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ASOS - announces plans to issue new shares, extend debt

Sophie Lund-Yates, Equity Analyst | 7 April 2020 | A A A
ASOS - announces plans to issue new shares, extend debt

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ASOS plc Ordinary 3.5p

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Following stress tests of its balance sheet ASOS believes it has sufficient liquidity to weather the current disruption. However due to the uncertain nature of the situation the group is "close to finalising" plans to raise more money by issuing new shares, and also hopes to extend its debt facilities.

ASOS said it had a strong first half, with sales growth over 20%, as positive trading from the festive season continued into January and February. The group made progress in its goal to reduce non-strategic costs too, and as a result gross and operating margins have improved.

The shares rose 7.4% after the afternoon announcement.

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We expect half year results from ASOS tomorrow, and will be updating our view following that announcement.

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Trading statement (23 January 2020)

Group revenue rose 20% to £1.1bn in the four months to 31 December 2019. That was better than expected, thanks to a good performance across all regions, increased customer engagement and a record Black Friday.

Total retail sales rose 20%, reflecting a 20% increase in orders, and 1.4m extra active customers. ASOS attributed the strong sales growth to the Black Friday weekend, supported by improvements in product choice, stock availability and operational capacity.

Gross margins declined 1.7 percentage points, following US duty and increased marketing spend.

UK retail saw an 18% rise in sales to £408.9m, while the US recorded growth of 20% to £139.3m. Within the rest of the EU, there was a 22% rise, with sales reaching £332.5m, and the Rest of World division rose 23%. In total, international sales now account for 62% of retail sales, from 69% of total active customers.

CEO Nick Beighton said the "focus for this year is to further enhance our capabilities and leverage the investments we have made. It is still early in the year and much remains to be done, but we are encouraged by the progress we have made so far."

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