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AO World reports growing UK sales – and bottom-line loss after European investment

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AO World today unveiled fast-growing UK revenues, but investment in its European operations meant it reported a pre-tax loss.

The electricals pureplay reported revenue of £476.7m in the year to March 31, a rise of 23.8% compared to the previous year. Total UK revenue of £470.8m was 22.3% up on last time, and website sales in the country rose by 32.9% to £381.5m. Third-party website sales fell by 11.4% to £70.3m as the company focused on its own website. In its German market, sales of £5.8m helped total website sales reach £387.4m, 34.9% ahead of last time, and in its end-of-year statement the company said it was “encouraged by our progress over the first six months of trading in our new territory” and that its focus would remain on a long-term goal of profitable growth while “expanding the territories in which we operate”.

The company, which previously focused on white goods, expanded into audio-visual equipment in May 2014 and in the UK its net promoter score remained at more than 80, while repeat purchase levels grew from 36% to 45%.

But expansion into its first European market of Germany in autumn 2014 came at a cost. While earnings before interest, tax and asset writedowns (EBITDA) came in at £16.5m in the UK, 47.3% ahead of the same time last year, an £8m loss in relation to its European operations meant adjusted EBITDA came in at £8.5m across its operations – 24.3% lower than last time. Investment of £4.2m in its new European operations and long-term incentive plan costs of £2.5m resulted in a group operating loss of £2.2m, up from £7.2m last time. And at the bottom line, pre-tax losses of £2.9m improved by 61.8% on the £7.5m losses reported last time.

However, the company said it is seeing growing traffic to the German site allied to positive customer feedback. “Now we have demonstrated operational effectiveness we are in a position to accelerate sales growth, drive efficiencies and continue to expand our retail offering in this new territory,” said AO. “Our recent progress has encouraged us to review our infrastructure requirements and we will increase logistics capacity as we build scale.”

John Roberts, chief executive, said he was pleased with progress during the year. “Our long-term plan is on track and, despite missing our financial expectations for the year, we have continued to take market share in the UK MDA [major domestic appliances] market delivering significant growth in UK sales and adjusted EBITDA,” he said. “Our customer proposition remains strong – our unbeatable prices, huge range and amazing service mean our customer satisfaction levels have remained exceptional and we will continue to focus on this in the year ahead. The passion we have for our customers, staff and all other stakeholders has never been stronger and we still believe we can change the way Europe buys its electricals, simply by caring more and executing brilliantly.”

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