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AO World says full-year figures will be down on last year – but reflect lasting shift online in its market

AO World says its full-year profits and sales are set to be lower than they were during the pandemic, but still reflect a structural shift online that took place during the pandemic. AO says it now has 54% of the online major domestic appliance market, up from 43% pre-Covid-19.

But cost of living, inflation and logistics challenges all mean that the electrical appliance retailer is cautious about making forecasts for the future.

Full-year expectations

AO World says in a full-year trading statement today that it now expects group revenues to come in at £1.6bn in the year to March 31 2022. That’s 6% lower than the previous year, but 52% ahead of two years earlier. Within that, UK revenues are set to be 5% down on last year but 2% ahead of two years ago, and Germany revenues are on course to be 12% down on last year and 54% up on the two years ago.

Earnings before interest, tax and one-off costs are expected to come in at about £8m, reflecting lower sales and higher costs in its UK logistics operation. That’s lower than last year, when AO reported pre-tax profits of £20m, but well ahead of the £1m pre-tax profits that it reported two years earlier. As of March 31 2022, the company had available borrowing of about £50m with a credit facility of £80m that has been extended to April 2024. Net debt at the year end came in at £32.8m.

AO says that its revenues stayed resilient in the first half of the year to March 31, despite difficulty in finding drivers and ongoing supply chain shortages. In the second half of the year customer demand weakened progressively as supply chain disruption led to product shortages in some categories.

It says that in March 2022, customers started to respond to cost of living issues in the same way that they did in the first Covid-19 lockdown, with higher than average warranty cancellations, although this has since improved.

AO says it now has 54% of the online major domestic appliance market – up from 43% pre-Covid-19. It says it won more than 1.5m new customers during the year, and saw post-Covid repeat purchase rates rise, with high levels of customer satisfaction reflected in “exceptionally strong customer Net Promoter Scores”.

AO says it is cautious about its sales and profit expectations for the near future “in view of the volatile market conditions, inflationary cost pressures and logistical challenges in the supply chain together with the escalating cost of living for consumers”.

It adds: “Despite the current market challenges, we remain confident in AO’s long-term prospects given the inherent resilience of our business model, the quality of our customer proposition and the ongoing structural shift to online.”

European operations

A review of AO’s Germany business is continuing, with several options under consideration by the board. AO says the share of sales taking place online has returned to pre-pandemic levels In Germany – with shoppers going back to stores “to a greater degree than anticipated”. Despite this, it says, competition is intense and digital marketing costs are “significantly” increased.

AO is ranked Top500 in RXUK Top500 research.

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