City round-up: AO World; Sosandar; Co-op Bank; Supreme

Bolton-based online electrical goods retailer, AO World, has “a Morecambe and Wise summer sales period”, said CEO John Roberts, reporting today’s interim results for the six months to September 30, 2024.

He explained the group had sold “all the right volumes just not in the right categories”.

Revenues rose from £481.7m to £512.1m, pre-tax profits improved, increasing from £13.2m to £16.2m, free cashflow showed a 320% improvement, from £3m to £14m and net funds jumped 147% from £16m to £38m.

During the six month period the group also increased and extended its Revolving Credit Facility with the total facility rising from £80m to £120m and now expiring in October 2028.

The group’s current year guidance is an upgrade in the adjusted profit before tax to between £39m and £44m, group revenue of £1.09bn to £1.13bn, with growth approximately 10% in B2C Retail, and a capital expenditure of around £11m.

It said following the Budget last month its estimate of the annual impact is an additional circa £4m of direct costs but, including indirect costs where the impact remains to be seen, this will likely be more than £8m. It said it will work hard to mitigate the impact of this to overall profitability.

John Roberts said: “I’m delighted to report another successful six months for AO during which our main B2C Retail business has returned to double digit growth alongside making more progress towards our medium term ambition of delivering a PBT margin of over 5%.

“We’ve had a Morecambe and Wise summer sales period; all the right volumes just not in the right categories. The wet summer weather meant we sold fewer fridges and air conditioning units and more tumble driers than we had planned. Overall, our team did a fantastic job to play this out as a satisfying score draw.

“We also made good progress beyond our core MDA category, and I’m very encouraged with how our customers and members are responding to our improved range and value proposition in newer categories.”

He added: “Our laser focus on costs and efficiency remains which ensures, as planned, that profit grew faster than sales on the growth we’ve delivered.

“Reflecting our truly world class customer service, AO.com has now surpassed 600,000 Trustpilot reviews with an overall score of 4.8 out of five. We’re also giving our members even more reasons to shop with us.

“None of this has happened by accident and I’m grateful to the entire AO team, our suppliers and partners for their continued support and hard work.

“We’re now well into peak trading with customers responding positively to the thousands of unbeatable deals we’re offering for the Black Friday period.”

Dan Coatsworth, investment analyst at Manchester investment platform, AJ Bell, said: “AO reported decent growth in a somewhat uneven first-half results which, nonetheless, included modest upgrades to full-year guidance.

“The company has made progress in areas like cash generation and has kept a lid on costs – although some of this progress could be undone by the changes to employer National Insurance contributions and the National Living Wage in the UK Budget.

“After a rollercoaster ride for shareholders since AO joined the stock market more than a decade ago, which took in the highs of post-pandemic demand and the lows of unsuccessful overseas ventures, investors want to see evidence of stability.

“Today’s numbers come ahead of the completion of the musicMagpie acquisition which boosts its ESG credentials via greater recycling activities and expands its footprint in areas like mobile.

“The market will be watching closely if this is a step too far outside its comfort zone – or an opportunity to bring its logistics capabilities to the table to help make this business a real asset.”

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Sosandar

Sosandar, the Cheshire-based women’s fashion brand, cut its half year losses, despite a fall in revenues in the six months to September 30, 2024, as it continued to transition away from price promotional activity outside the major scheduled sale events, it revealed today.

Turnover dropped from £22.163m to £16.187m, while a pre-tax loss of £659,000 was compared with a £1.35m pre-tax loss the previous year.

Sosandar opened its first four physical stores in the UK during the period, as it continues to further expand its multiple routes to market.

It said the stores have strong footfall and conversion, and has seen circa 65% of purchases in store being made by brand new customers.

Trading in the second half of the financial year has been in line with full year market expectations which, for the year ending March 31, 2025, it believes are currently revenue of £40.5m and profit before tax of £1.0m.

Co-CEOs and founders, Ali Hall and Julie Lavington, said: “The past six months have been incredibly important steps in Sosandar’s development.

“We are now well on our way to becoming a true multichannel retailer following the opening of our first four stores during the half. Seeing the Sosandar brand on high streets, and the reaction we have received so far, validates our decision to give our customers more ways to shop with our brand.

“Post period end we signed an agreement with NEXT for our brand to be licensed to develop a homeware range, providing further validation of the strength of the Sosandar brand.

“This shows the leverage and brand equity that we have built and will allow us to broaden our reach into new audiences and enable existing customers to deepen their affinity to our brand.”

They added: “Trading in the second half of the financial year to date has been encouraging, across all our channels, as we head into peak season. In the lead up to Christmas we have seen extremely strong sales of occasionwear, knitwear, including knitted dresses, and denim.

“Looking ahead, we remain incredibly excited for what lies ahead for Sosandar as we take advantage of the multiple opportunities available to us, and we take the Sosandar brand to more customers across the UK and worldwide and continue on our journey to become one of the largest womenswear brands globally.”

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Co-operative Bank chief executive Nick Slape

Manchester-based Co-op Bank unveiled third quarter figures today. Last March it announced a £780m takeover by Coventry Building Society.

The bank said today that its trading performance has been robust with a significant surplus to all capital and liquidity requirements.

It reported strong wholesale market activity with a benchmark £500m three-year covered bond issued and £200m MREL-senior capital refinanced.

The board of The Co-operative Bank Holdings has approved an interim dividend of 0.996774p per class A ordinary share for the year ended December 31, 2024, to be paid on November 28, 2024, returning £90m to shareholders.

Chief executive, Nick Slape, said: “I am very pleased with the bank’s momentum; net mortgage balances have increased by 2% and SME net lending balances were up by 16% since FY 2023, with total customer deposits up 1% in the same period.

“Current account net switch-outs are c70% lower than at this time last year and we are on track to end the year with a net positive switch position for the first time in several years following our proposition success.”

He added: “I am also delighted with our strong wholesale market activity, with a new £500m three-year covered bond issuance and the successful early refinance of £200m MREL-senior capital, both attracting very strong demand from investors.

“These transactions are both underpinned by our return to an investment grade credit rating from Moody’s of Baa3, and highlight the continued confidence in the long term strategy of the bank.

“We have focussed on delivering shareholder value; our shareholders have patiently supported the bank in its turnaround and, following the continued profitability and successful normalisation of capital requirements, I am delighted that the board was able to declare an interim dividend which returns value ahead of the expected completion of the sale of the bank to Coventry Building Society in Q1 2025.

“The bank is in a strong position, maintaining a resilient, low risk balance sheet and sustained credit quality.”

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Supreme chief executive Sandy Chadha

Consumer goods manufacturer and vaping specialist Supreme made pre-tax profits of £12.9m in the half year to 30 September 2024.

On revenues of £113m the Manchester headquartered business also said it is “currently pursuing a buoyant and diverse M&A pipeline” and says revenue and profits for the year ending 31 March 2025 will exceed previous guidance of £240 million in revenue and adjusted EBITDA of £37 million.

However, the business is rapidly diversifying its business in expectation of a clampdown on disposable vaping products.

In the half year the business acquired Clearly Drinks, a UK manufacturer and brand owner of specialised canned and bottled-at-source spring water and soft drinks, for £15.6 million.

The acquisition is expected to generate around £3.5 million of annualised incremental EBITDA and will provide cross-sell opportunities alongside the Sports Nutrition & Wellness division.

Non-vape annualised revenue now exceeds £100 million (around 45% of Group revenue).

The company has also relocated its administrative headquarters to ‘Ark’ in the last year, alongside its warehouse, which it describes as “the final phase of the relocation plan”.

Chief executive Sandy Chadha said: “We have experienced steady growth across our categories whilst seamlessly diversifying our portfolio through the acquisition of Clearly Drinks. Adding well-recognised and trusted brands into Supreme’s unrivalled distribution network across UK retail is central to our long-term growth strategy, and this acquisition reaffirms our ability to identify and execute quickly on M&A opportunities.

“The strength of our strategy and the proactivity of our teams means we are well-positioned for upcoming changes in the UK vaping sector. Non-disposable vapes account for the majority of our vaping revenue, and we continue to report growth in 10ml e-liquid refills.

“Looking forward, we are expecting trading to be ahead of market expectations for the current financial year and the Board is confident that Supreme is well positioned to deliver ongoing profit growth and shareholder value.”