AO World raises guidance again as it returns to profit despite falling revenues

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Undated screengrab from the home page of AO.com. AO World has said it is "cautiously optimistic" as the online electricals retailer revealed that moves to slash costs have helped the firm's profits surpass expectations. Last year, the Bolton-based company closed its loss-making German business and launched actions designed to save at least £30 million a year by 2023-24, including axing a raft of senior and middle management jobs. Issue date: Tuesday January 10, 2023.

Electrical retailer AO World has raised its profit guidance despite revealing a fall in revenue, according to a trading update published this morning.

The online group, which calls Frasers Group its largest shareholder, said a decision to stamp out unprofitable sales led to a 12 per cent dip in revenue during the interim. 

But adjusted EBITDA surged 205 per cent to £27m up from £9m in the same period last year, as the group was bolstered by a simplification of its operations including exiting a trial with supermarket Tesco last year. 

A reduction in warehouse costs, thanks to the cooling of inflation, also helped improve its bottom line. AO World said the figure fell from £25.5m down from £31.1m last year. 

AO World said it now expects its full year earnings to be in the range of £29-£33m up from a previously forecasted rate of £28m.

The firm said: “Whilst mindful of the ongoing cost of living crisis and geopolitical events that give rise to uncertainty and volatility, we continue to optimise for profit outturn and are increasing our profit before tax expectations to between £28m and £33m for the full year.”

John Roberts, chief executive said: “I am very pleased with the clear progress that we are making as a result of our strategic pivot to focusing on profit and cash. We have generated more profit in the first half of this year than we did in the whole of last year, and are also upgrading our profit expectations for the remainder of FY24.   

“As we anticipated, sales have reduced year on year as we continue to annualise the actions that we’ve taken to remove non-core channels and unprofitable sales from the business. However, we expect to end the year having returned to run rate revenue growth.”

He added: “Our core fundamentals are in great shape and our service to customers has never been better. Our Trustpilot scores continue to be the best in the market, our spontaneous brand awareness is at record levels, and our transacted customer base now stands at 11.6m people.”