I think we could have another year of losses, which will follow the trend here. Last year’s loss amounted to some £16.2m; up from £12m in 2016/17. This cash burning company, which raised £50m in April 2017, is getting through its cash fast. AO. has to cover its losses and has just agreed to spend £20.9m on Mobile Direct.
On the cash front last accounts show cash £52.9m. Debt £14.6m so net cash £38.3m – £20.9m = £17.4m. If this year’s loss is the same as last AO will be tapping the market again. Shareholders will already be diluted by some 2.8% for the Mobile Direct purchase next year.
Growth has also slowed. Last year’s UK revenue increase by 8% but Q1 and Q2 this year’s it’s down to 5.7%. So growth in its home market is slowing. Meanwhile their overseas side is also slowing from 54.8% last year to 46.2% in Q1 and Q2.
The competition for selling mobile phones is worse than trying to sell white goods! It feels like they have made their company more complicated with this purchase.
I also think their costs will go up. With some 2800 employees they will feel increased pressure from the 4.8% increase in national minimum wage. Their overheads have continually wiped out their profits since they came to market – something tells me this pattern will not change anytime soon and that they will dilute their shareholders again.
With an update on 20 November we could see this fall futher. When the general tide turns I will be glad to have this strong short in my armoury.

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