Asos profits fall in first half but company eyes annual sales of 2.5bn pounds

2nd Apr 2014 07:01

- Revenues and gross profit up 34 and 35 per cent- Pre-tax profit and EPS down 22 and 21 per cent- Increased capex to allow 2.5bn pounds annual sales- Full-year EBIT margin guided to around 6.5 per centFirst half-profits were trimmed at fashion e-tailer Asos due to increased investment in sales capacity to create a 'truly global business' that can turn over £2.5bn a year. While revenues increased 34% to £481.7m, profits before tax fell 22% to £20.1m, which was better than some analyst forecasts and is part of expected 30/70 split between the first and second halves of the year due to the front loading of the company's investment in logistics, IT and its start-up business in China. Retail gross margin improved by 60 basis points.Chief Executive Nick Robertson said the £68m investment in 2014 will more than double sales capacity with improved efficiency at its main UK warehouse, a new 'Eurohub' in Berlin, an expanded facility in Ohio in the US and a new warehouse in Shanghai."We are now investing in the capacity to support a truly global business with sales of £2.5bn as the next staging post on our journey," he said.Although the increased pace of investment has reduced profitability in the period, he stressed "ASOS is not and has never been about the short-term". The Asos.com website continued to attract new customers from across the globe and now has 8.2m active customers, an increase of 36% on prior year particularly boosted from overseas with over 60% of active customers now located outside the UK.Robertson was "pleased with progress" at the China operation, which was launched in October 2013, towards the initial goal of establishing "an effective operating model which provides the capability for future growth in this exciting market". Asos plans to launch on China's Tmall e-commerce platform during the second half of the year, which is hoped will provide an established gateway through which it can further grow brand awareness and market share.The UK, the group's most mature market, continued to grow strongly, with sales lifting 32% year-on-year. The fastest growing segment was the EU, where sales grew 65%, with France and Germany lapping up improved payment and delivery options. US sales grew 31% and the Rest of the World segment was slowest at 14% due to currency movements and China's early stage of operations. For the full year, the company said it expects EBIT margin to be around 6.5%.OH