What recession? AO World says worst case consumer downturn hasn’t materialised
AO World expects to make revenues and profits at the upper end of the guidance it gave the markets in February.
The Bolton-based online electrical retailer told markets this morning that initiatives to reduce costs and improve margins are working.
Also, the statement said: “Potential adverse effects from trading risks, continuing macroeconomic uncertainty and tough consumer environment that we anticipated at 28 February have not materialised to the extent envisaged and as such we are updating our profit guidance to around the top end of profit guidance issued at that date.”
UK revenues for the full year to 31 March 2023 are expected to be £1.13bn, with market share of 32.1%, according to year on year comparable data from GfK.
The company has also renewed a £80m revolving credit facility with HSBC, NatWest, and Barclays, extending to April 2026.
2022 was a turbulent year for AO World as it swung from profit of £20m in 2021 to posting a £37m loss. AO closed its German operation and issued a string of profit warnings that dented market confidence with shares plunging 75% from their peak.
John Roberts, chief executive and founder, said: “We are encouraged by the work undertaken to pivot the business during the financial year 2023. AO enters the new financial year with net funds on the balance sheet, a robust trajectory, and full confidence in our ability to deliver on our medium-term profit guidance of 5% adjusted EBITDA. We anticipate that our progress in improving both operational cost efficiencies and margin in FY23 will continue through the next 12 months and beyond.”
AJ Bell investment director Russ Mould said: “After a rollercoaster of a time around the pandemic when initially the company enjoyed huge share price gains before crashing back down to earth, investors will be pleased with AO World’s latest update.
“The online electricals seller expects full year profit at the top end of expectations as consumers have proved to be more resilient than feared and, significantly, margins are holding up.
“The company is making tangible progress in reducing costs and this latest update has to be chalked up as a serious achievement given how tough it is to sell larger ticket items right now.”
