After holding between £1.25 and £1.30 throughout January, the AO share price sank across the first week of February, eventually slipping all the way to 95p. It took another tumble in early spring, briefly striking an all-time low of 85.5p on the day of its latest trading update. It has rallied somewhat since then, however, with AO shares now at a current trading price of £1.13 (Spreadex, 29/05/2019).
April’s trading statement wasn’t great. The re-appointment of John Roberts as CEO at the start of 2019 brought about a rather costly management re-shuffle; combine that with a loss making contract in Germany the company has been unable to terminate, and it is set to incur exceptional charges of around £2.5 million. This comes on top of the costs related to the £32.5 million acquisition of Mobile Phones Direct at the end of 2018.
It also announced that during the final quarter of the financial year it had increased its core fast moving inventory levels by around £15 million as part of its Brexit contingency plans.
As for its full year performance, the company is expecting group revenue to arrive at c. £900 million, which would be at the mid to upper end of its expected range, and a 13%-ish improvement on 2018. In the UK specifically, revenue is forecast to be around £748 million, rising just shy of 10% year-on-year.
Group adjusted EBITDA, meanwhile, is expected to be at the lower end of market expectations, which is worrying given that estimates have it anywhere between a £400,000 loss and a £2 million profit.
The response to AO World’s full year results, then, may well be predicated on whether or not it does indeed slump to an adjusted loss, as well as the size of said loss.
AO World PLC shares have a consensus rating of ‘Hold’ alongside an average target price of £1.45.
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