LIBERUM: ASOS - Strong top-line but questions remain
Revenues grew 20% y/y in the four months to 31st December, well ahead of consensus of +14.4%, which suggests that the focus on improving operations and execution is delivering initial results. However, the uncertainty around the cost of achieving this growth remains. Gross margin declined -170bps vs. consensus -93bps. The shares may do well on the growth pick up but questions remain. Management notes there is much work still to be done and the outlook is unchanged, however we have little detail on what the outlook looks like including the path back to a 4% EBIT margin. Maintain HOLD
23 Jan 20
LIBERUM: UK Small & Mid Cap Dispatches
AFH Financial Group, Video: Technology Outlook, Podcast: Consumer Discretionary Opportunities, The Gym Group
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20 Jan 20
LIBERUM: Morning Comment
AFH Financial Group, Video: Technology Outlook, Podcast: Consumer Discretionary Opportunities, Mining Update, The Gym Group
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20 Jan 20
LIBERUM: Morning Comment
Consumer Discretionary Sector In-Depth, Strategy Quarterly Style Review, Alternative Funds Portfolio 2020, Big Yellow, Clinigen, 4imprint, Judges Scientific, Ten Entertainment, Vertu Motors, Kier Group, Non Standard Finance, Market Highl...
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16 Jan 20
LIBERUM: UK Small & Mid Cap Dispatches
Consumer Discretionary Sector In-Depth, Strategy Quarterly Style Review, Alternative Funds Portfolio 2020, Big Yellow, Clinigen, 4imprint, Judges Scientific, Ten Entertainment, Vertu Motors, Kier Group, Non Standard Finan...
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16 Jan 20
LIBERUM: Consumer Discretionary - Opportunities in a tough market
Early indications from Christmas trading are that overall sales growth was decent, but not as good as hoped for. This leaves many companies unable to offset rising costs and has led to several downgrades.
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16 Jan 20
Cenkos: ASOS Plc - Back on track
ASOS's overseas warehouses have turned the corner in terms of efficiency, which had been undermined by the business's great leap forward in capacity. For what is primarily a distribution business, this is pretty fundamental. Together with the recycling of cost savings from an overdue review of overhead, we expect the circle to become more virtuous, with sales growth accelerating again outside the UK. Without the distraction of issues with the core machinery, management can focus on delivering an own-brand offer which drives participation back towards 50%, from H1's unimpressive 36%. It is from here that the greatest value-add will come over the long term.
22 Oct 19
Improved traffic in Q4 and better efficiencies expected in FY2020
Asos has managed to solve its operational warehousing problems and buoyed up its traffic in Q4. Sales were up 15% in Q4 and 12% in FY19. Total orders placed increased by 14% and the number of active customers was up 10%.
16 Oct 19
Small Cap Feast
Registration document approved for Helios Towers. The Group provides essential network services, flexible infrastructure solutions and reliable power supply to mobile network operators in five African growth economies. Revenue increased 7 per cent. year-on-year to US$191m (H1 2018: US$178m), with Adjusted EBITDA up 15 per cent. year-on-year at US$99m (H1 2018: US$86m) for the six months ended 30 June 2019. Pricing rumoured at 115p to 145p implying valuation of up to $1.8bn. Expected 18 Oct 2019. African Export-Import Bank a supranational financial institution w hose purpose is to facilitate, prom ote and expand intra- and extra- African trade, of its potential intention to publish a registration document, the Bank hereby confirms its intention to proceed with an Initial Public Offering. The GDRs are expected to be admitted to the standard listing segment of the Official List of the FCA and to trading on the Main Market of the LSE.
ASC DEST BOKU BOKU BOKU GTC RRL AUG ARK ARBB LGRS GOOD
16 Oct 19
Preview of full year results
Pureplay fashion retailer ASOS is due to announce its full year results (year to the end of August) on Wednesday 16th October. Following two profit warnings (December 2018 and July 2019) FY2019 has been a difficult year for the company with operational issues causing a collapse in the operating margin (from 4.0% in FY18 to c.1.2% in FY19F). In our view, management must rebuild credibility in its financial guidance and show a clear path that it can recover operating margins over the medium term. There is currently no guidance for FY2020 and so our forecasts come with a health warning. We look for more clarity on the timing of the margin recovery. In our view, there is no guarantee that the operational issues that the company has encountered in both Berlin and Atlanta will be fully resolved ahead of peak trading. We reiterate our SELL rating believing that the risk remains on the downside.
11 Oct 19
LIBERUM: General Retailers - Screening for M&A targets
M&A in the UK consumer space is increasing. We screen for those companies with international earnings and strong forecast cash flows, while also highlighting those where market caps have been hit hard since June 2016.
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12 Sep 19
LIBERUM: General Retailers - Taking stock
Our coverage can be split into three cohorts. Firstly, those that are achieving structural growth, that have a continued positive outlook and have seen no forecast downgrades.
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07 Aug 19
LIBERUM: ASOS - Another significant profits warning; serious questions need answering
ASOS’ Q3 trading update highlights the ongoing issues being faced as the Atlanta and Berlin warehouses ramp up. Sales growth for the FY is now expected to remain at current levels of c.11% (vs our expectation of 15% previously).
18 Jul 19
LIBERUM: Consumer Discretionary - Dealspotting and other news
The uptick in deal activity seen in May has continued into June. Global Fashion Group, Trainline, The RealReal, Chewy and Revolve all successfully listed in their respective markets, raising £1.35bn between them. We hear that Karen Millen is now for sale, among others. Augmented/virtual reality has been a theme, with John Lewis trialing ‘visualise your space’ and ASOS launching a virtual catwalk.
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03 Jul 19
LIBERUM: VIDEO: Consumer Discretionary Online Retailers - Volume III
In these series of videos Liberum's Consumer Discretionary Analysts, Wayne Brown and Tom Musson, look at the online space which offers good value now that intrinsic values are, on average, 1.2x current enterprise values in the market. They highlight deep value at Zooplus, in particular and favour those who optimise their LTV:CAC spreads to drive growth, and where sales retention rates and year 0 churn is improving.
ASC ZO1 BOO
07 Jun 19
Cenkos: ASOS Plc - Plan A heading in the right direction
Our Buy case is simple enough: either Plan A delivers a recovery in EBIT margin, or Plan B will have to be implemented. Today's results showed a recovery in the gross margin in Q2, supporting the view that Plan A will do the job. There is a great deal of potential at ASOS, demonstrated clearly by the consumer reaction to proposition improvements in the US which overwhelmed the warehouse. There is also a good deal of operational risk; H1 offered a laundry list of issues and errors which are being addressed. The good news is that success is largely in the company's hands.
11 Apr 19
LIBERUM: Consumer Discretionary: Retail - IFRS 16 – Deep dive and impact
IFRS 16 is due to be implemented for annual reporting periods on or after 1 January 2019. While it is a non-cash adjustment, it could impact how investors assess Retail companies.
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11 Apr 19
Profits below estimates in H1 19 while guidance maintained
Asos has missed its estimates but maintained its guidance unchanged. PBT was down 87% to £4m. A long list of mistakes has torn down sales, including the under-estimate of the staffing required in the Atlanta warehouse, the cut in marketing investments in Europe and an inappropriate assortment of Asos designs. However, management was confident about restoring growth and margins in the mid-term. Also, it confirmed it should be able to generate positive cash flow in FY20.
10 Apr 19
Interim results preview
Pureplay fast fashion brand ASOS is due to announce its interim results on Wednesday 10th April 2019. Back in December 2018 ASOS surprised the market with a significant profit warning which saw sales guidance realigned downwards, but perhaps more importantly was the halving of the operating margin guidance to 2.0% in FY2019F. We last heard from the company in mid-March with their H1 post-close trading update, which highlighted sales growth of 14% during the first six months. That said, it was somewhat of a mixed performance with US sales weaker than expected with reported sales growth of 4% in Q2, against a Q1 run-rate of 13%. The recent trading updates provided reassurance that the previously revised guidance is now baked into FY2019 forecasts. In our view, the shares are fairly valued, and we look for further clarity at the forthcoming interims on the likely timeframe to rebuild operating margins back towards 4.0%, in the medium term. For now, we believe that ASOS’ shares are fairly valued and reiterate our HOLD rating.
03 Apr 19
LIBERUM: Consumer Discretionary - Dealspotting and other news
March was a challenging month across the retail space, highlighted by the increase in the number of profits warnings, restructurings and companies falling into administration. Majestic Wine, Goals Soccer Centres, LK Bennet and speculation surrounding Arcadia Group are some of those.
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02 Apr 19
LIBERUM: Consumer Discretionary - A screen for Red Flags in Retail
We have analysed data from companies across both our coverage and the Retail sector as a whole, focussing on 10 areas that may indicate future business risk. We categorise our screens into four groups: profit smoothing, working capital, cash uses and miscellaneous & governance.
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29 Mar 19
Cenkos: ASOS Plc - One way or another
The gross margin has fallen 150bp, driving the EBIT margin to just 2%. ASOS cannot risk a further deterioration: operating costs need to be cut. We believe consensus is too pessimistic in assuming a flat gross in 2019/20. But, should there not be a significant recovery in the gross, management could address the main cost opportunity - cutting the range. It is not the preferred way forward, but we believe investors would accept temporarily slower sales growth for stronger cash generation.
19 Mar 19
LIBERUM: ASOS - No light as yet at the end of what is proving to be a difficult year
A shock profit warning in December has been followed by further disappointing news. Trading in France and Germany remain tough and the launch of the new DC in USA, has caused disruption and delays to US orders.
19 Mar 19
LIBERUM: General Retailers - Buying and selling the re-rating
The chasm between winners and losers is widening. While this was expected, the scale of the ongoing structural changes is mired by the multiple excuses that have become far too common.
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04 Feb 19
LIBERUM: ASOS - Significant forecast cuts, lower visibility. Downgrade to HOLD
We lower our FY19E EPS forecast by 54%, with a flow through to outer years due to (i) lower sales growth, (ii) lower retail gross margins, and (iii) a halving of FY19E EBIT margin from 4% to 2%. Our FY19E H1/H2 PBT split is now 12%/88% vs. guidance of 10%/90% and a c.35%/65% average over FY15-18. While the trading environment is more challenging, company specific factors seem to have been important drivers of yesterday’s profit warning. There is still significant value in ASOS’s existing customer base, which suggests an intrinsic value for ASOS that is higher than its current EV, but with earnings visibility much lower, important questions still to answer and shorter-term catalysts lacking, we move to HOLD (from BUY). TP lowered to £28 (from £80).
18 Dec 18
Small Cap Feast
PetroTal Corp is an oil and gas company whose shares are currently admitted to trading on the TSXV. The Company is focused on development of oil and gas assets in Peru and it currently has controlling interests in three onshore Peru license blocks. No new funds being raised. Due 21 Dec. Mkt cap c.£80m Litigation Capital Management—provider of litigation financing and ancillary services, moving from ASX (ASX:LCA) to AIM. Offer raising £20m at 52p. Due 19 Dec. Mkt Cap £56.5m. Greenfields Petroleum (TSX-V:GNF) production focused company with operated assets in Azerbaijan seeking AIM dual listing including $60m private placement. Mkt cap $12.6m CAD. Expected mid December.
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17 Dec 18
LIBERUM: Consumer Discretionary - Dealspotting, and other news; November 2018
November has seen a mixed bag of results from the Consumer sector, but on balance they weigh negatively. Over 80% of our coverage universe saw their shares fall in the month. But against a backdrop of uncertainty, high levels of M&A and capital raising persist, showing that deals are still getting done in this tough market. ASOS stands out this month as launching the most interesting innovation, with its Fit Assistant and the launch of Afterpay (we assume just in Australia, for now). Ahead of Christmas trading, Debenhams and Next have increased their online share of voice.
ASC DEB NXT
03 Dec 18
A reassuring positive showing
Asos has accelerated its growth in revenues in the last two months (compared to the previous period) and maintains its full-year performance of 24% lfl. Operating profit was up 28%. Cash position has deteriorated following the significant investments’ outflow.
18 Oct 18
LIBERUM: ASOS - A predictable, in-line result
Group revenues increased 26% y/y to £2,417m (vs consensus £2,406m). Gross margin is broadly in line with consensus at 49.9%, which is 130bps growth y/y due to a positive net FX position and improved buying margin. PBT of £102m (+28% y/y) is c.2% ahead of consensus of £100m. Financial guidance remains unchanged for the year ahead. KPIs have all moved ahead with active customer growth of 19%, ABV +1% and units per basked up 5%. Average selling price is down 4% despite the strength of the US dollar highlighting potential scale of price investment. Impressively this drove frequency +7% meaning total orders grew 27% vs. customer growth of 19%. Growth rates have remained within the guided range and the retail gross margin provides c.£10m firepower to support proposition and customer acquisition. We make no change to our forecasts today and see the shares at a CY19E P/E of 41x falling to 33x in CY20E as good value today for the continued growth on offer. Maintain BUY.
17 Oct 18
LIBERUM: VIDEO: Consumer Discretionary - Online Retailers - updating the metrics
In these four videos Consumer Discretionary Analysts, Wayne Brown and Tom Musson, look at the online retail space using a new valuation methodology aligned with the online companies’ strategies, and highlight their key stock recommendations.
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01 Aug 18
LIBERUM: ASOS - Share price fall is overdone
We believe the 10% drop in the share price following yesterday's P3 reporting is an overreaction. The 25% fall overall since mid-March now offers a compelling entry point. We found the analyst's call reassuring with sensible explanations for lower top-line growth than the market was expecting. Confidence should be taken from the acceleration into July and the benefit from greater gross margin expansion than was previously guided. We leave our profit forecasts unchanged, assuming slightly lower sales growth but a higher gross margin. We see ASOS as a structural winner, benefiting from scale and first mover advantage as it entrenches its position through a centralised distribution network alongside a best-in-class product offer and engagement strategy.
13 Jul 18
LIBERUM: ASOS - Q3 keeps FY expectations on track
Total group revenue for Q3 is below consensus estimates (+21% CC reported, vs +25.3% consensus) driven by International, however the Retail gross margin has increased ahead of plan and management has reiterated its previous FY guidance. We are encouraged by current trading, where the company notes Q4 has started well, particularly in terms of full price sales, reflecting a disciplined approach to discounting. We make no change to our earnings forecasts and do not expect a material change to consensus. Management continues to expect medium term sales growth of 20-25% p.a. and a c.4% EBIT margin. We see any further pressure on the share price (down c.10% since mid-March) as a good buying opportunity.
12 Jul 18
Sales jump and operating profit shrinks
Asos has reported sales growth in the low range of guidance in H1 and its operating margin was slightly down. Sales increased by 25% at CER and the operating profit edged up 9.6%. Guidance is maintained unchanged for sales and the operating margin, but upgraded for capex.
11 Apr 18
LIBERUM: ASOS - Focussed on growth: Interims as expected
Interims today are in line with expectations resulting in unchanged profit and margin guidance. Capex is expected to be higher as the group continues, as it should, to build an IT framework ready for an augmented and AI enabled world. ASOS is benefitting from scale and first mover advantage and its strategy is centred around entrenching its position through a centralised distribution network alongside a best-in class product and engagement strategy. Characterised by increasing LTVs, declining CACs, the strategy to re-invest operating leverage in its proposition and technology so as to further entrench its market positon is absolutely the right thing to, making ASOS a key long-term winner in online space.
11 Apr 18
Another strong growth in the first four months
Asos fulfilled its guidance promises and increased its sales by 28% at CER in the first four months. The strong performance was reported in all geographies, but the continuously innovative offer has driven an exceptional and surprising acceleration in the UK.
25 Jan 18
Strong FY2017 results and guidance upgrade for FY18
Group revenues were up 27% at CER (+33% reported) to £1,924m. Retail sales increased by 27% at CER (+34% reported) to £1,877m. The ASOS brand contributed 41% to full-year sales. Retail sales in the UK amounted to £698m (+16%). International retail sales outperformed, rising 36% at CER (+47% reported) to £1,178m. A strong performance was reported in all geographies. In the US, retail sales were up 31% to £261.6m. Sales in Europe amounted to £544.1m (+34%). Other regions’ sales jumped by 42% to £372.6m. Margins have slipped slightly. The operating margin lost 22bp to 4.14%. Operating profit stepped up 26.3% (excluding exceptional items) to £79.6m. Net profit came to £64.1m. Capex rocketed to £168m compared to £87m last year. The FY18 guidance was raised to 25-30% for top-line growth, while the EBIT margin was left unchanged at 4%.
18 Oct 17
Guidance upgrade for the second time in 2017
Asos experienced a strongly favourable market momentum in H1, leading to an upward revision of the 2017 growth guidance. Sales were up 31% at CER (+37% reported) to £911.5m, boosted by the outperformance of international sales which soared by 41% to reach £560.2m. The market dynamism was experienced in all regions with a market outperformance in Russia (+200% reported). Revenue in the UK edged up 17% to £351.3m. Asos has closed H1 with 14.1m active customers (+29% yoy) and 3% increasing basket value stemming from a 2% rise on average units per basket. Margins were slightly hit by higher distribution costs. The gross margin was cut by 60bp to 48.3% generating a gross profit of £440.1m (+36%). The operating profit was up 14.3% to £27.1m. Earnings from continuing operations surged by 15.9% to £21.9m. The financial position remains strong with a net cash of £154.3m. Given the striking performance in H1, the company has upgraded its guidance for 2017 to 30-35% sales growth. Mid-term guidance is maintained unchanged at 20-25%.
04 Apr 17
Reassuring strong Christmas
The glorious era continues for Asos. Sales were up 30% at CER (+36% on a reported basis) in the four months to end December to £605.7m. Sales in the UK surged by 18% to reach £244m. Abroad, all regions experienced strong growth. In the Americas, revenues edged up to £82.7m (+42%). Sales in Europe soared by 38% to £165.8m. The company highlighted that its retail gross margin was down 30bp yoy. The customer base remains powerful with 25% consolidating active customers and a 2% increase in the average basket value. The mid-term growth guidance was maintained at 20-25%.
12 Jan 17
Disappointing expected slowdown in FY17 despite an impressive performance in FY16
The online fashion retailer posted a 26% surge on its FY16 revenues to reach £1,445m. Retail sales amounted £1,403m. Sales in the home market were up 27% to £603.8m. International sales edged up 25% to reach £799.9m, contributing 57% to total retail sales. A strong favourable momentum was experienced in the USA with a 50% sales’ rise (£179.2m), underpinned by a positive FX impact as the performance at constant rates was 40%. In Europe, retail sales amounted to £375m, i.e. a surge of 28%. In other regions, adverse FX moves slowed growth to a reported 9% while sales at constant rates edged up 14% to £245.8m boosted by positive momentum in Russia and Australia. The gross profit jumped 26% to £722.2m bringing the gross margin to 50% vs. 50.1% a year earlier. The retail gross margin slipped 30bp to 48.5%. The pre-tax profit before exceptional items edged up 37% to £63.7m. The net profit was down 33.7% to reach £24.4m, backed by a one-off exceptional legal settlement of £20.9m and the discontinued operations in China. The financial position remains strong with 45% increase on cash and cash equivalents to £173.3m, despite a surging capex to £79.2m vs. £50.4m in FY15. The expansion of the platform has led the active customer base to be enlarged by 25% and the average basket value increase by 3%. A slight slowdown is expected for FY17 with growth guidance of 20-25%.
20 Oct 16
Margin performance allows for some reinvestment in H2
ASOS has traded well in the 4 month period ended June with Retail sales growth of 20% (as expected) accompanied by a healthy recovery of 280bps in the gross margin against last year’s soft comps. Combined Retail GP for the year therefore looks to be running ahead of expectations by c£10m. This has been reinvested back into the business. Although this may limit any forecast upgrades to low-enders the newfound momentum in the business is well received and we have reviewed our target price to 3620p using a target 30x Aug’16 EV/EBITDA multiple.
07 Jul 15
Conroy ups the grade, Entu enters acquisition, Getech heads up stream, To Gfinity and beyond
ABDP trading update, ASC interim results, AVCT partnership, CBUY partnership and first contract, CGNR* high grade gold intersected, ENTU acquisition, GTC acquisition and interim results, GFIN interim results, IMO trading update, LPA trading update, MARL* trading update, MXO* Mexico energy bid round update, QXT final results, SVR final results, TECH first day of dealings on AIM
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07 Apr 15