Online electrical retailer raises profit guidance as strategy gains traction

Online electrical retailer, AO World, said profitability levels at the Bolton-based group are running ahead of previous expectations.

In an unscheduled trading update today, AO said the actions it has taken to reduce costs and improve margins are gaining traction.

Accordingly, the board now expects adjusted EBITDA to be in a range of £30m to £40m for the full year, ahead of previous guidance which was around the top end of a £20m to £30m range.

The board said: “We remain cautiously optimistic and yet mindful of the continuing macroeconomic uncertainty and tough consumer environment, whilst also taking into account both the extent to which these and inflationary pressures can impact our contract assets.”

The trading update covers the third quarter, the three months to December 31, 2022.

Since the beginning of the current financial year the group has been focused on profitability, prioritising more profitable cash generative sales and reducing costs.

UK revenue continues to be in line with the board’s expectations, decreasing by 17.2% compared with the same period last year.

AO said it will publish a scheduled full year pre close trading statement on March 30, 2023.

Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “After multiple profit warnings in 2022, AO is on the comeback trail with news that profit for the year to March is going to be ahead of expectations.

“The company has been in repair mode since deciding to pull out of Germany and focus on its core UK operations. Costs have been taken out of the business and more effort made to improve margins.

“So far so good, but at the end of the day it still needs to shift high volumes of washing machines and fridges to make money.

“This remains a highly competitive market and in a difficult economic environment people with broken kit might be more willing to seek a repair rather than a replacement, such as was the previous trend to buy something new when the existing item developed a fault.”