Online electrical retailer AO World (AO.) swung to a modest pre-tax profit last year as government-imposed lockdown measures spurred online shopping.
Results for the year to March showed continued top line momentum, although shares in the web-based washing machines, fridges and televisions seller softened 0.4% to 163.4p as it warned a weaker economic backdrop could weigh on growth.
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The Bolton-headquartered online electrical pure play eked out a pre-tax profit of £1.5 million last year, versus a £20.2 million loss a year earlier, as revenue increased 15.9% to almost £1.05 billion, with the company securing significant market share gains from the start of lockdown on 23 March.
Group adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) rose 54% to £19.6 million as domestic earnings improved and losses in Europe narrowed to €24.2 million (2019: €27.9 million).
AO World, which closed its loss-making Netherlands business in March, is also encouraged by the current trajectory of revenue growth and profit improvements in Germany.
‘COVID-19 has accelerated a shift in customer behaviour towards online shopping and we now need to cement that change,’ enthused founder and chief executive John Roberts. ‘In short, we must drive forward so those customers never look back.’
Early share price gains eroded as investors latched onto an outlook statement that was cautious in tone. As a result of government lockdown measures, the market for electrical products moved nearly 100% online for that period, which helped AO World to deliver better than expected annual revenues.
However, AO World warned that a fall in consumer confidence might delay the purchase of big-ticket items and also flagged uncertainties in the UK housing market, together with additional uncertainty over a hard Brexit in December.
Nevertheless, AO World believes there has been a seismic impact on retail from COVID-19 which presents the company with an opportunity to convert consumers to a better way of shopping for electrical products.