City round-up: AO World: Norcros; Science in Sport
Bolton-based online electricals retailer, AO World, is to close its German business following a strategic review announced in January.
The move could cost the group up to £15m. It has not revealed how many jobs will be lost through the closure.
Its review was launched, it said, as a result of material changes to the local trading environment which have significantly impacted the German business over the past year.
These included an intensifying competitive landscape, as customers have returned to pre-pandemic levels of online shopping, a substantial increase in digital marketing costs, and a constrained supply chain.
AO said the decision was based on the continuing deterioration in the outlook for the German business, as well as the board’s responsibilities to shareholders and other stakeholders.
The business, which AO launched in 2014, will continue to trade for a brief period to facilitate a structured and orderly closure for its customers, suppliers and employees.
The German operation currently represents around 10% of AO’s total group revenue.
AO said it will now increase its focus on its leading online position in the UK electricals market and optimising the group’s profit and cash generation potential. It said, given the strength and scale of the AO business model, its market leading, consistently high levels of customer satisfaction, and the structural market trends towards online retailing, the group continues to have confidence in both its strategy and its long term prospects.
It added that, while remaining mindful of the uncertain macroeconomic context in the UK and the continuing global supply chain challenges, the group’s UK business continues to trade in line with the board’s expectations for financial year 2023.
In April AO’s share price dropped 15% after it warned of lower sales in a market update, continuing a torrid 15 months that has seen more than 80% wiped off the company’s value from its peak at the start of 2021.
It’s 52-week high saw shares priced at 262.80p per share, while its 52-week low mark was a price of 64.7p per share. It closed trading yesterday (June 8) at 74.10p per share, valuing the business at £356.07m.
When trading opened this morning the share price fell by 0.75p to 72.70p, valuing the company at £348.61m. By 9.30am the share price was 71p, a 3.07% drop, valuing the company at £340.6m.
Russ Mould, investment director at Manchester investment platform AJ Bell, said: “When AO declared ‘AO, let’s go’, one would have presumed it was talking about going places, but that’s not quite the case. AO has thrown in the towel with its struggling German business, ending a long period of pain.
“For years it has declared ambitions to replicate its UK success overseas, providing big growth opportunities. But a highly competitive marketplace has defeated AO and it’s now shutting up shop in Germany.
“AO’s future now depends on greater success in the UK, which will be very hard to achieve. Its proposition is appealing to consumers – competitive prices and good service levels. But the problem is that it makes such a tiny margin that simply shifting boxes from A to B will not create a business empire for AO. It is going to need to pull a bigger rabbit out of the hat to thrive.”
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Wilmslow-based bathroom and kitchen supplies group, Norcros, reported a strong year’s trading today, with revenues and pre-tax profits increasing, and a rise in the total dividend payment.
Sales of £396.3m in the year to March 31, 2022, compared with £324.2m, while pre-tax profits of £33m were up from £18.5m the previous year. A total dividend payment of 10.0p per share is recommended, up from 8.2p in 2021, a 21.9% increase on the previous year in line with the growth in earnings.
The group said it took decisive action taken to counter unprecedented cost inflation and supply chain challenges during the year.
It has underlying net cash of £8.6m (2021: net cash of £10.5m). Its acquisition of Grant Westfield, worth up to £92m, completed after the year end, which it described as a compelling strategic fit with the group.
In current trading, group revenue in the two months to the end of May 2022 was marginally ahead of the strong prior year comparator by approximately one per cent and significantly ahead of the pre-pandemic comparator of the two months ended May 2019 by approximately 25%.
While market conditions are likely to remain uncertain, the board believes that the group’s proven business model and leading customer service proposition will continue to drive outperformance leading to further progress and market share gains, in line with its expectations, for the year to March 31, 2023.
Chair, Gary Kennedy , said: “I am pleased to report a record performance for the group. Norcros has continued its recovery following the period of exceptional global disruption and uncertainty caused by the COVID-19 pandemic.
“Furthermore, the resilience of the group’s business model and strategy has proven once again to be highly effective through a period of unprecedented cost inflation and supply chain challenges.”
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Science in Sport
Performance nutrition company Science in Sport, which has a manufacturing base in Nelson, East Lancashire, and a new operation in Blackburn, announced the departure of its CFO, James Simpson today.
The business said he has resigned to take up a position as CFO in a privately held business.
He will remain as a director of the company and CFO until September 2022.
The Science in Sport board said it would like to thank him for his significant contribution to the growth of the business as CFO and wishes him well in his new role.
The search for a new CFO is under way, and a further update will be issued when appropriate.
