AO World Jumps on Stable Outlook as Savings Measures Bite

By Geoffrey Smith 

Investing.com -- AO World (LON:AO) shares rose over 13% at the open on Thursday after the British-based online electronics retailer said it has succeeded in stabilizing its business outlook after a rocky year marked by a failed attempt to crack the German market.

AO World said the three months through June, the first quarter of its fiscal year, had proceeded in line with expectations, allowing it to maintain its full-year guidance for revenue of between 1 billion pounds ($1.2 billion) and 1.25 billion pounds, and earnings before interest, taxes, depreciation, and amortization of between 20 million and 30 million pounds.

It also said that the final costs of closing down its German operation will be only 5 million pounds, having earlier indicated they could be as high as 15 million.

AO had been one of the early pandemic winners as both its focus - consumer electronics - and its online-only distribution model positioned it perfectly for the changes in consumer spending patterns in 2020. However, the stock fell sharply as pandemic effects unwound and the related stimulus programs ended, leaving the U.K. consumers in a cost-of-living crisis with little disposable income for discretionary spending.

"In the short term, we expect our strategic pivot and business realignment will reduce both sales and costs," the company said, adding that it still sees average annual growth of over 10% in revenue and an EBITDA margin of over 5%.

The company lost 37 million pounds before tax in the 12 months through March, leaving it with net debt of 33 million pounds. However, a 40 million capital increase and an increase in its revolving credit facility to 80 million pounds last month have substantially improved the company's liquidity position. AO said it was now positioned to take advantage of growth opportunities in the U.K., notably through a recycling operation whose revenue, it said, is growing at 36% a year.