AO WORLD PLC INTERIM RESULTS FOR THE 6 MONTHS ENDED 30 SEPTEMBER 2014

Transcription

1 AO WORLD PLC INTERIM RESULTS FOR THE 6 MONTHS ENDED 30 SEPTEMBER AO World plc, the United Kingdom s leading online retailer of major domestic appliances, today announces its unaudited financial results for the six months. Financial Highlights 1 AO Website revenue up 38.6% to 173.7m (2013: 125.3m) Total revenue up 25.1% to 217.1m (2013: 173.5m) Adjusted EBITDA 2 up 115% to 7.3m (2013: 3.4m) Adjusted EBITDA margin increased to 3.4% (2013: 2%); 9% EBITDA on incremental sales Adjusted Operating Profit 3 up 134% to 5.5m (2013: 2.4m) Operating Profit for the period 0.9m (2013: 2.4m) after German set up costs of 3.3m and Long Term Incentive Plan costs of 1.3m (2013: nil) Overall number of completed orders 4 up 30% to 0.61m (2013: 0.47m) Operational Highlights Launched our AudioVisual ( AV ) category in May Launched ao.de, our German website six months ahead of schedule on 1st October with first customer deliveries on 14th October Commenting on today s statement, John Roberts, Chief Executive Officer said: I am pleased to report another period of strong trading in the UK. AO.com sales are up by 38.6% as our brand recognition grows and we continue to make our customers happy. Overall sales are up by 25.1%, in line with expectations. Adjusted EBITDA has also seen a significant jump, increasing more than twofold in the first six months compared to last year, reflecting our ability to deliver profitable sales growth. 1 The highlights are for the period and the comparative 2013 period. 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 Adjusted EBITDA is defined by the Group as profit/loss before tax, depreciation, amortisation, net finance costs, Adjustments and exceptional items. Adjustments is defined by the Group as setup costs relating to overseas expansion and share based payment charges attributable to the LTIP IPO award which the board considers one off in nature. See adjustments section of Financial Review and Note 4 to this interim financial information. 3 Adjusted Operating Profit is defined by the Group as profit/loss before tax, net finance costs, Adjustments and exceptional items but after depreciation and amortisation. Adjustments is defined by the Group as setup costs relating to overseas expansion and share based payment charges attributable to the LTIP IPO award which the board considers one off in nature. 4 Number of orders refers to the total number of retail orders across AO and third party retail websites. 1

2 The UK growth was delivered at the same time as management resource was also focused on launching our proposition in Germany, which we achieved in October some six months earlier than promised. This launch has given us confidence in our ability to replicate our model overseas. While this accelerated investment has brought forward our associated setup costs for the period, our focus is on the longterm as we proceed with our strategy to deliver a marketleading proposition in new categories and countries. Although Germany has only been operating a number of weeks, we are delighted with the way our culture has transferred, with the way it s operating and with the way sales are building. Trading for the second half of this financial year has started well. We have recently launched consumer finance in the UK allowing us to reach a wider range of customers and we continue to broaden our service proposition and product range. We remain confident of meeting full year expectations and are well positioned as we move into our peak trading period. Webcast details A results presentation hosted by John Roberts and Steve Caunce for analysts and investors will be held today, 25 November at 8:45am (GMT) at Instinctif Partner s office 65 Gresham Street London EC2V 7NQ. Please register your attendance in advance with Instinctif Partners using the details below. A webcast of the presentation will be available to watch live and later in the day at where the results presentation can be viewed. 1 For further information, please contact: AO World plc +44(0) John Roberts Steve Caunce Instinctif Partners Matthew Smallwood Guy Scarborough Justine Warren +44(0) Cautionary statement This Interim Management Report (IMR) has been prepared solely to provide additional information to shareholders to assess the Group s strategies and the potential for those strategies to succeed. The IMR should not be relied upon by any other party or for any other purpose. This IMR contains certain forwardlooking 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. No undertaking is given to update the forwardlooking 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. The IMR 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. 1 The content of the ao.com website should not be considered to form a part of or be incorporated into this announcement. 2

3 PERFORMANCE AT A GLANCE Summary Results 1 Income Statement Six months 2013 Change Year 31 March AO Website sales 173.7m 125.3m +38.6% 287.1m Thirdparty website sales 34.1m 38.3m 11.0% 79.3m Thirdparty logistics services 9.3m 9.9m 6.1% 18.5m Revenue 217.1m 173.5m +25.1% 384.9m Adjusted EBITDA 2 7.3m 3.4m 115.0% 11.2m Adjusted EBITDA margin 3 3.4% 2.0% +1.4ppts 2.9% Adjusted operating profit 4 5.5m 2.4m % 8.4m Exceptional items 5 IPO costs ( 15.4m) Adjustments 6 Germany setup costs 7 ( 3.3m) Sharebased payment 8 charge ( 1.3m) ( 0.2m) Operating profit/(loss) 0.9m 2.4m 61.3% ( 7.2m) Earnings/(loss) per share Adjusted EPS p 0.40p % 1.50p Basic earnings/(loss) per share 0.12p 0.40p 70.8% (2.38p) Cash flow Cash generated/(absorbed) from operating activities 3.5m ( 4.8m) % 13.6m Cash generated/(absorbed) from operating activities 5.5m ( 4.8m) % 13.6m (before Adjustments) Period end net funds/(debt) 10 position 43.9m ( 4.0m) % 48.7m 1 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 Adjusted EBITDA is defined by the Group as profit/loss before tax, depreciation, amortisation, net finance costs, Adjustments and exceptional items. See Note 4 to this interim financial information. 3 Adjusted EBITDA margin is defined as Adjusted EBITDA divided by Revenue. 4 Adjusted operating profit is defined by the Group as profit/loss before tax, net finance costs, Adjustments and exceptional items but after depreciation and amortisation. 5 Exceptional items of 15.4m relating to IPO costs incurred during the year 31 March. 6 Adjustments is defined by the Group as setup costs relating to overseas expansion and share based payment charges attributable to the LTIP IPO award that the board considers oneoff in nature. 7 Includes Germany setup costs incurred by Group entities trading in the UK and trading in Germany. 8 Share based payment charges attributable to the LTIP IPO award which the board considers one off in nature. 9 Adjusted Earnings Per Share is Basic Earnings Per Share excluding Adjustments, exceptional items and the associated tax impact. 10 Net funds are defined as cash as per the consolidated statement of financial position less borrowings. 3

4 GROUP RESULTS The Group has made an encouraging first half to the year, delivering strong sales growth overall driven by ownbrand web site sales. AO.com sales have increased by 38.6% over the reporting period to 173.7m (2013: 125.3m). Overall revenue has grown by 25.1% to 217.1m (2013: 173.5m) driven by higher order volumes. Third party website sales have fallen slightly year on year as, in line with our strategy, we focus more upon our own AO.com channel. Third party logistics sales were slightly down year on year. Adjusted EBITDA increased more than twofold to 7.3m (2013: 3.4m) yielding an Adjusted EBITDA margin of 3.4% for the reporting period (2013: 2.0%). The growth in Adjusted EBITDA margin demonstrates our ability to leverage Selling, General and Administrative SG&A costs as we grow, and in the period we have delivered 9.0% Adjusted EBITDA margin on our incremental sales. Similarly, Adjusted Operating Profit for the period (which excludes Adjustments) increased significantly to 5.5m (2013: 2.4m). The Group s cash generated from operating activities was a cash inflow of 3.5m (2013: 4.8m outflow). The difference between this and Adjusted EBITDA results from Germany setup costs 2m, and other working capital improvements net of capital expenditure 1.8m. In May we added a new category to our retail proposition with Audio Visual AV and we now additionally offer televisions, sound systems and ancillary equipment to our customers. In doing this, we have developed our relationships with our existing brand partners who operate in this category and have built new relationships to broaden our range. The market for AV is significant and we re expanding our internal expertise to capitalise on this. We are continuing to learn and develop the small domestic appliance category and expect to drive increased volumes in the next financial year. In October we took the first steps in our international expansion strategy, launching ao.de. Initially, the German offering will concentrate solely on the MDA category (major domestic appliances) as we learn about customer preferences and the German market. The operating model has been replicated from the UK and the German operation is now fully up and running. We have invested in end to end resource including head office, warehouse and outbase infrastructure and our own last mile delivery capability to offer next day delivery to the majority of customers and to completely control the customer experience as has been successful in the UK. Customer feedback has been extremely positive and the levels of traffic to the site are most encouraging; initial volumes were kept intentionally low to ensure we could deliver to promise, but now we have demonstrated operational effectiveness we are allowing sales to build. We are now in a position to accelerate the drive for sales and are taking necessary steps to facilitate growth. STRATEGY AND OUTLOOK Our strategy remains consistent to Build, Drive, Broaden and Expand our business whilst redefining retailing in our chosen categories; by offering unbeatable prices, range and availability and delivering amazing service to customers. The various aspects of the business are all at different phases of this strategy but we are executing it well and in good shape to deliver. We aim to continue to build new operations overseas, but always safely and steadily; to drive up sales in our existing categories and broaden our offering by adding complementary categories and services to existing operations. Trading for the second half of this financial year has started well. We have launched consumer finance on AO.com which allows us to address a different demographic of customer. There has been the usual seasonal increase in sales in October as we approach our peak trading period and results for the UK business for the full year remain in line with market expectation. Whilst the German operation has only been fully live for a number of weeks, we are pleased with the way it is operating and can now really drive sales. This all gives us much confidence for the future opportunity in Europe. Our earlier than anticipated entry to the German market has brought forward set up costs for that entity into HY15. German trading losses, as we build critical mass in the second half of the year, will reduce our overall operating profit for the full year. 4

5 BUSINESS REVIEW Operational Review Customer Acquisition & Brand We revisited national television advertising in the first quarter of the financial year rolling out three adverts focussed on our delivery capabilities, our unbeatable prices and our rich website content specifically our video reviews. These were well received and helped to drive sales. Going into the second quarter we decided to delay some TV advertising originally planned for that quarter to the third quarter, to achieve a better return on investment. Facebook likes are now in excess of 1.6m and our brand team continues to evolve our social media content to enhance brand perception. Our advertising and marketing costs, as a percentage of sales, were down compared to the prior year at 3.6% (2013: 4.4%) mainly due to delayed TV advertising and improvement in brand awareness. Customer Service & Proposition Delivering an excellent customer proposition and great service remains paramount to our success. We are pleased to be able to report that, notwithstanding the significant increase in orders, we maintained an exceptional deliver to promise percentage rate. We are well prepared for peak trading in the run up to Christmas and our delivery capability and delivery options remain marketleading. Our dedication to our customer proposition has been recognised by the industry and we are pleased to have won four awards at the Etail Awards, including Overall Award for Excellence and four awards at the ecommerce Awards for Excellence including Large ecommerce Retailer of the Year. Culture We consistently state that culture is at the heart of everything we do and continues to be core to our success. Happy employees means productive employees driving better results for the business and, importantly, such happiness and energy permeates through our interactions with customers (whether it be face to face, over the phone, through our advertising or purely through the design of our website). Over the reporting period we ve launched a Group wide intranet, which has helped individuals to connect with each other, share ideas and learnings and update each other on progress across different areas of the business. It has helped to reaffirm the culture in our UK operations and to instil it in our new overseas colleagues. There have also been some incredible examples of people going the extra mile to help our German colleagues find their feet and learn processes and strategies and we are delighted with the way our culture has transferred to our new territory. 5

6 Financial Review Revenue For the six months total revenue for the year increased by 25.1% to 217.1m (2013: 173.5m) with AO.com sales increasing by 38.6% to 173.7m (2013: 125.3m) Six months ( m) 2013 Change AO Website Sales % Thirdparty Website Sales % Thirdparty Logistics Services % Revenue % Revenue derived from AO.com sales grew by 38.6% over the reporting period to 173.7m (2013: 125.3m). We continue to enhance and enrich the content and grow the brand. The total number of completed orders grew by 30% over the reporting period to 607k (2013: 466k) with products per order and average order value remaining broadly the same. Third party website sales were slightly down year on year at 34.1m (2013: 38.3m) as the Group focuses less on third party consumerfacing website sales. Some of the lost third party sales are likely to have been consumed by AO.com as our own brand gains more visibility. Third party logistics sales also fell by 6% to 9.3m (2013: 9.9m) as we annualised the loss of a customer in September Gross Margin Gross margin decreased marginally by 0.4 percentage points to 18.8% (2013: 19.2%) with the cost of sales increasing by 25.6% compared to the overall revenue growth of 25.1%. The majority of this variance is due to the mix of AV sales in the period at a lower margin. 6

7 Administrative Expenses Total Administrative expenses for the six months to (excluding Germany setup costs) increased to 36.7m (2013: 30.9m) but as a percentage of revenue improved to 16.9% (2013: 17.8%). Six months ( m) 2013 Change Advertising and marketing % % of sales ppts Warehousing % % of sales Other Admin % % of sales ppts Administrative Expenses % % of sales ppts Deduct Adjustments: Germany setup costs 1 (3.3) Share based payment charge 2 (1.3) Administrative Expenses net of Adjustments % % of sales ppts Advertising and marketing costs increased by 3.7% to 7.9m in the period. The advertising cost on our incremental sales was lower than forecast, as we delayed TV advertising costs in to the third quarter. Warehousing costs (excluding German warehouse set up costs of 0.2m) increased to 7.9m delivering an increase of 1.3m on the prior period, or 3% cost on incremental sales. Other administration costs for the period were 24.0m, an increase of 7.3m on the same period last year. Included within this are 3.1m of costs relating to setting up the German operation and 1.3m relating to the share based payments charge. At a trading level this cost increased by 2.9m year on year. 1 Includes Germany setup costs incurred by Group entities trading in the UK and trading in Germany. 2 Share based payment charges attributable to the LTIP IPO award which the board considers one off in nature (any future LTIP charges will be included in trading numbers). 7

8 Adjusted EBITDA Adjusted EBITDA for the six months to was 7.3m (2013: 3.4m) representing more than a twofold increase against the prior year period. Adjusted EBITDA margin increased from 2.0% to 3.4%. Six months ( m) 2013 Change Operating profit % Add Adjustments 1 : German setup costs 3.3 n/a Noncash share based payments charge 1.3 n/a Adjusted Operating profit % Add: Depreciation and amortisation % Adjusted EBITDA % Adjusted EBITDA as % of sales 3.4% 2.0% +1.4ppts Adjustments Germany setup costs During the reporting period ao.de was launched. The bulk of these costs relate to staffing and services provided by the Group, together with professional fees. Share based payment charges At the time of the IPO a share based payment award was made to a number of senior staff. The board considers that the magnitude and timing of this award is oneoff in nature and so add this charge back to adjusted EBITDA. Any future LTIP charges will be included in trading numbers. Taxation The tax charge for the period was 0.3m (2013: 0.5m). The effective rate of tax for the period was 36.7% (2013: 25.1%). Whilst the business is subject to UK taxes and through its branch structure for Germany is able to fully offset losses, the share based payment charge is disallowable on an accruals basis for corporation tax which results in this higher effective rate. The year in which the scheme matures will see a lower effective tax rate than normal in that year. Loss/earnings per share Earnings per share was 0.12p (2013: 0.40p) and Adjusted Earnings Per Share 2 was 0.95p (2013: 0.40p). Dividend Policy In line with the Group s dividend policy no dividend has been proposed or paid during the period. 1 Adjustments is defined by the Group as setup costs relating to overseas expansion and the share based payment charge relating to the LTIP IPO Award, which the Board considers to be onoff in nature (any future LTIP charges will be included in trading numbers). 2 See Note 6 to this interim financial information. 8

9 Cash resources and cash flow The net funds position at was 43.9m (2013: net debt of 4.0m) ( numbers take into account the net proceeds raised from the issue of new shares in the IPO of 40.3m). Total borrowings including finance leases increased to 6.2m (2013: 5.5m). The Group s cash generated from operating activities was a cash inflow of 3.5m (2013: 4.8m outflow). The difference between this and Adjusted EBITDA results from Germany setup costs 2m, and other working capital improvements net of capital expenditure 1.8m. Working Capital Six months ( m) 2013 Inventories As % of Cost of goods sold 13.2% 12.7% Trade and other receivables As % of Revenue 18.0% 18.4% Trade and other payables (71.6) (50.9) As % of Cost of goods sold 40.7% 36.3% Net Working Capital (9.3) (1.2) Change in Net Working Capital (8.1) n/a As at Inventories were 23.2m (2013: 17.8m) as the Group increased its stockholding days to be able to offer better availability to customers and facilitate our expansion into the audio visual category. Average stock days increased to 20 days (2013: 17 days). Trade and other receivables were 39.1m as at (2013: 31.9m) increasing in line with the increase in turnover. This line includes 21.2m accrued income in relation to product protection plans (2013: 14.7m). Trade and other payables increased to 71.6m (2013: 50.9m) in part due to the general growth in sales but also reflecting improved payment terms with creditors and an increase in stock holding. Capital Expenditure Capital expenditure (net of finance leases) for the period was 2.7m (2013: 2.5m), providing improvements across the Group to infrastructure and systems and fitout costs for the new head office, national distribution centre and outbases in Germany. John Roberts Steve Caunce CEO COO & CFO 25 November 25 November 9

10 CONSOLIDATED INCOME STATEMENT For the six months Note Six months Six months 2013 Year 31 March (audited) Revenue 2 217, , ,918 Cost of sales (176,195) (140,299) (310,741) Gross profit 40,864 33,236 74,177 Administrative expenses (39,950) (30,874) (65,976) Operating profit before exceptional items ,362 8,201 Exceptional items 5 (15,441) Operating profit/(loss) ,362 (7,240) Finance income Finance costs (290) (252) (391) Profit/(loss) before tax 779 2,140 (7,551) Tax (286) (538) (2,022) Profit/(loss) for the period 493 1,602 (9,573) Earnings/(loss) per share (pence/share) Basic and diluted earnings/(loss) per share (in pence per share) (2.38) 10

11 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the six months Six months Six months 2013 Year 31 March (audited) Profit/(loss) for the period 493 1,602 (9,573) Exchange differences on translation of foreign operations 38 Total comprehensive income for the period 531 1,602 (9,573) 11

12 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at Noncurrent assets At At 2013 At 31 March (audited) Intangible assets 13,288 12,767 12,830 Property, plant and equipment 12,872 8,229 11,409 Trade and other receivables 13,613 8,402 11,255 Deferred tax asset ,132 29,593 36,069 Current assets Inventories 23,230 17,793 15,881 Trade and other receivables 25,523 23,538 21,711 Cash and bank balances 50,068 1,452 55,050 98,821 42,783 92,642 Total assets 138,953 72, ,711 Current liabilities Trade and other payables (71,647) (50,902) (62,918) Current tax liabilities (322) (1,028) (1,146) Borrowings (2,032) (2,904) (1,996) Provisions (900) (737) (209) (74,901) (55,571) (66,269) Net current assets/(liabilities) 23,920 (12,788) 26,373 Noncurrent liabilities Borrowings (4,183) (2,585) (4,403) Total liabilities (79,084) (58,156) (70,672) Net assets 59,869 14,220 58,039 Equity Share capital 1, ,053 Share premium account 55,665 55,665 Merger reserve 4,368 5,337 4,368 Capital redemption reserve (1,068) (1,068) (1,068) Share based payments reserve 1, Translation reserve 38 Retained (losses)/earnings (1,681) 9,920 (2,174) Total equity 59,869 14,220 58,039 12

13 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months Share capital Merger reserve Capital redemption reserve Translation Reserve Share premium account Retained (losses)/ earnings Share Based Payments Reserve Total Balance at 1 April 2013 Total comprehensive income for the six months 31 5,337 (1,068) Dividends Balance at 30 September ,206 14,506 1,602 1,602 (1,888) (1,888) 31 5,337 (1,068) 9,920 14,220 Share capital Merger reserve Capital redemption reserve Translation Reserve Share premium account Retained (losses)/ earnings Share Based Payments Reserve Total Balance at 1 April 2013 Total comprehensive loss for the year Issue of share capital (net of expenses) Sharebased payments charge 31 5,337 (1,068) 1,022 Dividends Expenses incurred as a result of bonus issue Balance at 31 March (969) 1,053 4,368 (1,068) 10,206 14,506 (9,573) (9,573) 55,665 56, (2,807) (2,807) (969) 55,665 (2,174) ,039 Share capital Merger reserve Capital redemption reserve Translation Reserve Share premium account Retained (losses)/ earnings Share Based Payments Reserve Total Balance at 1 April Total comprehensive income for the six months Sharebased payments charge Balance at 30 September 1,053 4,368 (1,068) 55,665 (2,174) , ,299 1,299 1,053 4,368 (1,068) 38 55,665 (1,681) 1,494 59,869 13

14 CONSOLIDATED STATEMENT OF CASH FLOWS For the six months Six months 30 September Six months 2013 Year 31 March (audited) Cash flows from operating activities Profit/(loss) for the year 493 1,602 (9,573) Adjustments for: Depreciation and amortisation 1,836 1,053 2,796 Finance income (155) (30) (80) Finance costs Taxation charge ,022 Exceptional items 15,441 Share based payment charge 1, Operating cash flows before movement in working capital 4,048 3,415 11,192 Increase in inventories (7,351) (9,085) (7,173) Increase in trade and other receivables (6,174) (5,114) (6,141) Increase in trade and other payables 13,141 6,298 18,314 Increase/(decrease) in provisions 690 (120) (647) 306 (8,021) 4,353 Taxation paid (902) (159) (1,906) Cash generated/(absorbed) from operating activities 3,452 (4,765) 13,639 Cash flows from investing activities Interest received Acquisition of property, plant and equipment (2,187) (2,292) (2,788) Acquisition of intangible assets (550) (221) (493) Cash used in investing activities (2,582) (2,483) (3,201) Cash flows from financing activities Interest paid (290) (252) (391) Repayment of preference shares (1,010) (1,010) Repayment of shareholder loan (20) (269) (Repayment of)/new borrowings (286) 11 (1,627) Payment of finance lease liabilities (928) (351) (1,771) Dividends paid (1,888) (2,807) (Costs settled)/net proceeds from share issue (4,332) 40,277 Net cash (used in)/from financing activities (5,836) (3,510) 32,402 Net (decrease)/increase in cash (4,966) (10,758) 42,840 Cash and cash equivalents at beginning of period 55,050 12,210 12,210 Exchange losses on cash & cash equivalents (16) Cash and cash equivalents at end of period 50,068 1,452 55,050 The accompanying Notes are integral to this financial information. 14

15 NOTES TO THE UNAUDITED FINANCIAL INFORMATION 1. Basis of preparation The interim financial information was approved by the Board on 19 November. The financial information for the 6 months has been reviewed by the Company s external auditor. Their report is included within this announcement. The financial information for the 6 months 2013 has neither been audited nor reviewed by the external auditor. The financial information for the year 31 March has been based on information in the audited financial statements for that period. The comparative figures for the year 31 March are an abridged version of the Group s full financial statements and, together with other financial information contained in these interim results, do not constitute statutory financial statements of the Group as defined in section 434 of the Companies Act A copy of the statutory accounts for the year 31 March has been delivered to the Registrar of Companies. The auditor has reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under s498(2) or (3) of the Companies Act This condensed set of consolidated financial statements has been prepared for the 6 months and the comparative period has been prepared for the 6 month period 30 September Basis of preparation and accounting policies The annual financial statements of AO World plc are prepared in accordance with IFRSs as adopted by the European Union. The unaudited condensed consolidated set of financial statements included in this halfyearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union. The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements. 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. Going concern The directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. This follows a review of the Group s financial projections and takes into consideration the proceeds received from the Group s IPO in March where the Group continues to maintain substantial cash headroom. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements. 2. Revenue An analysis of the Group s revenue is as follows: Six months Six months 2013 Year 31 March (audited) Own website sales 173, , ,109 Thirdparty website sales and trade sales 34,076 38,310 79,323 Thirdparty logistics services 9,295 9,894 18, , , ,918 15

16 3. Segmental Analysis Six months UK Germany Total Segment EBITDA 1 5,169 (2,419) 2,750 Add back Germany setup costs 904 2,419 3,323 Add back Sharebased payment charge 1,271 1,271 ADJUSTED EBITDA 7,344 7,344 IFRS 8 Operating Segments requires operating segments to be determined based on the Group s internal reporting to the Chief Operating Decision Maker in our case the Executive Board. As the Group now operates in two principal geographic regions and based on management and internal reporting structure, it has been determined that the UK and Germany should be presented as separate segments. Given that AO Deutschland does not have a material balance sheet or material sales, full segmental analysis has not been included but will be in the year end annual report. The majority of Germany setup costs have been allocated to the Germany segment. The balance of costs (relating to systems, processes and intellectual property) has remained in the UK segment. 4. Profit/(loss) for the period The Group has calculated Adjusted EBITDA by adding back those material items of income and expense which, because of the nature and expected infrequency of events giving rise to them, merit separate presentation to allow shareholders to better understand the financial performance of the Group in the year. Adjusted EBITDA: Six months Six months 2013 Year 31 March (audited) Operating profit/(loss) 914 2,362 (7,240) Add: Depreciation 1,746 1,012 2,546 Add: Amortisation EBITDA 2,750 3,415 (4,444) Exceptional items IPO cost 15,441 Adjustments Germany setup costs 3,323 Share based payments charge 1, Adjusted EBITDA 7,344 3,415 11,192 1 EBITDA attributable to operating segments. 16

17 5. Exceptional Items Nonrecurring IPO costs In March, AO World plc floated on the London Stock Exchange. Nonrecurring IPO costs totalled 19.7 million in the year 31 March, of which 15.4 million was charged to the income statement and 4.3 million was charged to the share premium account as being directly related to newly issued shares. 6. Earnings/(loss) per share The calculation of the basic and diluted earnings/(loss) per share is based on the following data: Six months Six months 2013 Year 31 March (audited) Earnings/(loss) Earnings/(loss) for the purposes of basic, diluted and adjusted earnings per share being profit/(loss) for the year 493 1,602 (9,573) Exceptional items (net of tax) 15,441 Germany setup costs (net of tax) 2,500 Shared based payment charge (net of deferred tax) 1, Adjusted earnings 4,010 1,602 6,024 Number of shares Number of ordinary shares for the purposes of basic and diluted earnings per share 421,052, ,000, ,672,675 Earnings/(loss) per share (pence/share) Basic and diluted earnings/(loss) per share (in pence per share) (2.38) Adjusted earnings per share (in pence per share) Given the changes in capital structure prior to the IPO, the weighted average number of shares for 2013 is based on the shares in issue immediately pre IPO as per the requirements of IAS 33: Earnings per share. 7. Dividends A dividend was declared on 19 July 2013 totalling 1.9m and a further dividend was declared on 8 November 2013 for 0.9m taking a full dividend for the year March of 2.8m. No dividend has been declared for this period. 8. Taxation The tax charge for the period has been provided at the effective rate of 36.7% (2013: 25.1%) representing the best estimate of the average annual effective tax rate expected for the full year applied to the pre tax income for the six month period. 17

18 9. Principal risks and uncertainties There are a number of potential risks and uncertainties which could have a material impact on the Company s performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. The directors do not consider that the principal risks and uncertainties have changed since the publication of the annual report for the year 31 March. These risks are summarised below, and how the Company seeks to mitigate these risks is set out on pages 32 and 33 of the Annual Report and Accounts which can be found at A summary of the nature of the risks currently faced by the Group is as follows: Risks relating to the effective operation of the business including the dependence on a single national distribution centre, the interdependence of our IT systems, relationships with manufacturers and changes to search engine algorithms; Risks relating to acceptance of our customer proposition including failure of our brand, websites and offering to receive wide acceptance, that consumer acceptance of online retailing of MDAs might not increase, and that European expansion is unsuccessful; Risks relating to people, such as failure to maintain the culture and recruit AO appropriate staff, dependence on executive directors and senior management team, relationships with key suppliers; and Risks relating to regulatory changes, such as changes to EU or UK consumer protection or employment laws. Responsibility Statement We confirm that to the best of our knowledge: The condensed set of financial statements has been prepared in accordance with IAS34 Interim Financial Reporting. The interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year). The interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties transactions and changes therein). The directors of AO World plc are listed on the Group s website: By order of the Board: John Roberts CEO Steve Caunce COO & CFO 25 November 18

19 INDEPENDENT REVIEW REPORT TO AO WORLD PLC We have been engaged by the company to review the condensed set of financial statements in the halfyearly financial report for the six months which comprises the consolidated income statement, consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated statement of cash flows and related Notes 1 to 9. We have read the other information contained in the halfyearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume to anyone other than the company, for our review work, for this report, or for the conclusions we have formed. We have not audited or reviewed the financial information for the period 2013 which has been included for comparative purposes only, and accordingly do not express an opinion thereon. Directors responsibilities The halfyearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the halfyearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom s Financial Conduct Authority. As disclosed in Note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this halfyearly financial report has been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union. Our responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the halfyearly financial report based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the halfyearly financial report for the six months is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom s Financial Conduct Authority. Deloitte LLP Chartered Accountants and Statutory Auditor Manchester, United Kingdom 25 November 19