Shares in online electricals retailer AO World (AO.) were among the best FTSE 250 performers on Thursday, sparking up 3.3% to 328.2p after the freezers-to-flatscreen TVs seller assured profits for the year to March 2021 will match market expectations following a strong final quarter.
AO World declared the pandemic has helped to drive ‘a step change in profitability’ and buoyed by the momentum in the business, management guided to double-digit revenue growth in the current financial year, even though rivals have now reopened brick and mortar stores.
For the year ended 31 March 2021, and despite Covid-related costs, group adjusted EBITDA (earnings before interest, taxation, depreciation and amortisation) is expected to be in the £63 million-to-£72 million range.
That’s in line with market consensus of around £66 million and up from £19.6 million in the previous year.
This EBITDA figure is now being reported excluding a one-off, non-cash warranty asset impairment of around £15 million following an uptick in warranty plan cancellations, although the number crunchers at Numis Securities expect ‘minimal impact to outer year profitability from warranty behaviour’ and the broker has left its outer year forecasts unchanged accordingly.
Boosted by the stay-at-home and technology spend tailwinds, group sales grew by 62% to £1.66 billion, 2% ahead of consensus, last year, with momentum continuing in the fourth quarter.
AO.com, the company’s UK website, increased year-on-year revenue by an impressive 88% in the fourth quarter, while German website AO.de increased full year revenue by 77%.
Encouragingly, AO World’s German business achieved run rate profitability in the third quarter and is on course to generate profits in the current financial year.
BETTER WAY TO SHOP ELECTRICALS
‘The last 12 months have been like no other and we have been very proud to rise to the challenges for our customers - keeping their lives powering on with essential electrical and technology products,’ enthused AO’s founder and CEO John Roberts.
‘Serving customers in The AO Way and treating every customer like our own gran, irrespective of cost, has enabled us to impress millions of customers with a better way to shop electricals.’
Roberts expects Bolton-based AO ‘will continue to be a double-digit growth business in the year ahead, even now as we lap the tough comparatives from last year with physical stores open.’