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AO Trading 'Resilient'; Warns Again On Supply Chain

AO delivery man hi-vis vest 725 x 500

AO World plc (“the Group” or “AO”), a leading European online electrical retailer, today announces its unaudited financial results for the six months ended 30 September 2021 (“HY22”). Given the exceptional operating environment over the past 18 months, our performance over the comparable period in HY20 provides a more meaningful overview of our business performance than a comparison with HY21. Both the one-year and the two-year percentage movements are presented below.

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Financial highlights

  • Continued strong Group revenue growth of 67% over two-year period, including 88% revenue growth in Germany on a local currency basis
  • Group EBITDA growth of 24% over two-year period; impacted in HY22 by the investments in systems and people (in particular drivers) and increased marketing costs
  • Group operating loss of £11m (HY21: profit of £16m1)
  • Overall liquidity7 of £66m (HY21: £161m). Net debt at 30 September 2021 of £102.2m (31 March 2021: £28.1m; 30 September 2020: £20.7m)

Operational highlights

  • Over 780,000 new customers4 experienced The AO Way, with notable step changes in post Covid repeat purchase rates
  • c.500 new drivers recruited to meet peak period demand, bringing our fleet up to full strength and easing the previously reported shortage of drivers
  • Five new outbases opened across UK and Germany; over 300,000 sq ft new warehousing added
  • Third Party Logistics revenues grew 38.5% with three new contracts in Germany
  • 300,000 Trustpilot ratings, averaging an excellent 4.6 out of 5 stars and Net Promoter Scores5 averaging over 80
  • Over 2 million fridges have now been recycled at our AO Recycling facility and we are now working with manufacturers to use our recycled plastic in new products

Outlook

At the start of our financial year in April, we planned for continued revenue growth and built up our cost base accordingly. However, since then, growth in the UK has been impacted by the nationwide shortage of delivery drivers and the ongoing disruption in the global supply chain, and the German online market has seen significantly increased competition.

As we now look to the second half, we continue to see meaningful supply chain challenges with poor availability in certain categories, particularly in our newer products where we have less scale, experience and leverage. In addition, shipping costs, material input prices and consumer price inflation remain challenging uncertainties.

As a result of these factors, the all-important current peak trading period is significantly softer than we anticipated only eight weeks ago. As a result, we now expect full year Group revenue to be flat to minus 5% year on year, with Group Adjusted EBITDA in the range of £10m to £20m.

While a substantial amount of short-term uncertainty remains, we are taking decisive action to address and mitigate the issues and are confident in our ability to trade our way resiliently through this period. In the medium-term, our international expansion ambitions remain entirely unchanged. We remain confident about AO’s future prospects, based on the strength of our business model, the quality of our customer proposition, and the ongoing structural shift online.

AO’s Founder and Chief Executive, John Roberts, said: “Our results over this period have inevitably been affected by the constraints and uncertainty seen across our industry. We’ve materially cemented the progress of last year, with a step change in scale and consumer behaviour – and the fundamentals of the business are in place for sustained growth.

“We’re seeing more customers making repeat purchases more frequently across categories. Once they experience the AO Way, they keep coming back. Our outstanding operational capabilities are also being recognised by more and more companies who are now outsourcing their delivery services to us. “We’re working hard to solve some of the current challenges that our industry is facing. We’ve recruited c.500 new drivers and are working closely with our manufacturer partners so that customers can get what they need.

“Our AOers continue to deliver brilliantly, and our consistently world-class Net Promoter Scores and Trustpilot ratings are evidence of that. I’d like to take this opportunity to thank them for their amazing work, and I’d also like to thank our manufacturers for their ongoing support despite facing their own challenges during the period. While the short-term challenges are clear, I remain hugely optimistic about AO’s long-term growth prospects.”

Source : AO World

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24 November 2021

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