AO World losses continue but turnaround is on track

By Geoffrey Smith 

Investing.com -- AO World (LON:AO) said on Tuesday its turnaround is on track and expects underlying earnings to be at the top of its guidance range for the current fiscal year, despite a wider loss in the first half.

AO World's stock surged 12% at the open in London in response, to its highest in four months.

The online electronics retailer, which has struggled all year with a hangover from the post-pandemic bust in appliance sales, had said earlier that adjusted earnings before interest, taxes, depreciation and amortization would be between £20 million and £30 million (£1=$1.1848) this year, while restructuring charges will cause it to report a net loss. 

"Whilst mindful of the current economic challenges we expect to be around the top end of the range," AO World said as it unveiled first-half results. Additonally, it said it will meet its medium-term target of a 5% EBITDA margin in its fiscal 2024 year. 

AO World expects its restructuring measures to generate annual savings of at least £30M in fiscal 2024, and hinted at possible further measures on Tuesday, saying it will "continue to 'right size' our cost base to market conditions and outlook."

That 'right-sizing' led revenue to decline 17% to £546M in the six months through October. Adjusted EBITDA inched down to £9M from £10M, while the operating loss widened to £9M from £3M. The net loss was £12M, more than the £4M reported a year ago. 

However, there were clear signs of the pressure on the company's balance sheet easing. Available liquidity rose to £68M from £50M at the end of April, while net debt was little changed at £19M.