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Online electricals retailer AO World unveils £50mln cash call, says full-year trading in line

AO said brokers Jefferies International and Numis Securities had placed just under 37.8mln new shares, representing around 9% of the company after an accelerated book-build at 132.5p each
Washing machines
AO said it expects full-year group revenue to be around £700mln, up approximately 17% year-on-year

Online electricals retailer AO World PLC (LON:AO.) unveiled a £50mln cash call today as it reported that its full-year trading is anticipated to be in line the company’s expectations.

AO said brokers Jefferies International and Numis Securities had placed just under 37.8mln new shares, representing around 9% of the company after an accelerated book-build at 132.5p each, raising proceeds of £50m before expenses.

Steve Caunce, AO’s chief executive officer, said: “This is our first capital raising since our IPO and the proceeds will support our continued growth and increasing scale as we pursue our proven strategy.”

He added: "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."

In a separate pre-close trading update for the 12 months to March 31, AO said it expects group revenue to be around £700mln, up approximately 17% year-on-year.

The group added that its guidance range for adjusted underlying earnings (EBITDA) was tightened to being flat and a loss of £2.4mln.

AO said revenue in the UK business is expected to be around £629mln, with anticipated own-brand revenue growth of around 16% year on year, and own-brand revenue growth of 10% in the third quarter and expected growth of around 13% in the fourth quarter.

In Europe, revenue is expected to be around £71mln, with expected fourth quarter growth of around 58% in local currency.

Patterns continuing …

Looking ahead, AO said it expects the patterns of trading seen in the second half  to continue into the year ahead, with UK business profits largely being reinvested in its European operations.

It added: “The board continues to be cautious given the uncertain UK economic outlook, currency impacts on supplier pricing and the possible effect on consumer demand.”

In early trading, AO shares shed 2.8%, or 3.9p to 134.0p.

In a note to clients, analysts at Shore Capital downgraded their rating for AO to ‘sell’ from ‘hold’.

They said: “We have previously stated we harbour concerns about the continued downward pressure being applied to estimates, demonstrating weak earnings momentum.

“The shares are currently trading on c75x our existing FY2018 EBITDA expectations. Prior to today, although we held a neutral stance, we indicated that we believed the pendulum swung more towards downside, rather than upside, to the current share price.

“Whilst we applaud management for building a strong consumer proposition, we downgrade our recommendation to a sell, reflecting our concerns”.

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