AO.com founder makes £86m as white goods retailer floats on stock …
A former kitchen salesman made £86m selling part of an online white goods company he started for a bet in Bolton pub on Christmas Eve 14 years ago – and he still has a stake worth more than £440m.
John Roberts, 40, was moaning to a friend that he wanted to quit his job as a salesman at Moben Kitchens and start his own business. His friend Alan Latchford, who went on to become a co-founder, bet him £1 he wouldn’t get round to starting the firm.
The company AO.com, which sells fridges, freezers, washing machines, tumble dryers and other household appliances online, floated on the stock market on Wednesday. The shares soared by more than 33%, valuing the business at nearly £1.6bn.
At that price AO.com is worth more than Home Retail Group, which owns the Argos and Homebase chains, and is likely to make it into the FTSE 250 at the next reshuffle in June – even though it made profits last year of less than £7m.
Roberts, 40, cashed in 10% of shares giving him an £86m payday. He still owns 28.6% of the company, worth about £442m. The finance director, Steve Caunce, owns 13.6% of the shares worth more than £200m. Other directors own 17.1%.
Roberts, who “wasn’t very academic at school” and left without any qualifications to work in a kitchen distribution warehouse, said he was “delighted” the float had been so well received by investors. “They have understood our business model and our potential. We welcome them as shareholders,” he said.
The shares, which floated at 285p, soared above 400p before closing at 378p. It is the biggest first-day rise of any initial public offering (IPO) in London since Royal Mail shares soared by 38% on their debut in October.
Some analysts warned that the high valuation, which works out more than five times its sales, is reminiscent of the dotcom bubble, which saw the value of technology companies soar in the late 1990s before crashing when the bubble burst in 2001.
Nick Bubb, a veteran independent retail analyst, said the company’s valuation “seems somewhat excessive”.
“AO’s excellent customer service has clearly excited investors, but AO has yet to prove that its recent success is sustainable or show that it can grow outside the UK,” he said. “It still has to compete in the UK with mighty Amazon, as well as the ‘multi-channel’ presence of Dixons, and it has yet to move into Europe.”
AO, which made sales of £275m last year, said it will spend the £41m it made from the share sale to fund its expansion into Europe.
Roberts has promised investors he will set up infrastructure, such as a warehouse and delivery network, to launch in Germany within 12 months of listing. Caunce said the firm’s ambition is to become “the leading electricals retailer across Europe”.
The company, which was originally called Appliances Online, was started as a bet. “Like all the best businesses, it started in the pub. It was Christmas Eve and I was having a drink with Alan Latchford, who is the L of [Ao.com’s parent company] DRL. He bet me a pound I wouldn’t do it,” Roberts told Retail Week.
Roberts said he hadn’t heard of the internet when he started the company but Latchford had, and he was tasked with building the website before New Year’s Eve.
Roberts credits the company’s success with its relentless focus on customer service. Call centre staff have the autonomy to despatch a new product on the day that customer call up with a complaint and can send a bunch of flowers without seeking a supervisor’s approval.
Staff are rewarded with intra-office table tennis tournaments, gym membership for £2 a month and free chocolates and crisps. Roberts said free crisps cost the company £50,000 last year.
Despite his new wealth, Roberts has committed to staying with the company. “We are not taking profits and running for the hills or refinancing our balance sheet to pay off debts,” he said this month. I’m not going anywhere and there is passion and energy in this business. It is like my sixth child.”
AO has signed up Brian McBride, the chairman of online fashion retailer ASOS, as a senior non-executive in a bid to replicate the success of the web clothing business, which has seen its shares rise 2,000% in the past five years.
Excerpt from:
AO.com founder makes £86m as white goods retailer floats on stock …
See which stocks are being affected by Social Media
