AO.com - 7 things to know before you buy shares in the UK online retailer
1) AO World - better known as AO.com - started as a bet between two mates in the pub back in 2000 - the wager was for £1 that founder John Roberts - who went on to become a multi-millionaire - wouldn't start his own business.
2) The company floated its shares on the stock market in 2014, with the business being valued at £1.2 billion, yet the business only made an £8m profit giving a valuation akin to what was seen during the dot com bubble. The float came with more controversy as the prospectus was rushed out giving little time to digest the detail and much of the valuation was based on customers buying extended warranties with their new microwaves and refrigerators.
3) A week after the float, shares hit an all time high of 377p and have been in a steady decline ever since, now trading at barely one third of that price
4) This week, AO World reported losses for the full year of £12m, despite revenues rising by 17% to over £700m
5) A venture into Europe - which needed a further £50m investment from shareholders - is being seen as to blame for the losses, but will this move into the continent be the company’s salvation?
6) The UK’s consumer economy is now facing a slow down as rising inflation, stagnant wages and increasing uncertainty over what Brexit might hold is giving little incentive to upgrade to the latest 4K ultra HD TV.
7) The company pursued a customer-first approach to its operations, which seems rare for the sector. Ultimately if consumers aren’t willing to pay a premium for better service, can businesses like this expect to succeed?