AO World lifts profit targets after impressive first half

by | Nov 21, 2023

(Sharecast News) – Electrical goods retailer AO World has raised its bottom-line guidance for the full year after swinging to a profit in the first half despite a reduction in sales.

The company is now guiding to a pre-tax profit of £28m to £33m for the full year ending March 2024, up from previous guidance given in. July of £28m.

The company reported a pre-tax profit of £13m for the six months to 30 September, compared with a loss of £12m the year before, which it put down to its approach “to deliver on our strategic pivot to profit and cash”.

AO World has undertaken an extensive restructuring to remove unprofitable sales, as well as introduce delivery charges on all deliveries. Advertising and marketing costs have been “tightly controlled”, while warehousing and admin costs have reduced.

As a result, the gross margin has improved to 23.5%, up from 19.5% a year earlier.

“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,” said founder and chief executive John Roberts. “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.”

However, these actions also meant that revenue decreased by 12% to £482m as results annualised the actions taken to remove non-core channels and unprofitable sales. Revenues for the full year are expected to decline by 10%.

Looking ahead, the company said in order to take advantage of its addressable market in the UK, estimated at £27.6bn, it has decided to “deepen our presence” in categories such as televisions, laptops, audio visual and small domestic appliances.

“The online segment of the market in those categories remains a key opportunity for us as the long-term structural migration to online retailing continues,” AO World said.

Shares were up 6% in early deals on Tuesday at 87.89p.

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