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AO Like-For-Like UK Revenue Increases by 5.7%

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AO World PLC has reported audited final results for the year ended 31st March 2019, advising of 'continued growth and a renewed mindset'.

Financial Highlights

• Continued revenue growth in both the UK and Europe with total revenue for the period increasing by 13.3% to £902.5m (2018: £796.8m); against a backdrop of ongoing weak consumer confidence in a continuingly competitive market, particularly in the UK:
     - Total UK revenue up 10.1% to £749.3m (2018: £680.8m), (up 5.7% on a like for like basis excluding revenues from our newly acquired mobile phones business (“MPD”)).
     - Europe revenue for the period increased by 32.2% on a constant currency basis to €173.3m (2018: €131.2m) (in GBP 2019: £153.2m, 2018: £116.0m).

• Group Adjusted EBITDA losses of £0.4m (2018: £3.4m losses).
     - UK Adjusted EBITDA improved by 20.9% to £27.4m (2018: £22.6m) (up 14.3% on a like for like basis excluding EBITDA from MPD).
     - Europe Adjusted EBITDA losses increase to €31.3m (2018: €29.6m) (in GBP 2019: £27.8m loss; 2018: £26.0m loss) reflecting less progress than expected on product margins and cost pressures from re-configuring driver scheduling arrangements in Germany.

• Group operating loss reduces to £15.2m (2018: £16.2m loss) reflecting an increase in UK operating profit of 28.4% to £14.9m (2018: £11.6m) offset by trading losses incurred in Europe of £30.1m (2018: £27.8m).

• Group net debt position as at 31 March 2019 was £9.0m (2018: net funds of £38.3m); with gross cash of £28.9m (2018: £52.9m). Debt increased over the year to fund the acquisition of MPD and construction of the new Plastics Plant in recycling. Total available liquidity to the Group as at 31 March 2019 of £85.0m.

• Basic loss per share of 3.78p (2018: 2.93p).8 Diluted loss per share of 3.78p (2018: 2.92p).

Strategic and Operational Highlights
• Growth in the AO customer base to nearly 6.5m customers in the UK and approaching 800,000 in Europe.

• Net Promoter Score maintained at its consistently high level of over 80 in the UK and Germany and over 75 in the Netherlands reflecting continued high levels of customer satisfaction, whilst growing volumes and focussing on new competencies.

• Mobile proposition significantly enhanced through the acquisition of MPD making AO the UK’s second largest indirect mobile connector, significantly increasing our customer base and extending our existing mobile offering to include network contracts and SIMs.

• MDA share maintained and double digit growth in all new categories in the UK. Share gains across all categories in Europe.

• Our dedicated B2B team has been established and is working to grow its customer and client base across multiple industries; a number of trials are underway with housebuilders and charities;

• We are refocussing on growing our third-party Logistics business to leverage our two-man delivery expertise, infrastructure and capacity;

• We have continued to develop our finance offering to be appropriate to all categories and territories and have significantly improved our AO Care proposition by switching the service backed warranties to insurance and creating a truly digital experience;

• We have commenced building a plastics refining facility due to be operational during FY20 to give us the capability to sort waste plastics from our fridge plants to create an additional sustainable revenue stream;

• We have launched a trial rental services for white goods shortly post the period end, partnering with two Housing Associations and running a small B2C trial via; and

• Our ambition remains to be run-rate profitable in Europe during FY2113. We have a number of initiatives in place across four key measures; customer service, revenue growth, gross margin and cost to deliver that are currently being actioned. We will provide a further update at the time of our interim results in November against these measures.

John Roberts, AO Founder and Chief Executive Officer, said:

“We’ve delivered double digit revenue growth in the UK and achieved over 30% in Europe and Adjusted EBITDA in the UK has improved by over 20%. The UK result was achieved against an ongoing tough trading environment and includes three months contribution from Mobile Phones Direct which we acquired in December 2018 and its integration continues to go to plan.

Adjusted EBITDA losses in Europe have increased slightly against the prior year with progress hampered somewhat by driver challenges in Germany and a lack of real improvement in product margin and customer acquisition costs.

We are working to address these issues. We’ve also made changes to the management of our international operations and are ensuring we utilise all the influence, intelligence and capability within AO.

The AO model is an eco-system of complementary competencies across retail, mobile, recycling and logistics through to financial services and B2B trade. We have huge structural advantages when these capabilities operate in harmony. So, we have enhanced structure with informality and a renewed mindset and are now releasing the immense unrealised value we’ve created. We’ve started to see this in the last few months and it will be an important driver for the year ahead.

Overall, the AO team deserve praise for their efforts in FY19 but we can do better and I’m pleased with the progress that we are now making in the first few months of this financial year. I’m proud to be back at the helm of the business I founded almost two decades ago and I’m more excited than ever about the future for AO.”

Source : Insight DIY Team and AO World

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04 June 2019

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