Online retailer benefits from new shopping model following lockdown
Bolton-based online electrical retailer, AO World, moved into the black, today, as it reported annual results for the year to March 31, which saw it break the billion-pound turnover mark.
The group improved total revenues from £902.5m to £1.046bn, while a pre-tax profit of £1.5m compared with a £20.2m pre-tax loss the previous year.
Total UK revenue was up 20.3% to £901.6m, although European revenues decreased by 4.6% to €165.4m due to the closure of AO.nl, the Netherlands website, in the third quarter as the group re-aligned its European operating model with UK policy.
Net debt was £23.4m, compared with £9m in 2019, although AO said it has significant liquidity headroom of £63.6m, as at March 31, including available funds and undrawn revolving credit facility (RCF), with a new £80m RCF facility which matures in April 2023 entered into shortly post year-end.
During the year the group developed an AO-branded mobile proposition and commenced building the foundations for the next stage of growth for its mobile business.
It focused resources and energy on its German business, resulting in the closure of the Netherlands operation at a cost of £2.5m.
Today’s announcement said the group continues to expect to achieve positive EBITDA in Germany on revenue of around €250m. It said it is very encouraged by the current trajectory of revenue growth and profitability improvements and will update further in the half year results announcement in November.
It also revealed how its business changed when the Government imposed its coronavirus lockdown.
It said this created a unique set of circumstances from the end of March through to the beginning of June: “The products we sell are an essential part of people’s lives and the electricals market migrated to nearly 100% online overnight.
“We, therefore, experienced strong demand and made significant market share gains across many of our key categories from the start of lockdown, the impact of which saw sales above our expectations and an improvement to our working capital.”
It said that, while demand remains strong, the recent reopening of the high street means that customers now have more options to purchase their appliances offline from stores. Although customers are able to return to bricks and mortar stores, initial data shows that since stores have reopened the online market has, in fact, continued to grow year-on-year.
John Roberts, AO founder and chief executive, said: “I’m pleased that we have made substantial progress, closing the year in good shape after getting AO fit and focused on the future.
“COVID-19 has accelerated a shift in customer behaviour towards online shopping and we now need to cement that change.
“In short, we must drive forward so those customers never look back.
“At the start of the financial year, we went back to basics, bringing clarity and leadership to the fundamentals of our business.
“AO’s model and vertically integrated ecosystem is a structural advantage when properly leveraged. The whole business is now fixed on delighting our customers, driving innovation and creating growth.
“As a result, we made significant headway against our four priorities of double digit MDA growth in the UK, becoming cash generative as a group, accelerating our journey to profitability in Germany, and operating as One AO.
“That progress ensured that we were in the best possible shape when COVID-19 hit in the final weeks of the financial year.
“Investing to make sure our operations were safe so that our customers and people were protected allowed AO to be a proud lifeline for customers during lockdown. Many experienced AO for the first time and were delighted with what they found.
“AO now has the opportunity to become a new habit that lasts – by delivering brilliant service for customers. In other words, turning those lockdown learnings into lifelong change.”
He added: “This has not been an easy journey and I’m grateful both to our teams across the UK and Germany for their exceptional work during an extraordinary time and also to our partners for their continued support.
“Looking ahead, there is a huge amount of uncertainty, but the values and principles that guide our thinking have positioned us well for the opportunities and challenges that are to come.”