Phone con­tract for AO World

The Scotsman - - Business - By ALYS KEY and EMMA NEWLANDS

AO World has agreed to buy on­line-only phone re­tailer Mo­bile Phones Direct in a “game-changer” acquisition that will ex­pand its mo­bile of­fer­ing in time for the in­tro­duc­tion of 5G. The £32.5 mil­lion takeover will in­crease AO World’s mo­bile of­fer­ing, which is cur­rently lim­ited to hand­sets only.

Chief ex­ec­u­tive Steve Caunce said: “This deal rep­re­sents a sig­nif­i­cant step for­ward in our strat­egy of de­vel­op­ing our grow­ing range of on­line elec­tri­cals and adding new com­ple­men­tary cat­e­gories that cus­tomers want and ex­pect from AO.” He added that the deal would po­si­tion the com­pany to take ad­van­tage of the roll­out of 5G over the course of the next two years.

Mean­while, Richard Bax­en­dale, cur­rent chief ex­ec­u­tive of Mo­bile Phones Direct, said: “This new venture marks an ex­cit­ing mo­ment for both AO and Mo­bile Phones Direct, cre­at­ing some­thing that we be­lieve will be a real gamechanger for the in­dus­try.”

Last year Mo­bile Phones Direct and sis­ter site Smart Phone Com­pany pulled in 13.6 mil­lion vis­i­tors be­tween them.

The busi­ness gen­er­ated £121.7m in rev­enue for the year ended 31 March and un­der­ly­ing earn­ings of £5.5m.

The acquisition is ex­pected to be com­pleted in the first quar­ter of 2019, sub­ject to share­holder and com­pe­ti­tion watch­dog ap­proval.

Aoworld­warned­in­ju­lythat weaker con­sumer de­mand had af­fected sum­mer trad­ing in its core mar­kets, de­spite a rise in sales ear­lier in the year.

An­a­lysts Greg Law­less and Clive Black at Shore Cap­i­tal took a cau­tious view. “In our view, whilst the acquisition mul­ti­ple looks at­trac­tive and scales the com­pany in a new cat­e­gory, we do not see how this can be earn­ings-en­hanc­ing,” they stated.

“On the one hand this small acquisition scales up the com­pany in a com­pli­men­tary cat­e­gory – but also com­pli­cates the group fur­ther.”

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