TIDMAO.
RNS Number : 8854S
AO World plc
14 July 2020
AO WORLD PLC
FINAL RESULTS FOR THE YEARED 31 MARCH 2020
A year of change and transition towards One AO
AO World plc ("the Group" or "AO"), a leading European online
electrical retailer, today announces its audited financial results
for the year ended 31 March 2020 ("FY20") .
John Roberts, AO Founder and Chief Executive Officer, said:
"I'm pleased that we have made substantial progress, closing the
year in good shape after getting AO fit and focused on the future.
Covid-19 has accelerated a shift in customer behaviour towards
online shopping and we now need to cement that change.
"In short, we must drive forward so those customers never look
back.
"At the start of the financial year, we went back to basics,
bringing clarity and leadership to the fundamentals of our
business. AO's model and vertically integrated ecosystem is a
structural advantage when properly leveraged. The whole business is
now fixed on delighting our customers, driving innovation and
creating growth. As a result, we made significant headway against
our four priorities of double digit MDA growth in the UK, becoming
cash generative(13) as a group, accelerating our journey to
profitability in Germany and operating as One AO.'
"That progress ensured that we were in the best possible shape
when Covid-19 hit in the final weeks of the financial year.
Investing to make sure our operations were safe so that our
customers and people were protected allowed AO to be a proud
lifeline for customers during lockdown. Many experienced AO for the
first time and were delighted with what they found.
"AO now has the opportunity to become a new habit that lasts -
by delivering brilliant service for customers. In other words,
turning those lockdown learnings into lifelong change.
"This has not been an easy journey and I'm grateful both to our
teams across the UK and Germany for their exceptional work during
an extraordinary time and also to our partners for their continued
support.
"Looking ahead, there is a huge amount of uncertainty but the
values and principles that guide our thinking have positioned us
well for the opportunities and challenges that are to come."
Financial Highlights(1)
-- Strong revenue growth with total revenue for the period
increasing 15.9% to GBP1,046.2m (2019: GBP902.5m)
- Total UK(2) revenue up 20.3% to GBP901.6m (2019: GBP749.3m),
(up 8.2% on a like for like basis excluding revenues from our
Mobile Phones Direct(3) business ("MPD"))
- Europe(4) revenue for the period decreased by 4.6% to
EUR165.4m (2019: EUR173.3m)(5) (decreased 5.6% in GBP to GBP144.5m,
2019: GBP153.2m) due to the closure of AO.nl, our Netherlands
website, in the third quarter as we re-aligned our European
operating model with our UK policy
-- Increase in Group Adjusted EBITDA(6) of 53.6% to GBP19.6m (2019: GBP12.8m)
- UK Adjusted EBITDA improved by 7.0% to GBP40.8m (2019: GBP38.1m)
- Europe Adjusted EBITDA losses decrease to EUR24.2m (2019:
EUR27.9m) (in GBP 2020: GBP21.1m loss; 2019: GBP25.3m loss) with
actions implemented during the period starting to benefit
performance during in the second half
-- Statutory Group operating losses reduced to GBP3.8m (2019: GBP13.0m loss)
-- As at 31 March 2020:
- Net debt (7) was GBP23.4m (31 March 2019: net debt of GBP9.0m)
- Significant liquidity headroom of GBP 63.6m as at 31 March
2020 including available funds and undrawn Revolving Credit
Facility (RCF), with a new GBP80m RCF facility which matures in
April 2023 entered into shortly post year - end
-- Basic earnings per share of 0.38p (2019: 4.00p loss), which
includes foreign exchange gains from inter-group funding. Reversing
such foreign exchange gains gives an adjusted loss per share of
0.91p (2019: 3.36p loss). (8)
Strategic and Operational Highlights
-- Commenced roll out of One AO model across the Group to create
a centralised approach to scale the businesses in our
eco-system
-- Net Promoter Scores(9) maintained at consistently high level
of over 80 in the UK and Germany reflecting continued high levels
of customer satisfaction
-- Strong progress against our four immediate strategic
priorities with a renewed focus on evolving the customer
proposition:
UK Growth
- UK MDA growth of 9.1% YoY versus a market that remained
broadly flat over the year; increasing to growth of 19.9% in final
quarter of FY20 against a market that saw an increase of
3.2%(12)
- UK product revenue grew by 10.3% during FY20
- Continued to invest in the customer journey and improve in the
breadth and usability of our overall retail experience including
the launch of AO Finance to offer customers additional purchasing
flexibility, increased payment methods and move to more tactical
marketing with the use of social media and influencers
- Developed an AO branded mobile proposition and commenced
building the foundations for the next stage of growth for our
mobile business
Journey to profitability in Germany
- Full review of Europe business model undertaken at start of FY20
- Focused resources and energy on German business, resulted in
the closure of our Netherlands business by 31 March 2020 at a cost
of GBP2.5m
- Alignment with UK pricing model reduced lower quality
price-driven revenue, with benefit of other actions beginning to
flow though in the second half of FY20
- Improved relationships with suppliers, gaining a renewed
commitment to AO as a quality online retailer able to leverage its
UK customer proposition of best journey, content, service and price
into Germany
- Increased confidence in establishing a profitable German
business through more efficient customer traffic acquisition and
the centralisation into the UK of core disciplines including
eCommerce and marketing
- Continue to expect to achieve positive EBITDA in Germany on
revenue of c.EUR250m; we are very encouraged by our current
trajectory of revenue growth and profitability improvements and
will update further at our half year results in November
Leverage our eco-system
- Continued development of eco-system to compound the benefits within the AO group
- Leveraging our capabilities externally, added new third-party
logistics clients including Aldi and Simba
- Plastics refining facility built, operational and in final
phase of testing and commissioning providing the capability to sort
waste plastics from our fridge plants and creating an additional
sustainable revenue stream
Cash & financing
- Cash outflow reduced during the year; the Group was cash
generative on an Adjusted EBITDA less debt repayment, interest,
taxes and monthly share of annualised capex on a run rate basis by
the end of the reporting period
COVID-19 and post-period end
During the final weeks of our reporting period the implications
of Covid-19 became apparent and began to impact the business. The
measures introduced by the Governments in both the UK and Germany
to deal with the outbreak of Covid-19 led to an immediate change in
shopping practices and habits. This significantly increased demand
in our core retail business at the same time as presenting us with
some challenges and increased costs particularly in recycling and
our logistics operations. We also experienced some challenges in
our supply chain which we worked through with our manufacturer
partners. Our actions were taken swiftly and in line with
Government guidance, which we continue to follow.
Safety of our people and our customers:
This remains our top priority. We are continually adapting the
services we offer to comply with current guidance on social
distancing and ensuring safety measures to protect our people in
front line operational roles. At the start of lockdown we
prioritised services to the most vulnerable members of society and
donated essential products to those in need. As a technology-led
business we were able to quickly mobilise approximately 1,500 of
our people to work from home with minimal impact on the operation
of our business.
Impact on trading:
The measures implemented by Governments created a unique set of
circumstances from the end of March through to the beginning of
June. The products we sell are an essential part of people's lives
and the electricals market migrated to nearly 100% online
overnight.
We therefore experienced strong demand and made significant
market share gains across many of our key categories from the start
of lockdown on 23 March 2020, the impact of which saw sales above
our expectations and an improvement to our working capital. We
worked hard with our supply partners to maintain the availability
of our products for our customers and we will continue to look for
win-win collaborative solutions to meet demand.
While demand remains strong, the recent reopening of the high
street means that customers now have more options to purchase their
appliances offline from stores. Although customers are able to
return to bricks and mortar stores, initial data shows that since
stores have reopened the online market has in fact continued to
grow year on year.(12)
Operational impact and business resilience:
Increased consumer demand and new Government guidelines have
presented us with additional operational and ongoing challenges.
The changes made in our logistics operations to accommodate new
ways of working has led to some continued inefficiencies and cost
increases, largely in increased staff costs. Our distribution
network remained open during the full lockdown period. However, as
we concentrated on the delivery of essential electrical products,
we paused the majority of our installation services and the
logistics services we provide to our third-party clients. The
easing of social distancing measures in recent weeks means we are
now offering most of these services again in line with
guidelines.
We are pleased that despite these challenges we continued to
maintain our high standards of customer service, achieving a record
NPS high in the UK during the first quarter of our new financial
year.
The decision by councils to close household waste and recycling
centres together with a reduced collection from AO's customers,
presented supply challenges in our recycling plants, materially
reducing operations for a six week period. Our WEEE (11) recycling
facility is now open with increased costs from social distancing
measures and resultant capacity constraints, whilst also suffering
from a depressed market for output materials. Although we expect
there to be some limited recovery, we expect to see volatility in
the short term.
During FY20 our B2B business was successful in winning a number
of commitments with housebuilders. The conversion of this pipeline
has now been delayed as a result of sites closing during lockdown.
We remain excited by the opportunity for this business unit to
support this industry as it reopens and assesses its supply
chain.
We are particularly pleased with how the financial services and
insurance products business has operated during Covid-19, adapting
from working in a sales environment to home working with no
noticeable impact in performance. During the first few weeks of
lockdown measures we experienced a small spike in the cancellation
rate of the AO Care product. However, we have since seen a lower
level of cancellations as we believe our improved product offered
through a structured regulated sales process provides customers
with additional security in times of uncertainty. We are mindful of
the potential increased risk in the rate of cancellations against a
challenging economic backdrop.
Financial stability:
As reported above, we now have a new GBP80m RCF in place which
matures in April 2023 and which replaces our previous GBP60m RCF
and GBP20m term loan. As anticipated net debt (excluding right of
use lease liabilities under IFRS 16) increased by GBP14.3m in the
period to GBP23.4m as a result of investment in the Group's
infrastructure and a relatively modest outflow of working capital.
Including lease liabilities arising from the adoption of IFRS 16,
net debt was GBP99.1m (2019: GBP83.5m).
Our strategy is to be cash generative (on a Group Adjusted
EBITDA less debt repayment, interest, taxes and monthly share of
annualised capex) on a run rate basis going forward . With our
liquidity headroom of GBP63.6m as at 31 March 2020 including
Revolving Credit Facility and Group cash resources, we are able to
continue to grow but remain vigilant given economic
uncertainty.
Outlook for 2020/21
With the closing of physical retail outlets as a result of the
implementation of the Government's lockdown measures, the market
for electrical products moved to nearly 100% online for that
period. This resulted in an increase in our revenue above our
expectations and has led to improvements in working capital. We
continue to expect to achieve positive EBITDA in Germany on
revenues of c.EUR250m; we are very encouraged by our current
trajectory of revenue growth and profitability improvements and
will update further at our half year results in November.
Although around 70% of electrical purchases are replacement in
nature, a fall in consumer confidence may lead to a delay in the
purchase of big-ticket items. There may also be a significant fall
in GDP in both the UK and Germany and the level of UK housing
transactions, to which our performance is in part linked, may also
decline as a result of restrictions in the mortgage market. There
is also an additional level of uncertainty over a hard Brexit in
December.
Although it is difficult to predict with certainty, we believe
this crisis has had a seismic impact on retail and that many
shoppers will have been permanently converted to online shopping.
The forced migration to online has presented AO with an opportunity
to impress a new customer demographic and convert them to the AO
Way as they experience a better way of shopping for electrical
products which should continue to drive sales growth through repeat
and recommendation purchases.
The strength of AO's customer proposition, infrastructure and
ecosystem, underpinned by our culture and strong balance sheet puts
us in a good position to ensure we are prepared for the times
ahead.
Webcast details
A pre-recording webcast of our results presentation hosted by
Geoff Cooper, John Roberts and Mark Higgins for analysts and
investors will be available via the following link AO World FY20
Results Webcast from 7am (BST) today, 14 July 2020. A live Q&A
session will also be held today at 9am (BST). Please register to
join the Q&A session at AO World FY20 Q&A . Both the
webcast and a playback of the Q&A session will be available on
AO's corporate website at ao-world.com(10) later today .
For further information, please contact:
AO World plc ir@ao.com
John Roberts
Mark Higgins
Tulchan Communications Tel: +44(0) 20 7353
Will Smith 4200
James Macey White ao@tulchangroup.com
William Booth
About AO
AO World plc, headquartered in Bolton and listed on the London
Stock Exchange, is an online electrical retailer, with a simple
mission: to have the happiest customers by relentlessly striving
for a better way. We create value by providing electrical products
and related services to our customers, offering a huge range, a
price-match promise and market-leading customer service.
We sell major and small domestic appliances and consumer
electronics in the UK, and Germany and deliver them via our
in-house logistics business and carefully selected third parties.
We also provide ancillary services such as the installation of new
and collection of old products and offer product protection plans
and customer finance.
In the UK, AO operates in four main categories (Major Domestic
Appliances "MDA", Small Domestic Appliances "SDA", Audio Visual
"AV" and Consumer Electronics "CE"). Following the acquisition of
Mobile Phones Direct Limited in December 2018, AO has significantly
broadened its mobile phone offering.
AO launched in Germany in October 2014 with MDA and now sells
Floorcare, AV and SDA categories.
AO also has a majority equity stake in AO Recycling, a WEEE(11)
processing facility, allowing AO to ensure its customers' waste is
dealt with responsibly in the UK.
______________________________
Unless otherwise disclosed all figures stated throughout this
statement are after the adoption of IFRS 16 . Comparative figures
have therefore been restated.
(1) The highlights are for the 12 month period ended 31 March
2020 and the comparative 2019 period. References to FY20 are
defined as the twelve months to 31 March 2020. 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) UK is defined by the Group as entities operating within the
United Kingdom. (It excludes AO Deutschland Limited which is a
company registered in England but operates in Germany and therefore
is included in the Europe segment).
(3) Mobile Phones Direct Limited (acquired in December 2018) has
been renamed AO Mobile Limited. This entity includes the
MobilePhonesDirect brand.
(4) Europe is defined by the Group as entities operating within
the European Union but excluding the UK.
(5) Where Euro amounts are disclosed they represent the actual
Euro revenue, cost or loss for the period. Providing this
information eliminates the impact of foreign exchange
movements.
(6) Adjusted EBITDA is defined by the Group as profit/ (loss)
before tax, depreciation, amortisation, profit on disposal of fixed
assets net finance income, and adjusting items. Adjusting items are
set out in the paragraph below entitled "Alternative Performance
Measures"
(7) Net debt is defined by the Group as cash less borrowings
(excluding Lease Liabilities recognised on the adoption of IFRS 16)
less overdrafts as per the consolidated statement of financial
position.
(8) Please refer to the earnings per share paragraph later in
this announcement for a reconciliation.
(9) NPS is defined by the Group as Net Promoter Score which is
an industry measure of customer loyalty and satisfaction.
(10) The content of the ao.com website should not be considered
to form a part of or be incorporated into this announcement.
(11) WEEE means waste electrical and electronic equipment . MDA
means Major Domestic Appliances.
(12) Source: GfK
(13) Cash generative is defined as on a Group Adjusted EBITDA
less debt repayment, interest, taxes and monthly share of
annualised capex
Alternative Performance Measures
The Group tracks a number of alternative performance measures in
managing its business. These are not defined or specified under the
requirements of IFRS because they exclude amounts that are included
in, or include amounts that are excluded from, the most directly
comparable measure calculated and presented in accordance with
IFRS, or are calculated using financial measures that are not
calculated in accordance with IFRS. The Group believes that these
alternative performance measures, which are not considered to be a
substitute for or superior to IFRS measures, provide stakeholders
with additional helpful information on the performance of the
business. These alternative performance measures are consistent
with how the business performance is planned and reported within
the internal management reporting to the Board. Some of these
alternative performance measures are also used for the purpose of
setting remuneration targets. These alternative performance
measures should be viewed as supplemental to, but not as a
substitute for, measures presented in the consolidated financial
statements relating to the Group, which are prepared in accordance
with IFRS. The Group believes that these alternative performance
measures are useful indicators of its performance.
EBITDA
EBITDA is defined by the Group as earnings before interest, tax,
depreciation, amortisation and profit/loss on the disposal of fixed
assets.
Adjusted EBITDA
Adjusted EBITDA is calculated by adding back or deducting
Adjusting Items to EBITDA. Adjusting Items are those items which
the Group excludes in order to present a further measure of the
Group's performance. Each of these items, costs or incomes, is
considered to be significant in nature and/or quantum or are
consistent with items treated as adjusting in prior periods.
Excluding these items from profit metrics provides readers with
helpful additional information on the performance of the business
across periods because it is consistent with how the business
performance is planned by, and reported to, the Board and the Chief
Operating Decision Maker.
The Adjusting Items for the current year are as follows:
-- Closure costs of the Dutch operations: At the time of the
publication of our interim results in November 2019, the Group
announced the intention to close its operations in the Netherlands.
On 9 December 2019, the website was closed and subsequent to that
date management have worked with suppliers, staff and the
authorities to ensure an orderly closure of the companies and this
has been completed at 31 March 2020. Costs incurred between 9
December 2019 and the 31 March 2020 of GBP2.5m have been treated as
the cost of closure of these operations and include the write off
of unsold stock, redundancy payments for all staff and legal
costs.
-- In December 2017, the Group entered into a marketing contract
in Germany which was anticipated to generate significant additional
revenue. In the prior and current financial years, the performance
of this contract has been re-assessed due to significant losses
being incurred and the benefits expected from the contract not
materialising. The Group is however committed to the contract until
December 2020 and whilst management are continuing to explore
routes to re-negotiate the contract, it is clear that the cost of
fulfilling the contract over its life will significantly exceed any
benefit gained from it. In line with the treatment in FY19,
management have added back the full cost in the current period of
GBP1.3m (2019: GBP1.3m).
-- Further to the actions disclosed in the 2019 financial
statements regarding a full review of the European business
following its unsatisfactory performance in the second half of
FY19, the Group has undertaken a restructure of its European
business. In addition to the closure of the Netherlands costs, of
GBP0.9m were incurred, which principally relates to a reduction in
headcount in Germany.
-- Following the signing of a new longer term contract with
Vodafone in October 2019, certain historic claims against AO Mobile
Limited (previously Mobile Phones Direct Limited) were discharged
and as a consequence provisions of GBP2.3m were released into the
income statement. As the provisions had been created as part of the
purchase price allocation exercise on the acquisition of AO Mobile
Limited, the charge for these claims has never been recognised in
the Group income statement.
In the previous year, the Adjusting Items were:
-- LTIP awards were made to a number of senior staff under the
Performance Share Plan at the time of the Company's IPO in 2014 and
also under the Employee Reward Plan (ERP) in July 2016. These were
outside of the normal share schemes operated by the group and due
to their magnitude and nature have been treated as an adjusting
item. The options vested in June 2019.
-- Following the changes in Chief Executive Officer, the Group
undertook a restructure of its senior leadership team. The cost of
this restructure was GBP1.2m.
-- The Company acquired AO Mobile Limited (previously Mobile
Phones Direct Limited) on 17 December 2018. Fees in relation to the
transaction were GBP1.6m.
Adjusted EBITDA (excluding Netherlands)
As a consequence of the closure of the Groups Dutch business
during the period management have also disclosed the Groups
Adjusted EBITDA, as defined above, excluding the financial results
of the Dutch business prior to its closure as it is considered an
appropriate measure of the continuing Group.
Pre IFRS-16 EBITDA
As consequence of the adoption of IFRS16 during the year, the
Group has shown an alternative measure of Adjusted EBITDA
(including and excluding the Netherlands) which removes the impact
of IFRS 16 to allow the reader to compare against the prior
year.
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 Guidance 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
31 March 2020 31 March 2019 Better / (worse)
-------------------------- -------------------------- ------------------------- --------------------------
UK Europe Total UK Europe Total UK Europe Total
-------------------------- ------ -------- -------- ------ -------- ------- ------- -------- -------
Income Statement
-------------------------- ------ -------- -------- ------ -------- ------- ------- -------- -------
Product revenue 692.8 140.7 833.5 628.4 151.1 779.5 10.3% (6.9)% 6.9%
Services revenue 35.0 3.4 38.3 30.1 1.6 31.8 16.0% 106.6% 20.7%
Commission revenue 143.8 0.2 144.0 61.2 0.3 61.5 135.0% (31.6)% 134.2%
Third party logistics
revenue 16.6 0.1 16.7 15.3 0.0 15.3 8.6% - 8.9%
Recycling revenue 13.5 0.2 13.6 14.3 0.1 14.5 (6.2)% 31.4% (5.9)%
-------------------------- ------ -------- -------- ------ -------- ------- ------- -------- -------
Revenue 901.6 144.5 1,046.2 749.3 153.2 902.5 20.3% (5.6)% 15.9%
-------------------------- ------ -------- -------- ------ -------- ------- ------- -------- -------
Adjusted EBITDA 40.8 (21.1) 19.6 38.1 (25.3) 12.8 7.0% 16.4% 53.6%
-------------------------- ------ -------- -------- ------ -------- ------- ------- -------- -------
Adjusted EBITDA
margin 4.5% (14.6)% 1.9% 5.1% (16.5)% 1.4% (0.6)% 1.9% 0.4%
-------------------------- ------ -------- -------- ------ -------- ------- ------- -------- -------
Adjusted operating
profit/(loss) 22.9 (24.3) (1.4) 22.8 (28.5) (5.7) 0.6% 14.6% 75.0%
-------------------------- ------ -------- -------- ------ -------- ------- ------- -------- -------
Adjusting items
Share-based payment
charge attributable
to exceptional
LTIP awards - - - (2.3) - (2.3)
Fees incurred
on acquisition
of subsidiary - - - (2.6) - (2.6)
Provision release 2.3 - 2.3 - - -
Netherlands closure
costs (0.1) (2.4) (2.5) - - -
Onerous contract
cost - (1.3) (1.3) - (1.2) (1.2)
Executive restructuring
costs (0.2) (0.7) (0.9) (1.2) - (1.2)
-------------------------- ------ -------- -------- ------ -------- ------- ------- -------- -------
Operating profit/(loss) 25.0 (28.8) (3.8) 16.7 (29.7) (13.0) 49.5% 3.2% 70.8%
-------------------------- ------ -------- -------- ------ -------- ------- ------- -------- -------
Earnings/(loss)
per share (pence)
-------------------------- ------ -------- -------- ------ -------- ------- ------- -------- -------
Basic earnings/(loss)
per share 0.38 (4.00) 109.4%
Diluted earnings/(loss)
per share 0.37 (4.00) 109.3%
Adjusted earnings/(loss)
per share (0.91) (3.36) 73.0%
-------------------------- ------ -------- -------- ------ -------- ------- ------- -------- -------
Operating & Financial Review
We are pleased to report a strong financial performance over the
reporting period as we experienced growth in Group revenue of 15.9%
to GBP1,046.2 (2019: GBP902.5m) and an increase in Group Adjusted
EBITDA of 53.6% to GBP19.6m (2019: GBP12.8m). Profit before tax
increased to GBP1.5m (2019: GBP20.2m loss).
Excluding the impact of our Netherlands operations, which were
closed during the year, Group revenue increased by 16.6% to
GBP1.03bn and Group Adjusted EBITDA increased to GBP22.6m (2019:
GBP17.4m).
UK
In the UK turnover increased by 20.3% to GBP901.6m (2019:
GBP749.3m), up 8.2% on a like-for-like basis when excluding
revenues from our mobile phones business ("MPD") which was acquired
during the previous reporting period (Group revenue generated by
MPD in FY20 was GBP123.5m versus GBP30.1m in the prior year)
UK product revenue increased by 10.3% over the period, largely
driven by a return to growth in our core MDA product category in
line with our strategic priority to return to double-digit growth
rates. We achieved MDA sales growth of 9.1% during the twelve
months to 31 March 2020 versus a market that remained broadly flat
over the year; increasing to growth of 19.9% during the final
quarter of the reporting period against a market that experienced
an increase of 3.2%.(12)
Growth has been driven by improvements in the breadth and
usability of our overall retail experience. For example during the
period we:
- reviewed our customer acquisition techniques, investing in this area;
- launched "AO Finance", a market leading rolling credit
facility operated in partnership with NewDay giving more customers
access to essential products and us a larger share of wallet
through appropriate and affordable finance;
- implemented a new CRM platform to more effectively engage with our customers;
- made improvements to remove friction in the customer journey;
- expanded our accepted payment methods making the checkout process even easier;
- invested jointly with our brand partners in more initiatives
to improve the online journey increasingly with our content as the
destination of choice for the best product information; and
- we moved to more tactical marketing with an emphasis towards
social media, in-house content creation and the use of influencers
instead of investing in traditional above-the-line marketing such
as TV advertising.
In addition, we continue to focus on our AO Business offering
and this has been a key driver of our growth in the MDA
category.
The foundation of our UK business is providing a combination of
world leading customer service with best-in-class execution. The AO
cultural DNA of treating customers like our grans and making mums
proud is deeply ingrained throughout the business and is
demonstrated by our 4.7 Star Trustpilot rating and consistently
high NPS scores during the period.
Although MDA growth is key to short term increases in UK
profitability, the market opportunity in our newer categories
remains huge and these performed well during the period,
contributing to overall growth. These categories provide us with
more brand touch points with our customers reinforcing the service
and proposition that we have to offer.
We are satisfied with the performance of our mobile business
over the period. During the year whilst we developed an AO branded
mobile proposition, our focus continued to be on maintaining the
mobilephonesdirect brand. Over the next twelve months we will
integrate this brand further with ao.com enabling us to utilise
AO's market leading logistics, finance and recycling proposition
and leverage our e-commerce competencies to grow the business
further. During FY20 we commenced building the foundations for the
next stage of our growth. Part of this was choosing to work
strategically with fewer networks so that we can offer our
customers the right proposition in a sustainable way. In discussing
our longer-term relationships with our network partners, we entered
into a new contract with Vodafone agreeing a new three-year
partnership however we currently do not offer the EE network to our
customers.
During the year we continued to grow our third-party client base
in our Logistics business as we leverage our market leading
delivery proposition into new categories. To support growth in our
Logistics business from both AO's retail operations and third-party
customers, towards the end of the reporting period we added a new
Distribution Centre to our Logistics infrastructure hub in Crewe
taking the total to three with over 800,000 sq ft of capacity.
We experienced some challenges in our recycling business during
the reporting period as we began to feel the impacts of downward
pressure on metal prices and as the processing of stock built up in
the prior year was offset by a reduction in volumes from
third-parties during the period.
Our new plastics plant is now operational in its final phase of
testing and commissioning providing us with the capability to clean
and refine the plastic from discarded fridges, transforming it into
high-quality reusable materials.
Europe
During the year we undertook a full appraisal of our German and
Netherlands operations concluding that we did not have the
bandwidth to make the necessary profit improvements in both these
territories at the same time. As the infrastructure of our European
operation is built from Germany, we took the decision to close our
operations in the Netherlands. In line with our expectations this
business was fully closed by 31 March 2020 at a cost of GBP2.5m and
has been excluded from underlying trading numbers to identify
performance of the continuing business. During the reporting period
revenue from our Netherlands operations was GBP19.3m and Adjusted
EBITDA losses were GBP3.0m.
As outlined at the time of our half year statement, our plan for
the German business involved a number of actions. The effect of our
actions were as planned, with the changes in on pricing delivering
an immediate reduction in revenue and the results from other
actions taken to improve gross margin beginning to materialise in
the latter part of the reporting period. As a result, sales in our
German business reduced by 3.4% year-on-year to EUR143.5m but we
increased our gross margin by EUR3.6m representing an improvement
2.3ppts. In the second half of FY20, gross margin was 4.0% compared
to a gross loss in the first half of 0.7%.
We significantly changed our pricing policy in Germany to align
it with our UK model. Where we had previously deployed a strategy
to drive sales by undercutting the prices of competitors, we
focussed on differentiating with an improved range and product
content to drive higher conversion rates. In applying this strategy
it was critical that we rebuilt the support of our suppliers and
during the year we successfully restructured and improved our
buying terms with the majority of them, the benefits of which, as
anticipated, began to take effect during the final quarter of our
reporting period where we saw significant improvements in our gross
margins. Going forward we will continue to deepen our supplier
relationships as we expand into new product ranges and
categories.
We replicated our UK traffic conversion principles and
algorithms in our German operations to drive customer traffic and
ultimately revenue. Although there have been some short-term
increases in acquisition costs as we pay for a larger volume of
traffic, we anticipate that costs will reduce and revenue will
increase as we build scale, brand awareness and leverage our UK
expertise and systems further to improve conversion. We are now
approaching a customer base of 0.9 million in Germany providing us
with a fantastic asset to leverage for future growth. Our repeat
business remains strong, we continue to attract new customers and
our NPS score is exceptionally high in this territory averaging
close to 90 over the reporting period.
Increased scale provides the key to drive down our unit cost to
deliver in our German operation. We made solid preparations in this
area particularly in the final months of our reporting period as
the application of our lessons learned in the UK and improvements
to systems and infrastructure began to gain traction. We anticipate
we will make further progress as sale volumes continue to increase,
we refine our delivery proposition and as we benefit from increased
van fill rates and reduced mileage between deliveries.
The most significant restructuring required to move towards the
One AO model was in our German overhead, also reflecting the
closure of the Netherlands operation. This allows us to leverage
our UK skills and expertise, particularly in eCommerce, marketing
and logistics disciplines into our German operations. The cost of
the restructure in Germany was GBP0.9m, which principally relates
to a reduction in headcount, and the cost of the closure of the
Netherlands operations was GBP2.5m which includes the write-off of
unsold stock, redundancy payments for all staff and legal costs.
Excluding these costs, other adjusting items and losses from our
Netherlands operations, as a result of the actions undertaken
outlined above, our Europe business reduced Adjusted EBITDA losses
to a GBP18.2m loss (2019: GBP20.7m loss). We now have an increased
level of confidence in our journey to profitability in Germany and
expect to achieve positive EBITDA at a level of c. EUR 250m sales,
which equates to only a 4% share of MDA in this territory, compared
to our 18% MDA share in the UK over the reporting period.
Cashflow and Revolving Credit Facility
Shortly following the year end we re-financed our GBP60m
Revolving Credit Facility and GBP20m Term Loan which were due to
run until June 2021. These facilities have been consolidated into a
replacement GBP80m RCF which matures in April 2023 and we were
delighted to add NatWest to our club of lenders.
Working capital has been carefully managed throughout the year
with a focus on maximising availability, whilst improving the
overall efficiency of our stockholding. We have also worked with
our supplier base to maintain credit terms despite any issues they
may face with credit insurers. Contract assets have continued to
increase during the period relating to both warranties and network
commissions. Both the creditor and inventory balances were
flattered at year end by the sudden increase in demand caused by
Covid-19.
The structural improvement in profit performance in Germany seen
towards the end of the reporting period meant that on a monthly
basis we became cash generative (on an Adjusted EBITDA less debt
repayment, interest, taxes and monthly share of annualised capex on
a run rate basis), and expect to maintain that position on an
ongoing basis.
Financial Review
Revenue (see Table 1)
For the year ended 31 March 2020, total Group revenue increased
by 15.9%% to GBP1,046.2m (2019: GBP902.5m).
Overall revenue in the UK increased by 20.3% to GBP901.6m (2019:
GBP749.3m), up 8.2% on a like-for-like basis i.e. excluding the
impact of the acquired Mobile Phones Direct Limited business which
was acquired in December 2018 (since renamed "AO Mobile Limited").
As MPD generates the majority of its income from commission
revenues, this has reduced the share of UK sales attributed to
product revenue which now accounts for 76.8% of UK sales (2019:
83.9%). Product revenue growth from our retail website comprising
ao.com, marketplaces and third-party websites, increased by 10.3%
to GBP692.8m largely driven by a good performance in MDA product
sales as a result of a number of initiatives launched during the
period including: AO Finance; expanding the payment methods
available; removing friction in parts of the customer journey;
investment in customer acquisition and leveraging more tactical
marketing channels such as social media. We have been successful in
continuing to drive revenue from our marketplace channels including
Amazon and eBay and we believe the significant majority of these
customers are new to the Group and do not cannibalise traffic that
would otherwise shop with ao.com. In addition, we continue to focus
on our Business to Business (B2B) offering and this has been a key
driver of our growth in the MDA category. Black Friday continues to
be a major sales event in our retail calendar. This year our
promotional period extended over three weeks, meaning our great
deals were able to reach even more customers than ever before.
UK Service revenue increased by 16.0% compared to the previous
year, slightly ahead of product revenue growth, reflecting
improvements to the customer propositions which have resonated well
for example service bundles, installing tv's on walls and delivery
time slots.
Growth in UK Commission revenue is largely attributable to the
acquisition of AO Mobile Limited in December 2018 which generates
the majority of its revenue as commission from the Mobile Network
Operators (MNO) for the procurement of connections to the MNO's
network and the delivery of the handset to the end customer. We
continue to integrate this business into the wider AO Group and we
see a number of opportunities for growth following the development
of the ao-mobile.com platform in August and the signing of a new
commercial agreement with Vodafone in October.
As previously reported, in the second half of the year to March
2019, service plan customers of ao.com migrated from a
service-backed warranty product to AO Care insurance and hybrid
insurance products offering greater regulatory protection. This
migration and base contact exercise caused a small spike in plan
cancellations during this time at a level we had anticipated.
However, during the reporting period we have seen a lower level of
cancellations on a monthly basis as we offer an improved regulated
product through a structured regulated sales process.
The amended product form to insurance, together with introducing
a regulated sales process, has run in parallel with the ongoing
digitisation and development of the product itself. AO Care is now
an in-life service product truly representing our values. Whilst
there has been a small drop in the sales conversion through this
transition, this has been offset by increased lifetime value.
We experienced growth of 8.6% to GBP16.6m in our third-party
logistics revenue reflecting effect of new contracts won during the
year including Aldi and Simba. We continue to target new growth in
the current financial year.
Revenues in our UK Recycling business decreased slightly during
the reporting period at GBP13.5m (2019: GBP14.3m) as we began to
feel the impacts of downward pressure on metal prices and as the
processing of stock built up in the prior year was offset by a
short-term reduction in volumes from third-parties during the
period. During the year we continued to invest in our new plastics
plant. We expect the plant to be fully operational during the
second quarter of the current financial year following completion
of the final phase of testing and commissioning. The new plastics
plant will provide us with the capability to sort waste plastics
from our fridge plants allowing us to resell this plastic and to
create an additional sustainable revenue stream on our journey for
a circular economy.
In Europe sales generated from our German website AO.de (and our
Netherlands website AO.nl until its closure in December 2019)
generated revenues of EUR165.4m (2019: EUR173.3m) (which equates to
GBP144.5m (2019: GBP153.2m) on a reported currency basis), a
decrease of 4.6% . As previously reported, we did not see the
improving trend of losses in the second half of FY19 that had been
expected. We commenced an appraisal of our European business and
business model to ensure that we are able to generate long-term
sustainable and profitable growth (and minimise cash outflow in the
process). This entailed a review of our pricing policy (where,
instead of undercutting the prices of competitors, we focussed on
differentiating with an improved range and product content to drive
higher conversion rates) and an evaluation of traffic channels
(particularly marketplaces) where cost to acquire traffic is more
expensive than our traditional website acquisition costs. The
outcome of this appraisal resulted in a significant change to our
European pricing policy which has now been brought in line with our
UK model. As a consequence, although revenues have reduced year on
year, these have been delivered at an improved margin compared to
the prior year. Revenue growth in this segment is a fundamental
component of the journey to profitability and we are now
replicating the initiatives which have been successful in the UK to
drive customer traffic and conversion rates, and to improve the
customer experience for example expanding our payment options,
increasing the number of customer reviews and making improvements
to the overall journey and our content.
In line with the requirements of IFRS 15, the Group has
disaggregated its revenue into the main business lines and these
are shown in Table 1 below:
Table 1:
2020 2019 Better/(worse)
======================
Year ended 31 March
(GBPm) UK Europe Total UK Europe Total UK Europe Total
====================== ===== ====== ======= ===== ====== ===== ====== ======= ======
Product revenue 692.8 140.7 833.5 628.4 151.1 779.5 10.3% (6.9)% 6.9%
====================== ===== ====== ======= ===== ====== ===== ====== ======= ======
Service revenue 35.0 3.4 38.4 30.1 1.6 31.8 16.0% 106.6% 20.7%
====================== ===== ====== ======= ===== ====== ===== ====== ======= ======
Commission revenue 143.8 0.2 144.0 61.2 0.3 61.5 135.0% (31.6)% 134.2%
====================== ===== ====== ======= ===== ====== ===== ====== ======= ======
Third party logistics 16.6 0.1 16.7 15.3 - 15.3 8.6% - 8.9%
====================== ===== ====== ======= ===== ====== ===== ====== ======= ======
Recycling 13.5 0.2 13.6 14.3 0.1 14.5 (6.2)% 31.4 (5.9)%
====================== ===== ====== ======= ===== ====== ===== ====== ======= ======
Total revenue 901.6 144.5 1,046.2 749.3 153.2 902.5 20.3% (5.6)% 15.9%
---------------------- ----- ------ ------- ----- ------ ----- ------ ------- ------
Gross margin (see Table 2)
Gross margin for the Group, which includes product margin,
delivery costs, commissions from selling insurance plans and
network connections and other ancillaries (which generally attract
a higher margin as a percentage of revenue than product sales),
increased slightly to 17.0% (2019: 16.9%) for the reporting period
with total gross profit increasing by 16.9% to GBP178.3m (2019:
GBP152.5m).
Gross Margin in the UK business reduced to 19.7% (2019: 20.7%)
which, as expected, was impacted by the full years' impact of MPD
which has a lower gross margin but a corresponding lower cost to
serve. Excluding the impact of MPD, UK gross margin was 21.2%
(2019: 21.0%). As in previous periods, the increasing share of
total revenue attributable to newer categories, as well as that of
business to business sales, also had a dilutive effect on Gross
Margin. However, individual product margins in our retail business
have increased in all categories.
In Europe, including the Netherlands operations, gross margin
improved during the reporting period increasing to 0.6% versus a
1.7% loss in the prior year period with gross profit improving to
GBP0.9m (2019: GBP2.6m gross loss). This improvement is partly
attributable to the change in our pricing strategy to bring it in
line with the UK; reducing the level of price discounting, and
improvements in supplier terms which began to impact towards the
end of the reporting period and efficiencies made in the logistics
operations.
Table 2:
2020 2019 Better/(worse)
====================
Year ended 31 March
(GBPm) UK Europe Total UK Europe Total UK Europe Total
==================== ----- ------ ----- ----- ------ ----- --------- ------- -------
Gross profit/(loss) 177.4 0.9 178.3 155.1 (2.6) 152.5 14.3% 136.1% 16.9%
==================== ===== ====== ===== ===== ====== ===== ========= ======= =======
Gross margin % 19.7% 0.6% 17.0% 20.7% -1.7% 16.9% (1.0)ppts 2.3ppts 0.1ppts
-------------------- ----- ------ ----- ----- ------ ----- --------- ------- -------
Selling, General & Administrative Expenses ("SG&A") (see
Table 3)
Total SG&A costs across the Group as a percentage of revenue
decreased during the period from 18.7% to 17.5%.
UK SG&A expenses for the year to 31 March 2020 increased by
10.2% to GBP153.2m (2019: GBP139.0m), representing 17.0% of sales
(2019: 18.8%). Advertising and marketing costs as a percentage of
revenue reduced by 0.6ppts as the comparable prior year period
included the costs to the launch the "Delivering Tomorrow"
creative. During the year, TV advertising costs were minimal as we
focussed on other advertising channels such as social media to
promote the AO brand.
Warehousing costs have increased with continued investment in
our outbase network driving overall efficiencies, benefitting gross
margin and the leverage effect of increased sales resulted in a
decreasing percentage of revenue of 4.2% compared to 4.3% in the
prior year.
Research and development costs increased by GBP2.4m to GBP9.3m
compared to the prior period, representing 1.0% of revenue,
reflecting the investment in our technology teams as we develop
initiatives to support future customer proposition and drive
revenue.
UK other administration expenses increased by GBP12.5m to
GBP84.1m (2019: GBP71.6m) and as a percentage of revenue decreased
by 0.3ppts to 9.3%. Of the increase, GBP4.6m was attributable to a
full year of costs in relation to MPD (2019: GBP2.0m). Excluding
the impact of MPD, UK other admin expenses increased by 0.3ppts to
10.0% reflecting the investment made in our UK Retail expertise to
support the One AO approach, inflationary costs, investment in
people infrastructure and the annualisation of certain costs
incurred in the prior year principally in relation to premises.
In Europe, including the impact of our Netherlands operations,
our SG&A costs as a percentage of revenue increased by 2.5ppts
to 20.8% and totalled GBP30.1m (2019: GBP27.6m). We would expect
these costs to reduce in absolute terms as the full impact of our
One AO approach is realised and as a percentage of sales as we
drive revenue and leverage our scale and logistics
infrastructure.
Advertising and marketing costs in Europe increased by 1.5ppts
as a percentage of revenue with higher investment in acquisition
costs to drive revenue following the change in pricing strategy in
the period. Due to the predominantly fixed nature of the costs in
warehousing, the reduction in revenue experienced during reporting
period, together with additional outbase costs, led to a slight
increase in costs as a percentage of revenue however the output of
our actions to drive growth gained traction towards the end of the
reporting period and costs were leveraged leading to only a
marginal increase in warehousing costs a percentage of sales to
3.4% (2019: 3.1%). Other admin costs reduced to 10.5% as a
percentage of revenue (2019: 11.0%) following the impact of the
restructuring on headcount and as we leverage the skills and
knowledge of our people from the UK as part of the One AO
approach.
Table 3:
2020 2019 Better/(worse)%
==========================
Year ended 31 March
(GBPm) UK Europe Total UK Europe Total UK Europe Total
========================== ===== ====== ===== ===== ====== ===== ======= ======= =======
Advertising and marketing 21.9 7.8 29.7 22.3 5.9 28.2 1.8% (32.2)% (5.3)%
========================== ===== ====== ===== ===== ====== ===== ======= ======= =======
% of revenue 2.4% 5.4% 2.8% 3.0% 3.9% 3.1%
========================== ===== ====== ===== ===== ====== ===== ======= ======= =======
Warehousing 37.6 4.9 42.5 32.2 4.8 37.0 (16.7)% (1.2)% (14.7)%
========================== ===== ====== ===== ===== ====== ===== ======= ======= =======
% of revenue 4.2% 3.4% 4.1% 4.3% 3.1% 4.1%
========================== ===== ====== ===== ===== ====== ===== ======= ======= =======
Research and development 9.3 - 9.3 6.9 - 6.9 (34.8%) - (34.8%)
========================== ===== ====== ===== ===== ====== ===== ======= ======= =======
% of revenue 1.0% - 0.9% 0.9% - 0.8%
========================== ===== ====== ===== ===== ====== ===== ======= ======= =======
Other administration 84.1 15.2 99.2 71.6 16.8 88.4 (17.4)% 9.9% (12.2)%
========================== ===== ====== ===== ===== ====== ===== ======= ======= =======
% of revenue 9.3% 10.5% 9.5% 9.6% 11.0% 9.8%
========================== ===== ====== ===== ===== ====== ===== ======= ======= =======
Adjusting items(*) 0.3 2.3 2.5 5.9 0.1 6.0 - - -
========================== ===== ====== ===== ===== ====== ===== ======= ======= =======
% of revenue 0.0% 1.6% 0.2% 0.8% 0.1% 0.7%
========================== ===== ====== ===== ===== ====== ===== ======= ======= =======
Administrative expenses 153.2 30.1 183.3 139.0 27.6 166.6 (10.2)% (8.9)% (10.0)%
========================== ===== ====== ===== ===== ====== ===== ======= ======= =======
% of revenue 17.0% 20.8% 17.5% 18.8% 18.3% 18.7%
-------------------------- ----- ------ ----- ----- ------ ----- ------- ------- -------
(*) Adjusting items in the year to 31 March 2020 are detailed in
the paragraph below entitled "Alternative Performance Measures -
Operating loss and Adjusted EBITDA.
Operating loss and Adjusted EBITDA
The operating loss for the year was GBP3.8m (2019: GBP13.0m). As
highlighted above on page 6 the Group tracks a number of
alternative performance measures including Adjusted EBITDA. The
reconciliation of statutory operating profit/(loss) to Adjusted
EBITDA is as follows:
Table 4:
2020 2019 Better/(worse)
-----------------------------
Year ended 31 March
(GBPm) UK Europe Total UK Europe Total UK Europe Total
----------------------------- ----- ------ ----- ---- ------ ------ -------- -------- --------
Operating profit excluding
Netherlands 25.0 (23.5) 1.4 16.7 (25.0) (8.3) 49.5% 6.0% 117.2%
============================= ===== ====== ===== ==== ====== ====== ======== ======== ========
Netherlands Operating
loss - (5.2) (5.2) - (4.7) (4.7) - (11.7)% (11.7)%
----------------------------- ----- ------ ----- ---- ------ ------ -------- -------- --------
Operating profit/(loss) 25.0 (28.8) (3.8) 16.7 (29.7) (13.0) 49.5% 3.2% 70.8%
============================= ===== ====== ===== ==== ====== ====== ======== ======== ========
Depreciation 15.8 3.1 18.9 14.2 3.2 17.4 (10.7)% 2.3% (8.3)%
============================= ===== ====== ===== ==== ====== ====== ======== ======== ========
Amortisation 2.2 - 2.2 1.1 - 1.1 (107.5)% - (107.5)%
============================= ===== ====== ===== ==== ====== ====== ======== ======== ========
(Loss)/ profit on
disposal of non-current
assets (0.1) 0.1 - - - - 100.0% (100.0)% -
----------------------------- ----- ------ ----- ---- ------ ------ -------- -------- --------
EBITDA Excluding Netherlands 42.8 (20.4) 22.4 32.0 (21.9) 10.1 33.8% 7.0% 122.4%
----------------------------- ----- ------ ----- ---- ------ ------ -------- -------- --------
Netherlands EBITDA - (5.1) (5.1) - (4.6) (4.6) - (11.8)% (11.8)%
----------------------------- ----- ------ ----- ---- ------ ------ -------- -------- --------
EBITDA 42.8 (25.5) 17.3 32.0 (26.5) 5.5 33.8% 3.6% 214.7%
============================= ===== ====== ===== ==== ====== ====== ======== ======== ========
Adjusting items
============================= ===== ====== ===== ==== ====== ====== ======== ======== ========
Adjusting items excluding
Netherlands (2.0) 2.2 0.2 6.1 1.2 7.3 133.0% (87.8)% 97.1%
============================= ===== ====== ===== ==== ====== ====== ======== ======== ========
Netherlands Adjusting
Items - 2.2 2.2 - - - - - -
----------------------------- ----- ------ ----- ---- ------ ------ -------- -------- --------
Total Adjusting Items (2.0) 4.4 2.4 6.1 1.2 7.3 133.0% (269.9)% 67.5%
============================= ===== ====== ===== ==== ====== ====== ======== ======== ========
Adjusted EBITDA excluding
Netherlands 40.8 (18.2) 22.6 38.1 (20.7) 17.4 7.0% 12.4% 30.2%
============================= ===== ====== ===== ==== ====== ====== ======== ======== ========
Netherlands Adjusted
EBITDA - (3.0) (3.0) - (4.6) (4.6) - 35.2% 35.2%
============================= ===== ====== ===== ==== ====== ====== ======== ======== ========
Adjusted EBITDA 40.8 (21.1) 19.6 38.1 (25.3) 12.8 7.0% 16.4% 53.6%
----------------------------- ----- ------ ----- ---- ------ ------ -------- -------- --------
To assist users of these financial statements in reconciling the
above numbers to those reported in the 2019 Annual Report, the
table below removes the impact of IFRS 16 on Adjusted EBITDA to
enable a like for like comparison. The result for the Netherlands
excludes amounts of GBP0.7m (2019: GBP0.6m) which relate to ongoing
costs of the Group. These costs are therefore adjusted in arriving
at the Excluding Netherlands Adjusted EBITDA below.
2020 2019 Better/(worse)
=========================
Year ended 31 March
(GBPm)
On Pre-IFRS 16 Basis UK Europe Total UK Europe Total UK Europe Total
========================= ====== ====== ====== ====== ====== ====== ======= ======= =======
Adjusted EBITDA as
above 40.8 (21.1) 19.6 38.1 (25.3) 12.8 7.0% 16.4% 53.6%
Less impact of IFRS
16 (11.9) (2.6) (14.5) (10.7) (2.5) (13.2) (10.7%) (6.2)% (9.9)%
------------------------- ------ ------ ------ ------ ------ ------ ------- ------- -------
Adjusted EBITDA Pre-IFRS
16 28.9 (23.8) 5.2 27.4 (27.8) (0.4) 5.6% 14.4% 1422.8%
========================= ====== ====== ====== ====== ====== ====== ======= ======= =======
Excluding Netherlands 28.9 (20.1) 8.8 27.4 (22.6) 4.8 5.6% 11.0% 83.8%
Allocation of costs - (0.7) (0.7) - (0.6) (0.6) - (16.7)% (16.7)%
------------------------- ------ ------ ------ ------ ------ ------ ------- ------- -------
Excluding Netherlands
adjusted 28.9 (20.8) 8.1 27.4 (23.2) 4.2
========================= ====== ====== ====== ====== ====== ====== ======= ======= =======
Netherlands - (3.7) (3.7) - (5.2) (5.2) - 29.2% 29.2%
Allocation of costs - 0.7 0.7 - 0.6 0.6 - (16.7)% (16.7)%
------------------------- ------ ------ ------ ------ ------ ------ ------- ------- -------
Netherlands adjusted (3.0) (3.0) - (4.6) (4.6) - 35.2% 35.2%
Adjusted EBITDA Pre-IFRS
16 28.9 (23.8) 5.2 27.4 (27.8) (0.4) 5.6% 14.4% 1422.8%
------------------------- ------ ------ ------ ------ ------ ------ ------- ------- -------
Taxation
The tax charge for the year was GBP0.1m (2019: GBP2.1m credit).
The effective rate of tax for the year was 5.8% (2019: 10.4%) which
is lower than the UK corporation tax rate for the period of
19%.
The Group is subject to taxes in the UK, Germany, Belgium and,
for the year under review, in the Netherlands. The Group continues
to be able to offset its German losses against profits within the
UK through its registered branch structure in Germany. No overseas
tax is attributable to Germany due to its current trading results.
In addition, no overseas tax is attributable in the Netherlands as
operations ceased in the period. Tax losses arising in the period
in the Netherlands and Belgium have been carried forward but no
deferred tax asset has been recognised.
In addition to the movement in the unrecognised deferred tax on
losses the lower effective tax rate is also due to the Group having
permanent adjustments when calculating taxable profits in the UK,
including non-taxable foreign exchange gains arising on
intercompany balances, the share-based payment charges and
associated tax relief.
A prior period adjustment to deferred tax of GBP1.0m credit has
also been recognised in the period due to an increase in the
deferred tax asset arising on share-based payments and the
preservation of capital allowances and carried forward losses for
future periods.
Tax losses from prior years in Germany remain as carried forward
losses and continue to be as not recognised for the purposes of
deferred tax on the basis that they arose before April 2017, when
the change in the loss relief rules occurred. In AO Recycling tax
losses continue to be carried forward and the Group expects to use
these losses in the future. On this basis tax losses carried
forward at the end of the year have been treated as a recognised
deferred tax asset.
Our tax strategy can be found at www.ao-world.com .
Retained loss for the year and loss per share
Retained profit for the year was GBP1.4m (2019: GBP18.1m loss).
In addition to the improvement in operating profit noted above, the
retained profit for the year has also benefitted from movements in
non-cash financing items with the exchange movement on intra-group
loans moving from a GBP3.0m loss in the prior year to a GBP6.0m
gain in the current year (driven by the movement in the GBP/EUR
exchange rate) and the movement in the fair value of the put and
call options which the Company holds in relation to the
non-controlling stake in AO Recycling Limited.
Basic loss per share was 0.38p (2019: 4.00p loss) and diluted
earnings/(loss) per share was 0.37p (2019: 4.00p loss). Basic
earnings per share is reconciled to adjusted basic loss per share
(after excluding the impact of foreign exchange differences - see
above) of (0.91)p (2019: (3.36)p) as follows.
Year ended 31 March (GBPm) 2020 2019
=============================================== =========== ===========
Earnings/(loss)
=============================================== =========== ===========
Profit/(Loss) attributable to owners
of the parent company 1.7 (18.6)
=============================================== =========== ===========
Foreign exchange (gains)/losses on intra-Group
loans (6.0) 3.0
=============================================== =========== ===========
Adjusted loss attributable to owners
of the parent company (4.3) (15.5)
=============================================== =========== ===========
Number of shares
=============================================== =========== ===========
Basic and adjusted weighted average number
of ordinary shares 472,462,309 463,153,515
=============================================== =========== ===========
Potentially dilutive share options 4,857,812 6,447,240
=============================================== =========== ===========
Diluted weighted average number of shares 477,320,121 469,600,755
=============================================== =========== ===========
Earnings/Loss per share (in pence)
=============================================== =========== ===========
Basic profit/(loss) per share 0.38 (4.00)
=============================================== =========== ===========
Diluted profit/(loss) per share 0.37 (4.00)
=============================================== =========== ===========
Adjusted basic loss per share (0.91) (3.36)
----------------------------------------------- ----------- -----------
The foreign exchange gain has arisen as a result of the
significant movement in the exchange rate between Sterling and the
Euro in the period and prior period. This has impacted the value of
intra-group loans held in GBP in the European entities giving rise
to the GBP6.0m gain (2019: GBP3.0m loss) referenced above.
Cash resources and cash flow
Cash balances at 31 March 2020 were GBP6.9m (2018: GBP28.9m).
The reduction in cash is largely driven by the repayment of
borrowings and lease liabilities of GBP22.6m and capital
expenditure of GBP6.9m offset by the cash generated from operating
activities of GBP14.1m.
Borrowings, which comprises bank borrowings, reduced to GBP21.9m
(2019: GBP30.4m) and lease liabilities increased to GBP84.1m (2019:
GBP82.0m) resulting in net debt at 31 March 2020 of GBP99.1m (2019:
net debt GBP83.5m). Net debt, when excluding Lease Liabilities
recognised on the adoption of IFRS 16 was GBP23.4m (2019: GBP9.0m).
The decrease in borrowings in the year was mainly due to the
repayment of quarterly instalments on the term loan of GBP24m used
to partly fund the acquisition of Mobile Phones Direct Limited and
the maturity of a 5 year term loan originally used to help finance
the start-up of the German business in October 2014.
During the year, the Group continued to benefit from the
availability of its GBP60m revolving credit facility with HSBC Bank
plc, Lloyds Bank Plc and Barclays Bank Plc in the banking
syndicate. On 6 April 2020 the Group refinanced its debt facilities
by consolidating the existing GBP60m Revolving Credit Facility and
the GBP20m outstanding on the Term Loan into a new GBP80m RCF which
matures in April 2023. The new facility resulted in Natwest Bank
plc joining the existing banking syndicate as an additional lender.
The facility is available for general corporate purposes, including
UK working capital movements. The undrawn amount at 31 March 2020
under the previous facility was GBP56.7m. The amount utilised
relates to letters of credit and payment guarantees.
Working capital (see Table 5)
At 31 March 2020, the Group had net current liabilities of
GBP53.8m (31 March 2019: net current liabilities of GBP33.9m)
principally as a result of the reduction in cash noted above.
Movements in working capital are set out in Table 5.
As at 31 March 2020 UK inventories were GBP61.7m and therefore
at a similar level to the prior year (2019: GBP60.7m). Ordinarily
we would expect to see levels of inventories adjust in line with
our sales growth. However, during the last week of March the
business experienced a particular increase in demand for products
following the introduction of lockdown measures in response to
Covid-19 without an immediate corresponding increase in inventories
received from product manufacturers.
UK average stock days remained broadly consistent against the
prior year at 27 days (2019: 29 days).
UK trade and other receivables (both non-current and current)
were GBP216.3m as at 31 March 2020 (2019: GBP184.4m) principally
reflecting an increase in contract assets in respect of commissions
due on product protection plans sold in the year and the contract
asset relating to the commissions from the Mobile Network
Operators.
UK trade and other payables increased to GBP246.7m (2019:
GBP224.2m) primarily reflecting an increase in deferred income as
result of the high sales volumes between the introduction of
lockdown measures on 23 March 2020 and the financial year end and
an increase in contract liabilities in relation to the Mobile
business.
At 31 March 2020, European inventories were GBP10.9m (2019:
GBP15.6m) with the reduction against the prior year a result of the
closure of the Netherlands business, improved stock management and
increased sales as result of the migration to online due to
measures introduced in relation to Covid-19. Trade and other
receivables decreased to GBP9.1m (2019: GBP9.5m) mainly reflecting
the closure of our Dutch operations.
Trade and other payables decreased to GBP10.3m (2019: GBP13.0m),
impacted by the closure of the Netherlands operations, timing of
supplier payments around year end and the lower stock levels.
Table 5:
2020 2019
==============================
Year ended 31 March (GBPm) UK Europe Total UK Europe Total
============================== ======= ====== ======= ======= ====== =======
Inventories 61.7 10.9 72.7 60.7 15.6 76.3
============================== ======= ====== ======= ======= ====== =======
As % of cost of goods sold 8.5% 7.6% 8.4% 10.2% 10.0% 10.2%
============================== ======= ====== ======= ======= ====== =======
Trade and other receivables 216.3 9.1 225.3 184.4 9.5 193.9
============================== ======= ====== ======= ======= ====== =======
As a % of revenue 24.0% 6.3% 21.5% 24.6% 6.2% 21.5%
============================== ======= ====== ======= ======= ====== =======
Trade and other payables (246.7) (10.3) (257.1) (224.2) (13.0) (237.2)
============================== ======= ====== ======= ======= ====== =======
As % of cost of goods sold 34.0% 7.2% 29.6% 37.7% 8.3% 31.6%
============================== ======= ====== ======= ======= ====== =======
Net working capital 31.2 9.7 41.0 20.9 12.1 33.0
============================== ======= ====== ======= ======= ====== =======
Change in net working capital 10.3 (2.3) 8.0 25.4 3.9 29.3
============================== ======= ====== ======= ======= ====== =======
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.
Capital expenditure
Total cash capital expenditure in the year was GBP6.9m (2019:
GBP4.2m). The expenditure in 2020 principally comprised costs in
relation to the construction of the new plastics plant in our
Recycling business, continued investment in our existing WEEE
recycling plant, investment in restructuring our outbase network
and investment in technology and software particularly in our
logistics operations but also across the Group. Capital expenditure
in the prior year included costs in relation to the commencement of
the construction of the new plastics plant, investment in recycling
and fit-out costs in relation to additional corporate office
space.
Mark Higgins
Group Chief Financial Officer
13 July 2020
CONDENSED CONSOLIDATED INCOME STATEMENT
For the year ended 31 March 2020
2019
2020 GBPm
Note GBPm Restated
(See note 9)
----------------------------------------- ------ ------- -------------
Continuing operations
----------------------------------------- ------ ------- -------------
Revenue excluding Netherlands 1,026.9 880.6
Netherlands revenue 19.3 21.9
----------------------------------------- ------ ------- -------------
Total Revenue 2 1,046.2 902.5
Cost of sales (867.9) (750.0)
----------------------------------------- ------ ------- -------------
Gross profit 178.3 152.5
Administrative expenses (183.3) (166.6)
Other operating income 1.2 1.1
----------------------------------------- ------ ------- -------------
Operating profit/(loss) excluding
Netherlands 1.4 (8.4)
Netherlands operating loss (5.2) (4.6)
----------------------------------------- ------ ------- -------------
Total operating loss (3.8) (13.0)
Finance income 4 10.9 2.6
Finance costs 5 (5.6) (9.7)
----------------------------------------- ------ ------- -------------
Profit/(loss) before tax 1.5 (20.2)
Tax (charge)/credit 7 (0.1) 2.1
----------------------------------------- ------ ------- -------------
Profit/ (loss) after tax excluding
Netherlands 6.6 (13.3)
Netherlands loss after tax (5.2) (4.8)
----------------------------------------- ------ ------- -------------
Profit/(loss) after tax for the
year 1.4 (18.1)
----------------------------------------- ------ ------- -------------
Profit/(loss) for the year attributable
to:
Owners of the parent company 1.7 (18.6)
Non-controlling interests (0.3) 0.5
----------------------------------------- ------ ------- -------------
1.4 (18.1)
----------------------------------------- ------ ------- -------------
Profit/(loss) per share (pence)
Basic profit/(loss) per share 6 0.38 (4.00)
Diluted profit/(loss) per share 6 0.37 (4.00)
----------------------------------------- ------ ------- -------------
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2020
2019
2020 GBPm
GBPm Restated
(See note 9)
------------------------------------------ ------ -------------
Profit /(loss) for the year 1.4 (18.1)
Items that may be subsequently recycled
to Income Statement
Exchange differences on translation
of foreign operations (5.5) 2.4
------------------------------------------- ------ -------------
Total comprehensive loss for the period (4.1) (15.7)
------------------------------------------- ------ -------------
Total comprehensive loss for the year
attributable to:
Owners of the Company (3.8) (16.2)
Non-controlling interests (0.3) 0.5
------------------------------------------- ------ -------------
(4.1) (15.7)
------------------------------------------ ------ -------------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2020
2019 2018
2020 GBPm GBPm
Note GBPm Restated Restated
(See note (See note
9) 9)
------------------------------- ------ ------- ---------- ----------
Non-current assets
Goodwill 28.2 28.2 13.5
Other intangible assets 15.8 16.9 1.2
Property, plant and equipment 29.3 26.5 28.0
Right of use assets 64.7 63.2 62.0
Trade and other receivables 87.9 79.4 47.9
Derivative financial asset 0.6 0.8 2.2
Deferred tax asset 4.5 4.6 2.5
--------------------------------- ------ ------- ---------- ----------
231.0 219.5 157.3
------------------------------- ------ ------- ---------- ----------
Current assets
Inventories 72.7 76.3 53.2
Trade and other receivables 137.4 114.5 55.1
Derivative financial asset - - 0.2
Corporation tax receivable 1.0 0.6 0.2
Cash and bank equivalents 8 6.9 28.9 56.0
218.0 220.3 164.7
------------------------------- ------ ------- ---------- ----------
Total assets 449.0 439.8 322.0
--------------------------------- ------ ------- ---------- ----------
Current liabilities
Bank overdraft - - (3.1)
Trade and other payables (249.6) (229.8) (149.9)
Borrowings 8 (5.2) (9.5) (4.2)
Lease liabilities (16.1) (14.3) (9.7)
Derivative financial liability (0.2) (0.6) (0.4)
Provisions (0.7) - -
--------------------------------- ------ ------- ---------- ----------
(271.8) (254.2) (167.3)
------------------------------- ------ ------- ---------- ----------
Net current liabilities (53.8) (33.9) (2.6)
--------------------------------- ------ ------- ---------- ----------
Non-current liabilities
Borrowings 8 (16.7) (20.9) (10.4)
Lease liabilities (68.0) (67.8) (63.2)
Trade and other payables (7.5) (7.4) -
Derivative financial liability (0.8) (2.9) (3.4)
Deferred tax liability (2.6) (2.7) -
Provisions (1.9) (2.2) (1.8)
--------------------------------- ------ ------- ---------- ----------
(97.5) (103.9) (78.8)
------------------------------- ------ ------- ---------- ----------
Total liabilities (369.8) (358.1) (246.1)
--------------------------------- ------ ------- ---------- ----------
Net assets 79.7 81.8 75.9
--------------------------------- ------ ------- ---------- ----------
Equity attributable to owners
of the parent
Share capital 1.2 1.2 1.1
Share premium account 103.7 103.7 103.7
Other reserves 21.9 29.0 5.3
Retained losses (46.1) (51.2) (32.6)
--------------------------------- ------ ------- ---------- ----------
Total 80.7 82.7 77.5
--------------------------------- ------ ------- ---------- ----------
Non-controlling interest (1.0) (0.9) (1.6)
--------------------------------- ------ ------- ---------- ----------
Total equity 79.7 81.8 75.9
--------------------------------- ------ ------- ---------- ----------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2020
Other reserves
----------------------------------------------
Share Investment Share Merger Capital Share- Translation Other Retained Total Non- Total
capital in own premium reserve redemption based reserve reserve losses controlling
shares account reserve payments interest
reserve
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------- ---------- -------- -------- ----------- --------- ------------ -------- --------- -------- ------------ --------
Reported
Balance
at 1 April
2018 1.1 - 103.7 4.4 0.5 9.1 (6.6) (2.1) (28.9) 81.2 (1.6) 79.6
Adjustment
on initial
application
of IFRS
16 (net
of
tax) - - - - - - - - (3.7) (3.7) - (3.7)
---------------- -------- ---------- -------- -------- ----------- --------- ------------ -------- --------- -------- ------------ --------
Restated
Balance
at
1 April
2018 1.1 - 103.7 4.4 0.5 9.1 (6.6) (2.1) (32.6) 77.5 (1.6) 75.9
Loss for
the period - - - - - - - - (18.6) (18.6) 0.5 (18.1)
Share-based
payment
charge net
of tax - - - - - 4.0 - - - 4.0 - 4.0
Issue of
shares net
of expenses - - - 17.8 - - - - - 17.8 - 17.8
Foreign
currency
gains arising
on
consolidation - - - - - - 2.4 - - 2.4 - 2.4
Acquisition
of
non-controlling
entity - - - - - - - (0.4) - (0.4) 0.3 (0.1)
---------------- -------- ---------- -------- -------- ----------- --------- ------------ -------- --------- -------- ------------ --------
At 31 March
2019 as
reported 1.2 - 103.7 22.2 0.5 13.1 (4.2) (2.5) (46.4) 87.5 (0.9) 86.6
Cumulative
adjustment
to opening
balance
from
application
of IFRS
16 (net
of tax) - - - - - - - - (4.8) (4.8) - (4.8)
---------------- -------- ---------- -------- -------- ----------- --------- ------------ -------- --------- -------- ------------ --------
Restated
balance
at
31 March
2019 1.2 - 103.7 22.2 0.5 13.1 (4.2) (2.5) (51.2) 82.7 (0.9) 81.8
Profit for
the period - - - - - - - - 1.7 1.7 (0.3) 1.4
Share-based
payment
charge net
of tax - - - - - 2.0 - - - 2.0 - 2.0
Issue of
shares net - - - - - - - - - - - -
of expenses
Foreign
currency
loss arising
on
consolidation - - - - - - (5.5) - - (5.5) - (5.5)
Acquisition
of minority
interest - - - - - - - (0.2) - (0.2) 0.2 -
Movement
between
reserves - - - - - (3.4) - - 3.4 - - -
---------------- -------- ---------- -------- -------- ----------- --------- ------------ -------- --------- -------- ------------ --------
Balance
at
31 March
2020 1.2 - 103.7 22.2 0.5 11.7 (9.7) (2.7) (46.1) 80.7 (1.0) 79.7
---------------- -------- ---------- -------- -------- ----------- --------- ------------ -------- --------- -------- ------------ --------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2020
2019
2020 GBPm
GBPm Restated
(See note
9)
-------------------------------------------------------- ------ ----------
Cash flows from operating activities
Profit/(Loss) for the year 1.4 (18.1)
Adjustments for:
Depreciation and amortisation 21.1 18.5
Finance income (10.9) (2.6)
Finance costs 5.6 9.7
Taxation charge/(credit) 0.1 (2.1)
Share-based payment charge 2.0 4.0
Increase in provisions 0.4 0.2
Operating cash flows before movement in
working capital 19.7 9.6
--------------------------------------------------------- ------ ----------
Decrease/(Increase) in inventories 4.0 (16.3)
Increase in trade and other receivables (32.3) (10.4)
Increase/(decrease) in trade and other payables 22.5 (4.5)
Total movement in working capital (5.8) (31.2)
Taxation refunded 0.2 0.8
--------------------------------------------------------- ------ ----------
Cash generated from/(used in) operating
activities 14.1 (20.8)
--------------------------------------------------------- ------ ----------
Cash flows from investing activities
Acquisition of subsidiary (net of cash acquired) - (5.9)
Interest received 0.1 0.1
Proceeds from sale of property, plant and
equipment 0.1 -
Acquisition of property, plant and equipment (6.9) (4.2)
Acquisition of intangible assets (1.1) (0.5)
Cash used in investing activities (7.9) (10.5)
--------------------------------------------------------- ------ ----------
Cash flows from financing activities
Acquisition of shares in non-controlling
interest (0.5) (0.4)
Movement in bank overdraft - (3.1)
Net Proceeds from new borrowings - 27.0
Interest paid on borrowings (1.5) (0.2)
Interest paid on lease liabilities (3.7) (4.2)
Repayments of borrowings (6.4) (1.2)
Payment of lease liabilities (16.2) (13.7)
Net cash (used in)/ generated from financing
activities (28.2) 4.2
--------------------------------------------------------- ------ ----------
Net decrease in cash (22.1) (27.0)
Cash and cash equivalents at beginning of
year 28.9 56.0
--------------------------------------------------------- ------ ----------
Exchange losses on cash and cash equivalents 0.1 (0.1)
--------------------------------------------------------- ------ ----------
Cash and cash equivalents at end of year 6.9 28.9
--------------------------------------------------------- ------ ----------
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 2020 or
2019, but is derived from those accounts. Statutory accounts for
2019 have been delivered to the Registrar of Companies and those
for 2020 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.
Adoption of new and revised standards
The accounting policies set out in Note 3 have been applied in
preparing these financial statements. During the year, the Group
has adopted the following new accounting standards and
interpretations for the first time.
- IFRS 16 Leases
- IFRIC 23 Uncertainty over Income Tax Treatments.
- Annual Improvements to IFRS Standards 2015-2017 Cycle
(Amendments to IFRS 3, IFRS 7, IFRS 9, IFRS 11, IAS 12, IAS 23 and
IAS 39).
Other than for IFRS 16 Leases, there has been no impact on the
financial statements as a result of the adoption of these new
accounting standards or interpretations. The detailed impact of the
adoption of IFRS 16 Leases is shown below.
Adoption of IFRS 16 Leases
The Group has applied IFRS 16 in these financial statements. The
standard replaces IAS17 and sets out the principles for the
recognition, measurement, presentation and disclosure of leases.
The standard is mandatory for the accounting period beginning on 1
April 2019 and the Group has opted to apply the new standard using
the full retrospective approach utilising the practical expedient
to not reassess whether a contract contains a lease.
As such, the comparative figures in the financial statement for
the financial year ending 31 March 2019 have been restated as if
IFRS16 had been applied at 1 April 2018.
The main effect on the Group is that IFRS 16 introduces a single
lessee accounting model and requires a lessee to recognise assets
and liabilities for almost all leases.
In addition, the two capitalisation exemptions proposed by the
standard - lease contracts with a lease term of less than 12 months
and lease contracts for which the underlying asset has a low value
(on acquisition) - have been taken by the Company. The payments for
such leases will be recognized in the income statement on a
straight-line basis over the lease term.
The adoption of IFRS 16 has no impact on the operational
performance of the business and has no impact on the groups cash
and banking facilities (Including any covenants attached to its
revolving credit facility).
Going concern
Notwithstanding net current liabilities of GBP53.8m as at 31
March 2020, and a cash outflow for the year of GBP22.1m, the
financial statements have been prepared on a going concern basis
which the directors consider to be appropriate for the following
reasons.
The Group meets its day to day working capital requirements from
its cash balances and the availability of its revolving credit
facility.
The Directors have prepared base and sensitised cash flow
forecasts for a period of at least 12 months from the date of
approval of these financial statements which indicate that the
Group and Company will remain compliant with its covenants and will
have sufficient funds through its existing cash balances and
availability of funds from the new GBP80m Revolving Credit Facility
(of which GBP56.7m is currently undrawn) to meet its liabilities as
they fall due for that period. In assessing the going concern
basis, the Directors have taken into account reasonably possible
downsides including e.g., a reduction in sales growth, a reduction
in margin, tightening of credit terms from suppliers due to
pressure from credit insurers and the potential impact arising as a
result of Covid-19, as well as considering potential controllable
mitigating factors.
In relation to Covid-19, management have considered the impact
of a short-term closure of part of its warehousing capacity in
addition to the potential impact on customer behaviour in respect
of product protection plans and mobile phone disconnections due to
a decline in the macro-economic environment post lockdown.
Consequently, the Directors are confident that the Group and
Company will have sufficient funds to continue to meet its
liabilities as they fall due for at least 12 months from the date
of approval of the financial statements and therefore have prepared
the financial statements on a going concern basis.
2. Revenue
An analysis of the Group's revenue is as follows:
Major product/services lines
2020 2019 % change
---------------------- -------------------- -------------------------
Year ended 31 March
(GBPm) UK Europe Total UK Europe Total UK Europe Total
Product revenue 692.8 140.7 833.5 628.4 151.1 779.5 10.3% (6.9)% 6.9%
Service revenue 35.0 3.4 38.3 30.1 1.6 31.8 16.0% 106.6% 20.7%
Commission revenue 143.8 0.2 144.0 61.2 0.3 61.5 135.0% (31.6)% 134.2%
Third party logistics
revenue 16.6 - 16.7 15.3 - 15.3 8.6% - 8.9%
Recycling revenue 13.5 0.2 13.6 14.3 0.1 14.5 (6.2)% 31.4 (5.9)%
----------------------- ----- ------ ------- ----- ------ ----- ------ ------- ------
Total revenue 901.6 144.5 1,046.2 749.3 153.2 902.5 20.3% (5.6)% 15.9%
----------------------- ----- ------ ------- ----- ------ ----- ------ ------- ------
3. Segmental analysis
The Group has two reportable segments, online retailing of
domestic appliances to customers in the UK and online retailing of
domestic appliances to customers in Europe (excluding the UK).
Operating segments are determined by the internal reporting
regularly provided to the Group's Chief Operating Decision Maker.
The Chief Operating Decision Maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Executive Directors and has
determined that the primary segmental reporting format of the Group
is geographical by customer location, based on the Group's
management and internal reporting structure.
a. Income statement
The following is an analysis of the Group's revenue and results
by reportable segments.
Year ended 31 March (GBPm) 2020 2019
--------------------------- ------------------------- -------------------------
UK Europe Total UK Europe Total
--------------------------- ------- ------- ------- ------- ------- -------
Total revenue 901.6 144.5 1,046.2 749.3 153.2 902.5
Cost of sales (724.3) (143.6) (867.9) (594.2) (155.7) (750.0)
--------------------------- ------- ------- ------- ------- ------- -------
Gross profit/(loss) 177.4 0.9 178.3 155.1 (2.6) 152.5
Administrative expenses (153.2) (30.1) (183.3) (139.0) (27.6) (166.6)
Other operating income 0.8 0.4 1.2 0.6 0.4 1.1
--------------------------- ------- ------- ------- ------- ------- -------
Operating profit/(loss) 25.0 (28.8) (3.8) 16.7 (29.7) (13.0)
Finance income 6.4 4.5 10.9 2.6 - 2.6
Finance costs (4.9) (0.7) (5.6) (6.2) (3.5) (9.7)
--------------------------- ------- ------- ------- ------- ------- -------
Profit/(loss) before tax 26.5 (25.0) 1.5 13.0 (33.2) (20.2)
Tax credit/(charge) - (0.1) (0.1) 1.6 0.4 2.1
--------------------------- ------- ------- ------- ------- ------- -------
Profit/(loss) after tax 26.5 (25.1) 1.4 14.7 (32.8) (18.1)
--------------------------- ------- ------- ------- ------- ------- -------
The Group uses alternative performance measures which are not
defined within IFRS, as well as IFRS measures. One of these is
adjusted EBITDA.
The reconciliation of operating profit/(loss) to Adjusted EBITDA
is shown on page 15.
b. Geographical analysis
Revenue by location is the same as that shown in section (a) by
reportable segment. Information on non-current assets and share
based payments by geographical location is shown in section
(c).
c. Other information
Additions
-----------------------------
Intangible Right of Profit
2020 (GBPm) assets PP&E use assets Depreciation Amortisation on disposal
------------ ---------- ---- ----------- ------------ ------------ -------------
UK 1.3 8.3 13.0 15.8 2.2 (0.1)
Europe - 0.2 1.3 3.1 - 0.1
------------ ---------- ---- ----------- ------------ ------------ -------------
1.3 8.5 14.3 18.9 2.2 -
------------ ---------- ---- ----------- ------------ ------------ -------------
Additions
-----------------------------
2019 (GBPm) Intangible Right of Profit
(restated) assets PP&E use assets Depreciation Amortisation on disposal
------------ ---------- ---- ----------- ------------ ------------ -------------
UK 0.5 4.7 11.2 14.2 1.1 -
Europe - 0.1 0.7 3.2 - -
------------ ---------- ---- ----------- ------------ ------------ -------------
0.5 4.8 11.9 17.4 1.1 -
------------ ---------- ---- ----------- ------------ ------------ -------------
In the previous year, intangible and tangible fixed assets
(Including Right of use assets) of GBP17.0m were acquired with AO
Mobile Limited.
Due to the nature of its activities, the Group is not reliant on
any individual major customers or group of customers.
No analysis of the assets and liabilities of each operating
segment is provided to the Chief Operating Decision Maker in the
monthly board presentation, therefore no measure of segmental
assets or liabilities is disclosed in this note.
4. Finance income
Year ended 31 March (GBPm) 2020 2019
---------------------------------------- ------ -----
Foreign exchange gains on intra-Group 6.0 -
loans
Movement in valuation of put and
call option 1.9 0.2
Unwind of discounting on non current
contract asset 2.9 2.3
Other interest 0.1 0.1
---------------------------------------- ------ -----
Total 10.9 2.6
---------------------------------------- ------ -----
5. Finance costs
Year ended 31 March (GBPm) 2020 2019
----------------------------------------- ----- -----
Interest on lease liabilities 3.7 4.2
Interest on bank loans 0.6 0.2
Foreign exchange losses on intra-group
loans - 3.0
Unwind of discounting on long
term payables 0.3 0.2
Movement in valuation of put and
call option 0.1 1.8
Other finance costs 0.9 0.3
----------------------------------------- ----- -----
Total 5.6 9.7
----------------------------------------- ----- -----
6. Earning/(Loss) per share
The calculation of the basic and diluted loss per share is based
on the following data:
2019
2020 (GBPm)
Year ended 31 March (GBPm) Restated
Loss
-------------------------------------------------- --- ----------- -----------
Profit/(Loss) for the purposes of
basic and diluted earnings per share
being loss attributable to the owners
of the parent company 1.7 (18.6)
------------------------------------------------------- ----------- -----------
Number of shares
Weighted average number of ordinary
shares for the purposes of basic loss
per share 472,462,309 463,153,515
Potentially dilutive shares options 4,857,812 6,447,240
------------------------------------------------------- ----------- -----------
Weighted average number of diluted
ordinary shares 477,320,121 469,600,755
------------------------------------------------------- ----------- -----------
Earnings/(Loss) per share (pence per
share)
-------------------------------------------------- --- ----------- -----------
Basic Earnings/(loss) per share 0.38 (4.00)
------------------------------------------------------- ----------- -----------
Diluted Earnings/(loss) per share 0.37 (4.00)
------------------------------------------------------- ----------- -----------
In the previous year, as the potentially dilutive shares do not
result in a reduction a loss per share, the diluted loss per share
has been restricted to the basic loss per share.
The basic earnings/(loss) per share is affected by significant
foreign exchange movements arising from intra-Group funding
arrangements therefore an adjusted basic earnings/(loss) per share
has been calculated below excluding this impact as management
believe it provides helpful additional information for stakeholders
in assessing the performance of the business.
The foreign exchange movement has arisen as a result of the
change in the exchange rate between sterling and the euro in the
period.
Management do not adjust for all the items included in the
Adjusted EBITDA alternative performance measure as when considering
these significant items impacting profit/ (loss) before tax from
one period to the next, significant foreign exchange movements
arising from intra-group funding has the largest impact.
2019
2020 GBPm
Year ended 31 March (GBPm) GBPm Restated
---------------------------------------------------- -------------- -------------
Earnings/(loss)
Profit/ (Loss) attributable to owners
of the parent company 1.7 (18.6)
(Reduction)/Add back of foreign exchange
movements on intra-Group loans (6.0) 3.0
---------------------------------------------------- -------------- -------------
Adjusted loss attributable to owners
of the parent company (4.3) (15.5)
---------------------------------------------------- -------------- -------------
Number of shares
Basic and adjusted weighted average
number of ordinary shares 472,462,309 463,153,515
Potentially dilutive shares options 4,857,812 6,447,240
---------------------------------------------------- -------------- -------------
Diluted weighted average number of ordinary
shares 477,320,121 469,600,755
---------------------------------------------------- -------------- -------------
Earnings/(loss) per share (in pence)
Basic Earnings/(loss) per share 0.38 (4.00)
Diluted Earnings/(loss) per share 0.37 (4.00)
Adjusted loss per share (0.91) (3.36)
---------------------------------------------------- -------------- -------------
7. Taxation
2020 2019
Year ended 31 March (GBPm) Restated
Corporation tax:
Current year 0.1 0.2
Adjustments in respect of prior
years - -
0.1 0.2
Deferred tax
Current year 1.0 (2.0)
Adjustments in respect of prior
years (1.0) (0.3)
--------------------------------- ------ ----------
Total tax credit/ (charge) 0.1 (2.1)
--------------------------------- ------ ----------
Corporation tax is calculated at 19% (2019: 19%) of the taxable
loss for the year. Taxation for other jurisdictions is calculated
at the rates prevailing in the respective jurisdictions.
The credit for the year can be reconciled to the loss in the
income statement as follows:
2020 2019
Year ended 31 March (GBPm) Restated
----------------------------------------- ------ ----------
Profit/ (Loss) before tax on continuing
operations 1.5 (20.2)
Tax at the UK corporation tax rate
of 19% (2019: 19%) 0.3 (3.8)
Ineligible expenses 0.3 1.6
Income not taxable (1.5) -
Movement in unrecognised tax 1.5 -
Research & Development tax credit - 0.2
Difference in overseas and UK tax
rates (0.3) (0.3)
Impact of difference in current and
deferred tax rates (0.2) 0.1
Share-based payments 1.0 0.4
Prior period adjustments (1.0) (0.3)
Tax credit / (charge) for the year 0.1 (2.1)
----------------------------------------- ------ ----------
8. Net debt
2020 2019
GBPm GBPm
Cash and cash equivalents at year end 6.9 28.9
Borrowings - Repayable within one year (5.2) (9.5)
Borrowings - Repayable after one year (16.7) (20.9)
----------------------------------------------- ------- -------
Lease liabilities - Repayable within one year (16.1) (14.3)
Lease liabilities - Repayable after one year (68.1) (67.8)
----------------------------------------------- ------- -------
Net debt (99.1) (83.5)
----------------------------------------------- ------- -------
At 31 March 2020, AO Limited, a direct subsidiary of AO World
Plc, had undrawn amounts on its Revolving Credit Facility of
GBP56.7m (2019: GBP56.1m). The total facility is GBP60m. The amount
drawn at the year-end was in relation to letters of credit
(GBP2.3m) and payment guarantees (GBP1.0m). The Revolving Credit
Facility was due to expire in June 2021.
During the previous year, AO Limited entered into a term loan
agreement under which it borrowed GBP24m to partly fund the
acquisition of Mobile Phones Direct Limited. This is repayable in
quarterly instalments starting on 1 April 2019 with a final
repayment date in June 2021 in line with the Revolving Credit
Facility noted above. At 31 March 2020, GBP20m was outstanding.
In addition, AO Recycling Limited entered into GBP3m term loan
to part fund the capital expenditure required for the development
of its new Plastics Plant. During the current year GBP2.0m of the
loan has been converted into finance leases. Following the year end
the remaining GBP1.0m was repaid in full.
On 6 April 2020, AO Limited entered into a new Revolving Credit
Facility of GBP80m. This replaced the existing revolving credit
facility and the term loan. At 6 April 2020 GBP56.7m was available
under the facility with the drawn amounts relating to letters of
credit and payment guarantees (see note 10).
9. Restatement of Comparatives
The 31 March 2019 comparatives for the primary statements have
been restated following the adoption of IFRS 16 Leases, the
completion of the purchase price allocation exercise on the
acquisition of AO Mobile Limited, a reclassification of payments
made to acquire non-controlling interest as required by IAS 7 and a
number of presentational changes following further consideration of
the definitions in IFRS 15 and its practical application. The 31
March 2018 statement of financial position has also been restated
for IFRS 16 Leases only. The impact on the income statement,
statement of financial position and statement of cash flows as a
result of the restatements are presented below:
Income statement (including segmental analysis)
31 March 2019 as reported Effect of IFRS 16 31 March 2019 as restated
adoption
GBPm UK Europe Total UK Europe Total UK Europe Total
---------------- --------- -------- -------- ------ ------ ----- --------- -------- --------
Revenue 749.3 153.2 902.5 - - - 749.3 153.2 902.5
Cost of sales (594.5) (155.7) (750.2) 0.2 - 0.2 (594.3) (155.7) (750.0)
---------------- --------- -------- -------- ------ ------ ----- --------- -------- --------
Gross profit 154.9 (2.6) 152.2 0.2 - 0.2 155.0 (2.6) 152.5
Administrative
expenses (141.0) (27.9) (168.9) 2.0 0.4 2.4 (139.0) (27.5) (166.6)
Other operating
income 1.0 0.5 1.5 (0.4) - (0.4) 0.6 0.5 1.1
---------------- --------- -------- -------- ------ ------ ----- --------- -------- --------
Operating loss 14.9 (30.1) (15.2) 1.8 0.4 2.2 16.6 (29.6) (13.0)
Finance income 2.5 - 2.5 0.1 - 0.1 2.6 - 2.6
Finance costs (3.4) (2.8) (6.2) (2.8) (0.7) (3.5) (6.2) (3.5) (9.7)
---------------- --------- -------- -------- ------ ------ ----- --------- -------- --------
Loss before tax 14.0 (32.9) (18.9) (1.0) (0.3) (1.3) 12.9 (33.1) (20.2)
Tax credit 1.5 0.4 1.9 0.2 0.1 0.2 1.7 0.5 2.1
---------------- --------- -------- -------- ------ ------ ----- --------- -------- --------
Loss for the
year 15.5 (32.5) (17.0) (0.8) (0.3) (1.1) 14.6 (32.6) (18.1)
---------------- --------- -------- -------- ------ ------ ----- --------- -------- --------
The reconciliation of statutory operating profit to Adjusted
EBITDA is as follows:
31 March 2019 as reported Effect of IFRS 16 31 March 2019 as restated
adoption
GBPm UK Europe Total UK Europe Total UK Europe Total
---------------------- ------- --------- --------- ----- ------- ----- ------- --------- ---------
Operating loss 14.9 (30.1) (15.2) 1.8 0.4 2.2 16.6 (29.6) (13.0)
Depreciation 5.3 1.1 6.4 8.9 2.1 11.0 14.2 3.2 17.4
Amortisation 1.1 - 1.1 - - - 1.1 - 1.1
---------------------- ------- --------- --------- ----- ------- ----- ------- --------- ---------
EBITDA 21.3 (29.0) (7.7) 10.7 2.5 13.2 32.0 (26.5) 5.5
Share based payment
charges attributable
to exceptional
LTIP awards 2.3 - 2.3 - - - 2.3 - 2.3
Fees incurred
on acquisition
of subsidiary 2.6 - 2.6 - - - 2.6 - 2.6
Onerous contract
costs - 1.2 1.2 - - - - 1.2 1.2
Restructuring
costs 1.2 - 1.2 - - - 1.2 - 1.2
---------------------- ------- --------- --------- ----- ------- ----- ------- --------- ---------
Adjusted EBITDA 27.4 (27.8) (0.4) 10.7 2.5 13.2 38.1 (25.3) 12.8
---------------------- ------- --------- --------- ----- ------- ----- ------- --------- ---------
The restatements principally relate to the removal of the rental
charge from cost of sales and administrative expenses in relation
to assets acquired previously under operating leases which are
replaced with a depreciation charge on the new Right of Use asset
(in cost of sales and administrative expenses) and an interest
charge in relation to the related lease liability.
The restatement of the Income Statement has also resulted in
Earnings per Share being restated. The loss attributable to
shareholders in the prior year has increased from GBP17.5m to
GBP18.6m as a consequence of the adoption of IFRS 16 which results
in Basic loss per share 4.00p (2019 reported: 3.78p) and diluted
loss per share being 4.00p (2019 reported: 3.78p).
Statement of financial position
Year ended 31 March 2019
At 31
At 31 Effect IFRS 15 Effect of March
March of IFRS Reclassification IFRS 16 2019
GBPm 2019 reported 3 adoption restated
------------------------------- --------------- -------- ------------------ --------- ---------
Non current assets
Goodwill 27.6 0.6 - - 28.2
Other intangible assets 16.9 - - - 16.9
Property, plant and equipment 26.8 - - (0.3) 26.5
Right of use assets - - - 63.1 63.1
Trade and other receivables 79.4 - - - 79.4
Deferred tax asset 3.6 - - 1.0 4.6
Derivative financial asset 0.8 - - - 0.8
------------------------------- --------------- -------- ------------------ --------- ---------
155.0 0.6 - 63.8 219.5
------------------------------- --------------- -------- ------------------ --------- ---------
Current assets
Inventories 76.3 - - - 76.3
Trade and other receivables 118.0 (0.5) (2.8) (0.2) 114.5
Corporation tax receivable 0.6 - - - 0.6
Cash and cash equivalents 28.9 - - - 28.9
------------------------------- --------------- -------- ------------------ --------- ---------
223.8 (0.5) (2.8) (0.2) 220.3
------------------------------- --------------- -------- ------------------ --------- ---------
Total assets 378.8 0.1 (2.8) 63.6 439.8
------------------------------- --------------- -------- ------------------ --------- ---------
Current liabilities
Trade and other payables (230.1) (0.1) (5.6) 6.0 (229.8)
Borrowings (9.5) - - - (9.5)
Lease liabilities (2.8) - - (11.5) (14.3)
Derivative financial liability (0.6) - - - (0.6)
Provisions (8.3) - 8.3 - -
------------------------------- --------------- -------- ------------------ --------- ---------
(251.3) (0.1) 2.7 (5.5) (254.2)
------------------------------- --------------- -------- ------------------ --------- ---------
Net current liabilities (27.5) (0.5) (0.1) (5.7) (33.9)
------------------------------- --------------- -------- ------------------ --------- ---------
Non current liabilities
Borrowings (20.9) - - - (20.9)
Lease liabilities (4.8) - - (63.0) (67.8)
Trade and other payables (7.0) - (0.4) - (7.4)
Derivative financial liability (2.9) - - - (2.9)
Deferred tax liability (2.7) - - - (2.7)
Provisions (2.6) - 0.5 - (2.2)
------------------------------- --------------- -------- ------------------ --------- ---------
(41.0) - 0.1 (63.0) (103.9)
------------------------------- --------------- -------- ------------------ --------- ---------
Total liabilities (292.2) (0.1) 2.8 (69.8) (358.1)
------------------------------- --------------- -------- ------------------ --------- ---------
Net assets 86.6 - - (4.8) 81.8
------------------------------- --------------- -------- ------------------ --------- ---------
Share capital 1.2 - - - 1.2
Share premium account 103.7 - - - 103.7
Other reserves 29.0 - - - 29.0
Retained losses (46.4) - - (4.8) (51.2)
------------------------------- --------------- -------- ------------------ --------- ---------
Total 87.5 - - (4.8) 82.7
------------------------------- --------------- -------- ------------------ --------- ---------
Non controlling interest (0.9) - - - (0.9)
------------------------------- --------------- -------- ------------------ --------- ---------
Total equity 86.6 - - (4.8) 81.8
------------------------------- --------------- -------- ------------------ --------- ---------
The restatement principally reflects the recognition of Right of
Use assets in relation to assets previously financed through
operating leases and the related lease liability. The difference is
recognised as a movement in equity. The movement in payables
relates to the reversal of rent free periods in relation to certain
properties as these are now built into the value of the Right of
Use asset and associated lease liability.
In the prior year, the Group adopted IFRS 15 'Revenue from
contracts with customers'. Following further consideration of the
definitions in IFRS15 and its practical application, the Group has
reconsidered and amended the presentation of certain balance sheet
amounts as described below. Comparative amounts have been restated
for consistency in line with a change in accounting policy, but the
changes in presentation have had no effect on net assets or profit
and loss for any period presented.
In the prior year, receivables in relation to commission from
product protection plans and mobile network operators were
classified as receivables at fair value through profit or loss on
the basis that the Group has no further obligations to undertake
after the point of sale when revenue is recognised and therefore
commissions receivable were only dependent on the passage of time
(albeit subject to the behaviour of the end customer). As a
consequence, amounts recognised as accrued income in the 31 March
2019 statement of financial position of GBP151.1m have been
presented as a contract asset under IFRS 15, reflecting the
variable nature of the commission receivable based on future
customer behaviour.
In the prior year, clawback provisions in relation to commission
from mobile network operators were classified as provisions. As the
clawback provision relates to commissions which could be returned
to the mobile network operators should a customer cancel a
contract, the amounts have now been included as a reduction in
contract assets to more appropriately reflect the net amount of
commission receivable. As a consequence, GBP2.8m has been
reclassified against the contract asset and the comparatives
changed accordingly. There is no impact on the income
statement.
In the prior year, cashback provisions in respect of cashback
schemes operated by Mobile Phones Direct, which were calculated
based on historic redemption rates, were included within
provisions. Payments are expected to be made up to 23 months from
the year end. Having considered the requirements of IFRS 15,
because the company does not receive any goods or services in
relation to the cash paid to the end customer, management believe
it is appropriate to treat these as a reduction in revenue and a
contract liability. As a consequence GBP6.1m of provisions at 31
March 2019 have been reclassified as contract liabilities. As the
impact on the income statement was immaterial in the prior year
(GBP1.3m) the income statement has not been restated.
In addition the balance sheet at 31 March 2019 has been restated
to reflect the final changes to the assets, liabilities and
subsequent goodwill arising from the acquisition of AO Mobile
Limited in December 2018. This has had the impact of reducing
contract assets by GBP0.5m and increasing accruals by GBP0.1m and
increasing goodwill by GBP0.6m.
Year ended 31 March 2018
Effect
of At 31 March
At 31 March IFRS 16 2018
GBPm 2018 reported adoption restated
------------------------------- --------------- --------- -----------
Non current assets
Goodwill 13.5 - 13.5
Other intangible assets 1.2 - 1.2
Property, plant and equipment 28.0 - 28.0
Right of use assets - 62.0 62.0
Trade and other receivables 47.9 - 47.9
Derivative financial asset 2.2 - 2.2
Deferred tax asset 1.7 0.8 2.5
94.5 62.8 157.3
------------------------------- --------------- --------- -----------
Current assets
Inventories 53.2 - 53.2
Trade and other receivables 54.8 0.3 55.1
Corporation tax receivable 0.2 - 0.2
Cash and cash equivalents 56.0 - 56.0
------------------------------- --------------- --------- -----------
164.4 0.3 164.7
------------------------------- --------------- --------- -----------
Total assets 258.9 63.1 322.0
------------------------------- --------------- --------- -----------
Current liabilities
Bank overdraft (3.1) - (3.1)
Trade and other payables (156.0) 6.1 (149.9)
Borrowings (1.2) - (1.2)
Lease liabilities (3.0) (9.7) (12.7)
Derivative financial liability (0.4) - (0.4)
(163,7) (3.6) (167.3)
------------------------------- --------------- --------- -----------
Net current liabilities 0.7 (3.3) (2.6)
------------------------------- --------------- --------- -----------
Non current liabilities
Borrowings (3.4) - (3.4)
Lease liabilities (7.0) (63.2) (70.2)
Derivative financial liability (3.4) - (3.4)
Provisions (1.8) - (1.8)
------------------------------- --------------- --------- -----------
(15.6) (63.2) (78.8)
------------------------------- --------------- --------- -----------
Total liabilities (179.3) (66.7) (246.1)
------------------------------- --------------- --------- -----------
Net assets 79.6 (3.7) 75.9
------------------------------- --------------- --------- -----------
Share capital 1.1 - 1.1
Share premium account 103.7 - 103.7
Other reserves 5.3 - 5.3
Retained losses (28.9) (3.7) (32.6)
------------------------------- --------------- --------- -----------
Total 81.2 (3.7) 77.5
------------------------------- --------------- --------- -----------
Non controlling interest (1.6) - (1.6)
------------------------------- --------------- --------- -----------
Total equity 79.6 (3.7) 75.9
------------------------------- --------------- --------- -----------
The restatement principally reflects the recognition of Right of
Use assets in relation to assets previously financed through
operating leases and the related lease liability. The difference is
recognised as a movement in equity. The movement in payables
relates to the reversal of rent free periods in relation to certain
properties as these are now built into the value of the Right of
Use asset and associated lease liability.
Statement of cash flows
GBPm
Year ended Year ended
31 March Effect 31 March
2019 reported IFRS 15 of IFRS 2019
Reclassification Reclassification 16 adoption restated
-------------------------------- --------------- ------------------ ------------------ ------------- ------------
Cashflows from operating
activities
Loss for the period (17.0) - - (1.1) (18.1)
Depreciation and amortisation 7.5 - - 11.0 18.5
Finance income (2.5) - - (0.1) (2.6)
Finance costs 6.2 - - 3.5 9.7
Taxation credit (1.9) - - (0.2) (2.1)
Share based payment charge 4.0 - - - 4.0
Increase in provisions 0.1 - 0.1 - 0.2
-------------------------------- --------------- ------------------ ------------------ ------------- ------------
Net operating cashflows before
movement in working capital (3.6) - 0.1 13.2 9.6
-------------------------------- --------------- ------------------ ------------------ ------------- ------------
Increase in inventories (16.3) - - - (16.3)
Increase in trade and other
receivables (10.2) - (0.2) - (10.4)
Increase in trade and other
payables (5.2) - 0.1 0.5 (4.5)
-------------------------------- --------------- ------------------ ------------------ ------------- ------------
Net movement in working capital (31.7) - (0.1) 0.5 (31.2)
-------------------------------- --------------- ------------------ ------------------ ------------- ------------
Taxation received 0.8 - - - 0.8
-------------------------------- --------------- ------------------ ------------------ ------------- ------------
Net cash used in operating
activities (34.5) - - 13.8 (20.8)
-------------------------------- --------------- ------------------ ------------------ ------------- ------------
Cashflows from investing
activities
Acquisition of subsidiary (net
of cash acquired) (5.9) - - - (5.9)
Acquisition of minority interest (0.4) 0.4 - - -
Interest received on sub lease
of Right of Use assets - - - 0.1 0.1
Acquisition of property, plant
and equipment (4.5) - - 0.3 (4.2)
Acquisition of intangible assets (0.5) - - - (0.5)
-------------------------------- --------------- ------------------ ------------------ ------------- ------------
Net cash used in investing
activities (11.2) 0.4 - 0.3 (10.5)
-------------------------------- --------------- ------------------ ------------------ ------------- ------------
Cashflows from financing
activities
Acquisition of minority interest - (0.4) - - (0.4)
Movement in bank overdraft (3.1) - - - (3.1)
New borrowings 27.0 - - - 27.0
Interest paid on borrowings (0.2) - - - (0.2)
Interest paid on lease
liabilities (0.7) - - (3.5) (4.2)
Repayment of borrowings (1.2) - - - (1.2)
Repayment of lease liabilities (3.1) - - (10.5) (13.7)
-------------------------------- --------------- ------------------ ------------------ ------------- ------------
Net cash generated from
financing
activities 18.6 (0.4) - (14.1) 4.2
-------------------------------- --------------- ------------------ ------------------ ------------- ------------
Net decrease in cash (27.0) - - - (27.0)
-------------------------------- --------------- ------------------ ------------------ ------------- ------------
Cash and cash equivalents at
beginning of the period 56.0 - - - 56.0
Exchange gains and losses (0.1) - - - (0.1)
-------------------------------- --------------- ------------------ ------------------ ------------- ------------
Cash and cash equivalents at
end of the period 28.9 - - - 28.9
-------------------------------- --------------- ------------------ ------------------ ------------- ------------
The restatement principally relates to operating lease payments
previously recognised under IAS 17 being removed from the loss for
the period to be replaced by a depreciation charge and a repayment
of lease liabilities, the latter shown within financing
activities.
The Group has also reclassified the payments made to acquire
non-controlling interest from investing activities to financing
activities as required by IAS 7.
In addition, as a consequence of the reclassifications in the
Statement of financial position relating to IFRS 15, the movement
in provisions and working capital have been restated to reflect the
revised classifications. There is no impact on cash from the
restatement.
10. Post balance sheet events
As set out in note 8, on 6 April 2020, AO Limited entered into a
new Revolving Credit Facility of GBP80m. This replaced the existing
revolving credit facility and the term loan. At 6 April 2020
GBP56.7m was available under the facility with the drawn amounts
relating to letters of credit and payment guarantees. The facility
expires in April 2023 and is secured by a debenture over the assets
of the relevant companies, a charge over the shares of the
companies and a charge over the AO.com domain name.
Ends
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London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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