas trading.
The insurers’ power is enormous. The boss of one under-pressure electrical goods retailer recalled the nerve-racking experience of having his business’s fate in their hands. “I was sat outside a room in Atradius’s head office in Cardiff where three of them were inside deciding whether to pull cover. Thankfully, there were two votes to one in favour of keeping it. If it had gone against me, it would have been game over,” he said.
As AO’s shares came under pressure on Monday, the company rushed out a statement that the reduction in credit insurance, which took place in May, had no impact on its cashflow and that it was trading as expected. The attempted assurances failed to ease market jitters and by the time AO unveiled its capital raise on Wednesday its shares had fallen by 31 per cent in just two days. Under stock exchange rules, the investors that AO had lined up for the placing were prevented from buying shares on Monday and Tuesday — potentially removing sources of support.
Roberts was irritated by market commentary that the capital raise betrayed a state of emergency. “The placement had been organised for some time and now it’s being presented as a rescue package— it had nothing to do with the reduction of credit insurance [being publicised]. We couldn’t have done it that quick,” Roberts said. Atradius, he added, was reducing cover from elevated levels only to reflect a fall in sales from their pandemic peak.
Sources close to the company said the capital raise was linked to the eleventh-hour collapse of the sale of its German business, which is now being wound down. Roberts, whose stake was diluted to 20 per cent last week, had hoped the business would fetch about £40 million to boost the cash position.
AO will not be the last business to be targeted by credit insurers as an economic downturn looms. Online retailers that had been having problems getting their hands on the goods needed to meet buoyant demand now have too much cash tied up in unsold stock, according to Zelf Hussain, a partner in PwC’s restructuring practice.
Forecasting demand is hard at a time when the cost of living crisis is plunging households into poverty. In a possible sign of things to come, XBite, an online retailer, filed notice last week of its intent to appoint administrators. The Chesterfield
After three days watching AO’s shares get trashed last week, John Roberts could have been forgiven for wallowing a little. But when the online retailer’s ever-chirpy chief executive and founder dialled into his monthly managers’ meeting on Thursday, he launched a rallying cry in what he calls his “candid Boltonese” style.
“I was like, ‘This is galvanising! Come on! Let’s go and prove them wrong and prove the investors who backed us right,’ ” Roberts, 48, said.
While he is eminently comfortable playing the scrappy underdog taking on the establishment, AO’s Energizer Bunny has had a difficult week.
Last week The Sunday Times revealed that Atradius, a credit insurer, had cut its cover for suppliers to AO. The news catalysed a market sell-off as investors feared that the Bolton-based retailer’s cash reserves would be drained should nervy suppliers start to demand to be paid upfront. Roberts insisted that such fears were ill-founded.
However, AO’s evangelical founder is steering a ship sailing into choppy waters. Big-ticket items are bearing the brunt of a slowdown in consumer spending, just as costs for businesses are spiralling. A jump in energy bills in October, and the increased cost of imports after a fall in sterling, will only add to the pain.
AO shored up its balance sheet on Wednesday by tapping investors for £40 million in return for discounted shares. The shares finished a bruising week 37 per cent lower at 43p, valuing AO at £206 million — a far cry from its £1.2 billion float. Can Roberts steer the one-time stock market darling away from danger?
He left grammar school halfway through his A-levels and got a job in the warehouse of a kitchen supplier, before working his way up into the sales department. In a pub on Christmas Eve in 1999, aged 26, he was moaning about his work to a friend who bet him £1 he would not start his own business. Appliances Online was born the next year.
Roberts won early backing from Bill Holroyd, a serial investor and associate of his father, who was bowled over by the young entrepreneur’s sales skills.
“When you meet him, he comes off as brash because he is so confident,” Holroyd said. “John can argue the back legs off a donkey, but if his argument is wrong he can be persuaded. He does listen.”
In 2014, Roberts swaggered on to the public markets with City fund managers lapping up AO shares. The man who boasted of his ability to function on “little sleep and lots of booze” was suddenly halfway to becoming a billionaire. As critics lined up when the float did not deliver on its lofty promises, Roberts said he “didn’t give a ****” whether fusty old fund managers bought AO’s shares.
Crispin Odey, a hedge fund manager, recalled: “John thought we were ignoramuses and we thought he was a jumped-up idiot.”
Odey Asset Management owns about 18 per cent of AO, and bought almost 24 million shares as part of last week’s placing. “I actually have a lot of respect for John,” Odey said. “He is a great motivat
Certainly looks very very interesting. He clearly wants a chunk of these. Share price at these levels I would not be surprised if he just starts buying on the open market.
There's an article in the Mail today which talks about this, it says that MA tried to get involved in the placing / rights but it looks like he was blocked and as far as I can see MA doesn't hold any shares as of this week.
I think it was his intension to buy a chunk this week and to possibly buy more later but who knows now whats going to happen if anything. But with AO at this low level someone could make an offer i guess.
Ps to be clear I think this is a long term and short term winner. Short term via takeover / value recovery or long term via this being a genuine winner.
Personally I think it is. The market they are in and the setup they have is Rick solid. But the founder has 22 percent of the shares. How much would he want? Because without him being on board it’s hard to see it happening. Personally I would say at least 90p to 100p to take the company out. Remember it’s 8 times lower than it was just 1 year is ago ( I think it was about 350p ( need to check it’s early ) .. lots of bargains out there at the moment.
Takeover on the cards !
50/60p ?
Directors committed to over 2 million shares but can’t take them till out of closed period.
The Directors have been surprisingly subdued during this upheaval which is very curious indeed. Normally they would be shouting out that they have been buying shed loads of shares and that the company has a great future.
Their plan to takeover the world is finished and it wouldn’t surprise me if the founder has had enough and probably wants to move on to something new.
Considering this fund raise had already been planned long before the press got wind of it I just wonder if they also have been exploring the possibility of a sale .
I have taken a small stake because at this price they are cheap and now have £40 million in the bank !!
Odey Asset Management have been building a 7.8% stake in AVO too, announced today.
Looks like they are shopping for oversold stocks with lots of upside. AVO make no money yet either but their tech could be worth 20x the share price.
There's generally bigger upside on stocks that are not necessarily making a profit yet but should do in years to come.
I bought some around the 45p mark. Great value here. People will be looking for the latest and most efficient appliances as energy stays high. Like on the petrol courts, retailers are competing less and getting more margin. These types of purchases in many cars are not discretionary. With the huge revenues here and closing Germany I am sure they can improve margin and make decent returns. Really a great opportunity at these levels which odey can clearly see and has out his money in. Suspect back over 50p next week.
Jefferies - house broker - kept on Hold. 45p target price. note out last night
Goodness ODEY ASSET MANAGEMENT LLP now hold 18%.
Do they smell a takeover soon at this price ?
This will rise back to above 50p within next few trading days, which means 20%+ and hold above 50p.
It's a good opportunity to recover some loss many had within last few days weeks IMO.
GLA
I really hope this rallies above 43p and holds soon, or some may consider bailing on their RI, which is probably what the MM's want.
Med-long term I am 'really' worried about the AO business model
Will AO survive, yes they will but they could bring in new money/funding , and dilute our pie, i saw thomas cook bring in 95% of new money, leaving current shareholders with only 5%..
by pure luck (and busy at work) I never added earlier this week, + i'm massively underwater on ASOS & boo so I'm more cautious these days.
GL all, and remember it's 'cheap' for a reason
it's good to see a good mix of 'many opinions' on this board, most/all posters are honest & helpful and for that i thank you all guys
Thursday 7th of July 2022
AO World: Numis upgrades from hold to buy targeting GBP 60
https://www.marketscreener.com/news/latest/Analyst-recommendations-Bunge-Coinbase-Ford-Morgan-Stanley-Goldman-Sachs---40917427/
Obviously people with a lot more money than us are investing in this! Which must be a positive that it will go back up
Odey Asset Management has increased their holding to almost 14%
Nice chunky buy just gone through !!
15:29:53 43.358 693,304 £300.60k
Just looked in here as saw it on the list of losers the other day....last time I did things were looking very rosy as per the share incentive plan news from July 2020..what on earth went wrong?
it's totally reasonable for a founder to cash in but harder to make sense of it given he has just said the business should be generating 5% ebitda on call it £1.2bn in the medium term ie. £60m
therefore to sell any shares - rather than buy them - at a £250m market cap looks strange if he believed his own forecasts
as for the raise, it was a clear reaction to the credit insurance issue. you're incredibly naive if you think it was for growth!
the Accounts delay is something that should be in focus now and what will happen to the warranties business given that is most/all of profits. If things are a bit tighter you'll cancel your policy or not take one out with your new purchase
interesting from the Currys release-they're introducing initiatives that will hurt AO such as free credit for 12 months and a price freeze on some lines
Net assets £96 million at end of July last year ... suggests fair value per share is c.20 pence and falling Surprised it raised £40 million
Now that I've got a fuller picture about his selling, I quite agree.
Totally reasonable for him to cash in in an orderly way, especially since he hadn't sold any shares from flotation in 2014 through to when he made the announcement in April.
I cant imagine he is in a rush and probably just wants to sell a little each year and get some reward for starting a Billion £ company! I know I would!