AO World claims “step-change in profitability”

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AO World PLC (LON:AO.) said the coronavirus (COVID-19) pandemic led to a sharp increase in revenues and “a step-change in profitability”.

The online seller of white goods and other electrical equipment said group revenues in the year to the end of March 2021 rose 62% from the year before to £1.66bn, with momentum continuing in the final quarter of the company’s fiscal year.

AO.com, the UK website, increased year-on-year revenue by 88% in the final quarter, while AO.de, the German website, increased full-year revenue by 77% and is expected to move into profit in the current financial year.

Group adjusted underlying earnings (EBITDA) in the financial year just ended is expected to b in the range £63mln – £72mln, up from £19.6mln the year before and in line with market consensus forecasts.

In its third-quarter trading statement the company has flagged an increase in warranty plan cancellations, and today it told investors it is completing a full reconciliation of the contract base, and subsequently expects to take a one-off non-cash charge of around £15mln in the value of the contract asset relating to the period 2008 to 2020.

“The last 12 months have been like no other and we have been very proud to rise to the challenges for our customers – keeping their lives powering on with essential electrical and technology products. Serving customers in The AO Way and treating every customer like our own gran, irrespective of cost, has enabled us to impress millions of customers with a better way to shop electricals,” said John Roberts, the founder and chief executive of AO World.

“I believe that these market dynamics will stick and, whilst there is inevitable uncertainty, the direction of travel is firmly with AO and the business model we have spent more than 20 years building. I expect that we will continue to be a double-digit growth business in the year ahead, even now as we lap the tough comparatives from last year with physical stores open. I look forward to providing more detail at our full-year results in June,” Roberts said.

Shares in AO World were up 2.2% at 324.6p.

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