Green Build Expo

AO World raises £50m for expansion

DATE: Oct, 10   COMMENTS: 0   AUTHOR: Allan Azarola

The online electrical retailer AO World has raised £50 million via a placing to expand in Europe.

The fundraising comes just over three years after the company raised £60 million in an initial public offering.

Steve Caunce, its chief executive, said the proceeds would “support our continued growth and increasing scale as we pursue our proven strategy”.

The retailer placed just over 37.7 million new shares at 132.5p, making up 9 per cent of the issued share capital. Shares in AO World, which have halved since floating at 285p, rose 1.9 per cent to 140½p.

Mr Caunce said the company had seen another year of strong growth in Britain and Europe, despite the challenging dynamics in our markets. “The strength in our UK business and our investment in mainland Europe have positioned us well for the future and this will be further strengthened by the capital raising,” he said.

In a pre-close update for the year to the end of March AO World said that trading was in line with expectations. It expects revenue to have risen by about 17 per cent to £700 million, but it still expects to make a loss.

Neil Wilson, senior market analyst at ETX Capital, said in a note: “Another Ocado? Like the grocery pick-and-pack specialist, AO World is growing sales impressively but finding it hard to turn a profit.”

The company said it broadly expected the patterns of trading seen in the second half to continue, with profits from the UK business largely being reinvested in its European operations. Revenue in the European business is expected to have risen 58 per cent in the fourth quarter in local currency.

Mr Wilson said that although European growth suggested that this was a good avenue to pursue given uncertainty about the UK market, it was proving a costly strategy. “Rival Dixons Carphone is much larger and it’s profitable,” he said. “On a price-to-sales ratio, AO World is twice as expensive. No wonder it’s doubling down on its European expansion to deliver the scale required to make its slender margins work.”

John Roberts, who founded the business 17 years ago after a bet at a Conservative club in Bolton, netted about £86 million in the float. He still owns just under 26 per cent of the company. He and Mr Caunce, who holds 12 per cent, participated in the placing.

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