AO World revenue surged on 13.6% and EBITDA Margin showed almost no change
05 Jun 2018 • About AO World (
$AO.) • By InTwits
AO World reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- AO World is a fast growth stock: FY2018 revenue growth was 13.6%, 5 year revenue CAGR was 23.7% at FY2018 ROIC -21.4%
- The company operates at negative EBITDA Margin: -1.1%
- AO World motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for FY2014-FY2018 was 0.0% while average EBITDA Margin was -0.8% for the sames years
- AO World has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.8%.
- The company has unprofitable business model: ROIC is -21.4%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue surged on 13.6%. Revenue decline was accelerating on average at -6.0 pp per annum in FY2014-FY2018. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin jumped on 23.8 pp from -6.7% to 17.0% in FY2018.
Gross Margin decreased slightly on 0.63 pp from 18.4% to 17.8% in FY2018. SG&A as a % of Revenue showed almost no change in FY2018. SG&A as a % of Revenue followed a growing trend at 0.73 pp per annum in FY2014-FY2018.
Net Income margin decreased slightly on 0.74 pp from -0.94% to -1.7% in FY2018.
Investments (CAPEX, working capital and M&A)
In FY2018 the company had CAPEX/Revenue of 0.60%. AO World showed almost no change in CAPEX/Revenue from FY2015 to FY2018. It's average CAPEX/Revenue for the last three years was 0.81%. During FY2014-FY2018 CAPEX as a % of Revenue topped in FY2016 at 1.0% and was declining since that time.
Return on investment
The company operates at negative ROIC (-21.4%) and ROE (-21.7%). ROIC showed almost no change in FY2018. ROE decreased on 7.1 pp from -14.6% to -21.7% in FY2018. During the last 5 years ROE topped in FY2015 at -4.3% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 0.9x and Debt / EBITDA is . Debt increased slightly on 1.7% while cash surged on 90.5%.
AO World has no short term refinancing risk: cash is higher than short term debt (767.1%).
Financial and operational results
FY ended 31 Mar 2018
AO World ($AO.) key annual financial indicators| mln. £ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 384.9 | 476.7 | 599.2 | 701.2 | 796.8 | 13.6% |
| Gross Profit | 74.2 | 87.6 | 105.9 | 129.2 | 141.8 | 9.8% |
| SG&A | 66.0 | 89.8 | 116.5 | 142.4 | 159.8 | 12.2% |
| EBITDA | -4.4 | 1.7 | -5.8 | -6.0 | -8.6 | |
| Net Income | -9.6 | -2.5 | -6.0 | -6.6 | -13.4 | |
Balance Sheet
|
|---|
| Cash | 55.1 | 44.9 | 33.4 | 29.4 | 56.0 | 90.5% |
| Short Term Debt | 2.0 | 2.1 | 2.4 | 3.7 | 7.3 | 97.3% |
| Long Term Debt | 4.4 | 4.9 | 5.6 | 13.7 | 10.4 | -24.1% |
Cash flow
|
|---|
| Capex | 2.8 | 4.4 | 6.1 | 5.7 | 4.8 | -15.8% |
Ratios
|
|---|
| Revenue growth | 40.0% | 23.8% | 25.7% | 17.0% | 13.6% | |
| EBITDA growth | -143.8% | -137.8% | -445.4% | 3.4% | 43.3% | |
|
|---|
| Gross Margin | 19.3% | 18.4% | 17.7% | 18.4% | 17.8% | -0.6% |
| EBITDA Margin | -1.2% | 0.4% | -1.0% | -0.9% | -1.1% | -0.2% |
| SG&A, % of revenue | 17.1% | 18.8% | 19.4% | 20.3% | 20.1% | -0.3% |
| Net Income Margin | -2.5% | -0.5% | -1.0% | -0.9% | -1.7% | -0.7% |
| CAPEX, % of revenue | 0.7% | 0.9% | 1.0% | 0.8% | 0.6% | -0.2% |
|
|---|
| ROIC | -17.0% | -3.5% | -17.8% | -21.8% | -21.4% | 0.5% |
| ROE | -26.4% | -4.3% | -11.2% | -14.6% | -21.7% | -7.1% |
| Net Debt/EBITDA | | -22.6x | | | |
Peers in General Retailers
Below we provide AO World benchmarking against other companies in General Retailers industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Just Eat ($JE.) | | 57.7% | 51.7% | 45.4% | |
| Mysale Group ($MYSL) | 23.4% | 5.1% | 7.0% | 6.4% | |
| Aa ($AA.) | | 1.0% | -5.0% | -0.2% | 2.9% |
| Shoe Zone ($SHOE) | -10.8% | -3.5% | -4.2% | -1.3% | |
| Signet Jewelers Ltd ($SIG) | | 36.3% | 14.2% | -2.2% | -2.4% |
| |
|---|
| Median (9 companies) | 1.5% | 3.7% | -0.7% | -2.2% | 0.5% |
|---|
| AO World ($AO.) | | 23.8% | 25.7% | 17.0% | 13.6% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Just Eat ($JE.) | 89.7% | 90.2% | 90.6% | 82.4% | |
| Aa ($AA.) | 64.7% | 64.8% | 64.0% | 63.5% | 62.5% |
| French Connection Group ($FCCN) | 47.6% | 46.7% | 46.3% | 45.8% | 45.2% |
| Lotte Shopping Co Ltd ($LOTS) | 31.2% | 30.6% | 32.6% | 42.0% | |
| Signet Jewelers Ltd ($SIG) | 37.5% | 36.2% | 37.3% | 36.8% | 35.0% |
| |
|---|
| Median (9 companies) | 31.6% | 34.3% | 34.9% | 36.8% | 40.1% |
|---|
| AO World ($AO.) | 19.3% | 18.4% | 17.7% | 18.4% | 17.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aa ($AA.) | 42.2% | 37.9% | 37.4% | 37.6% | 39.4% |
| Signet Jewelers Ltd ($SIG) | 16.2% | 12.7% | 13.4% | 14.9% | 12.5% |
| Shoe Zone ($SHOE) | 9.3% | 8.4% | 8.5% | 8.1% | |
| Lotte Shopping Co Ltd ($LOTS) | 7.4% | 6.3% | 7.2% | 7.8% | |
| Mysale Group ($MYSL) | 2.3% | -4.7% | 1.8% | 2.0% | |
| |
|---|
| Median (9 companies) | 7.4% | 8.5% | 2.0% | 2.0% | 7.1% |
|---|
| AO World ($AO.) | -1.2% | 0.4% | -1.0% | -0.9% | -1.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aa ($AA.) | 1.0% | 3.8% | 8.0% | 7.6% | 6.6% |
| Lotte Shopping Co Ltd ($LOTS) | 6.6% | 3.8% | 5.0% | 4.9% | |
| Signet Jewelers Ltd ($SIG) | 3.6% | 3.8% | 3.5% | 4.3% | 3.8% |
| Shoe Zone ($SHOE) | 1.2% | 1.1% | 2.0% | 3.3% | |
| Just Eat ($JE.) | 3.4% | 2.3% | 2.5% | 2.7% | |
| |
|---|
| Median (9 companies) | 1.3% | 2.1% | 1.8% | 2.7% | 3.2% |
|---|
| AO World ($AO.) | 0.7% | 0.9% | 1.0% | 0.8% | 0.6% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aa ($AA.) | 61.1% | 34.9% | 32.0% | 30.8% | 32.3% |
| Shoe Zone ($SHOE) | 34.2% | 30.0% | 30.6% | 30.7% | |
| Signet Jewelers Ltd ($SIG) | 20.4% | 15.5% | 15.2% | 16.0% | 13.0% |
| Caffyns ($78GL) | 11.1% | 37.3% | 10.4% | 7.1% | 5.5% |
| Lotte Shopping Co Ltd ($LOTS) | 3.8% | 2.6% | 2.3% | 1.9% | |
| |
|---|
| Median (10 companies) | 10.5% | 12.3% | 2.3% | 1.9% | 9.2% |
|---|
| AO World ($AO.) | -17.0% | -3.5% | -17.8% | -21.8% | -21.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aa ($AA.) | 7.7x | 7.9x | 8.0x | 7.6x | 7.0x |
| Lotte Shopping Co Ltd ($LOTS) | 5.2x | 6.7x | 7.1x | 3.5x | |
| Caffyns ($78GL) | 3.0x | 0.7x | 2.2x | 2.2x | 4.0x |
| Signet Jewelers Ltd ($SIG) | -0.3x | 1.7x | 1.4x | 1.4x | 0.6x |
| Shoe Zone ($SHOE) | -0.6x | -1.0x | -1.1x | -0.9x | |
| |
|---|
| Median (6 companies) | -0.6x | -0.2x | 1.4x | 1.8x | 4.0x |
|---|
