(AOF) – Asos shares (+8.82% to 376.75 pence) jumped in London thanks to a clear increase in its cash flow in the first half of 2024, despite a decline greater than expectations of its turnover. Over this period, the British online fashion and cosmetics retailer says its “free cash flow improved by approximately £240 million compared to the first half of the 2023 financial year. This improvement is due to “improving underlying profitability and eliminating old inventory”.
“Despite the decline in sales over the first half, free cash flow of around £20 million represents a strong result in a period typically characterized by significantly negative working capital. It represents our best cash flow performance for the first half since the 2017 financial year,” said Asos.
The group closed this half with a strong cash balance of over £330 million (vs. consensus of £325 million), an improvement of over £20 million on the first half of 2023.
Sales decline stronger than expected
In addition, Asos sales over this half-year fell by around 18%. For UBS, “the British company’s first half turnover is worse than expected”.
Commenting on the group’s half-year performance, in its note of the day, the broker underlines that “the drop in sales is greater than what Asos had forecast for the first half. The market anticipated a decline in sales of 13.5% and UBS by 15%. He also notes the encouraging progress made in terms of destocking and free cash flow.
“We expect disappointing sales to weigh on the shares. We expect more ‘color’ on profitability, when Asos’ full first half results are published in April,” adds UBS.
In terms of outlook, Asos maintains its forecasts for the whole of 2024.
The company anticipates a drop in sales of 5% to 15%, positive adjusted EBITDA, and a return of inventories to levels prior to the Covid crisis. It expects positive cash flow generation and a reduction in net debt.
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