Online electricals giant AO has endured a turbulent last couple of years.
The Bolton-headquartered company experienced a boom during the first year of the Covid-19 pandemic, with sales rising while its share price surged to record levels.
AO's shares jumped from just under 70p a few days before the first UK lockdown and peaked at 429p on January 2, 2021.
READ MORE: AO to close German business because of continuing poor results
Since then however, the company's value has been steadily dropping as investors continue to sell off shares at increasingly lower prices.
Its share price is now back at pre-pandemic levels while its sales are also coming down, with AO announcing in April that its turnover for its latest financial year will be £1.557bn, down 6%.
AO has also recently announced the closure of its German business, which it first launched in 2014, because of the "continuing deterioration in the outlook".
So what does the future hold for one of Greater Manchester's most prominent companies? Analysts from investment bank Panmure Gordon have had their say.
In a statement sent to BusinessLive, the bank said that it had been "obvious" since after the peak of the Covid-19 pandemic that AO had been "struggling" in Germany.
It added that the company's immediate priority will not switch to keeping its UK business going but that there is "evidence of significant cash burn" that suggests a "deterioration in supplier terms".
Panmure Gordon also said that AO looked to be in a "weakened state even before the looming consumer spending squeeze is upon us".
The bank said that while it would not take a lot of capital to get AO through the next year or so, there remains a risk of a "sweetheart take-private deal".
It also suggested that a fundraise could "unlock value by allowing AO to reset its strategy without immediate funding pressure".
The Panmure Gordon analysis read: "While it has been obvious since just after peak-Covid that AO has been struggling in Germany, the decision to pull out through closure highlighted how little end-value was generated over seven years.
"The immediate priority now switches to keeping the remaining UK business going but there is evidence of significant cash burn, suggesting deterioration in supplier terms.
"Drawing a line under German investment and losses was probably (unconfirmed) necessary to placate the group’s lenders.
"Conceptually the selling side of the AO model remains attractive. But AO looks to be in a weakened state even before the looming consumer spending squeeze is upon us.
"We are not sellers despite the near-term fundamentals because it would not take a lot of capital to get AO through the next year or so in our view.
"The risk is a sweetheart take-private deal. A fundraise might appear dilutive initially but could unlock value by allowing AO to reset its strategy without immediate funding pressure."
In AO's trading update in April, the group said its available liquidity as at March 31, 2022, was around £50m but that because of the current economic environment and the seasonality of its cash flows, its liquidity has since reduced.
However, it added that it expects this situation will improve as it moves into its second quarter "driven by a range of actions that we are implementing".
The group's revolving credit facility of £80m was extended and now expires in April 2024 while its net debt at the end of the financial year was £32.8m.
When AO announced it was to close its German business, it cited an intensifying competitive landscape, a substantial increase in digital marketing costs as well as a constrained supply chain.
However, Panmure Gordon said it "clearly overestimated" the near-term marketing size during the Covid lockdowns and found shrinking its operation to a sustainable level "too difficult".
It adds that AO's move to close the German business leaves the group's overall strategy "unclear".
One option for the future could be AO expanding into another European market but Panmure Gordon said that after the German "debacle" it is "hard to see AO having much credibility with another geographical expansion".
However, it did concede that it is "not impossible" to see after sufficient time has elapsed".
On its share price, Panmure Gordon adds that it continues to be "battered by negative news flow" and that it is unlikely to improve until "we get to the other side of the current/prospective squeeze on discretionary spend".
It also said that extra funding of between £30m and £50m would be enough to "keep AO on the road.
It added: "We do not say that with a lot of confidence and a positive rating depends on improved risk emerging in markets generally and AO trading its way through current issues. That is all possible."
