In the first of our series of e-commerce stars of 2013 we take a look at AO.com.
The basis of the review is that a growing number of online retailers are shuffling into the queue for a possible London Stock Exchange listing or refinancing.
Of these we see a number that are very strong candidates for a potential IPO, finding new investors or just future success. But others where, as outsiders, we are struggling.
Short of brokers or advisers to do the 'big sell' and cook the numbers for us, we decided to crunch the numbers ourselves.
The first in our series is Appliances Online: recently furnished with a new moniker AO.com. Starting in 2000, the company behind the website, DRL Holdings, has grown as the high street electricals model has dwindled. If ever there was a product that suited to being sold online and dropped off at your home by two muscle-bound Eastern European blokes trained to do so, it was the washing machine.
As with fridges and dishwashers, dimensions, specification and price is pretty much everything and most of that you can see on a computer screen. Margins are so slim it also helps that expensive stores and lease costs can be cut out.
The business developed as bricks and mortar retailers fell by the wayside. Powerhouse collapsed first in 2003 and then 2006 and it was followed by Comet last year - both of whom focused more heavily on white goods - that is fridges, freezers, dishwashers and other large kitchen appliances - far more than the more multi-faceted Dixons (which also owns PC World and Currys).
Many retailers saw the attraction of selling white goods but few wanted the bulky stock in their stores or even in their warehouses. As the market opened up, DRL signed up a host of supermarkets, high street retailers, catalogue retailers and online retailers for a 'white label service'.
First, in 2004, Sainsbury's became its first client allowing customers to buy what they thought was from Sainsbury's but was actually sourced, stored and then delivered by DRL. Boots, Next, House of Fraser, M&S, Debenhams, Shop Direct, Screwfix, Empire Direct, Argos and even B&Q all followed suit.
Purely and simply that is an example of a business with an excellently run model cornering the market.
It also bought Expert Logistics from grocer Iceland in 2009 after the chain's founder returned to run it (and decided it had better things to do than sell fridges and freezers in its shops). At the time the retailer devoted 18 per cent of space in its stores to selling white goods. And guess who is now running Iceland's white goods delivery business which it plans to launch later this month? Of course, it's DRL.
A quick run through the accounts for parent group DRL Holdings (yes, they filed early, just two months after their year end - almost unheard of for a private business and a strong indication the management is serious about wooing investors) tells you all you need to know about this business. Sales increased 33 per cent to £275.5 million in the year to March and profit swung to £8.1 million from a £2.2 million loss the previous year.
Small profit margins are not unusual for a private firm and the sudden swing as they prepare to find new investors suggests they've got a good handle on costs and all the levers and buttons to pull a bit back when they want. Sensible businesses will then always leave a bit for the analysts to crow about and wave at investors as evidence of the growth in the model.
That will be easy: the accounts paint the picture of a business growing rather than cutting costs. The average number of staff employed during the year was 834, 24.5 per cent more than it did the year before.
Overall, since 2010 when it made £126.7 million, it has more than doubled in size in three years.
Sky News suggested in September that the business could be valued at £300 million - about one times revenues - but we think this may underestimate the true worth of this rapidly growing, well-run business.
Just a few weeks ago it launched its first ever national television campaign so its eye is clearly on a nationwide growth model through its own business and that which it supplies through others. It's a win-win. It now controls a large chunk of the white goods delivery market.
If it sees more growth and profit coming from its own sites, it simply switches off the wholesale taps supplying its retail and supermarket customers.
With the usual caveat that we have not spoken to management or had access to all the filing cabinets in the executive suite, this is a company growing with a firm handle on the future. We'd love to hear the rest of the investment case because companies only tend to sell when founders see an end to growth in sight. Potentially of course, other bulky items could be sold or delivered and, clearly, the model must be transferable overseas.
There are always issues for new investors in either an IPO or private funds looking to come in when a entrepreneurial founder - in this case John Roberts - remains such a strong influence. But there are things can can be done to sure up a bit of confidence if any management changes are afoot - or if it turns out he has his eye on a complete exit at some point in the future.
Verdict: tie in the management and founder with a ball and chain for at least three years (five if possible!) and where do we sign up?
Expect Part 2 coming soon: Boohoo.com
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