Online appliances retailer AO to float on London Stock Exchange …
AO made profits of £8.1m as its sales rose nearly 30% in the year to March 2013
The founder of Appliances Online, who set up the business following a £1 bet in a pub, is set to scoop £400m in cash and shares when the business floats next month.
AO, as the internet-only retailer is now known, is expected to be valued at £1bn – more than three times the valuation placed on it by analysts recently. John Roberts owns nearly 40% of the company, putting him in line for a windfall of around £400m whan AO lists on the London stock market.
The firm is at the head of a queue of as many as 15 British retailers expected to float this year with a total valuation of around £8bn. Convenience store retailer McColl’s confirmed plans for an initila public offering last week while Pets at Home and Poundland are expected to reveal their plans within a fortnight. The businesses are hoping to cash in on a surge in the equity valuations of retailers amid hopes of a recovery in the consumer economy and investors’ new supply of cash from multimillion pound payouts from the likes of Vodafone.
AO has signed up Brian McBride, 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.
The kitchen appliance website, which was founded in 2000 by Roberts, wants to raise about £60m from issuing new shares while existing shareholders, led by Roberts and his management team, will also sell stock.
Roberts said: “We are recognised as a stand out competitor within the IPO queue. We are not the product of private equity deal. We are not taking profits and running for the hills or refinancing our balance sheet to pay off debts. I’m not going anywhere and there is passion and energy in this business. It is like my sixth child.”
The new funds raised will go towards enhancing the online retailer’s services, extending from washing machines, fridges and cookers into new markets such as TVs and small electrical appliances like kettles and toasters as well as expansion into Europe. The company has promised investors it will set up infrastructure, such as a warehouse and delivery network, to launch in Germany within 12 months of listing.
AO’s finance director, Stephen Caunce, said: “Our ambition is to be the leading electricals retailer across Europe.”
AO has had a significant impact on the UK’s electricals market in recent few years as it has stepped into a gap left by US online giant Amazon, which does not sell large kitchen appliances, to attack high street chains such as Currys. In the year to March 2013, AO’s sales rose nearly 30% to £275m and it achieved profits of £8.1m.
The etailer says it controls nearly a quarter of all online sales of major domestic appliances in the UK and expects that market to grow by 11% annually between 2013 and 2016. While city investors are keen to get their hands on another fast growing internet retailer, independent retail analyst Nick Bubb said AO was quite a different proposition to ASOS.
“White goods are obviously low margin products, compared to fashion, and it’s hard to see that the business can ever make that much money, despite its excellent customer service reputation,” he said.
Meanwhile, AO’s plan to sell more small kitchen appliances and TVs puts it in direct competition with Amazon as well as major supermarkets and Dixons, which owns the PC World and Currys chains. AO’s capability to set up overseas is also unproven.
But Roberts said: “The market is unquestionably moving on-line. Online is where all the growth is the only growth are of the electricals market.”
He said AO had been able to grow quickly by offering the best prices, but also by offering superior service which had won it more fans than the much larger Tesco on social media site Facebook. “We are not only a price story. We deliver an outstanding level of service not matched by anyone else in our market,” Roberts said.
Original article:
Online appliances retailer AO to float on London Stock Exchange …
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