Asos had plenty to talk about on Tuesday evening as it updated the markets on the impact of the coronavirus, released its half-year results and also announced a share placing to raise extra cash.
The pandemic has clearly had an impact and demand has been “significantly” down in its most recent three weeks of trading. It said the drop has ranged between 20% and 25% with “most markets following the pattern of demand shock before the impact partially moderates”.
But the company is an online specialist has clearly helped to insulate it from some of the problems many of its retail peers with physical shops have faced, and a fall of 25% in the current circumstances will be seen as good news by many in the retail sector.
It also said there has been “minimal” disruption to product sourcing from China and all its warehouses remain operational, “but at lower capacity with effective social distancing measures in place”.
The interim results for the six months to the end of February saw a record half-year performance and showed that the company’s turnaround was on track before the coronavirus pandemic hit.
Its group revenues rose 21% to £1.59 billion while retail sales rose by the same percentage to £1.55 billion. UK retail sales were up 20% to £577.1 million and international retail sales rose an even better 22% to £974.3 million.
Its gross profit was up 17% at £750 million, but the retail gross margin fell to 45.4% from 47.4%. Profit before tax rose to £30.1 million from £4 million, but its net debt also widened by 332% to £163.6 million, “reflecting [the] seasonal peak”.
The company also said the number of orders placed rose 19% to 41.1 million and it saw a robust operational performance across all distribution centres.
It's clearly in good health, but with the coronavirus being something of an unknown in terms of its duration and overall impact, the company is taking action to ensure that it stays in good health. It said that while it has enough cash to see it through the current crisis, it's raising more cash.
It's going to extend its current credit facility and raise other money via a share placing adding up to no more than 18.8% of its existing issued ordinary share capital. It said it would "put sufficient financing in place to weather no improvement in current trading for at least 18 months; enable the company to emerge from the current crisis in a stronger financial position to continue to invest in the growth of the business; and to work supportively with its long-standing supplier base to mutual advantage as the industry recovers from the pandemic".
The online retail giant said it has been monitoring the ongoing financial impact of Covid-19 on its business operations and has been “evaluating a number of different scenarios”.
And it added that while it’s “impossible to be precise as to all the impacts, we have stress-tested our liquidity under these scenarios and are comfortable that with mitigating actions, there is sufficient liquidity within our existing £350 million facility”.
That's encouraging news given that the pressures on fashion retailers at the moment are massive.
CEO Nick Beighton, said: "Asos had a strong start to the year, making significant progress against the priorities we set out and delivering a better than anticipated first-half performance, driven by the operational improvements we are making to the business. Along with other businesses, we have been significantly impacted by the Covid-19 outbreak. We have been focused on keeping our business delivering for customers whilst implementing a series of actions to mitigate the sales impact we have been experiencing. At the same time we have been working to strengthen our financial position. The Asos business model provides us with significant resilience and we are encouraged to have seen, across our markets, that where consumers are in lockdown, Asos continues to be an important part of their lives.”