AO World (LON: AO.) shares surged at the start of Tuesday, currently up more than 15% after the company reported its interim results, stating that sales are on track and profit for full-year 2023 is now expected to be around the top end of guidance.
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The retailer, which specialises in electrical goods, told investors its revenue for the six months ended September 30, came in at £546 million, down 17% from the £661 million reported during the same period last year.
The company's loss before tax declined significantly, by 168% to £12 million from £4 million the previous year, while its operating loss came in at £9 million compared to £3 million last year.
The revenue decline was put down to a reduction in the overall electricals market and actions the company has taken to remove non-core channels and loss-making sales. It also acknowledged that it is not immune to the challenging and uncertain consumer environment, and expects to continue to be impacted by the cost of living crisis and ongoing supply chain problems.
Operationally, AO World stated there were over 410,000 new customers during the period, with an increase in the repeat customer purchase rates.
The company's Germany operation is being closed “quickly and efficiently” with minimal cash impact, and total cash costs for the closure are now expected to be near zero against the initial estimate of up to £15 million. Meanwhile, AO World is simplifying its UK business, concentrating on more profitable lines that fit into its core mode.
“During the first six months of the year, we've made good progress with our strategic realignment as we focus on profitability and cash generation, all of which is yielding the results we expected,” said AO World Founder and Chief Executive John Roberts.
Looking ahead, AO World said the cost reduction initiatives implemented during the first half of the year have resulted in the cost base of the business reducing, giving an annualised run rate saving of at least £30 million in FY24 compared to FY22.
The company previously said it expected adjusted EBITDA for the full year to be between £20 million and £30 million, and while it is mindful of the current economic challenges, it expects to be around the top end of the range. In addition, AO World's medium-term ambitions to deliver average revenue growth of 10+% per year, with an EBITDA margin of 5+% and improved cash generation, remain unchanged, and it expects to achieve 5% EBITDA in the next financial year.
In the longer term, AO World said it is looking to deepen its presence in categories such as televisions, laptops, audiovisual, and small domestic appliances as the online segment of the market in those categories “remains a key opportunity.”