London Briefing: AO World back in spotlight as shares rise nearly 10%
Online white goods retailer AO World says expansion plans in Germany on track
M&S executive John Dixon: the 26-year M&S veteran was widely seen as a potential successor to chief executive Marc Bolland. He has quit to take on the role of chief executive at another company. Photograph: M&S/PA Wire
Online fridges and washing machines retailer AO World has had a wild ride since it went public a year and a half ago.
Its stunning stock market debut in February 2014 was followed by a shock profits warning and a slump in its overvalued shares.
Along the way its founder, John Roberts, has had some choice words for the City.
Defending the boom and bust of its share price performance following the float, he lashed out at the Square Mile’s short-term investors, saying “they don’t give a shit about me, so I don’t give a shit about them”.
Now saddled with the label “former stock market darling”, AO World, which has about a quarter of the UK electricals market, saw a little of the love rekindled yesterday as its shares leapt almost 10 per cent at one stage following an upbeat trading statement.
Putting it into context, however, that took them to 131p, still well short of the 285p flotation price and a world away from the peak of more than 400p reached in the frenzy of its stock market debut.
The shares were sold on a heady 72 times’ forecast earnings, valuing the business at £1.2 billion despite profits of a mere £8 million.
Roberts himself did little to calm the frenzy surrounding the float in which he cashed in shares worth £500 million, maintaining that, even at £1.2 billion, the business was “still cheap”.
It’s a whole lot cheaper now, of course, but the City remains wary of the shares despite their rapid devaluation.
Behind yesterday’s rise in the price was news of a 6.5 per cent increase in UK revenues in the three months to the end of June and a “strong start” to July.
That was a slowdown on the 14 per cent growth seen in the previous quarter, and below some analysts’ forecasts, but there was relief that the performance wasn’t worse.
The company also said its expansion plans in Germany were proceeding to plan and would be followed by moves into other European markets.
Describing the first quarter as “muted”, Roberts admitted AO had been hit by increased competition from Dixons, which has been going like a train since its merger with Carphone Warehouse.
As part of its fightback, AO is planning its first national television advertising campaign.
Roberts, a former kitchens salesman, founded Appliances Online 15 years ago after a friend he was drinking with in the pub bet him £1 that he wouldn’t break out and build his own business.
He proved his friend wrong. Now Roberts needs to do the same in the City or have AO known forever as the former stock market darling. ***** Marks & Spencer was making the headlines again last week with two major announcements – it will no longer sell Percy Pigs at its tills and there’s to be a new boss of its struggling clothing division.
Customers were more interested in the fate of Percy Pig, the pink, pig-shaped jelly sweets that have acquired cult status since they were introduced by M&S in the mid-1990s.
They have proved an irresistible last-minute temptation to countless shoppers in the checkout queues at M&S but from September customers will have to search the aisles for their favourite sweets along with chocolates and other confectionery. Percy is being removed from the checkouts in an attempt to reduce the nation’s sugar consumption.
In the City, though, it was the fate of M&S executive John Dixon that grabbed the attention.
A 26-year M&S veteran, Dixon headed the struggling clothing division, and was widely seen as a potential successor to chief executive Marc Bolland.
Dixon has quit to take on the role of chief executive at another company – yet to be revealed – and is to be replaced by Steve Rowe, who runs M&S’s successful food side.
He would clearly prefer to leave on a high note, with clothing showing real signs of improvement after years of falling sales. He has now decided that his head of food is the man to bring about that long-awaited recovery.
But, for Rowe, it’s a double-edged sword: if he succeeds in turning around clothing he’ll be a shoo-in to take the top job when Bolland departs. But if he fails his chances of moving into the chief executive’s office will be over too.
Fiona Walsh is business editor of theguardian.com