- Shares leap 18% from all-time lows

- New focus on earnings over sales growth

- Firm has plenty of liquidity

Bombed-out online electrical goods retailer AO World (AO.) surprised the market, not so much with its resilient performance in the year to March as with its confident outlook and its plan to prioritise cash and profitability going forward.

Its shares jumped as much as 18% to 47.7p on above-average volume in mid-morning trading.


Full year group revenues of £1.56 billion, in line with most forecasts, were slightly down on the previous period but up more than 50% on the year to March 2020 which represents the most recent ‘normal’ trading environment.

At the same time, increased costs during and after the pandemic meant the firm slipped to an operating loss.

However, the firm said this year marks ‘a period of realignment for the business’ as it unveiled a strategic pivot to focus on cash and profit generation rather than sales growth.

As a result, revenue for the year to March 2023 is expected to be in the range of £1 billion to £1.25 billion, significantly lower than last year, while adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) will be between £20 million and £30 million, well above last year’s £8 million.

‘AO was founded on the belief that online is a better way to buy electricals’, said founder and chief executive John Roberts. ‘That belief is as strong as ever, even - and especially - as we go through one of the most challenging operating environments we've weathered as a company.’


With AO shares trading at all-time lows, valuing the business at just £250 million before today’s announcement, it could be argued expectations were already depressed and anything other than a complete disaster would spark a rally.

Yet it is worth noting today’s bounce has nothing to do with short sellers covering their positions, as unlike other online retail stocks such as ASOS (ASC) and Boohoo (BOO:AIM) there haven’t been any big shorts in AO since the start of this year.

As analysts at Numis point out, execution during this phase of refocusing the group on its profitable core business will be absolutely critical, but the firm has plenty of liquidity after the recent capital raise and an experienced operator at the helm.


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Issue Date: 18 Aug 2022