AO World: Record earnings after Music Magpie acquisition
AO World has reported better-than-expected revenue growth after its acquisition of Music Magpie and an expansion in its membership scheme helped boost the figures.
The electrical retailers told markets this morning that life-for-like adjusted profit before tax grew 32 per cent to £45m in the year ended March 31, above the top end of its previously-upgraded range of £39m to £44m.
Share rose by 0.17 per cent in early trades.
Like-for-like revenue grew seven per cent to £1.1bn, while business-to-consumer retailer revenue grew 12 per cent to £832m.
Growth was driven by an expansion of the company’s membership offering, plus an expanded product range and the acquisition of Music Magpie, AO World said.
Russell Pointon, Director of Consumer & Media at Edison, said the results mark a “strong year” for the group.
“The integration of musicMagpie offers long-term potential to enhance the recommerce proposition and sustainability credentials.
“Investors will be watching closely to see how AO navigates the mobile strategy review and continues to scale its category diversification,” Pointon added.
Julie Palmer, Partner at Begbies Traynor said: “[AO’s] return to growth hasn’t been easy and driven by a focus on cost-cutting and restructuring, but it is clearly paying off for the white-goods retailer as customers numbers have also surged.”
Music Magpie contributes to AO World growth
Consumer tech and disc media retailer Music Magpie, which AO bought for £9.9m last October, contributed an additional £30m revenue for the period, the company said.
Free cashflow improved from £21m to £23, year on year, driven by “strong operating performance and efficient working capital management”.
AO World has targeted profit before tax of £40m to £50m for the next financial year, and aim for a profit before tax margin of five per cent in the medium term.
The company said the deal with Music Magpie would help it achieve this goal over the long term as consumers look for different options with their recycling habits.
” The real test for AO World lies in demonstrating its ability to deliver growth for a sustained period after some false starts, but for now, there are some clear positive signs that it may soon be back in the ascendence,” Palmer said.
Chief executive John Roberts said: “Our 25th year in business has been our best yet. We’ve delivered a record profit before tax performance, significantly grown our sales, and continued to delight our ever-growing customer base with trusted, outstanding service.
“One of the key drivers of this performance is our Five Star membership programme, which is giving our customers even more reasons to keep coming back to us. We’re also broadening our product range beyond the Major Domestic Appliance category that we’re best known for.”