Equity Briefing: AO World, AB Foods and Micro Focus

Online electricals retailer AO World releases preliminary results this morning, while Primark’s owner AB Foods and software giant Micro Focus will both release interim results. We explain what to expect before markets open today.

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AO World

AO World, the largest online-only seller of white goods and electricals in the UK, will release preliminary results covering the 12 months to the end of March this morning after they were delayed to provide more time for the auditing process.

The company has come into its element during the pandemic as consumers were forced to shop for everything from fridges to tablets online whilst stores were closed. AO World has already revealed that revenue jumped 62% in the year to £1.66 billion, and revealed growth had accelerated in the fourth quarter to set it up for another year of growth.

The performance in the UK will be closely watched as lockdown rules have been eased and shops have reopened since the end of March, and investors will want to see evidence that people are still willing to buy big-ticket items online rather than in-store.

AO World has also provided a glimpse into what to expect in terms of earnings, with adjusted Ebitda set to soar to a range of £63 million to £72 million, marking a huge improvement from the £19.6 million booked the year before. Building on that guidance, analysts are expecting pretax profit at the bottom-line to jump to £40.1 million from just £1.5 million the year before and for EPS to soar to 6.24p from 0.38p.

Associated British Foods

AB Foods is due to release a trading update this morning to provide insight into how it has performed since it released interim results back in April.

Although demand for its food-based businesses has increased since the pandemic started, it has been more than offset by the steep decline in sales at Primark during lockdown.

The company’s trading updates only focus on revenue and the focus will be on how Primark, which lost out during the pandemic due to its lack of online presence, is performing now that stores are reopen and restrictions have relaxed. Its last update came just over a week after stores started to welcome customers back again in April, but the company said demand was already showing the ‘relevance and appeal of our value-for-money offering’.

Primark accounts for the bulk of earnings and is the driver of cashflow in normal times, so its recovery is key to returning AB Foods to growth. That is even more important considering demand its food-based business will soften in the second half.

Micro Focus

Micro Focus will release interim results covering the six months to the end of April later today, at around 1230 BST.

The company, which provides enterprise software to businesses and organisations around the world, has already revealed that revenue fell 5% at constant currency to $1.4 billion. Strong growth in licensing, partly thanks to weak comparatives from being disrupted by the pandemic last year, was countered by declines in revenue from maintenance and consulting work, as well as a fall in recurring revenue from its Software-as-a-Service unit.

Analysts are expecting adjusted Ebitda to drop to $502.0 million from $552.2 million the year before.

Today will also see new chief financial officer Matt Ashley, who has previously worked as CFO at William Hill, take up his role on the board.

Investors will also want to hear more about its new long-term partnership with Amazon Web Services and how its recovery is progressing, with Micro Focus aiming to stabilise revenue and generate sustainable cashflow.

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